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By Benjamin Reilly

NEW YORK, New York (May 4, 2001 - Asian Wall Street Journal)---Weak governance, widespread corruption, economic mismanagement, rising crime, and violent ethnic conflicts are undermining the stability of the island nations of the South Pacific. The chaos has been hastened by the neglect of the United States, Australia and New Zealand, the region’s traditional benefactors. Moving in to fill the void are organized Russian and Chinese crime gangs, including drug and arms dealers. Other nations such as China and Taiwan, both of which have important diplomatic, economic and strategic interests in the region, are increasing their presence in the region.

As a result, the peaceful paradise that was once the South Pacific region is now looming as a threat to Asia-Pacific security. Major reform of existing political institutions and a focus on sustainable economic opportunities will be needed if the islands are to turn the corner.

The depth of the crises was illustrated by last year's ethnic coup in Fiji, where nationalist gunmen occupied Parliament and held hostage the country’s first ethnic Indian prime minister, Mahendra Chaudhry, and most of his cabinet. It still isn’t clear whether elections later this year will result in a government recognized as legitimate.

Nearby in the Solomon Islands, the situation is worse. Following nearly two years of civil war on its capital island of Guadalcanal, the elected government was overthrown last year after the Malaita Eagle Force from neighboring Malaita Island routed the local ethnic militia, the Isatabu Freedom Movement. More than 100 people have been killed in the fighting in a country with a population of just 400,000, while 20,000 have lost their homes. The economy has been devastated by the conflict.

The South Pacific's relative poverty, chaotic politics, opaque legal structures, and weak bureaucracies make the region a magnet for organized crime. Criminal organizations have, in fact, overrun Samoa, Vanuatu and Nauru, according to recent reports by the U.S. State Department and Organization for Economic Cooperation and Development, which singled these countries out as havens for money laundering by international crime syndicates.

A March United Nations report on crime and the illicit trade in arms in the South Pacific warned that an increasing number of guns flowing from local security forces to criminal or insurgent groups posed a major threat to regional stability. In Fiji, rebel leader George Speight and his supporters amassed an extraordinary display of firepower stolen from military depots.

In the Solomon Islands, Prime Minister Bartholomew Ulufa’alu resigned after Guadalcanal’s ethnic Malaitan police force supplied weapons to the Malaita Eagle Force rebel group. And many of the weapons trafficked to Guadalcanal came from Papua New Guinea’s 12-year war in Bougainville.

In both Fiji and the Solomons, there are now incumbent governments installed by the bullet, not the ballot.

Perhaps no one nation exemplifies the stunning array of region-wide problems more than Papua New Guinea, covering the eastern half of New Guinea island and a chain of scattered islands north of Australia. There, reformist Prime Minister Mekere Morauta faces growing hostility to his blueprint to reduce spending, privatize state-owned businesses and crack down on graft. In March, rebel army battalions protested Mr. Morauta’s proposal to downsize the army, forcing him to scrap the plan and grant the mutineers amnesty. In one of Papua New Guinea's regular exercises in political instability, a no-confidence motion may soon be moved against him.

Although rich in oil, gas, gold and timber, about 40% of Papua New Guinea’s four million people live in poverty. A recent study on education by Oxfam New Zealand exposed the region’s plight when it revealed that a mere 31% of Papua New Guinea's children between the ages of five and 14 enroll in primary school, and just 60% of those are still at school five years later.

The report said a dramatic increase in the entire region’s youth population coupled with economic crises, government cutbacks and political instability would likely result in ongoing poverty, unemployment and increased social problems.

Driving many of the conflicts in the South Pacific are long-standing disputes between ethnic groups for control of land and natural resources.

Behind the rebellion in Fiji, for example, were simmering tensions between the indigenous Fijians and the descendants of Indians brought to the islands to work in sugar plantations in the 19th century. Ethnic Indians make up about 44% of the population of 800,000 and dominate Fiji’s business and economic life. Many of Fiji’s indigenous elites, including jailed coup-leader George Speight, are determined to protect their control of the island’s natural resources, such as the lucrative timber industry.

Not surprisingly, the region’s instability is scaring off potential investors. Traditional benefactors -- Australia, New Zealand and the U.S. -- have become increasingly exasperated with the region and its problems.

But with their foreign policies focused elsewhere, the South Pacific is undergoing a geopolitical shift away from the West and toward Asia. Into the gap have stepped the rising Asian powers, particularly China and Taiwan, who have launched a vigorous campaign of aid and diplomatic initiatives in the region. Although Australia and New Zealand helped broker a peace agreement to the conflicts in Bougainville and the Solomons, both have reduced their aid and want the World Bank and International Monetary Fund to pick up the slack.

Japan, the region’s largest aid donor, China and Taiwan have been particularly prominent in exploiting this change. Taiwan’s dollar diplomacy in the Solomon Islands has resulted in diplomatic recognition over China. China has forged new defense ties with Papua New Guinea and other governments, and in 1997 established a military satellite-tracking facility on the Micronesian island atoll of Kiribati.

The long-term strategic consequences of these developments have yet to be fully comprehended -- especially by the U.S. and its allies, who have treated the region’s problems with a surprising degree of complacency.

Despite pleas for assistance, there was no external intervention to restore democracy when the Solomon Islands' government was overthrown last year.

Nor were the U.S., Australia or New Zealand prepared to boycott the military-led regime enshrined after the violent overthrow of Fiji’s elected government last year.

To turn the region around, the traditional Western powers need to re-engage with the island states. First, economic assistance needs to be targeted at building sustainable industries, rather than simply providing development aid. The immense economic potential of the South Pacific fisheries – the world’s only major fishing ground that is not currently over fished – is a case in point.

Second, the island states need help developing new political institutions that more accurately reflect their social and economic conditions, and manage incipient conflicts before they break out into warfare. Third, regional institutions need to be beefed up to respond to the conflicts that can affect the security of the region as a whole. This was a key recommendation of last year’s Pacific Islands Forum.

Without such reforms, the downward spiral of many South Pacific states, and their drift away from the U.S. and its allies and towards Asia, is likely to continue. The region may yet become an arena of superpower competition, as it was during the Second World War. If this occurs, the West will have no one to blame but itself.

Mr. Reilly is a research fellow in political science at the Australian National University.

Copyright Dow Jones & Company Inc May 4, 2001

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