Australia will spend almost $3 million on the development of digital identity infrastructure for Pacific Island nations as part of the Albanese government’s effort to counter China’s influence in the region.
The funding for digital identity led a $6.3 million package announced on Tuesday to prevent the loss of western banking services in the Pacific, as leaders from the Pacific, US and Australia met in Brisbane.
The soft power push through digital identity comes as Australia rolls out its own system, initially through government services but set to expand to banks and other private providers within two years.
Treasurer Jim Chalmers announced the $2.9 million digital identity funding that will go to the World Bank and Asian Development Bank to “develop digital identity infrastructure and improve compliance with regulations”.
The development banks are leading global efforts to develop interoperable identity systems that promote individual rights and facilitate access to basic services and entitlements in the physical and digital worlds.
The funding is the latest in Australia’s efforts to preserve or upgrade digital infrastructure in the Pacific while keeping it out of China’s control.
The federal government funded Telstra’s 2022 acquisition of mobile phone operator Digicel Pacific, fearing the network could come under Chinese control and be used to spy on users.
It also committed almost $80 million last year to connect smaller Pacific Island nations to a new trans-Pacific subsea cable to be built by Google between Australia and the United States.
Australia’s new support for the regional digital identity is also aimed at keeping western financial institutions operating there after the Pacific experienced the fastest withdrawal of correspondent banking relationships anywhere in the world.
The retreat threatens the Pacific’s access cross-border payment services, connection to the global financial system, and ability to fund economic development projects, as Beijing looms with alternatives.
“The key to any lasting solution to the decline of services is rebuilding robust financial markets infrastructure across all Pacific nations,” Dr Chalmers said. “And so that’s what we’re targeting.”
Australia’s own digital identity system will ramp up later this year when the Australian Government Digital Identity System (AGDIS) expands across the economy following the passage of landmark laws earlier this year.
The Albanese government has bolstered the national scheme with more than $433 million in funding commitments for digital identity in the last eight months.
Australia’s new funding for the pacific is also aiming to improve regional compliance with anti-money laundering and counter-terrorism financing requirements ($1.7 million) and to assist with criminal justice and law enforcement capacity in the region ($1.7 million).
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