Foreign Investment Screening in Small Island States: Who Checks the Deals?

What investment screening is, and why islands are asked about it

Screening is different from ordinary investment approval. Most countries register foreign investors, set minimum capital, or reserve some trades for citizens. Screening asks a narrower question: could this buyer’s ownership or control of this asset be used against the country’s security? Australia’s guidance puts the concern plainly: foreign ownership of critical infrastructure and other sensitive assets may give foreign intelligence services opportunities for espionage, sabotage or other activities contrary to national security (FIRB Guidance Note 8).

For small island states the question arrives through a handful of assets: the one international port, the airport, the undersea cable landing, the mobile network, the power utility and the main bank. ISPI’s undersea cables explainer shows how much depends on one or two cables, and our Solomon Islands–China security agreement timeline shows how quickly a security relationship can follow broader engagement. The table compares how selected jurisdictions handle the security question.

The reference models: Australia, New Zealand and the United States

Australia. Under the Foreign Acquisitions and Takeovers Act 1975, a foreign person must notify and get approval before starting or acquiring a direct interest in a national security business, or acquiring national security land; penalties may apply for failure to notify. The Treasurer can also call in other investments for review if they may pose national security concerns, while proposed or up to ten years after completion. Investors who notify voluntarily get certainty from call-in, and a last-resort power lets the Treasurer impose conditions or, in exceptional cases, require divestment of an approved investment if new risks emerge (FIRB Guidance Note 8).New Zealand. The national security and public order regime took effect on June 7, 2021. It applies to overseas investment in “strategically important businesses.” Notification is mandatory before a deal takes effect if the target works on military or dual-use technology or is a critical direct supplier to the Defence Force or the intelligence agencies, and voluntary for other strategically important businesses (LINZ). The Act lists businesses involved in ports and airports, electricity, water, telecommunications, financial infrastructure and significant media among them (Overseas Investment Act 2005). Called-in decisions are made by the Minister of Finance (LINZ).United States. The Committee on Foreign Investment in the United States (CFIUS), chaired by Treasury, can review certain purchases, leases and concessions of real estate near listed military installations. A final rule issued November 1, 2024 extended coverage within one mile of 40 more installations and within 100 miles of 19 more (U.S. Treasury). The current list includes Joint Base Pearl Harbor–Hickam, Marine Corps Base Hawaii, Camp H.M. Smith, Fort Shafter, Pohakuloa Training Area, Kaena Point Satellite Tracking Station and the Maui optical site in Hawaiʻi, the Pacific Missile Range Facility and Tropic Regions Test Center in its extended-range part, and Andersen Air Force Base, Naval Base Guam, Camp Blaz and the Guam Tracking Station (31 CFR Part 802, Appendix A). See ISPI’s Guam and CNMI research hub and Hawaiʻi hub.

All three models share features that matter for comparison: a named decision-maker, a written list of sensitive sectors, a deadline, and powers to impose conditions or unwind a deal. They are also backed by intelligence agencies that can assess an investor’s ownership and links, a capability most island governments do not have in-house.

What Pacific Island investment laws actually check

Most Pacific investment laws were written to register and promote investment, and to keep small-scale trades for citizens. In January 2024 the Asian Development Bank’s Pacific Private Sector Development Initiative (PSDI) published Investment for Growth, a review of the foreign direct investment frameworks of Papua New Guinea, Samoa, Solomon Islands, Tonga and Vanuatu that covered entry rules, “including FDI screening and restrictions” (PSDI). Tonga’s investment agency summarises the findings as fragmented policies, excessive investment restrictions and limited strategic direction in most of the countries, with recommendations that include modernising laws and reducing reserved activity lists (Invest Tonga summary).

Fiji is the clearest exception. Its Investment Act 2021 lets the Minister prohibit a foreign direct investment to protect national security interests, and requires a foreign investor in a sector that may affect critical infrastructure (energy, transport, communications, data storage, financial infrastructure), critical technologies, the security of supply of critical inputs, or access to sensitive information to submit a proposal for approval (Investment Act 2021, s.7). The U.S. State Department’s 2025 report notes that observers find the law vague on requirements in sectors of national security interest, and that there are no standard application forms or information requirements for data-related approvals (U.S. State Dept., Fiji).Samoa requires businesses with foreign shareholders to hold a Foreign Investment Certificate under its Foreign Investment Act 2000. All foreign investment is screened at registration, a response is required within five working days, and Samoa’s Transnational Crime and Financial Intelligence Unit gives input, but the State Department reports there is no capacity under the Act to deny an application because of an adverse finding (U.S. State Dept., Samoa).Papua New Guinea requires foreign businesses to obtain Investment Promotion Authority certification, and the Bank of PNG approves all foreign investment proposals, reviewing whether financing terms are reasonable and loan funds are brought into the country (U.S. State Dept., PNG). Solomon Islands requires foreign businesses to register and obtain a certificate before operating under its Foreign Investment Act 2005, with domestic-oriented and small-scale activities reserved for citizens (Invest Solomons; Invest Solomons). Neither description includes a national security test.

The pattern is not a failing of any one government. These laws answer a different question (is this investor registered, capitalised and in a permitted sector?) from the one security partners now ask (who ultimately controls this asset, and what could they do with it?).

Treaties are now doing part of the screening

Since 2023, Australia’s bilateral treaties have added a check that sits outside investment law. The common element is a consultation or consent step before a third state or entity becomes involved in critical infrastructure. ISPI’s basing and status-of-forces agreements explainer covers the defence side of these treaties; the table sets out the infrastructure clauses.

Tuvalu. Under Article 4 of the Falepili Union, Tuvalu must mutually agree with Australia any partnership, arrangement or engagement with any other state or entity on security and defence-related matters, which include critical infrastructure such as ports, telecommunications and energy (Falepili text, Art. 4). The treaty entered into force on August 28, 2024 (PM of Australia).Nauru. The Nauru–Australia Treaty, signed December 9, 2024, goes further on finance. Nauru must mutually agree with Australia any third-party engagement on its critical infrastructure concerning banking and telecommunications, and must consult Australia on other critical infrastructure such as ports, aviation and energy; a joint committee meets within two weeks of a notice to consult, and both parties agree the infrastructure will not be used by a third party for security purposes (treaty text, Art. 5). In return, Australia supports Nauru’s access to banking services. The treaty entered into force on September 19, 2025 (DFAT).Vanuatu. The Nakamal Agreement, signed in Canberra on June 29, 2026, is softer: Vanuatu agrees to keep its critical infrastructure free from militarisation, foreign interference or unauthorised access, and to consult Australia on proposed third-party engagement, with Australia providing technical advice and practical support during consultation (Nakamal text, Art. 8; Australian ministers). At the first Nakamal Committee meeting on October 15, 2026, Vanuatu had completed its domestic processes and the agreement was still progressing through Australia’s treaty process (Nakamal Committee statement). See ISPI’s analysis of the Nakamal Agreement.

These clauses do not create an investment screening agency. They create a diplomatic step: notice, consultation and, in Tuvalu’s and Nauru’s case, agreement. Whether that step happens before a contract is signed depends on whether the island government’s own ministries spot the deal early enough to raise it.

Financing as the alternative to a veto

Where screening is weak, partners have sometimes bought or built the asset instead. In 2018 Australia contracted Vocus to build the Coral Sea Cable System to Papua New Guinea and Solomon Islands, with Australia delivering and majority-funding the cables and both countries co-contributing (Australian Foreign Minister, 2018). In July 2022 Telstra completed its purchase of Digicel Pacific, which serves Papua New Guinea, Vanuatu, Fiji, Samoa, Tonga and Nauru, supported by a USD1.33 billion financing package from the Australian Government through Export Finance Australia; Telstra owns and operates the business (Australian ministers).

Financing gives island states a funded alternative, but it is not a substitute for their own review. It depends on a partner being willing to pay, it arrives deal by deal, and it leaves the host government without a standing process for the next port lease, data centre or power purchase agreement.

What island governments can ask before a critical infrastructure deal

The questions below are ISPI’s synthesis of the features the reference models share, scaled to a small administration. They are not a legal template.

• Is there a written list of sensitive assets? Ports, airports, cable landings, telecommunications, power, water, banking and government data. Fiji’s Act and New Zealand’s Act both name sectors in law.
• Who decides, and by when? A named minister or committee and a deadline, so screening does not become indefinite delay for legitimate investors.
• Who ultimately owns the investor? Beneficial ownership, state ownership and financing sources, not only the local registered company.
• Can the government attach conditions? Data location, access controls, local staffing, or the right to inspect, instead of a simple yes or no.
• Can it act after the fact? Australia’s ten-year call-in window shows why some risks emerge only after completion.
• How do treaty obligations fit? If a Falepili, Nauru or Nakamal-style clause applies, the investment office needs to know when to notify the foreign ministry.
• Who supplies the assessment? Regional bodies, partner governments or independent researchers can help where in-house capacity is thin, without handing over the decision.

These questions connect to ISPI’s wider research. WP-10: Democratic Resilience in Pacific Island Nations and PB-18: Democratic Resilience in Small Island States look at why institutional technical capacity underpins democratic resilience in Pacific Island nations facing outside pressure, and CM-14: China and Pacific Security looks at the community-level public safety implications of China’s expanding security presence in the Pacific. The region’s own frame is the expanded concept of security in the Boe Declaration (see our Boe Declaration explainer); the same ownership questions arise in our deep-sea mining explainer and, for the U.S.-affiliated states, in our Compacts of Free Association explainer.

Frequently asked questions

What is foreign investment screening?

A government review of whether a foreign purchase of a company, land or infrastructure creates a national security risk, with power to approve, attach conditions or block. It is separate from ordinary business registration and reserved-activity rules.

Do Pacific Island countries screen foreign investment for national security?

Few do through investment law. Fiji’s Investment Act 2021 lets the Minister prohibit an investment to protect national security and requires approval in critical sectors. Samoa screens at registration but, according to the U.S. State Department, cannot refuse an application because of an adverse finding. Papua New Guinea and Solomon Islands focus on certification, registration and reserved activities.

How do the Falepili Union and the Nauru treaty affect investment?

They do not screen investors directly. Tuvalu must mutually agree with Australia any third-party security engagement, which the treaty says includes ports, telecommunications and energy infrastructure. Nauru must mutually agree on banking and telecommunications and consult on ports, aviation and energy.

Does CFIUS cover Hawaiʻi and Guam?

Yes for listed sites. The CFIUS real estate list includes military installations on Oʻahu, Maui, Hawaiʻi Island and Kauaʻi and four sites on Guam, with an extended 100-mile range around the Pacific Missile Range Facility and the Tropic Regions Test Center.

Is the Vanuatu–Australia Nakamal Agreement in force?

Not as of October 15, 2026. It was signed on June 29, 2026; Vanuatu had completed its domestic processes and Australia’s treaty process was still under way.

ISPI publishes its research free under CC BY 4.0. If your government, agency or organization needs a briefing on investment security, critical infrastructure ownership, or regional security architecture, you can commission research from ISPI. ISPI is a nonprofit organization; its application for 501(c)(3) tax-exempt status is pending. Contributions are not tax-deductible until IRS recognition is granted.

Sources

1. Republic of Fiji, Investment Act 2021 (Act No. 5 of 2021), sections 5–7 (PDF)
2. U.S. Department of State, 2025 Investment Climate Statements: Fiji
3. U.S. Department of State, 2025 Investment Climate Statements: Samoa
4. U.S. Department of State, 2025 Investment Climate Statements: Papua New Guinea
5. Invest Solomons, “Foreign Investment Act 2005”
6. Invest Solomons, “Constrained activities for foreign investors”
7. Pacific Private Sector Development Initiative (ADB), “Enhanced foreign direct investment can drive economic growth and development,” January 17, 2024
8. Invest Tonga, “Investment for Growth: A Review of Foreign Direct Investment Frameworks in the Pacific (2024)”
9. Australian Foreign Investment Review Board, Guidance Note 8: National Security, version 2, July 1, 2023 (PDF)
10. Toitū Te Whenua Land Information New Zealand, “Find out if you need to notify us of your transaction”
11. Toitū Te Whenua Land Information New Zealand, “Legislation, ministers and delegated powers”
12. New Zealand, Overseas Investment Act 2005 (New Zealand Legislation)
13. U.S. Department of the Treasury, “Treasury Issues Final Rule Expanding CFIUS Coverage of Real Estate Transactions Around More Than 60 Military Installations,” November 1, 2024
14. Electronic Code of Federal Regulations, 31 CFR Part 802, Appendix A: List of Military Installations and Other U.S. Government Sites
15. Australian Department of Foreign Affairs and Trade, Australia–Tuvalu Falepili Union, treaty text
16. Prime Minister of Australia, “Entry into force of historic Australia-Tuvalu Falepili Union,” August 28, 2024
17. Australian Department of Foreign Affairs and Trade, Nauru–Australia Treaty, text (signed December 9, 2024)
18. Australian Department of Foreign Affairs and Trade, Naoero (Nauru) country brief
19. Australian Department of Foreign Affairs and Trade, Vanuatu–Australia Nakamal Agreement, text
20. Australian ministers, “Vanuatu and Australia sign Nakamal Agreement,” June 29, 2026
21. Australian Department of Foreign Affairs and Trade, “Nakamal Committee meeting outcomes statement,” October 15, 2026
22. Australian ministers, “Telstra finalises acquisition of Digicel Pacific,” July 14, 2022
23. Australian Minister for Foreign Affairs, “Contract signed to deliver undersea cables to Papua New Guinea and Solomon Islands,” June 19, 2018