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China-Solomons telco deal prompts warning for NZ’s Pacific efforts

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Chinese Foreign Minister Wang Yi met Solomon Islands Prime Minister Manasseh Sogavare in Honiara earlier this year. Photo / Supplied

A top cybersecurity expert believes New Zealand is “selling its values out” to China in the Pacific, and wants the Government to encourage private companies to think twice about projects they get involved with.

It comes as Foreign Minister Nanaia Mahuta today sits down with Solomon Islands’ Minister of Foreign Affairs and External Trade, Jeremiah Manele, who is making his first official visit to New Zealand.

Newstalk ZB can reveal KPMG’s New Zealand branch was contracted to independently review a controversial telco overhaul, through which Beijing will loan more than $100 million to the Solomon Islands for Huawei mobile towers.

The proposal has since been given the green light, with Huawei set to build 161 3G and 4G mobile base stations across the country.

In a press release issued in August, the Solomons government suggested it was “both financially viable and compatible with existing telecommunication infrastructure”.

But when questions about the project’s viability were put to KPMG New Zealand, a spokesperson refused to comment.

Foreign Affairs Minister Nanaia Mahuta. Photo / Mark Mitchell
Foreign Affairs Minister Nanaia Mahuta. Photo / Mark Mitchell

The deal has prompted Australian cybersecurity specialist and Internet 2.0 co-founder Robert Potter, who has worked closely with the US State Department, among others, to raise the alarm over what he believes to be the plan’s “significant risk”.

“In 2022, they’re deploying 3G towers, literally rolling out tech from 20 years ago.”

Newstalk ZB has obtained what appears to be a final copy of the independent review, despite the first page including a note to keep it secret, insisting “any redistribution requires the prior written approval of KPMG”.

The analysis paints a vastly different picture to comments made by the Solomon Islands government.

It notes that the initial proposal for 200 towers “significantly overstates the financial return potential”, and the project would likely “require financial subsidy”.

Although the report points out that the risks are “considered manageable”, it digs into “optimistic” financial forecasts, and that the “implementation timetable is overly ambitious”.

“Our Telekom [current mobile provider for Solomon Islands] has historically rolled out 15 new sites per year … a three-year construction timeline for 200 sites does not appear realistic.

“Ultimately, the decision to invest [in the project] will require policy judgment and strategic motivation.”

Mahuta told ZB that New Zealand’s approach is to provide grants rather than loans, and not add to the region’s “debt burden”.

“There are particular challenges and risks associated with high levels of external debt in the Pacific, which can limit governments’ ability to provide public services, respond to external shocks, and build the resilience of economies.

“New Zealand encourages all partners in the wider region to be transparent with their actions and intentions,” she said.

But Potter has hit out at New Zealand’s contributions, saying he believes it’s been “missing” in the area, and “inconsistent” in the strength of its positions.

“Massively underperforming … and with no interest in changing that,” he said.

“New Zealand is selling its values out.”

He believed the Huawei telecom loan deal is “great for China”, but the “people of Solomon Islands are paying for it”.

Potter claimed there were both “security concerns around Huawei … and then sustainability concerns about the project itself”.

The proposal also suggests a revenue-sharing model, with Huawei set to take home 50 per cent for the first 10 years of operation.

“I don’t think this makes sense to any normal government, which is why no other government has really said, yeah, let’s do this,” Potter said.

According to the Solomon Islands government, the project will be funded “with a 20 years’ term concessional loan of approximately CNY448.9m (NZ$112m) from the Exim Bank of China at 1 per cent interest rate”.

“This proposal will be a historical financial partnership with the Peoples Republic of China (PRC) since the two countries established diplomatic ties in 2019,” it said.

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