Anderton: Forestry industry forum
Hon Jim Anderton
Minister of Forestry
Forestry industry forum
4.30pm Wednesday, 12 October 2005
Ellerslie Event Centre
80-100 Ascot Ave
Peter Berg, Chair of Forest Owners Association,
Members of the Association and other guests.
I want to begin by acknowledging first the role of forestry in New Zealand.
It’s not just a central part of our economic development - though we will talk about that today.
It has also grown roots in our New Zealand identity.
It is one of the iconic industries of New Zealand.
Our forestry and wood production have become part of the way we define ourselves.
We identify with the ruggedness of our forests.
We see the best of New Zealand in the strength of our towering trees.
The industry represents natural growth and steadiness.
These are quintessential New Zealand values.
After all, our greatest All Black was called ‘Pine Tree’!
If you read a few New Zealand poets you notice how frequently our writers use metaphors of New Zealand’s natural assets.
We are a country used to defining ourselves by our physical environment.
One of our best poets was Denis Glover, who wrote a poem called Home Thoughts:
I do not dream of Sussex Downs
or quaint old England’s
quaint old towns -
I think of what may yet be seen
in Johnsonville or Geraldine.
He meant we have left behind the idea of Mother England.
We are shaping a future here in the towns and suburbs of New Zealand.
When we think about the future we can make for ourselves, our economic development is central to everything we can be.
The industries of our future will determine our successes in Johnsonville and Geraldine and in every corner of the land.
Forestry and its downstream industries tower above other sectors when we think of the development of New Zealand’s regions, towns and even cities over the next decade.
MAF did some modeling work for the pre-election economic update.
It gives some context to bear out this potential.
When it extrapolated forestry models for the next ten years it showed the forest industry could be harvesting nearly 32 million cubic metres of logs, based on market demand.
That’s up nearly sixty percent on last year.
In ten years the industry could be processing up to twenty million cubic metres of those logs.
That increases current volumes by half as much again on current levels.
This model suggests the industry could have total export and domestic sales of ten billion New Zealand dollars.
That’s an increase of eighty percent on current levels.
It will transform New Zealand’s industrial base.
This is all based on models of what we know now about the current situation.
It doesn’t assume new markets will be opened or that new or different products are produced, though we must do both.
It doesn’t assume major new marketing initiatives.
Increased capacity in the model accounts only for publicly announced investment intentions.
Will we deliver these gains?
Modeling is imprecise and the figures are not a forecast.
It is a ballpark assessment of the industry’s potential.
This is robust growth and cause for optimism.
But it is far from cause for complacency.
If we look at the modeling more closely we see that sales are estimated to increase because of increased volumes rather than much higher average prices.
The industry has its own ambitious Vision 2025, which sets out long-term economic targets.
This is an industry where a very long-term view is called for.
We all have our own views about the possible impediments to the industry achieving its potential.
There is not much to be gained this afternoon from going through them.
But there will be a time when we have to commit to doing so.
The government has been committed to working in partnership with the industry to minimise barriers to its development.
I am confident the incoming government will continue and deepen that commitment.
There are, however, some factors the government can’t influence, such as international shipping rates.
There are others only slightly influenced by the government, like the exchange rate.
But where we can, the government will work co-operatively with the industry.
Partnership between government and industry should run deep, to sectors within the industry and individual firms where that can help to develop our economy.
Everyone who has a stake in New Zealand’s economic development has a place at the table.
We can’t allow rigidity and inflexibility to get in the way of the best outcomes for the industry.
The current focus for continuing co-operation is still the Forest Industry Development Agenda.
It’s generally known as FIDA.
are five work areas under the FIDA:
Education & training;
and excellence in wood engineering design.
All areas are up and running.
In July the FIDA Steering Group looked at market development.
Looking out ten to fifteen years it identified that the industry needs a strategic development plan.
An industry development strategy should help everyone in the industry to make informed decisions.
It also needs to recognise individual companies have their own strategies and approaches to their business.
A strategy will aim to ensure organisations pull against each other less.
It will provide a guide to measure decisions against.
It will outline where gains are possible through co-operation and where competition can do better.
The mechanics of a strategy are being worked on, along with a market development plan.
It’s not for governments or ministers to make the call on strategic issues.
The industry needs to master its own destiny, with the government acting as a facilitator and partner.
Co-operation is not limited to FIDA, though that is a valuable and constructive partnership.
Where the well-being of the industry and New Zealand can be advanced, the government will look positively at all avenues to co-operate.
Staying with the themes of opportunities and partnership, there is encouraging co-operation between the forest industries here and in Australia.
Forestry agencies of the two Governments are working together more.
This is a natural progression.
An increasing number of companies operate in both countries.
Many northern hemisphere investors look at the ANZAC market as a whole when considering investments "down under".
So Trans-Tasman co-operation could open up an opportunity for expanding our domestic market, if you want to view Australia that way.
But it could also develop into an opportunity for an ANZAC outlook to the rest of the world in export marketing.
I’ve been asked to comment today about post-election challenges.
The challenges the industry faces are enduring.
They don’t come and go with single elections or even a single term of government.
Enduring challenges are common to any business:
Generating a return on investment, for example, is a pre-requisite for encouraging new investment and re-investment.
We need to increase the value of our products beyond simply adding cost.
Social and environmental factors affect the industry uniquely.
Employment and soil stabilisation, for example, affect the industry intrinsically.
Each also has far-reaching effects on the wider community.
Challenges will also be posed over time by the changing make-up of the forest industry.
Those who grow the trees and those who process the wood are increasingly separated.
This is a fact of life in the industry and it poses new challenges.
Growers want to maximise returns, and processors want to minimise costs.
All businesses throughout the value chain need to make a profit.
But everyone along the value chain relies on others in the chain.
The challenge is to increase co-operation for mutual benefit within the wood products value chain.
We need New Zealand's value chain to compete with other value chains from South America, from Europe and so on.
And we need our producers to access global value chains where there are opportunities.
The alternative is competition up and down our own value chain as well as competition from offshore and missed opportunities.
Strong, well-resourced and well-supported industry associations are important players in meeting the challenges.
While the Forest Industries Council was a champion for many sectors of the industry, its structure wasn't meeting expectations.
It’s a sign of the industry’s maturity that it disbanded itself.
And from there WoodCo has been developed as an "association of associations".
I hope all industry associations will see value in participating in WoodCo.
Now that the Forest Industries Council has been dissolved some have sought better representation - the so-called ‘corporate wood processors’ and the pulp and paper sectors.
So the Wood Processors' Association has formed.
The Government welcomes these developments and will work closely with the new industry organisations.
Research and development underpins our economic growth in many industries.
In forestry, science has lifted the value and efficiency of our production.
It is an essential component of future growth in the value of the sector.
So it’s pleasing to see represented at this forum Scion, the organisation that is still forestry's primary research provider.
There are sure to be die-hards (like me!) who still refer to ‘Forest ‘Research, and even further back to ‘FRI’.
Scion, as it is now known, has faced challenges to its own economic growth.
It’s had a long association with the forest industry and I know we all look forward to its success in meeting the research needs of the industry in the twenty-first century.
The modeling I mentioned at the outset suggests the potential for much greater volume sales in this industry.
Better living standards and better profits come from better productivity.
Better science will help us to achieve productivity gains.
Introducing more design into our production will help to push us up value chains.
Better market access and market development will help us to move up the value chain and to find value niches.
The greatest productivity gains will come from better aligning our production to market demands.
Better returns from the industry, though, will come from greater sales, but best returns will come from producing higher value products where there is demand.
So it's a central challenge for the industry, as with all New Zealand enterprise, to focus on productivity gains.
If we want, as a nation, to buy higher value imports, then we need, as a nation, to sell higher value exports.
The challenges for this industry, as with any business, will be resolved by a judicious and businesslike sense of purpose.
Growth comes from identifying opportunities and overcoming barriers to growth.
I'm confident that better strategic development and better co-operation within the industry will drive it to exceed the expectations of many.
The long-term future for forestry, as with all New Zealand industry, will be determined by the ambitions we have.
It takes entrepreneurial attitudes and a culture of success and creativity.
If there is one quality to fill us with confidence and optimism about New Zealand it is meeting young people with business ideas.
They see not only forests, and the market possibilities before us now.
They see what we are yet to become, in Johnsonville and Geraldine.
They see the potential for creative business uses of our wood.
They see markets we barely begin to dream of.
We need to foster and encourage a spirit of entrepreneurial creativity in our industries.
We identify as New Zealanders with rugged industries, like forestry.
We will always have that; it’s part of what makes us kiwis.
I hope we will also increasingly have a dimension of unrivalled creativity in our business.
When I look to the challenges ahead of this industry, that’s the greatest of them, and I look forward to working with you on that challenge for the future.