During the Asia-Pacific Economic Cooperation (APEC) forum earlier this month, tensions spiked among world leaders due to competition over the economic and political structure of the South Pacific. The participants, including China’s President Xi Jinping, Japanese Prime Minister Shinzo Abe and U.S. Vice President Mike Pence, did not even issue a communique, a first in the APEC summit’s 30-year history. To their dismay, South Pacific states experience growing influence from superpowers. This is especially true for Papua New Guinea, which also happened to host the forum, as it is the poorest of the APEC countries and remains heavily dependent on aid programs. Historically, it is has always had strong ties with Australia, but today China is taking a greater economic hold on Papua New Guinea. Chinese investments in Papua New Guinea have risen sharply over the last years (to more than $1.9 billion in 2018 and China has committed another $4 billion for building roads). In the face of this growing Chinese influence, in a region that has traditionally been considered within the Oceanian powers’ sphere of influence, Australia and New Zealand have been stepping up coordination with the U.S. and Japan. Australian Prime Minister Scott Morrison, New Zealand Prime Minister Jacinda Ardern, Prime Minister Shinzo Abe and U.S. Vice President Mike Pence agreed with Papua New Guinea on a project to increase electricity access in the South Pacific nation to 70% of its population by 2030 (from the current 13%). Moreover, the U.S. has revealed plans to join Australia in the expansion of a naval base on Papua New Guinea’s Manus Island. Furthermore, in a pushback against Beijing’s rising regional influence, Australia and New Zealand are in talks to sign a new “wide-ranging” security pact with other nations in the South Pacific with a specific intent of confronting China’s expanding influence. To illustrate, China’s plan to build a base in Vanuatu’s Luganville wharf earlier this year was quickly met with a counter-proposal from Australia. As such, the South Pacific is becoming a battleground of large power politics.

RISKS MARKED ON THE RISK RADAR AS NUMBER 2: Competition South Pacific

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