Australia Increases Investment in South Pacific Islands in an Apparent Response to China’s Growing Economic Influence in the Region
On July 11, the Australian government signed an MoU with the Solomon Islands and Papua New Guinea (PNG) for cooperation on a subsea internet cable connecting the three countries. The project, for which Australia is footing two-thirds of the cost ($137 million), is a direct response to China’s growing efforts to carry out similar infrastructure and other work in these and other South Pacific island nations.
Initially, in 2016, the subsea cable work was awarded by the Solomon Islands to China’s Huawei Marine Cable . Fearing the security implications of Huawei carrying out this project and linking to Australia’s telecommunications infrastructure, Canberra refused to authorize the cable’s landfall in Australian territory, effectively blocking the project’s implementation.
Huawei’s participation in the subsea cable project was a substantial concern for Australia’s intelligence community, which has been increasingly vocal about its concerns over the company’s ties to the Chinese government being a risk to regional security. In 2016, the Australian government blocked the sale of Ausgrid, the country’s largest electrical distribution company, to China’s state-owned State Grid Corporation. The government also appears to positioning itself to ban Huawei’s involvement in Australia’s planned 5G broadband network.
More broadly, recent events seem to show increased Australian investment in the region in response to growing Chinese commercial activity in the South Pacific islands. Following news of this deal, reports emerged that Vanuatu is also in negotiation with Australian authorities to develop a high-speed undersea internet cable connecting the island-nation to Australia. This comes after China has made a series of aggressive investment moves in the country. Australian concerns about the implications of Beijing’s economic engagement of Vanuatu appears to have been sufficiently intense as to generate an assurance from the Vanuatu government that it would prohibit Chinese militarization of its island – a central underlying concern of Canberra.
Despite recent pushback, China’s E&F presence in the region continues to proliferate through critical infrastructure investments that many worry could trap these small nations into familiar patterns of debt-burden and influence-peddling. In some cases, Chinese entities have gone so far as to offer outright bribes and financial sweeteners to garner political favor. Some notable cases are as follows:
- In 2013, an $87 million wharf and road construction project was undertaken in Vanuatu by Shanghai Construction Group, experienced several “miscalculations” that resulted in huge losses to the port’s commercial activities, amid simultaneously rising concerns about its dual-use military capabilities.
- In 2017, allegations surfaced that Huawei had paid a $6.5 million bribe to the Solomon Island’s ruling, Social Credit Party.
- In June 2018, state-owned China Radio International took over shortwave radio frequencies in the Pacific region and remote parts of Australia, which were formerly used by the Australian Broadcasting Corporation (ABC). An opposition Australian Member of Parliament described this as a significant loss for “national interest.”
- In June 2018, investigative reports alleged that ZTE had bribed former Papua New Guinea President, Michael Somare, with $780,000 in exchange for a $36 million telecommunications contract, which was in fact, offered to the company in 2010. The bribe was paid out of a $35 million slush fund set up by Beijing through the Export-Import Bank of China