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Goodhew: New Zealand Institute of Forestry Conference

Jo Goodhew

1 July, 2013

New Zealand Institute of Forestry Conference

E aku rangatira, tēnā koutou katoa. Ka nui te honore ki te mihi ki a koutou.

Good morning everyone and thank you for inviting me to speak to you today.

I would like to begin by acknowledging NZIF President Dr Andrew McEwan, the NZIF Council, and conference organiser John Schrider. I’d also like to acknowledge the students here today from the University of Canterbury’s School of Forestry and the Wairiki Institute of Technology, as well as my fellow speakers.

The Government recognises that there are many ways in which forests are important to New Zealand and New Zealanders. They are the basis for one of our largest export earners. They provide environmental benefits such as carbon sequestration, erosion control, biodiversity and improved water quality. And they also provide cultural and recreational activities.

I note that this year’s conference has a special focus on the Taranaki region. Here, as elsewhere in New Zealand, our challenge is how to strike that difficult balance between economic development and environmental sustainability. This is a question that has been around for a long time.

1913 Royal Commission on Forestry

A century ago this year, the Royal Commission on Forestry was considering similar issues.

Part of the Commission’s brief in 1913 was to find ways to manage and conserve what was seen as a dwindling native forest resource. An immediate priority was preserving the native timber-producing trees being milled to make butter boxes and cheese crates for export.

The Commission’s landmark report would provide the springboard for setting up a State Forest Service, led by a professional forester. It would also pave the way for a comprehensive Forests Act with a mandate that included conserving the native forestry estate.

That important work a century ago reminds us that forestry has always been valued for its role in safeguarding soil, water and biodiversity. Today we understand this approach as part of sustainable land management.

Forestry – a vital role

Forest management and practice has of course changed dramatically since the time of the 1913 Royal Commission. But the forest industry continues to be an important contributor to the export economy, as it has been for well over 160 years.

As our third largest exporter, forestry provides $4.3 billion in annual export revenue. Making up three percent of GDP, the sector directly provides 18,000 valuable jobs, particularly in rural and provincial areas. That number could – and should – continue to grow.

The Government’s Business Growth Agenda (BGA) supports New Zealand businesses, and the broader community, by focusing on practical initiatives that enable growth and create jobs. We are working with business to create improvements over six growth areas – export markets, innovation, skilled and safe workplaces, infrastructure, natural resources, and capital. The forestry industry is likely to be interested in and benefit from most of this work.

We expect much of the required future growth in the forest industry will be derived through the first two areas – innovation and export markets. However, capital is also important – for the wood processing industry to grow, significant additional capital is required.

Primary Growth Partnership

Government has made a significant contribution to funding forestry and primary sector research and development over a long period of time.

But more recently, Government has been playing its part in driving innovation activity through the flagship Primary Growth Partnership (PGP) projects.

The PGP is about harnessing innovation to lift both productivity and profitability across the primary sector, including forestry and wood products. Projects depend on commercial partners coming forward with workable ideas.

An example of interest to this audience is the Steepland Forest Harvesting project being led by Future Forests Research Ltd. Running over seven years, the project aims to unlock the potential of the massive standing crop on the hillsides of New Zealand, and to improve the safety of workers operating in these areas.

The challenges of forest harvesting on steep areas has long been seen as a hurdle in achieving greater profitability in forestry. One of the aims of this project is to create novel remote-controlled machines that can work on the harvesting slope, and to develop high-speed cable extraction systems. Building technical capability in harvesting and machinery development will help ensure the industry’s future, and further reduce the environmental footprint of harvesting.

The Government and industry have agreed to fund up to $6.5 million, with the programme expected to produce estimated total net benefits of over $100 million by 2016. The downstream benefits of this activity should be considerable.

A new round of PGP bids has opened. With Woodco’s ambitious goal in its strategic action plan of increasing forest product exports to $12 billion over the next ten years and the Woodscape study recently released, now is the ideal time for the sector to submit bids for PGP funding. I strongly urge you to do so.

The forestry sector’s slice of the PGP ‘pie’ is currently very small and does not reflect its contribution to New Zealand’s exports. I encourage you to consider developing projects that might fit with the PGP goals – I know MPI is available to provide advice and assist with developing bids if needed.

Export Double

The Business Growth Agenda has a special focus on export markets. This Government has a goal of lifting the value of exports from 30 per cent to 40 per cent of GDP by 2025. This ambitious goal is an important part of current activity to build a more productive and competitive economy.

This translates to a doubling of the value of primary sector exports by 2025. We call this goal the ‘Export Double’. As our third largest primary sector export earner, forestry has a significant role to play in helping achieve it.

The Export Double will require significant changes in the way industries like forestry operate – to increase both the volume and the value of exports.

As far as volume is concerned, New Zealand is well positioned to increase returns from log exports. Wood availability is increasing, with the annual harvest having just passed 27 million cubic metres a year. And over the next ten years this is forecast to progressively rise to 35 million.

Most of this increase will come from the large number of small-scale growers who established forests during the 1990s. The actual timing of harvest of these forests will depend on market conditions and the decisions of those smaller-scale owners.

In recent years we have experienced strong demand from China for logs - and this is expected to continue. Our market share in China is increasing at the expense of Canada, which is busy diverting logs to the neighbouring United States. A second export rival, Russia, is also experiencing domestic challenges, to our advantage.

In contrast to log exporters, New Zealand wood processors, sawmillers in particular, generally continue to experience challenging conditions.

Woodco Action Plan

Achieving the Export Double will also require the forestry sector to increase the value of exports. Greater levels of wood processing provides a platform to do this. High-value products stand to play an especially important role here.

I note that a current action plan for the forest and wood products industry places considerable emphasis on wood processing of this kind.

Developed by the Wood Council of New Zealand (Woodco), the plan has a vision of more than doubling the value of forest sector exports to $12 billion by 2022. You, the industry people here today, are the ones who are in a position to follow through on implementing this useful and practical road map for the future of your industry.

Woodscape

As part of helping ensure an export-led future, Woodco is taking a close look at the opportunities and challenges of processing additional logs.

Using a tool known as WoodScape, Scion has undertaken an analysis of 39 existing and emerging wood processing technologies. The findings were released in early June.

The analysis looked at the impacts of scale, input costs and exchange rates. The industry will be able to gain a clearer understanding of the opportunities and investment risks associated with each of these technologies.

The WoodScape model is available through Scion for use by wood processors, potential investors and others. I hope this important and timely analysis will result in an informed and forthright conversation across the industry on the future opportunities to increase profitability and to grow exports.

Engineered timber products

Greater use of engineered timber products in New Zealand and elsewhere, is another practical way to draw more value from wood products.

Engineered timber can be easily manufactured into large panels for floors, walls and roofs. It can be made into pre-fabricated structural components, such as long-span beams. These products allow multi-storey commercial buildings to be constructed from laminated veneer lumber and cross laminated timber components. Examples can already be seen in the Christchurch rebuild.

There could also be opportunities to develop and export high-value, pre-fabricated buildings or the technology to the Asia-Pacific region.

The Government is prepared to look at new ways to help promote greater use of these emerging and innovative technologies. But the industry must come to the party with funding as well. There are certainly opportunities for this partnership through the PGP.

Role of foreign investment

An increase in exports of the scale envisaged by the targets mentioned today will require significant amounts of capital.

We need to acknowledge tough conditions in the wood processing sector. Low levels of domestic savings make it hard to source this capital domestically, either from within the industry or outside it. Significant new capital will therefore need to be sourced from foreign investment.

Foreign investment also brings new networks and greater international connectedness to our businesses and businesspeople. It can allow businesspeople to better take advantage of export opportunities in overseas markets.

Investment brings new skills, knowledge, technology and management practices, increasing the productivity of local businesses. This will be of particular benefit to improving our capacity for high-value wood processing.

Economy and the environment

One of the themes of this conference is integrating forestry with other land uses to get the best environmental and economic outcomes.

The establishment of the Ministry for Primary Industries (MPI) underlines the importance Government attaches to this vital goal. By working with the sector, other Government agencies, Māori and the wider community, MPI is working to both grow the primary industries, and to protect what we already have.

A major MPI priority is championing sustainable resource use, productivity and export opportunities for primary industry products. Another priority is safeguarding the resource base and our reputation for safe and high quality primary products on which production and exports depend.

That reputation depends in part on the world-class biosecurity system that the Government maintains. This is one of many things the Government does to contribute to the sector’s sustainability.

The Government has had a long and active involvement in the sustainable development of our forestry sector. Over that time, it has been a significant investor in forest research and development.

The Forest Research Institute (FRI), for example, was established in 1947 to coordinate all scientific research for the then Forest Service. The Rotorua-based FRI, (later Scion), would go on to become an internationally recognised leader in plantation forestry science.

Improving productivity, environmental sustainability and safety have always underpinned this investment.

In recent years, we have seen a series of landmark Government initiatives as part of a wider sustainability agenda for improving water and soil management. The Land and Water Forum and Canterbury Zone Committees are good examples, each with strong emphasis on collaborative processes.

Upcoming changes to the Resource Management Act (RMA) will make the system easier to use and increase national consistency of plans while continuing to protect the environment. The Minister for the Environment will make detailed announcements later this year, but I believe the changes to the RMA will be positive for forestry.

Hill Country Erosion programme

The Hill Country Erosion programme, working to increase protection of highly erodible land, is a good example of continuing Government commitment to sustainable land management.

The programme aims to build the technical capacity of regional councils and to provide targeted funding for catchment initiatives. It is based on the idea of encouraging communities to adopt a total catchment management perspective towards sustainable land management.

I note that one of the Hill Country Erosion projects is co-funded with the Taranaki Regional Council. The South Taranaki Regional Erosion Support Scheme aims to reduce the effects of accelerated, erosion-induced sediment generation, in the Waitotara Catchment.

The Government has funded one third of the $3 million budget for this valuable work. It is a practical illustration of a collaborative process between central Government, local Government, and land owners, using forestry as a mitigation tool for erosion.

Conclusion

I would like to end by reaffirming this Government’s commitment to the forestry sector. It is in our direct interest to ensure that the sector remains strong and continues to thrive.

You are a vital part of our economy and I ask that each of you seize some of the economic and environmental opportunities I have covered today.

I wish you every success for your conference.

Nō reira, tēnā koutou, tēnā koutou, tēnā koutou katoa.

ENDS


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