PAPUA NEW GUINEA – In the mountains near Port Moresby, a new road and a new bridge mark the site of Papua New Guinea’s most recent hydroelectricity project.

The $260 million Edevu Hydro Project is a private development, but PNG Government ministers say it is being funded by the China Development Bank.

The project is one of several major infrastructure developments in PNG funded or built by the Chinese Government.

“It will be a development for the local economy,” China’s ambassador to PNG, Li Ruiyou, said at the launch.

“It will be beneficial for the local people and it also will be a promotion for the cooperation between the two countries.”

Australia’s defence and diplomatic community are privately expressing unease about China’s growing influence in Papua New Guinea, where the Chinese Government is investing billions in infrastructure and business development.

Chinese government companies are building roads in the highlands and to the Lae airport, and redeveloping Lae’s port.

The Chinese government has also lent the PNG government hundreds of millions of dollars to build roads in Port Moresby, create a National Broadband Network and a National Identity Card system and develop a system to share information between government departments.

Unlike Australia, which delivers its aid primarily through grants to specific programmes, China delivers its aid via concessional loans.

PNG’s budget documents show the cost of servicing and repaying its debts to China has risen more than tenfold – from $2.46 million to $26.2 million annually – in the past five years.

There is also speculation some of China’s support is being channelled through PNG government corporations, so is not subject to the same transparency requirements as projects which appear in the national budget.

PNG’s business community has also noticed an increase in Chinese investment, particularly in property development.

Port Moresby’s Chamber of Commerce and Industry chief executive David Conn said Chinese enthusiasm for investing in PNG contrasted with Australians’ view of the country’s economic and social prospects.

“I’m impressed with their foresight and their willingness to invest and I’m quite critical of Australians who say, ‘oh, the Chinese are taking over, the Malaysians are taking over’,” he said.

“I say, ‘well, look fellas, the pitch was yours and you left it’.”

The Chinese government says the country has almost $2.5 billion in direct investments in PNG – that is still well behind the $20 billion of Australia investment, but it is growing fast.

Ambassadore Li said trade between PNG and China grew to $3.3 billion last year.

“It’s quite a big amount of trade between the two countries with rapid growth,” he said.

Australia is Papua New Guinea’s biggest aid donor, and the government recently acknowledged it would spend more than $100 million to help with security for PNG’s hosting of the APEC leaders’ summit in 2018.

This aid is more than just Australia’s traditional support to PNG.

The ABC understands the Australian government was persuaded by security and foreign policy advisers that the commitment was necessary to offset the risk of China stepping in with its own assistance.

- ABC