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Australia's PNG policy must be big and bold

By Jeffrey Wall - posted Wednesday, 17 February 2021

Last weekend, the Australian's Foreign Affairs and Defence Writer, Ben Packham, revealed details of an agreement between Papua New Guinea and the Peoples Republic of China giving "conditional" approval to the Ramu2 Power Project.

The project will be financed by an Exim Bank loan of around K6 billion (six billion kina) the equivalent of over $A2.3 billion. The loan will be guaranteed by the state owned PNG power authority with a guarantee that will end up being the responsibility of the PNG Government.

The Australian Government had lobbied hard against the project during both the O'Neill and Marape Governments. But its efforts have been comprehensively unsuccessful, to say the least!


Given the limited size of the planned power station this is an expensive project and it adds significantly to PNGs already substantial total debt burden. The debt burden to China has grown considerably since PNG signed up to China's "Belt and Road": agenda in 2018.

It would ordinarily be reasonable to criticise this latest agreement. But when you look at the question – what has Australia done in practice to offer alternative projects – then it is harder to criticise it, despite the added debt burden and the projects doubtful "economics".

With much fanfare during APEC 2018 in Port Moresby Prime Minister Morrison, together with the Japanese and New Zealand Prime Ministers, and the United States Vice President announced a joint program to try and deliver affordable electricity to 70 per cent of the people of PNG by 2030.

A worthy goal but a herculean one given just 15 per cent of the people of PNG today have access to affordable electricity!

The Australian Government set up the Australian Infrastructure Financing Facility (AIFF) to help deliver Australia's contribution to infrastructure in PNG and the Pacific. One of its first "approved" projects is a solar power station in the Markham Valley in the same areas as Ramu2.

If you go to the AIFF website you will be disappointed. The project is there, but the AIFF contribution has not been determined and effectively NOTHING has happened! That is despite bold assurances made 28 months ago!


I have no doubt the Chinese Ambassador, who was embarrassed when Prime Minister O'Neill invited the four countries to work with PNG to "Power PNG" has been working doubly hard to get Ramu2 over the line. And as usual he has been very successful.

If Australia seriously wants to not just match, but counter, China's rapidly growing influence in Papua New Guinea we will have to lift our game and go "big and bold" without delay.

Firstly, the Prime Minister should appoint an regional infrastructure "czar" to cut through the red tape and bureaucratic processes and get infrastructure promises under the Pacific "Step Up" program, and the much heralded agreement with Japan, New Zealand and the United States (and Papua New Guinea) to deliver electricity to 70 per cent of the population.

Ideally, the "czar" should be an experienced engineer or construction boss with a solid record in the electricity delivery sector. And ideally he or she should be experienced in the electricity or construction sectors in a developing country such as Papua New Guinea.

At the same time the government needs to review progress on other AIFF projects committed for Timor Leste and the Solomon Islands, given that China is active in both countries.

But I believe Australia needs to take a "big and bold" approach, initially in PNG, but also across the region progressively.

Australia should re-visit a hydro power project that would deliver affordable and reliable power to the majority of Papua New Guinean families, and be a real incentive to down stream processing and other industries.

The Purari Hydro Power project in the Gulf Province has long been talked about, assessed, supported, but in more recent years consigned to the "too hard" basket.

It is not cheap. A decade ago the cost of the initial stage was put at around $5 billion. That is well beyond the fiscal capacity of Papua New Guinea.

Last year Andrew "Twiggy" Forrest looked at it, linking it to a possible iron ore smelter construction. Sadly his interest appears to have waned.

But if the Australian Government put together a funding package and reached an agreement to oversee construction and the provision of downstream process industries with the need for a highly competitive power supply Forrest might be interested in playing a role. The funding package would necessarily need to include other countries, notably Japan and the United States.

The project would be located close to Australia and ironically close to Daru where Chinese entities have been promoting a fish processing factory, and wharf – even closer to Australia.

Purari could power the PNG capital, Port Moresby, where today power supply is in a terrible state – unreliable, and for most families unaffordable.

Because the Purari River never dries up – with tributaries flowing from the PNG Highlands where some mountains are snow-capped – a hydro power station would be environmentally sound, and would deliver reliable electricity at a cost highly attractive to industry and households.

At the very least it is worth revisiting. Hydro power is clean and green and PNG is ideally suited to a major hydro power project build in stages over five years or so.

If has been supported in the past by a number of PNG leaders, including Peter O'Neill and Paias Wingti, and the Gulf Province Governor, Chris Haiveta, is a definite supporter.

The Markham solar power project, and Ramu2, would pale into insignificance when compared to Purari.

Big and bold, yes, but if Australia is serious about countering the growing dominance of China throughout key sectors in PNG – construction, electricity, communications among them – then we simple have no other choice!

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About the Author

Jeffrey Wall CSM CBE 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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All articles by Jeffrey Wall

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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