A Tasmanian environmental group, “Doctors for Forests”
(click here to read
more) is calling for the preservation of old growth rain forests, and I guess
many environmentalists support them. Nevertheless many relatively poor
people, loggers and farmers want to clear the forests, and I doubt if many
people believe that no old growth forest should ever be cleared.
Few of us want to still be forest dwellers.
The real issue is not whether to log any forest, but how
much to log. The way to choose the correct amount is to ensure that people
have secure property rights to the land and the forests. The owners will then log them only until the demand for wood
is less than that for unspoilt forest.
The alternative is to leave it to government regulation. Even
if the government starts off doing what most people want i.e. clearing the
forest, the danger is that it won’t stop when the demand for unspoilt forest
exceeds that for wood. The reason is twofold, governments lack market signals
and vested interests in what they are doing already prevent change.
The environmental doctors show how Tasmania provides a good
example of the poor results of the government planning approach.
Over the last few hundred years the Tasmanian Government owned pretty
much all the forest and steadily sold it off for logging and clearance.
Only when most of it had been destroyed did they declare much of the
remainder a protected national park and even then the government has gone on
supporting a logging company, “Forestry Tasmania”.
Now, there’s nothing wrong in principle with private logging companies,
which pay their way in the world, but “Forestry
Tasmania” is nothing like that. It is as it website puts it, a Government Business
Enterprise”, or as you and I would put it, a lame duck company propped up by
government loans and feather bedded contracts.
“Doctors for forests” have described what’s going on.
FT is increasing it’s logging of old growth forests, but is only
achieving a return on investment of 1-2%.
They could get 7% by investing in bonds.
At the same time Forestry Tasmania’s main customer, Gunns Ltd, a
private company is vastly more profitable.
The doctors compare the two companies by looking at their EBITDA
(earnings before interest, tax,
depreciation and amortisation), as a percentage of revenue.
The EBITDA
for Forestry Tasmania is 13.9%
and for Gunns 23.6%.
What’s going on?
One explanation could be that Forestry Tasmania is unprofitable because
of the commitment to gaining community support for Forestry Tasmania's
operations. This might perhaps be
justified. However as the
doctors put it:
“Unfortunately, the exact opposite is true. The
community oppose clear felling of native forest and prefers plantation
forests. While supportive of the logging industry, the community also believe
that tourism is the key to Tasmania's long-term success. It is the very same
rapid expansion of native forest felling and low price sales that is pulling
down the return on investment of Forestry Tasmania, which is also losing it
support within sectors of the community. Hence, in the words of the title of
this report "Forestry Tasmania is failing to meet its financial or its
community targets in a worst of both worlds scenario"
iGreens would put it another way. The government of Tasmania is
subsidising the destruction of the old growth forest. It should stop.
Jim Thornton, Nottingham, 6 Jan 2003.
