Tonga urges Pacific nations to press China to forgive debts as Beijing defends its approach

Updated

The leader of Tonga has called on Pacific Island leaders to band together and press China to write off their debts, saying his small nation is suffering "serious" debt distress.

Key points: Tonga's Prime Minister wants to use the Pacific Islands Forum to tackle the Chinese debt issue

Akilisi Pohiva says the region should collectively urge Beijing to waive repayments

China says its aid is aimed at "improving people's lives" and "economic development"

The calls come as Beijing defended its spending program in the Pacific in a statement to the ABC as "sincere and unselfish" while arguing that it only provides loans to those who can afford it.

Several Pacific nations have taken on large loans from China, as well as from multilateral institutions.

Tonga confirmed last month it would start to pay back two loans worth around $160 million from China's Export Import Bank.

This morning Tonga's Prime Minister Akilisi Pohiva told the ABC the repayments would put pressure on his small country.

"It has become a serious issue. We have debt distress," he said.

But Mr Pohiva said Tonga was not the only Pacific Island nation which owed substantial amounts to China — and the region should collectively urge Beijing to waive repayments.

"It is no longer an individual issue for countries to consider. It has become now an issue for all countries who have loans from China," he said.

"I think these small countries will eventually come together to find a way out."

Pacific leaders urged to present united front against China

Pacific leaders will meet in Nauru next month for the Pacific Islands Forum (PIF) — and Mr Pohiva said he wanted to use the Forum to tackle the issue.

While there had been plenty of internal back and forth within Pacific nations over debt, raising the topic at PIF would represent a significant escalation.

But Mr Pohiva said Beijing would be more likely to listen if Pacific leaders presented a united front and asked for debt relief.

"China will not make a decision on individual requests," he said.

"China has to take into consideration all the countries that have loans."

Mr Pohiva first publicly raised the prospect of PIF discussing debt in an interview with the Samoa Observer last week, after a meeting of Pacific foreign ministers.

He said it was too early to predict if other nations would agree to discuss Chinese debt at PIF. "But some of these countries have already thought about it, and there have already been discussions by these countries outside formal meetings," the Prime Minister said.

Beijing defends its 'sincere and unselfish' spending

China's lending of hundreds of millions of dollars across the Pacific has also concerned the Turnbull Government, which warned the arrangements would erode the island nations' sovereignty.

"We recognise we're not the only partner, but we would like the Pacific to see Australia as providing them with the kind of support that maintains their sovereignty, maintains their economic stability and doesn't become an unsustainable debt burden," Ms Bishop told Fairfax last month.

There is also criticism of the previous Tongan government that took on the loans and its management of the funds.

Responding to questions from the ABC, the Foreign Ministry said China's aid was aimed at "improving people's lives" and "economic development".

"When those benefit countries encounter the difficulties during the process of paying the debts, China always properly handles the issue by bilateral dialogues," the Ministry said.

"In general, China would prolong the term of payment when it is necessary."

'China seems to be always the one to blame': Global Times

The Lowy Institute's report found that while Australia remains by far the biggest donor to the Pacific Island nations, China has been the second largest donor in recent years.

The report estimates that 70 per cent of Chinese aid money comes in as cheap loans which are used to fund the big projects Beijing favours.

Australia's International Development Minister Concetta Fierravanti-Wells says she thinks the issue of Chinese debts will be high on the agenda at next month's meeting of Pacific leaders.

Senator Fierravanti-Wells has previously accused Beijing of building 'roads to nowhere' and 'useless buildings' in the region, as it seeks to exert its influence.

She described Mr Pohiva's comments as interesting and said she was pleased to see the issue gaining attention.

"We're starting to see issues pertinent to debt, debt sustainability and lending feasibility appear in Pacific Island Forum documentation, so my sense is that it will be discussed," she told the ABC.

"I think it is important that it is discussed because it is vitally important to so many countries in the Pacific."

The Minister pointed to the Lowy Institute research which identified 13,000 projects involving 62 different donors in 14 different countries and she said it was unclear what conditions, if any, were attached to those loans.

"We do not know whether these are simply concessional loans, we do not know whether these loans are debt for equity, we do not know if these loans have assets that have been given as collateral for that loan," she said.

But in their comments to the ABC, Beijing maintained it "always pays high attention to sustainability" when dealing with Pacific countries.

"We will try our best … China's aid is always sincere and unselfish," the Foreign Ministry said in statement.

"[It has] won appreciation from the governments and the people from South Pacific Islands."

The Ministry added that before granting loans, China conducts "strict economic and technical evaluation, that fully considers the sustainability of those benefit countries and their ability of paying the debts back".

The state-owned Chinese tabloid the Global Times also published a comment piece shortly after the publication of the Lowy Institute report, saying that "finding fault" in its donations was not appreciated.

"China seems to be always the one to blame either for not helping others or for giving out too much help," the article said.

"There is clearly a mixture of vigilance and anxiety about China's growing sway in the region that is traditionally seen by Australia as its backyard."

Topics: world-politics, foreign-affairs, foreign-aid, pacific, china, asia, australia

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