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Who Should Own The Tussocks?

5 September 2005

Who Should Own The Tussocks?

Economic Benefits And Costs Of Freehold Versus Crown Ownership Of High Natural Value Land With Economic (or Productive) Values

A POPULAR SUMMARY OF A REPORT BY PROF CAROLINE SAUNDERS AND ECONOMIST MARTIN EMANUELSSON OF THE AGRICULTURAL ECONOMICS RESEARCH UNIT LINCOLN UNIVERSITY

Background

1. Some 300 high country farms on the eastern side of the South Island main divide are leased by farmers who have Crown Pastoral Leases. Under what is known tenure review, lessees may apply to the Crown to convert all or part of their land to fee simple (‘freehold’) title.

2. Before allowing farmers to get freehold title, the Crown is required to ensure that land with significant inherent values is protected or preferably restored to full Crown ownership and control. Only then may land which is capable of economic use be considered for full privatisation.

3. If all eligible properties enter tenure review, it is expected that the loss of currently productive land to the conservation estate will result in a reduction in livestock carrying capacity of 663,000 stock units (31 per cent of total). It is estimated that gross economic farm-gate output per year will be reduced by $33 million. (Greer Report, 2003).

4. Tourism is one of several potential economic activities that will be more attractive for high country farmers after tenure review. However, the mid and high altitude land which is often best suited to tourist activities is most likely to go to the Crown for conservation under tenure review. Many winter activities such as alpine skiing and Nordic skiing are dependent on, and make economic use of, high altitude land.

Conclusions

5. From a strict economic perspective, the benefits from land now in pastoral lease remaining in private ownership are likely to be substantially higher than if it becomes public land. That does not mean that the marginal benefits at the moment of more public conservation land are not higher than the marginal benefits of more private land. However, there is a balance to be struck so as not to severely limit the high country’s economic potential – a balance which New Zealand is currently far from achieving.

6. For example, high quality and high value infrastructure investments on two privately-owned high country properties are the Cardrona Skifield and the Waiorau station snow farm and Nordic skifield. These generate turnovers of $12 and $8.1 million respectively – a total of $20.1 million. This compares with the $15.2 million of direct output from all the tourism operations that run on the 1.9 million hectares of public conservation land on the West Coast.

7. The growth in tourism based on natural resources and a new trend which links conservation and market access for agricultural products, needs to taken into account in the tenure review process.

8. Public ownership may also not be optimal in protecting biodiversity and conserving the land, given that economic use tends to be more efficiently provided under private ownership.

Multiple land use

9. The way tenure review is being carried out reflects the long-established New Zealand practice of separating conservation and agricultural use of land, based on the assumption that conservation would automatically conflict with economic use.

10. There is a growing concern within the science, policy and environmental movements that this approach is not working as well as it might, and that the underlying assumptions are faulty. Instead a "pluralism of approaches” – which is normal practice in many other countries – is being advocated for New Zealand (Norton & Miller, 2000; Perley et al., 2001).

11. Tourism based on natural resources is increasing worldwide and has led to an increase in tourist-based farm enterprises. In NZ and overseas there is a growing trend toward multiple land use, linking tourism with conservation and agriculture, and recognition that these cannot be separated. Even agencies which have biodiversity as their main focus argue that sustainable tourism can provide significant benefits to biodiversity conservation (Secretariat of the Convention on Biological Diversity, 2004).

12. At the same time, the protection of biodiversity is increasingly being linked to market access for agricultural products, especially to Europe. EurepGAP, a European-based market driven certification scheme, is one example.

EurepGAP verifies and ensures best practices in agriculture and requires farmers to have a biodiversity plan which takes into account the impact of farming on the environment; wildlife and conservation.

13. Tourism in the high country is growing even faster than NZ as a whole. The vast majority of high country farms (96 per cent) have some recreational activities occurring on their land.

Activities like skiing, heli-skiing, rafting, 4WD safaris and farmstays are placing growing pressure on the high country and perceptions of crowding are common. (Ibell, 1997).

14. Based on overseas experience, there are four challenges facing nature tourism: to manage demand at peak periods and popular destinations so as to not exceed the carrying capacity of the land; to balance recreational and tourism activities with other uses in a multi-functional ecosystem; to control cumulative and irreversible landscape transformations; and to strengthen the landowners’ incentives to invest in the land for high value tourism.

15. As much of the land in the high country that is being used for tourist operations is in public ownership, it is characterised by two typical problems; inability to control overuse and lack of incentives for investment.

Individual users of the resource have little incentive to maximise the benefits from its use, given that these can be captured by the others who also have access to the resource. As a result, popular resources tend to be over-exploited.

16. In contrast, the revenue of the Cardrona ski field (more than $12 million) is supported by many million dollars in investment. This development would most likely not have taken place if it was not for the incentives that exclusive property rights provide. The same logic applies to the $20 million invested in the snow farm at Waiorau station.

17. The NZ tourism strategy aims to encourage the development of high value niche markets for international visitors. In order to attract the high value tourist, a higher standard of integrated service provision and all-inclusive experience, including high quality accommodation, is needed – all of which requires infrastructure investment by the tourism operator.

18. Private exclusive rights have the advantage of ensuring that those accessing the resource would be those who value it most, therefore increasing the economic benefits to NZ.

19. Private ownership also provides the incentive to minimise the overuse of the resource. Legal constraints, including the Resource Management Act, The Conservation Act and the Ngai Tahu Claims Settlement Act also ensure that the high country is managed sustainably, regardless of ownership.

20. Economic activities such as tourism are permitted on DOC controlled land through concessions. Concessions may be sufficient for tourist activities which require little infrastructure development and where investment is limited to capital items, such as boats and horses, which can be transferred to other locations relatively easily. DOC concessions are not as suited to tourism developments requiring connections with other operations; or infrastructure development; as they do not provide the exclusive rights which would provide an incentive to invest in longer-term developments.
21. The types of tourist operations which are most likely to be affected if farmers are unable to retain their mid-high altitude land following tenure review are those which attract high yielding tourists, as these require the most infrastructure investment and coordination between activities. These operations are critical to the successful implementation of the NZ tourism strategy.

22. Hunting provides a good example of what is at stake. Hunting can be an operation with low, if any, capital expenditure where the tourist provides their own vehicle and equipment and access is the only factor required. Alternatively, the hunted resource can be managed as a quality product which attracts higher-yielding tourists, provides local employment and increases the overall benefits to New Zealand.

This requires investment in equipment and vehicles, quality roads and access, local knowledge and guides, and accommodation. In order to have the incentive to make this investment, some form of exclusive property use rights are needed. Also, raising finance to invest in such a business will also be difficult, if not impossible, if there is no guarantee to future benefits.

ENDS


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