A Chinese company gave $3.6 million to Labor while bidding for government work – and it's totally legal

Donations data reveals Chinese company Zhongfu gave more than A$3.6 million to the Australian Labor Party in the same year it won the right to develop a controversial food bowl project.

So, while our politicians froth over Labor senator Sam Dastyari’s receipt of $1,600 from a Chinese company to cover travel expenses, there are much more sinister foreign donations – indeed, one 30 times bigger than the usual large donation – buried in cryptic disclosures data.

Zhongfu’s donation and investment

In 2012-13, Zhongfu donated the money while its subsidiary, Kimberley Agricultural Investments, was bidding to develop the second stage of the Ord Irrigation Scheme.

This was one of Australia’s largest-ever greenfield agricultural projects. State Labor and federal Coalition politicians lambasted the controversial deal at the time as selling off the farm and as a threat to Australia’s national food security.

It has been revealed this week that Australian Security Intelligence Organisation (ASIO) head Duncan Lewis had in 2014 briefed the major parties about the security risks of taking donations from some Chinese companies. They were told the Chinese government had been seeking to exert influence through donations given by linked companies. It is not known if Zhongfu was one of the companies named.

The Ord Irrigation Scheme is a $510 million joint Western Australian and federal government project to develop the Kimberley region. Under the terms of the deal, Shanghai Zhongfu Group agreed to invest $700 million in developing a 33,000-acre site to grow sugar and related products for export to China.

In return, Shanghai Zhongfu Group received $1 a year for 50-year leases, and a government commitment to provide supporting infrastructure, such as irrigation channels and roads.

WA Premier Colin Barnett conceded at the time of the announcement that his state was unlikely to ever recoup the investment in terms of tax revenues, but argued it was worth it to develop the Kimberley region and the benefits it would bring to Indigenous communities. The company currently employs more than 50 locals.

Zhongfu beat two other contenders to win the bid, the Australian Agricultural Company and Tropical Forestry Services.

The WA government announced Zhongfu was the successful bidder. It is not clear what role the federal government had in the process despite its $195 million investment.

What chance reform?

The awarding of the contract to Zhongfu nonetheless raises questions. Why did the party in federal government receive such a large payment from a vested interest during the decision-making process?

That there is no evidence of the company making donations to the ALP at any other time should also set off alarm bells.

There is nothing illegal about the donation under Australia’s archaic political donation laws. There is no ban on foreign donations, no cap on the size of donations that can be made, and – under Australia’s system of declaring donations up to a year after they were given – Labor correctly disclosed the receipt.

There is currently debate over whether Australia should join the 114 other countries globally that ban foreign donations. However, movement toward reforming Australia’s donation laws has been slow.

Donations reform was first raised under the Howard government, which subsequently watered down disclosure laws. Two further attempts were made under the Rudd and Gillard governments, but both failed.

Political donation laws are seen as a party-political issue, in which the Liberal Party believes it has more to lose than Labor. It believes its supporters are more likely to be dissuaded from disclosing their interests than the unions. The Liberal Party also receives a lot more than Labor; it received $125 million in 2013-14 in comparison to Labor’s $78 million.

As a result, don’t be surprised if the Liberal Party decides to pass up the opportunity to demand answers from Labor, and this behaviour is allowed to go largely unscrutinised.