Why PNG is now China’s number one priority

The escalation in China's influence in Papua New Guinea is no longer a matter of speculation – the available evidence just proves it.

The PNG Prime Minister, James Marape, was the only Pacific leader invited by President Xi to attend the opening of the Winter Games.

Even though he had to cut short his trip after being infected with Covid he had a virtual meeting with the Chinese Premier.

The main initial outcome was yet another tied loan to fund infrastructure – another K800 million added to a debt level already beyond PNG's capacity to repay .

The upgrading of the power line from Ramu to Hagen is a necessary project but it will be carried out by a PRC contractor with no local involvement at a time when the local construction sector is really struggling.

In the last 12 months PNG has signed up to electricity loans of around K6 billion.

These loans are in addition to billions in loans for road construction and other projects.

The statement issued by the Chinese Premier and the PNG Prime Minister was much broader and included the goal for finalising a free trade agreement When concluded it will be PNG's first free trade agreement.

The statement clearly points to China's priorities in Papua New Guinea.

Apart from effectively controlling all major infrastructure work, the clear focus is on fisheries. China already takes a growing share of PNG's fisheries exports. This agreement just strengthens that influence.

There is also a focus on agriculture, and of course on timber exports.

The sum total of existing projects and those planned in the immediate future is a growing dominance in the PNG economy, principally at our expense.

It is also clear the PNG Prime Minister sought additional loans to help fund the massive budget deficit.

What has to concern Australia and our allies is that the PNG Government no longer seeks to disguise the growing reliance on China……and with national elections just months away there iis virtually no debate in the campaign over the extent of China's influence.

That might change when the campaign proper begins – but its depressing that no political leader or party is prepared to challenge the growing dependence on China.

The problem political leaders face is that the China involvement is now so extensive that it would be politically risky to oppose it.

It is also clear China is interested in acquiring a share in PNGs minerals, oil and gas resources.

While no projects are readily available, China is playing the long game when it comes to acquiring resources.

The other ongoing concern has to be the proposed major fisheries/ports project on Daru and the initial direct cash injection into the Ihu-Kikori special economic zone.

The current PNG Foreign Minister is pushing the development of this project in his electorate given he is facing the voters in just 3 months time.

The question readers may wel be asking is why China has decided to give its priority to PNG?

I think the answer lies in the size of the PNG economy and the fact it is resource rich – and especially the resources China needs.

The Minister for Agriculture is pushing hard to give China a guaranteed share of the nations coffee and cocoa.That is why he wants a central government controlled agency to handle the export of unprocessed agricultural resources.

The other lucrative area is forestry. China today takes 80 per cent of unprocessed logs but it wants more.

The other reason why China now focusses on PNG ahead of small island nations – with the exception of the Solomon Islands which also recently reached a range of agreements to strengthen economic "co-operation".

One of the goals is to attract 90,000 Chinese tourists! That number would swamp the economy.

I believe China has decided that it just cannot rely on the small economies of countries such as Tonga and Samoa. Both are already having difficulty repaying existing loans.

If PNG defaults China would have the right to taken over assets it has funded – just as it has done in Sri Lanka.

In summary, focussing on a broadly based and resource right economy like PNG offers China greater opportunities and the capacity to take over assets if PNG defaults.

The scenario I have outlined is not unrealistic. A compliant PNG Prime Minister facing re-election is not an obstacle at all.

From Australia's point view it is a truly alarming scenario. And there is nothing we can do about it directly challenge China's expansion.