04/09/2007 - 22:00

Landmark China visit

04/09/2007 - 22:00

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This week’s visit to Perth by Chinese president Hu Jintao highlighted the important role Western Australia plays in supporting the world’s powerhouse economy.

Landmark China visit

This week’s visit to Perth by Chinese president Hu Jintao highlighted the important role Western Australia plays in supporting the world’s powerhouse economy.

The visit came just one week after official news that China had overtaken Japan as Australia’s largest trading partner. China was already WA’s biggest trading partner, with annual exports from WA to China totalling nearly $14 billion.

The president’s visit was the third visit to WA by one of China’s most senior leaders, following chairman Wu Bangguo in May 2005 and premier Wen Jiabao in April 2006.

China’s rapid growth and WA’s abundant mineral resources have created a virtuous cycle, resulting in extraordinary growth in business investment, unprecedented prosperity for many WA businesses and record low unemployment.

The visit was used by several major companies to sign important commercial agreements. Most notably, Shell signed an LNG sales agreement that will help to progress the long-delayed development of the Gorgon gas project, which it owns jointly with Chevron.

In addition, Rio Tinto Iron Ore signed new agreements with Sinosteel concerning the Channar iron ore joint venture.

It is worth remembering that Sinosteel’s original investment in the Channar iron ore mine, undertaken 20 years ago, was one of China’s first foreign direct investments. It was also the first overseas mineral project entered into by a Chinese enterprise.

Today, multiple Chinese companies are looking to invest in mining and infrastructure projects in WA.

Younger readers may take the Chinese interest in WA for granted, but that shouldn’t be the case. It marks a seismic shift away from Japan, which was the dominant trading partner during the 1970s and 1980s, and South Korea, which came to prominence during the 1990s.

Japan, South Korea and other markets around the world are still important to WA’s future but they have all been usurped by the central place of China, as an export destination, as an investor, and as the engine room of global economic growth.

 

Taking the long view

Rio Tinto’s HIsmelt plant at Kwinana has been on the agenda for all of the Chinese leaders who have visited Perth.

HIsmelt has experienced more than its share of problems, costing more to develop and taking longer to commission than had been anticipated. However, the Chinese are renowned for being patient, long term investors and that approach would seem to be appropriate for HIsmelt.

It utilises revolutionary technology to produce high-quality liquid iron using a process that offers significant capital and operating cost savings, and has major environmental benefits. China is progressively rationalising its steel industry, with smaller producers merging so they have the capacity to invest in cleaner, more efficient production.

China has just started down this path, but wouldn’t it be pleasing to see HIsmelt technology playing a part in the modernisation of Chinese industry - and contributing to a cleaner environment.

Rio Tinto estimates the HIsmelt technology could provide reductions of at least 20 per cent and possibly up to 90 per cent in greenhouse gas emissions associated with iron-making.

 

Don't be complacent

Outsiders looking at WA sometimes perceive the state as a land of milk and honey, where everybody is revelling in the good times.

Living here, it doesn’t always feel that way. Many people feel frustrated about the lack of vision, and by the difficulty of getting things done in this state.

This flows in part from rapid economic growth, which has resulted in rising costs, shortages of skilled labour and difficulty in maintaining service quality.

Nonetheless, there is an expectation that more could be achieved. Gather a group of business people together and almost invariably the talk will turn to their frustration at slow decision making, poor access to ministers and unclear policy frameworks.

These concerns are not confined to the state government. Articles in this week’s property section highlight the problems that arise when the three tiers of government - federal, state and local - do not operate in a consistent and effective manner.

 

More action on skills

The shortage of skilled workers has been one of the biggest issues facing industry in WA for at least three years. Hence, we thought it was timely to analyse the response of both industry and government to this crisis.

Our report finds that a lot of progress has been achieved, with a substantial increase in the number of apprentices, but it has made only a small dent in the problem.

Political sensitivity surrounding the use of section 457 visas has made it difficult for the federal government to advocate temporary migration of skilled workers.

The reality is that only a handful of questionable cases has been identified, yet the popular perception seems to be that rapacious employers are cruelly exploiting foreign workers.

Like the debate over workplace agreements, employers who abuse the current laws should be vigorously prosecuted.

But we shouldn’t leap to the conclusion that a handful of problems signify a wider malaise.

Temporary migration has a big role to play in dealing with short term labour market pressures, but as the prospect of continued strong economic growth seems more and more likely, we need to focus on sustainable long-term solutions.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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