The Australian Foreign Minister Alexander Downer says Papua New Guinea could become a failed state, exploited by criminals and possibly terrorists if Australia withdrew all of its 200 million US dollars of annual aid.
Mr Downer says Australia is spending a lot of money in the Solomons because of the dangers of people-traffickers, money-launderers and possibly terrorists exploiting a failed state on Australia's doorstep.
He has told a Sydney radio station that that could happen in PNG if Australia withdrew its aid.
After talks in Port Moresby on Thursday, Mr Downer won agreement from PNG to send about 200 police to its former territory to help improve law and order and
to more closely monitor how government money is spent.
Mr Downer says Australia's new assistance could include helping to manage the PNG treasury and finance department to try to recover a lot of the money that is going missing.