In reply to Terence Liow who wrote: > I suspect that New Zealand also has the advantage of higher forest > productivity (i.e., growth rates) and perhaps a favourable tax regime. Yes, radiata pine growth rates in New Zealand are higher than growth rates of coniferous species in most Northern hemisphere countries. Obviously there are many factors which help to determine "profitability", and not least among these are the forestry workers. My point was that the profitability of New Zealand forestry rests on a workforce which is highly productive, but low paid by the standards of the US, Australia, Western Europe, Scandinavia, Japan etc. Further, the incomes of NZ workers as a whole have been declining in real terms over recent years. The point I was responding to was the suggestion that there was nothing wrong in forestry turning a high rate of profit. I would simply add to that the conditions "No provided it is not at an unreasonable cost to the forestry workforce or the natural environment" > The U.K. allowed expensing against income in the '80s which resulted > in many reforestation/afforestation projects then. Perhaps New > Zealand also has favorable tax treatment. In New Zealand forest establishment costs may be deducted from income from other sources for tax purposes at the time the costs are incurred. The state also funds forestry training and research, until 1985 (?) met half the cost of all private forest establishment, and since 1987 has transferred established state forests to mainly large corporate owners at prices as low as 50% of market value (as indicated by subsequent on-sales). > Many pulp and paper companies are divesting their timberlands as the yield > (often 8%) holds down overall return on investment/market capitalization. > Yes, and I think you will see the same thing happening here in New Zealand before too long. The present rate of profit is unsustainable. Capital gains through purchase of state forests and overcutting are one-off benefits. Contract labour rates have hit rock bottom. It will be probably 2-3 years before log prices recover from their current low. Add it all up, and forestry companies in New Zealand will have to either start thinking about divestment, or reconcile themselves to 8% rates of return like your Northern hemisphere forest owners. Geoff Fischer 628 Te Ngae Road, Rotorua, New Zealand Phone 64 7 345 3299 Credit for the message above belongs solely to Geoff Fischer. and not to his employer or internet service provider.
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