A mill owner's perspective
IAN McDONNELL
SPEECH DELIVERED 3 NOVEMBER, 2010
I have been asked to speak tonight from an industry point of view on what possible effect the forward sale of Forestry SA plantations could have on our local manufacturing industry here in the south east.
I have tried to look at this as objectively as possible but feel that whichever way I do it is impossible to give a positive response. I believe that because so little detail about the proposed sale other than the desire to repay debt and lack of any information regarding any conditions or guidelines it may or may not contain to accommodate or safe guard our local industry, shows a complete disregard for the industry and its participants. This is despite the fact that the decision was apparently made back in 2008.
If the question was put, does the proposed sale have the potential to adversely affect our processing industry then the answer is YES. There is no doubt this seems to be one of those cases where the devil may very well be in the detail.
I believe what our industry needs most of all right now is growth not uncertainty. It is my view that the state government should be expanding or at the very least, looking to reinvest the annual profits it is making from Forestry SA into more plantations, thus allowing existing business to grow and new ones to establish.
Over the past 10 years or so, there has been virtually no expansion of the softwood plantation estates. This has been largely due to the sharp increase in land prices. Now, with the demise of the various MIS schemes, land prices are returning to somewhere near an affordable level and I believe it is an ideal opportunity for our industry to expand and our state government should be a part of this.
To put it simply, stick with the original plan that was established so many years ago. It has stood the test of time and has succeeded in producing both wealth and prosperity for our state and region.
When looking at the value this asset brings to the state coffers each year, it is not just the $42 million reported last year, but there is also the other income stream the government enjoys via things such as payroll tax, land tax, GST back from the Fed, and the list goes on.
I am also very interested to know, as I am sure many of you are, if the government does go ahead with the sale of the plantations, are they planning to give up the annual income from log sales, or is it going to be disguised in new fees and charges somewhere else?
Australia is a net importer of various timber products, a lot of these coming from countries in Europe and South America where their governments offer all types of assistance and subsidies to support local business. What I believe we need from our government at this time is leadership and a genuine show of support for our industries and regional communities.
The South East has always enjoyed a reputation for the high quality of its plantations and timber products. If a forward sale were to go ahead, how would this be protected? All of the major sawmills are focused on producing structural products, it would be critical that this be maintained for them to remain viable.
Based on the little information we have been able to extract from the minister or the government, I fail to see how any forward sale can give the industry any certainty for the future, or any confidence to invest the many millions of dollars required to remain competitive.
It is my understanding that the longest supply agreements currently in place with local processors have between ten and fifteen years left before they expire. With the proposed sale ranging between 30 and 100 years it does create a large amount of uncertainty.
To be fair, logic would say that regardless of who owns the trees at the time of harvest, you would think local producers should be able to be competitive with prices offered for the logs but given that logic so far appears to have played no role in this process, I don't believe we can rely on this.
As stated previously in my opinion the government needs to provide a stable environment to encourage companies to reinvest and for others to want to invest. I believe their actions to date are demonstrating quite the reverse.
I believe that in the absence of any solid financial or beneficial reason, there can be no option other than to oppose the proposed forward sale of our forests. I encourage the government to reconsider its decision and enter into meaningful discussions with our civic leaders and community representatives.
In conclusion I call on the former member for Mount Gambier to explain to us exactly what it was he agreed to with the government back in 2008, when we are now being told by the treasurer and others in government that the decision was made then?