Belt and Road brings China to PNG and our doorstep

An offer by a Chinese government-backed company to build a $US30bn ($39.3bn) city in one of the most impoverished areas of Papua New Guinea appears to be a classic case of debt-trap diplomacy. But however absurd and unlikely the proposition might be, the planned location for the metropolis, only kilometres from Australian territory, means it must be taken seriously. News of the city plan follows the signing in December of a memorandum of understanding between Chinese interests, PNG Fisheries Minister Lino Tom and Western Province Governor Toboi Awi Yoto to build a “comprehensive multifunctional fishery industrial park” on Daru Island. The city plan, which was put to PNG’s national government in writing in April last year, would expand the project to cover an area of 100sq km.

Western Province is PNG’s most impoverished province and the closest to Australia. Daru is located about 200km from the Australian mainland but within kilometres of the islands of the Torres Strait. China’s city plan includes a major seaport, an industrial area and a free-trade zone. An offer has been made by Hong Kong-registered WYW Holdings to build and operate the city and transfer it to PNG after an unspecified period. The company has a track record for major projects, having worked on Myanmar’s New Yangon City.

WYW says the PNG project is contingent on an agreed sovereign guarantee based on a long-term build-operate-transfer contract. China’s financial and diplomatic outreach across the Pacific has been a growing source of concern for Australia as trade tensions between China and the US and Australia have deteriorated. Expansion of China’s Belt and Road Initiative and worsening relations with the West have coincided with a more assertive international stance being taken by the Chinese Communist Party under President Xi Jinping and his wolf-warrior diplomats. China’s unrelenting drive to gain strategic advantage in the region is on display in the way it is brazenly showing support for Myanmar’s generals in the face of the international condemnation that has followed this week’s coup.

The fallout from the announcement of the Daru fishing agreement is an indicator of what difficulties the latest city proposal may bring for Australia. The Daru fishing proposal offered by Fujian Zhonghong Fishery Limited may never eventuate but it has the blessing of China’s Ministry of Commerce and the support of Beijing’s powerful ambassador in Port Moresby, Xue Bing. China is well aware of the diplomatic discomfort its activities in PNG and around the Pacific are causing Australia. Under the headline “Bonanza at Sea Awaits Island Nation”, China Daily said signing the MoU between PNG and a Chinese fishing company had attracted criticism in Australia about regional security risks and depletion of fishery resources but that critics ignored the economic benefits the project would bring to PNG, including jobs for local people.

China’s generosity, on paper, is exposing simmering resentments about Australia’s inability to deliver greater prosperity to the region. In recent interviews Mr Yoto has criticised Australia’s reaction to the fisheries proposal and its failure to make a counter offer to the Chinese plan. He was not satisfied, he said, with Australia’s intention for his people to remain in poverty. Mr Yoto told the ABC it was good for him to explore what China was offering and he accused Australia of working behind his back to deter foreign investment.

Despite promises from China, Australia remains the biggest provider of aid to the region, including a $20m grant for an emergency tuberculosis program in Daru. Australia is PNG’s largest trading and commercial partner, with the latest figures from the Department of Foreign Affairs and Trade showing bilateral trade worth $6.7bn in 2018 and direct investment of $17bn (2018) in resources, light manufacturing, infrastructure and service delivery. Australia has work to do to keep its standing as PNG’s principal ally in the face of lucrative offers of assistance from China. The government must resist, at all costs, becoming involved in a bidding war with China for the attention of PNG that might enrich members of the political class but have no lasting impact on the ground. At the same time, we must step up our diplomatic efforts and continue to play a constructive role in improving the health and economy of our neighbour. It is openly acknowledged in Port Moresby that China has a history of talking big but delivering small. Australia, by contrast, can be relied on to do what it says it will. Australia has a long-term strategic interest in what happens in PNG and must keep the diplomatic relationship on track.