Australia’s approach to handling refugees through its offshore detention strategy exemplifies ongoing challenges in regional diplomacy. The contentious funding agreements, lacking transparency and accountability, highlight a pattern of murky financial dealings that could strain ties with PNG and undermine regional stability.

The deal between Australia and Papua New Guinea (PNG), as part of Canberra’s offshore detention scheme, looks to have hit a new low as Canberra has been forced to find a new funding deal. The whole story embodies Australia’s problematic approach to its northern neighbour.

In 2021 the Morrison Government was forced to strike a hurried arrangement for the 75 refugees stuck on PNG’s Manus Island, after the closure of Australia’s regional processing centre. The facility was finally padlocked in 2017 after a PNG Supreme Court found that the centre was illegal under the nation’s law. The remaining refugees there were allowed to stay in PNG, with a funding arrangement negotiated with the Morrison Government to pay for them to live there.

Part of the Howard Government’s “Pacific Solution,” the Manus Island facility was opened in 2001 to controversially deflect and detain asylum seekers and refugees who arrived in Australia by boat. The centre was initially closed in 2008 only to be re-opened again in 2012 by the Gillard Government, before being permanently shuttered five years later.

The shambolic story of the centre makes for a sorry summation of Manus Island’s role in Australian immigration history. But, there’s a further twist in the tail. The latest deal between the Albanese Government and the government of James Marape is to provide support funding for the 72 former Manus detainees still remaining in PNG. Officials in Port Moresby were threatening to send the asylum seekers and refugees to Australia—knowing full well the outcry that would result—unless new money was found to look after them.

In early July, Canberra relented to the pressure and announced that funding would be provided. The Albanese Government says details of the funding deal cannot be made public. The secrecy is necessary, the Government said, because the information could “cause significant damage” to relations between the two countries.

It leads to questions about whether the money was pocketed by venal politicians in PNG, used for other “off the books” purposes or simply never delivered at all. In truth, we may never know. The shady nature of this case is in keeping with the pattern of Australian aid and development money to PNG.

Canberra has provided AUD$2.5 billion direct budgetary loans for PNG over the last four years. This money is retrospective, effectively plugging gaps in PNG’s shortfalls in the previous budget year.

Being budget aid, it is not tied to any particular program or purpose. It simply disappears into PNG’s administrative and political system. There is little or no actual accountability for these funds, little transparency, and limited, if any, benchmarks or goals for these funds. Governance oversight and due diligence from Canberra on these funds is more or less non-existent.

PNG currently has a cap on foreign currency purchases from the local Kina, a move likely to have been driven by the need to repay loans like those from Australia, China or from international bodies like the International Monetary Fund. As such, PNG businesses can’t pay for materials and retailers can’t import goods for the local market.

Recently, again continuing the established pattern, the Australian Government pledged $600 million to back a PNG team into the National Rugby League. Again, details of the spending are vague. As one leading sports media outlet put it, it doesn’t pass the pub test.

Australia’s funding model, as highlighted by the above examples, is part of a wider malaise. Geostrategic agendas in the Indo-Pacific are driving a rush to the bottom on regional aid and development models and on inter-government governance standards.

In trying to compete with Beijing’s deep pockets and lax governance requirements, those seeking to curtail China’s reach in the region appear to be lowering their own standards. For Australia and its regional partners, it may turn out to  be a zero-sum game for them and for regional populations. The realities are not lost on Papua New Guineans themselves.

As budgetary and sports dollars flow from Canberra, targeted funding from Australia for health and education in PNG is falling.

The cost of living in PNG has skyrocketed, as it has elsewhere. The minimum wage has not budged since 2016. Poverty is a very real presence not only in the outlying regions but in the major centres like Port Moresby and Lae.

Riots earlier this year, in which 22 people died, were among the worst the country has seen. Triggered by a cut in public servants’ wages, the unrest was actually an expression of anger and frustration at the dire economic conditions, unemployment, and high crime rates, as well as with out of touch officialdom.

The latest Manus deal, and the opacity around its details, underline the likelihood that the current geostrategic mindset and the drive to fund PNG almost at any cost, will increase the distance between the people of PNG and its own government. Further it will alienate more and more Papua New Guineans from erstwhile allies like Australia.

With a fully accountable and transparent funding relationship with PNG, Canberra and its allies can generate more security and stability in PNG, just the kind of scenario that surely everyone wants.

Carolyn Blacklock is former managing director of PNG Power Ltd and former resident representative for the World Bank Group in PNG.

This article is published under a Creative Commons License and may be republished with attribution.