Victoria’s secret agreement with China faces federal government scrutiny

The Commonwealth will probe a third deal between the Andrews government and China to advance public-private partnerships for infrastructure projects, signed separately to Victoria’s controversial Belt and Road deal.

The state government has been forced to hand over details of the memorandum of understanding – which has been kept secret – that Premier Daniel Andrews signed in 2017.

Premier Daniel Andrews in Tiananmen Square in 2015.

The document came to light after the Morrison government compelled the state to hand over documents under its new foreign veto laws.

The federal government could order the document be torn up if Victoria fails to adequately explain why the agreement is in Australia’s national interest under the terms of the legislation, which passed Parliament in December.

Victoria’s Belt and Road deal with China has raised concerns within national security agencies and the Department of Foreign Affairs and Trade.

This earlier agreement, signed in 2017 – 18 months before the BRI document – is expected to ring further alarm bells within the federal government, according to foreign policy experts.

Signed by the Victorian government in March 2017, the memorandum of understanding – which it has refused to release – was struck with China’s National Development and Reform Commission, committing it to working with Beijing on infrastructure projects through public-private partnerships.

Chinese officials are likely to closely follow the federal government’s decision on whether to tear up Victoria’s three agreements with Beijing, especially in light of China’s most recent Two Sessions meeting that set the country’s blueprint for the year, but which is largely considered a “rubber-stamp” parliament.

With the coronavirus pandemic largely under control, this year’s meeting focused heavily on the country’s so-called dual circulation strategy, which is designed to simultaneously reduce China’s dependence on the global economy and increase other countries’ reliance on Beijing.

Prompted by the Andrews government deal with China, the Commonwealth in December gave itself powers to cancel or block agreements entered into by states, territories, local governments and public universities with foreign governments if they are deemed to compromise Australia’s national interests.

However, Mr Andrews and some foreign policy experts have previously warned about the potential to further weaken the China-Australia relationship, which is now more fraught than at any time since the 1970s.

The $1.5 trillion Belt and Road Initiative is Chinese President Xi Jinping’s signature policy to invest in infrastructure globally, including roads, railways, pipelines and telecommunications systems. But western governments, including Australia and the United States, increasingly view it as a foreign policy and propaganda tool, as well as a potential debt trap for developing nations.

Foreign policy expert Michael Shoebridge, the director of defence, strategy and national security at the Australian Strategic Policy Institute, said the ramifications of committing to projects through the public-private partnership agreement had grown in the past three years, with the national security risk further heightened following last month’s political meeting.

“The implications of doing projects under [the public-private partnership] arrangement have grown,” Mr Shoebridge said.

Daniel Andrews visiting pandas during his 2015 China trip.

“Public-private partnerships, and the Belt and Road Initiative, is at the core of Beijing’s plans for a China-centred global economy.

“China talks about PPPs as a way of accelerating and broadening the activities you can do to implement the Belt and Road. It’s a faster way of getting projects delivered, and a way of obtaining alternative finance to government finance.

“But I think a key thing about the way China thinks about public-private partnerships is that they’re still absolutely guided by the government – so it uses private corporations and corporate capital for government purposes.”

Mr Shoebridge said there would be renewed focus on the risks of entering into a public-private partnership agreement with the commission in light of the most recent Two Sessions gathering – the annual meeting of the National People’s Congress and the Chinese People’s Political Consultative Conference.

The gathering brings together China’s leadership and lawmakers to set the blueprint for the coming year and is considered the most important event on the government’s calendar, it also offers a rare glimpse at what President Xi and top officials consider priorities. Discussions this year signalled Beijing’s intentions around technology competition, control over Hong Kong and strategic threats posed by the West.

The Belt and Road Initiative and public-private partnership agreements will be shaped through the lens of this strategy, Mr Shoebridge said.

“The federal government will have to evaluate it based on its merits, but I would be surprised if the national security risks around this memorandum of understanding have anything but risen given the way the Chinese government has operated in the last three years, and with the economic directions outlined in the recent Two Sessions meeting, where the risk of China using economic coercion has grown.”

In a 2018 progress report on “Victoria’s China Strategy”, the government spruiked a deal it had developed with China’s national government to enter into the public-private partnership arrangement.

“[This marks] the first time the NDRC has entered into an agreement with a sub-national government on this subject,” the document states.

“Since the agreement was signed, the partnership has strengthened through reciprocal visits. Victorian education providers joined the Premier in Beijing where they were introduced to senior NDRC officials to discuss delivering training on PPPs in Melbourne.”

The Victorian government on Tuesday provided a one-line response to a list of questions from The Age and The Sydney Morning Herald about the agreement. It refused to provide any details about the contents of the document or any deals that may have been struck as part of the partnership.

“The Victorian government is continuing to work with the Commonwealth in line with the legislative requirements,” a spokeswoman said.

Mr Andrews has previously warned that any federal government decision to cancel his state’s Belt and Road agreement with China would further aggravate the relationship between the countries and adversely affect businesses that were already struggling.

“I don’t think ripping up agreements resets anything. I think it might make a very challenging set of circumstances for farmers, for workers, for businesses, for every Victorian much, much harder,” he said a day after the new foreign veto laws passed Parliament.

“There’s no getting around it – whether you like it or not, this is our biggest customer.”

Prime Minister Scott Morrison and senior ministers such as Home Affairs Minister Peter Dutton have been critical of Victoria’s dealings with China on the Belt and Road, claiming it undercuts the role of the Department of Foreign Affairs and Trade.

Foreign policy experts say while the language in Victoria’s Belt and Road deal with China is innocuous, the involvement of governments from richer jurisdictions such as New Zealand and Victoria make it harder for poorer nations to protect their interests.

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