The government’s relationship with China faces a stiff test with Scott Morrison to announce today a major foreign policy pivot towards the South-West Pacific, and Treasurer Josh Frydenberg deciding to block the $13 billion takeover of the APA Group by Hong Kong’s CK Group.
With Foreign Minister Marise Payne in Beijing to meet her Chinese counterpart and thaw relations, the Prime Minister will commit to a $2 billion regional infrastructure fund, $1 billion in boosted export assistance, increased security, sporting and cultural ties, and five new embassies as it escalates its foreign policy focus on a region in which China is seeking to spread its influence.
Mr Morrison, who is scheduled to meet China’s leaders at next week’s East Asia Summit in Singapore and the Asia-Pacific Economic and Cooperation Summit in Port Moresby, will announce the regional “step up” in a speech in Townsville.
He will describe the South-West Pacific as “where Australia can make the biggest difference in world affairs”.
“My government is returning the Pacific it where it should be – front and centre of Australia’s strategic outlook, foreign policy and personal connections, including at the highest levels of government,” he will say.
“While we have natural advantages in terms of history, proximity and shared values, Australia cannot take its influence in the South-West Pacific for granted. And too often we have.”
The government rejected that either the “step up” in the South-West Pacific or the APA Group decision were motivated by China.
Although CKI group is a Hong Kong company, there were concerns about Beijing’s reach into Hong Kong. The APA bid was scrutinised on national security grounds by the government’s newly-created Critical Infrastructure Committee and, as The Australian Financial Review revealed in September, there were national security concerns about the bid.
Mr Frydenberg rejected the bid yesterday on the grounds it would result in an “undue concentration of foreign ownership by a single company group in our most significant gas transmission business” and he stressed the decision was “not an adverse reflection on CK Group or the individual companies”.
“My preliminary view reflects the size and significance of APA Group,” he said. Senator Payne is expected to explain the decision to the Chinese today.
The Morrison government is working on rebuilding the relationship with Beijing that deteriorated under Malcolm Turnbull,l but Mr Morrison also acknowledged last week Australia must navigate a “testing” and higher degree of strategic competition between the United States and China.
Today’s announcements in Townsville will build on last week’s confirmation by Mr Morrison that Australia will upgrade the Lombrum naval base on Manus Island, Papua New Guinea, and will involve a reprioritisation of the aid budget,
Mr Morrison will pledge $2 billion in aid money and long-term loans to establish an Australian Infrastructure Financing Facility for the Pacific (AIFFP) which will be used for high-priority infrastructure projects in the region in telecommunications, transport and water. This fund, similar to one Labor has also promised, will be in addition to a trilateral initiative involving Australia, Japan and the United States which will act as a rival to China’s Belt and Road Initiative.
Australia, the US and Japan are expected to announce next week the first wave of Indo-Pacific projects to be supported under this program as part of US Vice-President Mike Pence’s attendance at the APEC summit.
Mr Morrison will also announce new diplomatic missions in Palau, the Marshall Islands, French Polynesia, Niue and the Cook Islands.
He will boost by $1 billion the budget of Efic, Australia’s export financing agency, to encourage Australian businesses to invest more in the region, especially in infrastructure.
In a snub to the ABC, Mr Morrison has been negotiating with commercial networks about broadcasting Australian content into the regions. The Abbott government shut the ABC’s Australia Network, which broadcast into the region, sparking criticism it was killing off an important tool for soft diplomacy. Mr Morrison is reversing that, but not with the ABC.
“I’ve been speaking to Free-TV Australia and the commercial TV networks about how we get more of our Australian content into the region. Our Pacific family switching on to the same stories, news dramas and sports we are watching at home,” he will say.
Mr Morrison will also announce expanded sporting links as well as increased ties between military and police. This will include annual meetings of defence, police and border security officials.
“It’s part of a larger vision of Australia as a force for good in the Pacific, working with others to ensure our region is secure, stable and sovereign,” Mr Morrison will say.
“We seek cooperation with others – New Zealand, the United States, Japan, China, France and the UK – to ensure our engagement supports common goals.
Australia has already stepped up its relationship with Vanuatu, following reports Beijing had held preliminary discussions with that country about building up its military presence.
And Australia stepped in to fund an undersea internet cable between the two nations, squeezing out a rival bid by Chinese telco Huawei.