Northern Territory Chief Minister Adam Giles surprised many on October 13 by announcing that the Port of Darwin would be run under a 99-year lease by a new operator: Chinese company Landbridge.
Those most surprised might well have included Australia’s foreign and defence ministers and their American counterparts who, on the same day in Boston, issued a statement expressing “strong concerns over recent Chinese land reclamation and construction activity in the South China Sea”. The annual Australia-US Ministerial meeting promised “to pursue enhanced naval co-operation” including US marines operating out of Darwin Harbour.
Australian Defence officials also might have been surprised. Seeking approval to spend $18 million on a new barge ramp facility for loading ships in Darwin Harbour, a Defence submission to parliament’s public works committee in February this year said: “Darwin is strategically vital for supporting ADF maritime operations across Australia’s northern approaches, particularly in mounting operations that involve the (navy’s) amphibious capability.”
Australia’s strategic interests, including responding to increasingly assertive Chinese maritime behaviour in the South and East China seas, now have to be balanced against the reality of operating out of a harbour run by a company whose website proclaims it is “contributing its best to … realising the great rejuvenation of the Chinese dream”.
The Port of Darwin lease raises hard questions about the specifics of the deal and how Australian governments make sensible decisions on national security when considering foreign investment proposals.
At breakneck speed — only 16 days were allowed for public submissions — the Northern Territory Assembly produced in April a study of lease models for port facilities. The report recommended Defence and the Foreign Investment Review Board should be consulted over offering century-long leases to foreign companies.
Giles has said that Defence was “quite supportive of what we were doing” but there is no clarity around what was asked of whom. Giles also has said that the FIRB was consulted, but the 99-year lease arrangement is arguably an artifice to avoid FIRB assessment over outright sales.
Given the strategic value of Darwin Harbour — Australia’s only substantial northern navy facility — one would expect a matter of this seriousness to be considered by the national security committee of cabinet.
Cabinet consideration presumably would have assessed risks to the security of Defence and US Marine Corps operations. It is the case that the navy barge ramp, due to be completed next year, is not part of the lease arrangement but it is adjacent to the now-leased East Arm Wharf and both share common access areas.
Defence’s $18m investment in the barge ramp in reality buys only 60 days access a year — the rest will be made available to commercial shipping — and is guaranteed for only the next 20 years. The ramp is needed for supplying roll-on, roll-off ships but isn’t relevant for other types of navy vessels. One wonders why there is such under-investment in our naval infrastructure in the north despite successive governments saying how vital this is.
About 100 navy and allied ship visits to Darwin Harbour happen every year and the number is expected to grow, particularly as the US Marine taskforce reaches its planned growth to 2500 personnel with supporting ships. These vessels rely on inadequate wharf access in areas that will now be run by Landbridge Group.
We do not know the extent to which the US may have been consulted about the leasing proposal. It is certain, though, that Washington would take the matter very seriously. Its interest will not only be about the harbour in peacetime but what potential impact the new leasing arrangements will have in times of regional crisis when there will be substantial pressure on harbour facilities.
Let’s not be naive here. We face an increasingly tough strategic competition between China and the US and its friends and allies. No one could confidently claim this competition wouldn’t give rise to open hostility. No one wishes for this outcome and no organisation works harder than Defence to prevent it, but government must be satisfied Australia’s national security interest will be top priority.
In agreeing to the proposal for the barge ramp, parliament’s public works committee asked Defence to report back with ‘‘any changes to the project scope, time cost function of design’’. The lease of the Port of Darwin should trigger an urgent reconsideration of this proposal, this time taking a detailed look at the wider national security considerations.
More broadly, the Port of Darwin debacle should force reconsideration of how Australia deals with the national security implications of foreign direct investment proposals. Bizarrely, no commonwealth agency — not Defence or the intelligence agencies — has clear responsibility to assess the national security impact of such investments.
Defence’s interaction with the FIRB typically is limited to assessing how specific bases and facilities may be affected by foreign direct investment. ASIO assesses risks of subversion and espionage, but these assessments can fall short of considering the aggregate effect of foreign direct investment on national security. FIRB has a bias to facilitating investment.
In effect the national security committee of cabinet has become the only place where a broad national security test can be applied to investment decisions. That works on only the few occasions when projects are brought to the NSC. The FIRB should be redeveloped with a view to strengthening the capacity for sensible whole-of-government decision-making on national security. A group outside of Treasury — maybe Defence or the Prime Minister’s Department — needs to be explicitly vested with the responsibility to advise on the national security impact of foreign direct investment, not simply on whether investments encroach on Defence bases.
As NSW considers options to lease or privatise its electricity infrastructure in the form of Transgrid, the need is for a careful assessment of the national security implications.
Can leasing ‘‘poles and wires’’ be considered strategic? Yes, because Transgrid supplies power to all Australia’s defence and intelligence facilities in NSW and the ACT and operates the third largest telecoms network in the country.
Unlike the Port of Darwin experience, NSW’s lease or privatisation of Transgrid should be an open and considered process rather than a graceless race for cash.
Peter Jennings is executive director of the Australian Strategic Policy Institute.