FLAX INDUSTRY

Dominion, Volume 30, Issue 173, 19 April 1937, Page 10

FLAX INDUSTRY

Reorganisation Plan Disliked COST TO TAXPAYERS Trepidation over the provisional plan for the reorganisation of the flax industry as recently announced by the Minister of Industries and Commerce is felt by the Associated Chambers of Commerce. It has issued the following statement on the scheme: — “Tlie main provisions of the plan are for Government guaranteed prices; the licensing of mills; a Government advisory service for millers: Statecontrolled marketing, overseas aud internally : Government expenditure on publicity and investigational work: Government restriction of imports ot' raw or manufactured material; establishment of a Government mill for experimental and commercial purposes; an industrial committee to regulate aud control the industry. “This plan is very drastic, and we regard it witli considerable trepidation. The flax industry in New Zealand has been on the.decline for a considerable number of years, it is this fact which has prompted the Bureau of Industry to suggest the present comprehensive plan of Government action and control, as an alternative to allowing the industry to run its natural course to decadence. The industry is decadent because those engaged in it have found it to be uneconomic, through the competition of other products. Sisal and manila have displaced it ou the open market. Labour costs have played a very important part in this; Mexico. Tanganyika and Java, from whence come the chief supplies of sisal, are cheap-labour countries. This factor is one to be considered more than ever to-day, with tlie increased labour costs which must be taken into account by industry in New Zealand. Therefore, would application to the New Zealand flax industry of the plan proposed by the Bureau of Industry be a proppingup of an uneconomic industry? Price Prospects. “The answer to this question depends very largely on the price the Government would guarantee for the flax. AA’e understand tliat the price proposed is £26 per ton. This is more than the average price in New Zealand currency (£25/12/6) realised per tou of high fair New Zealand hemp during 1937. and tlie price has fallen as low as £lO in 1932 in tlie New Zealand currency of tliat year. In view of the heavy competition from cheaplabour countries, a guaranteed price based on present-day market values, together with substantial capital and annual expenditure on the New Zealand flax industry by tlie Government, would appear to be a highly speculative proceeding. “AA’e are aware that-it is proposed to apply tlie benefits of scientific research to tlie production of flax, but it should not be forgotten that New Zealand will gain by such application no clear advantage over its competitors. Another important point is that New Zealand has negligible standing areas of suitable green flax for milling. Consequently, tlie flax would have to be grown, and that takes seven years. Any market prospects which may be evident at present might well change very considerably iu that period. Taxpayers Involved. “Apart from technical considerations, however, we are chiefly concerned from tlie standpoint of tlie public interest with the manner in which tlie taxpaying community of New Zealand will be involved if the plan proposed by the Bureau of Industry is carried into effect. The plan proposes tliat the Government undertake a capital expenditure, as initial outlay, of approximately £71.000 ou land, a Government mill, housing, etc. Il is certain that, the commercial mill, as proposed, would not be a commercial proposition, and that it would sustain an appreciable annual loss. This expenditure, however, is only initial outlay. Tlie plan also proposes that approximateily £22,000 annually be spent by the Government, with considerable additional costs in a few years’ time. In effect, this means tliat the taxpayers would be providing a ' total of at the very least £225,000 over a period of seven years to finance the plan, and also a staff of State officials, probably highly paid, and growing in numbers as the plan was elaborated. This is too extravagant a commitment in which to involve the taxpayers, but apparently the bureau is intent on all or nothing. “No estimate whatever has been given of any compensating savings in costs that are likely to be effected in the industry under the plan. Any figures as to 'savings that would be effected in Unemployment Fund disbursements through tlie employment created in the State-controlled flax industry are no argument iu times of prosperity, when there are avenues of employment in trades and industries. Men losing employment in the decadent flax industry would find ample employment in the farming industry, which is suffering to-day from an acute labour shortage. As it is, if losses are sustained in the proposed State enterprise iu flax, as seems likely, the labour costs will still be a charge on the taxpayers. “Tliis association is strongly ot opinion that it would be the height of unwisdom for the Government to enter into a speculative undertaking by becoming involved in an industry which has had a notoriously chequered history, aud in which large sums of money have been lost already. The Government would be better advised to concentrate on establishing conditions for private business which would enable it to absorb the greatest possible amount of labour in profitable enterprise.”