Forestry ‘sale of century’ begins

Press, 26 October 1989, Page 1

Forestry ‘sale of century’ begins

By

PATTRICK SMELLIE

in Wellington

New Zealand’s forest assets were put up for auction yesterday, with the launch of the Government’s biggest privatisation to date.

Bidders for the 550,000 ha (about 1.4 million acres) have six months to evaluate their bids. Most of the forests must be sold by this time next year.

Already about 600 local and offshore bidders have shown an interest in buying parts of the forest resource.

The forests are being offered in 90 parcels and Government decisions on who they will go to will be based almost exclusively on price. Mr Alan Gibbs, chairman of the Forestry Corporation, which will manage the sales process, said the forests were "the sale of the century.”

“There have been few resource sales of comparable scale anywhere in the world since the United States Government auctioned its Alaskan oil leases,” he said.

At this stage it was not known how much the vast resource would fetch. “We cannot be sure within even 50 per cent of their value,” said Mr Gibbs. “But we won’t reveal what that 50 per cent is either.” The range of estimates is $1.5 billion to $7 billion, the most conservative guesses being $1 billion to $2 billion. Bids for the forests will be called no later than June 30 next year. Native forests are excluded from the sale but two sawmilling plants, at Conical Hill and Waipa, are for sale as well.

Existing contracts for wood supply will stand. This particularly affects the Kaiangaroa forest in the Bay of Plenty, which represents about one-third of the total forests on offer. Mr Gibbs said the Government was selling the forests because the industry was about to go through a period of massive growth in wood output and required investment of $6 billion to $7 billion to cope with potential processing opportunities.

New Zealand forestry was about to stop being 60 per cent oriented to the local market and become a big exporter as wood production doubled.

In addition, the nature of the world wood market was changing, with a move away from felling native forests to farming forests like crops. Forestry development also offered new market opportunities when New Zealand was facing high unemployment. “Asian-Pacific regional demand for the importing of softwood products will rise by 60 per cent in the next 10 years,” Mr Gibbs said.

“To sell our rising wood volumes we need 10 per cent of that total market.”

Having that development occur through the private sector was more likely to ensure that investments were commercially sound.

The historic involvement of the Government in the forestry industry was hopeless from a commercial point of view, he said.

Rejecting suggestions that sales should be made conditional on buyers agreeing to establish processing industries in New Zealand, Mr Gibbs said the way to make sure that happened was to have a competitive economy which attracted such .investment on its own merits.

Further reports, page 3