Solomon Islands moves ahead with controversial plan to build Huawei cellphone towers with $100m loan from Beijing

The Solomon Islands is pushing ahead with a controversial plan to borrow nearly $100 million from China to build 161 mobile phone towers across the country with telecommunications giant Huawei, despite an internal report warning that the project might not accumulate financially.

The Permanent Secretary of the Ministry of Finance and Treasury, McKinnie Dentana, told reporters in Honiara on Wednesday that the towers would expand and improve mobile coverage across the country.

He also confirmed that it would be funded by a concessional loan from China, the first time the Solomon Islands government has borrowed from one of Beijing’s major overseas lending institutions.

“The project will be fully financed through a concessional loan facility with EXIM Bank of China of approximately 448.9 million yuan ($96 million) at an interest rate of 1% over a period of 20 years. “, did he declare.

Mr Denata said the government would roll out the project over the next three years and wanted to complete almost half of the towers before the Pacific Games, to be held in Honiara in November next year.

“It will help people in rural areas to enjoy the Games even if they don’t come to Honiara,” he said.

He also claimed that outside advisers had told the government they would be able to repay the loan with revenue generated from the towers.

“The independent review of the project shows that the project would generate enough revenue for the government to repay both the principal loan amount and interest charges in full over the life of the loan,” he said.

However, the ABC has obtained a copy of what appears to be the same independent report, which was produced by consulting giant KPMG.

Earning potential “significantly” overestimated

KPMG estimates that about $225 million will be needed to cover revenue shortfalls over the next 20 years.(Photo: Gary Rivett, ABC News.)

The report analyzes an earlier and slightly more ambitious proposal to build 200 mobile towers, rather than the 161 the government is proposing.

However, the results paint a much more complex picture than that presented publicly by the Solomon Islands government.

KPMG warns in its report that the proposal put forward by the Solomon Islands “significantly overstates the potential financial return” of the project and warns that it will require financial subsidies.

The report estimates that the project will generate a financial loss of almost 0 million ($144 million) and that approximately $156 million will be needed over 20 years to make up the shortfall.

KPMG says the risks surrounding the project are “manageable”, but also warns that the planned three-year rollout is “too ambitious” and “does not seem realistic”.

And while KPMG estimates the project could generate “indirect” economic benefits “in the range” of the $100 million needed to offset the projected direct financial losses, the report also points out that it is “difficult to quantify in any meaningful way.” reliably the indirect economic benefits” of towers.

“It is less certain that they can be achieved because they rely on other social and economic initiatives,” the report says.

“A huge amount of borrowed money”

Telecoms expert Amanda Watson – from the Department of Pacific Affairs at the Australian National University – said the deal could pose significant financial risks for the Solomon Islands.

“It’s hard to imagine that you will generate a huge amount of indirect economic benefit in those areas of the Solomon Islands that are currently not covered,” she told the ABC.

“If I was a decision maker in the Solomon Islands, I wouldn’t bet on perquisites if I could avoid it.”

Dr Watson said that while the towers would help people in remote parts of the Solomon Islands who lack mobile coverage, it was not clear that the project would stand up financially.

“Although the Chinese loan is being offered at a concessional rate, it still has to be repaid, and that’s a huge amount of borrowed money. I have some concerns about their ability to do that,” she said. declared.

Some opposition MPs and civil society groups in the Solomon Islands have also raised concerns about the deal, saying the bidding process was mired in secrecy and wondering whether it was really necessary to build so many new towers across the country.

The Australian government said it was “aware” of the deal, but stressed that development decisions lay “with the Government of the Solomon Islands”, a spokesman for the Department of Foreign Affairs and Trade said ( DFAT).

“Australia supports infrastructure investments that are transparent and open, address real needs, deliver long-term benefits and avoid an unsustainable debt burden,” the spokesperson said.

Australia is separately constructing six telecom towers in three separate provinces of the country at the request of the Solomon Islands government.


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