Fiji's government said its cabinet had agreed to enter into a memorandum of understanding with Australia for the project after Australia committed to financing.
"The revival of the shipbuilding industry in Fiji has been articulated as a key priority," Fiji's government said in a statement on Thursday.
"It has the potential to increase job opportunities, develop and expand specialised skill-sets amongst Fiji nationals and stimulate investment and economic growth."
Australia would provide initial grant financing to the Fiji government and the Fiji Ports Corporation, it said.
Australia, the largest aid donor to the Pacific Islands region, is stepping up its infrastructure support to counter China's push to expand security and policing ties in the region.
"Countries who want to build their influence in the region look for vacuums to fill and the Australian government is working very hard to be the best development and security partner for the entire region, so there are no vacuums to fill," Australia's Pacific Minister Pat Conroy said on ABC television.
Conroy will travel to Fiji, the Pacific's biggest transport hub, on Friday, and is expected to announce the ports deal and Australian financial assistance during his visit.
In November, Fijian Prime Minister Sitiveni Rabuka told parliament he wanted to collaborate with China on a key port modernisation and shipyard project after discussing it in a meeting with Chinese president Xi Jinping.
China is the world's largest shipbuilder, accounting for half of all ships built in 2024.
The pace of expansion of its navy has concerned Australia, which has donated dozens of patrol boats to its Pacific Islands neighbours to boost surveillance of their territorial waters.
A defence agreement allowing the militaries of Australia and Fiji to work in each other's country and share intelligence has meanwhile been introduced to Australia's parliament this week for ratification.
The "status of forces" agreement was signed by Australia and Fiji in 2022 but needs to be approved by both parliaments.
Australia is seeking to discourage its Pacific Islands neighbours from signing security or policing deals with China, after Beijing struck a security pact with Solomon Islands in 2022.
Last week, Fiji told the Guardian it would not scrap a decade-old policing agreement with China after a review by Fiji's new government, but said Chinese officers would no longer embed in Fiji's police force.
20°C