Address to Japan-New Zealand Business Council

Address To The 29th Annual Joint Conference Of The Japan-New Zealand Business Council

Auckland, 17 October 2002

Stephen Jacobi Chief Executive New Zealand Forest Industries Council

“Japan And New Zealand – Developing A New Level Of Engagement In Forestry”

It’s good to be with you today.

I’d like to extend a special welcome to delegates from Japan and say how much we value your interest in New Zealand and your involvement in our forestry industry.

Last year I had the honour of visiting Japan in the company of New Zealand’s Trade Minister Jim Sutton.

I was able to see for myself the nature of links between our two countries in forestry as well as in a range of other sectors.

In Tomokomai we visited the home of Oji Paper which makes paper from wood pulp shipped from Pan Pac in Napier.

In a furniture store in Ginza we saw high quality design furniture made by Abraham Industries in Waimate.

In a building site in the Chiba prefecture we saw kitset homes under construction – all made from New Zealand pinus radiata by Tristyle Industries in Northland.

These three examples provide a good illustration both of the forestry value chain and the regional spread of our industry.

They also indicate the range of products we have to offer the highly competitive and discerning Japanese market.

With this experience in mind, I’d like today to consider two questions:

What role will Japan play in the future of the New Zealand forestry industry? What role can forestry play in building the new level of engagement which New Zealand seeks with Japan and which forms the theme of this conference?

Forestry and Japan

Let me start with some vital statistics.

Forestry is already a key sector of the New Zealand economy – with turnover of $5 billion, accounting for around 4 percent of GDP, employing some 23,000 people directly and a further 100,000 indirectly, earning NZ$3.7 billion in foreign exchange as the country’s third largest export sector.

What’s more, New Zealand’s plantation forest resource continues to expand.

Some 39,000 new hectares were added over the last year to bring our total planted area to 1.8 million hectares, or about 7% of New Zealand’s land area.

In 2001/02 the harvest exceeded 20 million m3 for the first time.

As many here will know, wood availability is forecast to expand significantly.

We are well on track to reach between 35-40 million m3 by 2015.

New Zealand’s ‘wall of wood’ is already a ‘wave of opportunity’ as all of this increased harvest is destined for international markets.

There is a misconception amongst the New Zealand public that much of New Zealand’s exports are in the form of logs.

In fact, close to seventy percent of exports contain some added value component whether in the form of pulp, sawn timber, paper and paperboard, fibreboard, manufactured components or furniture.

As I saw in my visit to Japan last year, forest products already play an important role in the trade and economic relationship between Japan and New Zealand.

In the year ending June 2002, forest product exports to Japan were valued at NZ $687 million, or 18.5 percent of total exports to Japan.

Although exports declined by some 17 percent between 2002 and 2001, Japan remained New Zealand’s second most important market after Australia.

Beyond trade flows, Japanese investment has assisted the continuing growth in output from the industry which assures Japan a key place in the future of our industry.

Securing the industry’s future, and setting a vision for its future development, have been the main goals of the Wood Processing Strategy – a partnership between government and industry that has been underway since January 2001.

The Wood Processing Strategy sets some ambitious targets – it looks forward to 2025 and an industry providing 14 percent of GDP, employing 60,000 directly and 250,000 indirectly and earning $14 billion as New Zealand’s largest export earner.

To turn this vision into reality the Strategy aims to stimulate some $3 billion new investment by 2010 which will enable the further processing of an increase of at least 50% of additional harvest by 2015.

It goes without saying – almost – that increased investment from Japan would be invaluable in making these targets more than just words and dreams.

But this investment will come only if it makes sense commercially. That means focusing attention on the economics of processing in New Zealand.

So the Wood Processing Strategy has looked at the range of barriers to the further development of the industry and has sought, with the active involvement of Ministers, to take a “whole of government” approach, where appropriate, to removing the obstacles.

Progress in regional transport, research and development, biosecurity, certification and resource management have been the early beneficiaries of concerted government/industry action.

The Wood Processing Strategy has got off to a great start but it is only the ‘end of the beginning’ as far as the future of the industry is concerned.

Further work is required in trade access and international marketing if the industry is to derive maximum value from the increased resource and enhanced processing capability.

In both these respects the Japanese market is of prime interest.

Improved access will generate the further development of bilateral trade.

For example, Japanese tariffs on sawn timber discriminate against pinus radiata and favour competing species from other import sources.

This matter is regularly raised with the Government of Japan by New Zealand Ministers and officials – the industry now looks to resolution of this issue in the context of the World Trade Organisation negotiations if not before.

Similarly, while there has been success in achieving equivalent treatment under Japanese building standards, a significant bonus would be for New Zealand-based organisations to be able to provide third party certification against Japanese standards.

Improved access seeks to level the playing field for New Zealand suppliers, but a secure place in the market can be secured only through a successful marketing strategy.

While responsibility for marketing rests primarily with individual companies and with their Japanese partners, there is scope for a broader generic strategy which seeks to understand market wants and needs and to differentiate New Zealand product in the market place.

The International Marketing Committee of the Forest Industries Council has in hand the development of such a strategy based on two key planks – third party certification of New Zealand’s sustainable forest management practices and the positive perception of the quality of New Zealand products.

The marketing end of the industry development spectrum is in some respects the ‘final frontier’.

It’s where the industry must learn to ‘collaborate to compete’ – and that applies most particularly in a sophisticated and demanding market such as Japan.

Forestry and the ‘ nloe’

Japan, therefore, has a key role to play in the industry’s future both as a source of investment made more attractive through the Wood Processing Strategy and as a more open market market for competitive, sustainable and high quality added value products.

I want to turn now to the central theme of this conference – how to develop a new level of engagement between Japan and New Zealand and the role that forestry might play.

First, let me say that the forestry industry welcomes this level of attention to the relationship between New Zealand and Japan, as well as the interest shown by Prime Minister Helen Clark and her Japanese counterpart, Prime Minister Koizumi, and by senior business leaders in both Japan and New Zealand.

Just as we need a vision for the future of our industry so too do we need a vision of the future partnership between our two nations at opposite ends of the Pacific.

We welcome also the significant activities that have already taken place including trade and investment missions in both directions.

The question for us to consider today is what more can be done at the sectoral level to contribute to lifting the level of engagement even higher.

Since Japan and New Zealand are in many respects natural partners in forestry, it follows that the relationship can be developed further only if the respective industries come even closer together.

Let me make a bold prediction.

Whereas in the past much of the economic activity between us has been developed as a result of the transactional exchange of goods, often through agents and trading houses, the future is likely to be built on a far greater alignment of industrial strategies.

New Zealand suppliers of increasingly added value, niche products will need to move closer to their end users and this will require them to get to know their Japanese partners and customers even better.

Similarly Japanese companies looking to develop secure, long term relationships with suppliers will need to understand their partners in a fundamentally different way than before.

Earlier in my presentation I talked about the work we were doing to build a future for the forestry industry in New Zealand.

We need to match this work in Japan with another stream of activity aimed at building a future together.

There is no doubt that conferences such as these provide an invaluable opportunity for exchanging information, building relationships and achieving greater alignment of vision and strategy.

There may be scope for further exchanges of this type at the sectoral level building on the missions that have already taken place.

As someone with a background in trade negotiations I cannot resist the temptation to say that a comprehensive free trade agreement between Japan and New Zealand would provide just the right sort of political framework for respective industry sectors to move closer to each other.

Even as we wait for this political level picture to emerge there is much we can do as industry leaders to move in the direction we need to be headed.

Conclusion

I started this presentation by talking about some of the examples of forest sector co-operation I had seen when I visited Japan – pulp and paper, furniture and kit set homes.

These are only the tip of the iceberg but they indicate the range and depth of our present engagement.

My message today is a simple one.

Japan and New Zealand are natural partners in forestry.

Forestry is a key component of the new level of engagement we are seeking.

That must be the vision that drives us forward.

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