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Corruption of a noble ideal for wood chips

wood chips pile

The fruition of blue gum plantations in Esperance illustrates the corruption of a noble ideal.  In July last year the first shipment of Esperance wood chips was exported with much fanfare but nine months later local farmers and contractors are still waiting for payment from that shipment.  Source: The Esperance Express

It is almost 20 years since Esperance joined the national initiative to make Australia self sufficient in wood products.

But while the ideal was for a diverse forest industry comprised of a mix of pine and hardwood plantations, managed investment scheme (MIS) companies favoured blue gums to produce woodchips for the Japanese paper mills.

Forest cycles for bluegums were only 10 years as opposed to over 30 years for saw log rotations and the returns were attractive.

In the late 90s, loopholes in the MIS legislation were exploited by some financial advisors to claim unrealistic tax benefits for their clients.

MIS was already being used as a vehicle to fund some unlikely schemes. When the bureaucrats closed the loopholes and retrospectively taxed profiteers in 2001, the forestry industry reeled because its high start up costs relied on continuous cash flow that suddenly dried up.

It wasn’t long before the concessions intended for forestry were loosely applied to other agricultural enterprises that were mostly well established and not needing investment incentives.

The ready money flowing from the investment schemes enabled MIS companies to push the boundaries of where trees could be grown commercially despite scant research and a lack of available knowledge at the time.

In Esperance, 50,000 hectares was planted to blue gums through managed investment schemes.

The industry took a battering again during the global financial crisis. Although forward planning prompted the managed investment schemes, the processing of the final product has been reactive since the company who established and managed the trees exited the forest industry.

Stakeholders needed a long-term view as they strove to overcome the logistical and financial challenge of establishing infrastructure to process the wood chips.

Although their patience will be rewarded later this year with up to two export shipments planned, but will farmers have sufficient confidence for new plantings to realise the forestry ideal?