Papua New Guinea reconsiders China as a partner

By China News on June 10, 2013 • ( 3 )

Papua New Guinea’s Prime Minister Peter O’Neill has written to Public Enterprises Minister Ben Micah asking him to review a $300 million deal with China’s ZTE Corporation and China Great Wall Industry Corp for a communications satellite.

This is the latest of a series of complications in the relationship between PNG and China, which was for many years warm but remained chiefly diplomatic.

More recently, however, soft loans through the Export-Import Bank of China and other Chinese channels have facilitated much closer engagement, with Chinese companies taking a prominent role in development projects around the country – resulting in some tough lessons starting to be learned on both sides.

First, state-owned giant Metallurgical Group Corporation built the $1.4 billion Ramu nickel mine, which recently began operating after a two-year hiatus while environmental issues were fought through the courts.

Then a year ago China provided a $3bn soft loan to rebuild PNG’s crumbling roads, especially its transport spine, the Highlands Highway. This is conditional on a Chinese company taking at least 70 per cent of each contract.

China Overseas Engineering Group was criticised by Highlands politicians William Duma – the Petroleum and Energy Minister – and former prime minister Paias Wingti for its work on roads in the region.

Mr Wingti, now Western Highlands Governor, said: “We can’t allow a cheap workforce” – referring to Chinese labour – “and cheap equipment to compromise quality”.

And controversy emerged last month over tendering procedures in plans to award $470m out of China’s credit line to China Railway International and China Machinery Engineering Corp for reconstruction of sections of the Highlands Highway.

The latest issue relates to a memorandum of understanding struck between Mr Micah and ZTE and China Great Wall to design, produce and launch into orbit a satellite at the end of 2016, on which exploratory work started recently. Mr O’Neill’s request for a review follows concerns raised in the US congress and a corruption case in Singapore.

ZTE managing director Peter Poon has denied that ZTE is involved in such events, and confirmed that a memorandum of understanding has already been agreed by the PNG government.

Source: The Australian – Tensions with China fanned by PNG review