The pact comes as China pushes for influence in a region Australia views as its backyard, amid souring ties after Prime Minister Malcolm Turnbull last year accused Beijing of meddling in Canberra’s affairs.
Australia will pay two-thirds of the project cost of A$136.6 million ($100 million) under the deal, signed on a visit to Brisbane by Solomon Islands Prime Minister Rick Houenipwela and Papua New Guinea Prime Minister Peter O’Neill.
“We spend billions of dollars a year on foreign aid and this is a very practical way of investing in the future economic growth of our neighbors in the Pacific,” Turnbull told reporters about the deal.
The project, for which Australian telecom firm Vocus Group Ltd is building the cable, will link the two nations to the Australian mainland, besides connecting the Solomons capital Honiara with the archipelago’s outer islands.
For years, Western intelligence agencies have worried over Huawei’s ties to the Chinese government and the possibility that its equipment could be used for espionage.
Australia, which is poised to ban Huawei from its domestic 5G mobile network on the advice of its intelligence services, raised “concerns” that scuppered a Huawei offer for cabling to the Solomons, Houenipwela has previously told the Australian Broadcasting Corp.
Huawei has said it was never informed of any security problems with its planned cables for the Solomons, where Chinese activity has attracted additional attention, as it is one of six countries in the Pacific to maintain ties with Taiwan.
China claims self-ruled Taiwan as its own and has never renounced the use of force to bring under its control what it sees as a wayward province.