A Chinese City on Australia’s Northern Border?

10 February 2021 Jarryd de Haan, Research Analyst, Indo-Pacific Research Programme
Plans for the city on the PNG Torres Strait island of Daru are unlikely to come to fruition. It does, however, underscore ongoing interest from China for infrastructure projects in PNG and Australia’s political concerns.

Background

Reports on a leaked document detailing a proposal to build “New Daru City” on the Papua New Guinean Torres Strait island of Daru, circulated across Australian media on 5 February. The proposal was put forward in April 2020 by WYW Holding Ltd. (WYW), a private company registered in Hong Kong. A spokesman for Papua New Guinea’s Prime Minister, however, told media that the Prime Minister was unaware of the proposal while adding that PNG would welcome multi-billion-dollar foreign investment projects, as long as they comply with PNG laws and bring benefits to the local populace.

Comment

According to the reports, the proposal includes: ‘an industrial zone, seaport, business and commercial zone, along with a resort and residential area, over a 100 km2 area’. The cost of such a project has been projected by some to be up to $39 billion, exceeding the GDP of PNG which sits at $32 billion. It is unclear whether WYW, which was registered in April 2017, would have the capacity or experience to undertake such an ambitious project. There is very little, if any, public information on the company and Michael Shoebridge, Director of ASPI’s Defence, Strategy and National Security programme, described the company as obscure and its proposal as a scam.

In a report by ABC News, it was noted that the company has listed infrastructure financing and investment projects in Pakistan and Myanmar. More details, however, are not publicly available and any public records of the company are difficult to find. Other reports have given the company credit for building New Yangon City in Myanmar. That project, however, is still in its early stages, and firms are currently competing against Beijing’s bid under the China Communications Construction Company (CCCC), not WYW. Comparatively, CCCC, was established in 2005, and has an extensive, albeit controversial, history in major infrastructure projects.

The Australian Government also appears to harbour some scepticism about the project. In an interview with Sydney Radio 2SM, Prime Minister Scott Morrison said, ‘I honestly think it’s just speculative… It’s just people flying some kites and I’m not going to overreact to the noise that is flying around out there.’

While the New Daru City Project looks unlikely to go ahead, its proposal does highlight ongoing strategic concerns for Australia. Such concerns were already raised in December 2020 when the PNG Government agreed for China to undertake a feasibility study to build an industrial fisheries complex on Daru Island. Sitting atop the Torres Strait and within 200 kilometres of the Australian mainland, there are concerns that Beijing’s interest for infrastructure projects on that island are more geopolitical than economic, especially if those projects were to include any kind of port facility.

As noted in a previous Strategic Weekly Analysis, PNG is in a vulnerable position. Due to the difficulties caused by COVID-19, the country’s GDP growth dropped to -3.3 per cent, down five per cent from earlier estimates of two per cent growth. As a consequence, PNG’s ongoing debt problem, most of which is owed to China, will be elevated and could add decades’ worth of repayments. Lucrative offers for investment, therefore, are especially attractive to the PNG Government. So, while New Daru City is unlikely to go ahead, it is likely that PNG will see some form of infrastructure investment from China in the coming years. The Australian Government, while it likes to tout a close relationship with PNG, will have a difficult time persuading its neighbour to refuse such investment

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