The Guardian 7 May, 2008
Chasing the dragon
Ben Bohane
Rohan Ellis* suggests that the Pacific Islands should take a long term view when it comes to dealing with China rather than just dealing with "the first guy who walks in the door".
China’s go-go economy and relative political stability have ensured that China continues to reinforce its place as a growing world power as well as "the factory of the world". Rohan Ellis, chief trade representative for the Pacific Islands Forum Trade Office (PIFTO) in Beijing, says this represents an historic opportunity — and challenge for Pacific Island countries.
"China has opened up a whole new world of markets and investment opportunities for the islands. Each year we are seeing a 13 to 15 percent increase in SOE (Chinese State Owned Enterprises) investment in the islands and we expect this pattern will double within the next three years because of the China Economic Development Fund providing soft loans backed by China’s Export Import Bank (an offshoot of the Bank of China)", he says.
"The scale of China’s economy and their need for raw materials, sea resources, timber, food and niche products like black pearls from Tahiti or palm oil from PNG all add up to sizeable benefits — if the islands can get their act together."
Ellis says the Forum Trade office in Beijing, as the main umbrella organisation representing Pacific trade and policy interests in China, is in direct communication with various wings of the Chinese government to help manage the growing relationship between the Pacific Islands and Beijing.
The PIFTO works closely with China’s Council for Promotion of International Trade (CCPIT), a department within the Ministry of Commerce, which has 700 branches around China linking government policy with private sector enterprise.
Ellis and the PIFTO seek investment from both the State Owned Enterprises (government to government) and a second tier involving private, small to medium sized enterprises (SMEs). Ellis also predicts significant tourism potential with a huge influx of Chinese tourists and tourism-related infrastructure by 2012.
Although two-way trade has blossomed to nearly a $1 billion exchange, most of the capital investment is obviously one-way and there is little direct Pacific investment in China. Ellis claims it is hard to present any reliable figures on Chinese investment "because SOE’s tend to inflate their figures while SME’s tend to under-report theirs."
Premier Wen Jiabao’s state visit to Fiji last year, where he addressed assembled Pacific leaders from around the region, signalled China’s growing interest in the Pacific for a variety of strategic and trade reasons.
"Premier Wen’s visit was significant. It was a way of declaring that ‘we’re here, we’re serious and we’re here for the long-term,’" reckons Ellis. "In return, China wants access to our resources, open sea lanes and our votes at the United Nations."
At the same time, he acknowledges that because of the small population and limited infrastructure, there’s not much money to be made by China in the islands, which is partly why some observers are questioning why China is taking such an interest in the region.
"The reality is that we are further down the food chain than we probably realise," says Ellis. "China’s focus at the moment is Africa, then the Caribbean (as a gateway to the US and South America) and then the Pacific, so in a way it’s up to us to prove that we can be a good partner for China if we want the relationship to grow and be beneficial."
One issue being confronted is the type of products that Pacific nations should push. Ellis describes a "policy battle" by Pacific scholars and businessmen around how to keep China a viable market on one hand, while at the same time developing value-added industries as well.
"Some Pacific scholars say we should be selling value added products rather than raw materials, but there are high costs involved in this. All the cries fall on deaf ears because resource owners want to do direct sales and get short-term cash."
Ellis suggests that because of the scale of China and its long-term interest, island nations can afford to be more selective and discerning in who they deal with and find partners who have a shared Pacific vision. Part of the responsibility lies with Pacific Island leaders to think and govern with long term foresight like the Chinese do and avoid the corrupt practices which keep the islands mired in short term thinking.
"We have to form a stronger bloc to better represent our interests," he warns. "Now more than ever is the time for Pacific nations to come together as a team and the Pacific Islands Forum Secretariat is the best umbrella organisation to help realise this. Whether it is dealing with China or the fishing industry or a range of other areas, we have to be more unified and be thinking 20 years, 50 years ahead."
Clearly the six years Ellis — a Cook Islander — has spent in Beijing, he previously worked in tourism and the Cook’s Ministry of Economic Development — has given him a feel for how the Chinese approach the Pacific region and how the two regions can create a mutually beneficial relationship. He hopes to see more Pacific entrepreneurs "think big" and engage with China and for each Pacific Island to find its own niche in the world economy.
*Rohan Ellis of the Pacific Islands Forum Trade Office in Beijing.
Acknowledgement to Pacific Magazine.