Notes:
(*) Quantification or evaluation was not possible due to time constraints.
- Values in US$ billion (various sources)
- New Zealand exports for 1996-2000 (MAF Statistics), Chile exports for 1997-2000 (INFOR Statistics), USA exports for 1994-2000 (World Trade Atlas GTIS), Australia exports for 95/96 to 99/00 (National Association of Forest Industries), Sweden exports for 1990-1999 (Swedish Forest Industries Association)
The initial evaluation does not consider absolute numbers, e.g. volume of wood resources, but indicates the relative increase in resources within each country and whether those resources are accessible in physical and economic terms, etc. The same principle was used to evaluate all the variables.
In the second stage of construction of the competitiveness index, each variable was assigned a value in a scale of 1 to 10, with 1 being the least competitive value and 10 the most competitive. Each factor was then evaluated using a simple average of the variables.
Table 12 shows the results of the second stage of evaluation of the forestry factors. These results are summarised in Table 13, which also includes the weighted index and ranking of countries according to the forestry factors only.
Table 12: Evaluation of Forestry Factors (Second Stage)
Notes:
- The variables Number of forest product exports, Number of countries exported to and Top 5 markets percentage were combined into the single variable Diversification of markets and products.
Finally, the Wood Processing Competitiveness Index was obtained after adding all the factors (base competitiveness index plus forestry factors) weighted by each factor percentage as shown in Table 14. These are summarised in Table 15, showing the final results for the Wood Processing Competitiveness Index.
Table 14: Wood Processing Competitiveness Index
Table 15: Final Results Wood Processing Competitiveness Index
| Country | Wood Processing Competitiveness Index |
| New Zealand | 7.0 |
| Australia | 7.2 |
| Chile | 7.2 |
| Russia | 5.0 |
| Sweden | 7.6 |
| USA | 8.4 |
Results and discussion
From the results shown in Table 15, New Zealand competitiveness in the wood processing industry is lower than the United States and Sweden, similar to Chile and Australia, but significantly higher than the competitiveness of the Russian Federation.
The subjectivity of the evaluation method, however, makes it impossible to explain small differences in competitiveness between New Zealand, Australia and Chile.
The value of the proposed index is in the relative importance of the factors and variables that were used in its construction, rather than the absolute values presented in the index.
One important question resulting from this exercise is how important is the general competitiveness of a country compared with specific wood processing factors to determine its competitiveness for the wood processing industry? In this case, the index proposes that 40 percent of a country’s competitiveness in the wood processing industry is explained by its general competitiveness. But this number may well vary according to who is doing the evaluation. For a local investor the general competitiveness of the country may be irrelevant, because the investor is determined to invest within his/her own country, with wood processing factors being more relevant. Of course this is not always true, especially for large investors, who have the choice of investing overseas. A small investor will be more likely to invest locally, attracted by the forestry factors and maybe comparing these factors with those of other industries before making a decision.
To conclude, competitiveness at the country level is indeed very difficult to estimate because there are many different perspectives to consider, and each one will consider different aspects of competitiveness. Having said that, it is still possible to draw some general conclusions for each country.
New ZealandNew Zealand’s major competitive advantages are its wood processing development, (relatively high level of technology in wood processing plants plus a broad spectrum of products), its industry knowledge development (high knowledge of radiata pine, relative high education and training and adequate labour skills) and investment attractiveness (medium wood and processing costs, adequate infrastructure, favourable exchange rate and relative short distance to ports). In contrast, its main disadvantage is a weaker general competitiveness compared with the United States, Sweden and Australia.
In terms of the forest resource, quality and availability are strengths but its relative dispersion and the relative high cost of wood downgrade its comparative competitiveness. Low species diversification also makes New Zealand less competitive than other countries as it relies almost exclusively on the international performance and market environment of only one species.
Although market development for New Zealand wood product exports has improved in the last decade, other countries such as Chile have outpaced it. The number of products exported and the number of countries exported to are good indicators of the maturity and competitiveness of an industry. Unfortunately it was not possible to obtain this information for all the countries analysed.
AustraliaAustralia’s major advantage is its high score on the ‘general competitiveness’ factor, which has been improving significantly in the last five years. It also scores high in the ‘industry knowledge’ factor. Favoured by strong economic growth, Australia has been able to invest heavily in education, training, research and development and its government has considered the forest industry as a special area to be developed. On the other hand, it has weak international market development. Its wood processing development has been until now focused almost exclusively on the domestic market. It has the challenge now to grow and compete into the international market for wood processing products.
ChileChile scored well in all forestry factors helped by a healthy industry, which has taken full benefit of the globalisation process of the last decade. Chilean companies have capitalised, diversified in products and markets and finally invested in other South American countries where the potentials for forest plantation growth and processing are very high. Its major weakness at the moment is a relatively low position of general competitiveness for its economy. After a recession year in 1999, Chile is recovering slowly, but failing to resume the annual GDP growth rate of 6 to 7 percent that gave it a major boost in the past decade. Uncertainty over some legislation changes in the labour market and proposals for increased regulation in some areas of the economy may be the cause for a delay in new investments that has made unemployment rise considerably. However, a devaluation of the currency plus increased production in the wood processing industry confirms a high competitiveness value.
RussiaRussia has a significantly lower competitiveness value compared with the rest of the countries analysed. The main reason is the poor state of the economy and all the problems associated with the transition from a socialist centralised system to a free market one. The lack of capital, high corruption and an obsolete legal system are some of the many issues that are preventing a higher general competitiveness value. As for forestry factors, Russia shows a much better performance, especially in terms of resource cost and availability, energy costs and lack of environmental pressures. Some of the weaker factors are the current state of the wood processing industry, with all the legacy of the Soviet era in terms of poor management, efficiency and lately a lack of maintenance and equipment modernization. (Chaudhry, 1999)
It is fair to say that Russia will provide limited opportunities in the near term for foreign companies willing to invest in a high risk/high return environment and it will take some time for the economy to realise the full potential of its huge wood resources.
SwedenIts major strengths are in processing development and industry knowledge development of its wood processing industry, together with a very high general competitiveness evaluation. Sweden is usually given as an example of a relatively small country that has taken full advantage of the globalisation process and has embraced the knowledge economy. In reality, Sweden has been a highly industrialised country for a long time, with many highly competitive industries.
Its principal weaknesses are a relatively high cost resource that is based on slow growth natural forests, an important active environmental movement combined with very restrictive environmental legislation.
United StatesThe main competitive advantage for the United States is the world leading score of general competitiveness. During the past decade, a strong growth has stimulated demand for wood products making it the main market in the world for wood processed products.
A highly competitive wood processing industry is installed in the U.S. with capital availability and a strong knowledge development. Abundant natural and plantation resources would make the U.S. the ideal location for any wood processing company. However, an increasingly powerful environmental movement has persuaded the government to reduce the supply of wood resources for a number of processors during the past decade. This uncertainty about a key aspect of the business case makes the competitiveness index fall well below any other country as far as resource availability is concerned. High relative wood and processing costs make it more difficult for non-American companies to consider the U.S. as an attractive place to invest in wood processing.
Contact for Enquiries
Rural Affairs Coordinator
Sector Performance Policy
MAF Policy
Ministry of Agriculture and Forestry
PO Box 2526
Wellington
NEW ZEALAND
Phone: +64 4 894 0675
Fax: +64 4 4 894 0745
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