Forest Sector `Has Lost $5.5b'
Posted on: Tuesday, 13 September 2005, 15:00 CDT
THE forest and logging industry has destroyed $5.5 billion of capital in the past eight years, badly hurting the economy, says the New Zealand Timber Industry Federation.
It contends that the industry has been too focused on achieving scale at the expense of other considerations.
The federation is run by Wellingtonian Wayne Coffey who conducted research for a discussion paper on the industry's future, extracts of which were published in the federation's September newsletter.
"The industry would have made a substantial return if it had not planted trees," the newsletter said. The land itself would have risen in value in line with other property values in New Zealand.
"We need to improve the quality of what we do, not the quantity".
Questions also needed to be asked about the credibility of forest valuation techniques and the ethics of forest investment schemes. Parts of the forest industry owed their existence to government interventions, through such things as tax breaks, rather than economic fundamentals.
For too long government support had been targeted at the idea that New Zealand industries needed scale because they were in a small country. It was a fallacy that scale equated to economic value.
The paper differentiates between forest ownership and logging sector and wood processing. It said that in the past seven years the wood products industry had earned a surplus of $1.9 billion.
The forest ownership and logging sector lost $3.5 billion in the six years to 2003 and had probably lost a further $2 billion since then.
The federation estimates the government has put $70 million of support a year into programmes for the forestry industry but this was doing little to improve performance.
The wood processing industry took 65 per cent of the sector's saw log output and paid 20 per cent more than that paid by export customers.
But wood processors were now experiencing economic losses and running down capital in order to survive. "The best outcome may well be a confirmation of the present trend toward a smaller forest industry with a much greater proportion of output directed to the export of unprocessed logs."
Source: Dominion Post
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