Concetta Fierravanti-Wells, the former minister for international development and the Pacific, has raised questions about whether Scott Morrison’s recent pivot to the region, including a new $2bn infrastructure financing facility, is the right approach.

In an interview with Guardian Australia’s political podcast, Fierravanti-Wells has expressed concern that the new mechanism, which will provide loans for infrastructure development in Pacific countries and Timor-Leste, will increase indebtedness in the region, when it would be better for Australia to provide more grant funding.

Earlier in the year, when she still held the Pacific portfolio, Fierravanti-Wells blasted China for using using concessional loans to boost its influence, and for building useless infrastructure projects, like roads to nowhere.

Morrison, ahead of this weekend’s Apec summit in Port Moresby, unveiled a $2bn infrastructure financing facility for the Pacific as part of new measures designed to project Australia as the region’s principal security and development partner at a time of rising Chinese influence.

The former frontbencher, who lost her spot in the Liberal leadership convulsion, said the new Australian loan facility raises concerns. “I don’t want to see a situation where one debtor is swapped for another.”

She said debt, and debt sustainability, was now a significant concern for Pacific countries, troubling the international community, multilateral banks and the Pacific Islands Forum grouping.

“It’s all very well to look at infrastructure, and that’s very important – undersea cables and all those things – but at the village level, the things that really matter are the school, the community hall and the hospital. Because if they can’t stand the next cyclone or storm then, for that village or community, it’s really hard for them to pick themselves up again.”

Australia has recently stepped in to fund a new underwater internet cable for the Solomon Islands to lock the Chinese telecommunications company Huawei out of any deal.

Fierravanti-Wells said more cost-effective interventions involved climate proofing existing infrastructure and investing in disaster preparedness, which was the key regional priority, in the spirit of helping Pacific nations to help themselves.

China’s expansion in the region has coincided with the Coalition’s decision to cut Australia’s foreign aid budget, which foreign policy experts say has worked against Australia’s interests in the Pacific – particularly in a time of uncertainty about America’s ongoing commitment to the region.

In a wide-ranging interview, Fierravanti-Wells, a government conservative, said she would favour moving the Australian embassy from Tel Aviv to Jerusalem – a debate that continues to generate considerable controversy – and suggested she would be sanguine about the free-trade deal with Jakarta being a casualty of the shift.

She said Australia must be able to determine its own foreign policy positions and “not be afraid of commercial impacts”.

“Values are values and if you tell the Australian public you hold a particular value then there comes a time when you are going to have to make decisions and consider those decisions in the context of your values,” she said.

The former frontbencher also engaged on relations with the Islamic community following the Bourke Street attack and an increase in divisive political rhetoric after that event.

Earlier in the year, she used a contribution to a compilation rebooting Robert Menzies’ “forgotten people” speech and essays to reflect on the challenges Muslim Australians face, including prejudice, and to emphasise the importance of open dialogue inside and outside the community.

She said Muslim Australians had now arrived at the same “crossroads moment” faced by preceding waves of immigrants, including her own antecedents, Italians.

Fierravanti-Wells said it was imperative that the community “own” the problem of radicalisation, and come together, despite a spectrum of views, to present a united front on security issues “even though there may be major differences”.

Asked whether there was a risk of politics on security issues becoming rancid in the lead-up to election contests over the coming months, she said: “I think the situation for [the Islamic community] is now more drastic than it was say a number of years ago because there are much more inculcated views in our society about these issues”.

She said it was becoming more pressing for Muslim communities to “take decisive action” to safeguard the Australian legacy of immigration by owning their own problems. “What we cannot do is let this issue taint the broader legacy,” she said.

Fierravanti-Wells said Muslims born in Australia also needed to experience equality of opportunity in this country in order to feel fully part of the nation.