Vision for the Future
Rio Tinto’s decision to team up with a Chinese State Owned Enterprise to develop the
massive high grade iron ore Simandou province in Guinea might sound attractive to Rio
Tinto’s London based board. But this, and the emergence of 400,000 DWT ships and Asian
ports being modified to handle, will dramatically affect and potentially damage the future of
West Australia in ways that, regrettably, are getting little attention in the public domain.
Simandou is a very high grade iron ore province that, when developed, will be able to
produce not only iron ore for decades at low cost, but once infrastructure is established in
Guinea, will pave the way for other minerals in serious competition to Australia’s interests.
Rio are wanting to take advantage of Guinea’s relatively low labour costs to export iron ore
in increasing quantities to Asian markets, markets that we would like to think of as
Australia’s forever. These changes will occur in the near future – within four to five years –
meaning that Australia has a very short time to prepare.
We cannot simply wish these developments away or ignore them.
Australia has been protected against its high costs for several decades by a freight advantage.
It has been cheaper for Australia to ship resources to nearby Asia than for countries further
away, like Brazil or countries in Africa. With our freight advantage disappearing quickly this
makes it even more pressing for Australia to implement new measures to keep our own costs
competitive, to endeavour to compete against Guinea and Brazil.
What can we do?
Firstly, we must recognise the problem. Far too often our focus as a country is on spending.
But what we need before we spend is revenue, including having as much certainty as possible
about Australia’s ability to continue to expand that revenue base. We need expanding
revenue to be able to afford to improve our hospitals (which badly need it) and other
necessary infrastructure, and to provide more for our elderly, for defence, our defence force
and their families, for abused women and children, for police, and for those who are ill, all of
which are only possible if revenue is increased.
In West Australia, as the Gorgon project and other resource developments occur, we must
address a critical problem that is already becoming obvious again, that is, the shortage of
construction workers willing to work in remote Northern areas. Australia can no longer cling
to old policies that restrict the availability of temporary short term construction workers from
overseas. Such old policies risk stopping or unnecessarily delaying development and can
make Australian projects prohibitively expensive, while at the same time raising costs for
other non mining businesses. We must recognise that long term jobs and revenue are more
important than very short term construction jobs and the very real risk of losing projects and
their long term revenue altogether.
The comparison with what is happening in Guinea is obvious given that its labour costs are
so much lower, yet even they are planning to include Chinese workers to speed up
infrastructure establishment and provide the required rail building skills.
Australians, particularly West Australians, are excited about the growing Chinese market,
and think that as long as we keep supplying minerals to China, the resource and related
industries employees can keep buying more expensive cars, homes, boats and holidays etc.
But to be able to keep enjoying all this, we must get ready for the important changes
immediately ahead of us, when Simandou will be developed and supplying higher grade ore
with lower costs for decades to come, and our freight advantage will be lost. Competition
from Guinea does not simply apply to iron ore, as once Guinea’s infrastructure is improved,
this will help to realise the potential for other minerals flooding from Guinea into Asian
markets, (e.g. bauxite, diamonds etc), in fierce competition to our own minerals. Let’s
remember Asian markets will not want to buy more expensive minerals from Australia, their
priority will turn to countries that can supply minerals competitively. Australia was able to
go through the recent GFC and GEC with fewer problems than other countries largely
because our mineral industry was able to continue to supply to the growing Chinese market.
There will be more GFCs or GECs, and Australians and our politicians “burying their heads
in the sand”, will not protect us.
So we must look at the options before us as to what should we be doing.
For instance, we can of course, ask the Rio board in London to change its mind about
developing Simandou given the effect this will have on Australia. Sadly, this is unlikely to
happen. Rio may have grown to the company it is today on the back of Australia and the
Pilbara in particular, and still make a major part of its profits from the Pilbara, but it is a
multinational company with its own focuses.
The only real alternative is to make Australia more attractive to investors and more
Our suggestion is to set up special “economic zones” for remote or major projects in our
remote North, be they “Brownfield” or “Greenfield”. We must change the political attitude
that focuses on prioritising a relatively small percentage of Australians undertaking short
term construction jobs in remote regions and, instead, focus as a national priority on longer
term jobs and revenue that come from enabling major projects in remote areas to actually
proceed in order to have a better chance of being competitive in the world markets. Making
our projects too expensive to compete internationally only jeopardises Australia’s future.
Hence, in these special Northern “economic zones”, we should allow competitive and
temporary short term workers to build our projects, say for a duration of up to two years nine
months or so, which once built on Australian shores, earn revenue for Australia. An
alternative to this option could be to modify so that our Government could choose, if such
workers had proven to be good workers and potentially good citizens, whether to extend their
stay to a longer period, or even after such testing period, to become immigrants, but not to
give the temporary workers any prior commitments.
Temporary labour for a remote North in a special “Economic Zone”
would be a “win, win and win” for:
•the revenue, to protect Australia’s economy and improve our standards of living;
•the opportunity for longer term jobs after construction, for Australians, including
Indigenous Australians, for decades;
•temporary workers, with the opportunity to provide for their families and then return to
their own countries;
•assisting population growth in Northern areas, particularly if government regulations and
approval processes are no more onerous than for established producers, and preferably
recognise the need to encourage capital investment to earn revenue for Australia;
•reducing the growth strains on our expanding cities; and
•reducing the inflation factor which drives upwards our interest rates, and causes problems
for the many Australians with home mortgages and other loans not able to benefit from
construction jobs in Northern areas.
Special economic zones in Northern Australia would be particularly effective if governments
recognise via the tax system (such as reducing pay roll tax) and via reducing regulations the
absolute need to encourage capital investment in these areas.
The Government could also encourage individuals to move to and work in these Northern
Economic Zones by reducing the levels of personal taxation while they are there.
Special economic zones, and/or temporary labour opportunities and fewer tax impediments to
investment and fewer regulation impediments to investment, have worked very well in other
countries, such as our neighbours in Singapore, and greatly benefited their people – why not
let Australian’s enjoy such advantages?
This article and recommendations herein is supported by:
Chief Operating Officer
Chief Executive Officer
Humfrey Land Development
NCS Communications Pty Ltd
TransCoal Pty Ltd
ATI Solution Group
Peter J Fitzpatrick AM
Crusader Management Group Ltd
Chairman of the Port Hedland Community Progress Association
(Nominee for the West Australian Business Woman of the Year)
Pilbara Chair of the Real Estate Institute
Jan Ford Real Estate
United Industries WA Pty Ltd
Merton Group Ltd
AXCEN Australia & China Business
CEO & Director
Humfrey Land Developments
Inputs Pty Ltd
Stirling Resources Limited
Swan Gold Mining Limited
Mr Imants Kins
E Com Multi Limited
Thai Australian Resources Company Limited.
Chairman & CEO
Australasian Resource Consultants Pty Ltd
Mannkal Economic Education Foundation
Empire Oil & Gas NL
The Brisbane Line Inc Pty Ltd
Avalon Minerals Ltd
MSP Engineers Ltd
Aspire Mining Ltd
Bauxite Resources Ltd
Fairfax IS PLC
Hugh Morgan AC
First Charnock Pty Ltd & Board Member of an International Advisory Board.
Dennis T R Morris
Director, CBH Resources Ltd
Director, Ivanhoe Australia Ltd
Strzelecki Group of Companies
Bounty Oil and Gas NL
Hill End Gold Limited
Hancock Prospecting Pty Ltd & the Hancock Prospecting Pty Ltd Group
Reward Minerals Limited
Cape Lambert Iron Ore
Thiess Pty Ltd
Moonraker Pty. Ltd
Austral Dutch Kaolin Pty. Ltd.
Mr Ken Stapleton
MineOp Consulting Pty Ltd
Hancock Prospecting Pty Ltd
Wen Trading Pty Ltd
Modern Industries Holdings Pty Ltd
and others, including David Humann, Vince Hyde, Tim Humphries, Nicholas Van Der Sluys,
John Hancock and Bianca Rinehart.
May we ask readers their initial views on the above?
a. Should we establish “economic zones” in remote Northern areas,
•to help to save costs;
•to help us to compete on the world market;
•enable more investment in Australian mineral projects and infrastructure;
•to increase revenue for Australia and provide greater certainty of future
revenue to improve our hospitals, our infrastructure, defence etc;
•provide long term Australian job opportunities;
•assist population growth in remote areas and lessen population strain on our
major cities; and
•to lessen the impact of inflation and consequent rising interest rates?
If you agree with this please email “yes” to …….. or if you disagree, do you have any
better suggestions? (Can the West Australian provide an email address?)
b. Should we not establish “economic zones” in remote Northern areas, and not allow
temporary workers to competitively build projects in our remote North?
If you agree with this, please email “yes” to ……. (Ditto, or would the West prefer us to set up an email address.)