Solomon Islands locks in Huawei contract

Solomon Islands is going ahead with a $100m deal with Chinese telecommunications giant Huawei to build 161 mobile phone towers across the country.

The Turnbull government banned Huawei from the Australian rollout of the 5G telecommunications network in 2018 because of security concerns. Picture: AFP

Solomon Islands is going ahead with a $100m deal with Chinese telecommunications giant Huawei to build 161 mobile phone towers across the country, ­despite a report warning that the project might pose substantial ­financial risks for the island ­nation.

Honiara’s decision comes as Beijing seeks to expand its footprint and allegiances in the ­Pacific, having already signed a security pact with Honiara in April that opened the way for China to send police and military forces to the Pacific nation.

The Turnbull government banned Huawei from the Australian rollout of the 5G telecommunications network in 2018 because of security concerns, given the company’s links to the People’s Liberation Army.

Solomon Islands Ministry of Finance and Treasury permanent secretary McKinnie Dentana on Wednesday said the towers would expand and improve mobile coverage across the country, the ABC reported on Thursday night.

Mr Dentana said the project would be funded by a concessional loan from China.

“The project will be fully funded with a concessional loan facility under the EXIM Bank of China of approximately CNY448.9m ($96m) at a rate of 1 per cent interest for a period of 20 years,” the ABC quoted Mr Dentana as saying.

He said an “independent review of the project showed the project would generate sufficient revenue for the government to fully repay the principal loan amount”, despite the KPMG report, obtained by the ABC, reportedly finding the “project was expected to generate a financial loss of almost $144m”.

The KPMG report said the proposal put forward by Solomon Islands “significantly overstates the financial return potential” of the project and predicted it would require financial subsidies.

“The project will generate a ­financial loss of almost $US100m, and around $US156m will be required over 20 years to bridge that shortfall,” the report said.

Although the “risks surrounding the project are manageable”, the planned three-year rollout was “overly ambitious and does not appear realistic”.

A Department of Foreign Affairs and Trade spokesperson said the Australian government was “aware” of the deal but development decisions were a “matter for the Solomon Islands government”.

“Australia supports infrastructure investment that is transparent and open, meets genuine needs, delivers long-term benefits and avoids unsustainable debt burdens,” the DFAT spokesperson said.

Australia is building six ­mobile telecommunications towers in the Solomons.