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Australia must demand answers on Asian Development Bank funding in Papua New Guinea

By Jeffrey Wall - posted Wednesday, 7 October 2020


Australia is a founding member of the Asian Development Bank and, since 1966, has directly contributed US$8.5 billion in capital subscriptions, as well as US$2.86 billion to special funds. Our annual subscription this year is around US$430 million-more than that of the People's Republic of China.

Since the ADB's establishment, Australian companies and consultants have won just US$1.75 billion in procurement contracts on ADB-funded projects. So, by any measure, we have been more than generous contributors.

No one doubts the value of ADB grants and loans in our region. In particular, it has long been a major contributor to our closest neighbour, Papua New Guinea.

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The total value of ADB projects in PNG is just over US$3 billion. Of that, US$1.82 billion has gone into the transport sector-roads, airports and ports.

What is now of real concern is that increasingly ADB-funded projects in PNG have been awarded to a small group of PRC construction companies. This is an issue that demands urgent and serious examination by the Australian government.

By my estimate, more than three-quarters of recent contracts have gone to PRC companies, most notably the state-owned conglomerate China Railway Construction and Engineering Group. As far back as 2012, China Railway won the lucrative contract for the Lae Port redevelopment-funded by the ADB-in a process which former PNG urban development minister Ken Fairweather tells me was hardly competitive.

The stranglehold that PRC companies have over the construction sector in PNG has been tightening for some years, and began well before PNG signed up to the Belt and Road Initiative in 2018. Today, it is so dominant that Australian, New Zealand and even PNG construction companies no longer bother tendering for most PNG government contracts, including those funded by the ADB.

PRC companies are currently implementing an ADB-funded program that involves upgrading no less than eight provincial airports right across PNG. Australian and PNG companies have not had a look-in.

It's the same story in road construction and rehabilitation. More than US$1 billion worth of ADB contracts have gone to PRC companies in and around Port Moresby, Lae and Mount Hagen. To that can be added hundreds of millions of dollars for smaller projects elsewhere in PNG.

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I am advised that four or five PRC construction companies have recently been lobbying PNG ministers and officials for other road projects valued at close to US$4 billion. It remains to be seen whether these projects are funded by China Exim Bank loans or ADB loans.

Australia is not entitled to seek a privileged position for our construction companies in relation to ADB-funded projects in PNG, or anywhere else. But we are entitled to insist on a transparent process not just in the 'invitation' phase, but in the actual awarding of contracts, which in PNG is principally done by the National Executive Council based on 'recommendations' from the bureaucracy.

This issue can no longer be put in the 'too hard' basket by the Australian government.

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This article was first published in The Strategist.



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About the Author

Jeffrey Wall OBE is a Brisbane Political Consultant and has served as Advisor to the PNG Foreign Minister, Sir Rabbie Namaliu – Prime Minister 1988-1992 and Speaker 1994-1997.

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