THE Pilbara region of WA contributed more than $49 billion to Australia’s economy in 2010, and this figure is set to quadruple within 10 years as further mega resource projects come online.
The Pilbara has become an export powerhouse in its own right, but with a population of 50,000 people spread across an area that covers more than 500,000 square kilometres – twice the size of Victoria – exponential growth has created a number of pressures on the local economy that require solutions from all facets of industry, government and the community.
The Karratha and Districts Chamber of Commerce and Industry (KDCCI) is an independent not-for-profit organisation that promotes the interests of members and the business community in the
Shire of Roebourne, one of the Pilbara’s four local government areas. The Shire covers 15,882sqkm and has a population of about 19,100, most of whom reside in the flourishing town of Karratha.
“We have about 450 businesses who are currently members of the Chamber in the Roebourne shire area, up from 350 last year,” KDCCI chief executive officer John Lally said.
“For the resource companies to thrive up here they need a good, strong local business sector around them, so a big role of ours is to lobby on behalf of our members.
“The issue is that in a town like Bunbury [175km south of Perth] you probably have about 15 to 20 businesses per 100 people, while up here we have 10: we have roughly half the businesses that a normal town this size would have because of the costs of running a business up here.”
The mining boom has simultaneously created opportunities while placing extraordinary economic and social pressures on the region, and Mr Lally stressed the need for government, business and resource sectors to create a legacy for the Pilbara’s future through policy and private investment.
Barriers to sustainable growth The Map, Gap and Supply Chain study, prepared for the KDCCI and released in April this year, highlighted the challenges brought about by the region’s rapid growth including unaffordable housing; insufficient upgrades and expansions to infrastructure to keep pace with growth; a reduction in small business numbers due to rising costs; below par education and health services; and a decline in the sense of community due to fly in, fly out rosters and 12-hour shifts.
The report also examined opportunities for economic diversification and development in the West Pilbara region, with a key consideration being the ongoing difficulties in retaining businesses to serve the towns and supply services to the dominant energy and resource sectors.
However, the fundamental problem for the region is not that of attracting new business, but housing: shortagesof other types of land can be an issue, but a lack of residential land cuts across the board in terms of its effects. As housing is in such short supply, rent in the Pilbara is close to three times that of Perth, which has a profound impact on the business viability of the region. In many situations it is less expensive for companies to deliver goods and services to the Pilbara from outside the region.
Mr Lally said that both government and private enterprise had to work together to make the Pilbara an economically sustainable place in which to live and work.
“The bottom line asks ‘how do you diversify the economy?’” he said.
“There is two ways: one, we have to build more houses so that people can afford to live here; and two, private enterprise has to invest in the area through infrastructure.”
Royalties for Regions
The Royalties for Regions policy formulated by the National Party of WA in 2008 was designed to significantly lift the facilities of many regional towns and cities around WA. A major task of the policy was to deliver social infrastructure – facilitated by 2012-2013 investments in health, education, skills training, water supply and natural resources management, and Aboriginal participation – towards the goal of promoting economic, business and social development in regional WA.
Royalties for Regions provides a dedicated, secure, ongoing income stream for regional development by appropriating 25 per cent of the state’s royalty income each year. In 2011-2012, WA’s royalty income was about $4.8 billion. This figure is expected to increase to $4.9 billion in 2012-2013, which corresponds to $1.225 billion for the fund.
Pilbara Cities Vision
Royalties for Regions is expected to encourage further spending by private enterprise and other areas of government. For example, its commitment of $1.1 billion to the Pilbara Cities Vision is expected to
make possible an overall investment of between $2.5 billion and $3 billion.
The Pilbara Cities Vision, a component of the Royalties for Regions initiative, will transform the isolated towns of the Pilbara into several vibrant city centres. With the ultimate goal of improving quality of life in the region, the Pilbara Cities Vision will fund significant projects that will help attract investment and increase local job creation.
The Pilbara Cities Vision aims to increase the population of Karratha and Port Hedland to 50,000 and Newman to 15,000 by 2035; other Pilbara towns will also be redeveloped into more attractive and sustainable local communities.
A key role of the initiative has beento remedy the skewed balance between housing demand and supply in the region. Significant progress has been made but there is limited expectation, based on house price movements, of any equilibrium between demand and supply in the foreseeable future.
This is partly because significant new investment – including Hancock Prospecting’s Roy Hill project and major operational ramp-ups by both Fortescue Metals Group and Rio Tinto – means that demand keeps increasing even as supply becomes available. Housing shortages have been key in hollowing out the Pilbara economy during the past decade. Small, and even some larger, businesses find it unviable to operate in the region, despite high demand among consumers, due to escalating rental prices.
“[WA Regional Development minister] Brendon Grylls, through the Royalties for Regions program, is regularly up here, which kept him up to date with what is going on,” Mr Lally said.
“There is also the Pilbara Cities [Vision] office, which is also a government initiative, and the Pilbara Development Commission is working hard to developing infrastructure.
“There is no magic bullet for anything up here: it is like a shotgun pellets approach.”
Project highlights Core Pilbara Cities Vision projects have already started. In January 2011, Mr Grylls announced a $106 million project to relocate the Port Hedland wastewater treatment plant, clearing the way for the development of 2500 new residential dwellings on land available in mid 2014.
Meanwhile, the Pilbara underground power project will replace ageing overhead power lines with underground networks. Another initiative is the Karratha service workers’ accommodation development, a $30 million affordable housing project aimed at those providing essential services outside the resource sector.
The South Hedland town centre revitalisation and Karratha CBD development are set to improve their respective population hubs.
Another key to a vibrant future for the Pilbara is economic diversification.
The WA Government has facilitated the building of the Pilbara Marine Common Use Facility. Designed to cater to the state’s growing offshore oil and gas industry as well as defence forces in the region, it will be based on the thriving Australian Marine Complex in Henderson, about 20km south of Perth.
Part of the State Government’s efforts to encourage more local business involvement in the resource sector upswing, the project received a $5 million cash injection in April 2012 for pre-feasibility studies.
“What we are doing with the Map and Gap survey is to figure out where local business can plug in [to the resources boom],” Mr Lally said.
“We are also looking at getting more workshops built up here so a lot more maintenance can be done locally and, as more accommodation becomes available, that becomes possible,” he said. Private sector involvement Federal Government statutory body Infrastructure Australia has encouraged business and community leaders in the Pilbara to push for greater private sector involvement in the region to help
speed local development. It believes the private sector is the key to getting much needed services and infrastructure implemented more quickly.
Mr Lally said developing communities could not rely solely on government. “It [Royalties for Regions] is [a] very good program, but government budgetsare shrinking and, politically, the Government has a lot of infrastructure they have to get into Perth as well because the population is also expanding down there,” Mr Lally said.
“It is a critical program and we need it, but the kick has to come from private investment.
“There has to be a paradigm shift because the expansion rate is enormous: over the next five years there is expected to be an additional 30,000 workers in the whole of the Pilbara.”
Fortescue, which will triple in size by mid 2014 through its multi-billion dollar Pilbara expansion program, is one company that supports the Government’s Pilbara Cities Vision. It has committed to establishing a larger residential workforce at Port Hedland, training and employing Aboriginal people, and providing opportunities for local businesses to increase their capabilities in servicing various mine sites across the Pilbara. For example, Fortescue has to date spent almost $10 million on construction of new houses in Port Hedland and has stated that it intends to acquire or construct 300 houses in Karratha.
It is important for different sectors to work together for the future of the Pilbara. For example, in April 2012, the Mirvac Group – a leading integrated real estate group listed on the ASX – targeted resource companies as it moved to form housing development joint ventures in mining regions across the state, building on its successful bid to develop a $1.5 billion master-plannedcommunity in the Pilbara. Mirvac has also partnered with WA Government agency Landcorp, to build a community with accommodation for 5000 to 6000 people in Karratha, and is the state’s preferred partner to build a major residential and hotel development in Port Hedland.
The Perth-based Aspen Group, which already provides accommodation in Karratha, is also seeking to expand its mining accommodation business.
Diversifying the economic base Greater food exports to China, India and the developing world represent a huge opportunity with WA, and the Pilbara in particular, benefitting from increased and new sustainable farmlands. The growing middle classes in China and India, and their increasing hunger for the Pilbara’s food, tourism, and other goods and services, offer tremendous export prospects. Thereare expected to be more than 3 billion people in the middle income bracket in the Asia-Pacific region by 2030, and tourism plays a small but vital role there.
In 2004-2005, the Pilbara attracted more than 300,000 visitors, representing about 4.3 per cent of WA’s total tourist numbers.
“There is a huge tourism industry waiting to start up here but, because the resource industry has sucked up all the accommodation, tourists can’t afford to stay here overnight,” Mr Lally said.
“The resource industry expanded so quickly that it caught everyone short. It even caught the companies short, and it certainly caught the Government short. So there has been a market failure in the amount of land released for development.
“We are starting to catch up but we are still very short on industrial land. [You] just can’t just release land in two minutes: it takes a year to two years to get anything up, and that’s the big issue.”
The future
Mr Lally said that regional development had to be geared to create growth opportunities, address market failure, and build regional capacity in ways that reflected the needs and goals of the regional communities, the mining companies and other local businesses, as well as the state as a whole.
“Part of the problem we have is that the people making decisions about the Pilbara are often a long way away in Canberra,” he said.
“In some cases you have explain where Karratha is, yet it supplies 7 per cent of GDP with 50,000 people.
We have politicians coming over who say ‘We had no idea what it was like; it’s a town on steroids’. “For example, in 1999 McLaren Hire had one vehicle: a ute. In 2010, they had 1000 vehicles for hire.
“People do talk about the Pilbara now. It’s an exciting place to live and work. People up here are innovative: they do get out there and get stuff done.”