An Australian company has been awarded a multi-million-dollar contract to redevelop Papua New Guinea's main naval base on Manus Island.

Clough was announced as the head contractor for the Lombrum Naval Base upgrade, which is expected to cost up to $175 million.

The head of Papua New Guinea's Defence Force, Major General Gilbert Toropo, said the upgrade would significantly improve PNG's maritime security capabilities.

"Redevelopment and rehabilitation of Lombrum Naval Base will really set the foundation for our effective maritime patrols," he said.

Major General Toropo said China's growing presence in the region presented "a challenge" for PNG.

"In the sense that when we don't have an effective and strong security force element, then we are vulnerable to that country's presence," he said.

US navy evacuated, COVID-19 blamed for delays

Construction was due to start this month, but Major General Toropo said COVID-19 had caused delays.

He said skilled technicians had been unable to travel to PNG from overseas and construction material supply chains had been disrupted.

About 20 US navy engineers involved in the project had also been evacuated from Manus due to an outbreak of the virus.

On Sunday, the province had recorded a total of 439 cases of the virus.

"It's something we have no control over," Major General Toropo said.

Economy 'at its lowest' in wake of offshore processing

Meanwhile, locals in Manus are anxious for construction works to commence, saying they desperately need employment.

Bab Korup, who runs a popular community Facebook page, said the island's economy was suffering enormously in the wake of Australia's offshore processing regime.

Under Australia's controversial immigration policy, more than a thousand refugees and asylum seekers were sent to regional processing centres on Manus Island, which were reopened in 2012.

But in late 2019, the processing centres on Manus were effectively closed and remaining refugees were transferred to PNG's capital, Port Moresby.

Mr Korup said about 3,000 locals employed through the processing centres had lost work as a result.

"Our economy is at its lowest point … there are no jobs on the island," he said.

He called on Australia to create long-term employment opportunities on Manus and invest in schools and services.

"We've had an increase in lawlessness on the island because of frustration that our young people can find jobs," he said.

"We've had an increase in domestic problems, because families can hardly keep the family unit together because of lack of cash problems."

Naval base brings promise of local jobs

The Australian Defence Force (ADF) said the Lombrum Naval Base upgrade would create about 200 local jobs in Manus and 350 in total across PNG.

Market stallholder Veronica Puto said she welcomed the investment, hoping it would provide an economic boost.

Ms Puto was subcontracted to supply food to the refugee processing centres but lost work when the centres closed.

"There is no cash flow in Manus," she said.

She said jobs from the naval base upgrade must be distributed fairly across the community, and not given solely to landowners from the Lombrum area.

Upgrade to boost military presence on Manus Island

Major General Toropo said construction would begin "as quickly as possible" but did not set a firm date.

Construction company Clough also declined to comment, saying it did not have approval from the ADF to speak about the project.

Announced in 2018, the upgrade includes an extension of the current wharf facility, which was built by the US navy during World War II.

It also includes improvements to the island's road and electricity network, and new accommodation and training facilities.

Major General Toropo said it would allow PNG to double the number of military personnel on Manus to 400.

The base will be owned and run by the PNGDF but Australian troops will also be able to use the facility for joint training exercises and mentoring programs.

Major General Toropo said Australia and PNG had a "strong" and "enduring" military partnership.

"If we have to prevent any illegal activities … I think it is that strong partnership that will ensure that our region is safe," he said.