Our influence in Papua New Guinea continues to decline

Twice a year I endeavour to take the temperature of our wide ranging relationship with our closest neighbour, Papua New Guinea.

In recent years the trend has been worrying to say the least. My latest assessment is arguably the relationship is the worst it has ever been, and I need to outline the reasons why I believe that is the position. There is not one answer, and the reasons why our standing continues to decline make the task of rebuilding our influence more challenging than ever.

In recent years, a combination of some poor development assistance priorities has been a significant factor - we are just not getting enough "bang for our buck" especially as our annual development assistance grant - over $500 million - significantly outweighs assistance from any other country, including China.

In this column I have outlined various ways that can begin being rectified. Sadly, none have really been taken up, except limited direct financial support for the Christian churches.

I have almost zero confidence the federal budget in two weeks' time will rectify that, or even begin doing so. Sadly, overseas aid, or development assistance, has really declined in public popularity in Australia.

With an election now just two months away, there is Buckley's chance our development assistance to Papua New Guinea will undergo radical reform - or any reform - in the budget.

So a poorly directed, and in some ways wasteful, development assistance program, generous though it is, is not going to improve our standing in Papua New Guinea.

The second factor in recent years has been China's growing influence across Papua New Guinea. Sadly, despite the limitations caused by the pandemic, that influence has continued to grow. It might have slowed in growth, but it remains active, and in some areas aggressive.

The most aggressive area in the last year has been lending by China to PNG Power and the wider infrastructure sector. The most worrying aspect of the growth in tied lending is that without exception it lacks transparency.

As an example, when Australia lends money to PNG, either the government directly or to state owned corporations, the conditions are publicly disclosed - such as the term of the loans, the specific objectives, and the rate of interest that is charged.

None of the lending under Belt and Road or other PRC programs has even the remotest transparency. Put frankly, that leaves PNG enormously vulnerable.

It is difficult to calculate what is the total indebtedness the PNG Government and state owned entities have to China, let alone on what conditions. I have estimated it in in the region of $10 billion - but that is only an estimate.

What I do know is that Chinese interest - official and unofficial - in the development of the port of Daru and the Kikori-Ihu Special Economic Zone has not gone away. The current PNG Foreign Minister continues to aggressively push Kikori-Ihu while the Western Province Governor pushes the Daru project, and other PRC engagement in the strategically important Western Province.

Both the Foreign Minister and the Governor are critical to China's ambitions. They are up for election in six weeks' time - and as with just about every contest in the PNG national elections their re-election is not guaranteed. So I would not be surprised if there is further action on both projects in the coming weeks.

In the last year or so it has become increasingly evident that China's interest in PNG has shifted in emphasis. I had believed it was more strategic given PNG's location so close to Australia.

The strategic interest must not be ignored by Australia, even if it has slid down the apparent PRC priority list.

I sense the current number one PRC priority in Papua New Guinea is economic and trade engagement. Papua New Guinea is rich in many of the resources China needs - especially oil and gas, copper, nickel, and gold as well as key agricultural commodities coffee, cocoa, and palm oil....and fisheries and forestry!

When we look at our engagement with PNG just one set of trade figures must surely cause alarm. They also confirm my view that our economic and trade engagement in vital community areas, such as agriculture, has diminished - again paving the way for China to gain a real foothold.

Papua New Guinea's main agricultural exports in terms of their benefit to the people are coffee and cocoa. In recent years, palm oil has experienced the most growth, but coffee and coco have significantly more growers. Unlike palm oil, where the major players dominate, for coffee and cocoa it is the rural majority who are the main participants.

That means strong coffee and cocoa production and export are widely beneficial across the 80 per cent plus of the population living in rural/farming environments.

That is why I am truly alarmed at the state of coffee and cocoa exports to Australia. PNG exports overall to Australia are currently lopsided given the predominance of gold and indirectly oil and gas.

Ten years ago, the value of PNG exports of coffee and cocoa to Australia totalled a modest $A45 million. Total they total just $A20 million!

I would have thought DFAT and Austrade would have given priority to coffee and cocoa imports from PNG, given the direct benefit both commodities offer the PNG economy, and especially the people of PNG.

Clearly, China has been watching this alarming trend in Papua New Guinea - Australia trade. Unless we are very careful, and frankly very active, China will capitalise on it.

The Pro-China PNG Minister for Agriculture, John Simon, has proposed the national government effectively "nationalise" the agricultural export sector......especially unprocessed exports.

Fortunately, the national elections are likely to derail, or at the very least delay, such a dangerous policy.

And what persuaded the Minister to put forward such a proposal? Well one of his stated reasons was the difficultly he is having in enabling China to purchase (on China's terms of course) a far greater share of the PNG coffee export sector!

Because coffee exports are controlled by private sector companies, there is no current way he can assist China to secure what it is after - no current way, but that would change radically if the export sector was "nationalised".

Is it any wonder I worry at the extent of China's influence and its economic ambitions?

That brings me to the third reason why our influence has declined further.

The restrictions imposed by the Covid-19 pandemic have effectively closed the border between Australia and Papua New Guinea. While trade has continued, in a reduced form, the vital people to people relationship has been absolutely destroyed.

I guess there are two just three or four commercial airflights between Australia and PNG each week - with passenger numbers limited and tough travel conditions in force. Conservatively, prior to the pandemic there were between 20 and 30 flights weekly, principally to Brisbane and Cairns.

Hundreds of Papua New Guinean families and businesspeople travelled to Australia each day - to visit relatives, enjoy holidays, and importantly, enable their sons and daughters attend schools and universities in Australia, and especially in Queensland.

And the business exchange level had been undergoing significant growth - especially in IT and service areas - until the pandemic intervened.

So what has happened in the last two years is a significant reduction in the all-important people-to-people engagement that was at the heart of the relationship, and something China could just not match.

I have not written about the vaccination rate in PNG for some time as there is frankly nothing to write about! The double vaccination rate is barely 2 per cent - and among the world's lowest. It has hardly shifted this year

No matter in which area of the world you look, full vaccination is an absolute requirement of international travel - and Australia is as tough as any country in insisting on it.

Unless something radical happens - and there are no signs of it - Papua New Guinea will be closed to Australia for years to come for all but a small minority of the population.

That will be a long-term tragic impediment to a once vibrant relationship based on history, on sporting links, education, religious connections, on family reunions, and business.

There is no way any Australian Government is going to ease visa and other conditions while the PNG vaccination rate is so low.

It is indeed ironic that China, where the virus began, stands to benefit from greater people to people engagement at our expense!

Sadly, I have to conclude with a very pessimistic assessment of a really important relationship, and even more sad the continued decline in our real influence.

That surely means Australia needs to be better focussed than ever - and most certainly more pro-active than ever.

Moving comprehensively to reverse the decline in vital agricultural exports such as coffee and cocoa would surely be a good start?