Eastern Wood Council launch - Gisborne

Acknowledgments:
Mayor Meng Foon,
Julian Kohn (chair of the Eastern Wood Council)
Peter Farley
Matt Todd
Sheldon Drummond

The first thing I want to state is that I am deeply confident about the future of the wood industry in New Zealand. I recognise that might sound optimistic at a time when the industry has been up against it. And timber people have felt the hard times as much here as anywhere.

So I want to take some time today to state why there is a great future - for those in the industry, for this region and for the country. And I also want to talk about what we have done and what we still have to do to realise its potential. None of us who have dealt with the timber industry are under any illusion about how tough things have been:

Forestry prices have been at cyclical lows. Industry asset strippers and failed investors have done their share of damage. They put under some quality businesses.
Other managers have had difficulty adapting to the regulatory environment and to the market. All of these factors have played a role to some extent. But none of them explain the root cause of the industry's difficulty.

The deep cause of the timber industry's difficulty has been the weakness of its basic structure. It is over-exposed to cyclical commodity prices and short on high value production. Our timber industry was developed as a way to grow trees as efficiently as possible and sell as many as we could. We never did enough to add value creation to that process.

We have been price takers, trying to compete on price because we are efficient growers. Our approach left us with too few resources when the global market pushed our competitors into low-cost exports as well. Our value chain is not going to change over-night. But I welcome the creation of the Eastland Wood Council because it is focused on unleashing the potential of this East Coast region. With initiatives like this, we can overcome the problems the industry has experienced in recent years.

There is enough wood growing in the East Coast Region to support a substantial expansion of the local economy. If market conditions are right the volume of wood harvested from this region could increase threefold over current volumes by 2010.

The Eastland Wood Council aims to have sixty per cent more of the logs, which will be harvested on the East Coast processed here, locally, within ten years. The economic and social implications of an increase like that are staggering. To achieve it, there is a lot of work to do.

The access road to the port at Gisborne needs to be upgraded and we need to complete essential access requirements that I got started under the regional development roads programme. We need to keep working in partnership, with industry and local and central government all playing their role alongside each other.
We need to keep the pressure on drugs - we need to offer jobs, not drugs, as the best path to a high quality future for young people on the Coast. And we need to keep working to develop the skills, which the industry needs to provide high quality jobs and opportunities.

I know the timber industry has been working on many of these issues for a decade, since the East Coast Forest Industry Group started up. My own involvement goes back a few years now, to the Tairawhiti Development Taskforce that got to work in April 2000. There were major lessons from the partnership we developed on that taskforce. One was that investment in wood processing was essential to the long-term well-being of the forestry industry. And it revealed that the government had to play its role in roads, skills and other issues such as resource planning.

I know there is further to go yet. But the progress that has been made has produced some encouraging results. For example, the roads programme was important in the decision by Hikurangi Forest Farms to buy 58 hectares near Gisborne for its new wood processing plant. It still needs Overseas Investment Commission sign off, but with resource management consents, the right market conditions and exchange rate, a processing facility will be build on the site by 2009. If we can increase local processing as well, the impact on the regional economy will be dramatic.

Officials estimate regional GDP could increase as much as 25 per cent. This would represent an additional $6000 in per capita income for the region. Who could not be inspired and motivated by the possibilities this offers? I feel confident about the future of the industry and the region because I know potential like this is within our reach. We need to commit ourselves to realising these gains.

The launch of the Eastland Wood Council will help the industry to refocus its strategy and refresh the enthusiasm of all of its players. Those who are still in the industry after the tough times it has been through are survivors. Companies like Juken, Earnslaw One, Hikurangi and others have been around for a long time.
You are all good corporate citizens.

The challenge we face is to transform the performance of the industry beyond the level that would be achieved if everyone did their own thing. There is an infrastructure in place, and experienced players could ride the upturn in the cycle when it comes. It's happened before. But - as we have learned from bitter experience -- the laid back approach doesn't maximise the potential of this industry. And it doesn't do much to lock in prosperity for the times when log prices turn downwards.
It's no wonder the industry struggles with its image when workers and businesses that depend on it for the livelihoods have a bulldozer driven through their dreams every few years.

We want skills in the industry - so we want young people to make a commitment to a future they believe is going to still be there long after they qualify. They want to see an industry committed to long-term growth. Only steady investment in higher value processing will ensure them of its potential. There are signs we could be at the threshold of a new future.

In the Rotorua Post last week there was an article telling of the confidence returning to the forestry sector. The general manager of the forestry industry exhibition there said many of the exhibitors felt "the industry had turned the corner and was heading for brighter times." Things are still tight, he said, but the signs are positive across all forestry industries from forestry equipment and major capital items to saw milling and added value processing. And he commented, "There are a lot of genuine good news stories in this industry but they don't always see the light of day."

"New Zealand companies are taking their innovative technology to the world... ranging from innovative tree breeding...
To software...
To sophisticated harvesting and processing technology...
To exciting research programmes."

Scion - formally NZ Forest Research Unit and its cutting edge wood fibre research programmes are leading the way. This is why I feel confidence. Times seem to be getting better. No one wants to predict fuel prices, but the recent rises in shipping costs seem to be flattening out, if not yet falling. Last year lumber prices in US dollars held steady and prices for panel products improved.

It's now clear that the New Zealand economy overall took a breather from six years of continuous growth during the election season in the second half of last year. But signs are that things are getting better already, especially in the export sectors. Now the New Zealand dollar has fallen significantly against the US currency. It's down to 60 cents US and it might fall further, especially if the US keeps increasing interest rates and we begin to reduce ours. That will provide relief.

But we need to use the opportunity to build in profitability across the industry. We need to see new investment and strategies that increase productivity. We need to build a long-term platform for substantial and sustainable growth.

The Eastern Wood Council will have a leadership role in unleashing the potential the industry has on this coast. I welcome its launch and the constructive role it will play in the development of the wood processing industry.

And I want to close by telling you about a football player from Poverty Bay who went off to play Super 14. He was with the Hurricanes, so he had a problem getting a start against all those All Blacks and star players the Canes have in abundance. He went the whole season, couldn't get a start and then a week before the last game of the season ...his father died. He went off to the tangi and came back the day before the last big game - he went up to the coach and he begged to play. The coach thought about it and said, 'well it's the last game, what can we lose - I can always take him off if it doesn't work out.' So he put him in the starting line up.

Well he ran, and tackled and scored three tries, he was first to every ruck, kicked, passed, never got penalised - Man of the Match.

And after it the coach went up to him and said, 'what happened out there? You were great! You played like an All Black!" And the player said, "Coach, you know my Dad died last week? And you know he was blind? Well this week was the first time he ever saw me play."

We all have potential within us. When we think about what this industry can do for the young men and women of this region, we can reach heights we dared believe. This region is lucky enough to be blessed with some of the most awesome beauty in New Zealand and some of the best lifestyles. If we can add an economy to compare, a job-rich, high-value economy, the place will be unstoppable.

I welcome every initiative that will help to take us closer to it and I welcome the launch of this Council.

ENDS

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