Papua New Guinea (PNG) has proposed a free-trade agreement between China and Pacific island countries and also asked China to help refinance its entire government debts.
PNG Prime Minister, James Marape, met with China’s ambassador to the country on Tuesday, according to a report in “The National newspaper” on Wednesday.
Marape sought help refinancing 27 billion kinas ($7.95 billion), which amounts to almost a third of the impoverished country’s economic output.
He said a proposed free-trade arrangement could boost economies in the region.
It marks the first time a Pacific island nation leader has proposed a free-trade deal with China but it was unclear how many in the region would actually participate.
Four of the 14 countries in the South Pacific (excluding Australia and New Zealand) support Taiwan.
The request highlights China’s growing influence in the Pacific region.
Currently, China only has a free-trade deal in the region with Australia and New Zealand, though it has also loaned PNG billions in the past for infrastructure projects.
PNG could use China’s aid as its total public debt as expensive, with 10-year bonds running at about 12 per cent interest.
The country has struggled to generate revenue and borrowed heavily under its last government in hopes of financing a mining and gas boom in the region.
In spite of being rich in minerals, timber, oil and gas, the country’s history of colonialism, political instability and mismanagement of resources have kept its eight million people impoverished.