Ord deal may turn sour

THE private Chinese corporation chosen to develop the Ord irrigation project has admitted its $700 million plan may never happen.

In the remote Kimberley region for the opening of the new irrigation channel that will double the area's farming capacity, Shanghai Zhongfu president Pui Ngai Wu said achieving scale was essential to making his company's sugar proposal work.

Zhongfu was selected by the West Australian government on Tuesday as the best company to turn 13,000ha of undeveloped Kimberley bush country into fertile sugar farmlands.

The company plans to introduce an industrialised sugar-farming model, common in Brazil, to Australia's north.

It will see the Chinese company building, operating and owning a massive sugar mill near Kununurra, fed with cane from land developed and effectively owned by Zhongfu under 50-year state government leases, and grown and harvested by Zhongfu employees using Zhongfu machinery.

But Mr Wu, who founded his Shanghai-based $2 billion private property development company after growing up on a peasant farm in China's north, said despite winning the pivotal tender, the visionary project, with its $425m mill, remains a work in progress.

"We need more land and a bigger supply of sugar cane; we don't have enough yet," Mr Wu, 57, said in Kununurra yesterday.

"Scale is very important to be commercially viable; the profit is not handsome enough if we don't have enough land, and what we have now is too small."

Critical to the success of Zhongfu's venture, now it has secured land in WA, is the fast-tracking of irrigation development on bushland adjacent to its farm blocks lying just across the Northern Territory border.

The Territory government announced yesterday it would fast-track development of all potential farming areas also fed by the Ord scheme's Lake Argyle within its boundaries, giving the east Kimberley border region a "project of state significance" status.

The announcement has delighted the Chinese company.

For a start, it holds the promise of a cut in red tape due to overlapping territory and federal environmental approvals, with a single bureaucratic unit to deal with all agricultural expansion.

The announcement also, in effect, doubles as evidence that the extension of irrigated "food bowl" farming across into the Territory will proceed without delay - akin to an informal decision giving the green light to what locals are calling the Ord stage 3 project.

Mr Wu says Zhongfu would ideally love to be automatically granted the lease to all 20,000ha of land capable of growing cane across the state border.

But the Territory government has not yet decided if it will run an open competitive tender process for the right to develop the land likely to be suited to cropping on its Keep River Plain.

Or it could decide to negotiate only with Zhongfu, given its parallel development of irrigated farms in adjoining WA and its ownership of the crucial future mill.

Native title rights to the Territory land also remain in the hands of the Miriuwung Gajerrong traditional owners, with negotiations about land tenure and future economic development benefit packages likely to take years.

"We hope we would be able to move quickly into the NT, but that part is not up to us," Mr Wu acknowledged yesterday.

Another key development yesterday came with the signing of a memorandum of understanding between the leaders of the WA and Territory governments, premiers Colin Barnett and Terry Mills respectively, and federal Regional Australia Minister Simon Crean, to use their joint experience to speed up agriculture development in Australia's north, regardless of state borders.

Zhongfu's Australian subsidiary, the Kimberley Agricultural Investment company, believes such government co-operation and support is invaluable for ensuring their investment quickly becomes reality.

The unusual cross-border location of the river plains also means the Territory, WA and federal governments are inextricably linked in getting the northern food bowl vision they share off the ground.

"We are not asking for (environmental or native title) laws or approvals to be relaxed, we are happy to work within the regulatory framework," says David Walker, the Sydney-based Holding Redlich lawyer representing Zhongfu. "But we are also not going to be spending $700m investing in this region unless it stacks up for us financially.

"So we are talking about removing administrative roadblocks; we have said to all three governments all along that for this ($700m sugar project) to happen within the six-year timeframe, we need significant buy-in on their part to act as our partners, to give this development major project status and to streamline approvals.

"Fortunately, we now have very positive indications all three governments are prepared to make that commitment to us; they know just like us that this sugar project investment can still fail if they don't do all the right things."

Jim Engelke, Kununurra-based general manager of Zhongfu's KAI, said the mill would need a guaranteed annual supply of at least two million tonnes of cane before it would be worth building.

Mr Engelke said all the uncertainties about land tenure, land supply and cane production made it "undeniably a risk" that Zhongfu's investment could fail before it got off the ground.

"We've seen all the failures in the Ord before - cotton and rice, for example - and there is the risk of that here," Mr Engelke said.

"But the Ord has also had spectacular successes; you only have to look around the existing farms to know it is wrong to say the Ord scheme is a $1bn white elephant where broadacre cropping will never work."

Mr Wu insists he is not transferring all of his corporate investments in the construction and development of big projects to Australia from China on the back of a mere whim. "As time goes by, I have become more and more confident about this (sugar bowl) project; I am thinking less about risks and more about the strategic planning to move us forward fast," Mr Wu said. "I believe in the future (with rising world food demand) that food and protein and new energy products (such as cane ethanol biofuels) will have promising and attractive markets.

"But when I look around the Kimberley (at undeveloped cattle plains) I imagine not just sugar crops growing and new market opportunities but a new world developing - and for a boy who was working on a farm in northern China 40 years ago, it's not just exciting, it's extraordinary."

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