Getting the Port of Darwin back

Getting the Port of Darwin back

The Port of Darwin - our northernmost port and ‘gateway to Asia’ is in the news at the moment… It’s strategically important for Australia’s national security and trade - but for the past decade it’s been leased to a Chinese company. The Albanese Government has flagged that it wants it back, which could test our relationship with China. So in this Squiz Shortcut, we’ll look at:

• How the port ended up in Chinese hands

• The steps being taken to get it back

• And what’s next…

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Squiz the Shortcut

There’s a lot going on at the moment - why are we talking about the Port of Darwin?
This story has been bubbling away in the news for some time, and it’s come up again so we thought it was time to explain the backstory. A lot of the focus on the port has to do with Darwin being strategically important for Australia.

Tell me about that…
Darwin is the capital of the Northern Territory, and even though it’s our smallest capital in terms of population, it’s hugely important for our trade and national security, which is why the Albanese Government says it wants it back in Aussie hands. 

Is it important because of its position?
Bingo… Darwin sits at the top of the country, about 830km south of Indonesia… And because of that proximity, it’s often referred to as our ‘gateway to Asia’. It’s especially key for our exports like liquid gas, oil, minerals and live cattle, which go through it - all big money-spinners for us. And on the import side, it’s where the NT’s fuel supplies come in. And as well as being a vital port for us in terms of trade, it’s also got strategic military importance for us and our allies.

Just explain that a bit more…
Sure… The US has a naval base close to the port, and they use some of its docks for their ships. Just to step it back a bit, US troops have a continuous military presence in Darwin called the Marine Rotational Force. It began in 2012, and it’s grown from 200 troops to an annual rotation of 2,500 US marines stationed in the city who take part in training exercises with the Australian Defence Force. They also generally help to maintain security in the Indo-Pacific region. 

What else do they do up there?
They’ve been investing in upgrades to infrastructure around the city, like a fuel storage facility and a new pipeline linking it to the port. And plans are on the table for the US to build a new expanded port to accommodate its naval ships - it reckons the current Port of Darwin is too small, and it’s also concerned about the port being leased to a company called Landbridge which is Chinese-owned.

So how did the Port of Darwin end up in foreign hands?
The decision was made by the Northern Territory Government in 2015, when it leased the port to a Chinese-owned company called Landbridge for 99 years. 

Just 88 years to go… Why did it do that?
To understand how the decision came about, we have to go back to 2015 when the Turnbull Coalition Government was in power, and relations with China were hunky dory. Covid-19 wasn’t yet a household name, and the world’s geopolitical situation was a lot more stable. But basically, it comes down to money - or a lack of it in the Northern Territory Government’s coffers.

Did they ask for Commonwealth money to maintain the port?
Yep… Reports say the decision by the NT’s Country Liberal Party (CLP) to privatise the port was made after several requests to the federal government for money to upgrade it were not granted. 

What happened?
The CLP’s Treasurer at the time, Dave Tollner, said the port was so dilapidated in some parts that it was sinking, and that the party didn’t want to go into debt by borrowing money to fix it, so they put it out to tender for long-term lease. Landbridge’s offer of $506 million was the highest by what Tollner said was “a significant amount”, and so it got the contract.

What was their thinking?
Tollner said the government believed it would help to open up new trade routes for the Territory’s key exports in agriculture, mining and gas. But the decision was criticised by the Labor opposition at the time because Landbridge is owned by billionaire Ye Cheng who has ties to the Chinese Communist Party. As we mentioned, the US wasn’t happy about the deal either…

What did the US say?
The President at the time, Barack Obama, reportedly called Turnbull to say the US should’ve had a “heads up”… Most of the negotiations for the lease of the port had been done under PM Tony Abbott prior to Turnbull, but he didn’t intervene. The CLP maintains that all the boxes were ticked before it was signed off. It went before the Foreign Investment Review Board (FIRB) - but it didn’t need approval there because it was exempt from FIRB rules. 

Why was that?
At the time, if an asset was owned by the government rather than a private entity and was leased rather than sold, it was exempt. The rule has since been changed. It did eventually get the government tick of approval after a Defence Department risk review. And even ASIO approved… 

What’s happened since then?
The port has been the subject of a national security debate ever since - and that’s mostly down to questions about Landbridge’s access to potentially sensitive military and trade information. And security concerns have been heightened by the tensions that rose between Australia and China in the years after the pandemic, and by China’s military tactics in our neck of the woods - like conducting live military exercises off our shores and sending warships to circumnavigate our coastline...

What’s China’s motivation?
China has been open about its ambitions to grow its influence in the Indo-Pacific in order to be the dominant power in the region instead of the US. We’ve said it before - that puts us in a tricky position. 

Why is that?
Because China is a hugely important trade partner for us. A lot of the commodities we ship from the Port of Darwin are destined for China. It’s the second-largest trading partner for the NT after Japan, with exports last year totalling $2.2 billion. But our military and political allegiance is to America. As we mentioned earlier, our defence activities are intertwined with them, we’ve got security agreements on the go like AUKUS, and Darwin is important to that alliance because of its strategic position. 

What does PM Anthony Albanese say about it?
He’s made no secret about wanting to return the Port of Darwin back to Australian control, saying his party “would never have flogged this off”. It was one of the PM’s promises leading into the federal election last year, when he said: “Obviously we are living in an uncertain world at the moment. The idea that you would have the major port in northern Australia owned by any foreign interest is not in Australia’s national interest”... 

Where does the Coalition sit?
They also promised to return the port to Aussie hands. But Labor has since won a second term, and the PM says they’ve been working on fulfilling their election promise. They’d scoped out several potential buyers in the months leading up to the election - but forcing the return of the port on the grounds of national security is threatening to make things very awkward in our newly stabilised relationship with China.

What has China said about it?
The topic of the port wasn’t raised during Albanese’s in-person meeting with Chinese president Xi Jinping last year, which was to discuss mutual trade and tourism opportunities. But it was alluded to by Chinese Premier Li Qiang who said he “hopes” Australia would “treat Chinese enterprises fairly and also properly resolve the issues of market access.” 

So they’re not happy about it…
No… Further to those comments, China’s Ambassador to Australia Xiao Qian has described the plan to take back control of the port as “ethically questionable” given it was unprofitable when Landbridge won the lease, and after improvements, it’s now turning a profit. But the federal government’s Special Envoy for Defence and Northern Australia Luke Gosling says Landbridge would be adequately compensated. 

So who’s in the mix to take it over?
The few names that have been mentioned in reports about the potential sale are foreign owned too - like a joint bid by US private equity group Cerberus and Toll Group, which is owned by Japan Post. But Landbridge says it hasn’t been consulted yet, and crucially - which is a big factor in all of this - it says the port isn’t for sale.

That’s a spanner in the works…
Sure is… And it’s gone to a new level in the past week with Landbridge launching legal action to stop the Albanese Government from buying it back. It’s taken that action in the World Bank’s International Centre for Settlement of Investor Disputes, saying it wants an arbitration - essentially for the tribunal to work out what should happen.

What’s its grounds?
Landbridge says that the plan to return the Port to Australian hands is discriminatory, and also breaks the current trade agreement between Australia and China. But the Albanese Government says that it’s sticking to its guns and it’s still going to persist with its plan. Legal experts say this could take years to resolve, so it’s an issue that could hang around for quite some time yet…

Onto our Recommendations

Watching: This report by the ABC’s 7.30 dives into the issues involved with the Port of Darwin and why the federal government wants it returned to Oz ownership

Reading: This report explains the recent legal action taken by Landbridge against the Australian Government

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