Chinese secure northern foodbowl as row over Ord River lease continues
Published: 14 Nov 2012
Posted in:  Australia | China
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The Australian | 14 November 2012
An aerial view of the second stage expansion of the Ord irrigation scheme in Western Australia's Kimberley region.

by Sue Neales

CHINESE property development conglomerate Shanghai Zhongfu has won the sole right to develop 15,200ha of high-value irrigated agricultural land in northern Australia after the state and federal governments spent $510 million of taxpayer funds building road, irrigation, port and local community infrastructure to support the deal.

The little-known Chinese private company has been handed all available land in the second stage expansion of the Ord irrigation scheme in Western Australia's Kimberley region for a peppercorn rent, on the condition it is cleared, developed, farmed and a state-of-the-art export sugar mill built.

The West Australian government will formally announce Shanghai Zhongfu as the preferred developer of the pivotal Ord stage 2 expansion next Tuesday, doubling the size of the East Kimberley's 30-year-old food and farming scheme.

It will argue that because the Chinese company is taking out a 50-year lease on the valuable farmland and will not own the irrigation channels, it is a good deal for the state's taxpayers who paid $315m to get the project ready for food bowl farming.
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Behind the scenes, the state and federal governments are bracing for a new furore about foreign ownership of Australian agriculture after the Zhongfu deal is announced.

It follows a public outcry in August when Australia's largest cotton farm and water rights holder, Cubbie Station, was sold to a Chinese textile company.

The Barnett Liberal government claims Shanghai Zhongfu's long-term investment in the East Kimberley region is a very different scenario from Shandong Ruyi's contentious $300m purchase of Cubbie Station because the land is only leased and is undeveloped now.

It will cost Shanghai Zhongfu at least $250m to turn the 7800ha of undeveloped country it will lease on the Knox Plains and

Ord West Bank into sugar fields and to build a sugar mill near Kununurra. The other 7400ha of the Ord stage 2 land at Goomig is already fully irrigated with taxpayer-provided water piped right to each block - land the West Australian government originally hoped to sell to small Australian farmers.

Shanghai Zhongfu beat two other Australian shortlisted contenders, including Australia's largest cattle and land company, AACo, to win the prized tender to develop the second stage of the Ord irrigation scheme into a new Asian food bowl.

AACo chief David Farley said yesterday that since he did not know about next week's announcement in Perth by the Barnett government of the preferred proponent - and hadn't been invited to the Ord stage 2 "ribbon-cutting" launch the following Friday in Kununurra - it was obvious his company had missed out in favour of the Chinese bidder.

"Am I disappointed? Well, if someone can afford more than we could, then good luck to them, because we couldn't make the project work on any more (money or promises)," Mr Farley said.

The Chinese company plans to grow sugarcane across the entire region, and build a new sugar mill to process the cane into sugar and ethanol biofuel. Neither of the other two bidders proposed to grow food crops.

AACo's bid was based on returning cotton to the Ord's irrigated plains, while the third short-listed bidder planned to expand sandalwood plantations.

West Australian opposition agriculture spokesman Paul Papalia accused the Barnett government of wasting taxpayer dollars in the Ord's expansion, all now to benefit a Chinese company's profits.

"Effectively what they have done is spend more than $300m of public money and given all that land that can now be irrigated and farmed to the Chinese," Mr Papalia said.

"It's not like the state will get much benefit from this; the sugar mill will be all Chinese-owned and so will all the profits, and where is the foodbowl in all this talk of sugar for biofuels?"

Larry Yan, vice president of Shanghai Zhongfu, confirmed to Deal Journal Australia a fortnight ago that the Chinese property developer wanted to grow sugar across a large swath of the East Kimberley.

Shanghai Zhongfu has no agricultural projects in China and its winning Ord scheme tender will be its first investment in Australia from a company better known as a hotel developer and major property project player than a food and farming enterprise.

"It's just a good business opportunity for us; as our boss found it might be profitable," Mr Yan said earlier this year.

Shanghai Zhongfu also employed former prime minister Bob Hawke as its Australian lobbyist to push the Ord bid. It won the tender based on its plans to grow sugar to export from Wyndham port and to build a new state-of-the-art sugar mill near Kununurra, offering employment for about 300 locals, including indigenous workers from the Miriuwung Gajerrong community.

The federal government used $195m of public funding under its joint commitment to the Ord stage 2 agricultural development project to build new housing, schools, upgrade the Kununurra hospital and expand nearby Wyndham port.

Northern Territory Primary Industries Minister Willem Westra van Holthe said the new government would progress development of the Ord scheme into the Territory as a priority.

According to West Australian Regional Development Minister Brendon Grylls, Shanghai Zhongfu did not have to gain Foreign Investment Review Board approval for its $500m-plus proposal as it was not buying any land.