Economics and finance, Government and governance, Trade and industry, International relations | Australia, Asia, The Pacific

11 February 2021

Despite concerns from Australian leaders, a new fisheries park supported by the Chinese Government in Papua New Guinea will be greatly beneficial for its economy and workers, Michael Kabuni writes.

Last November, Chinese company Fujian Zhonghong Fishery Limited signed a memorandum of understanding with the Papua New Guinea (PNG) Government to set up a $200 million multi-functional fisheries industrial park in the Western Province of PNG.

Unfortunately, debate in Australia surrounding this proposal has not extended beyond Australian security concerns to what this project means for the people of Western Province. Australia’s main concern is that the fishery investment is in an area not known primarily for an abundance of fish, and some believe it may have instead been chosen strategically because of its proximity to Australia.

This view, however, is not balanced. Australian policymakers should note the ways the fishing industry has benefited PNG and the potential benefit of this project for the people of Western Province.

A look back at the importance of fishing to PNG’s economic development is important here.

In 2007, PNG signed an interim-Economic Partnership Agreement with the European Union (the PNG-EU iEPA), which exempts tariff and quota limitations for canned tuna and smoked loins manufactured in PNG and exported to the European Union.

To access these benefits, about six foreign companies established tuna canning facilities in PNG. Though none are owned by Chinese companies, Chinese vessels do fish in PNG. Under the deal, their exports of manufactured tuna to the European Union increased from $60 million to more than $180 million over three years, providing important economic development for PNG. Although revenue from the exports fluctuates, it remains higher than it was before the PNG-EU iEPA.

More on this: PNG border security a key strategic interest for Australia

This more recent deal will likely bring similar economic benefits. The proposed investment comes after PNG negotiated access to China’s large seafood market. Just as access to European markets increased exports of canned tuna, local businesses will now be able to export tuna to the Chinese market, growing the PNG economy in the process.

On top of this, the government collects licensing and access fees from foreign fishing vessels that do not manufacture their catch in PNG, making expanded fishing grounds very profitable for the government. In 2016, the year for which latest data is available, the revenue from licensing and access fees alone generated $128.8 million for PNG.

The government is also planning to move towards full onshore manufacturing as part of the deal, meaning all the fish caught in the park will be canned in PNG manufacturing facilities.

This comes with another benefit: employment. The tuna manufacturing industry in PNG employs up to 40,000 workers, 90 per cent of whom are women. This is the highest of any manufacturing sector in PNG, and twice the number of people employed producing palm oil.

While finer details of the proposed industrial park in Western Province are not known, this means it is very likely to include manufacturing facilities which will employ ordinary people from PNG. But will Australia give the project its blessing?

Bruce Hunt’s book, Australia’s Northern Shield? Papua New Guinea and the defence of Australia since 1880, where he analysed declassified Australian cabinet documents on the issue, can help explain why Australia opposes the fisheries project.

More on this: PNG’s power plays and political sideshows

In it, he outlines that from the British colonisation of Papua in 1884 to the two world wars, PNG has been central to Australian security concerns. Whereas then Australian governments were concerned about German, communist, or Indonesian aggression, the country is now worried about Chinese influence in its northern neighbour.

The Coral Sea Cable – an underwater Internet cable connecting Sydney to Port Moresby – was negotiated after Huawei Technologies, a Chinese company, was engaged to build underwater Internet cables connecting PNG’s 14 maritime provinces in 2016. By 2018, Australia had asked PNG to terminate the Huawei contract even though the work was 60 per cent complete. PNG declined Australia’s request.

The story is the same with the $1.7 billion electricity deal projected to cover 70 per cent of PNG by 2030, co-funded by the United States, Australia, Japan, and New Zealand. This was only forthcoming when Chinese plans to build a $907 million hydro-power plant in Goroka were announced in 2018.

To cut a long story short, Australia’s intervention in infrastructure in PNG in recent years has largely been a reaction to Chinese initiatives.

While PNG remains the highest recipient of Australia’s foreign aid, including $20 million in the Western Province, its aid and investment in infrastructure will not create as many long-term jobs as the fishing industry has done and can keep doing for PNG.

A cannery at a fisheries park in Western Province will arguably provide more employment for the people there than electricity projects or building Internet cables. Above all, Australia’s behaviour shows a disrespect for the right of PNG to guide its own development.

After his meeting with the Australians, the province’s governor said, “it’s regrettable that all they want is for us to be subsistence farmers and fishermen and maintain our current status quo.”

The government may reject Australia’s pressure, just as it did when it requested it cancel the Huawei contract to build Internet cables in 2018. Alternatively, Australia may offer another deal in return for PNG dropping Fujian Zhonghong Fishery’s proposal, but it is unlikely that Australia will take over the fishery project as it did with Coral Sea Cable.

Ultimately, China’s offer comes with massive market access which Australia cannot match, and the best outcome for PNG’s economy is for the park to go ahead.

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One Response

  1. Francis Wargirai says:

    Good take. I do have my issues with China but that aside this is a good analysis of the issue. I am often of the impression that Australia’s foreign policy interests are particularly guided by ideology and its pivot towards the U.S. I remember a long talk I had with a senior bureaucrat within the provincial government that usually provinces lack the capacity to develop due to the absence of an “enabling environment”. This is exactly what our provinces need employment opportunities that nurture economic and social growth.

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