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Joint Standing Committee on the National Capital and External Territories - 26/03/2015 - Governance in the Indian Ocean Territories

EDWARDS, Mr Kevin John, Chief Operating Officer and Company Secretary, Phosphate Resources Ltd

Committee met at 10:35

CHAIR ( Mr Simpkins ): I now open this public hearing. Good morning and welcome to all who are here today. This is the first public hearing for the committee's inquiry into governance in the Indian Ocean Territories. The inquiry was proposed to us by Minister Briggs in March 2015. The minister invited the committee to inquire into and report on the interaction between formal institutions in the Indian Ocean communities, reviewing the role of the administrator, consultation mechanisms taken by government representatives and best practice for small remote communities, engagement with the Australian and state governments, local government's role and opportunities to strengthen and diversify the economy. The committee is travelling to the Indian Ocean Territories in a fortnight and will hold hearings there with a range of stakeholders, but today we will hear from Phosphate Resources Ltd.

Welcome. Although the committee does not require you to give evidence under oath, you should understand that these hearings are formal proceedings of the Commonwealth parliament and warrant the same respect as proceedings of the respective houses. The giving of false or misleading evidence is a serious matter and may be regarded as contempt of parliament.

Thank you for the written submission. Do you wish to make a brief introductory statement before we proceed to questions?

Mr Edwards : Yes, thank you. Firstly, I would like to thank the chair on behalf of the company for making this time available to convene this hearing. Because of unfortunate travel commitments of our senior executives and adverse circumstances facing our chairman, there was no-one else available in the time frame of your hearings on the island, so we greatly appreciate the opportunity to contribute to what we think is a significant initiative that hopefully will lead to some improvements in the island arrangements. I have prepared a short written submission and I have dealt with the issues in a slightly different order than they appear on your sheet.

I take the first issue: the role of the administrator. In short, our view is quite clear that the administrator should be considered properly to advance the role of the administrator and to enhance his powers and authorities in the administration of the territory. I might add at the outset that I am restricting my comments to Christmas Island as our area of interest and involvement. Our submissions imply is that the administrator ought to be clothed with the authority of a deputy secretary of the relevant department—that is, the department administering Christmas Island under the Christmas Island Act 1958. This is not, I would suggest, a novel proposition; it was historically the case in the seventies and eighties on the island and served the island well at that time. Over the past years, that authority has been diminished, delegations have changed and at present it is very unclear what, if any powers other than ceremonial the administrator has. We are strongly of the view that governments will not be able to attract and continue to attract high-calibre individuals unless the post is given a more meaningful role. This is readily available as I have set out and could readily be brought into account and would be appreciated, in our view, by the community as a whole. It would give them a lot more confidence in the operations of government.

However, I go to the main point of my submission, which is on the second item I have identified. We again are quite categorical in our views that there is a crying need for a whole-of-government determination whether or not it will sponsor economic development on the island outside the boundaries of the national park. We consider that 65 per cent of the island properly funded and administered to more than sufficiently provide a fully representative environmental example for future generations. As the present Prime Minister indicated when speaking about Tasmania, there has to be a determination whether or not it needs to be an economy as well as a national park. Without that whole-of-government decision, in our view the chances of economic development of any sort are extremely remote and unlikely.

We have sought this determination for the past 12 years from successive governments; and, while Minister Lloyd under the Howard government and Minister Crean under the Gillard government issued declarations as ministers, they were of little impact in the bureaucracy as a whole. It really requires a cabinet issued declaration, in our experience. It flows from that that an appropriate land release mechanism concurrently needs to be put in place by ordinance, which could be effective using the administrator and the shire acting in concert to provide an appropriate mechanism. The Commonwealth financial guidelines et cetera do anticipate that such an ordinance would exist and that it is not a matter solely for the Minister for Finance, which creates a real log jam at present.

I will just comment briefly on the mining operations. Although Minister King approved a renegotiated lease—negotiated between us and the department in 2013—which effectively gives us tenure over our primary leases until 2034, we doubt on current information and knowledge of our resources that we could continue much beyond the early 2020s, maybe stretch it beyond 2025. The market moves and things are a bit flexible but it is not a long time.

When the company was formed and the first land was granted, as Mr Snowdon would recall, it was anticipated that we would last 10 years. We have done very well; we have maintained a community, in our view, for 25 years now. We would like to keep it going for another 15 or 20, but we will not be able to do that unless we have access to a couple of hundred hectares of further vacant crown land.

As part of our operations, and relevant to this whole issue of economic development, the company have been sponsoring active research by Murdoch University which is now also supported by an Australian Research Council grant into alternative uses of the land postmining. The government itself has provided some funding to that exercise as well. But, even though the results are encouraging, it will be futile if there are not appropriate mechanisms put in place for land release and alternative uses on land outside the National Park.

Further, in this area, I have identified a couple of key items that are significant and that would make an immediate impact on the possibilities of economic development. One is to upgrade the airport by improving the firefighting capacity so that it reaches regular transport status—RPT, as they call it—which would enable international commercial flights to land there. At present, particularly given the unfortunate events surrounding Malaysia Airlines, that has dropped off in recent years.

Secondly, the island is largely dependent on sea-borne supplies and, for that reason, we need a fit-for-purpose marine crane. The current one was a secondhand building crane put in in 2002. That exposes the whole island economy to considerable risk. I will indicate at the outset that the company obviously would have commercial benefits from the rectification of that crane issue. We do not resile from that; it would be to our commercial benefit. But, equally, I would put it on record that the company would be prepared to contribute significantly to such a capital investment by the Commonwealth.

In respect of the other couple of items under review, the regional development organisation, as we indicated, is not an issue that can be advanced unless the primary issues are addressed. As it is presently structured, it really is not capable of contributing a great deal. There have been a range of consultations and reports over the years. The island has been to some extent over consulted and over reported. The findings are always the same; the issue of cabotage should be addressed et cetera. If they were, it would enhance economic opportunities. So I am not sure we need to do a lot more. We just need to finalise what has already been done.

Mr Snowdon interjecting

Mr Edwards : Yes, that is right. In the final issue, there is an item about local government. We obviously support some form of democratic representative input by the community. Under the current legal framework the shire provides that. What we are concerned about, however, is that we are a small island, a small community—now less than 2,000—and we want to ensure there is no duplication and that there is the maximum bang for buck is achieved. It all comes from the Commonwealth government anyway, and we believe the administrator together with the shire should review all the functions conducted by government on the island to ensure there is no duplication. I think, if we did that properly, we could probably squeeze out the full-time equivalents capable of managing, say, the full firefighting capacity without extra cost. We believe that should be addressed.

CHAIR: Thank you, Mr Edwards. We do not have much time, I am afraid. But can I just ask a couple of questions. How many people do you employ, and how many people come from off-island to be employed with you?

Mr Edwards : We employ some 215 people at present in total—that is, the company and our subsidiaries. The majority come from the island and have been on the island. Our workforce is remarkable in its age profile. Five per cent are over 70; and 60 per cent are over 60.

Mr SNOWDON: They don't want to stop.

Mr Edwards : And about 80 per cent have worked for us for more than 15 years.

CHAIR: It is hard to get into.

Mr Edwards : We have a regular apprenticeship and training program. We churn out five or six full-time tradesmen each year. We have an ongoing program. Most of them are young people who leave the island to go elsewhere. We have about 10 external employees that have come to the island in the blue collar workforce; and probably about 15 in management, supervisory and technical roles. But the bulk were engaged locally or had left the island briefly and returned in the early 1990s.

CHAIR: You mentioned before about the desirability of the upgrade of the airport, so that it can take international flights. Why does the island need international flights?

Mr Edwards : If you want to advance tourism or any other economic development, a flight from the north, from Malaysia or Singapore, is really very desirable.

Mr SNOWDON: You know it is only one hour from Jakarta.

Mr Edwards : That is right. It is only an hour from Jakarta. The issue of cabotage also revolves around that. If the Minister for Transport exercises the remote islands discretion, then they could land at Christmas Island and go on to Perth from, say, Bali or Jakarta or wherever—

Mr SNOWDON: To Darwin or anywhere.

Mr Edwards : and collect passengers and do the same on the return legs. It would halve the flight time, and save the Commonwealth a lot of money as well.

Mr SNOWDON: I think one of the issues we are going to have with the committee is that it is going to require them to do some reading, because they will need to look at the previous reports to understand what has gone before. Again, you may have this in your files, but there has historically been a number of different proposals which have come forward from the mining companies around alternative development on the island. I think it would be useful if we could get that sort of information to inform the committee of the sort of possibilities that have been explored previously, because there have been a huge number of them.

CHAIR: Were they dismissed for a reason or might they still be viable?

Mr SNOWDON: I can tell you that when we were in government the biggest issue when I was responsible for this area—and this is something that has yet to be resolved—was the crown land management plans. I went around the island with Dan Gillespie, who was then the Administrator, outside the national park, looking at blocks of land which we knew could be developed if only we could get the bloody planning process done. That was a huge problem. It has been embedded with frustration and a whole range of issues which have led to obfuscation.

CHAIR: Was that just bad processes or—

Mr SNOWDON: It was poor processes and partly the relationship and agreements we have with Western Australia, whose law we operate under on Christmas Island. That is an issue. But it really goes back to the autonomy of the island. I think Kevin's point about the Administrator and the shire is very important. What happened after 1996 was that delegations which previously existed on the island which gave more responsibility to the Administrator were removed. That meant, with great respect to the department, that the empire struck back and they asserted control and took away decision making. That made it extremely difficult for the island to assert any autonomy over decisions which were being taken. That has been the case since, despite the frustrations. Minister Lloyd tried. Simon Crean certainly tried. But I think Kevin has a really strong point here: the government, whichever one it is, has to make a decision that it wants something to change. If it wants something to change it is going to require giving people more responsibility—not creating a new government, but just changing the way we govern. That can work.

The other thing is to look at the infrastructure. You are going to be meeting the protagonist from the casino on the island. I am not sure who you are going to be meeting, but if our friend is there he can give you chapter and verse on tourism on the island. On the history of casinos, he is fantastic. He may not be able to talk to about the satellite proposal. But the primary purpose of the people who purchased the casino on the island at the time they went there was to set up a satellite launching facility. That led to a whole lot of decisions being taken by the then Howard government, including for the expenditure of a sizeable amount of money on upgrades which never happened. One of them was for the airport. What then transpired was that land was effectively taken from the mining company to allow for the development of the site for launching rockets, which never happened. But the land was taken, so there became an issue about giving that land back. That happened subsequently. That gave the mining company access to resources which it had previously had access to but which had been taken away from it to develop a satellite launching facility which was never in fact going to happen. Sadly, the community suffered. But what happened during the course of that was that the Administrator did a deal with David Kwon and he bought this facility for around $5.5 million, and it cost $80 million to build. So he now has this property which was being used to house the casino and subsequently a hotel, but it also had to accommodate the people from the detention facility. Now that has all changed, so he is going to have a different relationship.

But the infrastructure is the important thing. Pipelines for water and essential infrastructure are difficult to maintain on the island. Kevin has been going in and out of there for longer than I have. But they are huge issues. They have gradually been improved over time. But if you look at the land and infrastructure they are the two key points when it comes to economic development on the island.

Access is also an issue. You talked about the flights. There have periodically being regular charter flights in and out of the North to the island. They can happen, but regular RPTs cannot—and that is a problem. Getting people to the island for a whole range of tourism opportunities cannot really happen unless they are prepared to pay a great deal of money for fares. It is an inhibitor.

There are a whole lot of things. When you get there you will see that there is an opportunity which we are not taking because collectively we—that is, governments—have not made the best decisions for the island or have created obstructions which are unnecessary. I am not sure if you are going to visit the mine when you are on the island, but I think there would be a smart thing for you to do to look at two things. It is an opportunity to look at a current mine site, and it is reasonably close to where you are going to be staying, and to look at sites which have been rehabilitated and the ideas which are now being proposed for alternative economic development.

CHAIR: We have the Administrator taking us around for an hour-and-a-half or so on the morning, so I would assume that he would be able to point out some of these—

Mr SNOWDON: He may not know this stuff.

Mr Edwards : The Administrator is actually very enthusiastic about the development—

Mr SNOWDON: So he has seen it?

Mr Edwards : Yes. He has been involved. I am sure he would put that on the list of things to see, because it is close to town.

CHAIR: Mr Edwards, is there anything else you would like to say?

Mr Edwards : I will just comment on what Mr Snowdon has advanced. In my notes you will note that I have pointed out that the department now has to hand a fully developed proposal for land management and there has been a town planning mechanism under the WA legislation prepared—but neither have been adopted. They are the precursors to advance the issues. It really requires the cabinet as a whole to endorse it if you are to proceed.

CHAIR: So plans exist; they just need to be adopted? So no-one has made a decision yet?

Mr Edwards : That is exactly right.

Mr SNOWDON: This has been happening for years.

Mr Edwards : Yes, since 2009.

CHAIR: Who has the hard copies of those?

Mr Edwards : We can certainly make them available.

Mr SNOWDON: I have one more point to make. On the island, it would be worth talking to the school principal because they have proposals for international students. There are a whole range of things you can do.

Mr Edwards : We hope there will be scope for some small postgraduate studies developed and handled by Murdoch on the island as well.

Mr SNOWDON: Is it possible for us to get access to Murdoch so they can talk to us about—

Mr Edwards : Yes. They would be happy to do that. I can contact them and ask them to make themselves available when you are on the island.

CHAIR: Thanks very much. Thank you for attending and giving evidence to the committee at today's hearing. If the committee has further questions for you, these will be sent in writing through the secretariat.

Resolved that these proceedings be published.

Committee adjourned at 11:04