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Australia’s Development Policy in the Indo-Pacific: a Step-Up or a Step Down?

Source: Pexels/ Symeon Ekizoglou

Winuri de Alwis

The impact of regions on the international order, and the foreign and security strategies of states, is undeniable. Consider for example the ‘Indo-Pacific’, an increasingly popular term to describe an entire region which joins the Indian Ocean and the Pacific into one monolithic political and economic bloc. The significance of this “geopolitical nomenclature” is that it demonstrates the importance of Indian and Pacific Ocean states to the rivalry between the region’s two superpowers, China and the US, and creates “one contiguous area” of undivided strategic value stretching across two of the world’s largest oceans.

The Pacific’s geographical proximity to Australia has resulted in Australia asserting itself as the region’s natural leader. Many Australian Prime Ministers have referred to the Pacific in familial terms. Today, the broader Indo-Pacific region has become vital to Australia’s regional security interests. The 2017 Foreign Policy White Paper highlighted that “competition for influence” in the Indo-Pacific is growing. It also established Australia’s goal to ensure a “secure, open and prosperous Indo-Pacific”. However, despite their strategic importance, the ‘Indo’ and the ‘Pacific’ regions are not equally represented in Australia’s regional partnership rhetoric or foreign aid.

First conceptualised by Prime Minister Malcolm Turnbull in 2016, the Pacific Step-up (PSU) has become Prime Minister Scott Morrison’s signature aid program which doubles as an economic balancing act against an increasingly assertive China. Instead of providing new funding uniformly across the Indo-Pacific, this initiative has resulted in a redirection of aid away from South Asia. The importance of region-wide foreign aid, alongside reinforcing and diversifying interstate relationships, should never be undervalued in a government’s security strategy. As such, the prioritisation of aid to the Pacific to the detriment of South Asia not only raises concerns about the security of the region, but also about Australia’s ability to achieve its foreign policy objectives.

How effective has the PSU been in creating a secure Indo-Pacific?

Following years of struggle to maintain influence in the Pacific, the PSU was a welcome change in Australia’s foreign policy and development agenda. Through the PSU, Australia has attempted to set itself up as the regional leader of the Pacific. Australia remains the largest aid donor to the Pacific Island states, and the PSU is set to further reinforce Australia’s dominant presence in the region. The creation of the Office of the Pacific will enable better communication between Australia and the region, and signals its commitment to improving Australia-Pacific relations. Collaborating on areas such as security, development, climate and disaster resilience will deepen these important geopolitical connections. Moreover, aiding the creation of strong economies and self-reliant Pacific states will ensure a more prosperous Indo-Pacific, bringing clear economic benefits to Australia.

Furthermore, the PSU is an important tool for Australia’s regional security, and was mentioned in the 2017 Foreign Policy White Paper and the 2020 Defence Strategic Update. Jonathon Pearlman, editor of Australian Foreign Affairs, believes that “the unstated motivation for the ‘Pacific Step-up’ [is] – to ensure that a foreign military presence is not installed in Australia’s sphere of influence in the South Pacific. Today, this threat comes from China.” Although Australia’s desire to maintain a sphere of influence in the Indo-Pacific is clear, aid alone in the form of a Pacific Island bulwark against China will not suffice.

In this regard, creating “an exclusive sphere of influence in the South Pacific is not going to be possible against a regional power that is far stronger than any [Australia has] ever confronted”. Employing Cold War type strategies of building spheres of influence will do little to prevent China’s political and economic rise. Rather, good development and aid policy must address the specific challenges faced by the recipient state. Professor Hugh White shares this sentiment, arguing that Australia should ‘get to know’ our Pacific neighbours, learning what concerns they have and how Australia can best address them.

Logically, this approach should not be limited to the Pacific alone, but should be applied to the entire Indo-Pacific region. It is through quality international engagement that Australia can give itself the upper hand in becoming the ‘partner of choice’ for its neighbours in the Indo-Pacific.

A Policy of Reallocation?

Despite this need for concerted regional cooperation, the PSU has been observed by many as a ‘step down’ in Asia. Australia’s foreign aid to South and West Asia was slashed in 2019-20, which caused concern that funds from Asia were being funnelled into the Pacific alone. Although Australia’s foreign aid in 2020-21 is estimated to increase in Southeast Asia, West Asia will receive less economic support; for example, Pakistan will not receive any Official Development Assistance (ODA).

This policy of reallocating funds has been rightly criticised for being “short sighted”. Under the current strategy, Australia’s soft power tools are not prioritised, with ODA making up only 0.22 per cent of Australia’s gross national income (GNI). This places it below the OECD state average of 0.30 per cent. Ensuring a stable and prosperous Indo-Pacific requires stability, security and predictability. Bridi Rice, of the Australian Council for International Development, argues that inconsistent funding to Asia “undermines trust and the long term, deep relationships” which are needed for effective development. Dwindling aid reduces Australia’s ability to build relationships and weakens its soft power in strategic parts of the Indo-Pacific. In contrast, while Australia is shirking away from South and West Asia, China is establishing its maritime presence through a ‘string of pearls’ in the region, building ports in Sri Lanka, Pakistan and Myanmar which have been the subject of much concern.

Australia’s budget allocations speak volumes about its regional priorities. How can Australia fathom becoming the ‘partner of choice’ in the Indo-Pacific when its development policies imply that the security of Asia is not its first priority? Given that the Indo-Pacific is crucial to Australia’s security and prosperity, it is concerning that Australia’s aid policies largely ignore an entire region which is supposedly of great ‘strategic importance’.

A Rejuvenated Indo-Pacific Strategy

Having said this, several recent developments in Australia’s Indo-Pacific strategy are to be commended. The signing of the Regional Comprehensive Economic Partnership (RCEP) and Australia’s continued involvement in ASEAN have placed it in a good political position with its Asian neighbours. Australia’s comprehensive partnership with Indonesia is also an important step towards a stronger alliance with one of the region’s emerging strategic and regional powers. Over the past two months, Australia has also dedicated significant resources towards ensuring access to a COVID-19 vaccine, which is an important step towards the region’s economic recovery. As Australia’s newest comprehensive strategic partner, Indonesia has been promised a $1.5 billion loan to assist with the economic struggles caused by COVID-19. The Morrison government has also announced a range of capacity building support measures for ASEAN countries in the areas of technology, defence and security.

These actions portray Australia as a supportive partner. Yet, the aid being poured into Asia this year is a direct consequence of COVID-19 and was not part of the original foreign policy budget. In this regard, short term aid is woefully inadequate to foster the long-term relationships Australia desires.

Where to from here?

If Australia’s vision is for a more peaceful and resilient Indo-Pacific, Australia’s aid program must be more concrete. Australia should begin by progressively increasing its ODA to 0.7 per cent of GNI. Long-term partnerships which extend beyond the COVID-19 recovery effort must also be developed. This will allow Australia to establish meaningful networks across the Indo-Pacific region, enhancing its presence and reputation as an indispensable ally.

Australia should also be taking significant action on issues that matter to the entire region, such as climate change, poverty reduction and sustainable development. Such engagement will enable Australia to become a more trusted regional partner in the Indo-Pacific.

Focussing policy attention on regions that are close to home is not necessarily a bad thing. However, creating durable development and aid programs with only geographically close partners and not with other states in the wider geopolitical arena risks hindering the achievement of critical foreign policy goals. Therefore, to truly achieve a “secure, open and prosperous Indo-Pacific”, it is crucial that Australia’s development agenda delivers to the Indo-Pacific as a whole.


Winuri de Alwis is a 4th year Law and Global Studies Student, specialising in International Relations at Monash University. She is intrigued by Australia’s relationship with the Indo-Pacific and the United States. International human rights law, security and climate action are her core areas of interest.



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