Australia, Japan, US Partnership Targets Pacific Infrastructure

Prior to the APEC summit held in Papua New Guinea in mid-November, Australia, Japan, and the United States signed a Memorandum of Understanding (MOU) to instigate a cooperative Trilateral Partnership for Infrastructure in the Indo-Pacific. The agreement will be a collaboration between Australia’s Department of Foreign Affairs and Trade (DFAT) and its Export Finance and Insurance Corporation (Efic), alongside the Japan Bank for International Cooperation (JBIC) and the U.S. Overseas Private Investment Corporation (OPIC). The signing of the MOU put into operation an initiative that had originally been constructed in Washington D.C. in July.

Through this MOU, the three countries are hoping to utilize both their public and private sector capital and expertise to deliver much needed infrastructure projects like ports and roads, enhance digital and energy connectivity in regions lacking this access, and boost the region’s overall development goals. It is estimated that the Indo-Pacific region has a $36 trillion deficit in infrastructure, and the countries would seek to consulate with local leaders on how best to make an impact into on this deficit.

The announcement comes as the strategic competition with China in the region continues to intensify, and language used when announcing this new partnership indirectly indicates that the action is a response to increased Chinese activity in the region. Australia’s statement on the MOU made notable use of the phrase “quality infrastructure development” — frequently used by Japanese Prime Minister Shinzo Abe — as a signal that Chinese investments may not be of the same high standard. The statement reiterated this perspective by further using the phrasing “principles-based, sustainable investment in infrastructure,” again alluding to China in the negative, without actually mentioning the country.

For this language and approach to remain authentic the Trilateral Partnership will need to make sure that their forthcoming investments are directly targeting projects that will have the most impact. And for the initial project announcement this looks to be the case. The trio of the countries, partnering also with New Zealand, have announced an ambitious plan to dramatically increase access to electricity within PNG. Currently only 13 percent of PNG’s population has access to consistent sources of power in their homes, and much of this supply remains unreliable, with blackouts common. The plan is to increase access to reliable electricity to around 70 percent of the population by 2030. The anticipated cost will be $1.7 billion.

If successful, the potential to improve quality of life and dramatically increase the country’s economic growth is apparent. However, beyond the cost the project will also face considerable logistical hurdles. Around 90 percent of PNG’s population live in rural areas, and much of the country is rugged mountainous terrain, with limited access via roads. The isolated nature of many of the country’s regions makes it extremely difficult to connect them to PNG’s current electricity grid (and explains why the figure of connected households is so low). Many regions also currently rely on expensive diesel fuel, limiting their ability to allocate resources more efficiently.

The reality of PNG’s terrain may require solutions that instead involve technologies that are highly localized and region-specific, rather than an attempt to create a centralized source of power generation. Currently most of PNG’s power comes from hydroelectric sources, and the ample water resources in the mountainous highlands makes a further roll-out of this form of electricity supply the most obvious path forwards, although with the decreasing costs of solar power generation, and ease of installation in remote regions, it is highly likely that this will prove attractive as well. The country also has abundant liquified natural gas reserves; however, currently all gas from these resources (including the large ExxonMobil PNG LNG, which was predicted to transform the PNG economy) is exported to Asia, and not utilized locally.

While this new Trilateral Initiative is an obvious reaction to China’s regional ambitions, if done consultatively, respectfully, and effectively, it will also be a welcome engagement in the Indo-Pacific region for these three states. That’s particularly true in countries like PNG where development requirements remain significant. But the engagement should also be an avenue to form more genuine and intimate partnerships in the region, beyond a transactional “donor-recipient” arrangement. This has the most potential to enhance regional development and security, while also maintaining positive influence.