Chile picks Japan’s trans-Pacific cable route in snub to China

Chile picks Japan’s trans-Pacific cable route in snub to China

Chile has chosen a route proposed by Japan for the first fibre-optic cable to directly connect South America and the Asia-Pacific region, designating Australia and New Zealand as endpoints while stopping short of landing in China, Nikkei has learnt.

Japan’s route beat out a pitch by China that would have made Shanghai the final landing point. This decision comes amid a US pressure campaign to keep China out of global telecommunication projects.

Under the Japanese proposal, the undersea fibre-optic cable would stretch roughly 13,000km across the Pacific Ocean, pass through New Zealand then arrive at its terminus in Sydney. The Chilean government says this route is the most recommended based on cost and feasibility.

Japan and Australia completed their own submarine cable linking the two countries in July, meaning Japan could easily connect to the trans-Pacific cable. Both Australia and New Zealand share deep ties with Chile through the Trans-Pacific Partnership, the trade deal that Tokyo has pushed for.

The Japanese proposal to Chile took into account Australia’s hardline position against Beijing, exemplified by Canberra’s decision to blacklist China’s Huawei Technologies from its 5G infrastructure.

This article is from the Nikkei Asian Review, a global publication with a uniquely Asian perspective on politics, the economy, business and international affairs. Our own correspondents and outside commentators from around the world share their views on Asia, while our Asia300 section provides in-depth coverage of 300 of the biggest and fastest-growing listed companies from 11 economies outside Japan.

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Chile was caught in the geopolitical crossfire as China, its largest trading partner, lobbied heavily for cable plan to have Shanghai as its terminus. When Chilean president Sebastián Piñera visited Beijing in April last year, Huawei pledged to invest in data centres in Chile.

Huawei initially emerged as the leading candidate for the undersea cable. But the South American country was unable to ignore US intentions in diplomacy and trade.

Right before Mr Piñera’s visit to China, US secretary of state Mike Pompeo arrived in Chile and accused Huawei of being controlled by the Chinese government, which would put Chileans at risk.

This June, the US Department of Justice released a filing recommending that a separate Pacific undersea cable backed by Google and Facebook should bypass Hong Kong. The document cited the risk of Chinese authorities collecting sensitive data.

Japan’s trans-Pacific cable route plan prevails

Undersea cables carry 95 per cent of international communications, including internet data. With the advent of smart devices and 5G communications, expanding the capacity of the optical cables has become a pressing issue.

Gloria Hutt, Chile’s transportation and telecommunications minister, has said her objective is to transform her country into South America’s digital hub. The government is expected to release its technological report in the third quarter. A dedicated fund for the project will be established as soon as the end of the year.

Contracting bids are scheduled to be conducted next year, with the scale of the initial investments estimated to be $500m.

With Chile adopting Japan’s route for the cable, Japanese companies will have an edge in winning contracts for supplying equipment. In the event that Japanese companies do win contracts, Tokyo plans to invest in and extend financing to a special purpose vehicle through the Japan Bank for International Cooperation and the Japan ICT Fund.

Japan’s NEC is one of the top three suppliers for undersea cables, along with US-based Subcom and France’s Alcatel Submarine Networks. NEC recently completed a transatlantic cable between Angola and Brazil.

Huawei, which had originally concentrated on short-distance cables, has expanded in recent years to undersea cables connecting Africa and Latin America. The company announced last June that it would sell its undersea cable assets, but the business will probably continue under the auspices of another Chinese telecom giant.

A version of this article was first published by the Nikkei Asian Review on July 29 2020. ©2020 Nikkei Inc. All rights reserved.

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