Risks and impacts of policy adoption
The preceding analysis identifies a number of changes that could, or should, be made to facilitate greater investment in wood processing. Many of these are quite generic, identifying potential areas where improvement should be sought, rather than specifying what that improvement might be. For example, sea-freight costs are a substantial component of the delivered costs of New Zealand wood, but they are an issue that is rarely discussed in industry fora, and as a forestry industry issue it is suggested shipping has received only a quantum of the attention paid to, for example, pruning regimes. Thus, the law of diminishing returns suggests an industry investigation of sea-freight options may yield far greater cost savings than a similar-scale study of silviculture. The key is to seek continuous improvement along the production chain, and to put the most attention into areas where the greatest returns (or cost savings) are likely to lie. At present, shipping is an issue which is receiving some renewed attention, but it is only one example of parts of value chains that have been paid much less attention than areas in which New Zealand has developed its greatest strengths.
An obvious area of concern is the Resource Management Act, and the evident magnitude of RMA-related costs reported shows this concern is well-justified. Logic surely dictates that Governmental consent processes should not be imposing multi-million dollar costs on industry investments, and nor should they be delaying projects by 18 months. These concerns need to be repeatedly hammered home to government, especially since the costs are tangible and measurable. The risk here is that if changes are not made to streamline RMA processes, then investment will be lost to New Zealand, and the efficiency of investments made will be compromised. Similar points apply in relation to reviews suggested for other legislation. If New Zealand does not offer a broadly level playing field for investors, then investment will occur elsewhere. Thus, in general, the risks associated with policy adoption need to be offset against the risks of maintaining the status quo. In an industry earning NZ$3 billion in export receipts there is surely scope to examine areas, with some specificity, where efficiencies might be enhanced, costs reduced, or profits increased.
Perhaps the most important suggestion relates to the need to be questioning some of the foundation concepts on which New Zealand’s forestry industry has been built. One of the key trends surrounding the New Zealand forestry sector during the past 20 years has been a move towards greater specialisation, which has come at the cost of generally narrowing individual focuses. Thus, where 20 years ago a student contemplating taking a forestry degree had a wide variety of potential career choices - natural forest silviculture and management, a wide sphere of potential research options, government and policy functions, as well as plantation industry roles – today, the suite of choices is much narrower. To appeal to the best calibre of people, the forestry industry must offer something else – and that something may be the verve of a dynamic industry that is addressing some fundamental questions about its core businesses and perceived to be shifting to some cutting edge principles of business – rather than an industry that is killing enthusiasm and losing talent and experience through pervasive restructurings. The key suggestion, therefore, is the need for all aspects of the production chain to adopt a market-led philosophy, and this involves better information sharing, better networking and a more open approach to strategy. The risk - if this happens – is that occasionally some sharp practices may see a business opportunity stolen. The risk – if it doesn’t – is that the industry will retain a narrow, sub-optimal focus – with opportunities lost to all.
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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