Campbell: Corporate welfarism behind aid changes

Can a subsidy to our own national airline really qualify as foreign aid to the Pacific ? Apparently it can. As Scoop reported on Monday, the government is subsidizing various Air New Zealand routes between Los Angeles, Samoa Tonga, the Cook Islands and Auckland. Hasn’t Pacific Blue, which is trying to compete fairly with Air New Zealand on some of those routes, got a right to feel aggrieved?

“I can’t tell you about the specifics of whether another airline should or shouldn’t be aggrieved,” Key replied to Scoop at Monday’s post Cabinet press conference. “What I can say is that the move from New Zealand to provide some underwrite of those air services was an important matter for both Tonga and Samoa. They’re important links for their tourism sector.” The leaders of Tonga and Samoa had raised the issue with Key at the Pacific Forum in January.

The government of course, is free to transform our foreign aid effort into a handout to our own airline any time it likes. In this case, will the money be coming out of the aid programme next year – as part of the re-orientation under way by Foreign Affairs Minister Murray McCully ? Yes indeed. “ My understanding,” Key replied. “ is yes, it will be effectively…it certainly fits within part of the wider MFAT funding and I’m sure that somewhere along the line it will be seen as being part of Pacific aid. “

Ironic that McCully – with these handouts to Air New Zealand in mind – should have chosen to criticize our current aid programme as offering a ‘handout’. McCully’s apparent determination to use the aid programme as a slush fund for corporate welfare and diplomacy is a step in the wrong direction. The IMFfor instance, as Scoop reported on Monday, has been urging developed countries to expand their aid in order to alleviate poverty among those hardest hit by the global recession. We seem headed in the opposite direction.

With fuel prices down, you would think Air New Zealand would be more able to run their services across the Pacific without requiring a handout. But no, not only is Air New Zealand getting subsidies on specific routes, it will also be a beneficiary of the special $60 million contestable fund for airlines that was announced at the recent jobs summit. At which one of the leading corporate figures was…Air New Zealand’s Rob Fyfe.

So which other corporate interests stand to benefit from McCully’s re-orientation of our aid programme, besides Air New Zealand ? Pacific commentator Dev Nadkarni gave a somewhat fuller picture of the government’s possible framework in a 21 November 2008 NBR article ( sorry, no link available) called “Nats get fresh start with Island nations.”

While Key and McCully cite Pacific tourism as the main driver in the decision to subsidise Air New Zealand, Nadkarni indicates a further corporate interest in any possible withdrawal from the routes : “This [prospect] caused widespread disappointment among the leaderships of Tonga and Samoa, as it would gravely hurt marine exports to the US.”

And who has a stake in those fish exporting plants in Samoa and Tonga ? Well, according to this article in Islands Business, fishing exports comprise about 40% of Samoa’s non-tourism exports, and 80% of that export trade is controlled by Apia Export Fish Packers, whose managing director is a Kiwi expatriate called John Luff. Luff’s firm , according to this 2006 article, sells to the huge StarKist firm in American Samoa and to customers in Los Angeles. As you will recall, it is the Los Angeles to Apia service by Air New Zealand that the government has chosen to subsidise.

As Nadkarni says, the National Party faces other imperatives in the Pacific as well. Namely :

[To] forge relationships that pave the way for New Zealand businesses to participate in the impending boom in seafloor mining in the islands’ soon-to- be-expanded exclusive economic zones ( there is competition already from Australia, Asian and NorthAmerican nations.

Some rumblings of discontent are already evident in the possible damage this seabed mining may do to the livelihoods of villagers in the region. The damage to the ecosystem from sediment spills and to bird life from barge activity are only part of the problem.

At his post Cabinet press conference, Key denied that the desire to forge relationships among the Islands political elites that would be more conducive to access for our mining interests lay behind the Air New Zealand subsidy. Tourism and its importance to the region, he maintained, motivated the decision to subsidise the Air New Zealand routes.

At present, there is no indication what will happen in a year’s time, when some of the subsidies are due to run out. Is Pacific aviation and the likes of Apia Export Fish Packers expecting to rely on corporate welfare from our aid programme in perpetuity – and if not, what demands are John Key and Murray McCully placing on Air New Zealand and the governments of Samoa and Tonga to ensure they lift their game, so that the aviation services can become self supporting ? After all, surely this measure by McCully is a hand-up, and not a handout.

Already, Pacific nations are asking New Zealand to clarify just what it is doing with its changes to the aid programme, and what the move away from the goal of poverty elimination will mean in practice. As RNZ International reported this morning, Cook Islands Foreign Affairs Minister Wilkie Rasmussen has indicated he would be seeking some answers from McCully :

“I think they owe it to all of us in the Pacific to be clear as to what their policies are, and what the new plans are in place, because some of the Pacific Islands pin their relationship on New Zealand because of the support New Zealand provides.”

The even wider framework for New Zealand’s change of focus is the struggle for influence in the region between China and Taiwan in particular, and the growing recognition – even among players as far afield as Israel – that Pacific Island votes at the UN and valuable resources in the Pacific may be up for sale to the country that can provide the biggest dollops of aid.

Hitherto, New Zealand has used diplomacy to achieve its regional goals, and it has consciously avoided tapping the aid programme as a slush fund to assist those efforts. The integrity of the aid programme now risks being fatally compromised if it is to be used to woo political favours – or worse, to prop up the business interests of the current elites in Tonga, Samoa and elsewhere, on the after thought that perhaps some benefits might trickle down eventually, to the most vulnerable.

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