Darwin port deal with Chinese group poses no threat, says defence official

A top public servant has dismissed as “absurd” claims that the lease of Darwin Port to a Chinese company would expose Australia to potential espionage.

Giving evidence to a Senate committee in Canberra, the secretary of the defence department, Dennis Richardson, said talk about the threat posed by Landbridge, which has alleged ties to the Chinese political and military elite, was not based on facts.

However, he conceded it had been an oversight not to inform the US before the announcement, which caused an awkward moment for the Australian prime minister, Malcolm Turnbull, when he was asked by the American president, Barack Obama, at the Apec summit in November why the US government had not been told about the deal.

And while Richardson took full responsibility for the slight, he suggested it was the job of the US embassy to keep its government updated.

The Senate standing committee on economics, which is examining the foreign investment review process following the controversial 99-year lease of the port of Darwin to Chinese firm Landbridge, had earlier heard from Peter Jennings, the executive director of the Australian Strategic Policy Institute (Aspi).

Jennings, who stressed he was giving his personal opinions, suggested Chinese control of the port and other infrastructure across northern Australia would assist Beijing’s strategic and diplomatic presence in the Asia-Pacific region.

“There is a deep Chinese driving interest in terms of understanding how western military forces operate,” he said. “Right down to the fine details in terms of how a ship operates, how it is loaded and unloaded, the types of signals a ship will emit through a variety of sensors and systems, the noise it makes as it moves through the water with its propellers.

“These are all points of information which are of deep interest to China and something they actively seek to gather in a range of means, both overt and covert.”

Richardson rejected the assertion, saying “no Australian or American naval vessel I’m aware of enters a commercial port, whether it be New York, Sydney, Shanghai, or Darwin, without turning off key emitters. The notion that you enter a commercial port – regardless of the operator – and you leave yourself exposed to possible collection is absurd.”

Other Aspi commentary about Chinese ambitions in the area was “alarmist nonsense”, he said.

“The notion that Landbridge’s lease in Darwin somehow or other is part of a broader strategic play by China, and this gives the PLA Navy access to Darwin, is simply absurd. It does not. It is not factually based.”

Jennings had called for the Australian government to strengthen the national security review of the Foreign Investment Review Board (FIRB) and extend it to cover state and territory assets, after the $506m Darwin deal revealed “loopholes” in legislation.

Under Commonwealth legislation, there was no requirement that the privatisation go through the board, although it did examine the deal initially owing to some confusion.

Jennings said it was beside the point the FIRB had been contacted and that there was a lack of clarity around the role played by defence and other security agencies in the process.

“I think that points to the need for a stronger national security test to be applied to foreign investment review processes,” he said.

He suggested there had not been sufficient due diligence in examining the lease, and said he was concerned at the 99-year term.

Richardson denied the department had failed to do its due diligence in assessing the deal.

“We’re paid to look at proposals hard-headedly ... and unemotionally and to provide rational advice,” he said in his opening statement.

“In respect of the port of Darwin, which is the subject of most discussion, any claim that we did not exercise due diligence is based upon ignorance, not on fact.”

He said the issue of privatisation was first raised in early 2014, and in May this year the department signed “the most extensive deed of licence we have with any port in Australia precisely because the port of Darwin, as others have indicated, is strategically important”.

Richardson said he was happy to answer questions on the deed but declined to provide the document, even in confidence, to the committee.

He said that in July 2015, the defence department was asked specifically by the Treasury to assess Landbridge as a potential bidder for the port, since the Treasury believed the Landbridge investment would require FIRB approval.

It became clear in September it was not required.

“We advised Treasury after specifically looking at the Landbridge arrangement that we did not have an objection to it,” Richardson said.

When he learned of the Northern Territory government’s announcement that Landbridge had won the contract, he called the defence department to confirm they had no issue with it.

However after reading “a string of criticism” and commentary from Aspi and others in the weeks following, he requested the director of the defence intelligence organisation “bring together people from other intelligence agencies to go over this again and see if we had missed anything, specifically from espionage and other perspectives”.

“The written advice I received on that was there was no significant implications and it was fine,” Richardson said.

Any Chinese national working at the Darwin port would need a security clearance and a visa, he said. “So you do your due diligence in that context.”

Duncan Lewis, the head of the Australian Security Intelligence Organisation (Asio), later told the hearing the agency was not precluded from giving advice on any security risk with the Darwin port simply because the Firb process had stopped.

He said Asio was engaged “throughout the process” giving advice to Treasury and Defence.

“We examined all of the aspects of security that we consider to be important and came to a view that the transaction as proposed could go ahead with the two deeds… and various mitigations,” he said.

Lewis stressed the examination by the intelligence agencies was thorough and complete but would provide no details on the manner, substance or sources of the investigation. Xenophon suggested Lewis was essentially saying “trust us, we’re from Asio”, to which Lewis said “unfortunately” yes.

Speaking outside the hearing, Xenophon told media the evidence from the inquiry and the lack of specific information from Lewis indicated the current foreign investment review process was “as clear as the silt at the bottom of the port of Darwin”.

He called for urgent reform and noted the instruction from the prime minister and treasurer to look at the whole framework.

“There is no way the Americans or indeed the Chinese would allow this sort of deal to go through with the level of scrutiny that it went through,” he said.

On Tuesday afternoon Anne Tan, acting NT government coordinator-general and Port of Darwin project lead, defended the transaction and said “comprehensive and extensive due diligence consistent with established precedents on other similar transaction was undertaken on all bidding parties”.

She conceded they did not inform the commonwealth specifically about the due dilligence processes they were undertaking with the bidders shortlist. It was assumed the federal departments were making their own enquiries.

“We were comfortable that the links between Landbridge and the Chinese government were acceptable to us,” said Tran.

“It is quite normal – and happens here in Australia as well – for business leaders in the community to be involved in strategic and policy think tanks and government forums, and our investigations revealed that was the role Landbridge played.”

Michael Hughes, the director of Landbridge’s Australian operations, said the company engaged early with both Firb and the defence department, first meeting with Firb in June 2015.

He said the company did not have an armed militia, and said Landbridge’s chairman Ye Cheng was not a member of the Communist party or the People’s Liberation Army.

“Any of my discussions with Mr Ye have certainly not indicated any influence or direction that seems to come from anything other than a commercial driver,” he said.

The hearing concluded on Tuesday. The committee was expected to report in early February.