One Hand Washes The Other - Comparing Good Governance In The Pacific & Wall Street.

U.S think tank Center for Strategic and International Studies (CSIS) recently produced publication titled: "Strengthening Governance and Development in the Pacific" highlights the American pivot to the Asia Pacific region and also attempted to frame the issues of Good Governance and Developments in the South Pacific.

Strengthening Governance and Development in the Pacific

By Gregory Poling and Elke Larsen May 4, 2012

As the United States focuses its energy on engaging the Asia-Pacific region, it has a growing interest in promoting good governance practices in Oceania. More than just democratic values and respect for human rights are at stake, as important as those are. The Pacific population is set to reach 18 million by 2050 and unemployment rates are already alarmingly high. The best means of ensuring regional stability is for economic development to truly take root. But it is difficult to attract capital to a region where poor governance means there is often high risk associated with investment.

It is therefore in the interests of the United States to promote good governance as the key driver of economic development in this region. Isolation is often blamed as the primary disincentive to investment in Oceania. Isolation undeniably remains an important consideration, but investment can be attracted to even the most isolated islands if good governance is practiced.

A case in point is Mauritius, which lies in the Indian Ocean 1,242 miles off the coast of Africa. Nobel Prize laureate James Meade claimed in the 1960s that Mauritius would likely become a failed state because of its isolation. And yet by 2000 Mauritius’s economic rise was being hailed as a “miracle.” In reality, though, Mauritius’s development was not miraculous, but rather the result of calculated good governance practices that transformed the island into an attractive destination for investment. Since the 1970s, there has been a consensus in Mauritian politics to promote growth via sound economic policies, export zones, respect for property rights, and zero tolerance for corruption. Mauritius currently ranks 23rd among the 183 economies in the World Bank’s “Ease of Doing Business” index. With a population of approximately 1.3 million, Mauritius in 2011 had a per capita GDP of $15,000.

In contrast, the most diversified Pacific economy, Fiji, with a population of 890,000 people, had a 2011 GDP per capita of $4,600. Recent developments underscore the negative impact that governance issues can have on development and help explain why the economies of the two most populous Pacific Island countries, Papua New Guinea and Fiji, contrast sharply with those of states like Mauritius. For example, Papua New Guinea’s Esso Highlands Ltd. liquefied natural gas (LNG) project, a joint venture project operated by Exxon Mobil, is expected to create local employment and increase Papua New Guinea’s GDP by 15–20 percent. However, land ownership issues caused serious delays in 2009 and again this year as landowners used threats of violence in attempts to extract rents.

The absence of the rule of law in the Highlands region became apparent with numerous events that stopped work in March and April on the LNG project, and violence by illegal miners near the Porgera Gold Mine prompted the government to deploy troops in January and again in late April. Former military commander Major General Jerry Singirok said of the latest deployment, “It’s important that the investors see the government is concerned about the major investments…it’s an act of deterrence.” Despite the government’s moves to protect foreign investments, however, the highly publicized difficulties faced by Exxon Mobil and other companies will serve as a cautionary tale to potential investors. Papua New Guinea is also facing political turmoil at the national level.

The judicial and legislative branches have been deadlocked over a March 28 Judicial Conduct Bill giving the parliament the power to remove judges. The bill would have lasting implications for Papua New Guinea’s separation of powers and political stability. This will affect how risky the country looks to foreign investors. Papua New Guinea is already ranked 101 out of the 183 economies in the “Ease of Doing Business” index. Tellingly, its poorest indicator on the index is the enforcement of contracts, on which it ranks 163rd. Undermining judicial independence will only make that indicator worse.

One finds further evidence of the importance of governance on investor confidence in Fiji. According to an International Monetary Fund report released in February, Fiji’s 2006 coup coincided with a severe decline in economic growth. From the 1990s until the 2006 coup, economic growth averaged 2.75 percent per year. It has dipped to less than 0.25 percent per year since, well below Fiji’s potential considering the economic boom elsewhere in the Asia Pacific.

A 2009 World Bank survey found that the greatest barrier to firms investing in Fiji was political instability. The country is presently ranked 77th in the “Ease of Doing Business” index. There are some bright spots. On March 9, Fiji began a consultation process for a new constitution, and it looks as if the country may be on track for a return to democracy. The military regime headed by Prime Minister Commodore Voreqe Bainimarama has announced that elections will be held in 2014 and will be open to all candidates. These steps toward better governance and political stability have already resulted in greater investor confidence. For instance, U.S.-based Gibson Guitars on April 20 announced plans to open a mahogany processing factory by 2013 that will create 2,000 jobs.

The geopolitics of Oceania are changing, providing the Pacific Islands with an opportunity to break out of their relative isolation. Lying as they do within the vast expanse between Asia and the United States, the Pacific Island countries offer investors largely untapped economic opportunities: mineral resources to meet Asia’s booming demand, the world’s richest tuna fisheries, and vast tourism possibilities, among others. If properly developed, these nations have the potential to link their economies to the massive Asian and North American markets. But tapping this potential depends on improving governance practices and reducing risk.

The United States has reiterated its commitment to the region’s development and has backed up that commitment with actions: sending the largest-ever U.S. delegation to the Pacific Islands Forum last September, opening a new USAID regional office in October, and supporting Vanuatu’s and Samoa’s accession to the WTO this year, among others. It therefore has a proven interest in promoting good governance as a critical part of helping the Pacific Islands maintain stability and reach their economic potential.

(This Commentary first appeared in the May 3, 2012, issue of Pacific Partners Outlook, http://csis.org/publication/pacific-partners-outlook-strengthening-governance-and-development-pacific.)

Gregory Poling is a research assistant, and Elke Larsen a researcher, with the Pacific Partners Initiative at the Center for Strategic and International Studies in Washington, D.C. Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues.

It seems quite indicative of the CSIS publication to extol the virtues of the World Band and the International Monetary Fund  (IMF), as well as cite their reports and haphazardly draw conclusions from its findings.  The issue of good governance in the context of IMF is contradictory, considering the voting system within the particular institution.

A useful counter point to the sentiments raised by the CSIS publication can best be addressed  by  Non Governmental Group (NGO) Action Aid., whose 2009 report  titled "IMF Policies and Their Impact On Education, Health & Womens Rights in Kenya- The Fallacies and Pitfalls of the IMF Policies" [www.actionaid.org/sites/files/actionaid/aaik_imf_policies.pdf]

The above mentioned CSIS publication stated: "According to an International Monetary Fund report released in February, Fiji’s 2006 coup coincided with a severe decline in economic growth. From the 1990s until the 2006 coup, economic growth averaged 2.75 percent per year".

The cascading effects of the 2008 Wall Street implosion, gives readers pause for thought, regarding the correlation and causality of any decline in economic growth in Fiji, let alone the world economy.
More so, it calls into questions the inability of the IMF or the World Bank to have prevented the Global Financial Crisis in the first place and dampen the damaging  ripples of  the financial Tsunami still unwinding in Europe.

The taglines "rule  of  law" and "good governance" are ostensibly used in many academic reports to point out short falls in a certain nation's state policies, in tackling corruption related problems. Or the lack of political will to reform plagued institutions.
The question that begs to be asked, is whether think tanks like CSIS are equally capable of reporting the shortcomings of governance in Pacific regions, as well as the glaring control frauds occurring in Wall Street or actively point out the revolving door between financial regulators and  K- street lobbyists.

PBS Frontline documentary "Money, Power & Wall Street" does provide yeoman's work in examining the timeline and events prior to the Global Financial Crisis.

Episode 1 (below)

Watch Money, Power and Wall Street: Part One on PBS. See more from FRONTLINE.

Episode 2 (below)

Watch Money, Power and Wall Street: Part Two on PBS. See more from FRONTLINE.

Episode 3 (below)

Watch Money, Power and Wall Street: Part Three on PBS. See more from FRONTLINE.

Episode 4 (below)

Watch Money, Power and Wall Street: Part Four on PBS. See more from FRONTLINE
.

The above listed Frontline documentary is exceptionally adept in addressing the timeline of events, it rather avoids calling for prosecution occurring for criminal acts within the financial system. The perpetrators in this sense, aided and abetted by politicians, have formed a cartel that controls the levers of power.

Bill Moyers articulated this revolving door syndrome in a TV segment (posted below).

For years, high-ranking administration officials have spun through the revolving door between the White House and American big business. But how have they influenced the regulation and reform of industries from which they came, and American democracy as a result?

Dr. Bill Black,addresses those in grained flaws, in a podcast  (posted below) that is fittingly titled:"Our System is so Flawed, Fraud is Mathematically Guaranteed".








CSIS publication ends with the following sentence: "[The U.S] therefore has a proven interest in promoting good governance as a critical part of helping the Pacific Islands maintain stability and reach their economic potential".

It is increasingly obvious, that the "good governance"  and "rule of law' in the U.S is in fact crony-capitalism, thinly veiled in democratic ideals.  Given that resources are presently being exported  from the region, readers should be concerned whether the CSIS, is actually advocating the same crony capitalism model for the Pacific, as a means to reach their economic potential.



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Coming In From The Cold?

In recent months Fiji has welcomed to its shores, the Foreign Minister of Russia and more recently the senior diplomat of Qatar. Other bilateral meetings with Iraq and Kuwait have also eventuated, including other nations.

SiFM
"Both Foreign Minster's unscheduled visit to Fiji, is somewhat symbolic in nature, as well as a face saving gesture to restore what shreds of their spheres of influence left intact since their self-imposed absence."

The recent announcement of the nascent Australian Foreign Minister, Bob Carr to visit Fiji, in mid stream of his Washington stop, was quite surprising to say the least . However, Carr's Fiji's stop was undoubtedly influenced by a little chat with  the 'foggy bottom' folks quite concerned at Canberra and Wellington's incessant refusal engage directly with the Fiji Government and in the process isolated the Western aligned alliance diplomatically and undermining their regional moves on the geo-strategic chessboard. 

Tagging along with Foreign Minister Bob Carr to display a united front, is New Zealand Foreign Minister, Murray McCully who also confirmed his itinerary in joining this last minute Pacific Islands Forum Ministerial Contact Group (MCG) visit to Fiji.
It is understood that other Ministers from Pacific Island Forum (PIF) nations, notably from Polynesian client states are only present to bolster the island look of the Anglosphere duo, Carr and McCully respectively; whose nations dominate the proceedings of the Pacific Forum, an organization deemed as an anachronism by Melanesian and Micronesian states.

36th Parallel interview, (video below) outlines the current seismic change in regional affairs.





This disengagement with Fiji by the Trans-Tasman nations, had subsequently encouraged other friends of Fiji, to close ranks and displace the diplomatic rapport they once held. Both Foreign Minster's unscheduled visit to Fiji, is somewhat symbolic in nature, as well as a face saving gesture to restore what shreds of their spheres of influence left intact since their self-imposed absence.

Another unspoken agenda in their visit of both senior diplomats and colonial cousins from the metropolitan nations, is the ambition to shore up support to the former premier regional multi-lateral organization Pacific Islands Forum(PIF) that has since been languishing in the looming shadow of the regional sub-group Melanesian Spearhead Group (MSG).

Another perspective by Dr. Wadan Narsey provides another independent view.

The excerpt:

Pacific tilting west to PNG – and Super Power rivalry

http://pacific.scoop.co.nz/2012/04/pacific-tilting-west-to-png-and-super-power-rivalry/

14:56 April 27, 2012 0 comments

Papua New Guinea gold ... vast mineral wealth changing Pacific politics

Photo: Kiridaresources

Pacific Scoop:
Commentary – By economist Professor Wadan Narsey

If this was a news release by a geologist, alarm bells would be ringing around the Pacific and international scientific community. But retitle it “Pacific politics tilting to PNG” and the alarm bells would be ringing in Samoa, Tonga and the Cooks (as I am sure they already are).

However, if Papua New Guinea ever decides to flex its burgeoning muscles, encouraged by a belligerent Fiji, the alarm bells would be ringing loudest in Canberra and Wellington.
Without doubt, Pacific politics is tilting towards the west, drawn by the all-powerful and inexorable gravitational forces of the massive LNG and other minerals wealth being generated in Papua New Guinea (and in West Papua – another sorry saga).

Pacific regional initiatives such as PICTA and EPAs with the European Union (administered by Forum Secretariat in Suva) or PACER Plus (administered through the Office of the Chief Trade Adviser in Vila) are going to be largely eclipsed by the Melanesian Spearhead Group of PNG, Fiji, Solomon Islands and Vanuatu, headquartered in the Chinese built secretariat in Vila. But are the PNG politicians prepared for the leadership role that comes with their wealth and markets?

Or will they be too bogged down in their debilitating internal squabbles for political power so as to ensure preferential access to the massive new wealth flows being created?
Relations with Australia and NZ are going to be a key factor in the direction taken by PNG and the MSG group, and that will depend critically on what PACER Plus offers the PICs, and how fast.
Understanding the complex chop-suey of forces at work in the Pacific is extremely difficult, as the diversity of issues discussed by this article indicates.

Super Power rivalry

But almost certainly, history, time and the “Pacific tilt” are not on Australia’s side. More than a decade ago, US withdrew its Peace Corps programme from the Pacific.  But in 2011, US Secretary Of State Hillary Clinton warned the US Senate Foreign Relations Committee not to cut the US foreign aid budget, citing the growing competition with China for global influence, specifically mentioning the Pacific and its vast natural resources.

The US is now back in the Pacific with a large new US Embassy in Suva, to rival the equally large Chinese Embassy. US has  also now stationed a small number of troops in North Australia, a move which is seen by an annoyed China as part of the US “containment policy” towards China.

The numbers of US troops will no doubt slowly grow, alarming Australian strategy advisers who see too close an attachment to US military strategies as being potentially harmful to long term Australian economic interests, which are inextricably linked to China’s economic growth (and which was the most significant factor saving Australia from the Global Financial Crisis).
Without doubt, super-power rivalry in the Pacific is now escalating.
PNG will have far more bargaining chips than ever before, especially if its leaders are able to successfully play off one Super Power against another, and take a leadership role in the Pacific, including the MSG.

W. Narsey
" Pacific regional initiatives such as PICTA and EPAs with the European Union (administered by Forum Secretariat in Suva) or PACER Plus (administered through the Office of the Chief Trade Adviser in Vila) are going to be largely eclipsed by the Melanesian Spearhead Group of PNG, Fiji, Solomon Islands and Vanuatu, headquartered in the Chinese built secretariat in Vila. "

Largest market

Papua New Guinea with its population of 7 million people is the largest market in the Pacific Island Countries Trade Agreement (PICTA), with the others just making up less than 2 million.
Yet 10 years ago, the PNG market was not given much importance by the other Pacific Island companies because the largely rural PNG consumers were too poor to spend money on modern goods. That has now totally changed with the massive economic growth now taking place in PNG, with equally large investment and consumer expenditures from both the private sector and government.

Foreign companies, including Australian, are taking a renewed interest in PNG. Even Fiji companies have made a beeline for PNG, pushed abroad by the last six years of economic stagnation in Fiji. All of a sudden, the Melanesian Spearhead Group (MSG) of PNG, Fiji, Solomon Islands, and Vanuatu has become the substantial integration movement in the Pacific, totally eclipsing PICTA.

The MSG is also achieving trade integration advances which PICTA has failed to deliver while PACER Plus totally stagnates.

Pacific countries will continue to talk endlessly on PACER Plus, as they did when PICTA was being negotiated, with every tiny trading or local commercial interest dragging the negotiations down to a snail’s pace, to the financial delight of an army of consultants.
This strengthening of the MSG has been assisted by Fiji’s belligerent attitude towards Australia and NZ, secretly admired by the political leaders of PNG, Solomon Islands and Vanuatu, who have long harboured intense resentment at what they perceive to be the paternalistic and condescending attitudes of Australian and NZ political leaders towards the Melanesians.
Underlying all this antagonism is the virtually taboo subject of Australian and NZ racism against the Melanesians, which surfaced in an oblique way at a recent conference at Deakin University in Geelong on PNG’s future.

Melanesians feel racism

This two-day conference produced many useful contributions from Australian and PNG academics and participants. But one jarring note in an otherwise diplomatic opening address by the debonair  Sir Charles Lepani (PNG High Commissioner to Australia) was his emotional complaint about the “galling” barriers faced by PNG nationals requiring a visa to come to Australia, while Australians come and go freely in PNG. This observation was greeted with applause by the largely white Australian audience, who had faced such difficulties when trying to get visas for PNG nationals.

Another senior and influential bureaucrat, a “mover and shaker” in PNG, complained bitterly that he had been coming to Australia for four decades, yet the Australian immigration department still wanted his bank balance and his grandparents’ addresses.
Ironically, while speaker after speaker (both PNG and Australian) complained about the post-independence debilitating deterioration in PNG civil service efficiency and widespread corruption, eminent Professor Ross Garnaut threw in a sobering reminder that the decades in which Australia controlled PNG before independence was “no golden era” for PNG people either, when they were required to have a permit to even come into their own capital, Moresby.

The conference was also reminded by yours truly that while Australia easily and freely gave out more than 600,000 work/holiday/study visas to a number of mostly white countries, PNG had yet to be confirmed for a quota of a mere 100

‘Blackbirding’ memories

Melanesian countries still remember their people being “blackbirded” a century ago, to clear the land in Australia for white farmers, and then callously and cruelly expelled (with the Chinese and Indians) to create the “White Australia” after federation in 1905 (led by Prime Minister Deakin). Today, the Melanesians are affronted that the descendants of that early slave labour are clearly not wanted in Australia in the way whites are.

In an evening function, very senior PNG people (including white Australian PNG “old hands”) confided quietly that the negative Australian attitude to PNG people was racism pure and simple – a continuation of the “White Australia” policy.
Few from the Melanesian Pacific would disagree, as they see that the Pacer Plus negotiations are bogged down by Australia on the one benefit that the Pacific countries feel would balance all the many costs of pure trade integration.

All PICs want is reasonable access for unskilled PIC “guest workers” into Australia – to ease their home unemployment and increase their valuable remittance earnings which has kept poverty at bay in several countries such as Fiji, Samoa, Tonga.
But for almost a decade now, Australia has been dragging its feet on proposals to let a few thousand Pacific Islands workers come to pick fruit, all under tightly controlled conditions, while 600,000 young workers from Europe, with minimal control or organisation whatsoever, come and go with a year’s permit for work and/or holiday, readily granted.

Add Sino-phobia

Many political strategists in Australia and NZ are worried about China’s rapid incursion into Pacific economies and politics, even though China is merely doing much the same kinds of things which other Super Powers and donors have done in the past century.

China may be extremely secretive about their financial flows to recipient countries and politicians. For instance, there is little publicly available data about what exactly are the loans which many Pacific countries are taking on for future generations.
But unlike Australian and NZ, China has little concern for insisting on local governance standards or basic human rights of the PIC citizens.

Sadly, the Western powers excluded China in their regional discussions with PICs, as I pointed out at a PIDP meeting in Honolulu early in 2011, on the future of the Pacific. The improbable excuse given was that there were “visa difficulties” for Chinese delegates.
It is open to question whether China will be any less racist or paternalistic or condescending than Australia or NZ.  But Chinese diplomats are not likely to make the political gaffes which Australian politicians make regularly with respect to the Pacific.
Australian failures
Australia’s failure to win the hearts and minds of Pacific political leaders may be contrasted with NZ’s greater success with Pacific countries, and with their Maori population.
No power-hungry Pacific politician is ever going to prise the Cook Islands, Tokelau or Niue (or even Samoa and Tonga) out of New Zealand’s camp.

Even Kiribati is now over the moon with Fiji, which has offered (sold) them a large block of land which will have more earth in it than all of Kiribati combined. While Kiribati’s President Tong hastily said the purchase was for food security and not settlement, there is little doubt that it also is going to provide a refuge for any I-Kiribati climate change refugees.
The I-Kiribati know that Tuvaluans are already quietly and happily acquiring property in Fiji, with no fuss whatsoever from Fiji authorities.  Tuvaluans are hard-working law-abiding residents of Fiji, enjoying all the benefits of good education for their children, health services for their sick, and a hospitable social environment.

Massive Australia, despite its daily acknowledgement of significant labour shortages for the foreseeable future, has made no such grand symbolic gesture towards the atoll countries which would have cost it so little and gained so much. It is not surprising that, apart from a few small Polynesian countries, the rest of the Melanesian and Micronesian Pacific has refused to speak out against the military regime in Fiji, despite the considerable diplomatic pressure from Australia and NZ.

W. Narsey
"Many political strategists in Australia and NZ are worried about China’s rapid incursion into Pacific economies and politics, even though China is merely doing much the same kinds of things which other Super Powers and donors have done in the past century. "

The PICs all know that Australia has been dragging its feet for a decade on PACER Plus negotiations and refusing to budge on access to Pacific unskilled labour, while the smaller NZ economy has had a small guest worker scheme operating very successfully for several years.
Australian needs to pay more attention to PNG views: one speaker at the Deakin conference on PNG futures quite bluntly told the gathering: “If Australia does not want to play ball with PNG, then we will play ball with China”.
The reality is that PNG is now positioned to lead a mass break-out of the economic barriers that Australia has built up against the ordinary poor and unskilled black populations in the Pacific.
While perpetually decrying the deterioration in governance and public services in PNG and other Melanesian countries, Australia has been ruthlessly extracting the very professional and skilled PIC citizens, whose departure is one fundamental cause of PIC economic and social disintegration.
It is a paradox to many Pacific economists why Australia is so backward in its policies towards the Melanesian countries.

Saying ‘sorry’

In the absence of any great Australian awareness of Australia’s exploitation of Kanaks in the past, it might be difficult to argue that Australia has any subconscious guilt complex towards Melanesians, as they seemed to have towards the Aboriginals.

But Australian political leaders, after a century of silence, finally said “sorry” to Aboriginals for all the horrifying injustices done to them in the past. It would be an interesting PhD to examine whether saying “sorry” has made any improvements at all to the political relationships between Australian and Aboriginal political leaders, and more importantly, to the welfare of the Aboriginals whose conditions are closer (by all the MDG criteria) to the poverty stricken people in sub-Saharan Africa, than to the rest of white or Asian Australia.

Perhaps the Melanesian countries should demand that Australia also say “sorry” to them, for the atrocities committed against the Kanak labourers a century ago. Acknowledging those past brutalities (and you might first need a few TV documentaries to drive that message home to the unaware Australian public) might encourage Australia to treat Pacific Island countries fairly and with human decency in the PACER Plus negotiations.

If PACER Plus delivers on the unskilled labour market benefits that PIC leaders want, and quickly, then Australian and NZ politicians might also have fewer nightmares about being outmanoeuvred by China in the Pacific, plus enjoy a lot of benefits as well.

Dr Wadan Narsey is a Fiji economist, academic, former parliamentarian and independent media commentator. He is a regular columnist on Pacific Scoop and Pacific Media Centre Online.

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Beazely Bi-lateral Gatekeeping & US Engagement In The Pacific

Fiji One TV segment covers the recent remarks of Australian Ambassador to the U.S, Kim Beazely (K.B) in an interview with "The Diplomat" dated April 14th 2012 titled "How Australia Sees America".

"The Diplomat "(T.D) interview excerpt that focused on US's engagement in the Pacific and Australia's assumed sphere of influence:

(T.D) Within the alliance, the South Pacific has traditionally fallen within Australia’s sphere of influence. In recent years, Australia has taken the lead on engaging its neighbors in the region on behalf of the West, including taking on major peacekeeping operations in Papua New Guinea and the Solomon Islands and taking the lead on engagement with Fiji. However, significant challenges have emerged in a number of these countries. Democracy hasn’t taken hold and there now appears to be a slitting of the Pacific Islands Forum along Melanesian and Polynesian lines.

This raises the question of whether the United States should not only take a more assertive role in the region, but also advance an alternative diplomatic approach in situations like Fiji or PNG. From Australia’s perspective, do you see any tension forming within ANZUS on diplomatic engagement in the South Pacific? And, how concerned are you about the rise of anti-Australian sentiment and the emergence of the Melanesian Spearhead Group as a possible alternative to the Pacific Islands Forum?

(K.B) The thing that we have always appreciated in our relationship with the United States is that the U.S. has always kept its engagement with the South Pacific islands under constant discussion with us. They engage us on where American policy is going. Clearly, from our point of view, the U.S. determines its own direction wherever it goes. It will rationalize that policy direction with its friends and others as the U.S. sees fit.

From our point of view, what’s much more important is that the U.S. is engaged. We think that it is good for the countries of the region that the U.S. involves itself. We have been arguing to – rather than with – the United States for a very long time that they become more involved in the region. So, we would do nothing but encourage them.

The region is getting increasingly complex as the leaders in the region become more adept at international diplomacy and more aware of the character of international relations. Australia doesn’t own any of this territory. We did once – at least part of it. But, we don’t own any of it now. So, our concern for that region is that they be wealthy, happy, cheerful, well-governed. That is our objective. And, we all stand for democracy. So, we are prepared to provide material assistance where that aid is sought – not imposed – by countries in the region. Because the U.S. tends to have very civil values, the U.S. is engaged in pursuing those objectives too. 

We don’t have any problems with the U.S. keeping the backdoor open as long as they consult with us. Clearly the U.S. will make up its own mind on what direction it wants to go. So long as it doesn’t give us any surprises, we have no basis for complaint.
The MSG has been around quite a long while, and we have coexisted with it jointly. So, it’s not something that has us phased or fussed.

More views from Kim Beazely below:

Trade &  Security Lecture At University of Virginia March 28 2012(Video posted below)

CSIS Interview Oct 17th 2011 (video posted below)




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Islands In The Cyber Stream.

Pacific Institute of Public Policy (PiPP) a think-tank (some have equated think tanks to universities without students).
PiPP unveiled a discussion paper (PDF) on the inherent benefits of the internet and the extent of mobile  penetration in the South Pacific:

 Over the past few years, attitudes towards telecommunications in the Pacific have
shifted. Complacent monopolies are being replaced by greater policy engagement,
and a more competitive marketplace. Wireless networks are significantly cheaper to
roll out than cable-based ones, especially in areas lacking significant road and power
networks. As wireless capabilities increase, so too do revenue opportunities as we are
now seeing with the delivery of data services via mobile phone networks.

Map from discussion paper.

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X-Post- New York Times: China Buys Inroads in the Caribbean, Catching U.S. Notice

China's developments in the Caribbean as outlined in a New York Times (NYT) article, brings to mind an earlier SiFM post titled "The Islanders with a Dragon Tattoo" , the recent reports of the arrival of US Marines in Darwin and Huawei being blocked from bidding on Australia's broadband network. All symptoms of the changing geostrategic landscape.

The excerpt of NYT article:


China Buys Inroads in the Caribbean, Catching U.S. Notice 

Jason Henry for The New York Times

Tourists and locals enjoying the view at a restaurant and bar in Nassau, a beneficiary of China's largess. More Photos »Slide Show Jason Henry for The New York Times

By RANDAL C. ARCHIBOLD

Published: April 7, 2012 

NASSAU, the Bahamas — A brand new $35 million stadium opened here in the Bahamas a few weeks ago, a gift from the Chinese government. 

T he tiny island nation of Dominica has received a grammar school, a renovated hospital and a sports stadium, also courtesy of the Chinese. Antigua and Barbuda got a power plant and a cricket stadium, and a new school is on its way. The prime minister of Trinidad and Tobago can thank Chinese contractors for the craftsmanship in her official residence.
China’s economic might has rolled up to America’s doorstep in the Caribbean, with a flurry of loans from state banks, investments by companies and outright gifts from the government in the form of new stadiums, roads, official buildings, ports and resorts in a region where the United States has long been a prime benefactor.

The Chinese have flexed their economic prowess in nearly every corner of the world. But planting a flag so close to the United States has generated intense vetting — and some raised eyebrows — among diplomats, economists and investors. “When you’ve got a new player in the hemisphere all of a sudden, it’s obviously something talked about at the highest level of governments,” said Kevin P. Gallagher, a Boston University professor who is an author of a recent report on Chinese financing, “The New Banks in Town.” Most analysts do not see a security threat, noting that the Chinese are not building bases or forging any military ties that could invoke fears of another Cuban missile crisis. But they do see an emerging superpower securing economic inroads and political support from a bloc of developing countries with anemic budgets that once counted almost exclusively on the United States, Canada and Europe.

Jason Henry for The New York Times (More Photos)

The $35 million stadium in Nassau financed by China.

China announced late last year that it would lend $6.3 billion to Caribbean governments, adding considerably to the hundreds of millions of dollars in loans, grants and other forms of economic assistance it has already channeled there in the past decade. Unlike in Africa, South America and other parts of the world where China’s forays are largely driven by a search for commodities, its presence in the Caribbean derives mainly from long-term economic ventures, like tourism and loans, and potential new allies that are inexpensive to win over, analysts say. American diplomatic cables released through WikiLeaks and published in the British newspaper The Guardian quoted diplomats as being increasingly worried about the Chinese presence here “less than 190 miles from the United States” and speculating on its purpose.
 
One theory, according to a 2003 cable, suggested that China was lining up allies as “a strategic move” for the eventual end of the Castro era in Cuba, with which it has strong relations. But the public line today is to be untroubled. “I am not particularly worried, but it is something the U.S. should continue to monitor,” said Dennis C. Shea, the chairman of the U.S.-China Economic and Security Review Commission, a bipartisan Congressional panel. But, he added, “With China you have to be wary of possible policy goals behind the effort.” This archipelago, less than a one-hour flight from Florida, has gotten particular attention from the Chinese. Aside from the new stadium, with its “China Aid” plaque affixed prominently at the entrance, Chinese workers here in the Bahamas are busy helping build the $3.5 billion Baha Mar, one of the region’s largest mega resorts.

Beyond that, a Chinese state bank agreed in recent weeks to put up $41 million for a new port and bridge, and a new, large Chinese Embassy is being built downtown. The new stadium here, Bahamian officials said, was in part a reward for breaking ties with Taiwan in 1997 and establishing and keeping relations with China. It is one of several sporting arenas that China has sprinkled in Caribbean and Central American nations as gratitude for their recognition of “one China” — in other words, for their refusal to recognize Taiwan, which Chinese officials consider part of their country. “They offered a substantial gift and we opted for a national stadium,” said Charles Maynard, the Bahamian sports minister, adding that his government could never have afforded to build it on its own.

 In this enduring tug of war with Taiwan, others have switched, too, with a little financial encouragement. Grenada ended relations with Taiwan in 2004, and it is now in talks with China about getting a new national track and field stadium. The parting has not been entirely amicable; Taiwan and Grenada are now locked in a financial dispute over loans that Grenada received to finance the construction of its airport. Determined not to be sidelined, Taiwan is seeking to solidify its existing relationships with countries like Belize, St. Kitts and Nevis, and St. Lucia — which in 2007 broke relations with China in favor of Taiwan — with a bevy of projects, many of them agricultural, including an agreement signed with Belize in recent weeks to develop the fish farming industry there. Still, Taiwanese diplomats in the region conceded that they could never keep up with China’s largess but continued to make strategic investments in the Caribbean. There are some commodities in the region that China wants.

In August, a Chinese company, Complant, bought the last three government sugar estates in Jamaica and leased cane fields, for a total investment of $166 million. Last year, Jamaica for the first time shipped its famed Blue Mountain Coffee to China. The Jamaican government has also received several hundred million dollars in loans from China, including $400 million announced in 2010 over five years to rebuild roads and other infrastructure. “In order to be prosperous you need to build roads first,” said Adam Wu, an executive with China Business Network, a consulting group for Chinese businesses that has been making the case for China in several Caribbean countries.

Several analysts in the Caribbean say they believe that China eventually will emerge as a political force in the region, with so many countries indebted to it, at a time when the United States is perceived as preoccupied with the Middle East and paying little attention to the region. “They are buying loyalty and taking up the vacuum left by the United States, Canada and other countries, particularly in infrastructure improvements,” said Sir Ronald Sanders, a former diplomat from Antigua and Barbuda. “If China continues to invest the way it is doing in the Caribbean, the U.S. is almost making itself irrelevant to the region,” he added. “You don’t leave your flank exposed.” In some places, Chinese contractors or workers have stayed on, beginning to build communities and businesses.

So many have opened in Roseau, Dominica, that local merchants have complained about being squeezed out. immigration over the past century, but locals are now seeing more Chinese restaurants and shops, as well as other signs of a new immigrant generation. “I am second-generation Trinidadian-Chinese, and like most of us of this era, we have integrated very well in society, having friends, girlfriends, spouses and kids with people of other ethnicities,” said Robert Johnson-Attin, 36, a mechanical engineer now with his own successful business. “It’ll only be a matter of time before it happens with the Chinese coming in now.”

Here in the Bahamas, Tan Jian, the economic counselor at the Chinese Embassy, said he that believed “it’s only the start” of the Chinese presence across the Caribbean, casting it as one developing country using its growing economic power to help other developing ones. The Bahamian government, he said, “cannot afford to build huge projects by itself.” While the Chinese built the stadium, the Bahamas is responsible for utility hookups and the roads and landscaping outside it. The $35 million gift “is costing us $50 million,” said Mr. Maynard, the sports minister. “But at the end of the day it will pay for itself” by putting the Bahamas in position to host major sporting events and reap the tourism revenue that comes with that. For Baha Mar, the Chinese Export-Import Bank is financing $2.6 billion, nearly three-quarters of the cost, and China’s state construction company is a partner.

The Bahamas agreed to allow up to 8,000 foreign workers, most of them Chinese, to work on the project in stages, but it also required employment for 4,000 Bahamians, dampening concerns that Chinese workers were taking jobs. American companies will also take part in building and running it. Mr. Jian played down any economic competition with the United States, whose tourists, he asserted, stood to benefit from China’s presence in the Caribbean. The Chinese workers here live in barracks behind the project fences, largely shielded from public view. “We hardly know they are here,” said James Duffy, watching a track practice next to the stadium one recent afternoon, adding with a chuckle: “Except for the big things they build.”  

Karla Zabludovsky contributed reporting from Mexico City, Camilo Thame from Kingston, Jamaica, and Prior Beharry from Port of Spain, Trinidad and Tobago .


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MSG Talks In Fiji.

Melanesian Spearhead Group (MSG) Economic Ministers meeting begins in Suva, followed by the Leader's Summit later in the week. The MSG Senior Officials Meeting (SOM) which began over the last few days, had met, to discuss key points of cooperation; as reported by Solomon Star (S.S) article.

The excerpt of S.S article:

MSG meets key cooperation issues

Sunday, 25 March 2012 10:37

Senior Officials from the five members of the Melanesian Spearhead Group met key cooperation issues to be presented to the Foreign Ministers Meeting this week.

Chair of the MSG Senior Officials Meeting (SOM), Mrs Saipora W. Mataikabara thanked delegates from Papua New Guinea, Solomon Islands, Vanuatu, FLNKS and Fiji for their contribution and cooperation on addressing these key issues of common interest at the two-day meeting.On the first day, SOM endorsed among other issues the Director General’s Report to the Leaders, Secretariat papers on MSG Properties, Corporate Planning Process and the MSG Secretariat Soft Reforms.  SOM Chair confirmed that the Secretariat papers were to strengthen the organization’s administration arm of the MSG organization.

Mrs Mataikabara said on the second day of meeting the other reports presented to SOM were all endorsed.  She said the members’ endorsements reflected the common interests of the MSG in strengthening cooperation amongst member countries in particularly on cultural cooperation for instance the endorsement of the draft MSG MOU on Cultural Cooperation presented by the MSG Council of Arts & Culture.  She said other issues that will promote more cooperation between member countries include the preparation for the first Melanesian Games in 2013 as mandated by Leaders on 31st March 2011 was also endorsed by the Senior Officials Meeting today.

Mrs Mataikabara said the Special SOM was also able to endorse key recommendations presented by the Subcommittee on Institutional Issues (SCLII) to complete discussions on the Review of the Agreement Establishing the MSG. 

SOM Chair said legal and institutional issues are backbones of MSG as an organization and that is why members felt that careful consideration on the legal and institutional issues will help guide senior officials, foreign ministers and leaders in making sound decisions to strengthen the organization.  A key recommendation that was endorsed by SOM is that SCLII meet in July to further complete important discussions on the Review of the Agreement Establishing the MSG, Reporting Requirements, Membership Issues (Observers & Associate Members) and MSG Visa Arrangements.

Reports from the different subcommittees and technical committees such as Security, Trade and Economic Officials Meeting (TEOM), and the Police Commissioners’ Conference were also endorsed.  The draft MOU for the MSG Skills Movement Scheme and the MSG Trade Agreement on Rules of Origin and principles for enhancing fiscal management in Melanesia were all endorsed this special SOM.
Mrs Mataikabara thanked all delegates for their participation and cooperation in the pre-Summit SOM and confirmed that the SOM outcomes will be presented to the Foreign Ministers Meeting for their consideration this week.

Fiji Times article, quoted from MSG Director General, Peter Forau, who alluded to the absence of "power play" within the MSG; in comparison to the regular undue influence from larger metropolitan countries, in  the Pacific Islands Forum (PIF). Mr Forau highlighted the growing influence of the MSG, which could over shadow the PIF.

Excerpt of Fiji Times article:

No 'power play'

Elenoa Baselala
Monday, March 26, 2012

Director Trade and Investment MSG secretariat Mere Falemaka (left) and Barbara Ege

THE Melanesian Spearhead Group can easily become an influential power in the region, even more than the Pacific Islands Forum Secretariat.

"This should have happened long time ago," MSG director general and former Pacific Islands Secretariat deputy secretary general Peter Forau said.

In an interview with The Fiji Times, Mr Forau who has been on the job for the past six months said the MSG, made-up of the five big economies in the South Pacific region Vanuatu, Papua New Guinea, Fiji, New Caledonia and the Solomon Islands had great potential to become influential.

In fact, Mr Forau said the MSG trade agreement was the only trade agreement that was working with the Pacific Island Countries Trade Agreement "all over the place".
And while, many see the MSG as a threat to regional unity, Mr Forau said this was not the intention of the MSG.

Mr Forau said unlike PIFS, the MSG members had equal rights and there was not much "power play" or influence from bigger countries.
"If the MSG is seen as a threat that is not our intention, we are just working in the best interests of our members.

"If we are to become influential that is the natural cause of things," Mr Forau said.
Mr Forau, however cautioned, that for the MSG to grow to greater heights it must be united.
And they must do things to international standards to be recognised globally.
"Things are starting to happen. There are a lot of opportunities," he added.
The MSG Foreign Economic Ministers meeting starts today and ends tomorrow. The Leaders Summit will follow on Thursday and Friday.

In a Fiji Village (FV) article, Forau also addressed the need for the MSG countries to bring the benefits to their citizens.

Excerpt of FV article:

MSG issues to benefit citizens- Forau  

Publish date/time: 26/03/2012 [11:21]

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The Melanesian Spearhead Group cooperation must bring gains for their citizens at the national level.

That was the message Director General for the MSG secretariat Peter Forau urged regional Foreign Affairs ministers at the opening of the meeting this morning in Suva.

The Foreign affairs ministers will consider political, trade, economic, social and Secretariat organizational issues of interest that have been endorsed by the senior officials last week.

The Foreign Ministers Meeting will then present to the Leaders' Summit to make decisions which will be implemented accordingly.

Forau has encouraged the ministers to discuss and think thoroughly on the issues put forward.

Leaders attending later this week include Prime Minister Commodore Voreqe Bainimarama, spokesperson of the FLNKS Victor Tutugoro, PNG Foreign Affairs Minister Ano Pala,  Prime Minister of Vanuatu Sato Kilman and Prime Minister of the Solomon Islands Darcy Lilo

Fiji's Foreign affairs minister Ratu Inoke Kubuabola officially opened the meeting at the GCC complex in Nasese.

Story by: Sofaia Koroitanoa

Fiji News footage (video below) of the recent discussions among MSG Trade officials.



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X-Post from Island Business: A New Era of Geopolitics In The Region

Michael O’Keefe•


Last month, the Russian Foreign Minister Sergey Lavrov visited Fiji. There has been much speculation about the purpose of the visit, but this needs to be contextualised so we can make sense of its significance.

The extremes of opinion waiver between arguing that the visit heralds a major shift in the foreign affairs of the Pacific to arguing that it was simply routine diplomacy. It was neither. We need to dig deeper. We need to ask Why Fiji [the South Pacific?]? Why Now?

An overarching answer to these questions is geopolitics and strategic change. Geopolitics relates to the intersection of geography and politics. It focuses on shifts in relative power and what we are witnessing is a larger global geopolitical contest being played out in the Pacific.

To-date most discussion of regional strategic affairs has focused on China’s growing interest and whether this equates to influence. This is an issue worthy of attention but not the focus here. Suffice to say, the era of crude chequebook diplomacy whereby China and Taiwan faced off in the Pacific over diplomatic recognition is over.

China is engaging the Pacific at all levels (diplomatic, economic, cultural) and is staking its claim to being a worthy partner, especially in the context of Australian and New Zealand isolation of, and disengagement from Fiji.

Michael O’Keefe

"The political situation in Fiji may provide opportunities for engagement for the Chinese or Russians but for all powers. Fiji has strategic significance beyond its political or economic power.

This is the oft-cited ‘hub of the Pacific argument’. The ‘hub’ argument deserves close scrutiny because it is mentioned so regularly and often without explanation.

The point is that historical trends have been based on geography and have left Fiji at the centre of diplomatic, economic and educational interaction and cooperation in the region."

China’s growing interests in the region have not gone unnoticed in Washington and Canberra (and Moscow).
US President Barack Obama’s recent comments about the renewed US role in the Pacific century have highlighted the potential for strategic competition in the region the likes of which have not been seen since the end of the Cold War in the late 1980s.

Back then the issue was Soviet fishing agreements, which were seen as avenues for access for intelligence gathering in an area of primary strategic concern to the US and to its allies, Australia and New Zealand.
Fears over Soviet penetration in the region were proven to be exaggerated, but they did prompt a diplomatic reaction. The same is happening now but in the lead-up to the visit the Russian Foreign Minister himself highlighted that now it is Russia attempting to balance the US and China rather than being the main strategic competitor.

Why now? The most obvious answer to this question relates to global geopolitical changes. That is, that a rising China is challenging the US and that it is responding. Countries like Russia, South Korea and Indonesia see that their interests could be impacted and are taking action. This orthodox view is dealt with in-depth in the commentary so it won’t be a focus here.

The rest of this article focuses on issues closer to home.

It may also not be a coincidence that political instability in Fiji after the 1987 coup wrong footed the traditional metropolitan powers in relation to local support for protecting their strategic interests. At this stage, it was the potential for Soviet expansionism in an area that had hitherto been Australia and New Zealand’s patch.

Interestingly, at the time China also took note insofar as political change created opportunities for Taiwan to gain some headway, albeit briefly. Now it is arguable that China is benefitting from political change in Fiji and it is not only the Americans and their Australian and New Zealand partners that are taking note.

The political situation in Fiji may provide opportunities for engagement for the Chinese or Russians but for all powers. Fiji has strategic significance beyond its political or economic power. This is the oft-cited ‘hub of the Pacific argument’. The ‘hub’ argument deserves close scrutiny because it is mentioned so regularly and often without explanation. The point is that historical trends have been based on geography and have left Fiji at the centre of diplomatic, economic and educational interaction and cooperation in the region.

This is a colonial legacy, but one which Fijian leaders from Ratu Sir Kamisese Mara to the present have fostered. The hub may relate to the diplomatic missions that serve many Pacific Islands Countries (PICs), regional organisations such as the Pacific Islands Forum or Secretariat of the Pacific Community, the headquarters of major intergovernmental organisations, such as the UN, or non government organisations in Suva, the University of the South Pacific etc.

The hub also relates to Suva as a major economic hub for exports, the trans-shipment of essential supplies, such as fuel, etc. Economics is often cited as a core strategic issue, but in perspective Pacific trade with any of the interested external powers is relatively small in comparison to their economic interests elsewhere.
Even the most generous predictions would not place the Pacific in the top 20 trading partners for the countries competing for influence in the region.

Furthermore, for the foreseeable future the potential for significant growth may be more illusory than real in all areas (such as mining seabed resources) except tourism which will maintain its traditional position as an area where the potential for growth can be realised. As such we can largely discount the economic angle at this stage, despite much commentary on the bauxite mining and fishing agreements.

However, PICS are right to be concerned over unsustainable economics in relation to mining or fisheries. It is the strategic aspect of geopolitics that provides the clearest explanation for Russia’s recent diplomatic manoeuvring.

Fiji gives a country or organisation access to the Pacific. It is an economy of scale, and for a country rediscovering the Pacific, such as Russia is now, it is essential to be on good terms with the Fijian government to reap the benefits of the hub. As such, the Foreign Minister’s meetings involved the Fijian government, but other PICs were invited to meet and attend diplomatic functions in Nadi.

Fiji’s ‘Look North’ policy has opened the door to greater cooperation. In this context Russia’s advances could be added to a long list of countries that have increased their profiles in the Pacific since 2006, not least of which is China, South Korea, Indonesia, the US and UAE. Discussions with other countries, and organisations, such as the Arab League are also underway.

Suva has also reasserted its leadership role. It has been suspended from the pre-eminent regional organisation, the Pacific Islands Forum, following the 2006 coup. However, it has effectively used the Melanesian Spearhead Group (MSG) whose members include the larger PICs to forward its interests.
The MSG also highlights that there is an alternative to the PIF and one which is more relevant to Fiji’s interests than the other PICs.

During the Cold War the catch cry was “The Russians are coming! Run for the hills”. The concern over Russian diplomacy in the South Pacific is reminiscent of this sort of thinking. But context counts and the South Pacific of 2012 is not the South Pacific of 1980s.

Furthermore, the hub, Fiji, is not the Fiji of the 1980s either. There is a growing confidence in Fijian foreign affairs and the expectation is that the partnership and friendship posed by any country will be closely scrutinised through the lens of Fijian national interests.

The time when any great power would overtly influence Fijian diplomacy may be at an end, with obvious implications for traditional partners or new players on the block. There are dangers and vulnerabilities that come hand in hand with the opportunities to be gained from the greater attention that great powers are showing the Pacific.

Some of the distortions evidenced during the era of checkbook diplomacy come to mind, and this will be the issue in relation to recognition of Abkhazia and South Ossetia. There are already rumours of millions of dollars being spent to influence the votes of some PICs.

Furthermore, Russia’s main competitor in this regard, Georgia, has also been showing interest with increased aid and diplomatic representations. Russia has directly stated that Abkhazia is not the issue and Lavrov did not publicly raise it while visiting the Pacific, but this denial and Georgia’s interest should be treated as a signal of the opposite.

Any PICs building close relations would be factoring this into their engagement, especially considering Georgia broke off relations with Tuvalu over this issue last month. Global geopolitical reordering is playing out in the Pacific. The post-2006 diplomatic standoff has led to diplomatic opportunities. Fijian leaders are showing a new confidence by taking advantage of these opportunities and so too have many foreign powers that have hitherto shown little interest in the region.

Through Fiji’s leadership and role as a regional hub other PICs have also reaped the benefits of these developments. There are benefits and costs involved in this sudden interest, but PICs are showing greater confidence in viewing the benefits of cooperation through the lens of national interest.

Maintaining this focus will be their challenge as this trend intensifies in the years ahead.

• Dr Michael O’Keefe is a Senior Lecturer at La Trobe University & Adjunct Associate Professor at the Centre for Regional Affairs, University of Fiji.

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X-Post- 36th Parallel Weekly Analysis: Commodities Boom widens PIF Rift.

In order to understand political dynamics, underlying economic factors often need to be considered. The growing rift within the Pacific Island Forum between the Melanesian Spearhead Group (MSG) and the Polynesian Leaders Group (PLG) is one such instance.

The metals boom preceded the minerals boom, both of which have been paralleled by  ongoing interest in discovering new sources of energy, oil and natural gas specifically. Once metals markets were consolidated, investment flows turned to mineral resource extraction and towards exploring previously inaccessible sources of oil and natural gas. Rising prices for fuel and mineral commodities in an era of technological innovation has pushed capital investment into previously unexploited areas of the globe, including the South Pacific. Under highly competitive market conditions, Asian capital has joined the quest and accelerated the pace of primary resource investment even where it remains a secondary market player. The race to secure market share in these commodities is well and truly on.


Against that backdrop  Commodore Voreqe Baimimarama travels this week to Vanuatu in his capacity as Chairman of the Melanesian Spearhead Group (MSG) , a sub-group of the Pacific Island Forum (PIF) regional organization that encompasses most Pacific Island States, including Australia and New Zealand. Created in 1999, the MSG has recently been rivaled by the 2010 creation of the Polynesian Leader’s Group (PLG), which aggregates eight members of the PIF.

Unlike the PLG, the MSG has an established institutional structure and programmatic agenda, increasingly  dominated by Fiji due to its diplomatic importance and the relative underdevelopment of or political instability in other member states (New Caledonia, Papua New Guinea, the Solomon Islands and Vanuatu).The MSG contains a multilateral trade agreement between the its members, and because of historical investment interest in resource extraction in the sub-group (forestries and fisheries as well as minerals), it has seen the bulk of regional foreign investment in the last two decades. The ExxonMobil-led liquefied natural gas project in the PNG is one sample of that ongoing interest, now pushed into newly exploitable areas.

Polynesia has begun to experience the impact of the global energy and mineral rush. Whereas MSG members have a number of land and seabed mineral exploitation contracts within their Exclusive Economic Zones (EEZs), only recently have PLG nations begun to see significant investment in land mining, and fewer have seabed exploitation agreements (one, Nauru, has secured a license to exploit seabed resources in international waters). Many of the companies involved in developing the PLG region for mineral extraction are already in the MSG, so the economies of scale they bring to negotiations with small Polynesian states provides them with good leverage when negotiating agreements. As in the case of MSG members, these contracts are not bound by regulatory vehicles embedded in regional trade agreements such as PACER and PICTA (on regional architecture, see here).

36th Parallel Analysis

"Fiji is the strongest partner with the MSG, that antagonism has spilled into MSG diplomacy vis a vis the Antipodean states and has seen the sub-group prioritize its relations with Asian partners as a balance to Western patronage relationships (which is based more on developmental aid than investment).
[...]The sanctions and suspension regime has done little to hurt the Baimimarama regime but have pushed both Fiji and the MSG more firmly into an Asian-centric diplomatic orbit, accentuating the cleavage within the PIF (which the MSG sees as too compliant with Australian and New Zealand diplomatic interests)."

The PIF is an observer of the Trans-Pacific Partnership Agreement (TPPA) negotiations involving the US, Australia, New Zealand, Chile, Singapore, Peru, Brunei, Vietnam and Malaysia.  Japan, South Korea and Canada have also expressed desire to join the TPPA. Should the TPPA be ratified, increased trade volumes within the region are expected to grow even if the PIF does not become a full member itself. However, discussion has begun within the MSG about emphasizing bi- and multilateral trade with the so-called BRIC emerging economies: Brazil, Russia, India and China. None of these are party to the TPPA and yet are among the fasting growing economies in the world. They are, in fact, emerging great powers, gradually supplanting traditional Western powers as the motor force of the global economy.

China already has an established economic footprint within the MSG and its diplomatic presence, the largest in the PIF region, has grown  commensurate to the size of its investments. Russia and Fiji have just signed economic cooperation agreements, and Indian venture capital has made footholds there as well.

This trend has begun to be seen in PNG and the Solomons. Should the move to emphasize trade and investment between the MSG and BRICs lead to higher levels of commerce with the latter, the impact will significantly increase the investment gap between the MSG and PLG. Given its larger membership and smaller resource base, PLG benefits from an eventual TPPA will be much more diffuse than in the MSG with or without the BRIC connection. The more the BRIC-MSG connection comes into play, the less the MSG will need to be part of the TPPA and other pan-Pacific trade agreements. Should that happen, the MSG will begin to outweigh the PLG influence within the PIF, which opens the possibility of  an MSG-Australia/New Zealand confrontation within the PIF because the Antipodean states do not want the PIF to be dominated by Fijian interests.

As a result of the 2006 coup that brought Commodore Baimimarama to power, Fiji is currently suspended from the PIF and Commonwealth, and has been the subject of sanctions by Australia, New Zealand, the US and European Union. In response, Fiji has strengthened its ties to non-traditional partners such as China, something that gives it more flexibility in its foreign relations. Although the US has  softened its stance regarding the Baimimarama regime and its timetable for 2014 elections, the impasse continues with the Commonwealth, EU, Australia and New Zealand. Because Fiji is the strongest partner with the MSG, that antagonism has spilled into MSG diplomacy vis a vis the Antipodean states and has seen the sub-group prioritize its relations with Asian partners as a balance to Western patronage relationships (which is based more on developmental aid than investment).

Respecting the concept of national sovereignty, Asian economic partners are less concerned about Western notions of good governance, transparency, labor market conditions and environmental impact and more focused on returns on investment. This approach has been successfully used by Western companies operating within the MSG. The sanctions and suspension regime has done little to hurt the Baimimarama regime but have pushed both Fiji and the MSG more firmly into an Asian-centric diplomatic orbit, accentuating the cleavage within the PIF (which the MSG sees as too compliant with Australian and New Zealand diplomatic interests).

Against this backdrop, Baimimarama’s inspection visit before the 19th MSG conference later  this month provides him with the opportunity to set the agenda for this year’s discussions and to solidify Fijian interests within the group. Contentious topics such as granting both Indonesia and Western Papua observer status in the MSG (given Indonesian occupation of  Western Papua) are likely to be downplayed in favor of a consensus on strengthening ties with non-Western states and solidifying the MSG’s pre-eminent position within the PIF, at the expense of the PLG (and the much smaller Micronesian States Chief Executives Group).
Consolidating his position as leader of the MSG reinforces Baimimarama’s position at home, where in the face of Western demands that he keep to a timetable leading to open elections in 2014 he can point to demonstrable gains in terms of Fijian influence in regional politics as well as increases in Asian capital investments in that country (even if the country has experienced negligible net growth in the last decade). Bolstered by such events, the Baimimarama regime may feel confident enough to delay or cancel the elections, which will have major implications for the PIF.

The rift within the PIF  is evident in increased MSG demands that Fiji be included in any PIF trade discussions (such as PACER Plus). Whichever the approach adopted by the PIF Secretariat (inclusion of Fiji on matters of trade or its ongoing suspension), the division between the MSG and PLG is likely to widen in 2012. Boosted by the influx of foreign investment in minerals and energy exploitation, the MSG is in a position to make demands within the PIF that it previously could not. Given the failure of the sanctions regime, the inclusion of Fiji in future trade talks (the next PIF forum is in late August) could be a way of incrementally restoring it to full membership status while allowing Canberra and Wellington to save face (recent reports suggest that Australia and New Zealand are already re-considering the issue of Fijian sanctions). The ball is in the MSG court, with Fiji controlling the MSG play.

Summary PIF stability score is 5 (medium), the MSG score is 7 (good) and the PLG is 2 (low). (Stability score is ranked 1-10 on a range extending from none to full institutional capability and enforceable authority over time).

Futures Forecast: Sharpened differences between the MSG and PLG within the PIF will lead to an institutional weakening of the latter.

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