Huawei could pose a challenge for Australia in Papua New Guinea

Prime Minister James Marape's government has not yet reached an agreement with an International Monetary Fund–led consortium (which includes Australia) to cover the cost of this year's budget shortfall. Because the economy is in dire straits, state revenue has collapsed and it's highly likely that deficit financing for 2020, and probably for 2021 and beyond, will mean substantial cuts to basic services and the public-sector workforce.

It will almost certainly be necessary for the national government to begin the often talked about, but never delivered, sale of state-owned businesses. If that happens, Telikom PNG will be high on the list.

Huawei appears to have a long-term strategy in PNG and the data centre debacle is likely to be but a temporary setback.

The company remains well connected at the highest levels of the PNG government. There's absolutely no debate in government, parliament or the media about the wisdom of its growing communications presence. Even in PNG's robust social media environment, debate about its role is limited.

If Telikom PNG is privatised, Huawei will be well placed to join the race to buy it. The dilemma for Huawei might be that the larger communications provider, Digicel, which has a strong presence across the South Pacific and in PNG, might be up for sale as well.

If PNG started a serious sale of its state enterprises, the Australian government would need to watch it closely, and almost certainly get engaged. The most obvious way it could do so would be to provide financial support for Australian companies to buy strategic and viable assets in PNG, and PNG Telikom would have to be one of them.

Another important asset is Air Niugini, but given the state of international travel, buying into airlines might be a hazardous option.

The path towards any asset sales won't be straightforward, but it might be inevitable despite limited political and community support.

If the sales do proceed, the PNG government will have to secure the highest possible prices and paying top dollar might prove a problem for Chinese entities.

Australia is going to have to play a significant role in any debt financing and structural adjustment program for PNG, though it would be led by the IMF and the World Bank.

Any PNG agreement with the IMF must include a transparent process for asset sales that flow from such a deal. Australia needs to insist on nothing less.

But we will have to be prepared to look seriously at supporting Australian companies' bids for strategic assets-and that means providing concessional finance. Communications assets must be a priority.