The Solomon Islands government has agreed to a 448.9 million yuan (US$66.15 million) loan from the Chinese state-owned Export-Import Bank of China to fund the construction of 161 towers by controversial telecommunications giant Huawei.
In response, defence expert Michael Shoebridge has warned that Beijing is “moving fast and in a broad way” in the South Pacific to deepen its influence, and has called for the Australian government to cut funding for the Pacific Games due to be held next year.
On Aug. 18, Prime Minister Manasseh Sogavare’s government announced the deal under the pretence of helping people “enjoy” the Pacific Games.
The deal will come under the Solomon Islands National Broadband Infrastructure Project (SINBIP), and is supposed to be “fully funded” by a 20-year concessional loan from the Export-Import (Exim) Bank of China at a one percent interest rate. Further, the construction and supply of tower equipment will come from Beijing’s Huawei and the China Harbour Engineering Company Ltd.
“This proposal will be a historical financial partnership with the Peoples Republic of China (PRC) since the two countries established diplomatic ties in 2019 as the two countries work closely to ensure the successful implementation and operation of the project,” according to its website.
Under Prime Minister Sogavare, the Solomons switched diplomatic ties from Taiwan to China, a move that has attracted controversy and criticism from the opposition leader and provincial leader Daniel Suidani.
Echoes of ‘Debt-Trap’ Diplomacy
The government also claimed a Cabinet Steering Committee had consulted a local and New Zealand firm to review the viability of the project, which found it would “generate sufficient revenues for government” to fully repay the Chinese loan and interests within the 20-year period.
The deal will add to the existing debt owed by South Pacific governments to Chinese-based institutions. The World Bank estimates that major Pacific nations such as Fiji, Samoa, the Solomons, and Tonga owe around 38 percent of their external debt to the Asian Development Bank, with 22 percent owed to China.
The high debt levels to Beijing echo ongoing concerns around its global infrastructure program, the Belt and Road Initiative, which has snared several developing countries into unserviceable loans to Chinese institutions. Once the loans are called-in, some governments have handed over key assets to Beijing in return for the loan to be written off.
Meanwhile, regarding the current deal, the Sogavare government will create a new state-owned entity to own the 161 mobile towers, while discussions are underway with Solomon Telekom Company Ltd to be the operator. It hopes to finalise outstanding requirements around the deal by the end of the year and for construction to begin by early 2023.
The government has earmarked the “first 48 percent of the 161 towers” to be complete before the Pacific Games in November 2023, saying it should enable people to “enjoy the games even if they do not come to [Solomons capital] Honiara.”
No Practical Use for Huawei, Just A Power Play
Michael Shoebridge of the Australian Strategic Policy Institute questioned the need for another major telecommunications in the region—which was banned from the 5G networks of several developed countries—when it was already serviced by market leader Digicel Pacific, now owned by Australia’s Telstra.
“This deal is a demonstration that Beijing is moving fast and in a big broad way to create more leverage over the Solomon Islands government,” he told The Epoch Times.
“It also shows Prime Minister Sogavare wants a broad, deep relationship with China. And it undercuts the value of his continued assurances that the partnership he’s building with Beijing will not have a major security component,” he added.
Australian Labor Prime Minister Anthony Albanese and Foreign Minister Penny Wong have repeatedly stated that Sogavare had assured them that Beijing’s interest in his country would not involve potential security elements.
They also touted their different approach to engaging the Pacific nations compared to the previous Morrison government (which took a harder line on Beijing), emphasising that they were more willing to “listen” and that they had developed a personal connection with its leaders.
“One of the things we need to do is build personal relations between Australia and our friends in the Pacific,” Prime Minister Albanese told the Today Show in mid-July. “We need to be prepared to listen to what they have to say, be prepared to assist in their development.”
Shoebridge said, however, that the Australian government was “being played, both by Beijing and Sogavare.”
Taking the Fight to Beijing for the Pacific
Shoebridge warned that Australia and New Zealand need a broader strategy for the region and to offer something to the region that Beijing never could.
“Australia and New Zealand should open the closer economic relations framework that we have between our two countries to the small Pacific states, including the Solomons, and that would integrate our economies with our small Pacific partner economies and allow things like visa-free travel for work and education,” he said.
“Our own civil society institutions need to engage with democratic voices in these Pacific states because it’s in our interest to strengthen our democracy and to work with partner democracies to strengthen theirs as well,” he added.
He suggested initiatives like the Inter-Parliamentary Alliance on China could be extended to include South Pacific MPs and that Australia should help fund elections in the Solomon Islands instead of the Pacific Games.
Australia has pledged SB$100 million (US$12.13 million) towards the hosting of the Games, with officials estimating the event will attract around 5,000 visitors to Honiara.
Yet Sogavare has used the Games as a pretext for delaying elections that he could potentially lose.