PNG asks China for free trade deal, and debt re-financing

Posted by Radio New Zealand

Papua New Guinea's prime minister has asked China to enter into a free trade agreement with his country, and for help in restructuring his government's debt.

PNG's requests came as James Marape met with China's Ambassador, Xue Bing, in Port Moresby. While the debt re-financing would first require consultations and collateral negotiations, PNG is pushing hard for a Free Trade Agreement in the hope it could be signed on an upcoming visit to Beijing by Mr Marape.

The prime minister suggested that if China opens up free trade with Pacific Island countries like his, it will help build thriving economic corridors in the region.

The new PNG leader is seeking to elevate the two countries' development cooperation, and boost Chinese investment in his country.

Mr Marape also requested China's assistance in re-financing PNG's US$7.7-billion debt.

Both the Bank of PNG and China's People's Bank are expected to consult with Papua New Guinea's Department of Treasury over the re-financing.

Mr Marape's discussions with China's ambassador also focussed on the upcoming 3rd China-Pacific Islands countries Economic Cooperation Forum to be held in Samoa in October, and the forthcoming Pacific Islands Forum meeting in Tuvalu, this month.

"I also suggested for Chinese investment in the Agriculture and Fisheries sector, and in particularly establishing down streaming processing plants for products in forestry, fisheries, mining and petroleum, and general food production and supply in PNG," Mr Marape said in a statement.

Ambassador Bing briefed Mr Marape on China's investments in PNG, the main two being the Ramu Nickel Project and the Porgera Gold Mine Project which Chinese companies are involved in.

In the case of the Ramu mine, the project is in the process of being extended

Mr Marape and Ambassador Bing also exchanged views on global food security and discussed views on entering into an Agricultural Cooperation Arrangement to supply PNG organic food and vegetables to the Chinese Market, as well as a Fisheries Agreement for Chinese investors to build fisheries processing plants in PNG.

Ambassador Bing extended an invitation for Mr Marape to visit China, with a proposed official trip expected to feature signing of Memorandums of Understanding and other technical agreements.

"These will include developments in the field of air services, tourism, mining and petroleum, electricity, construction of roads, ports, airstrips, technical and vocational education schools, and the Chinese language curriculum to be introduced in schools, and more importantly encouraging business investments from China," PM Marape said.

Go to this link for more: https://www.rnz.co.nz/international/pacific-news/396125/png-asks-china-for-free-trade-deal-and-debt-re-financing

China circles PNG amid debt blowout

By Ben Packham - The Australian

Papua New Guinea has asked China to refinance its entire government debt of $11.8 billion in an unprecedented move that could give Beijing huge leverage over Australia’s nearest neighbour.

PNG Prime Minister James Marape announced the request after a meeting yesterday with Chinese ambassador Xue Bing in Port Moresby — less than a fortnight after an official visit to Australi­a at the invitation of Scott Morrison, who has sought to counter rising Chinese influence across the region.

Mr Marape, who had vowed to “take back” PNG’s resource-rich economy from foreigners, would give a formal letter of request to the ambass­ador to convey to Beijing, his ­office said in a statement.

“(The Prime Minister) requested the ambassador to inform­ Beijing on a bid to assist the government of PNG refin­ance its existing country’s K27bn debt,” the statement said. “He suggested that both the Bank of PNG and the PRC ­People’s Bank will take the lead with the Department of Treasury in ensuring that consultations are under way.”

The statement said Mr Mar­ape had also requested China enter into a free-trade agreement with Pacific Island countries, and foreshadowed a state visit by Mr Marape to Beijing.

It said the visit would be combined­ with signing agreements and talks on future co-operation on a range of projects including ports and airstrips.

The Australian understands the Australian government was already in preliminary talks with PNG to help it avoid a looming “fiscal cliff”. This included an offer of help to put together a debt re­structur­ing plan funded by the International Monetary Fund.

International banking sources, who requested anonymity for fear of antagonising China, said Beijing was likely to require collater­al — such as a major resource­s project — in case PNG defaulted on the loan.

Other countries have had to hand over key assets after falling into Chinese “debt traps”, including Sri Lanka, which was forced to sign over the Port of Hambantota on a 99-year lease when it defaulte­d on a Chinese loan.

The Lowy Institute’s Pacific program director, Jonathan Pryke, said if the deal went through, “it would be of huge bene­fit to the cash-strapped governmen­t”, consolidating short-term and ­expensive loans and helping to ­alleviate foreign exchange ­pressures.

“The risk for the lender is that, without commitments to struct­ural reform, there is no guarantee that PNG would be able to pay back the debt now owed to them,” Mr Pryke said.

“China may look for other strategic or economic guarantees that would make the $US8bn liability more palatable, but as far as I know this would be new territory for them.”

PNG’s public debt, which stands at about 32.8 per cent of GDP, is expensive to service, with 10-year bonds paying about 12 per cent interest.

PNG owes China about $870 million, or about 7 per cent of government borrowings.

PNG’s government debt for last year came in at 26.9bn kina ($11.8bn), a legacy of the O’Neill government, which borrowed heavily during the boom years of 2012-14.

This included a $1.2bn loan from investment bank UBS to buy a 10 per cent stake in the ASX-listed Oil Search, which later tanked on falling oil prices and cost PNG an estimated $420m.

Pro-China PNG MP William Duma, a former minister who was sent to the backbench by Mr Marape, welcomed the Prime Minister’s decision to seek debt consolidation assistance from China.

“Our country’s future lies with China and the rest of Asia,” Mr Duma said.

“Asian countries, starting with China, do not worry about the size of a country or how wealthy it is, but they give prominence­ to people-to-people relationships.”

Go to this link for more: https://www.theaustralian.com.au/nation/politics/china-circles-png-amid-debt-blowout/news-story/a79709b361d5dfe80fd1226b9cd6a3a8