Indonesian terrorists have an open door into PNG to target Australians and their mining and energy interests, thanks to Canberra's push to slash the size of the PNG Defense Force, says a former army commander.

Retired Major-General Jerry Singirok, who in 1997 defied the government and ousted Sandline mercenaries deployed to crush Bougainville secessionists, said the downsizing of the PNG military from more than 5000 troops to 2000 had crippled it.

Security on the border with the Indonesian province of Papua was already severly compromissed with few or no PNG Defense force (PNGDF) soldiers in place where full companies should patrol, he said.

"The Indonesian terrorist group Jemaah Islamiah (JI) posed a huge threat to Australia and PNG when the porous 760km border allowed illegal and suspicious migrants to cross with ease,"Mr. Singirok said.

"They would certainly target Australia's major investments in Papua New Guinea. As we have seen with the calls by Osama Bin Laden and his cohorts, they group Australia together with America and England as their enemy," the former commander told AAP.

The retired general's comment's were forwarded to the PNGDF, the Prime Minister's office and the Australian High Commission for comments, but none were forthcoming.

Major resource targets such as the Hides gas project, the proposed gas pipeline to Australia, the OK Tedi and Pogera gold and copper mines, and oil installations in the areas of Papua were potential targets, he said.

"Any terrorist with intention (to do harm) would obviously strike where there's no defense, no security systems in place. If they cannot hit Australia on its home soil, they're going to hit Australia where it hurts. There's billions of dollars of Australian investment in PNG and there's a relatively significant population of Australian's."

The downsizing of the PNGDF , with soldier payouts funded by Australia, was 'humiliating' and ' a major security blunder' that compromised PNG, Australian and Regional Security, he said.

Mr. Singirok said Australia constantly accused the PNGDF of being a destablising factor though the force had never threatened to take over the government.

"My challenge to Australia is it should not see us as a destabilising force, it should strengthen us, give us equal training and the same standards as the Australian Defense Force because we can be a major force of deterrence in the region."

A current Australian backed program to destroy around 3000 surplus PNGDF weapons has compromised the force's capability," Mr. Singirok said.