New Zealand forestry industry has wasted NZ$5.5B in eight years, says local timber federation

SAN FRANCISCO , October 25, 2005 () – The New Zealand Timber Industry Federation (NZTIF) claims the country's logging industry has destroyed NZ$5.5 billion of capital in the past eight years, seriously harming the economy, reports New Zealand news service Stuff.

The Federation contends the logging industry has focused too much on achieving scale at the expense of other considerations.

NZTIF Executive Director Wayne Coffey performed research for a discussion paper on the industry's future, extracts of which were published in the Federation's September newsletter.

"The industry would have made a substantial return if it had not planted trees," the newsletter said, and that the land itself would have appreciated in line with other property values in New Zealand. "We need to improve the quality of what we do, not the quantity," the newsletter added.

NZTIF also claims questions need to be asked about the credibility of forest valuation methods and the ethics of forest investment plans. Parts of the forest industry owe their existence to government intervention through such things as tax breaks, rather than economic fundamentals, it argues.

For too long government support has been based on the idea that New Zealand's industries needed scale because they were in a small country. It was a fallacy that scale equaled economic value.

The paper differentiates between forest ownership, the logging sector, and wood processing. It says that in the past seven years the wood products industry has earned a surplus of NZ$1.9 billion.

The forest ownership and logging sectors lost NZ$3.5 billion in the six years to 2003 and have probably lost another NZ$2 billion since then.

The NZTIF estimates that the government has invested NZ$70 million-worth of support a year into programs for the forestry industry, but that this was doing little to improve its performance.

The wood processing industry took 65% of the sector's log output and paid 20% more than that paid by export customers.

However, wood processors are now experiencing financial losses and running down capital in order to survive, said the report. "The best outcome may well be a confirmation of the present trend toward a smaller forest industry with a much greater proportion of output directed to the export of unprocessed logs."

* All content is copyrighted by Industry Intelligence, or the original respective author or source. You may not recirculate, redistrubte or publish the analysis and presentation included in the service without Industry Intelligence's prior written consent. Please review our terms of use.