Politics and forestry – new bedfellows?

HERE IN NEW ZEALAND, FOR THE PAST 20 years forestry and politics have rarely been found in the same sentence, let alone paragraph.

There was a clear separation following government forestry asset sales in the late 1980s and early 1990s, which led to a clear commercial focus replacing the previous, wider objectives of the NZ Forest Service.

Now, it is possible that the MMP coalition, will reconsider government’s role in forestry through common policies to intervene in the forestry sector to achieve some of those wider objectives once again, Much of the political campaigning has comprised rhetoric rather than fact, so it is an opportune time to review some of the key factors motivating previous governments to get out of forestry as we await news on how it will be treated under the new administration.

DEVOLVING FOREST OWNERSHIP THROUGH PRIVATISATION IN NEW ZEALAND

(Source: Food and Agriculture Organization of the United Nations, fao.org)

Between 1990 and 1992 the government sold more than 350,000ha of planted forests to the private sector. An additional 188,000ha of government-owned forests were sold in 1996.

FROM GOVERNMENT AGENCY TO

CORPORATION

From 1919 to 1987, the government's forestry operations were run by a single agency, the New Zealand Forest Service. The department's governing legislation of 1949 established its primary objective to produce and market forest products profitably. This objective was amended in 1976 to take other factors into consideration, including policies and directives to undertake afforestation in regions requiring economic development, employment provision, utilisation of low productivity land and respect of planting targets and environmental objectives.

By the mid-1980s, a number of converging factors suggested it was time for the government to rethink how it managed its forestry assets:

• A surge in the supply of wood from the forests was forecast for the 1990s, and a more commercial operating environment was regarded as necessary to maximise returns; this would require downstream investments

• The environmental movement was seeking to ensure that the government broadened its focus to consider not only wood supply, but also other aspects of sustainable management, including environmental issues

• The government's economic policy was to deregulate industries and thereby expose business enterprises to the pressures of a competitive environment for efficiency

• As a subset of the above, government policy was to clarify organisational objectives and thereby enable transparency and accountability.

In 1985, a decision was taken to corporatise the commercial functions of the New Zealand Forest Service, ie to transfer these functions to a state-run enterprise. Thus, in April 1987, the New Zealand Forestry Corporation was established as a limited liability company empowered to manage the government's commercial forestry operations (550,000ha of forest plus sawmills, nurseries and other assets).

The non-commercial functions of the Forest Service were transferred to two new government departments: the Department of Conservation (which would manage the state's natural forest estate) and the Ministry of Forestry (which would have policy, forest health and protection, and forestry research functions). The roles of the Ministry of Forestry were transferred to the new Ministry of Agriculture and Forestry in 1997. It subsequently became the Ministry for Primary Industries.

The New Zealand Forestry Corporation was a much leaner organisation than its predecessor, as:

• Some jobs were transferred to the newly established government departments

• Other jobs were turned into positions for contractors, as part of a strategy to improve labour efficiency

• Many of the head office jobs were lost. The principal objective of the New Zealand Forestry Corporation, as with all state-owned enterprises, was to operate as a successful business. A clear commercial focus was regarded as a prerequisite to enable the corporation to compete effectively with the private sector.

Indeed, the New Zealand Forestry NZ Forestry Corporation Results 1983 to 1990 (Source: FAO.org)

Corporation proved very successful in turning a loss-making government agency into a highly profitable corporate enterprise (see graph above). No longer constrained by social and environmental objectives – now the domains of the newly established government departments – it focused on its profit objective.

THE IMPETUS TO PRIVATISE

Commercial success was not sufficient, however, to entrench the new institutional approach to managing the government's commercial interests in forestry. The following considerations suggested that further change was needed and that the answer would be to sell the government's forests.

The higher profits of the New Zealand Forestry Corporation were partly attributable to the fact that, with profit maximisation as its primary objective, it did not carry out several of the multiple functions – economic, environmental and social – of the New Zealand Forest Service (Kirkland, 1996).

NZL