Anderton - Launch of an Economic Impact Assessment
Hon Jim Anderton
Minister of Forestry
Launch of an Economic Impact Assessment on the Forestry and Wood Processing Sectors in Otago and Southland
17 May 2005-05-15
Southern Wood Council,
Dunedin Art Galley, Dunedin
Matt Hitchings, Chairperson, Southern Wood Council.
There’s a story about Otago-Southland that I thought I might start with, because it’s topical this week.
It’s about two Southern men who die and wake up in hell.
The next day the devil stops in to check on them and sees them dressed in swannies, mittens and balaclavas warming themselves around the fire.
The devil asks them, "What are you doing? Isn't it hot enough for you?"
The two Southern men reply, "Well, you know, we're from Invercargill, we're just happy for a chance to warm up a little bit, eh."
The devil is ropable.
So he thinks, if these guys want a bit of heat he will turn all the heat off in hell.
The next morning, the temperature is below zero, icicles are hanging everywhere.
The devil smiles and heads for the room with the two Southlanders.
He gets there and finds them jumping up and down, cheering and shouting.
“I don’t understand. You were happy when it was scorching hot, and now you’re happy when it’s bitterly cold, what’s going on?
The Southlanders look and tell him…
“Hell’s just frozen over. That means the Highlanders have won the Super 12.”
Sometimes it’s good to be from Canterbury.
In contrast to the football, forestry in this part of the country can count on a record of growing success.
In 2002, the Southern Wood Council was chosen by what was then Industry New Zealand to receive cluster development funds.
The idea was to use the money to build partnerships around the region for the good of the industry.
Three years have passed and we can look back on a record of success.
A range of projects have been achieved from a training cadetship scheme to the recent commissioning of the Economic Impact Assessment.
The industry is working through the Council more.
Outside agencies are viewing it as the main point of contact.
The partnership has been developed across the region to include others with a stake in the industry.
Local authorities, ports and development agencies are all part of the industry cluster.
So this is a record of success.
New Zealand needs success across all our regions.
If there is one message I have for you today, it is the commitment of myself and this government to the success of the forestry and wood industries.
When I first became Minister of Economic Development, I asked officials for an assessment of the sectors with the highest potential for rapid growth.
I wanted to know what we needed to do to realise the potential of our most promising industries.
Forestry and wood processing were at the top of the list.
That’s why I take an interest in being Minister of Forestry.
This industry is so important to New Zealand’s economy, it needs attention.
Today, forestry is a very important contributor to the New Zealand economy.
Forestry and wood processing are New Zealand's third largest export earner.
The sector directly employs 26,000 people, and earns over four percent of our GDP with sales of more than $5 billion a year.
So the industry is very important to New Zealand.
The potential of the forestry industry dwarfs its current contribution.
It is urgent for New Zealand to achieve the growth that forestry makes possible.
Yet there have been challenging international market conditions over the last few years.
The industry as a whole has had to confront the rising exchange rate, increasing freight costs, and higher electricity and insurance charges over the last two to three years.
In the South, here, wood growers and processors have experienced acutely the pressures on the industry as a whole.
While this period has demanded a response, the future over the long term is very bright for forestry in Otago-Southland and in New Zealand as a whole.
Tough market conditions have changed the industry.
As a result, production and returns are increasing.
There is more confidence within the local industry that it can meet the challenges of the current trading environment.
This renewed confidence is illustrated by recent industry developments:
City Forests Limited has begun construction of a sawmilling and processing operation. It is expected to be operational by late 2005;
Blue Mountain Lumber has been re-building its workforce, as a result of new export orders in Asia and Australia; and
South Wood Export Limited has announced that it is continuing to purchase land for the development of short rotation stands of Eucalyptus.
These signs are encouraging.
It would be foolhardy to underestimate the pressures the industry has been under.
Even the best managers struggle to cope with the currency variation the industry has experienced, for example.
So it is valuable to get some outside advice on the status of the industry.
Last November, the Southern Wood Council commissioned BERL to undertake an economic and social assessment of the forestry sector in the south.
The study made a number of findings:
The forestry sector has been a key driver of growth in Otago and Southland, and will continue to be;
The economic benefits of the industry are spread across the two regions, and forestry is a significant employer in smaller communities; and
The local industry has taken a strong lead in forest certification.
Though the assessment provides valuable detailed information, it is no surprise that the industry is an important contributor to the region’s economy.
As for Otago-Southland, so for New Zealand as a whole.
We need to build on the strength of the forestry industry.
In April, the coalition government agreed with leaders in the industry to do more work together under a new relationship.
It’s called ‘FIDA’ – Forest Industry Development Agenda, and its role is to promote the development of the forest and wood processing industries.
The Government will invest $18.1 million to develop the industry with a further $3.8 million (GST excl) contribution expected from industry.
The money will help to fund market access; market development; bio energy; skills and training; and wood design.
The investment recognises the industry’s significant economic, social and environmental contribution to New Zealand.
There are many issues facing forestry.
The Forest Industry Development Agenda Steering Group has been set up.
It will draw on the best brains in the industry and be open to advice from across the industry
The process will help us better work together to identify issues and work out the best way to respond to them.
In the past forestry has expanded strongly when conditions ease, then closed down again when the going got tough.
With every “boom and bust” it gets harder to attract top people to the industry.
That tells us something about the skills shortage we are currently dealing with.
In that regard the tight labour market in Otago and Southland is making it difficult for forestry to attract and retain sufficient workers.
Part of the problem is the generally poor image of the industry.
It is good to see that a number of initiatives are being undertaken by the Southern Wood Council to turn this image around.
But changing the views of students and parents on the value of a forestry career will be a slow process.
We need to move beyond boom-and-bust, to a clear long-term future.
Globally, forest products have a bright long-term future.
Forestry, especially commercial well-managed forests, will benefit many of long-term trends and environmental pressures facing the world.
Wood from properly managed forests is a truly sustainable material.
It requires low energy to process compared to most alternative materials.
In construction, wood's sustainability, low energy requirements and greenhouse gases advantages make it an ideal material.
Interestingly, wood is probably cheaper than alternatives of concrete and steel for buildings up to 6 stories high.
Yet wood is used in very few of the commercial buildings where it would be suitable and probably cheaper.
We can do better by promoting it better.
The government is investing two million dollars over the next five years to help promote excellence in wood design in the construction sector.
This is a new programme, with a working title of Timber Buildings Design Initiative.
It provides seed funding for senior wood design teaching positions at the Universities of Canterbury and Auckland.
Funding is also available to develop supporting software for timber design.
To be really successful, however, the industry will need to get behind the initiative and support it with its own promotional activities.
So our partnership is promising, and that’s why I am confident about the industry.
This is not an easy time to be involved in an industry that is exposed to a high exchange rate and to energy prices.
Yet those firms which take a long-term and realistic view of the industry are continuing to succeed.
And all our businesses are benefiting from a period of economic prosperity almost unheard of in the working life of most adults.
No one seriously disputes these days – not even Government’s opponents – that New Zealand has enjoyed five years of very strong economic performance.
Our growth has outstripped the average of developed countries.
Our unemployment levels have dropped to the lowest in the developed world and the lowest since we started compiling the Household Labour Force Survey two decades ago.
Incomes are up, profits are up and our business environment is as competitive as anywhere in the world.
These conditions will produce more freedom in coming years to solve some of the issues we need to deal with and lock in our security.
It provides us also with the strength to ensure New Zealanders enjoy the benefits of our gains.
There is still a lot to do.
But there is, for the first time, a willingness to do it.
There is a commitment on the part of the government to be a partner in removing the obstacles to growth and building on our advantages.
These days, the Minister of Forestry works with the industry, as a partner, to create success.
A pro-business, pro-forestry approach will work positively for the industry.
So a lot is happening to help the New Zealand forest industry reach its full potential contribution to regional and national economies.
This economic impact assessment on the forestry sector in Otago and Southland by BERL will provide a valuable benchmark against which progress in the South can be measured.
And I believe you have ample cause to be confident in the long-term path of the industry too.