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Development assistance in the Pacific

Pacific Regional—Economic growth and private sector development

Overview

Working with Pacific partners to build a region that is secure, stable and economically strong is one of Australia’s highest foreign policy priorities. Closer integration among Pacific countries, and with larger economies such as Australia, is essential to the region’s long-term economic prospects.

Australia’s response to COVID-19

Strict border measures, combined with lower demand for Pacific exports and a collapse in tourism, have come at a high economic cost.

In response, Australia is committing $304.7 million to deliver critical financing to the Pacific and Timor-Leste to help mitigate fiscal crises, maintain critical social services, protect the most vulnerable people, and support economic recovery.

The two-year package (2020-21 and 2021-22) will be a temporary and time-bound addition to the existing and ongoing $4 billion ODA budget. It will build on our existing bilateral partnerships and investments and complements existing Pacific Step-up initiatives and finance from the international financial institutions.  It also complements Australia’s $100 million immediate Response Package which was delivered at the beginning of the pandemic.

The Partnerships for Recovery: Australia’s COVID-19 Development Response strategy sets out how Australia’s development efforts will work alongside the full suite of our national capabilities—diplomacy, defence, security, commercial links, scientific skill, people-to-people ties—to address the challenges of COVID-19 in the Pacific and beyond.

Economic Recovery

Australia has reopened Pacific labour mobility, working with industry and whole-of government partners to identify additional sectors and new pathways for labour mobility to Australia. We support the continuation of remittance flows to the Pacific, as well as rural and regional Australia labour market needs.

We will support the implementation of the Pacific Agreement on Closer Economic Relations (PACER) Plus to boost regional trade and investment. PACER Plus will play a role in economic recovery and strengthening the rules-based system that underpins international trade.

We will support inclusive skills development across the region through the Australian Pacific Training Coalition. We will adapt training to ensure future offerings reflect the new needs of Pacific employers, including digital literacy, and those industries hardest hit by COVID-19, and maximise the opportunities created by labour mobility.

Our partnerships with multilateral development banks and international financial institutions will support Pacific nations to access global finance. By August 2020, 46 per cent of the USD1.5 billion requested from the IFIs by Pacific countries had been approved or disbursed.

Australia will continue to work with Pacific island governments, the World Bank, ADB and the United Nations to access finance, policy and technical assistance and improve crisis response and multilateral system reform to build back better. 

Related initiatives

Pacific Private Sector Development Initiative (PSDI) Phase IV

Up to $32.3 million, 2020-2024

Australia has been a long-standing supporter of the Asian Development Bank’s Pacific Private Sector Development Initiative (PSDI). Australia is supporting the current phase of PSDI - PSDI IV. PSDI works with the ADB’s 14 Pacific developing member countries to reduce constraints to doing business to support inclusive, private sector-led economic growth. 

Countries benefiting from the program include Cook Islands; Federated States of Micronesia; Fiji; Kiribati; Nauru; Niue; Palau; Papua New Guinea; Republic of Marshall Islands; Samoa; Solomon Islands; Tonga; Tuvalu; and Vanuatu.

The overall goal of PSDI is to reduce unnecessary costs of doing business in the Pacific and enable private sectors to formalize and grow, to  create jobs, increase tax revenues, and lift people out of poverty.

To achieve this, PSDI helps Pacific countries address the problems outlined above through its five focus areas. The specific goals of the focus areas are to:

  • Streamline  cumbersome business laws and regulations
  • Improve financial markets and services that increase access to finance
  • Reform state-owned enterprises and pursue public-private partnerships
  • Establish effective competition and consumer protection frameworks
  • Advance the economic empowerment of women

While COVID-19 is creating significant new economic challenges for Pacific governments, the private sector will play an important role in economic recovery.

The economic impacts of COVID-19 are widespread across the Pacific, threatening the survival of many businesses and raising unemployment across the region. The implementation of emergency fiscal responses will increase public debt while lower economic activity will reduce public revenue, creating additional economic constraints for Pacific governments.

PSDI’s long-standing work improving businesses’ ability to access finance; ensuring that legislation and policy make it easy for businesses to start and operate; increasing the efficiency and reliability of state-owned enterprises; and protecting consumers; and continuing to develop competitive markets, will be critical to helping the private sector drive economic recovery.

PSDI will provide crucial assistance to this recovery by drawing on its strong track record, regional experience, the complementarity of its work areas, and long-standing relationships with Pacific governments and private sector stakeholders, while continuing to boost the resilience of the private sector to protect against future economic shocks.

Related documents*

Name of document Year published Type
Pacific Private Sector Development Initiative, Mid-term review 2017 Mid-term review

Management response to the Pacific Private Sector Development Initiative, Mid-term review

2017

Management Response to the mid-term report

Related links

International Finance Corporation (IFC) Pacific Partnership (Regional)

Up to $49 million, 2012-2022

The IFC Pacific Partnership, co-funded by New Zealand, combines advisory services with investments to generate private sector activity and economic growth in Pacific Island countries. IFC's work is aimed at improving domestic business opportunities, and accessing and creating new markets. IFC's focus to improve policies, build sustainable business environments, reform the regulatory environment, eliminate discrimination, provide alternative dispute resolution mechanisms and improve access to finance will increase opportunities for trade and improve economic prosperity in the Pacific.

A key focus is increasing women's economic empowerment, particularly by leveraging opportunities and addressing challenges to women's employment and leadership in the workforce, supply chain, customer base and leadership of companies to produce better business and development results.

Since 2012, the Pacific Partnership has mobilised over USD 843 million in investment, delivered over USD 232 million in lending to over 2,400 small and medium enterprises, extended access to financial services for 2.2 million Pacific Islanders, including over 507,000 women, and improved access to basic infrastructure for 1.9 million people. 

Related documents*

Name of document Year published Type

In Partnership: Australia, New Zealand and the International Finance Corporation

2020

Information booklet

More than profit: contributing to sustainable economic development through the Pacific Partnership

2016

Progress report

Assessment of the economic impact of cruise tourism in Papua New Guinea and Solomon Islands

2016

Analysis

Vanuatu agri-tourism linkages: a baseline study of agri demand from Port Vila's hospitality sector

2015

Baseline study

Assessment of the economic impacts of cruise ships to Vanuatu 2014 Analysis

Related links

Pacific Readiness for Investment in Social Enterprise

Up to $9.7 million, 2016-2020

Impact investors seek social as well as financial returns from their investments. In 2015 DFAT began an innovative pilot to test impact investment business development models in the Pacific, with the aim of developing "investment ready" enterprises that could attract private capital.

Following on from an initial trial, which demonstrated early potential for impact investment in the region, a new initiative, the Pacific Readiness for Investment in Social Enterprises Facility (Pacific RISE) commenced in 2016 to further connect impact investors to Pacific social enterprises.

Pacific RISE seeks to facilitate an impact investment market in the Pacific with the aim of delivering greater economic empowerment in the Pacific, particularly for women. Operating across 14 Pacific island countries, Pacific RISE has a goal of attracting at least $10 million of new private investment into the Pacific by July 2021.

Pacific RISE funds technical assistance for enterprises based in or serving Pacific Island countries. It also works closely with impact investors to promote investment that improves economic and social outcomes, including for women.

The pilot is also pioneering a "gender lens investing" approach that incorporates gender analysis into financial analysis and investment decisions.

Related links

Pacific Financial Inclusion Program

Up to $31.2million, 2009-2020

The Pacific Financial Inclusion Program (PFIP) aims to increase access to financial services among low income and rural households through activities such as designing financial literacy programs, capacity development of financial service providers and regulatory bodies and giving performance-based grants to financial service providers to develop and implement pro poor financial services.

PFIP is a multi-donor fund program – EU, UNDP, UNCDF, DFAT (Australia), NZ Ministry of Foreign Affairs and Trade – and is jointly implemented by United Nations Development Program (UNDP) and the United Nations Capital Development Fund (UNCDF). Australia provided around $4.75m of total funding for Phase 1 which ended in June 2014. Phase 2 of PFIP commenced from July 2014 with total DFAT funding of $27.4million (50 per cent contribution).

Key achievements in Phase 1 include:

  • providing financial access to nearly 600,000 previously unbanked people, including 250,000 women
  • developing Financial Inclusion and Financial Literacy strategies for PNG, Fiji, Solomon Islands and Vanuatu and a National Financial Literacy strategy for Samoa
  • establishing national finance inclusion taskforce in PNG, Solomon Islands, Vanuatu and Fiji
  • establishing financial competency baselines for PNG, Fiji, Samoa, Solomon Islands
  • mainstreaming financial education programs into the core curriculum in schools (Fiji and Samoa)
  • effective dissemination of information to scale through training, workshops and publications.

PFIP's strategic partnerships with an array of private sector players, government agencies, and central banks across Fiji, Papua New Guinea, Samoa, Solomon Islands, Tonga and Vanuatu have enabled Pacific islanders to access financial services and products through alternative channels of distribution using digital financial services.

Key achievements in Phase 2 include:

  • An additional 1,600,000 people gaining access to an appropriate, affordable financial service
  • Over 580,000 previously unbanked women gaining access to a formal savings account
  • An additional five Pacific Island countries having national financial inclusion strategies
  • An additional three countries are now offering financial education through core curricula in school or tertiary institutions.

Related documents*

Name of document Year published Type
Management Response to the End of Programme Evaluation of the Pacific Financial Inclusion Programme – Phase II 2019 Management Response to the Final Evaluation report
Pacific Financial Inclusion Program Mid-term review and management response 2017 Mid-term review

Related links

PACER Plus Implementation Unit

Up to $19 million, 2020-2025

PACER Plus is due to enter into force on 13 December 2020. Eight countries have now signed and ratified the Agreement: Australia, Cook Islands, Kiribati, New Zealand, Niue, Samoa, Solomon Islands and Tonga.

As a trade and development agreement, it provides a platform to help keep markets open, develop common protocols and guidelines to facilitate trade. It also offers a regional framework for additional trade related assistance following entry into force, which will help support the region’s economic recovery. Australia and New Zealand are jointly funding this AUD25.5 million (AUD19 million and NZD7 million) development and economic cooperation package over 5 years to help Pacific island countries realise the benefits of the Agreement. The work program of activities will be agreed by Parties and delivered by the Implementation Unit.   

Related links

Pacific Horticultural and Agricultural Market Access (PHAMA) Plus

Up to $35.6 million, 2018-2022

The Pacific Horticultural and Agricultural Market Access Program (PHAMA) Plus program is the successor program to PHAMA (2010-2017), assisting Papua New Guinea, Fiji, Tonga, Samoa, Vanuatu and Solomon Islands.It builds on the work and relationships established in PHAMA to help increase the quantity and quality of their agricultural, horticultural and cultural exports sustainably to benefit the producer and exporter. Ultimately, PHAMA Plus aims to contribute to improved economic growth and improved rural livelihoods in 200,000 Pacific households through either increased net attributable income in targeted farming households, increased turnover in targets exporters, processors and intermediate service providers, or other Pacific producers and exporters replicate new practices, addressing critical agricultural and food security supply chain issues.

Very recently, the program has responded to significant biosecurity threats to the region, African Swine Fever and Fall Army Worm outbreaks establishing partnerships with Biosecurity authorities in PNG with the National Agriculture and Quarantine Inspection Authority (NAQIA) and Vanuatu (Department of Biosecurity Vanuatu) to support improved delivery of selected biosecurity services in preparedness for, and prevention of African Swine Fever (ASF) incursion.  While disruptions have occurred due to COVID-19 and Tropical Cyclone Harold the program delivery has been effectively maintained in this difficult context.  PHARMA Plus has pivoted to contribute to COVID-19 economic recovery, for example, through implementing a partnership with HACCP Australia for development of remote HACCP accreditation renewal systems with Pacific-based exporters.

Related documents*

Name of document Year published Type
Pacific Horticultural and Agricultural Market Access Program (PHAMA) Plus Investment Design Document 2018 Design document
 
Pacific Horticultural and Agricultural Market Access Program (PHAMA) Evaluation Report 2016 Independent evaluation
Partnering for more secure South Pacific trade 2014 Publication
Annual Strategic Plan 2014/2015 2014 Annual plan
Annual Strategic Plan 2013/2014 2013 Annual plan
Independent Review of the Pacific Horticultural and Agricultural Market Access (PHAMA) Program 2013 Independent evaluation

Related links

Reducing the cost of remittances to the Pacific

Remittances represent a vital source of income for many countries in the region, and are an important avenue to greater financial inclusion. Pacific island countries are more dependent on remittances than other countries in the world. In Tonga for example, the value of remittances are equivalent to a third of Tonga’s GDP.

Recognising the role of remittances in advancing inclusive and sustainable development, Australia places a high priority on facilitating remittance transfers to the Pacific. At the household level, money remitted by overseas workers to their families can help smooth consumption, cover essential costs such as education and healthcare, and cushion the effects of shocks caused by economic downturns or natural disasters.

However, the cost of sending remittances to the Pacific from Australia remains high, and above the global average. The high cost is related to a number of factors, including structural issues that make operating financial services difficult and costly; and behavioural issues, where a lack of information and/or digital skills capacity poses challenges to the uptake of new remittance service options  

To address these problems, the Department of Foreign Affairs and Trade is supporting a range of activities to ensure that financial channels remain open, safe and affordable. 

Send Money Pacific Website ($1 million, 2016-2020)

Send Money Pacific is a remittance price comparison website allowing users to compare the cost of sending remittances from Australia and New Zealand to eight Pacific countries (Fiji, Kiribati, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tuvalu and Vanuatu). Send Money Pacific also allows users to compare the cost of sending remittances from the US to Fiji, Samoa and Tonga.

AUSTRAC Pacific Islands Partnership ($1 million, 2020-2022)

The Australian Transaction Reporting and Analysis Centre (AUSTRAC) aims to enhance the capabilities of Pacific financial intelligence units and promote greater regional collaboration to combat money laundering and terrorism financing risks in the South Pacific region. This partnership will seek to maintain integrity and trust in the Pacific financial system, enhance economic security and governance, and increase confidence that the Pacific remains a safe destination for the conduct of remittances.

Expansion of ‘Ave Pa’anga Pau to Australia

Funded under the IFC Pacific Partnership, the IFC has developed the Tonga ‘Ave Pa’anga Pau remittance voucher in partnership with the Tonga Development Bank.

The IFC designed the ‘Ave Pa’anga Pau in response to ongoing de-risking policies that resulted in the closure of money transfer operators in New Zealand in 2015. Since its launch in 2017 in New Zealand, uptake has been growing amongst Tongan workers and diaspora, with most if not all Tongan seasonal workers using this service. The cost of remitting through ‘Ave Pa’anga Pau is also low at around five per cent, which is well below the average cost of remitting to Tonga from New Zealand.

Building on this success, the IFC is working to expand ‘Ave Pa’anga Pau to Australia.

Related links

Pacific Trade Invest Australia

$10 million, 2019-2022

Pacific Trade Invest (PTI) Australia is a trade and investment promotion agency focussed on developing and promoting businesses and people from the Pacific through trade, investment, tourism and labour mobility. PTI Australia is an agency of the Pacific Islands Forum Secretariat and supports 16 Forum countries.

In 2019, PTI Australia facilitated over $26 million of trade and over $2 million of investment for the Pacific, including assisting over 200 women-led businesses.

Related links

The Department of Foreign Affairs and Trade – Department of Agriculture, Water and the Environment Pacific Biosecurity Partnerships Program

$2.1 million, 2020-2023

In response to growing biosecurity threats in the Pacific and the Pacific step-up agenda, the Department of Foreign Affairs and Trade and the Department of Agriculture, Water and the Environment have entered into the Pacific Biosecurity Partnerships Program. Aimed at enhancing Australia's contribution to Pacific agricultural sector growth and improving food security through better market access and biosecurity outcomes, the partnership seeks to:

  • Boost agricultural export opportunities for Pacific Island farmers and exporters by continuing agricultural produce import risk assessments to resolve market access issues, progress new access to markets and improve existing access, supporting Pacific Island exports to be more viable/feasible.
  • Introduce International Plant Protection Convention (IPPC) Generic ePhyto National System (GeNS) to a number of South West Pacific countries that do not have the capability via this national system to produce and receive ePhytos. This will allow Pacific countries to exchange phytosanitary certificates electronically in an innovative, cost effective and globally harmonised way to enhance Pacific countries international market access and trade.
  • Develop and deliver a plant Biosecurity operations training accreditation program to strengthen Pacific Island countries biosecurity operational capabilities. This will assist Pacific National Plant Protection Organisations to meet the phytosanitary requirements of importing countries for plant products and reduce non-compliance incidences. This will reduce wastage and remedial costs, and boost the return on investment to rural communities and small exporter businesses.
  • Develop and deliver a regional trade and market access communication strategy to promote harmonised and consistent messaging on trade and market access issues and benefits across the region.
  • Scope the need and benefit of updating or redeveloping the regional plant pest and biosecurity status database, in collaboration with the Pacific Plant Protection Organisation (PPPO) and the Pacific Community (SPC).

The partnership will focus predominantly on Papua New Guinea, Fiji, Solomon Islands, Vanuatu, Tonga, Samoa and Timor-Leste, but will also involve other Pacific island countries, particularly the ePhyto component. The partnership will play an important role in operationalising Australia's PACER Plus commitment to facilitating trade with Pacific Island countries. The partnership will work closely with the Australian Pacific Horticultural and Agricultural Market Access Program (PHAMA).

Pacific Financial Technical Assistance Centre (PFTAC)

Up to $28 million, 1995-2023

The IMF's Pacific Financial Technical Assistance Centre (PFTAC) based in Suva supports macro-financial stability in the Pacific (16 member countries) by assisting Pacific Island Country (PICs) policy makers to develop more sustainable fiscal policies, respond to macroeconomic shocks, and maintain sound financial systems.   Australia is a founding donor of PFTAC and provides around one quarter of PFTAC's funding.  The Asian Development Bank, Canada, European Union, Japan, Korea and New Zealand also fund PFTAC operations. PFTAC has been a strong partner for Australia to support economic policy reforms in the region.

As an arm of the IMF embedded in the region, PFTAC is well positioned to play a key role in supporting Pacific Island Countries (PICs) to manage macro-economic shocks from COVID−19. PFTAC's early response has included redirecting resources to support the IMF's surveillance work, and assisting PICs seeking additional or debt relief. Resources are being reallocated to support adjustments to macro-economic projections to reflect COVID−19 impacts; and capacity development in areas including better spending, revenue mobilization and financial sector stability. The IMF/PFTAC is in discussion with other donors on enhanced support for debt management in the region. PFTAC has commenced work on an 18-month project to address Correspondent Banking Relationships (CBR) and remittance challenges in the region, as part of the work undertaken by the South Pacific Central Bank Governors group.

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