China eyeing Digicel network
19 May 2020
WASHINGTON DC - The strategic competition between China and Australia in the South Pacific looks likely to intensify with a potential attempt by China to gain a major share of the region’s telecommunications market.
It was reported last week in the Australian Financial Review that China’s state-owned telecommunications company, China Mobile, is looking to purchase the local assets of the largest mobile carrier in the Pacific Islands, Digicel.
The prospect would be of serious concern to Canberra, which would undoubtedly see China Mobile as another “high risk vendor” alongside Huawei, and a threat to its security relationships throughout the Pacific.
Digicel issued a statement after the AFR report ran strongly denying it.
“We can categorically state there is no basis to this whatsoever and that no approach has been made to us,” Antonia Graham, head of communications for Digicel Group, said in an emailed statement to Reuters.
With its headquarters in Jamaica, Digicel operates primarily in the Caribbean, Central America, and the Pacific.
Since its launch in the Pacific in 2006 it has risen to become the largest mobile phone carrier in Papua New Guinea, Vanuatu, the Solomon Islands, Tonga, and Samoa, and second to Vodafone in Fiji.
However, the company currently finds itself $6.7 billion (K23 billion) in debt, and China Mobile earlier this year — according to the report in the AFR — launched a scoping study to assess the feasibility of taking over the company’s Pacific assets.
The Australian government would likely be very wary of such a development, should it occur. Defending its primacy in the South Pacific is Canberra’s top strategic objective, and countering the increased Chinese footprint in the region has been the driving force behind its ‘Pacific Step-up’.
The AFR report mentions that an Australian consortium has begun devising their own bid for Digicel’s Pacific assets, and may gain financial support from the government.
Any support Canberra may provide should be seen as not an attempt to stifle economic competition, but a recognition that certain economic activity becomes complicated when Chinese companies are involved, due to the unique relationship these businesses — state-owned or private — have with the Chinese state.
Article 7 of China’s 2017 National Intelligence Law states Chinese companies must “support, cooperate with and collaborate in national intelligence work” when asked to do so.
That makes these companies obliged to submit themselves to the strategic designs and self-seeking objectives of Communist Party (CCP).
When Article 7 is applied to telecommunications companies the potential for the CCP to gather sensitive information becomes very real.
The Australian government previously stepped in to outbid Huawei on critical communications infrastructure in the Pacific with the creation of the Coral Sea Cable, a fiber optic cable link from Sydney to Honiara in the Solomon Islands and Port Moresby in Papua New Guinea.
The strong desire in Canberra to defend its interests in the Pacific could see it make a similar intervention in the mobile carrier arena.
Australia now seems actively committed to an significant involvement in the improvement of the Pacific’s communications infrastructure (and to consolidating its strategic goals).
Radio New Zealand reported this week that Canberra is providing funding for a marine survey to prepare a second submarine fiber optic cable to Palau.
The cable will be constructed by Japan’s NEC Corporation to provide a second connection to the United States’ hub in Guam.
This demonstrates coordination between allies to counter China’s emerging technological capabilities.
Australia and the United States have made a concerted push to limit the acquisition and expansion of Chinese communication technologies into critical communications infrastructure of their close partners.
Both countries banned Huawei from participating in their 5G networks, and just this week President Donald Trump extended by another year his executive order banning US companies using any technology provided by Huawei and ZTE.
Attempts to apply pressure to other aligned countries to do likewise has had limited success. Germany strengthened its rules around foreign vendors in their communications infrastructure but stopped short of banning Huawei outright, and the United Kingdom is allowing Huawei to participate in “non-sensitive” areas of its 5G network.
There is now a significant deficit of trust that exists between Australia and China, with almost daily tit-for-tat bickering over the need for an inquiry into the COVID-19 pandemic and Beijing’s retaliatory threats to Australian agricultural products (although interestingly not to coal, gas, and iron ore).
However, this seems to be only strengthening Australia’s resolve in its inclination to push back against China’s use of such tactics.
On critical communications infrastructure it is likely that Australia will now make no distinction between an economic opportunity for Chinese companies and a geostrategic move by the CCP.
In the Pacific the COVID-19 pandemic looks to be escalating the strategic competition between the two countries as well. While Pacific Islands may often feel like they are in a tug of war between larger powers, they also have the savvy to play this competition to their advantage.
If the result of China’s expanding reach in the region is greater Australian assistance with constructing quality essential infrastructure in their countries, then they will have secured a positive outcome.
Other Pacific people also speak of difficulty in understandings with China's governance.
Canada's Prime Minister Justin Trudeau says "China doesn't work quite the same way and (doesn't) seem to understand that we do have an independent judiciary."
Posted by: Lindsay F Bond | 22 May 2020 at 08:37 AM
While the subject is beyond breadth normative of my intrusions in this blog, today it is unsettling to read of "Chinese foreign ministry spokesperson Zhao Lijian" linked with statement saying that Taiwan's independence was a "road that leads to death".
While that statement includes belief that "Taiwanese independence is doomed to failure", the expression of 'death' deepens disturbance of Pacific-minded people.
Not only Taiwanese or Australians might experience discomfort at that outspokenness.
Posted by: Lindsay F Bond | 21 May 2020 at 01:04 PM