Row threatens plans for East Coast jobs

By KEVIN TAYLOR

Until this week the Government looked set to score kudos for helping the East Coast to process its forests.

However a row has flared that threatens plans for expansion of the wood processing industry, a better port, and more jobs.

Jim Anderton, the Minister for Economic Development, is unhappy that the Gisborne District Council has decided to sell its port.

The Government, through the Economic Development Ministry and Industry NZ's "jobs machine", had been lining up investors to build plants to process the forests into something other than raw logs.

Anderton said up to 800 jobs could be created from additional processing, and hundreds of millions of dollars were to be invested.

One investor was ready to sign in the next few weeks on the basis of certainty that the port would be developed.

But Anderton and industry representatives now argue that that certainty has gone with the council's decision to sell.

A taskforce to study the East Coast was set up in 2000, and last October a Government-sponsored report by consultancy GHD said up to $120 million was needed for roading to meet the forestry industry's needs during the next 20 years.

Over that period, the volume of logs and wood products coming from the Tairawhiti area is expected to increase from its present annual level of less than 800,000 tonnes to about 4 million tonnes.

But the region, poorly served by roads, would need upgraded infrastructure. So Anderton joined the party and $30 million was committed for road improvements.

The plan had been that the Government would get the investors interested in processing plants, TransFund would increase road funding to cope with the increased number of logging trucks, and the council would sell some valuable farms to fund the development of the port.

But last week Anderton's adviser from Industry NZ, Pelenato Sakalia, emailed the council to bluntly say the roading programme and other help was off following the council decision to keep the farms and sell the port instead.

Anderton will not hear criticism that his hands-on approach to picking winners is flawed, and that an economic development process relying on political patronage is fraught with difficulty.

He asked who would have facilitated downstream processing and development of the East Coast forests if the Government had not stepped in.

"If we didn't do it no one would have - so 20 years of planting forests would have become completely useless and the trees rot in the ground."

He said overseas investors had been "virtually on a plane" ready to launch their plans for wood processing in the Tairawhiti region.

He would not identify the investors.

Anderton said the council's decision created uncertainty in the minds of the investors, and as a consequence a lack of added-value processing would put in jeopardy the 800 jobs that could have been created and the money for roads.

Asked why it mattered who owned the port, Anderton said in one sense it did not matter but the certainty of the port development was critical.

Julian Kohn, chairman of the East Coast Forest Industry Group, agreed with Anderton and said the council's decision last week had initially sent investors scuttling away.

Subsequently one of the investors had put his plans "on hold", but the effect was still clear.

Kohn said the decision generated uncertainty.

Without the port's development, the Government's funding would dry up. The GHD report and subsequent correspondence made clear that Government money had been strategically linked to the port's development.

Kohn said processors would not come to Gisborne without a publicly controlled and committed port.

Gisborne district mayor Meng Foon seemed unfazed by the fuss.

Despite the concerns from Wellington he thought there was no problem and the investors, followed by the better roads, would still come.

Asked why the council was selling the port, Foon said the GHD report gave about half a dozen options to fund the port.

One option was to sell the farms to pay off debt and develop the port.

"We want to keep the farms in council ownership for the benefit of the community," he said.

Another option, the mayor said, was to sell part of the port or seek an equity partner.

The issue has blown up into a major local controversy.

On Tuesday at a special meeting of the council its plans became clearer when it said it would retain local control of the port.

The council would either sell the lot to council-controlled, cash-rich Eastland Energy Trust, or sell up to 49 per cent to another buyer.

Foon had "no doubts here at all" about attracting investors.

But Anderton said the search for an equity investor in the port would further delay processing plans.

And he said "friendly, warm, cuddly community trusts" could still be sold to outsiders, removing control of the port from local hands anyway.

He is worried about the possibility that one forestry company may buy the port for its exclusive use.

He also argued that ports such as Tauranga or Napier might buy the port and redirect the logging traffic (he did not discuss the possibility that the Commerce Commission might frown at such a move).

Anderton also pointed out that people in the area were agitating for a port at Tolaga Bay, 56km northeast of Gisborne.

He said FR Partners and local iwi wanted the new port to ship logs, and that the iwi went to the High Court and Court of Appeal to halt a 1995 council decision to sell the Gisborne port farms the local body has now rejected selling. The iwi lost the case.

However residents in the area are still interested and held a hui at Tolaga Bay marae last Tuesday to discuss the idea.

However, Anderton's officials think the wood processing companies would not invest in Tolaga Bay anyway, and the idea appears to be a side issue.

Of far more importance is what to do with the existing port.

Port company chairman and former mayor of Gisborne district, John Clarke, said the council had moved this week to clarify its decision to say it would preserve community ownership: initially it simply said the port was going to be sold.

The decision was not the port's preferred option, but it was the shareholder's prerogative.

"My position in all of this is that I'm only interested in focusing on the port," he said.

However, the port sale plan appears to have had unintended consequences for the region's big forestry plans.

And while the row rumbles on Gisborne waits for its economic rescue.