Foreign-owned forest interests push Shane Jones' patience in attacks on new Bill

Forestry minister Shane Jones. Photo / File

Forestry Minister Shane Jones says he's surprised at the lather forest managers and foreign investors are working themselves into over a Bill he's championing to help Kiwi wood processors - but it seems their worst fears about his next moves may be justified.

Responding to their criticism, Jones suggested they are putting at risk the "soft" path and social licence he gave foreign forestry investors through the Overseas Investment Act.

He also noted New Zealand dairy heavyweight Fonterra is obliged by statute to provide an amount of milk to other processors.

The innocuous-sounding Forests (Regulation of Log Traders and Forestry Advisers) Amendment Bill seeks to support continuous and long-term supply of timber for domestic processing and export in the $6.4 billion export industry.

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Another intent is to oblige registered log traders and advisors to ensure the sale of New Zealand grown logs - 58 per cent of which are exported, mostly to China - are traded in "a transparent and professional way".

The lack of detail in the Bill and the speed at which it's going through Parliament - it was introduced on May 14 and is before a select committee on Monday - has left forest owners and managers breathless and agitated, the wood processing sector delighted and foreign forestry investors nervous, judging by a flurry of emails Jones said he had received.

The main concern of plantation production forest owners and managers the Herald has spoken to is the lack of detail or regulations in the Bill and what new obligations on them it might enable later.
They fear the next step will be a Government requirement for them to sell a certain percentage of logs to local sawmillers and wood processors. "The devil will be in the detail" is their catchcry.

Another common refrain is that the Bill is blatant manipulation of the Parliamentary system by Jones to secure himself and his party NZ First a seat in Northland in the coming election. Both Jones and NZ First leader Winston Peters come from Northland, where even by the admission of the Forest Owners Association, there have been "behaviour issues"
by log export traders because of a shortage of logs. Translated, trees have been sold to cash-rich buyers for China before they reach their full mature value and local sawmills have struggled to pay those prices or access logs.

More than 1000 sawmill workers in small New Zealand towns lost their jobs to business failures over Christmas and New Year - before the Covid-19 crisis was imagined, according to the Wood Processors and Manufacturers Association.

Shane Jones' proposed legislation to keep eye on Kiwi share of log trade. Photo / File

The Herald put the fears and accusations of forest managers and advisors to Jones, who is also minister of regional economic development and minister of infrastructure.

He pulled no punches.

First, he noted the policy behind the Bill was announced in August 2017 as a condition of NZ First forming a coalition government with Labour, and the policy structure had been discussed with industry players for many months.

"There are statutory obligations on the Crown to consult prior to any regulations being operationalised. This happens in environmental legislation, in construction legislation, in commercial legislation.

"I have been plastered with scores of emails from aggrieved forestry investors from Switzerland and Germany," said Jones, who believes they have been "activated" by New Zealand forestry advisors and managers.

"My message to (foreign investors) them is New Zealand has an incredibly liberal overseas investment criteria for forestry. You can't enjoy the right of investment without accepting the obligation to do the best by Kiwis as well.

"In a post-Covid environment we've all got to work together.

"I'm not at this stage pushing for the foreign direct investment criterion to be constrained, but if foreign (investment fund) directors are disinterested or antagonistic to the notion of working with the Kiwi industry then they are putting at risk their own social licence to invest in our country."

Asked by the Herald if the Bill's critics had reason to be fearful an obligation to sell a certain volume of logs and timber to local manufacturers is around the corner, Jones said Fonterra - which controls around 80 per cent of New Zealand's raw milk supply - was required to sell milk to its processing competitors here.

"The Kiwi priority principle already exists in the primary sector with the sale of land to foreigners and the obligation to sell milk.

"The legislation as currently composed creates a regime to register log mongers and advisors - but I would say to you the forestry owners themselves tell me they are already selling logs to Kiwi processors.

"They tell me they will continue to do that but if that is the truth, they have nothing to worry about."

On accusations the Bill reflected Jones' self-interest in securing a Northland seat in the election, he said his first ministerial act had been to "carve out a way for foreign investors in forestry to enjoy a light-handed touch" through the OIO.

"The adulation forest owners showered me with when we carved the primrose path (for them) was reflective of a pragmatic understanding that the majority of the forestry estate was already foreign-owned."

Jones, claiming most New Zealand forest is foreign-owned, said foreign investors could not enjoy the right to directly invest here without an obligation to contribute to Kiwi employment post-Covid-19.

"You don't have a right without a duty."

On the speed of processing the Bill - which one industry leader called "poor process" - Jones said with the rising tide of unemployment due to Covid-19 "I want us to move with alacrity".

The proposed legislation is strongly criticised by the Forest Owners Association which anticipates "an unacceptable and pointless bureaucratic cost to all parts of the forest industry". It also questions why the Bill is being heard by the environment select committee and not the primary production committee.

Supporters include the Wood Processors Association and the NZ Timber Industry Federation.