A Chinese company has put forward a multi-billion-dollar plan to build a new city on the Papua New Guinean island of Daru, which sits on the nation's sea border with Australia.

Key points:

• The proposal includes an industrial zone, seaport, business and commercial zone, along with a resort and residential area
• It's planned for Daru Island, in the Torres Strait, only about 200 kilometres from the Australian mainland
• A spokesperson for PNG Prime Minister James Marape said the PM was "unaware" of the project

According to leaked documents, the proposal for 'New Daru City' includes an industrial zone, seaport, business and commercial zone, along with a resort and residential area, over a 100 km2 area.

In a letter addressed to PNG's Prime Minister James Marape and dated April of last year, the Hong Kong registered company, WYW Holding Limited, said its "investment and development plan" included "broad ranging ideas" for the development of several areas of PNG's Western Province, including Daru.

It says the "ambitious plan" is "predicted on an agreed Sovereign Guarantee based on a long-term BOT [Build Operate Transfer] contract".

A BOT would give ownership of the project to the company for a specified amount of time.

The company said it had entered into "preliminary discussions with representatives of Western Province".

Daru Island lies in the Torres Strait and is only about 200 kilometres from the Australian mainland.

In November last year Papua New Guinea's Government signed a memorandum of understanding with another Chinese company to investigate building a $200 million fisheries park on Daru.

That proposal sparked concerns within Australia regarding fishing stocks and national security.

Prime Minister Marape 'unaware' of city proposal

The CEO of WYW Holding, Terence Mo, writes in the 2020 letter to PNG's Prime Minister that it would be "an honour" to work with the PNG Government on creating "economic growth through infrastructure development".

But a spokesman for Mr Marape, told the ABC the Prime Minister was "unaware" of the project.

"However, if a foreign investor wants to come to PNG with multi-million kina investments, PNG will not stop them ... on the condition our legal laws are complied with and local Papua New Guineans benefit."

The company said it has experience in infrastructure financing and investment, listing projects in Pakistan and Myanmar.

Daru Island is less than 200 kilometres from the Australian mainland.(Google Maps)

In another letter to Mr Marape, the Chairman of WYW Holding and the CEO of AA Oil and Gas, Calvin Ng, writes that Papua New Guinea can "advance significantly through appropriate infrastructure development, modern communications, efficient transport systems and natural resource exploitation."

"We are very excited by the prospect of collaborating with your government in the development of both infrastructure and natural resource projects," his letter said.

The ABC has contacted WYW Holding and AA Oil and Gas but had not heard back at the time of publishing.

Long road for projects in PNG

In Papua New Guinea, getting projects approved and then built can be a long process. It requires extensive community engagement, especially with local landowners, and consultation with multiple levels of government.

A project as ambitious as building a city would likely be difficult to progress.

Papua New Guinea's Government signed a memorandum of understanding with another Chinese company to investigate building a $200 million fisheries park on Daru.(Supplied)

Even projects that reach a Memorandum of Understanding stage, often don't go any further.

In response to Australia's concerns regarding the fisheries proposal in Daru, PNG's Fisheries Minister Dr Lino Tom said the project hadn't been given final approval, but PNG was "within its sovereign rights" to be considering it.

The Governor of the Western Province, Toboi Awi Yoto, has been a strong supporter of the fisheries proposal, and criticised Australia's response to it saying Australia had "no alternative plans to counter and deter any foreign direct investment, especially to alleviate poverty and improve social services."

The ABC contacted Australia's Department of Foreign Affairs about the WYW Holding plan, but it declined to comment.