Chinese property developer Shanghai Zhongfu was today confirmed as the preferred proponent to develop 13,400 hectares of irrigated land in the Kimberley, and has immediately highlighted the substantial hurdles it needs to cross if the sugar farming project is to reach its full potential.
Premier Colin Barnett and Regional Development Minister Brendon Grylls confirmed the deal this morning, saying Shanghai Zhongfu was set to invest up to $700 million in the Ord River area.
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."
The little known Chinese conglomerate beat out a rival bid by Australian Agricultural Company, which wanted the land to grow cotton, and a third proposal from TFS Corporation to establish sandalwood plantations on part of the land.
Mr Grylls said the Chinese group was aiming to use up to 40,000ha or irrigated land to grow sugar.
That compares with the 14,000ha of irrigated farm land currently in use in the Ord stage 1, mainly for sandalwood plantations and horticultural crops.
Today’s announcement relates to a further 13,400ha, known as Goomig and Knox Plain. This land has been released after the state and federal governments agreed to invest $515 million in irrigation channels, roads and other infrastructure.
Shanghai Zhongfu’s expansion plans would involve leasing additional land in WA and securing 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 20121.
However Shanghai Zhongfu, which will make the investment through Australian entity Kimberley Agricultural Investment (KAI), was much more cautious in its predictions.
Its president and major shareholder, Mr Pui Ngai Wu, said there were “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”.
“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 is 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.
The Chinese investment is likely to cause controversy on two fronts, going against the idea of the Kimberley region as Australia's "food bowl" to produce substantial food crops, and selling more Australian agricultural land to foreign investors.
"Sugar is food," was Mr Barnett's immediate response.
Mr Grylls described sugar as a base crop to underpin the Ord’s expansion. He said about 20 per cent of the land would be used for rotation crops at any one time, contributing to the region’s agricultural diversity.
He also predicted that KAI would contract local farmers to grow the sugar, rather than bringing in Chinese workers.
Separately, Mr Grylls said a 1700ha area would be made available for other farmers to develop 25 new locally-run farms.