China’s PNG focus is clearly aimed at 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.