NZ government rushes to sell forests

Issue 

On August 19, it was disclosed that the New Zealand National Party government was planning to proceed with the privatisation of the Forestry Corporation, despite the fact that the government could well be turned out in national elections on October 12. We reprint here major excerpts from a speech by Alliance leader JIM ANDERTON in parliament on August 20. The Alliance has been conducting a petition campaign to have a national referendum on forest privatisation.

A TV3 poll last night showed 61% support for keeping the forests, and only 25% supporting the government.

We should start by looking at what is being sold. We are talking about the perpetual right to take every tree that ever grows in the forest.

Nor is it just the trees: it is the entire Forestry Corporation, with all of its skill and world class expertise, with all of its workers, with its brand name.

It is the Kaingaroa State Forest and three smaller forests in the central North island. It is the Waipa sawmill, a smaller plant at Mt Maunganui.

It is the perpetual right to use the land on which the forests grow. Unless there is a successful [Waitangi] Treaty claim, we will never get the forests back.

The prime minister has tried to say the corporation has been a loss maker. In fact it is one of the world's most successful forestry companies. In the five years since the corporation was established in its present form, it has returned $1.1 billion in dividends to the taxpayers who own it.

If you want to talk about loss-makers, look at the history of forest sales.

In 1989-90 the Labour Party sold 246,700 hectares for $1027 million. In 1992 the National government sold the rest for $366 million. World timber prices then rose rapidly, and within four years some of those forests were resold for three times the purchase price.

Foreign-owned companies like ITT Rayonnier, Carter Holt, Wenita and Juken Nisho have plundered our economy and took the profit that should belong to us. The taxpayer has missed out. New Zealanders who have had to put up with reduced social services have paid the price because Labour and National deprived the government of a perpetual revenue stream.

If the forests are sold, the government loses the profits — money that should be spent on health, on education, on meeting the needs of New Zealanders. That is money that will have to be raised some other way.

National says governments shouldn't own businesses. Its ideology says governments can't run businesses as successfully as the private sector can. Even if we ignore the fact that there is no empirical evidence for that statement anywhere in the respected world literature, let's think about it.

If we are to get a good a good price for the forests, it requires the government to be better at predicting the future value of timber than an international forestry company is. So what National is saying is that governments aren't as good as the private sector at owning forests, but the government is better at predicting the future value of forests.

The idea that governments should not own forests is itself flawed. I draw the attention of the house to an article written by New Zealand's foremost expert on forest economics — a lecturer in forest economics at Canterbury University, Ted Bilek. In an article called "The challenges of privatisation: New Zealand's experience with forestry", he says:

"Certainly a country's forestry sector should be organised so that it operates efficiently and delivers the forest products which the market demands over time. But world forest history has demonstrated that a government policy of laissez-faire does not always achieve this. Going back in history, there are usually good reasons why the State is involved with forestry."

The evidence all points one way. There are very good reason for forests such as Kaingaroa to remain publicly owned. The state is better at some businesses than the private sector is. Forestry is one of them.

There is no guarantee of more jobs from the sale. In fact, the minister repeatedly refused to tell this house that increased employment and investment in downstream processing would be a condition of the sale.

Jobs will be lost. The buyer who will bid highest for the forests will be the one which has existing spare processing capacity. Fletcher Challenge will close Waipa eventually. There is nothing to stop the new buyer from exporting all the timber as whole logs to feed their overseas mills. Existing jobs will go, along with the hope of new jobs, and pay and conditions of existing jobs will deteriorate.

Forestry Corp has very low debt-equity ratio by international forestry company standards. It could easily invest in more sawmills and manufacturing plants to create jobs and add value to the regional economy. Even if the present government will not allow this to happen, it could happen under a future government if the forests are kept in our hands.

The sale of Forestry Corporation will risk losing a unique opportunity to lead the world market for timber grown in sustainable forests. That means a wider mix of species, use of less toxic preservatives, better management of toxic chemicals and efforts to protect soil and water values and wildlife habitats within the forests.

If we keep control of our forests we can guarantee an approach that will position New Zealand at the forefront of quickly grown demand for eco-timber grown in sustainable forests. But a giant multinational corporation is unlikely to be interested in the New Zealand environment.

For all of these substantive reasons, the forests should be kept in New Zealand hands. New Zealanders know that. That is why they are signing an Alliance petition against the sale in their tens of thousands. It is why we will gather sufficient signatures before the election to force a referendum, and why that referendum will be successful.

I want to turn now to the particular reasons why this particular sale is defective — the reasons it is as deeply flawed as the NZ Steel sale that is now costing New Zealand taxpayers hundreds of millions of dollars.

A sale now would be a breach of constitutional convention.

The Cabinet Office Manual records that governments are subject to a convention of restraint in the period leading up to the election. One of the restraints is against signing a major contract in the three months before an election.

The next point is that this sale is coloured by the fact that no less than six ministers have shares in companies bidding for the forests. At the very time that cabinet is considering whether or not to sell the forests, a third of cabinet stands to gain financially from the decision.

Then we turn to the likely buyers.

The Alliance has asked the Commerce Commission to investigate the prospect of Fletcher Challenge buying Forestry Corp. It would end up with a dominant share of the market for mature trees.

If we want to see the abuse that results when a former state-owned enterprise is handed over to private owners with a dominant market share, just look at Telecom.

We have now gathered 155,000 signatures on the petition against the sale. Gathering signatures is easy, because opposition to the sale is overwhelming.

We will have enough signatures before the election. We will force a referendum.

If the forests are sold and our referendum is successful, we will buy the forests back at the price paid. Get this message. No sale will be final. We will take the forests back and pack the buyers on their way.