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Hodgson Speaks To Forestry Conference

Hon Pete Hodgson

Future Forestry: Keynote Address To The National Forest Industries Conference

I want to use this slot to focus on the future: to ask where the industry will be in 2020.

Any analysis of where our industry might be in twenty years must logically include a brief look at the topics we are so familiar with – the forest resource, R&D, technology transfer, tariff barriers, biosecurity, the adequacy of investment capital, occupational safety and health, training and education, infrastructure issues, energy efficiency, versatility in downstream processing, international certification, soil and water stuff, silviculture advances, overseas building regulations, and so on.

We all know the list.

But before I start picking off a few of those for closer analysis it would seem useful to go back twenty years, to 1980, to get an idea of where we have come from.

Twenty years ago forestry was already a significant industry. But it was a very different industry to today's.

For starters the mature forests were mainly located in the Central North Island, around one of the largest plantation forests in the world, Kaingaroa. In most of the rest of the country planting was building on very modest resources. Some regions, like Nelson, were just starting to come on stream. But Te Aupori, for example, was in its infancy, as were the plantings on the East Coast of the North Island and the West Coast of the South Island.

Twenty years ago MDF was in its infancy. IT was making a very modest contribution. Embryogenesis or organogenesis didn’t exist.

Twenty years ago Kinleith or Kawerau were energy inefficient, and suffered industrial unrest, and had environmentally unsustainable practices. There was very limited Maori investment in forestry, beyond rental gathered from Maori land. There were no hardening technologies, no LVL, and still lots more to be learnt about resource management.

Twenty years ago we dropped PCPs all over the place and our logging techniques were tough on soil. The New Zealand Forestry Accord did not exist and no one would have thought it much of an idea. The Uruguay round for GATT had not begun and no one had heard much of a Japanese city named Kyoto.

A lot has happened in twenty years.

And that means looking forward twenty years is a very tricky business indeed.

Fortunately it is a lot less tricky in forestry than it is in most other industries. The reason is that one side of the industry, the supply side, is pretty predictable.

You will recall Bogor, the cartoon strip woodsman invented by Burton Silver, who would often try his hand at bad poetry:

A woodsman’s job concerns the tree
He plants it when it’s very wee
And kills it when it’s thirty-three.

His rotation was a bit long, but twenty years from now we know with precision how many trees will be coming on stream. What do those stats tell us?

Well this wall of wood, this wave of opportunity, is large indeed. I won’t go on about it except to make three points.

First, production is going to double over that time, and I cannot imagine any other large primary sector industry that could remotely match that. Forestry is destined to become a larger and larger part of our economy and our society. There are many jobs to be won, and many export dollars to be banked.

Second, the largest production increases are due to occur in those areas where regional development is most acutely needed – Northland and the East Coast. Quite soon those two regions will reap the benefits of planting twenty years ago.

Third, about fifteen years from now the proportion of fibre coming from woodlots, farm forestry and other small scale ventures will be about one-third of the total harvest, and this percentage will continue to increase. That is pretty remarkable when just 13 years ago 80% of the resource was held by four owners.

Now this might be a good point for me to see if I can get offside with some people - though I promise you not gratuitously – by saying that I don’t think the farm forestry association, or the processing sector, or most territorial local authorities, or for that matter the Government, have quite got their heads around this situation yet.

The days of big contracts with one forest owner will be replaced with a large portfolio of contracts with many growers. Brokers able to negotiate enough volume over enough time involving enough growers will be pivotal if investment in processing is to cope with that very large change in supply-side ownership.

I am not convinced that our databases on who owns what, and where, are up to scratch.

So we face three big supply-side changes – a huge increase in volume, a significant regional redistribution and a significant change in ownership structure.

What can stop us benefiting from this extraordinary wave of opportunity?

Nothing, except a biosecurity disaster. If there is to be a cataclysm it will be a biosecurity event.

My understanding of the risk analysis is that a cataclysm is unlikely indeed. But a series of minor or moderate biosecurity failures are likely, and their collective effect may easily be felt in additional production costs or lower yields.

Biosecurity is important. Scarily so. My guess is that in the next twenty years our biosecurity efforts will increase significantly. I believe the recent debate over imported cars will be just the first of many. I think industry will accord biosecurity still greater attention, and Governments will too.

I think we will learn more about our risk profile. I think we will turn more and more to science, both to better predict the most prospectively dangerous pests in the New Zealand ecosystem and to use sniffer technologies and other sensor or pheromone devices to reduce the cost of detection.

Finally I think we will use our inspection techniques on our exports as a greater marketing tool than we do at present. We would be mugs not to.

Besides biosecurity there are a few other hurdles to overcome on the supply side. That's no surprise. When growth is as rapid as it is in this industry then growing pains must be spotted, scoped out and overcome.

Here is a good chance for me to put a plug in for this Government.

There is a role for good government in this industry and it is one that has not been played for a while. It is to do with leadership, partnership, facilitation, brokerage, and on rare occasions, funding.

If this role had been played well in the past decade, government locally and nationally might have made better progress on funding options for roads. A few more investors in processing might have arrived and the skills shortages that we face or may face in some regions might have been better anticipated.

As Jim Anderton has pointed out, these things were foreseen but not acted on. We had woodflow forecasts in 1976, 1986, and 1996. The 1976 model forecast an average annual harvest for the period 1996-2000 of 17.5 million cubic metres, and for 2001-05 of 24.1 million cubic metres. Time has shown these forecasts to be remarkably close to reality.

The quality of our strategic planning has been nowhere near the quality of our forecasting. New Zealand was overtaken by the view that planning must mean central control, and was therefore bad, so we now face problems due to a lack of planning.

This Government is keen to be more active and more facilitative in this industry than past Governments.

The East Coast is a good example. Jim Anderton has already spoken of it. There the increased production is steepest and the capacity to address that increase is wanting. So MED and MAF have become involved, I hope helpfully.

Help comes in many forms, from facilitating capacity building locally to shoulder-tapping investors internationally. The industry has been mighty helpful in many steps along the way. Thank you. It’s early days yet but hopefully our involvement will bring significant and palpable benefit to both the region and the industry.

And that neatly brings me to my role as Minister of Forestry. I myself as an advocate. An advocate within Cabinet, an advocate amongst MPs and the public. An advocate internationally.

It’s a role that contrasts sharply with another primary production portfolio I have - fisheries. The fishing industry involves the commons. There are no fence lines in the sea. Accordingly it is highly regulated. Countless decisions on who can or can’t catch fish where, how and in what quantity fall to me or to officials.

Forestry is the opposite . Much of the work needed to address issues your industry faces falls to my colleagues, not to me. It falls to ministers with responsibilities in economic development, overseas trade, training, science, commerce, biosecurity, environment, local government, occupational safety, energy, climate change.

As it happens I am some of those people, but not as Minister of Forestry.

You clearly have pulling power. Four ministers in one day. The level of interest from this Government in your industry is demonstrably strong. As it should be.

More than that those ministers are utterly committed to progressing their various portfolios – to improving our exports, lowering trade barriers, promoting regional development, reaching for improvements in safety and to ensuring that New Zealanders are well trained for the jobs ahead of them.

My job is to answer the phone when you call. I am your voice. You have used me many times already. You are welcome to keep doing so.

In particular I believe that the industry will wish to get in touch time and again on the issue of climate change and the challenges and opportunities that issue offers. The Kyoto Protocol is not going to go away. Even if it did, some other initiative would take its place.

My personal view is that this industry will secure significant benefits from this issue, but opportunity never comes without risk and you will have to carefully explore both.

That's enough of what we know, and about the role for Government and how keen we are to play it.

Let’s look into the unknown.

Twenty years from now, how much will tariffs on processed wood have been lowered? To what extent will non-tariff barriers impact on our trade? To what extent will wood have replaced steel in heavy construction?

How far will we have taken engineered wood products? How far will world opinion have shifted in favour of, or against, planted forests? Will I be right in predicting that world opinion will have shifted against sustainable logging and coupe felling of natural forests, to New Zealand’s advantage?

Twenty years from now, if the Kyoto agreement holds on course, we will be entering our third commitment period. What will be the future of sinks and to what will sink credits apply? If article 3.3 is to be a reality, will article 3.4, and in what form?

Even more important, perhaps are the answers to some other questions. And here I am going to play with ideas that you play with too - but only when you have time. I'm going to indulge myself a bit and I invite you to do so too.

In twenty years will we be using enzymes instead of energy for some wood processing? What pharmaceuticals or nutriceuticals will come out of the waste stream? Will pine needles be valuable?

Will saprophytic fungi be a money-making by-product? Will bacterial production within a Pinus radiata ecosystem be turning an interesting dollar?

Will we have secured a useful advance or two in drying technology? Will high-performance polymer-wood fibre products begin to substitute for plastics?

And, most important of all: if the answer to these is yes, will we have the intellectual property rights sewn up?

Just asking these questions reminds us that the future of primary production in New Zealand is no longer just in volume. Just as a commodity boom rushes towards us in the form of huge increases in volume, it is already time to look beyond and see that the future will not – cannot - lie in commodity production alone.

The future lies in processing, in product differentiation, in overseas consultancy, in the wise use of IT, in the wise use of biotech, in the development of innovative products and in close attention to the development of human capital.

Just as wool is being investigated as a source of mind-bending new materials or as a biosensor, just as meat products are being examined for bioactives, just as a dollar-a-kilogram fish by-product is about to have its value increased three hundred fold, just as pea protein is about to undergo a minor revolution, and just as milk proteins are already undergoing a series of minor revolutions, so too the components of what we call a tree offer considerable promise.

For this one reason. We have been fiddling with planted forests for quite a few decades. We know a lot about them. And that means we can launch into those new unknowns while others lag.

I challenge anyone to name another nation that knows as much about planted conifers as New Zealand. And I invite you to look beyond the wall of wood, or the wave of opportunity, and see a different opportunity other than volume.

All of which means that twenty years from now I can’t predict the future after all. But I do know that I am keen to bring it closer.

Thank you.

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