Australia has just made a big move — providing funding for a significant asset in the Asia Pacific — in the latest defiant act against China.
Australia’s decision to provide Telstra with $1.8 billion to buy South Pacific telecommunications network Digicel is “clearly directed against China” and will likely have consequences, one expert says.
Telstra announced the purchase on Monday night and said it had received US$1.3 billion ($AU1.8 billion) in funding from the Federal Government to buy Digicel, which operates in Papua New Guinea, Vanuatu, Fiji, Tonga, Samoa and Nauru.
Foreign Minister Marise Payne welcomed the decision and said the government’s investment was “consistent with Australia’s longstanding commitment to growing quality investment in regional infrastructure”.
In a statement she said the deal reflected the “Pacific Step Up” commitment.
“This is fundamentally in the interests of both Australia and our Pacific family,” she said.
University of Sydney Professor of Chinese Business and Management Hans Hendrischke told news.com.au the move to buy the South Pacific’s leading mobile and internet provider, was “clearly directed against China”.
Prof Hendrischke said he couldn’t guess how China would react but it had obviously been taking note of how Australia is making strategic decisions against it, which China has previously aired in a list of 14 grievances.
“They might put limits on how they engage with Australia,” he said.
However, he said China does need Australia’s support for its bid to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (a revised version of the Trans-Pacific Partnership) which is a trade agreement between 11 countries including Japan, Mexico, Malaysia and Canada. The United States was previously a member but withdrew under the leadership of former president Donald Trump.
“There’s a lot of factors at play so China is not going to be moved by one single factor when making decisions on how to deal with Australia,” Prof Hendrischke said.
When asked whether the Digicel purchase was a good move, he said there was a “clear consensus” in the government and between the Australia and the US that it would happen.
“It’s clear government policy and therefore the government will have decided that this is the move to take,” he said.
The Australian Financial Review economics editor John Kehoe noted that Australian security agencies were anxious that Digicel, which is largest telco operator in the Pacific with headquarters located in Papua New Guinea (Australia’s closest geographical neighbour) could be sold to China and would enable Beijing to spy on Australia’s neighbours.
He noted that providing taxpayer money for the sale was a “totemic shift” for a Western government to “weaponise” corporate capital and “fight back against the creeping influence of China’s Belt and Road Initiative”.
University of Queensland Associate Professor of International Politics Shahar Hameiri wrote in the Lowy Interpreter that the Telstra decision was the “clearest indication yet that Australia’s hands-off approach” to business activities overseas was being replaced by more “active direction” of investment.
“This shift is clearly driven by the perception that China’s growing presence in the Pacific Islands region constitutes a threat to Australia’s security interests,” Prof Hameiri wrote.
Prof Hameiri noted that China’s bilateral trade with most of the Pacific Islands region now eclipses Australia’s.
“Additionally, some significant Chinese-financed investments in the region’s resources sector and in its infrastructure have raised anxiety levels in Canberra,” he wrote.
“Australia has therefore shifted towards open competition with China in the region via the ‘Pacific Step Up’, which is meant to pull together and enhance Australia’s diplomatic, security, and economic engagements.”
As part of this, Australia has developed financing mechanisms such as the Australian Infrastructure Financing Facility for the Pacific, and the renamed Export Finance Australia, to encourage competition with Chinese firms in the Pacific, especially over infrastructure.
“It has also begun to actively prevent sensitive sectors, such as telecommunications, from coming under Chinese ownership,” Prof Hameiri notes.
He notes that Telstra’s purchase of Digicel comes after Australia signed up to finance an underwater sea cable connecting it with Papua New Guinea and Solomon Islands, to stop China company Huawei from implementing the project.
“For the Australian government to openly use financial incentives to direct companies towards particular countries and sector is a substantial change, with significant political implications.”