The New Zealand Economy - A Decade of Change
Since 1984 New Zealand has transformed its economy
to a point where, according to the World Economic Forum, it is
now ranked as the sixth most competitive economy amongst the world's
24 most developed countries.
New Zealand has an open economy that has averaged
almost 3 percent GDP growth annually since 1990, with inflation
under control at around 2 percent. A decade-long programme
of Government reform has produced an environment favourable for
the development of internationally competitive businesses, viz:
- deregulation of finance, labour, transportation
and energy markets;
- corporatisation and, in some cases, privatisation
of state sector assets and services;
- elimination of state subsidies, removal of import
controls and reducing tariff levels;
- creation of an open foreign investment regime;
- a firm Government stand against inflation.
An integral part of this reform programme has been
the internationalisation of the New Zealand forest industry.
New Zealand Forest Industry - Historical
Starting at the turn of the century, the New Zealand
Government purposely set out to develop a planted production forest
- protect New Zealand's remaining natural forests
(which has been cleared for farm land, urban settlement and timber);
- create a new economic sector.
During the period 1910-1930s the Government provided
the research drive that selected radiata pine as the ideal plantation
species, undertook extensive production forests planting activity
and implemented forest management and species improvement programmes.
The 1940s through to the early 1980s the Government
undertook additional plantings but increasingly encouraged private
sector participation through a range of incentive and support
It encouraged the development of the processing
sector - saw milling , panels and pulp and paper operations -
and undertook local and international market development for radiata
sawn timber and logs. The Government also entered into a number
of joint-venture forestry developments with Maori interests (New Zealand's
Internationalisation of the New Zealand Forest
During 1987-90 the New Zealand Government reorganised
its involvement in forestry by formally separating its natural
and production forestry assets, viz.
- a Government agency - the Department of Conservation
- was established to manage New Zealand's remaining natural forests
for conservation purposes - some 6.5 million ha, covering
24 percent of New Zealand's total land area;
- a state-owned company - the New Zealand
Forestry Corporation - was established to commercially manage
the Government's production forests and, in 1989-90, was used
as a vehicle for the Government to privatise its production forest
The New Zealand Government's exit from the
forest industry was completed in 1996.
Purchasers of the Government's production forest
assets included local interests as well as international forestry
interests from the US, Japan, China, Malaysia, Hong Kong and Indonesia.
As part of this reformation process, the New Zealand
Government put in place mechanisms to address Maori claims on
land area that the Government had developed as production forests
(a similar settlement process is being undertaken in other resource
areas as well).
New Zealand Forest Industry - Key Features
Today New Zealand's forest industry is an expanding
sector, based on a 1.5 million hectare production forest resource
(covering 5 percent of land area), converting 17 million m 3
of material into a wide range of softwood fibre and timber products
worth in excess of NZ$ 6 billion in annual sales. The industry
operates on a 25-30 year rotational cycle with an annual average
wood growth rates of around 22 m 3 per hectare.
Radiata pine is the main commercial species at around 90 percent
of forest area. Private sector interests now control 92 percent
of the production forest resource.
The industry has a significant number of vertical
and international market integrated companies, largely as a result
of the Government's forest asset sale process. Export values have
increased by 325 percent since 1986 and doubled since 1990.
It is now New Zealand's second largest export sector and
in 1996 earned NZ$ 2.4 billion from sales to customers in a number
of Asian-Pacific markets.
Employing some 31 000 persons, the industry
is a major driver of New Zealand's overall economic growth
and accounts for 7 percent of GDP.
The New Zealand market for wood fibre and timber
products is mature and annual per caput consumption - estimated
at 3 m 3 - is amongst the highest in the
world. The construction and agriculture industries make extensive
use of timber products. Paper and packaging consumption is also
high reflecting a well developed, modern consumer society with
high literacy rates as well as the use of packaging materials
by other industrial sectors in New Zealand which are also
highly export-orientated, such as the food and beverage industry.
Domestic consumption, in roundwood equivalents,
is static at around 10 million m 3 annually.
As indicated by the growth in exports, a combination of the well
developed local market and marginal domestic population growth
means the increasing harvest being processed by the forest industry
is for its global customer base.
Growing and Harvesting
The New Zealand forest industry actively replants
harvested areas. In addition, new plantings of production forests
is an important industry feature. Planting takes place on farmland
and since 1992 new planting rates have been significant - reaching
a peak of 98 000 ha in 1994. New Zealand has an
estimated 3 million ha of additional farmland potentially
available for conversion into production forestry.
Harvest rates have also increased significantly
as the wood from forests planted in the 1970s comes on stream.
Processing and Marketing
The processing and marketing sector has undergone
significant changes over the past decade as a result of the deregulation
and internationalisation process and expanding harvest levels.
Pulp and paper companies have faced increasing local
market competition from imports and have consolidated product
ranges while maintaining steady export growth. Product customisation
has also been a feature.
The panels industry has expanded significantly with
a number of "greenfield" MDF facilities coming on stream
and being further expanded during this period. To illustrate the
level of development, between 1986 and 1996, the value of panel
exports increased by nearly 1 000 percent.
New Zealand's sawmilling output has continued
to grow while undergoing quite significant structural change,
which has seen a reduction in the overall number of sawmilling
companies operating and extensive mill consolidation by larger
firms. Sawn timber export values increase by 332 percent
during this same period.
New Zealand has also developed a significant
log export trade which has expanded dramatically during this period.
Over the past 5 years log exports have averaged around 28 percent
of total forest product export value.
New Zealand has a timber remanufacturing and
engineering sector which continues to expand from its small base.
Internationally competitive downstream wooden furniture and kitset
housing sectors are evident and New Zealand's forestry services
sector is actively expanding into Asian-Pacific markets.
Exports of Forestry Products from New
Zealand - Growth 1986 to 1996
|Logs and wood chips
|| 84 156
|| 713 842
|Sawn timber (thousand m3)
||406|| 111 402
||961|| 369 891
|Wood pulp (tonnes)
||504 056|| 219 791
||680 911|| 389 269
|Paper and paper board (tonnes)
||249 462 || 187 489
||383 737|| 402 812
|Panel products (m3)
||81 611||37 038
||588 002||362 189
|Other forestry products (m3)
|All forestry products
|Estimated roundwood equivalent
|| 767 969 ||
|| 2 479 858
New Zealand Forest Industry Performance -
Over the past two years
the New Zealand forest industry has faced very tough international
trading conditions - a mix of low commodity prices in key products
including pulp, newsprint, logs and timber; weak demand in some
key product markets - such as the Australian housing market for
sawn timber; and the ongoing appreciation of the New Zealand
dollar against the US dollar squeezing margins and company profitability
(the New Zealand dollar strengthened by nearly 11 percent
Despite this, reflecting
medium-long term confidence in its ability to compete internationally
as a supplier of increasing significance to rapidly expanding
Asia-Pacific forest product markets, the following key performance
features were apparent:
- annual harvest expanded to 16.4 million m 3
in 1995 (up 9 percent from 1994) and grew by a further 3 percent
to 16.9 million m 3 in 1996;
- in 1995 new plantings where 71 000 ha,
with a 14 percent increase to 81 000 ha in 1996 (last
four year average has been 75 000 ha annually);
- the New Zealand Government completed its
exit from the industry through the sale of the State-owned Forestry
Corporation to a Fletcher Challenge Ltd led consortium for NZ$
2 billion covering cutting rights for 190 000 ha of
established production forests and two solid wood processing facilities;
- total export value contracted to NZ$ 2.45 billion
in 1996 for the first time since 1983. This was 7 percent
down from 1995 exports worth NZ$ 2.66 billion. In terms of roundwood
equivalents, export volumes were 10.5 million m 3
in 1995 (or 64 percent of total harvest volume) and 11.1 million m 3
in 1996 (66 percent of harvest);
- processing investments throughout the industry,
in both new and upgrading existing facilities, totalled NZ$ 448
million, including a new 145 000 m 3
MDF facility (overall processing investment commitments from 1995
through to 2005 currently total NZ$ 1.4 billion).
New Zealand's annual
wood harvest will at least double over the next 15 years to over
30 million m 3. Depending on planting
rates future potential beyond 2010 could increase significantly
and by the year 2035 New Zealand's total annual harvest could
be in excess of 50 million m 3.
Sustainable Forestry Management
Since the 1992 Earth
Summit in Rio, the New Zealand forest industry has become
increasingly involved in international environment issues relating
to sustainable forestry management (SFM). This involvement has
- participation with the New Zealand Government
in various UN processes - such as the International Panel on Forests
and FAO's Conference on Forests;
- leadership in the development by ISO of standards
for Environmental Management Systems for use by the forest industry,
- involvement with international forest industry
networks, such as the International Forestry Roundtable.
As a result of this, the New Zealand forest
industry has some well developed views on SFM and the role of
certification and product labelling.
Key Policy Positions
The New Zealand forest industry's position on SFM,
and forests and forest products certification and labelling is
based on the following viewpoints:
- The world's forestry systems are extremely diverse
and dynamic, both in biological terms and the social, environmental
and economic development objectives for which they are managed.
This extreme diversity makes a unitary approach to SFM and certification
and labelling inappropriate and unachievable.
- This diversity means the New Zealand forest industry
does not support any attempts to develop and implement singular
or prescriptive solutions that seek to achieve SFM on a global
basis - either through an international, legally-binding forestry
convention (such as appears to be the recommendation emerging
from IPF) or a monopolistic certification and labelling system
(as is being attempted by the environmental movement via the Forest
- Its important to note that northern hemisphere
countries have dominated SFM and certification developments and
the global "solutions" proposed to date are based on
managed natural forestry principles, which discriminate against
planted production forestry systems and potentially create trade
barriers for New Zealand's forest product exports.
Sustainable Forestry Management
The most appropriate level at which to address sustainability
issues is at the national level, as the forestry management and
forest product processing practices which occur take place within
a framework of local laws and regulations, ownership and processing
arrangements, and environment, social and economic development
objectives which are unique to each and every country.
National and local governments, working in partnership
with forest owners, processors, communities and other stakeholders,
have the capacity to achieve SFM solutions that meet their particular
environment, economic and social needs at the country level.
While the UN and regional intergovernmental initiatives
(such as the Helsinki and Montreal processes) have usefully focused
attention on SFM issues post the Rio Earth Summit, their future
role should be aimed to assisting individual countries develop
relevant SFM solutions - including the integrated forestry estate
model when appropriate - through information sharing and technology
The forest industry has a major role to play in
developing SFM solutions. The Third International Forestry Roundtable
(Concepción, Chile, 14-17 October 1996) has led to the
development of a shared vision on SFM involving resource stewardship,
best practice, continuous improvement, enhancing soil, water and
ecological values and compliance at the national level with local
laws and regulations governing social, environmental and economic
Certification and Labelling
Products certification and labelling, per se,
is a commercial issue involving buyers and suppliers. From a forest
products marketing perspective, sustainability is a product attribute
which customers may or may not value and seek in the wood fibre
and timber products they buy from industry.
Certification and labelling systems should not create
barriers to trade between nations and be compatible with WTO rules.
Certification and labelling systems should therefore be performance
based (i.e., not prescriptive) or management system based, be
voluntary and designed to provide industry a methodology to measure,
demonstrate and verify forestry management systems and practices
in order to satisfy customer requirements - whatever these requirements
may be. All criteria and indicators relating to SFM must be scientifically
The monopolistic approach to global certification
and labelling system proposed by the Forest Stewardship Council
is inappropriate as it attempts to impose a particular definition
of sustainable forestry management on global consumers and suppliers
and will impact on forest product trade flows, in particular planted
production forest sourced goods.
The ISO provides a more appropriate consultative,
participatory, multi-stakeholder framework within which relevant
certification and labelling tools can be developed for use by
industry. The TC207 Forestry Working Group is developing a technical
resource document for the forest industry that will enable certification
of forestry management systems at the company level - potentially
against whatever standard specific customers might set, including
While third party auditing clearly improves certification
credibility, the level of auditing is best determined by customers,
and should not be prescribed by industry, regulators or environmental
Achieving SFM - The New Zealand Model
New Zealand has achieved SFM by developing complimentary
forestry estates and separating commercial from non-commercial
management values and objectives, i.e.:
- natural forests, protected and largely managed
by Government for conservation-related values (accounting for
24 percent of land area, 6.4 million ha);
- highly productive, sustainably managed production
forests owned by private sector interests for commercial purposes
(at present covering 5 percent land area at 1.5 million ha).
- The purposeful development of the production
- preserved the natural forests by providing an
alternative, more specialised and productive source of wood fibre
and timber products;
- established a new industry - the forest products
industry - the development of which provides a wide range of social,
economic and environmental benefits to New Zealand.
These benefits include:
- wealth creation and increasing contribution to
GDP and foreign exchange growth;
- new regional development opportunities, including
stability for rural communities;
- increasing employment and enhanced skill levels;
- improvements in soil, water and air values.
The additional key components that have enabled
New Zealand to achieve its SFM solution are:
- a legislative framework that ensures compliance
with company, taxation, employee safety and training requirements;
- an effects based environment law - the Resource
Management Act - which is based on the concept of using all natural
resources on a sustainably managed basis and mitigation of the
impacts on the environment of all industrial processes;
- open dialogue with local communities and environmental
groups on the activities of the forest industry, including the
use of codes of conduct (i.e., covering harvesting and transportation)
and voluntary agreements that preclude the development of production
forests on natural forest areas;
- a robust settlements resolution process by Government
with the indigenous population that actively seeks to address
historic natural resource claims including natural and production
- an open market economy that recognises that private
sector interests are better placed than Government to carry out
commercial activities, such as forest product growing and processing