China’s PNG focus is clearly aimed at Australia

The outcome of the visit to Papua New Guinea last week by the PRC Foreign Minister is about as transparent as one would expect - totally devoid of anything more than the usual meaningless statements about helping PNG with infrastructure and trade and just about every other area of government activity.

The statements from the Marape Government were no different - in fact they read as though they were written by the PRC Embassy!!

But what is clear to me is that China has shifted its priorities in Papua New Guinea in a way that must alarm the Australian Government and the people of Australia.

If one looks back a decade China's focus in PNG was in the Momase region - the northern coast of the PNG mainland. It was the major investor in the Ramu nickel mine, it was interested in developing several fish processing plants, an industrial zone at Madang, the redevelopment of the port of Lae, the expansion of the Ramu hydro power project, and maybe a wharf on Manus.

Fast forward to the visit last week.

Just two specific projects have emerged. BOTH are on the Papuan Coast, with obvious proximity to Australia.

A statement by the project manager of the Ihu Special Economic Zone confirms that the PNG Foreign Minister committed the Chinese Government to promote and help fund the economic zone, a project it committed K80 million to earlier this year.

There are two specific reasons why China is committed to what is an ambitious project - attracting industry to a remote and undeveloped part of Papua New Guinea is an interesting challenge, to put it mildly.

The first reason is a purely political one. The principal proponent of the project is the local MP, Soroi Eoe, who happens to be the Minister for Foreign Affairs and Trade in the current PNG Government. He is China's best, but not only, friend in the government.

I am told the initial K80 million grant, not loan, from China has been used to build a road from the coast to inland areas. Roads are politically very popular in Papua New Guinea, so Mr Eoe will be expecting this project will win him votes in the PNG national elections next month. China will be hoping it does also.

The second reason is that the project is strategically located close to the proposed Purari hydro power project - which Andrew Forrest is currently evaluating. It is also close to the potentially lucrative Gulf of Papua oil and gas fields. The pipeline from the major PNG Gas Project in the Highlands is also close by.

But there is a third reason that has not been spoken about. There can be no doubt that the construction of a major wharf at Ihu-Kikori would not please the Australian Government. The area is of strategic significance for Australia. After Daru, Ihu is the closest reasonable-sized community to Australia.

By gifting an initial K80 million to the project China has effectively taken out a "mortgage" over it. Even if Australia was interested in helping develop the project China's presence would almost certainly make that impossible. Australia has shown no inclination in getting involved - so far. But my view is it is too late to do so.

The strategic benefit from controlling this project is obvious. China will be able to decide what it's long-term presence consists of - a wharf definitely but also a military base in the future. Australia would be almost powerless to stop that.,,,,,,without direct PNG Government assistance.

There is an immediate benefit from its engagement with the Ihu project for China. Inland from the two townships are vast high quality timber resources....resources that are part developed/exploited.

The road under construction will give significantly greater access to the timber resource - something China will capitalise on. China already takes around 80 per cent of Papua New Guineas log exports - this project will enable Chinese companies take even more.

There is an element of risk for China in this project. It surely depends on Mr Eoe holding his seat in the forthcoming election - something that is not guaranteed in the volatile world of PNG politics. It also depends on securing reliable and affordable power - and that may require the multi-million Kina development of the Purari hydro power project or gaining access to a major gas resource.

If this project is developed, essentially under the patronage of the Chinese Government, it will clearly not be in the Australian strategic interest. It defies comprehension that absolutely zero has been done by DFAT to put forward an alternate proposal to get involved in the project.

The second project that seems to have secured a level of Chinese commitment during the Foreign Minister's visit is one I helped initially expose eighteen months ago - the development of a seafood factory on the island of Daru - easily the closest PNG community closest to Australia. Daru is effectively adjacent to the islands of the Torres Strait which are part of Australia.

The initial proposal came from a Chinese company - and it seemed at the time the PRC Government may not have had a direct involvement. There is no doubt the PRC Embassy encouraged it, but it seemed to be a proposal from a little-known Chinese company.

Even though there has been no official announcement, media reports, which have not been denied, indicate that the Chinese Foreign Minister "offered" $US200 million to help fund the development of a fishing factory and wharf at Daru.

This should come as no surprise. As Australia's relations with China deteriorated China's priority clearly shifted to areas that impact on "the Australian strategic interest". Daru, first and foremost, meets that criterion.

Not only is Daru close to the islands to our north - part of Australia - it is close to a major seaway passage vital to Australia.

I am advised that the fishing areas around Daru are limited. They are currently fished by the people of Daru, and Australians from the islands in Torres Strait and Cale York. There are treaty agreements that enable both Papua New Guinea and Australia to access the sea between the two countries for fishing and other purposes.

There is a high level of exchange between the people of Daru and Australians living on the islands of the Torres Strait...commercial arrangements, health and education services, and family links.

If China is about to gain more than a foothold on Daru - and that is what a $200 initial investment would give it - relations with the people of the. Torres Strait and Northern Australia will surely change for the worse.

Daru is the capital of the Western (Fly River) Province. There is already a massive Chinese presence in the province, A China construction company is carrying out the largest infrastructure project in the province - the upgrading of the road between Kiunga and the giant Ok Tedi Mine at Tabubil. There are also substantial links between the provincial administration and the PRC Embassy in Port Moresby from the Governor down.

The formal PRC Involvement with the "development" of Daru is at a very early stage - nowhere near as advanced as China's involvement in the Ihu special economic zone.

That is significant. It is known that DFAT has been working for some time on a package of support for Daru. Sadly, Daru is a really poorly developed and serviced community. It has an inadequate water supply, no community-wide sewerage system, poor communications, an inadequate hospital targeted for redevelopment, and inadequate education for the children of the island. There are no industries to speak of.

As a consequence, the people of Daru suffer from an alarming array of diseases and illnesses including typhoid. There have also been instances of polio.

The contrast between the services enjoyed by Australians living on the islands of the Torres Strait could hardly be greater. The potential for mass illegal migration from Daru, and the Western Province, to the Australian mainland simply cannot be ruled out.

The new Australian Government needs to give the greatest possible priority and attention to the position on Daru.

It needs to offer a comprehensive package of support measures that address the deplorable state of community services and provide the kind of infrastructure that will enable living standards to be improved for the 20,000 people of Daru, and create services that will attract industry such as fish and other seafood processing.

I am aware of at least one proposal that would really give us a "presence" on Daru. It involves a partnership be5ween the Australian Government and the private sector in PNG.

Nothing short of a services, infrastructure and industry support package in the region of $A200-$300 million would be sufficient. This is not the time for peace meal projects and a halfhearted commitment.

The initial PRC commitment, or interest, does not address the needs of the people. It will do zero to raise living standards, to open up Daru to the world, but this could be done with a new airport in particular.

This is a real opportunity for Australia. It is overwhelmingly in the Australian national interest for the people of Daru to gain a real opportunity - an opportunity to enjoy better services. Higher living standards, and the opportunity to secure a better future.

The estimated cost is but a fraction of our existing $600 million a year aid budget. Yet if implemented the right way, and with a real public-private sector partnership, it can transform Daru and secure its future.

There can be NO doubt China has shifted its focus to at least two areas of strategic significance for Australia.

Our response must be robust and comprehensive - and generous. And now.!!