(Bloomberg) -- The U.S. and its key Pacific allies on Sunday announced plans to build a $1.7 billion electricity grid in Papua New Guinea, in the latest effort to counter China’s growing influence in the region.
The leaders of Australia, Japan and New Zealand joined U.S. Vice President Mike Pence in signing the partnership accord, which aims to connect 70% of the population to electricity by 2030, up from 13% currently.
The project “is proof that America and our businesses are investing in this region as never before,” Pence said at the signing ceremony in the capital, Port Moresby, with PNG Prime Minister Peter O’Neill, Australia’s Scott Morrison, Japan’s Shinzo Abe and New Zealand’s Jacinda Ardern. “Be assured, to our allies gathered here and friends all across this region, that the United States is going to continue to work in ways” to create “a brighter future,” he said.
The investment is part of a wider push by the Trump administration to check China’s economic and diplomatic thrust into the Indo-Pacific region and offer an alternative to President Xi Jinping’s Belt-and-Road Initiative. Still, the sums of money offered by the U.S. and its allies are dwarfed by Xi’s infrastructure lending plan, which Morgan Stanley says may total $1.3 trillion by 2027.
Addressing business leaders at an APEC CEO summit on Saturday, Pence said the U.S. offered countries in the region a “better option” than China. He warned against taking opaque Chinese loans, saying the U.S. “doesn’t drown our partners in a sea of debt” nor offer “a constricting belt or a one-way road.”
Xi defended the Belt-and-Road Initiative in his speech at APEC, saying it’s “not a trap as some people have labeled it.”
The U.S. has been increasingly critical of China-backed infrastructure projects, saying many aren’t properly planned, financially sustainable and of questionable use. A new six-lane highway built by China in Port Moresby, for instance, has been dubbed the “road to nowhere” in media reports.
The language in the electricity agreement signed Sunday is a nod to such criticism. The partnership is “intended to focus on the importance of principles-based, sustainable infrastructure development that is transparent, non-discriminatory, environmentally responsible, promotes fair and open competition, upholds robust standards, meets the genuine needs of the people of Papua New Guinea and avoids unsustainable debt burdens.”
At the leaders’ retreat earlier in the day, Abe said all infrastructure projects must conform with international standards of openness, transparency and economic viability.
O’Neill said the project to connect hundreds of thousands of families to the power grid would also include fiber-optic internet cables and would allow the nation to “participate in the global economy.”
Earlier this month, Australian Prime Minister Morrison unveiled a A$2 billion ($1.5 billion) infrastructure fund for the South Pacific, while New Zealand announced a NZ$10 million ($6.9 million) fund to help foster sporting and cultural engagement with Pacific island nations.
“It’s time to power up PNG, right across the country,” Morrison said Sunday. “We will always be here to support the people of PNG and support their economic development.”
New Zealand said the estimated cost of the project was $1.7 billion.
