Farm Forestry New Zealand

Forest Owners Association media release, 18 January 2018

Cutting Rights proposal jeopardising government’s billion tree and climate change mitigation goals

The Forest Owners Association is against the proposal the Overseas Investment Office should approve or decline sales of forest cutting rights. 

The FOA says it would jeopardise the government’s ambitions of both seeing a billion trees planted and of meeting its Paris Agreement obligations to reduce carbon emissions.

Treasury has invited submissions on a proposal to expand the scope of the OIO to include forest cutting rights for blocks of forestland larger than 50 hectares.

But FOA President Peter Clark says overseas investors will look elsewhere if cutting rights came into the OIO.

“We entirely get the idea that any investment into New Zealand is a privilege. We know and accept that overseas investors who wish to buy or lease substantial areas of land in New Zealand to plant trees for harvest have to go through the OIO application process.”

“But this proposed change of direction goes well beyond land ownership into another interest entirely.”

“The government issued a ministerial directive to the OIO back in late November.  The directive separated approval criteria for forestland from that for farmland.”

“That separation was a clear signal that the government believed it was vital to attract investors to plant some of the extra 50,000 hectares of land a year which would be necessary to meet the government’s own billion tree target.”

The ministerial directive for forestland told the OIO to give high relative importance to the criterion for an investment which would ‘advance significant government policy’.

“This is a crucially important message” says Peter Clark.  “This criterion was specifically not applied by the government to the sale of farmland.”

“The purpose and message of that ministerial directive was clearly to get enough investment in tree planting to use plantation trees’ ability to lock up large volumes of atmospheric carbon. This quality applies to every tree which is planted in every forest - not just by some investors, in some places, at some times.”

“Planting trees is the only feasible way, at the moment, the government can meet New Zealand’s commitment to reduce greenhouse gas emissions.  This was the key message from the London based Vivid Economics’ report ‘Net Zero in New Zealand’ last March, as well as from our own Commissioner for the Environment in October 2016.”

“The catch is that there is manifestly not enough available capital in New Zealand, including from the government coffers, to get enough trees planted to reach a climate change target without properly approved overseas investment.”

Peter Clark says it is therefore a shock to see the suggestion of cutting rights revived.

He points to Treasury’s backgrounder to submissions on the proposal.  It gives an example of overseas investors offering to commit half of their forest volume to processing within New Zealand, to give themselves a better chance of having their application approved.

“I don’t know how any investor, local or otherwise, could sensibly commit such a volume of their harvest to a local processor more than 25 years into the future, nor how a government could expect that.”

“Nobody knows which or where the local mills might be in 25 years.  Nor can they tell what their timber specifications might be and so what sort of management the trees ought to be given to supply to those specifications.”

“At the moment more than half the value of New Zealand forest exports is processed wood products, about $2.8 billion worth.  Sawn timber is the biggest component.  Processing for the New Zealand market is a large volume on top of that, and that’s where our best quality logs go.”

“These processed exports are worth more than what we earn from log exports.  We absolutely do need, and are market committed to, our local processors.  We do not need government rules to crystal-gaze market conditions, and terms, in the year 2043 and beyond.”

Peter Clark says even when approvals are granted by the OIO the process has become extraordinarily time consuming and expensive.

“It would not be worth the grief and months of uncertainty to put cutting rights applications in.  The investment would go elsewhere and Forestry Minister Shane Jones’ excellent tree planting programme won’t reach its potential.”

“The proposal is inconsistent at another level as well.  We don’t see any suggestions of milking rights for dairy farmers going through the OIO.  Nor should there be.”

“In November, the government wanted more forest investment and gave the OIO a directive to help achieve this.  But now, in January, it is heading in the direction of the same OIO rules thwarting that investment.”

“The Prime Minister stated last August that climate change ‘is my generation’s nuclear free moment and I am determined that we tackle it head on.’”

“Unfortunately, this proposal looks to me like reverse gear, rather than head on.”

For more information contact Peter Clark, 021 726 197