PNG request to China to refinance K27bn debt will rile Oz
PNG needs principled leaders to guide us to a better state

Multibillion debt request to China “took Australia by surprise”

KATE LYONS | The Guardian | Extracts

SYDNEY - Papua New Guinea prime minister James Marape has dealt a blow to Australian diplomacy by asking China to refinance his country’s debt.

The request marks a “significant shift” in regional politics and PNG’s allegiances, according to Pacific experts.

Australia has traditionally been the largest aid donor and most important ally of PNG, but in recent years ties between China and PNG have strengthened.

PNG’s prime minister, James Marape, visited Australia two weeks ago at the invitation of his counterpart, Scott Morrison, in his first international visit since becoming the Pacific nation’s leader at the end of May.

In a speech during his visit, Marape said he wanted PNG to move away from an “aid-donor” relationship with Australia within 10 years, and step up alongside its neighbour as a leader in the Pacific region.

However, on Tuesday, after a meeting with Xue Bing, the Chinese ambassador in Port Moresby, Marape requested that China refinance its debts of K27bn. PNG’s debt sits at around 32.8% of its GDP.

“[The prime minister] requested the ambassador to inform Beijing on a bid to assist the government of PNG refinance its existing country’s K27bn debt,” said Marape’s office in a statement seen by the Guardian.

“He suggested that both the Bank of PNG and [China’s] People’s Bank will take the lead with the department of treasury in ensuring that consultations are under way,” the statement continued.

“It suggest a significant shift in the relationship between Australia and Papua New Guinea and Papua New Guinea and China,” says Matthew Clarke, professor of international development at Deakin University.

“In the past Australia would have been the natural country to turn to for this sort of refinancing, but now we see China’s place in the region shift and it becomes potentially a much more dominant player in the donor relationship.”

However Clarke said that in many ways this was a “natural progression” for the relationship between PNG and China, which has grown closer in recent years.

During Marape’s meeting with ambassador Bing on Tuesday, he asked that China consider entering a free trading agreement with Pacific Island countries. Marape has been invited to visit China.

Chinese re-financing of Papua New Guinea’s debt is likely to be raised at next week’s Pacific Islands forum in Tuvalu, which will be attended by Morrison, Marape and other Pacific leaders.

Clarke said Marape’s statement would have taken the Australian government by surprise.

“I understand that they had had similar early negotiations and discussions around restructuring and supporting a potential application to the IMF. I think those preliminary discussions will have begun and so many will have been taken by surprise.

 “Beyond that, there will be concern about a potential ripple effect across the Pacific that they may see that PNG’s pivot toward China might mean a greater pivot in the region toward China as the dominant donor and that will be of concern to the Australian government.”

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