Report

Islands of opportunity: stepping up to the Pacific's energy challenge

17 May 2019
Description

Australia’s renewed commitment to the Blue Pacific comes at a vital time.

The stubborn challenges in the region seem to be becoming more acute. The development financing and aid landscape is becoming more contested. And Australia’s international reputation as an aid partner has been diminished in recent years on the back of a dwindling aid budget and diminished institutional capacity.

In this context, Australia’s Pacific ‘Step Up’ is also a step forward. But it’s essential that, in the rush to implement it, the opportunity to design a lasting, transformational infrastructure investment facility is not squandered. This report offers ideas that will help the AIFFP, Australia’s new infrastructure financing facility, achieve these aims.

This report begins by outlining the nature of the Pacific’s infrastructure challenge and Australia’s response. Within the region, an underinvestment in infrastructure, and inadequate asset management practices, have resulted in the dire need for basic infrastructure delivery. This investment deficit inspired a suite of measures by the Australian Government, but as is noted, certain elements of the current approach may have unintended consequences.

It then looks at the Pacific’s electricity challenge, which is twofold: across the Melanesian states of PNG, Solomon Islands, Vanuatu and (to a lesser extent) Fiji, as well as Timor Leste, millions of people have no access to electricity. In Micronesia and Polynesia, where electricity access is closer to 100 per cent, governments, communities and businesses are burdened by a reliance on expensive diesel-fuelled generation. It argues overcoming these challenges should be a priority for the Australian Government.

The report then offers ideas about how the Government can incentivise Australian industry to participate in overcoming the electricity challenges in the Pacific, while ensuring Australian investment doesn’t stifle local agency. The AIFFP could be structured in a way that encourages Australia’s nascent renewable industry to consider future investment in Pacific markets without undermining the capacity of existing Pacific firms to meet local needs.

Finally, this report offers recommendations aimed at ensuring the AIFFP delivers a lasting benefit to the Pacific, and is shaped in a way that allows it to take on the electricity challenge. It offers ideas ranging from allowing the AIFFP to offer finance and insurance separate from EFIC, to providing employment pathways for locals, focusing on rural electrification, fostering maintenance culture, incentivising responsible private sector investment, and more.

Australia’s Pacific step up, and the creation of the AIFFP, provides a once in a generation opportunity to radically improve development outcomes in the Pacific while confirming Australia’s value to such a vital region.

But so far, the AIFFP has been hampered by a rapid implementation, an unclear focus and an unimaginative design that resembles the approach of Australia’s competitors.

This report plots an alternative pathway.

Publication Details
Language: 
English
License Type: 
All Rights Reserved
Published year only: 
2019
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