Govt/Ind. Initiative Will Help Make Forestry No. 1

6 April 2005

Government - industry initiative will help make forestry number one

The Forest Industry Development Agenda, announced by Hon Jim Anderton, will help the industry on its way to becoming New Zealand's largest export earner, industry leaders said.

"It's good to see the Government recognising that forestry has an important role in New Zealand's future," Forest Industries Council Chairman Lees Seymour said.

Forestry is currently New Zealand's third largest export earner, but the industry aims to be the biggest by 2025. The new initiative builds on former initiatives such as the Wood Processing Strategy, and putting it in place has involved considerable commitment from industry organisations.

"It's a very good deal from our perspective and an opportunity for the industry to progress some things that we have been talking about for some time such as market access and development," Mr Seymour said.

Forest Owners Association President Peter Berg said the deal would benefit the whole industry because it would enable the development of a coherent strategy for the industry's future growth.

Mr Berg said industry would continue to work through issues relating to the Kyoto Protocol with Government, but these should not stand in the way of FIDA.

"This is separate from Kyoto. FIDA is government recognition that a thriving forest industry is good for New Zealand, socially, environmentally and economically," Mr Berg said.

"The industry has already demonstrated its importance in many ways. It delivers the carbon credits that will allow New Zealand to meet its climate change targets, as well as many other environmental and employment benefits. FIDA will provide useful further impetus to enable forests and wood to contribute positively to the country."

FIDA provides approximately $23 million of government and industry funding for initiatives in skills and training, market access and development, wood design and bio energy.

Mr Seymour said he hoped to progress initiatives in each of these areas before the end of the year.

Governance of FIDA funding will be in the hands of a Steering Group, which met for the first time on 5 April. The Steering Group is comprised of industry and government representatives. The Steering Group will set strategic directions, endorse expenditure, monitor outcomes and report to the wider industry.

About the forest industries

NZFIC and NZFOA together represent and promote the interests of all sectors involved in the New Zealand's forest and wood processing industry. Membership comprises forestry and wood processing companies and sector associations who collectively own and manage and derive wood and paper products from a sustainable, planted production forest resource of 1.8 million hectares.

New Zealand forest industries directly employ 26,000 people, account for 4 percent of GDP, have annual sales of more than $5 billion and are the country's third largest export earner at $3.5 billion annually. The industry aims to become New Zealand's largest export sector, directly employ 60,000 people, contribute 14 percent of GDP and record an annual turnover of $20 billion.

FOREST INDUSTRY DEVELOPMENT AGENDA:

BACKGROUND INFORMATION

What is the Forest Industry Development Agenda?

FIDA is a new relationship between the forest and wood processing industry and the Government. It provides a means for the Government and the industry to develop a strategic approach for the industry's future growth. It will see the Government invest $18.1 million (GST excl) to develop the industry, starting this year with a further $3.8 million (GST excl) contribution expected from industry.

Why is the Government doing this?

The Government's investment recognises the industry's significant economic, social and environmental contribution, including in respect of climate change, and its potential to become New Zealand's number one export earner.

The agreement addresses areas of industry need already identified in the Wood Processing Strategy.

What is included in FIDA?

The FIDA funding package is worth approximately $18 million over five years.

Areas to be funded would be: market access ($1.2 million over five years), market development ($8 million over four years), bio energy ($2.5 million over five years), skills and training ($4.4 million over five years) and wood design ($2.0 million over five years).

Access to the market access, market development and wood design funding is dependent on securing industry co-funding of approximately $3.8 million (excl GST).

FIDA is also about enhanced collaboration within and between industry and government agencies. It should help make government policies more effective by ensuring that their impact on the forest and wood processing industries is well thought through.

Will industry co-funding be secured and where will it come from?

This remains to be worked out. It could come from the whole industry, from companies or groups of companies. It will be up to the industry to secure the funding if it wishes to access the Government contribution towards market access, market development and wood design. In the market access area the industry, through the New Zealand Forest Industries Council, has already been funding key initiatives with the Government for the last two years. The establishment of a new umbrella body for the industry, if this can be achieved, may also be helpful in this context.

Does FIDA meet industry needs?

FIDA presents a good opportunity to make immediate progress on important industry development issues.

The areas that would receive funding via FIDA include most of the development initiatives that industry has agreed are important.

The market development funding is $3 million less than was offered in last year's proposed Forest Industry Framework Agreement (FIFA), but the deferred timeline (starting in July 2005) allows the industry more time to get the programme and the required co-funding in place.

Some of the initiatives contained in the FIFA proposals have not been carried forward to the FIDA. However the Government has advised that at the explicit request of the industry and with the agreement of the Ministers of Forestry and Finance, a portion of the funding for the market development initiative can be transferred to other areas of priority.

What does industry need to do in return?

Industry needs to contribute up to $3 million if it wishes to access government funding for market access, market development and wood design.

The Government also invites the industry to co-operate actively in the governance of FIDA, the development of strategy and the delivery of the programmes. There will be no Memorandum of Understanding required.

What about funding for roading?

FIDA doesn't include the regional road transport funding from the original FIFA offer. But Minister Anderton has confirmed that meeting the key transport needs of the forest industry in Northland and Tairawhiti through the regional development fund remains a high priority, and that current funding levels ($23 million pa) are expected to continue through until 2007/08 at least, consistent with Transfund's ten year forecast.

In early 2006/07 there will be a full review of regional development transport funding.

Is the FIDA funding confirmed?

Yes, the first release of funding will be available in the current calendar year, except for market development and wood design which will be available from 1 July 2005, subject to the industry's contribution.

Who will decide how the funding is spent?

A Steering Group has been established to provide governance for FIDA. The Steering Group will will provide strategic input and direction for the FIDA process. It will consider and provide advice on any issue it considers significant to the development of the industry.

The Steering Group will help identify the key strengths, weaknesses, opportunities, and threats facing the industry over the next 5-15 years. The Steering Group will also help relate this strategic analysis to a programme of activities and initiatives with clear objectives and achievable near-time milestones.

Members of the Steering Group are

Hon Jim Anderton (Chair)

Lees Seymour, Chairman, NZFIC/ Weyerhaeuser

Peter Berg, President, NZFOA / Pentarch Forest Products

Gary McVicar, President, NZTIF/McVicar Timber Group

Bruce Anderson, Pine Pac

George Asher, Lake Taupo Forests

Richard Carbines, Jenkin Timber

Grant Carruthers, Chairman, FITEC

Rick Christie, Chairman, Growth & Innovation Advisory Board

Sheldon Drummond, Juken NZ

Luke Moriarty, Rubicon Limited

Murray Sherwin, MAF

Peter Springford, Carter Holt Harvey

Ross Wilson, (Jim Jones) Council of Trade Unions

The Steering Group will be advised and supported by a Management Group of senior officials, industry association executives, local government and Union officials.

Other groups will be established to provide advice in specific areas.

What happened to FIFA?

FIDA is a separate agreement from the proposed Forest Industry Framework Agreement (FIFA).

Last year it became clear the industry as a whole had difficulty in accepting FIFA, because of issues around deforestation and carbon credits.

Towards the end of 2004 the Forest Industries Council, the Forest Owners Association and the Farm Forestry Association put forward a new, amended proposal that suggested the Government address industry development and carbon policy issues separately.

FIDA is the industry development result of that proposal. It includes the majority of the development initiatives included in the proposed FIFA agreement.

FIDA does not concern carbon policy issues. Acceptance of FIDA does not involve the industry giving ground on any of these issues. The industry continues to press for resolution of these issues with Government.

How will Kyoto issues be addressed?

The Government is well aware of the industry's perspective on Kyoto-related issues. Industry organisations will continue to represent member concerns strongly, as will individual companies.

What has happened to the Wood Processing Strategy?

FIDA supersedes the WPS and builds on its earlier initiatives and outcomes.

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