Paradise in Debt – China and ‘debt trap diplomacy’

Fiji for most is a tropical paradise where the water is warm and the weather is always idyllic but Fiji, like some of its Pacific Island neighbours, is sitting on a debt crisis that could have significant geopolitical impact for generations to come. 

The author of this article, Gianpaulo, is based in the South Pacific and is a student of Counterterrorism, Intelligence and Security. Interested in everything related to National Security. 24 News Enthusiast, political junkie and working on his first book ‘Hitchhikers Guide to National Security’.

It’s 11:00am local time in Nadi, the weather is a fine 31-degree celsius and the humidity is sitting around 90%, sitting by the beach its peaceful and not a care in the world can be had about what lies outside of this resort. You can hear the birds chirping and a couple of minutes ago I saw a coconut fall out of a tree, this truly is a tropical paradise.

But since the last coup that Fiji experienced when now Prime Minister Frank Bainimarama took control of the government this tropical home away from home has struggled with a new issue – cash in the region.

When the Fijian Coup of 2006 took place, Australia and New Zealand were quick to denounce the military and pull their High Commissioners from Fiji leaving no presence until they recommitted to diplomatic ties may years later.

The vacuum felt hurt Fiji, not by much as travellers still came from all over but the US cut $2.5 million in aid, the Commonwealth disavowed the government and country and with the government interfering with censorship of the media, free speech was silenced at a time that a free and independent press would be able to challenge the legitimacy of a coup that many condemned domestically and internationally.

This brings in our first act, the People’s Republic of China – there was a vacuum in diplomatic relations and the ability to buy influence. It starts simple, the Chinese enter and offer the government of a nation the ability to build infrastructure with Chinese money (e.g. roads, hospitals, ports).

The government agrees and talks up the potential benefit to local employment.

What the government doesn’t realise at the time is that there is a high probability that they won’t be able to repay that debt but the Chinese government doesn’t worry about that because that is part of the plan. If the foreign government can’t repay the Chinese on time that is when the negotiations start, the Chinese will either want payment in full or something else – usually the infrastructure itself.

Vanuatu, similar to Fiji in its situation, now faces a similar problem. The Chinese government splashed cash to build sporting stadiums, convention centres and even a port that could allow cruise ships to dock and unload hundreds if not thousands of willing tourists to the region.

Now the Vanuatu Government can’t repay the money that they borrowed to build the these expensive luxuries, luxuries that locals believed that the government shouldn’t build and now are within maintenance and, in the case of the convention centre, power.

So where does this leave Vanuatu? Potentially in a void where they are indebted to the Chinese, where their vote at the United Nations belongs to the Chinese and where the port, as a major strategic issue for Australia, could be converted to a dock for Chinese Naval vessels. Whilst the Chinese government and Vanuatu government both deny that this is the case but many analysis believe that it is inevitable.

You might be asking what sort of diplomacy this is– fortunately it has a name, unfortunately it’s a bleak one – Debt Trap Diplomacy.

In simple terms, think of it like the bank approaching you and saying that they will help you build that mansion and buy that luxury car that you have always wanted and all you would have to do is work hard and in five years time they would collect – don’t worry about it today, worry about it later.

The problem is that in five years time, once you’ve enjoyed the luxury the bill for all of it is higher than anything that you could ever afford so you’re stuck and you have two options: give in to the bank and find the money somehow to pay it all back in one hit or become a slave to the bank that put you there, doing their bidding when they whistle. Essentially this is debt trap diplomacy.

With the dispute in the South China Sea and the potential for China to establish military bases in the South Pacific many believe that this type of diplomacy could cause more long term problems for those that simply want to maintain the peace and put a hold on the arms race that is occurring.

Here in Fiji, especially in Suva, apartment blocks are being built and infrastructure erected as part of large Chinese projects that are being painted as modernising Fiji. However when you look closely there are no Fijians working on these projects with import workers being preferred. A tension is rising about how this will go down in the local community when the Fijian government can’t afford to repay the debt that they are racking up.

A recent visit from Australian Prime Minister Scott Morrison, the first prime minister to visit this country in two decades, was done as a good will trip to show that Australia valued Fiji, that the two countries have a long history together that can’t be changed but the fact remains, as the Fijian Attorney General Aiyaz Sayed-Khaiyum put it when asked by 60 Minutes Australia about this type of diplomacy ‘you left and the Chinese came’.

Debt trap diplomacy is here to stay and if Australia and New Zealand want to counter it in their region, the ensuing cash splash will have to be quite vast, meaning they may not be able to keep up with China.