21/11/2012 - 05:10

Chinese deal lifts Ord growth hopes

21/11/2012 - 05:10

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If all goes to plan, the Ord River irrigation area will attract $700 million of private investment, but there is a long way to go before that happens.

Chinese deal lifts Ord growth hopes
COOPERATIVE APPROACH: Shanghai Zhongfu president Pui Ngai Wu And MG Corporation chair Edna O’Malley in Kings Park at the announcement of the Chinese company’s investment plans. Photo: Annaliese Frank

If all goes to plan, the Ord River irrigation area will attract $700 million of private investment, but there is a long way to go before that happens.

THIS week’s announcement that Chinese group Shanghai Zhongfu had been selected as the preferred proponent to develop 13,400 hectares of irrigated land in the Kimberley brought back memories of a similar announcement 14 years ago.

Then premier Richard Court announced that a Wesfarmers Marubeni consortium had been awarded an exclusive mandate to develop stage 2 of the Ord River irrigation area.

Four years later, however, the hopes of the local community and the dreams of people who advocate a ‘food bowl’ in the north were dashed when the consortium walked away from the $500 million project.

That was the latest of many setbacks for the Ord, which is blessed with rich soils and abundant water but a host of environmental challenges that have made crops like cotton and rice unviable.

Sugar was the mainstay of the farming district for many years but the limited supply of irrigated land meant that was also not commercially viable.

The biggest industry in the Ord today is sandalwood plantations, which occupy about half the 14,500ha of irrigated land.

The balance is used for a variety of fairly small-scale horticulture and tropical fruit orchards.

However, the prospect of large-scale private investment and expanded farming operations has been hugely boosted by two developments.

The first was a comprehensive native title settlement finalised in 2005 under the Carpenter government.

The agreement provided a package of measures, including training and employment opportunities, to compensate the Miriuwung and Gajerrong people for surrendering native title over 65,000ha of land allocated for future development.

The second was a commitment by the state and federal governments to invest a combined $515 million on new infrastructure, including a major irrigation channel and roads.

Despite having made such a large taxpayer-funded investment, there was only modest interest shown when the state government called for expressions of interest in developing a further 15,000ha.

The short-listed proponents included Australian Agricultural Company, which wanted to grow cotton, taking advantage of extensive trials of genetically modified cotton.

Perth company TFS Corporation proposed the establishment of more sandalwood plantations.

Chinese property developer Shanghai Zhongfu has beaten them both, however, proposing a bold and unusual diversification into Australian agriculture.

The company was motivated in part by its president and major shareholder, Pui Ngai Wu, becoming a permanent resident of Australia in 2011.

“As a result, the board of directors of SZRE determined that Australia would become its first choice for future investments,” the company said in a statement this week.

Premier Colin Barnett and Regional Development Minister Brendon Grylls said Shanghai Zhongfu was set to invest up to $700 million in the Ord.

Its proposal includes construction of a $425 million sugar mill near Kununurra, and upgrades to the nearby port at Wyndham.

“This is a historic moment in the history of Western Australia,” Mr Barnett said.

“We will have a major agricultural precinct in the Kimberley. It has taken 40 years to achieve, but it has been achieved.

“It will produce hundreds of millions of dollars of agricultural produce year in, year out.”

Mr Grylls said the Chinese group was aiming to use up to 40,000ha of irrigated land to grow sugar.

That would start with two adjoining areas, known as Goomig and Knox Plain, totalling 13,400ha.

Shanghai Zhongfu’s expansion plans would require it to lease additional land in WA and secure a deal to use the 14,000ha Keep River Plain in the Northern Territory.

The WA government said the project would create about 350 local construction jobs and 400 operational jobs, once full production was achieved by 2021.

Shanghai Zhongfu, which will make the investment through Australian entity Kimberley Agricultural Investment (KAI), was much more cautious in its predictions.

“[There are] still significant challenges ahead to develop this project to its full potential and to achieve the economies of scale KAI requires for this to be commercially viable,” Mr Wu said.

“These include state and federal environmental approvals for Knox Plain and working with the Northern Territory and Commonwealth governments to expand into the Northern Territory, which for instance, will require environmental approvals and native title agreements with the MG people.”

The company added that it was too early to speculate about specific job numbers at this stage, as the ultimate scale of the project was unknown at this point.

“Employment figures quoted by the government are dependent on KAI acquiring and being granted access to more land in Western Australia and in the Northern Territory,” it said in a statement.

MG Corporation chair Edna O’Malley welcomed the deal but was also cautious, particularly when it came to development of land in the Northern Territory.

“It’s all well and good for governments and potential proponents to talk up future development of MG lands in the media, but the reality is that the traditional owners and native title holders have not been consulted,” she said.

More positively, she also noted that the Aboriginal Development Package with the WA government had led to a big rise in local Aboriginal employment, training and business development, and said MG Corp wanted to work with the Chinese group.

 

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