Following on from my previous blog I have now reviewed the GBE Scrutiny transcripts in relation to special timbers. They provide me with no cause for optimism.
I don’t know why we have Corporate Governance standards in Australia.
Clearly they don’t apply to Government business enterprises.
Even more clearly our politicians have no understanding of their corporate governance responsibilities.
Friday the 4th of December was the annual fiasco called the GBE Oversight Committee with Forestry Tasmania as one of the performing circus acts.
The transcript from the 3.5 hour performance is available here:
It makes for sad reading. In fact I would advise against reading all 52 pages. Severe brain haemorrhaging may result.
My review here focuses on special timbers/blackwood as they were discussed by the committee.
Special timbers are mentioned 28 times in the 52 pages of transcripts, on pages 2, 17, 18, 37, 39, 40, 49, 50, and 51.
Blackwood is mentioned only 3 times, even although blackwood comprises 80 % of special timbers harvest volumes, on pages 18, 49 and 51.
Community service obligations (CSO)/grants are mentioned only in relation to roads not special timbers!
The World Heritage Area is mention 9 times in the transcripts, on pages 39, 40, 46 and 48.
The word “profit” is mentioned 26 times even although Forestry Tasmania has no corporate objective to generate a profit.
So what matters pertaining to special timbers were discussed in the annual “scrutiny”?
What clarity, meaning and understanding does the annual scrutiny hearings provide for special timbers?
Spin from the Resources Minister trying to oversell FTs performance including “and the speciality timbers effort has also been buoyant – I think more buoyant this year than even two years ago, at about 11 000 cubic metres of speciality timber”. Most of this 11 000 cubic metres is craftwood and outspec log for which FT has no supply contracts or commitments. FT is supposed to produce 12 500 cubic metres of special timbers sawlog per year.
Pages 17 & 18
A question from MLC Ivan Dean about the profitability of special timbers:
“CHAIR – That was the point of your question: how long before you can see the business becoming profitable as a whole?
Mr DEAN – That is very clearly it. With specialty timbers, is there a profit returned to Forestry Tasmania?
Mr ANNELLS – It depends who you ask.
Mr DEAN – That’s why I am asking you. You are the chairman and you ought to know – and with the minister here I would thought we would get the truth.
Mr ANNELLS – I certainly hope you would.
Mr DEAN – I would hope so.
Mr ANNELLS – I will flick it to my chief executive.
Mr WHITELEY – With special timbers, some portion of it is profitable and others it is done as a CSO. Things like blackwood swamps and those sorts of things are really profitable. Wood that is picked up associated with native forest harvesting is profitable in the sense that roading has been provided by an outscale operation. Things like Huon pine aren’t profitable in their own right. We receive some assistance in recovering Huon pine – and it varies. Within our operations there is a profitable component and another component that requires some support.
Mr DEAN – Why can’t it be profitable? It’s a very sought-after timber worldwide. The users of it tell us they are paying higher prices for it where they are getting it from – obviously a lot of it through Forestry Tasmania. Why is it not possible to make it profitable in the circumstances – Huon pine, for instance?
Mr ANNELLS – Basically because the market will only pay a certain price. It is not an inexhaustible or elastic price mechanism. Huon pine is harvested like a lot of specialty timbers, as a by-product of our main activity. At the moment we have very significant costs for roading and other establishment costs that if we try to apply it against Huon pine, for example, would take it beyond the reach of all but the very few. We choose to sell special species timber at what we think the market will bear, but we do not seek to gouge in that process because to do so, we think, would lead to more bad publicity and, quite frankly, the market would simply dry up until we reduced the price again.
I have a lot of confidence in our people who are setting the price for this sort of stuff. You will always be able to find examples where people say, ‘You could have got more for this or that’. That is why we set up Island Specialty Timbers, much criticised in certain places, but it was a genuine attempt to bring some stability into the marketplace and to test the marketplace pricewise on a more regular basis”.
And the answer is a lot of mealy-mouth waffle.
No mention of the fact that in 2014-15 FT received a $900 000 taxpayer subsidy for it special timbers operations. That’s $82 per cubic metre subsidy.
Given the context of the question I find Chairman Bob Annell’s answer “It depends on who you ask” to be highly offensive; as if squandering taxpayers money is of no consequence whatsoever. And none of the MLCs called him on his attitude!
Mr Dean was after “the truth”. Instead he got obfuscation.
Some parts are profitable some parts aren’t. Why can’t it be profitable? “because the market will only pay a certain price!” “we choose to sell special species timber at what we think the market will bear!”
Has anyone heard of competitive market-based pricing?
It’s enough to make you cry!
These are adult businessmen talking as though they know absolutely nothing about economics and markets.
“That is why we set up Island Specialty Timbers, much criticised in certain places, but it was a genuine attempt to bring some stability into the marketplace and to test the marketplace pricewise on a more regular basis.”
Even although the tiny amount of wood that IST sells through tender and the prices they get bear no relationship at all to the administered price that FT sells to its long term customers.
And no member of the oversight committee sought any further clarification or understanding around wood prices and markets!!
No mention of the CSO grant and no question about how the $900 000 of taxpayers money was spent?
A very specific question about 72 kilometres of new roading for special timbers from Ivan Dean, for which he got no answer.
A question from Rob Valentine about special timbers regeneration following clearfelling. A question that seems completely irrelevant as it is generally known that the eucalypt regeneration will be harvested again long before the special species are of any commercial value for wood or honey.
A question from the committee Chair MLC Tania Rattray about the UNESCO delegation visit and special timbers harvesting in the World Heritage Area.
Given the political and social significance of special timbers logging in the World Heritage Area the lack of any serious questions from the committee about this subject is truly negligent. True it doesn’t directly involve Forestry Tasmania, but this is the main forum for discussing public native forest management and special timbers, so why the silence?
Pages 49, 50 and 51
More questions from MLCs Ivan Dean and Tania Rattray about special timbers supply and demand, which produce no clear credible answers. A new management plan is mentioned. The Three Year Wood Production Plan is mentioned. Hydrowood is mentioned, but not by name. By page 51 the mind is confused and exhausted.
Not one of the committee members seems to understand that the Hydrowood project may have significant positive and negative impacts on the special timbers industry. Certainly no one asked any questions in this regard.
Mssrs Dean and Rattray seem to be the committee members who have an interest in special timbers, but they seem to share the general view that our forests are a community service not a commercial resource. Never mind the fact that private growers are also competing with FT in the special timbers market.
I guess our elected representatives are busy people and just don’t have the time or interest to understand the special timbers industry and forest economics generally.
Three and a half hours and barely one useful question and certainly no useful answers.
I’m not sure what is more pathetic – the lack of quality and depth of the questions or the lack of quality and depth of the answers.
Even reading small parts of these transcripts is a mind numbing experience. The lack of clarity, purpose and outcome in these scrutiny hearings is truly staggering.
Twelve highly paid people in one room for 3.5 hours wasting time and money.
Three and a half hours of scrutiny and the special timbers industry is no better off than before.
Perhaps I should send a list of questions to the committee members next year so that they may better perform their corporate governance responsibilities, and the Tasmanian community may actually get some useful information from this circus act.
When will Tasmania get a fully commercial profitable forest industry?