Solomon Islands, China Discussed US$100B Loan: Leaked Documents

Pacific country mulls massive offer from private Chinese sources . . .

Documents leaked to the Australian Broadcasting Corporation reveal exchanges between the Solomon Islands Government and a Chinese businessman concerning a C$133-billion loan from private sources in China to the impoverished Pacific island country. On November 27, 2019, The Hon. Harry Kuma, Minister of Finance and Treasury of the Solomon Islands, wrote letters to a Beijing-based Mr. Terry Wong expressing interest in the “. . . proposed funding that could be made available to the Solomon Islands government” with a letter dated the following day indicating that an 11 per cent brokerage fee was accepted in principle. Mr. Wong’s reply to Minister Kuma, dated December 4, 2019, is light on detail, with both the interest rate and the loan duration to be determined.

Switching allegiance from Taiwan to Beijing . . .

Last September, the government of the Solomon Islands severed its long-standing relations with Taiwan in favour of establishing diplomatic relations with Beijing. The Pacific nation of Kiribati followed suit four days later, leaving Taiwan with formal diplomatic relations with only 15 countries, while 180 recognize Beijing. Most analysts agree that the two switched allegiances as Beijing was offering them greater financing related to development imperatives, particularly infrastructure. But not all in the Solomons are enamoured of China. Last October its government nullified an agreement for a Chinese state-owned enterprise to lease an entire island from a Solomon Islands province. The island, which was supposedly intended to host an oil refinery, is the location of a Second World War-era Japanese deep-water naval port.

Too good to be true?

Critics of the potential C$133-billion loan are wary. The immediate former Governor of the Solomon Islands Central Bank identified both the size of the loan and the 11 per cent brokerage fee as causes for concern, noting that the country’s annual economy is only about C$1.33 billion per year. An opposition MP was less diplomatic, describing the proposal as a "fantasy." Our analysts have examined the communications between Minister Kuma and Mr. Wong, and are similarly suspicious.