The history of forest plantation development in New Zealand is one of long-term vision, targeted government policies, use of direct and indirect incentives during its development phases, and the ability to quit government involvement once its role had been fulfilled (Figure 5). In the early stages of development, policies, legislation and incentives were focused on establishing a largely government-owned plantation resource to reduce the pressure on indigenous forest. In 1987, after over 60 years of such involvement, the government decided to relinquish its hold on plantation forestry. Direct incentives to forest planting were removed and a government-owned corporation was established to manage government plantations. By 1993, the government sold the bulk of its 0.5 million ha of plantation forests to domestic and overseas bidders.
Source: Ministry of Agriculture and Forestry
Figure 5: Sequences of plantation forestry development, principal incentives and area of new planting
Once direct government incentives had been removed during the reforms of the 1980s in an even-handed way across the economy, within a relatively short time the industry neither expected nor wanted the assistance. Indeed, the replacement of, at times, unpredictable government policy with free-market signals was seen by a mature industry as more sustainable. It was apparent that any move to restore subsidies or other market distorting mechanisms would be firmly opposed. Just as direct incentives played a central role in the establishment of New Zealand’s plantation forest industry, the absence of direct incentives was equally important in ensuring that a mature, export-oriented industry remained efficient and internationally competitive, and flourished.
The government and the forest industry recognize the continuing importance of certain indirect incentives. These focus on the provision and funding (in part) of infrastructure, biosecurity, research, market access initiatives and information, particularly independent and authoritative plantation resource data. Also critical have been the establishment and maintenance of neutral investment and environmental regulatory regimes within which all industries operate on an equal footing.
A wide range of direct and indirect incentives have featured in the development of New Zealand’s plantation forestry. The effectiveness of incentives is dependent on a clear understanding of their objectives (short, medium and long terms), the phase of development of the industry (new, developing, and mature), the key participants and their motivations. It is not possible to quantitatively assess the impact and effectiveness of individual incentives because:
They have been used in conjunction with each other and cannot be isolated;
The plantation forest industry comprised a number of interest groups that are motivated by diverse objectives and therefore by different incentives;
The impact of the incentives changes with the stage of development of the industry;
Cost details for most individual incentive mechanisms are not readily available; and
Indirect incentives are generic and not specific to plantation forestry.
The history of plantation forest ownership in New Zealand has seen dominance by the government replaced by dominance of the corporate sector. If the recent new planting trend continues, there could be dominance by small-scale plantation forest owners over the next couple of decades.
The various types of owners have been motivated by different objectives. The government initially wanted to ensure a sustainable wood supply to meet the nation’s future needs, and then desired economic development based on an export-oriented industry. The corporate enterprises had to deliver financial returns to their shareholders, while small-scale investors were motivated by a combination of factors (Table 8).
Table 8: Motivations of small-scale investors to establish plantations
|
Farmers’ motivations: |
Individual investors’ motivations: |
|
· sustainable land use |
· diversification of their
investment portfolios |
Plantation forestry as a new industry in New Zealand
The key incentives influencing the successful establishment of a new plantation forest industry in New Zealand were:
The understanding by the government of the importance of a secure wood supply, knowledge of the limitations of the indigenous forests to satisfy future supply and clear and generally consistent policies (focused on afforestation) to address these issues, which provided the foundation upon which the industry has been built; and
Government-led afforestation to demonstrate the biological and commercial successes of this new land use with exotic species on a long production cycle (thus developing the knowledge base and reducing the risks for private enterprises).
Plantation forestry as a developing industry in New Zealand
The key incentives influencing the successful development of a young plantation forest industry in New Zealand were:
An established government-owned resource base that private industry could build upon to develop regionally significant, and eventually export-oriented, plantation forest industries;
Government-led development of new, large-scale sawmilling and marketing to utilize the plantation wood resource. This was a critical step because plantation-grown wood has very different physical properties to the indigenous wood resource traditionally used in New Zealand;
Government-led planning and development of infrastructure in the key central North Island region that formed the heart of the plantation forest industry;
Government-funded research that increased the understanding of silvicultural management of plantation forests and the utilization of plantation-grown wood;
A period of government subsidies and extension services to encourage the uptake of small-scale plantation forestry by farmers, other landowners and local authorities; and
A commitment to train professional foresters and forest management personnel.
Debates and acrimony between the agriculture and forest industries, and the environmental movement and the forest industry, in the 1970s and 1980s, were the major disincentives. These resulted in statutory land-use controls, a poor public perception of the forest industry, and constrained development to some degree.
Plantation forestry as a mature industry in New Zealand
The key incentives influencing the transition to a mature plantation forest industry were:
Deregulation of the economy and the withdrawal of direct subsidies to ensure that plantation development became more efficient, market-led and internationally competitive;
The introduction of neutral and stable economic and regulatory environments to ensure that land uses and industries competed on their merits and did not face risks from changing and conflicting political directions;
The opportunity for private investors to purchase government-owned plantation forest assets and secure access to significant wood resources;
Majority funding of research by private industry to ensure it focused on end-user requirements;
Development of effective working relationships between the forest and agriculture industries, and the forest industry and environmental groups that led to better understanding and varying degrees of support for the objectives of each group; and
Publication of high-quality forest industry statistics, wood-supply forecasts and other information, often through joint initiatives by the government and private sector, that is essential for good policy development, short-, medium- and long-term planning, and monitoring.
A major, but short-term (1987-1991) disincentive was a taxation regime that might have been theoretically neutral, but failed to recognize the long gestation periods, and depressed new planting during its existence.
FUTURE DIRECTIONS
The focus of New Zealand’s plantation development strategy over the last 15 years has been on managing economic fundamentals (inflation, interest rates and the costs of business undertakings), encouraging enterprises and innovations, and avoiding, remedying or mitigating adverse environmental effects. There is no expectation of, or desire for, change to this approach. Built around an open and market-led economy, the New Zealand plantation forest industry has matured sufficiently to ensure continuing growth and vigour.
Nevertheless, there are issues that impinge on the development of the industry. Through the joint Wood Processing Strategy initiative, the government and forest industry have identified these issues as:
Biosecurity and the protection of the forest resource;
Climate change and the impacts on industry by the ratification of the Kyoto Protocol;
Investment in wood processing with a rapidly increasing wood supply;
Availability of skilled labour;
Market development and certification of sustainably grown plantation wood;
Research, science and technology and increasing the focus on markets, end uses and new products;
Inconsistency in the implementation of the Resource Management Act (1991), and the cost and time required for obtaining agreements;
Trade access and the elimination or reduction of tariffs and non-tariff barriers;
Development of infrastructure in some forestry growth regions;
Future energy needs of, and availability to, the wood-processing industry; and
Improvements in occupational health and safety.
The delivery of strategies to address these issues and other supporting functions will continue to require government border control, forest policy and research agencies with appropriately trained staff. A growing and diverse industry will continue to coordinate its input to issue resolution through sector associations and an integrated Forest Industries Council.
At the farm forestry level, development will continue to depend on the relative profitability of farming and forestry, the perception of forestry (often gained through the media), the development of certification, and the perception of long-term commercial and non-commercial values associated with trees and wood.
The ongoing success of the current strategy and new initiatives will be monitored primarily through:
Annual estimates of new planting and the expansion of the plantation forest estate;
Statistics reporting roundwood removals from plantation forests;
Estimates of investment in new wood-processing facilities;
Trade statistics reporting the volume and value of exported forest products;
Statistics reporting the volume of logs exported versus the volume processed domestically;
Comparisons of wood supply forecasts with estimates of actual harvest volumes;
Monitoring of trends in domestic and international log prices and price indices for forest products;
Reporting on incursions of new pests and diseases entering the country and their controls; and
Economic statistics reporting the contribution of forestry to the GDP.
CONCLUDING COMMENT
Lessons can be learned from the successes and failures of incentives in other countries, but ultimately the appropriate combination of policies, strategies and supporting incentives should reflect individual country circumstances, and the national needs and objectives. Consideration must be given to the factors that motivate people to invest in planting trees. Forestry is a long-term investment, and long-term visions and strategies - based on reliable information of resource, product, market supply and demand - are required. There is no universal model for success. New Zealand’s approach has been highly successful. Much of the impetus provided by the New Zealand Government has been through indirect incentives, particularly research. Such an approach may or may not be successful elsewhere.
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