29 Jun 2019
Joint plan to thwart China’s port storm
Australia’s Foreign Ministry this month hosted a session in Brisbane for 120 business representatives and contractors on the Australian Infrastructure Financing Facility for the Pacific.
The AIFF will start next month. That’s a positive move: grant and debt financing can help unlock infrastructure support for the region’s economic aspirations.
But now’s the time for Australia to examine our commitment to major infrastructure funding for neighbouring East Timor. That’s the obvious conclusion to be drawn from a report in The Australian this week about an influx of Chinese money to East Timor.
The government in Dili is poised to borrow up to $15.9 billion from China to develop the controversial Greater Sunrise gas project. The deal could result in China gaining access to a port on the south coast of East Timor. The country’s leaders wish to build a gas processing facility and associated port there.
What’s causing consternation in Canberra is that a Chinese-controlled port on the coast at Beaco could open the door for access by People’s Liberation Army ships and aircraft. Ultimately, China’s air and naval military assets could be deployed there and challenge Australia’s ability to control our air and maritime approaches.
It would appear East Timor is ready to sign a commercial loan with China under President Xi Jinping’s Belt and Road Initiative to develop the gas project. East Timor has a controlling equity stake in the Sunrise gas field. The China Civil Engineering Construction Corporation would build the new port, once the state-owned Timor Gap gas company has secured funding from China’s Exim Bank.
China is buying up development and operational rights to a chain of ports from Asia to the Middle East, Africa, Europe and South America under the strategic framework of the Maritime Silk Road, the oceanic dimension of the Belt and Road Initiative.
A brilliant study published last year by Devin Thorne and Ben Spevack, Harboured Ambitions: How China’s Port Investments are Strategically Reshaping the Indo-Pacific, points out that Chinese analysts unofficially discussing port investments “routinely prioritise China’s national security interests over the objective of mutually beneficial economic development, contradicting the position of official policy documents”.
It analysed 15 China-funded port projects through the Indo-Pacific and found the behaviour of Chinese companies indicated these investments aren’t principally driven by the concept of win-win development. Rather, they “appear to generate political influence, stealthily expand China’s military presence, and create an advantageous strategic environment in the region” for China.
China’s international port holdings are strategically positioned, linking with the overland Silk Road at key junctions. Based on the Economist Intelligence Unit’s research, the main focus is the “passage” from China to the Indian Ocean, Africa and onto the Mediterranean.
Ports play a key role in national economies and provide valuable data on logistics and the local economy. China’s efforts at financing (through Chinese banks), building (through Chinese construction companies) and operating ports (with Chinese operators) strengthens its global power.
Our Pacific step-up policy involves significant support for infrastructure. This week Australia, Japan and the US picked a liquefied natural gas project in Papua New Guinea as their first project for joint financing in the region. They plan to lend over $1bn. The three nations agreed in November to jointly finance infrastructure projects in the Indo-Pacific as an alternative to China’s Belt and Road initiative.
We should be lifting our engagement with our near neighbour before China establishes an even stronger infrastructure foothold.