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Inquiry into Government Programs and Projects Locked Bag 3001 WEST PERTH WA 6872

Submission: Ord River Irrigation Expansion Project – Contracts

Thank you for the opportunity to make a submission regarding the Ord River Irrigation Expansion

Project. I prepared this submission on behalf of a number of Community Reference Group Members

and the East Kimberley Chamber of Commerce.

I would also like to highlight that I was Shire President for the Shire of Wyndham East Kimberley

during the period 2004-2008 and advocated strongly for the Ord River Irrigation Expansion project to

occur.

Kununurra became a gazetted town in 1961. Its emergence as a town was solely because of the

vision and past investment by State and Commonwealth governments to create irrigated farmland,

and in particular dam infrastructure being the Kununurra Diversion Dam and Lake Argyle. The value

of these investments has been the subject of several previous studies conducted by the State

Government.

The economy of the region has diversified since then as people have discovered the unique

Kimberley landscape. The investment by governments in infrastructure including dams has

contributed significantly to the emergence of strong and interconnected industries such as

agricultural and tourism.

Fortunately, the discovery of diamonds in the late 1970 gave the region further economic

diversification and the Argyle Diamond Mine (1980) has been a major driver of the economy of the

East Kimberley for 35 years.

In 2005, the State Labor Government signed the Ord Final Agreement – native title (OFA). This was a

watershed agreement enshrined in opportunities to grow the economy through expanding farming

land and in the process delivering participation benefits to traditional owners; benefits that would

not otherwise be created.

The OFA is essentially a participation style agreement where benefits flow based on the level of

participation taken up by Aboriginal people. The Carpenter /Ripper State Labour Government

initiated one of the largest regional agreements in the nation. However, this agreement would have

been meaningless without the investment made to expand the Ord.

In 2006, the State Labor Government attempted to expand the irrigation area, and deliver on the

OFA by calling a Request for Proposal seeking private interest in this expansion. All submissions

indicated that some form of government equity was going to be needed to enable the private sector

to make this project work. That was the strong market signal, which at the time government was

unprepared for, and it rejected all submissions because of this. This left the prospect of economic

growth through irrigated agriculture and delivery of the OFA in question.

By 2007 the Argyle Diamond mine was speculating that the diamond resource was running out and

that it would need to commence underground mining to enable more resource to be gained and

that this might extend mine life by 15 years. Argyle has since made it well known it expects to end

mining in 2021. Hence, the contribution of the mine to the East Kimberley economy will come to an

end, and I suspect this end will have a significant financial and social impact on our community.

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In the absence of other growth, and with the decline of the Argyle Diamond Mine there will be a

migration of skilled people away from the East Kimberley and a region more reliant on welfare.

Why is this history relevant to this inquiry?

It is relevant because it needs to be recognised that there has been a long commitment to increasing

Ord irrigated agriculture by successive governments and that commitment has been around creating

a solid economic base for a region.

And, it is relevant because it goes to the core of decision making processes leading to the decision

behind the previous State government and Commonwealth investment in the Ord Expansion project.

By the time the Liberal-National government came to power after the 2008 State Election it knew

the above context, and it was highly cognisant that the benefits enshrined in OFA (an achievement

of the Labour Government) could not be realised without triggering the Ord Irrigation Expansion.

The community played a key role in raising the awareness of government at that time for the

urgency and the need to develop the Ord. Further, a failure to realise the benefits at that time could

have had wider negative consequences for the State in dealing with native title elsewhere.

Expansion of the Ord Irrigation area became a Liberal- National 2008 election commitment. The

creation of the Royalties for Regions program at the same time is significant because it gave a means

to fund it.

Value for Money

Leverage - One of the first things the Liberal- National government did was to seek to leverage

Australian Government funding to partner with it on the Ord expansion investment. This lead to a

National Partnership Agreement in which the Australian Government committed to $195million

investment in community and social infrastructure. This is relevant because that investment may

not have taken place without the State investment in the Ord Irrigation Expansion, and had that not

happened then there may have been a higher burden on State finances because much of the

infrastructure created was renewal or improvements to State assets. (See Appendix 1- East

Kimberley Development Package Projects). The community, and importantly the Shire at the time

realised that any further expansion of the Ord would require investment into social infrastructure to

support this growth, as such lobbied, and was proudly supportive of the unique place based

investment achieved by both levels of government.

Irrigation – The Ord Irrigation Project initially had a budget of $220million. This was later escalated

through State Cabinet approval to $322.5million. I assume reasons for that were understood by

Cabinet at the time. My understanding is that:

A strategic decision were made to scale the main arterial irrigation channel sufficient to

service the potential land development in the Northern Territory as well as the land in

Western Australia, as it would be cheaper to do that at the time than some time in the years

ahead. (How impressive was this that individuals were making decisions with futuristic mind)

Federal environmental conditions set (EPBC Act) and not known at the time caused costs.

Government set out (knowing that the 2006 Request for Proposal process indicated that some form

of government equity was needed) to invest in infrastructure and to attract suitable private sector

investors to then build and operate new farm land.

The Government has published that it built:

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41km of all-weather sealed roads

40 km of main irrigation channel

86km of storm water drains and levees

This infrastructure is visible for all to see and is of a high standard and I believe strongly supported

by the local community.

It should be noted that roads are a public benefit, not a benefit confined to the Ord Expansion

project. The main road constructed (Moonamang Road) is strategically important to and de risks:

Potential development of the Sorby mineral deposit (lead, silver, copper)

Potential development of Project Sea Dragon a project of State and National priority, and

representing a potential $1.5billion investment.

Potential land based gas deposits (Advent Energy)

Further tourism (e.g. Keep River area)

OFA - it should be noted that the Government agreed to fund the required Aboriginal Development

Package as a provision under the OFA for the Goomig land development, and investment of

$12.4million over the period 2009-2017 and from the Ord budget. The signed off agreed

achievements from this investment are included at Appendix 2 and include:

204 Aboriginal people employed in construction works for the Ord expansion

94 Aboriginal people in other work

21.4% of construction man days by Aboriginal people

$6.3 million spend through aboriginal owned business

$130million spend through local business

125Aboriginal people with accredited training.

Following a Request for Proposal process seeking investors to build farms and farm the land, the

State appointed Kimberley Agricultural Investment Ltd (KAI) as preferred developer. KAI has since

invested an estimated $200million in the East Kimberley region, and in its new vision document

outlines a proposed investment of around $750million- more than twice the State investment (KAI

vision Statement).

KAI has already created 70 new direct jobs in Kununurra, and is a leading business in the region. This

group and its connections have further invested in our shire. These are important jobs that would

otherwise have been difficult to sustain in the regional labour market.

Importantly, the new farms being built by KAI inject economic growth of around $120million per

year. This is important economic activity that in itself generate job and other private investment.

The value for money assessment of the Ord investment cannot be determined in such a short time

frame. It is a long- term strategy and in many respects supported by both sides of politics at a Local

and State and Commonwealth Level. It is triggering long term investment in new farms and it is

projected to continue well into the future. The expanded irrigation system will function for many,

many years and the benefit of that requires serious consideration and measurement of a longer

period. This is a NATION BUILDING PROJECT and should be consider this way in terms of the return

on investment.

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Community Engagement

I was part of a Community Reference Group established by the government to assist plan and ensure

that investments and projects being made 3,000km from Perth were designed and delivered to the

greatest extent possible to maximise community benefit.

The Community Reference Group met monthly, and it hosted 17 public forums with an average

attendance of 85 people across the 5 year period (2009-2014).

By any measure, the public was kept well informed of the design and the implementation of the

Project and was regularly consulted during each stage of the development. I am not aware of any

other government supported community engagement strategy that gave the community the lead on

informing and assisting government investment decision making.

Timing

The WA Auditor General Report highlighted the length of the Ord Expansion Project and criticised

that the Project ran over time by two years (2010-2014) rather than the initial 2 years envisaged in

2008. What has been ignored is that the State Cabinet took a deliberate decision to support the

Community Reference Group and community of Kununurra requested to extend the construction

time because it meant greater opportunity for up skilling of local Aboriginal people and business

versus the fly in fly out servicing. A strategic decision was made in the States interest supported by

the regional Community.

Governments are often criticised for not listening to local people and in the case of the Ord they

should be applauded for listening.

Procurement processes

I cannot comment on the adequacy of the government procurement processes. My understanding

is that;

government called tenders for the construction of Ord infrastructure with the first tender

and the contract was awarded to the Moonamang JV (Leighton Holdings and Indigenous

Business Australia), and this tender gave the option for government to award a second

contract for the balance of works or go back to tender. I assume this was done to manage

risk and incentivise the contractor to perform the second contract works. If my assumption

is right then it seems an appropriate thing to do.

I am acutely aware that the construction contracting process broke new ground, particularly in how

it facilitated Aboriginal employment, training, and capacity building. As highlighted above, at the

peak of the project, Aboriginal people were trained in a number of transportable skills sets such as

Plant Operation and it is this point that goes to the heart of the original investment of State and

Commonwealth funds.

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I am aware that some local business at the time felt that they should have received more of an

opportunity to participate in the tender process and that some felt that RFR projects more generally

limited their ability to tender due to tender specifications and requirements. I would hope that one

of the positive outcomes of this inquiry would be to structure future regional tenders so that smaller

business are given and encouraged to partner to have the capacity and capability to tender for the

larger development projects.

Yours sincerely

Michele Pucci

Vice Chairperson East Kimberley Chamber of Commerce

PO Box 1494

Kununurra WA 6743

On behalf of:

Community Reference Group Member – Lincoln Heading

21th June 2017

The Ord East Kimberley Expansion Projectwas a $322.5million investment by theState of Western Australia, largelythrough its Royal es for Regions program.The Project was implemented over the2010 2013 years and represented a keycomponent of implemen ng the Ord FinalAgreement, a na ve tle agreementsigned in 2005 between the State and theMiriuwung and Gajerrong (MG) People.

The Strategic Alliance Leadership Team(SALT) was created to provide governanceand leadership for the Phase 2 contract ofthe Ord East Kimberley Expansion Project(2012 2013) between LandCorp ac ngfor the State and Leighton Contractors.SALT brought together Tradi onal Owners,the Contractor, and Government to driveand monitor agreed targets and strategiesto achieve outcomes related to Aboriginalbusiness, training and employment.The members of SALT were commi ed tothe delivery of Aboriginal outcomes andworked in a collabora ve and collegialway to recalibrate strategies as needed toensure the best possible outcome forAboriginal people.

Key Aboriginal business, training and employment outcomes achieved by theProject under the leadership of SALT:

Employment Outcomes (2010 2013)

22,055 Aboriginal man days worked

204 Aboriginal people employed

104 were MG people

Peak Aboriginal workforce of 97(September 2012)

21.4% construc on man days workedby Aboriginal people (target 20%)

86% average a endance (target 80%)

Other Outcomes (2010 2013)

94 Aboriginal people were placed intoalterna ve employment outside of theOrd Project

30 Aboriginal people have been placedin FIFO/DIDO employment

554 people have par cipated in crosscultural awareness training, culturallyspeci c to MG people

Business Outcomes (2010 2013)

$6.3m spend in Aboriginal ownedbusinesses (target $4.4m 2012 13)

14 Aboriginal owned businessesengaged (Target minimum of 4)

$130m spend through local content inover 82 local businesses

A fund has been set up to incubate afuture MG legacy business

Photo courtesy of Vicky Biorac

Photo courtesy of Nathan Dyer

Photo courtesy of Nathan Dyer

Endorsed by SALT Members:

28 January 2014

Photo courtesy of Leighton Contractors Training Outcomes (2010 2013)

286 na onally accredited cer ca ons

190 mobile plant machinery

38 tra c control

22 rst aid

12 high risk

24 other na onally accredited

125 Aboriginal people accredited

94 in mobile plant machinery

A game-changing plan to realise the potential of the Ord River Irrigation Area

OrdBuilding the

With a planned investment of more than $1 billion, Kimberley Agricultural Investment (KAI) is working to build Northern Australia’s most exciting agricultural development.

Established in 1972 with the completion of Lake Argyle, the Ord River Irrigation Area has abundant water resources and land, and optimal growing conditions for a range of food and fibre crops.

Although successful in its own right, the 15,000-hectare Ord Stage One has lacked the scale and investment required to realise the region’s full potential.

Since 2012, KAI has been working to make that potential a reality.

To date, KAI has assembled approximately 27,000ha of land suitable for development into irrigated farms.

The project, still in the early stages, has already engaged the services of more than 70 local businesses and created more than 50 local jobs. The project will eventually create up to 700 jobs in the region.

With a focus on high value grains, cotton and beef, KAI’s agricultural operations will generate food and fibre products with an annual farm gate value of more than $200 million. After local processing, KAI's annual Ord production will be worth more than $300 million to the West Australian economy.

By 2030, two-thirds of the world’s middle-class will reside in Asia. KAI’s East Kimberley operations have unrivalled access to those markets.

KAI is building new farms, establishing new industries, developing global markets and creating jobs and opportunities for the East Kimberley, Western Australia and Australia.

Thevision

AFTER LOCAL PROCESSING,

KAI'S ANNUAL ORD PRODUCTION

WILL BE WORTH MORE THAN

$300 MILLION TO THE WEST

AUSTRALIAN ECONOMY.

$1 billion investment in the

East Kimberley region

$200 million annual farm gate

value by 2030

Up to 700 new jobs

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With a capacity of more than 10,000 gigalitres, the Ord Dam is one of Australia’s largest water resources, with potential to irrigate in excess of 50,000ha of crops.

The State and Federal governments in 2010 invested in the Ord East Kimberley Expansion project to improve social infrastructure, upgrade roads and build irrigation head works to increase farmland by 7,400ha in the Ord River scheme.

Announced as the preferred proponent for the expansion project in 2012, KAI is

clearing and developing new Ord agricultural land and will develop a total of 27,000ha by 2030.

KAI also owns the pastoral lease of 476,000-hectare Carlton Hill Station, which includes a further 20,000ha of sandy soils ideal for agricultural development.

Building thefarmLake Argyle capacity

is more than 10,000 GL

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27,000ha of farmland

developed by 2030

In addition to its land assets, KAI owns the following key infrastructure assets:

• freehold land near the Wyndham Port to facilitate future export capability;

• the decommissioned Kununurra sugar mill, with plans to establish a grains grading and packing facility, and sorghum processing plant;

• the CASE IH and IVECO machinery supplier and service centre for farm equipment; and

• the Kununurra Country Club.

Together, these assets provide KAI with the land and infrastructure required to realise the region’s agricultural potential.

KAI’s land assets in the region include:

Land parcel name Size Est. completion

Goomig 6,670ha 2017

Carlton Plain 9,000ha 2022

Mantinea 4,000ha 2023

Knox Plain 5,500ha 2026

Stage One area 1,200ha -

The companyEstablished in 2011 as an Australian subsidiary of

Chinese parent company Shanghai Zhongfu Group, Kimberley Agricultural Investment was named

preferred proponent for the Ord East Kimberley Expansion Project in 2012.

Chairman and founder, Mr Pui Ngai Wu, is a major real estate developer in Shanghai and has a wide range of business interests with multi‑billion

dollar assets and more than 20 years experience in large‑scale, complex project development.

Impressed by the genuine and positive attitude of the people of Kununurra and the East Kimberley, we are proud to be part of the

community, and to be building a vibrant future for local people.

Australia's high‑standard production systems mean its food products are highly regarded in Asia,

and other global markets.

Together, the people of Kununurra and Shanghai Zhongfu are at the leading edge of building stronger relationships between

Australia and China.

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KAI’s initial focus is on developing cotton and grains industries, with the possibility of grain grading and sorghum processing plants, a cotton gin and cattle feeding operations.

The keys to KAI’s vision are diversification and integration. A strong farming mix allows for good crop rotation, better farming practices and healthier soils.

Cotton will be grown and processed in the Ord River region, with bales exported to international markets.

Sorghum will be grown and processed to produce the raw input for the Chinese white liquor known as baijiu.

High value grains such as chia, quinoa, chickpeas, soybeans and mung beans will be grown to meet increasing demand from the world’s middle class.

By-products from the cotton and sorghum industries are both important fibre and protein sources for cattle, essential for KAI’s planned cattle feeding operation.

After local processing, KAI's annual Ord production will be worth more than $300 million to the West Australian economy and significantly contribute to the State government’s target of increasing fresh food and meat production by at least 50 per cent by 2025.

In addition to cotton and grains, longer-term opportunities exist with forestry and aquaculture. Preliminary planning for these industries has begun, with early estimates of additional annual revenue of between $200-$300 million.

With a focus on high value grains, cotton and beef, and by building a truly integrated agricultural enterprise, KAI’s Ord River operations will generate food and fibre products with an annual farm gate value of more than $200 million by 2030.

An integratedagricultural enterprise

WITH STRONG CROP

DIVERSIFICATION CHOICES AND

VALUE-ADDING PROCESSING

FACILITIES, FARMING IN THE ORD

RIVER REGION WILL GO FROM

STRENGTH TO STRENGTH.

David Cross, General Manager, Ord River District CooperativeBy 2030 annual value

added production worth

$300 million +

105,000 bales of cotton

600,000 tonnes sorghum

70,000 head of cattle through feeding

operation

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With 10,000ha of cotton, 24,000ha sorghum, 8,000ha of grains grown on an annual rotational basis and an established cattle feeding operation, KAI’s estimated Ord River output would include:

20,000 tonnes (105,000 bales) of cotton

28,000 tonnes of cotton seed and trash

600,000 tonnes sorghum

48,000 tonnes syrup

84,000 tonnes fibre

30,000 tonnes grain

70,000 head of cattle through yard feed operation

SYRUP PLANT

COTTON GIN

GRAIN GRADING PLANT

SUPERMARKETS

FEEDLOTS (BEEF)

GRAIN CROPS

SORGHUM

COTTON CROPS

FEED GRADE

FOOD GRADE

FIBRE WASTE

SYRUP

SEED & TRASH

BALES

COTTON OIL

NATIONALGRID

CO-GENBAIJIU

COTTON EXPORTS

Farm gate value to increase from

$200m to more than

$300 million

THE ORD VALLEY IS IDEALLY

LOCATED TO TAP INTO THE GROWING

DEMAND OF ASIA’S BURGEONING

MIDDLE CLASS.

By 2030, Asia will be home to two-thirds of the world’s almost 5 billion middle-class population. Food demand in the region is expected to double by 2050.

With growing concern about food safety fueling demand for clean and green produce, China is Australia’s most exciting agricultural export market.

The value of Australian-Chinese trade in 2014 was $150 billion.

Under the China Australia Free Trade Agreement (ChAFTA) the majority of Australian exports will be tariff free, creating unprecedented access to the world’s second largest economy.

The Ord Valley is ideally located to tap into the growing demand of China, and wider Asia’s, burgeoning middle class.

At present, the potential for exporting agricultural products from the East Kimberley

region directly to Asian markets is limited by infrastructure constraints.

Both Wyndham and Darwin ports require infrastructure investment to allow the region to leverage its advantage in terms of proximity to major markets to the north.

We believe both ports have potential to become major export points for food and fibre products produced in the East Kimberley.

With its strong ties to Asia, and particularly China, KAI is uniquely placed to drive investment and capitalise on the region’s growing demand for high quality, safe food.

Connectingto markets

Kununurra

CHINA

66% of world’s middle class will

reside in Asia by 2030

China-Australia trade worth

$150b in 2014

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The expansion of the Ord River Irrigation Area could not have been achieved without the support of the Traditional Owners who agreed to surrender native title over 65,000ha of East Kimberley land when they signed the Ord Final Agreement in 2005.

Since 2012, KAI has developed a strong relationship with the Miriuwung and Gajerrong people, through the MG Corporation, and established a number of initiatives to build on the good work of the Ord Final Agreement.

Signed in 2014, KAI’s Aboriginal Development Package sets out clear targets for indigenous engagement, including training and employment, and a commitment to build 680ha of new irrigated farmland for the Traditional Owners.

KAI's relationship with MG Corporation reflects the company’s strong commitment to the Miriuwung and Gajerrong people’s economic, social and cultural needs.

An average of 25 per cent of KAI’s East Kimberley workforce is indigenous.

Indigenousengagement

Shanghai Art ExhibitionIn 2013, Shanghai Zhongfu Group sponsored the

Our Living Land exhibition at the Salvo Hotel, Shanghai.

The exhibition bought together 42 works from 24 leading East Kimberley artists, with four of the artists travelling to China to attend the opening.

In addition to the curated artworks, a digital presentation and catalogue provided an insight into local indigenous perspectives in relation to

the value of land and connection to country.

The exhibition played an important role in developing cultural relations between Shanghai investors and the East Kimberley community.

KAI’S VISION FOR THE EAST

KIMBERLEY WILL CREATE JOBS AND

OPPORTUNITIES AND A BETTER

FUTURE FOR OUR PEOPLE.

Des Hill, MG Corporation, Kununurra

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KAI is focused on creating real jobs and developing local skills and capacity.

Direct employment from KAI’s Ord River operations is expected to reach up to 300 people by 2030.

At present, the company’s workforce includes 55 Kununurra-based employees and 10 Shanghai-based staff.

The multiplier effects of KAI’s regional investment will result in the creation of up to 700 new jobs in the East Kimberley.

As a local farmer, KAI is a key member of the Ord River District Co-operative, collaborating with other farmers to source farm inputs and manage harvested crops.

By increasing the scale of Ord River farming area, KAI’s operations will lower cost structures for other local farmers and open up new market opportunities.

KAI has already engaged goods and services from more than 70 local businesses. Many of the largest cost components of the development are sourced locally.

By creating new jobs, increasing skills and investing in the local community, KAI is helping to grow the East Kimberley and Western Australia.

BY BUILDING ON THE REGION’S

EXISTING STRENGTHS, AND CREATING

NEW GLOBAL MARKETS FOR FOOD AND

FIBRE PRODUCTS, KAI’S VISION FOR

THE EAST KIMBERLEY WILL CREATE

UNPRECEDENTED OPPORTUNITIES FOR THE

LOCAL BUSINESS COMMUNITY.

Jill Williams, Kununurra Chamber of Commerce & Industry

Flow onbenefits

Direct creation of 300 new jobs... up to 700 new

jobs in total

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Time Line

2011

2012

2013

20142015

2016 2017 2019 20212020 20232026

KAI established by parent company, Shanghai Zhongfu Group

KAI announced preferred proponent for Ord East Kimberley Expansion project

Ord Development Agreement signed between KAI and WA Government, and clearing works at Goomig commence

Earthworks, laser leveling and clearing works run simultaneously

Started cropping 600 hectares of chia, sorghum and millet

1,500ha of chia planted

Expected completion of 6,670ha Goomig development, and commence building of grain grading plant

First crops planted on 9,000ha Carlton Plain development

Commencement of cattle feeding operation

First crops planted on 5,500ha Knox Plain

First crops planted on 4,000ha Mantinea

Anticipated completion of cotton processing plant

Kimberley Agricultural Investment Pty Ltd

Kununurra Office – Lot 396 Moonamang Road (PO Box 2531) Kununurra WA 6743Ph: +61 8 9169 3113 Email: contact@kai-australia.com.au

Perth Office – Suite G01, Queens Riverside, 8 Adelaide Terrace, East Perth WA 6004Ph: +61 8 9221 0880 Email: contact@kai-australia.com.au

www.kai-australia.com.au

Concept and text: Nathan Dyer • www.nathandyer.com.auDesign and layout: key2creative • www.key2creative.com.au