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Goodhew: NZIF Annual Conference

Jo Goodhew

7 JULY, 2014

NZIF Annual Conference: ‘Tackling challenges and delivering value’

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

Good morning everyone and thanks for inviting me to address you today.

First, I want to acknowledge the institute, a professional body with a long and distinguished history.

I was interested to learn that the NZIF was founded in 1927, as this country’s first tree planting boom really took off.

I would like to acknowledge Bob Pocknall, from PF Olsen and Co, this year’s conference organising committee chair.

I acknowledge Dr Andrew McEwen, NZIF President, along with incoming president James Treadwell.

I also acknowledge my parliamentary colleagues Chris Hipkins and Steffan Browning.

I acknowledge the theme of this year’s conference: tackling challenges and delivering value.

You have asked me to talk about what this Government is doing to support the forestry sector to create value.

I will then discuss some challenges, especially an urgent one concerning health and safety.

So what are the activities underway to support forestry?

The National Government’s business growth agenda six stream fits well with your sector.

We have 350 actions across the six streams. Some have been completed while all have been started.

The six streams are; export markets, capital markets, innovation, skilled and safe workplaces, natural resources and infrastructure.

International Trade

The government plays an active role in negotiating trade agreements and opening doors to export markets via trade regulations.

International export markets hold the key to the continued growth of value from our forest and wood processing sector.

The answer lies in greater levels of domestic wood processing - and a higher proportion of value-add products.

The challenge - and the opportunity - is to lift the value of exports by targeting the right products at the right markets.

In order to creep up towards the potential figure of $12 billion for your sector, exporting high value products is a must, more raw products is not the answer.

This Government is working hard to negotiate free trade agreements.

The current trade agenda is particularly busy, with significant progress being made in a number of negotiations.

All 12 key markets have either signed an FTA, or have one under negotiation.

Regulatory environment

In regards to the regulatory environment our priority is to create the kind of business environment where industries including forestry can flourish.

This Government is currently putting in place the most significant water and resource management reforms in a generation.

The RMA reforms are aimed at improving decision-making at every level, and driving a shift towards more proactive planning and away from reactive decisions through consents and court appeals.

Many forestry companies operate across different districts and regions, and find themselves up against a variety of RMA planning rules.

This adds costs and creates investment uncertainty, both for the businesses and for the sector as a whole.

Officials are working collaboratively with forest owners, councils and environmental groups to iron out planning inconsistencies. And excellent progress is being made.

I would like to take this opportunity to acknowledge the ongoing commitment to this work from your industry representatives.

I hear the working group has now reached agreement on a consistent set of planning rules for seven out of the eight forestry activities identified. I note that agreement seems close on the eighth.

This represents a significant simplification of the planning rules, and will remove roadblocks to economic growth for your sector.

A National Environmental Standard (NES) continues to be the most appropriate regulatory option to implement these rules.

In another area, work has progressed to improve the East Coast Forestry Project.

Uptake of the ECFP on Māori land has been low. Consultation on options to improve the scheme occurred during February and March this year, and submissions were supportive.

The proposed changes will reduce unnecessary requirements and improve administration for both landowners and the Crown.

Also, the changes are important to delivering on the Relationship Accord between the Crown and Ngati Porou, which was signed on 23 April 2014.

Soil erosion and its impact on waterways remains a serious concern for Ngati Porou.

Subject to final Cabinet agreement, implementation of changes are expected in August this year.

Industry development

For industry development there must continue to be future growth opportunities.

Over the last six years this Government has invested approximately $30 million in associated strategic initiatives.

Now, a new forestry Strategic Partnership Group is already bringing greater alignment between industry and government priorities.

The partners include MPI, MBIE, wood processors and manufactures and New Zealand Forest Owners.

Current priorities for the Group include joint government and industry work to ensure that the legality of New Zealand timber is recognised in overseas markets.

The Ministry for Primary Industries along with the Australian government has recently developed guidelines for Australian importers, and these have been circulated to your industry for comment.

Engineered timber

Back in 2010, the Ministry for Primary Industries committed to work alongside the sector on its long term direction.

The landmark 2012 Woodco report and the WoodScape economic assessment was the outcome of this process.

WoodScape showed, for example, that engineered timber products offer investors returns higher than 10 percent.

The analysis provided hard evidence that such products create a whole lot more value.

The difference in value between a raw sawlog and a finished LVL beam or a CLT panel represents an opportunity for the industry and for the New Zealand economy.

Such products, therefore, offer potential to add real value to logs.

At the same time, however, there are issues with the uptake of engineered timber.

Supply chain blockages, skills shortages, information gaps, biases and fabrication capacity have all been identified and are being addressed.

To help raise the profile, the government sponsored the NZ Wood Resene Timber Design Awards.

This event is a great showcase of Kiwi timber engineering and building design with some innovative and aesthetic uses of engineered timber on display.

I was present at these awards, and was really heartened to see the amazing work of the young designers.

MPI has also surveyed those involved in the design and construction of engineered timber buildings in Christchurch, and are helping facilitate the update of NZS3603.

The Structural Timber Innovation Company (STIC) has already produced world-leading research into seismically resilient building designs that use engineered timber.

Local buildings using the STIC low-damage construction system include four buildings in Christchurch – the Tait, Trimble, Merritt and St Elmos Court buildings.

Regional economic development

This Government is committed to helping our regions attract investment to lift their economic performance and create more and higher-paying jobs.

A regional focus brings parties together to assess opportunities, capabilities and gaps, and pool the resources necessary to realise the opportunities.

My colleagues Hon Steven Joyce and Hon Nathan Guy recently announced the Bay of Plenty Regional Growth Study. This is the third in a series of in-depth studies focusing on understanding the economic potential in key regions.

The first report for the East Coast was a collaboration between government and local partners, and was released in April.

It reports on the economic potential and barriers to growth for the East Coast for the next 30 years, including for primary industries.

The second study is in Northland and will build on existing partnerships with Maori through MPI’s Maori Agribusiness programme.

And forestry is a key industry in each of these regions.

Sector research and innovation

Innovation is the particular focus of MPI’s Primary Growth Partnership (PGP).

PGP invests in business-led market-driven innovation programmes that work across the primary industry value chain.

There are 17 programmes underway and one completed.

The potential benefit to the wider economy is expected to be $6.4 billion per year from 2025.

An independent panel works to ensure potential programmes achieve the aims of economic growth and sustainability.

The assessment process for applications is rigorous which is necessary given the investment amounts involved.

Five proposals for engineered timber projects have not been approved by the Independent Advisory Panel.

I understand there may be some frustration at this, but the bar is set high.

To assist, Ministry for Primary Industries recently held a workshop for stakeholders from the engineered timber industry to discuss what makes a successful PGP proposal – such as taking an end-to-end value chain perspective.

Two exciting forestry PGP initiatives are currently underway, and a third has just finished.

The Steepland Harvesting programme which has developed the ClimbMax harvester, is improving safety and productivity in our hill country forests.

Four ClimbMax machines have now been built and are in commercial operation – three in New Zealand and one in Canada.

Three other new innovative harvesting products have been developed and are now available commercially including an advanced vision system to improve the safety and efficiency of hauler harvesting.

Other new and exciting products are under development include remote controlled technology to improve safety, and innovative new approaches to cable harvesting.

This programme is forecast to return $100 million in benefits each year by 2025.

The Stump to Pump programme will determine the feasibility of producing liquid biofuels from forest residues.

The third PGP programme, exploring alternatives to methyl bromide for export fumigation has just finished, and has identified methods by which a 40 percent reduction in the use of methyl bromide can be achieved.

Other funding for forestry

I also want to mention the Sustainable Farming Fund (SFF) that invests up to $8 million a year on projects that deliver economic, environmental and social benefits to our primary industries.

More than 90 forestry projects have been funded since 2000, valued at over $8 million.

This year’s funding round will open soon (it is expected to be 1 August). I encourage you to look at what projects could be developed in your region or across the country, and put in an application.

Post-harvest innovation is supported with funding via Callaghan Innovation, MBIE, TEC and CoRE Fund to universities, SCION and private companies.

Education and training

The capability of the people in primary industries is critical to achieving industries’ strategies and goals.

There is a lot of work underway to educate and train the industry workforce, to identify future capability and skills requirements, and to promote careers in primary industries.

Government-funded providers spent approximately $16.5 million between 2011 and 2013 on forestry-related tertiary education provision, including industry training.

The amounts are based on demand, so more is available if the demand increases.

And in Budget 2014 an additional $83 million was allocated to tertiary education, including forestry tuition subsidies.

At the beginning of June my colleague Hon Nathan Guy launched a study looking at theFuture capability needs for the primary industries in New Zealand. Forestry was represented at the launch by Dr Jon Tanner, CEO Wood Processors Association.

The study identifies training and education needs for the primary industries in 2025.

For forestry overall the workforce is expected to expand by 5,300 jobs.

However, the devil is in the detail.

By 2025 the forestry industry is expected to need an additional 15,100 workers with formal post-school qualifications (like certificates, diplomas and degrees).

This will amount to 77% of the workforce.

This is a big shift. Currently 48% of the workforce has formal post-school qualifications.

And 25,900 workers are required simply to replace those leaving through natural attrition.

These numbers highlight how much work this sector has ahead – you need to be looking at ways to attract, retain and grow your workforce going forward.

And increasing the level of training will go a long way to helping address safety issues and curb the high rate of turnover.

The Enterprising Primary Industries Career Challenge – the EPIC challenge – was recently announced by Minister Guy.

Organised by the Young Enterprise Trust, it aims to raise awareness among Year 10 students of the career opportunities in the primary industries, including forestry.

I encourage you all to engage with students and education providers and show them the opportunities available in the forestry sector.

Infrastructure

Last but not least, provision of infrastructure is another example of support for long-term sector growth

Ongoing improvements to our roads are a key element of this activity.

Close to 5,000km of state highways and local roads have been made available for high productivity motor vehicles.

And we’re not stopping there.

As most of you are probably aware this Government has also announced $212 million from the Future Investment Fund will be pumped into 14 regionally important State highway projects.

Some of this funding package will benefit high productivity and forestry trucking routes. Locally, it will accelerate two projects to access the Port of Napier.

Sector challenges

I now want to turn to challenges – a key theme of the conference.

The first of these, relating to health and safety, is especially important.

I am deeply concerned about this issue, as I know you all are.

The number of fatalities and injuries is simply too high, and needs to be brought down.

The Ministry of Business, Innovation and Employment has committed another $30 million to health and safety through its Working Safer reform package.

This is targeting high-risk sectors, including forestry.

In June, the Independent Forestry Safety Review panel held consultation meetings around the country. The panel aims to shed light on underlying factors resulting in workers being harmed - and recommend practical ways to make the industry safer.

Submissions have now closed, and the panel is considering its recommendations.

My colleague, the Hon Simon Bridges, Minister of Labour, has said that the Government will seriously consider the panel’s recommendations.

In a moment, you will hear from Sheldon Drummond on industry’s strategy to do this.

I applaud the steps taken by industry to date, and urge everyone in the sector to stay involved.

Other industry challenges

The sector also faces a set of challenges around quality and reputation.

Industry must avoid complacency about market share and the quality of material it supplies to domestic markets.

A quarter of the wood we produce is used in the domestic market, and most of this is used for residential construction.

This demand will continue as long as the construction industry and consumer expectations of quality are met.

But the competition from steel framing is increasing.

Another challenge is the boom and bust nature of the export log markets.

We are seeing the China log export market taking a significant dip, and the impact will be felt all the way back through the supply chain to the harvesting crews.

Obviously we cannot influence demand in China, but what can be done to better manage our supply into offshore markets?

I also urge the sector to work to lift the reputation of New Zealand radiata pine in overseas markets.

The structural properties and durability performance of radiata pine are well understood here.

But that is not necessarily the case elsewhere.

Our logs are most often used as low-value packaging and construction material.

Raising awareness of the qualities and structural uses of our radiata pine could lead to fresh offshore market opportunities.

I challenge you all to take up this opportunity. If you see a partnership role for Government, talk to us.

Conclusion

I would like to end by reaffirming the importance of the forestry sector to New Zealand’s economy.

As I hope I have shown today, Government and officials are supporting the sector on a number of fronts to strengthen it for the future.

You are a vital part of our primary industries and I ask that each of you seize some of the challenges I have covered today.

Thank you very much for your time today.

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


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