The EXIM Bank of China has authorised a loan of almost $100 million to help state-owned Solomon Telekom deploy 161 new mobile towers

This week, the Solomon Islands’s government has announced that it has a secured considerable loan from the Exim Bank of China, with the funds being used to deploy 161 new mobile towers across the country.

The loan of roughly $94 million will be repaid over 20 years, with an annual interest rate of 1%.

The government said that the towers will be gradually deployed over the next three years, aiming to have half of the total deployed before the Pacific Games take place in the nation’s capital, Honiara, in November 2023.

Chinese equipment giant Huawei will be contracted to provide the technology for the new towers, which will provide 3G and 4G services to the Islanders.

The decision to move forward with this project comes as something of a surprise, since an independent review conducted by consulting firm KPMG suggested that the three-year deployment target is overly optimistic and said that the Solomon Islands’ government also appeared to overvalue the indirect economic benefits from the towers’ deployment.

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

The decision will also be something of a blow to the Australian government, which had itself agreed a tower funding deal with the Solomon Islands earlier this year – albeit on a much smaller scale.

Back in March, the Australian government agreed a roughly $4.5 million in grant funding for the deployment of six mobile towers

These towers will use equipment from Ericsson and NEC and are expected to be operational by the end of 2022.

“We are grateful for Australia’s ongoing support to improving connectivity in Solomon Islands. The support is a testimony to the strong partnership between our two countries in the telecommunications sector that builds on the success of the Coral Sea Cable project to deliver improved internet connectivity to the people of Solomon Islands,” said the Solomon Islands’ Minister for Communication and Aviation, Peter Shanel Agovaka, following the deal’s announcement.

The Australian government has expressed scepticism about the financial feasibility of this new deal with the Chinese bank, questioning the Solomon Islands government’s ability to pay back a loan of this size, even with its concessional interest rate.

Nonetheless, a government spokesperson was keen to distance itself from the decision, saying that it was a matter for the Solomon Islands’ government alone.

“Australia supports infrastructure investment that is transparent and open, meets genuine needs, delivers long-term benefits and avoids unsustainable debt burdens,” said the government in a statement.

This is not the first time China and Australia have clashed over connectivity investments in the Pacific in recent years. Just a month ago, the Telstra announced it had completed its acquisition of Digicel Pacific for $1.6 billion, with the Australian government providing $1.3 billion of the required funds, largely in an effort to stop the region’s crucial telecoms infrastructure falling under the control of a Chinese firm.