Jim Anderton: Forestry Sector Has Many Challenges
Forestry sector has many challenges
Over the last three years I have worked closely with the forestry and wood industries.
I have worked with most of the people here today.
I've invested that effort because this industry potentially offers the fastest growth for New Zealand of any industry.
But it has come to a crossroads.
It needs to make a choice about whether it is serious in reaching its Vision 2025 goals.
If it is serious it needs to make a choice.
It needs to decide whether it is going to move from being mainly a commodity producer to being a producer of high-value products.
If this industry wants to achieve a high value future, it will have to work better as a domestic industry.
It will have to get better at market development.
We have made a lot of progress in clearing away impediments to growth.
I'm going to talk about those this morning.
And I will talk about the work the industry has to do itself.
I'm going to ask you to renew your commitment to increasing the contribution of the forestry and wood processing industry.
This is about your commitment to building a stronger New Zealand.
We're doing this so that our young people have real opportunities in New Zealand.
It is too important a mission to pass up.
It's time for the industry to step up.
It's three years since I first came to talk to the Forestry Industries Council at the Waipuna Lodge in Auckland.
Back then I talked about the enormous opportunities for forestry and wood processing and for regions like Northland and Tairawhiti.
I also spoke about our lack of preparedness for the wall of wood. The barriers to growth then were:
-Resource Management Act issues;
-The lack of communication and effective working relationships between industry, local and central government.
In the last three years, we have achieved an effective partnership by focusing on these barriers.
The symbol of that partnership has been the wood processing strategy.
It's worth recapping on the progress we have made.
When we started out, transport was an area of great concern.
We have jointly developed a pragmatic solution;
-$30 million of investment in roading for forestry rich regions like Northland & the East Coast; -$30 million for alternative modes such as rail;
It took a while and there is still more to do.
But it is significant that the new Land Transport Bill goes into Parliament this afternoon.
We have made significant progress on skills issues through the centres of excellence for wood processing.
We have also addressed skills shortages issue through modern apprenticeships, the tertiary sector and immigration.
I expect to see a well developed way forward presented by the Department of Labour in the current budget process.
As far as the Resource Management Act goes, the primary focus has been on making it work better.
We have tried to develop best practice standards within the current legislative framework.
It is now a matter of getting the consistency across the users of this legislation - both the councils and the companies - and of considering some National Interest criteria as well as local or regional considerations.
Within a very short period of time biosecurity was turned from a major problem to an example of how things can be turned around.
Additional funding has been allocated to address issues that arose from joint work.
An integrated Research, Science and Technology strategy was developed and released in August 2001.
The Foundation of Research, Science and Technology reinvested $11 million a year along lines proposed in the strategy.
A Wood Quality Initiative has been formally established and it's now operational.
The industry continues to make progress on establishing a National Standard and certification for planted forests.
We have been able to acknowledge the points of difference on climate change issues and work together to find common ground.
This has been reflected in the progress that we are making on Forest Industry Framework.
But that issue will not be fully resolved until we have completed the Framework process.
The work completed by this group provided valuable insights that assisted the coalition government in its deliberations on the broader energy issues.
We have made energy supply and pricing much more stable and certain than previously.
Although no formal working group dealt with investment promotion I have dealt with a significant number of companies which have raised issues with me.
They have sought to establish new processing facilities or to expand their operations in New Zealand.
We have improved the investment climate considerably.
* European market opportunities have been investigated and developed - in particular with Danish furniture manufacturers.
Additional coalition government funding has been allocated to address key trade issues identified by the industry.
China and Korea have been chosen as the priority markets. We need to also look towards India, which has significant and growing timber supply needs.
On the subject of trade, the failure of world trade talks in Cancun could have significant results for New Zealand.
The failure was not all that unexpected.
Regardless of what anyone thinks about how we have arrived where we are, New Zealand can only gain now from world trade liberalisation.
There isn't much doubt that trade liberalisation will not be quick.
Therefore we need to renew our efforts to move from commodities into higher value products.
The higher value the product, the less price sensitive we are to basic commodity price fluctuations e.g. logs i.e. Juken Nissho v log exporters or even just sawn timber.
There is no realistic prospect for quick advances in trade access through multilateral talks.
The greatest risk is that bilateral talks displace multilateralism - and that some nations are unfairly left out.
Our work in the wood processing strategy has become a prototype for the whole of government and partnership approach with industry.
Our focus on achieving tangible results has meant we have met the objectives we set for ourselves.
-Even more importantly it has improved the relationship.
-The question that we now need to ask ourselves is: "Is the agenda we set ourselves going to achieve the outcomes defined in Vision 2025?"
-My view quite simply is that it is not.
I have come to this conclusion for several reasons.
It is a programme that is focussed on cost efficiency.
-Cost efficiency is critical for commodity-based industries. -But can we be competitive with countries like China, and Eastern European Countries purely by competing on cost? Everyone agrees the answer is a resounding "No!".
Our programme doesn't set out the roadmap for achieving Vision 2025.
-When we examine our vision 2025 it becomes clear that a significant part of this will be generated through value adding.
-If we examine our vision - we aim to be New Zealand's largest export industry by 2025.
-We aim for substantial growth in the quantity and quality of our exports.
-Doubling or even trebling our commodities exports will only get us part of the way to achieving the vision.
-Most of the progress we need will only be achieved by adding value.
Industry issues are critical.
-Our partnership to date has focused on areas impeding growth that the coalition government can do something about.
-What is now clear to me is that there are some key issues within the industry that are also impediments to further development.
One of the most important issue is what forest owners can do to further develop domestic wood processing.
I am aware of the significant effort that goes into log export markets.
But where is the effort into developing the local wood processing industry?
By far the most expensive cost factor for manufacturing is logs.
I hear about consortiums for log exports but very little about improving the supply to the domestic wood processing industry.
As a sign of good faith in the partnership between the coalition government and industry - it is up to the industry to begin to deliver on these sorts of issues.
Market Development is obviously the most important commercial issue for this industry.
While we debate and position ourselves within NZ the rest of the world continues to get further and further ahead.
The competition is not within New Zealand, but within the international marketplace.
In recent times we have seen the forestry industry downturn impact significantly on workers throughout the country.
In the last 3 years I have advocated strongly amongst my Cabinet colleagues and in the regions how important the forestry and wood processing industry is to the future of this country.
A common reaction is that this industry is not a reliable employer and sheds workers on a regular basis as an industry response to commodity cycles.
Well in recent times my judgment has been questioned and I am starting to question it myself.
I have had to answer letters and queries from people throughout the country questioning me about why I am so strongly supporting this industry when it is causing significant damage to its people.
My message to you as an industry is that you must change.
You cannot expect the community and workers to support your future aspirations if they continue to be devastated on a regular basis.
You cannot expect your partners - that is the government, communities and workers - to be there working with you if this carries on.
I accept that there are some strong forces behind the recent downturn. I also accept that it is tough to break out of the commodity cycle. But what your partners, including the coalition government, are looking for is strong leadership and commitment from the industry that it will change.
You need to show a commitment to change, to find ways to improve stability within the industry and hence the workforce. You need to have an agenda that instills confidence amongst your workforce. You must have an agenda that demonstrates fairness and leadership.
We must have an agenda that sets out how we will diversify our industry away from being solely a commodity industry. You must acknowledge that the impact on people and communities is not acceptable."
The challenge for us is to get going.
*A lot of time and energy can be consumed on patch protection, and grand plans. *But there is no substitute for good old fashion action. *We do need to have a coherent programme that all parties agree with. * But lets be pragmatic in getting it going.
We need leaders to step up.
- These are people that are actually make things happen. - In the beginning of our partnership, the onus was on me as the Minister responsible for getting it done. - On the industry side we now need your leaders to come forward and make things happen.
As forest owners you have far more influence than the government as to what happens to the domestic processing industry.
-Your influence is exercised in the decisions you make, the business practices you use, and the relationships you build or damage collectively.
Privately I have heard frustrations about the difficulty of acquiring wood.
- I have been alarmed that domestic processors are cynical about the so-called 'wall of wood.' - How can it be a wall of wood if we can't get supply from forest owners?
I know that it is not quite that simple.
- But we need to improve the commercial arrangements and relationships between forest owners and domestic wood processors.
- I want to see some action plans to deal with these issues.
We need active strategies on the part of forest owners to work with the domestic processing industry.
- We need an extensive programme that develops the markets.
There is no single initiative that is going to be the total solution.
We need an overall programme for the current industry and its existing product range.
To move forward we can't just focus on what the government is going to do, but also on what the industry itself is going to do.
We need to continue with an agenda that focuses on improving our cost competitiveness. This is ongoing.
We need to accelerate the development of our domestic processing industry.
The base is already there but we need to expand it.
Forest owners need active strategies to work with the domestic processing industry.
It is not going to happen on its own.
We need an extensive programme that develops the markets.
There is no single initiative that is going to be the total solution.
We need an overall programme that will focus on the current industry and its existing product range.
We need to identify opportunities which will lead to faster development of the new industries and processes we need to build on top of our existing industry.
This is critical to diversifying what we do so that we are not entirely dependent on commodity markets.
We need to tackle these challenges in both existing and emerging markets.
What may be important for the major companies may be different to what is important for the smaller independent saw millers.
We need to acknowledge the different styles and methods of operation of the various groups within the industry.
All parties have a significant contribution to make.
Partnership isn't always easy.
It's not helpful when industry representatives bash the government every other week.
Next time someone thinks about doing it, ask yourselves how well the partnership will go if the government returns the compliment!
If you seriously want the government to pack up and go away, then sooner or later you will probably get your wish.
The outcome may well be a commodity-based low-value industry which will not realize its full potential.
There is much more to be gained for everyone - and for New Zealand - than that.
The coalition government is committed to working with the whole industry.
This is a very important industry to the government and the country as a whole.
- It has never been more important.
- A lot is at stake.
- Jobs, export earnings, an income and a future and for New Zealand.
We have had some successes.
- There are opportunities in the marketplace.
- We must be active in finding and developing them.
I am confident that this industry will prosper.
- If it works together better to find solutions - and continues to work constructively with the coalition government, its prosperity will be guaranteed.