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Saturday, 17 November 2012

New ideas drive investment in remote ag project

Northern WA farmer Christian Bloecker.
The long-term risk associated with large agricultural projects is not, it seems, everyone's cup of tea, but WA's Christian Bloecker, whose immigrant parents Wilhelm and Gabi came to Kununurra to farm in 1982, sees plenty of potential in northern Australia. Bloecker was just one of several people the Australian's Sue Neales spoke with to write a story on the recently-announced Chinese investment in the Ord land stage 2 expansion project (paywalled) being sponsored by both state and federal governments. The development involves native title owners the Miriuwung Gajerrong people, who have cooperated with the governments to progress it, and who are already seeing new employment opportunities stemming from it. The newspaper has form in promoting private investment in Australia's outback because of the capacity of such projects to improve the lives of indigenous people living there.

Bloecker is something of a poster boy for smart ag. His alma mater, the University of Western Australia did a long piece on him in 2009 when he graduated with his double degree (Bachelor of Science in Agriculture and Bachelor of Economics), and it's a story element Neales highlights too. No doubt many farmers will prefer this kind of image for Australian farmers compared to the bog-standard "bogan" image that has been used recently to promote dairy products here. Indeed, Bloecker's attitude is nothing short of inspirational. In the movie that can also be found on the news web page, Bloecker doesn't just talk about how the Ord stage 2 project can create economic opportunities for farmers and local jobs for indigenous Australians, he also talks passionately about how the arrival of more farmers in the area can lead to the development of new ideas.

As Neales' story shows, new ideas were at the bottom of the decision by Chinese corporation Shanghai Zhongfu to go for ag in the remote region.
The company is a private, family-based firm founded by chairman Wu Pui-ngai, who is a permanent resident of Australia, as are the rest of his family. Mr Wu is from Shanghai but has connections with Taiwan.
The firm's core activity is land development - not only construction but also, for instance, obtaining sites and landscaping them for private cemeteries, a particularly successful venture. It also has a science and research arm.
The company started visiting Western Australia about 18 months ago with a view to diversifying, as have many other Chinese land developers - in Zhongfu's case, originally into iron ore. The principals alerted the state government to their interest in investing, and were invited to the Ord region, where they saw a prime opportunity and shifted their attention from the crowded iron ore field.
It was an economic reason that drew the company away from investing in iron ore, a field where returns have dropped due to lower demand from Chinese manufacturers and also a possible glut of capacity as a number of new projects in Australia have reached the production stage, to investing in agriculture. As I pointed out in an earlier post, foreign firms often see potential in large-scale agriculture projects where local firms do not. It's not just the Ord stage 2 project that has Chinese and Singaporean firms interested in ag in Australia. It's their long-term view of how their capital will be used, rather than a demand for immediate high short-term returns. And it's also no doubt also because these companies are able to bring into play efficient marketing arms that can create business opportunities in the developing markets where the end product is destined to be sold.

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