Port of Darwin continues to highlight the pitfalls of botched privatisations

The Australian government’s willingness to undercut the Chinese-owned asset by funding upgraded port facilities nearby shows a lack of joined-up thinking.

Australian politics has entered campaign mode, with the incumbent coalition government having called a federal election to be held on 21 May.

Among the usual promises of infrastructure spending made in times like these was a A$1.5 billion ($1.11 billion; €1.03 billion) allocation, first announced in the pre-election Budget in March, to upgrade and develop new port facilities in Darwin, Northern Territory.

The wrinkle is that this isn’t for the existing Port of Darwin, an asset that was controversially privatised in 2015 when the NT government awarded a 99-year lease to operate the asset to Chinese energy and infrastructure firm Landbridge Group.

This was contentious at the time and has only become more so, as Australia has found itself increasingly at loggerheads with its larger Pacific neighbour over trade and other issues.

The disquiet seemed to reach a head last year when the government ordered the Department of Defence to conduct a review of the lease that considered national security concerns. The findings have never been formally published, but Australian media reports at the end of 2021 suggested the DoD found no concerns that would justify the cancellation of the lease, leaving the Australian government back at square one.

So, instead ministers have decided to fund separate facilities, which the government has been happy to suggest could be used for military purposes, helping to alleviate concerns from the US military about having to use a Chinese-owned port when importing fuel for its own operations, for example.

But under subsequent questioning, finance minister Simon Birmingham was quick to walk back earlier suggestions that the money was for an entirely new port, referring instead to “supporting an industrial precinct” with infrastructure improvements.

Birmingham also said that the Commonwealth government was unable to intervene in the original Port of Darwin lease, with tighter laws and restrictions relating to the Foreign Investment Review Board process passed since to prevent a repeat. This isn’t strictly true, though – if there were national security concerns in 2015, it would have been within the government’s remit to block the deal.

Regardless, we are where we are, and the way the whole saga has unfolded has been an unedifying spectacle that has not done the Australian government any favours.

John Coyne, head of the Australian Strategic Policy Institute’s Northern Australia Strategic Policy Centre, summed it up in an op-ed last week: “[Has] the government found a way to ensure that Australia, not a Chinese-owned private company, is guiding the future of Australia’s most economically and strategically important northern port? In short, the answer is a resounding ‘no’.”

The appearance of this new funding underlines the lack of coherent thinking and will raise eyebrows among some foreign investors at the willingness the government appears to be showing in undermining a recently privatised asset, even if it is more rhetoric than reality.

It also cements Port of Darwin’s dubious standing as a prime case study for the pitfalls of botched privatisation processes, which serves as a cautionary tale for global governments and investors alike.

The Pipeline, our start-the-week briefing, will be published Tuesday, 19 April on account of the Easter break.