Australia must go big and bold to strengthen its role in the South Pacific

Purari, if properly financed and developed, could meet PNGs key energy needs for years to come even with a staged development over a period of years.

A second big-picture and high-impact project Australia could consider is redevelopment of PNG's universities, which have been chronically underfunded for years. There's some evidence of Chinese interest in the tertiary sector, building on its major school project in Port Moresby and smaller projects in other parts of the country.

In 2010, the Australian and PNG governments initiated a review of PNG's tertiary education sector by Ross Garnaut and Sir Rabbie Namaliu. Some additional funding has been provided, but the case for a major restructure of the whole sector, with priority being given to mining, agriculture, business, information technology and tourism, is an overwhelming one.

Apart from selected major projects, it's inevitable that Australia, supported by the International Monetary Fund and the World Bank, will have to have frank conversations with the PNG government about its capacity to get itself out of, or at least minimise, its indebtedness to China.

Already PNG has total national debt of close to K40 billion (A$15 billion), now over 40% of GDP. A significant proportion, and a growing share, is in the form of loans from China in areas such as infrastructure, communications and agriculture. And this debt doesn't include the full impact of the Belt and Road Initiative agenda to which PNG signed up in 2018.

PNG owes China around K2.5 billion (A$1.1 billion) for communications projects - many of them defective - as well as hundreds of millions for road projects already underway.

But much more BRI debt is looming. On the horizon is a US$330 million agricultural industrial park, a commitment to a series of high-priority economic road projects worth at least US$3.5 billion, and a possible involvement in marine park project.

The capacity of the national government and state-owned entities, let alone provincial governments, to service PNG's existing debts to China is already questionable. But add in what is proposed, and promised, and the debt-managing capacity is more than just questionable.

We might need to be innovative in our discussions with PNG on reducing its reliance on loans from China and on stopping those debts from expanding in a way that is not fiscally responsible. PNG has been reluctant to agree to an IMF-led restructure package that might include devaluation and public sector cuts. But it may have little alternative, other than a bailout from China, which was on the agenda a year ago.

While recommendations here have focused on PNG, they are of equal relevance to Australia's relationships with other South Pacific nations.

Our immediate priority must be to look at big and bold projects that enhance our influence and assist Pacific nations in key areas at a time when they are sorely tested, economically and strategically.