Article - Sale of Irish forest ‘cannot be justified’ on economic grounds

The_Conductor

http://www.thejournal.ie/forests-ireland-coillte-772661-Jan2013/

ECONOMIST PETER BACON has said there is no justification for selling Coillte’s harvesting rights to raise money to pay off State debts.

According to his company’s analysis, the economic rationale for the proposed sale of the State-owned forests “no longer stands up and cannot be justified”.

The report, commissioned by the Coillte branch of the Impact trade union, says the State would remain liable for costs of €1.3 billion following a sale of harvesting rights. To cover these costs, which include the funding of the agency’s future deficit and its pension deficit, Coillte would need to sell at €78 per square metre, which is “well above current or recent prices”.

The Government’s “decision in principal” would see the future sale of 75 per cent of Coillte timber for a period of 80 years.

“There is no basis in these prices for assuming that this would be achieved,” continued the report, entitled Assessment of the Consequences of the Proposed Sale of Coillte’s Timber Harvesting Rights. “This means that, rather than generating State income, a sale of Coillte harvesting rights would represent a substantial cost to the exchequer.”

Forestry: Download the full report here>

The report emphasised that the proposal has not been “fully articulated” and the representations made are based on the consultants’ understanding of statements made thus far.

“At the start it is important to be clear that the only rationale that has been put forward is that this would raise liquid funds and there is nothing in existing Irish forestry policy nor in any strategic review of the sector that would support such a sale.”

There is also little in the way of international experience to guide the Irish decision, according to Bacon.

The report says the overall result of the Government’s proposal would effectively liquidate Coillte as a viable entity.

The analysis shows that the actual gains from the proposed sale would be limited, even in the short term, while there would be considerable longer term liabilities created with a lot of uncertainty regarding the full range of impacts.

“Given the non-commercial activities of Coillte and the residual land and forest that would need to be managed, it should be seen as a proposal to restructure Coillte as a National Parks Service that will depend on a state subsidy to carry out its obligations. However, no argument has been formulated to support such a move and, when viewed as such, the economic rationale for the sale disappears.”

The research also outlines other economic risks associated with the proposals including the potential to disrupt the Irish timber processing sector, due to lack of certainty over future supply. It says job losses, which could arise in the processing industry if timber were exported without processing in Ireland, would add to future costs to the State.

The proposal is an abrupt change in Irish forestry policy to the extent that it could greatly disrupt the sector and make the objectives that have been set unattainable. There are risks associated with this that go beyond the normal risks that can be associated with projections of timber prices.

“These include the potential to disrupt the processing sector, a possible cost factor that was not included in the assessment of costs. It is possible to envisage some options to minimise this potential, such as a piecemeal approach to the sale using a policy that could be soon reversed or a conditional sale, but it is unlikely that such options would have any real value in practice.”

Last week, RTÉ’s Ear to the Ground examined the Troika’s recommendation for Ireland to sell of State assets, including Coillte land and timber harvesting rights.

Reporter Darragh McCullough travelled to Ballybofey in Donegal to look at how 1,100 acres of forest has been put up for sale to help raise money to pay down the State’s debt.

“They seem to be selling off the family silver, without looking at what could have been left behind in the community,” John Gallagher of Glenfin Area Council told the programme. “Of course it’s about money….any semi-Staet organisation will have some conscious about the local environment and the community. Someone there for profit will not have the same conscience.”

The programme also heard that access to private forest in Ireland is much more restricted than in other countries, which could impact people’s recreational habits if more land was sold off.

Coillte is currently quite lenient and provides a public service but private owners would not be under any legal obligation to allow members of the public into their forests.

Link to Ear-to-the-ground from 24th Jan here

fits

I just don't understand why the troika think its good economic policy to sell off one of our large assets! Whose interests does this serve exactly. Not the Irish people's anyway.

Qualitymark

Perhaps another question is how Coillte is operating generally - who and in what countries does the company currently sell timber to and for how much - how high, and also how low. What profit is this bringing into Ireland, and could it be better.

zetecescort

on primetime tonight. probably only a 5 minute segment but should be interesting

periodictable

fits wrote: »

I just don't understand why the troika think its good economic policy to sell off one of our large assets! Whose interests does this serve exactly. Not the Irish people's anyway.

One component of the Troika is the IMF, which is about 30% funded by the USA. The US pretty much espouses rampant capitalism, and the sale of an asset like the Irish state forest base dovetails nicely with US economic policy-free trade, no matter what the cost.

viztopia

did i read somewhere before that coillte contributes little or nothing to the government in terms of profits each year? i will check their website and see if they have any accounts on it

Pete_Cavan

How do Coillte currently harvest their timber? Is it done inhouse or do they use private contractors?

If it is the case that they do it inhouse surely the major effect of selling harvesting rights would be reduce the cost of harvesting by using private contractors selected under competitive tendering rather than inefficient state employees. Coillte would also lose any say in what happens to the harvested timber as regards processing, as mentioned in the article.

If harvesting is currently done by private contractors then the only change is that the company who buys the rights now get to decide what they do with, and where the harvested timber goes for processing. I cant imagine shipping unprocessed timber to other countries for processing being economical, maybe if we had road/rail connections to other countries but not when we are an island.

In either case, will the net effect of sale of harvesting rights only result in reducing Coillte to a supervisory role, thereby reducing their costs, and engaging the private sector to carry out most of the work, for which Coillte receive a guaranteed income for the period while still retaining the main assest, the land. Does this not benefit both the Irish state and the private timber harvesting industry? Is the report mentioned in the article above just an attempt by a public sector union to protect their members jobs instead of allowing the private sector in?

Obviously I have little knowledge of the industry so can anyone with more knowledge on the subject enlighten me please. Thank you.

The_Conductor

I don't know whether the bulk of their harvesting is done in-house or contracted out- but I don't know why you're getting hung up on the harvesting operations- they are only a very small part of the life cycle of a forest- clearing up after harvesting and re-afforesting costs a multiple of times more than the harvesting itself. Indeed- the road building necessary for thinnings, costs more than harvesting operations. Forestry is a 30-40 year operation (if its SS- and even more if its Scots Pine or other spp.), with various services needed at different stages in the life cycle. Picking a single operation- such as harvesting, is ignoring the vast bulk of the life cycle of a forest. If you want to contract out the whole lot- you may as well sell off the asset, why bother continuing to own it?

periodictable

Al Jazeera news just carried a report on proposed sale of the Irish forests saying that the sale would service the interest on the debt for 3 weeks,that the Irish government would be left with the replanting costs, and that the whole exercise would cost twice as much as it would recoup. Food for thought.
Looking for a link but not online yet.

The_Conductor

Fecking hell- even Al Jazeera are trying to get the Irish public to torpedo this half brained idea......

Good article in the Politics section of yesterday's Irish Times


Sale of Coillte harvesting rights will cost State dear

Forestry policy is one of the few things that are actually working here. Why change it?

Last Updated Tue, Mar 12, 2013, 23:07
First published: Tue, Mar 12, 2013, 10:47

How long, the American farmer-poet Wendell Berry asked, does it take to make the woods?

As long, he answered himself, as it takes to make the world.

But Berry warned that woodlands can be unmade overnight, and that it then takes generations to remake them. The Government should remember this, before it proceeds to sell off the harvesting rights in our national forests, currently vested in Coillte.

There are many reasons – economic, cultural and environmental – for valuing our woodlands. Until recently, however, we have not been very good at exploiting them intelligently and enjoying them fully.

We often fool ourselves about this. The familiar nationalist narrative, telling us that our cherished virgin forests were ravaged by the foreign foe, is more than a little exaggerated. The author of the great lament Cill Chais identified the “end of the woods”, deireadh na gcoillte, with the end of the Gaelic world. He was partly right – but he ignored the inconvenient truth that we natives had also been busy clearing forests for millennia.

We didn’t exactly rush to restore them after independence, either. And the “social forestry” finally rolled out in the 1950s was a last-ditch effort to stem rural emigration, not a comprehensive policy for the sector.

From the late 1980s, however, we have seen a steadily more progressive – and profitable – engagement with forestry. This has happened through the high certification and environmental standards espoused (despite early lapses) by Coillte, a State-owned company with a commercial mandate; through successful tree-planting incentives for private landowners; and through NGO activism.

Forestry and the wood-processing industries directly support thousands of jobs, and many more indirectly. Native tree species are being re-established through impressive restoration programmes undertaken by the National Parks and Wildlife Service, by Coillte, and by NGOs such as Woodlands of Ireland. The recreational value of public forests is confirmed by 18 million annual visits nationwide.

Multiple additional benefits from woodlands, from carbon storage to flood control to enhanced human health, are being rediscovered or recognised for the first time. A forthcoming Woodlands of Ireland report will argue that our national accounts critically undervalue the natural capital and ecosystems services flowing from environmentally responsible forestry.

Yet just at this hopeful moment, the Government is proposing to sell Coillte’s harvesting rights, for almost a century to come, to the highest bidder. This would almost certainly be a foreign company, with no stake in local communities dependent on forestry jobs, or in the long-term health of our landscapes.

The reason? Selling public assets – to pay off privately generatedState debt – ticks another box on the EU-ECB-IMF troika’s must-do list.

Why lament for our forests, you may well ask, when this Government repeatedly reneges on commitments to the most disadvantaged in our midst? But if this proposed sell-off will cost the State dear, in financial and many other senses, then the disadvantaged will be even bigger losers if it goes ahead.

Critics of the proposal include unlikely bedfellows: sawmill owners on the Irish Timber Council, Coillte workers in Impact, conservation NGOs, recreational groups such as Mountaineering Ireland, and a mixed bag of TDs.

First published: Tue, Mar 12, 2013, 10:47

Qualitymark

With half the country installing wood-burning stoves, surely there's profit to be made from these forests by selling wood in Ireland? (Not by robotic felling, but by coppicing and clearing as needed.)

Pete_Cavan

smccarrick wrote: »

I don't know whether the bulk of their harvesting is done in-house or contracted out- but I don't know why you're getting hung up on the harvesting operations- they are only a very small part of the life cycle of a forest- clearing up after harvesting and re-afforesting costs a multiple of times more than the harvesting itself. Indeed- the road building necessary for thinnings, costs more than harvesting operations. Forestry is a 30-40 year operation (if its SS- and even more if its Scots Pine or other spp.), with various services needed at different stages in the life cycle. Picking a single operation- such as harvesting, is ignoring the vast bulk of the life cycle of a forest. If you want to contract out the whole lot- you may as well sell off the asset, why bother continuing to own it?

The reason for "getting hung up on the harvesting operations" is because harvesting rights are what is being sold here and everything else is related to that. The article in the OP talks of harvesting rights being sold for 80 years, which would be two cycles. Obviously whoever buys will have carry out whatever road maintenance, thinning, etc. as necessary. They are not going to buy the harvesting rights and then show up 40 years later and find the value of there investment is less than what it should be because they neglected to do any work. Replanting at the expirery of the rights can be included in the contract, or planting can be included in the contract of whoever wins the rights for the next 80 years. The reason to "bother continuing to own it" is because you can sell rights again and again and again, or do something else if you wish. Retaining the asset means the state has control over it and it will be worth far more in the long term than the short term gains of selling it. Look at Eircom for a textbook example of why an outright sale is a bad idea.

The article in post #10 just reads like more scaremongering to me. He talks about "selling public assets", knowing full well the asset is not for sale, just the right to use it for a limited period of time before it is returned to the state. Also, the fact is our state and semi-state sectors are grossly inefficient and wasteful, in many cases there is better value to be had for the taxpayer by bringing in the private sector. The author also claims the reason for selling leasing out public assets in to "pay off privately generated State debt". The fact is that €50bn of the €67.5bn we received from the Troika was to pay for our publicly generated budget deficit. The benefits of Coillte the author highlights (a commercial mandate, successful tree-planting incentives for private landowners and NGO activism) are not tied to harvesting operations and will remain even if harvesting rights are sold.

Any concerns regarding environment, local communities, work practices, etc. can be alleviated through contractual clauses. That is the way business deals work and thats what this will be, a business deal. Selling harvesting rights to the highest bidder through competitive tendering makes sense, the Irish state increases income by getting the best price possible while reducing expenditure. Perhaps I am wrong, like I said I dont know much about the industry but I know from experience that the private sector is a lot more efficient than the public sector and that the taxpayer can benefit by utilising the private sector instead of protecting state jobs in order to appease unions who are only interested in protecting themselves at the expense of everyone else.

periodictable

Coillte has done a great job in its various incarnations over the last 100 years creating a forest base.
With some balls, the government can shake up the public service mindset of some of the people within the organization, get greater productivity and do as good a job as any foreign owned private outfit in realizing the value of the crop, as well as paying due attention to the intangible benefits derived from the state owned forests.

The_Conductor

periodictable wrote: »

Coillte has done a great job in its various incarnations over the last 100 years creating a forest base.
With some balls, the government can shake up the public service mindset of some of the people within the organization, get greater productivity and do as good a job as any foreign owned private outfit in realizing the value of the crop, as well as paying due attention to the intangible benefits derived from the state owned forests.

The issue is the government see Coillte as a money box that they can hit for 400-500 million to get them out of a hole now- and the future bedamned. Nothing more, nothing less. Its a box ticking exercise- look, we're raising x amount by selling state assets. I'm not being cynical- thats the extent of the selling of harvesting rights, pure and simple. How are we to know whether Coillte have a mindset associated with them- they compete with the private sector successfully all over the country, and manage vast numbers of private plantations- who is to say they are managing their own plantations as well, or not better, than they're managing private plantations?

I don't have any issue with Coillte- they are not the public sector body that they once were- they are for all intents and purposes a private entity, and behave as one- however with a broader mandate than the pure generation of profits- the social and amenity values of their plantations are only beginning to be appreciated by current generations. Its not long ago that forests and any machinery associated with them were habitually burnt- and any landowners who had the tenacity to plant trees ostracised in their communities. Times are changing- hopefully the mindset of the government will too.

The_Conductor

Pete_Cavan wrote: »

The reason for "getting hung up on the harvesting operations" is because harvesting rights are what is being sold here and everything else is related to that. The article in the OP talks of harvesting rights being sold for 80 years, which would be two cycles. Obviously whoever buys will have carry out whatever road maintenance, thinning, etc. as necessary. They are not going to buy the harvesting rights and then show up 40 years later and find the value of there investment is less than what it should be because they neglected to do any work. Replanting at the expirery of the rights can be included in the contract, or planting can be included in the contract of whoever wins the rights for the next 80 years. The reason to "bother continuing to own it" is because you can sell rights again and again and again, or do something else if you wish. Retaining the asset means the state has control over it and it will be worth far more in the long term than the short term gains of selling it. Look at Eircom for a textbook example of why an outright sale is a bad idea.

The article in post #10 just reads like more scaremongering to me. He talks about "selling public assets", knowing full well the asset is not for sale, just the right to use it for a limited period of time before it is returned to the state. Also, the fact is our state and semi-state sectors are grossly inefficient and wasteful, in many cases there is better value to be had for the taxpayer by bringing in the private sector. The author also claims the reason for selling leasing out public assets in to "pay off privately generated State debt". The fact is that €50bn of the €67.5bn we received from the Troika was to pay for our publicly generated budget deficit. The benefits of Coillte the author highlights (a commercial mandate, successful tree-planting incentives for private landowners and NGO activism) are not tied to harvesting operations and will remain even if harvesting rights are sold.

Any concerns regarding environment, local communities, work practices, etc. can be alleviated through contractual clauses. That is the way business deals work and thats what this will be, a business deal. Selling harvesting rights to the highest bidder through competitive tendering makes sense, the Irish state increases income by getting the best price possible while reducing expenditure. Perhaps I am wrong, like I said I dont know much about the industry but I know from experience that the private sector is a lot more efficient than the public sector and that the taxpayer can benefit by utilising the private sector instead of protecting state jobs in order to appease unions who are only interested in protecting themselves at the expense of everyone else.

Is this the case though?
The political articles are talking of the ongoing costs associated with the plantations exceeding the net amount raised at the outset. The few official statements on the matter mention harvesting rights, nothing else. If we are costing the management of the plantations into the equation- as pundits are- this indicates that we are retaining the management of the forests- and selling the harvesting rights, plain and simple- nothing more, nothing less. This is spelt out in black and white in the Irish Times political piece.

Why are you assuming that the current cadre of staff in Coillte are any better or worse than private sector employees in other companies? They compete openly with them, on a level footing. They are not the state body they once were- they are a responsible company, operated as would be a private company, and with full clarity on their operations (have a look at their website).

The issue is not Coillte- its the manner in which they are being shaken as a money box- and the longterm damage this will do to Ireland and its amenties.

periodictable

here's the Al Jazeera report

http://www.aljazeera.com/news/europe/2013/03/20133149249128175.html

Chisler2

It is a myth that private enterprise is 'efficient, effective and economic'. Private sector approach cuts corners. These comments are not personal prejudice but based on 10 years of doctoral research on privatisation and/or contracting-out of NHS services in the UK.

Presumably when the scenario moves to private enterprises' purported 'efficient, effective and economic' functioning Ireland will (re)-import this vital energy-source?

This idea is as crazy and damaging as the Thatcher government destroying mining in the UK in the mid-70's........one origin of the degraded, dependent and economically-depressed condition of the country now. These 'good ideas' take decades before their effects play out.

Oldtree

http://www.irishtimes.com/news/environment/sweden-had-to-reverse-privatisation-of-state-forestry-expert-says-1.1396636

"Failure of industry to take responsibility for regeneration of forestry was one of the main reasons for the recognition that privatisation had been a mistake

Threats to the public’s right of access to forestry was also a factor"

“Separating land ownership from the right to harvest [ as proposed for Coillte] has occurred in some countries, but there is always a risk in terms of best management of new forest,”Mr Johannson said.

“If you sell the concession to harvesting, no one takes responsibility for regeneration and replanting,”he said.

hmmmmm!

Oldtree

But having said that I have just read the attached article in favor of selling Coillte in Village by Tony Lowes, and to say it shocked me to read is an understatement.

periodictable

Mr Lowes anti-conifer bias is painfully apparent- what native broadleaves he wants us to grow to I cannot imagine, now that ash is off the menu, unless we one plans to build clay and wattle houses.
Added to that is that is the fact that to grow the best broadleaves one requires the best land, and no farmer will give that up.
His comment re"fertilizer hungry Sitka Spruce" is a laugh- Sitka is a relatively undemanding species and grows on ground where broadleaves haven't a hope.

Oldtree

It wasnt so much his views on forestry per say, more the method used by the powers that be to set up grant aiding Coillte that I found very odd.

periodictable

Oldtree wrote: »

It wasnt so much his views on forestry per say, more the method used by the powers that be to set up grant aiding Coillte that I found very odd.

Totally agree with you.
That money should have been used for farmer afforestation. Coillte has enough of a base to be able to make a profit.
I am surprised at Lowes assertion of Coillte drawing timber up a watercourse-I have seen them harvest their property adjoining me and it's always been above reproach. I'd say it depends on the harvesting manager and whether or not he is concerned about doing things the right way and keeping on top of the contractor.
But in general, I have no time for Lowes.

Oldtree

I have a lot of time for the FIE as i see little else being done to draw attention to environmental issues here, and attention is needed.

http://www.friendsoftheirishenvironment.net/

in south mayo, near cong, clearfelling to within 15 meters of the corrib is frequently carried out, an spa/sac/proposed nha. Completely unnecessary imo and very damaging to the lake. The 2 recent examples are Lisloughrey and Ard na Gaoithe. While they may be following policy of leaving a tiny buffer, that policy is inadequate, lacking imagination and has no environmental spirit.

The clearfelling on Inchagoill island a number of years ago was also disgraceful.

The assertion does not surprise me, but i have also seen operations carried out in a thoughtful and conscientious manner.

Sadly, selective felling appears to be a long way off from the current mindset.