An international policy expert says the Federal Government was right to ban Chinese technology giant Huawei from bidding on the National Broadband Network (NBN) because of security fears it was too close to Beijing.
The Federal Government banned Huawei from bidding on the largest infrastructure project in Australia's history because it feared the telco's alledged PLA links may compromise the network.
Prime Minister Julia Gillard defended the decision at a press conference in South Korea yesterday.
"The National Broadband Network is a huge infrastructure project ... you would expect prudent decisions to be made to ensure it does what we want it to do, and we've taken one of those decisions," Gillard said.
The move was said to trigger a diplomatic storm with Former Foreign Minister and Huawei Australia board member Alexander Downer telling ABC AM yesterdaythe ban was "absurd".
"This whole concept of Huawei being involved in cyber warfare presumably ... would be based on the fact that Huawei comes from China," Downer said.
"This is just completely absurd."
Jeremy Mitchell, Huawei Australia's head of corporate affairs said there was "no way" the company would ever risk installing backdoors into its products.
He said the government's decision showed a lack of understanding of modern China.
He conceded Huawei's Chinese origins meant the bar was set higher, saying the company was prepared to work closely with Federal Government to aid in the security auditing of its equipment as well as helping to ensure that only Australian citizens had clearance to work on NBN projects.
Huawei said it had already supplied NBN Co and the Federal Goverment with its source code, as it did when applying for NBN-style projects it was subsequently awarded in eight different countries including New Zealand and the UK.
But the University of Sydney's John Lee, an expert with 10 years' experience in Chinese international relations, said the Australian Government's decision was right.
"It is a prudential move," Lee said. "It is basically unthinkable that Huawei would be at an arms' length from Bejing. The system the company comes from is extremely closely monitored and controlled by the Chinese Government."
He said there were "absolute links" between the company, the government and the People's Liberation Army. Huawei founder and CEO Reng Zhengfei formerly worked as an engineer with the PLA, a fact which has been cited by the company's detractors to bolster claims that Beijing is pulling the strings.
Huawei has repeatedly denied any links to Beijing or the PLA and has sought to address perceptions that it lacks transparency. Responding to charges that too little was known about its key execuitves and the processes governing their appointment, Huawei published in its 2010 annual report detailed biographies on each of them while explaining the voting process.
But Zhengwei's reported desire to give his children key positions within the company has raised concerns about nepotism.
The telecommunications sector was one of the 'seven strategic industries' which Bejing had designated last year to accelerate foreign trade and grow foreign funding channels.
Those included next generation communications, high-end equipment manufacturing, energy-saving and environmental protection, new energy, bio-science, new material and new energy vehicles.
Lee said those industries, and telecommunications in particular, were subject to an "explicit policy of control and close monitoring" by the government.
"Huawei is openly spoken of as a national champion by the government which has reserved it special credit and reserved access to markets -- and that doesn't happen without certain government interests."
Asked how the alleged state links with Huawei could affect the company's existing deals with Vodafone, Optus and the NSW Government, Lee said each contract had to be assessed on a "case by case basis" according to the security risks of each.