Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697628084744.pdf (Australia)
Tasmanian Farmers and Graziers Association Submission on: Forestry Managed Investment Schemes September, 2014 Forestry managed investment schemesSubmission 24 AGRICULTURE IN TASMANIA The total Tasmania gross state product (GSP) was $23.9 billion for the 2012 year.

The GVP of agriculture, forestry and fishing collectively amounted to almost 9% of this total – before input supply services and value-adding, which is well above that for the nation as a whole.
In 2010/11, the farm gate value of production (GVP) of agriculture, forestry and fishing was $1.98 billion.

This comprised:  agriculture - $1.150 billion;  forestry - $235million; and  fishing - $597 million.

This is before considering input supply services and value-adding.

Taking into account basic multiplier factors, this means the farm-dependent economy contributes more than $5.0 billion to the gross state economy - in spite of adverse pressures on the forestry industry.
Over the past 25 years, the average annual rate of increase in farm gate GVP has been close to 4%.

Average growth in the farm GVP over the recent past has been slightly slower than average, as a result of reduced export returns due to the high value of the $A and increasing cost pressures along the value chain.

Milk and milk products followed by livestock and livestock products were the main sector contributors to farm production value.
However, this was partly offset by reduced vegetables output associated with severe wet weather at harvest in the first quarter of 2011.

Some 10,500 people were employed directly in agriculture forestry and fishing.

A further 8,500 people were employed in services to agriculture and food and fibre value-adding.

This is close to 9% of the working population in Tasmania.
The preliminary Tasmanian government Scorecard data for 2010-11 (prepared by DPIPWE) indicates the wholesale value of food and beverage production has remained steady, roughly in line with the previous year at $2.7billion This demonstrates the important role that the processing sector plays in adding value to farm gate returns and the fortunes of those who live and work in the farm dependent sector.
Furthermore, the inclusion of forestry as a long cycle crop enterprise in farming businesses in the state means that the overall economic contribution must include these figures too.

Our best estimate is that in 2009/10 this added a further $400 million to farm gate income.

Clearly, as a result of the uncertainty currently evident in this sector, that figure has fallen significantly since then.

Nonetheless, on a long term outlook, forestry remains an integral part of a diversified farm business.
Compared to the previous year, growth in agriculture GVP has broadly offset the fall in forestry GVP.

TFGA – Submission Forestry Managed Investment Schemes-September 2014 P a g e | 2 Forestry managed investment schemesSubmission 24 The vast bulk of our agricultural product is sold interstate and overseas.

Farm exports in 2010/11 easily exceeded $550m (farm gate equivalent value) when account is taken of pharmaceutical products.

The share of exports to Asian destination exceeded 50%.
In addition, it is estimated that a further $1.8 billion of raw and value-added product was shipped to the mainland.

In 2011/2012, total exports from Tasmania were valued at $3.196 billion.

Agricultural products represented some 30% of that total – approximately $1 billion.

Almost 25% of total exports ($502 million) were destined for ASEAN countries.

Agricultural products valued at approximately $121 million represented 25% of that total.
ASEAN countries have become increasingly important destinations too, with overall exports increasing marginally over the past three years; and food exports alone increasing significantly from $71 million to $96 million over the period 2009/2010 through 2011/2012.

Major products exported to ASEAN countries included dairy ($42 million); seafood ($32 million) and wood products ($20 million estimated from private forestry sector).

Key destinations included Japan (35%), China (21%), and Hong Kong (21%).
Farmers are also significant land managers in the state, with almost a third of Tasmania’s land area of 68,300 sq.

km committed to agriculture.

These figures clearly confirm the importance of the sector as an economic driver for the state’s economy – and also demonstrate that agriculture is a more significant contributor to the Tasmanian economy than in any other state.

With this in mind, it is clear that Tasmania needs to ensure that the agricultural base of the state remains competitive and profitable.
About the TFGA The TFGA is the leading representative body for Tasmanian primary producers.

TFGA members are responsible for generating approximately 80% of the value created by the Tasmanian agricultural sector.

Operationally, the TFGA is divided into separate councils that deal with each of the major commodity areas.

As well, we have a number of standing committees that deal with cross- commodity issues such as climate change, biosecurity, forestry, water and weeds.
This structure ensures that we are constantly in contact with farmers and other related service providers across the state.

As a result, we are well aware of the outlook, expectations and practical needs of our industry.

With our purpose being to promote the sustainable development of Tasmanian primary industries, the TFGA is committed to ensuring that the agriculture sector in Tasmania is profitable and sustainable.
We are also committed to promoting the vital contribution the agricultural sector makes to the environmental, social and economic fabric of the Tasmanian community.

TFGA – Submission Forestry Managed Investment Schemes-September 2014 P a g e | 3 Forestry managed investment schemesSubmission 24 COMMENT The TFGA appreciates the opportunity make a submission on this important issue.
The terms of Reference for the Committee are broad and there are a number items contained therein which we have no knowledge or experience of and, accordingly, will not seek to make comment on.

Our comments on the issues for which we have some informed views are as follows: The burden on farmers and other agricultural producers who have been left with the uncertainty of timber plantations linked to forestry MIS on their land.
Unfortunately, managed investment schemes (MIS) produce investment that is primarily driven by tax incentives, rather than sound long term strategic investment regimes.

This often results in significant distortions within the markets in which they operate.

On many occasions, these distortions spread to other sectors.

These comments relate specifically to the forestry MIS schemes established in Tasmania but equally are applicable to other MIS arrangements in other areas such as the horticulture industry.
In the specific case of the forestry schemes, there have been a raft of perverse and detrimental outcomes which have been magnified by the collapse of Gunns Ltd.

Many private landowners who had arrangements with Gunns have now been left with a devastating economic and emotional legacy.
Coupled with the impacts of significant sovereign risk as a result of government decisions, this leaves scars that will ensure that further plantation expansion and replanting on private land will be limited if non-existent.

Many have been so adversely affected that the thought of planting another tree on their property is too much to bear.
Ironically, those in the conservation movement who for many years have called for the demise of Gunns and the replacement of native forest logging with a future based on plantations, have in one stroke destroyed both the company and the future plantation option.

Sadly, many do not acknowledge or even recognise their culpability; and instead have sought to lay the blame at the feet of others.
The future of the forestry industry now will rest primarily on native forest production both public and private as other resource options have now collapsed and many do not wish to be involved with plantations moving forward.

The original articulated reasoning behind introducing the concept of MIS into forestry was to enhance investment with the objective of increasing the area of commercial trees to levels that were not being met by normal market forces.
The idea was that allowing tax deductions would enhance this objective; and at the same time provide a valuable timber source into the future.

While it is debatable that such a market failure was real, the fact remains that we now find ourselves in a situation where the bulk of the plantation estate in Tasmania is an asset that is rapidly collapsing.
TFGA – Submission Forestry Managed Investment Schemes-September 2014 P a g e | 4 Forestry managed investment schemesSubmission 24 Much of the original speculation with the MIS plantation arrangements within Tasmania was that the estate would become a resource for downstream processing.

The main component of this was promoted to be the proposed Tamar Valley pulp mill, with other minor processing options adding to the overall industry.
In hindsight, the reliance on one project, and the establishment of vast plantations to feed it, was clearly strategically poor.

Silver bullet solutions rarely work.

The schemes should have been accompanied by concise research on what other options were available for downstream processing.

Had that been the case, then in the process a natural diversification of options would have been developed.
This would have ensured that the failure of one project and or company would not have put at risk a whole industry.

Many of the plantations have died or stopped growing and others have received little or no ongoing maintenance.

The result is an estate that is becoming unusable and requiring substantive restorative strategies to bring the land that the trees occupy back to productivity.
For many private landowners, their plantations have now reached the stage that pushing them over and resowing back to pasture is the best economic and emotional solution for them.

Unfortunately, such an exercise is expensive.

When landowners have received little or no return from the trees, it is a large impost that some are simply not able to absorb.

It is a reality that much irreversible damage has been done by the poor application of MIS arrangements in the forestry industry.
As a result, the private forestry sector in particular will take a considerable time to recover and adjust.

That adjustment and recovery has been severally hampered by the ill-fated TFA process which blatantly failed to address the concerns of private landowners; and yet sought to rely on the plantation estate as some type of panacea.
This failure to incorporate private landowners in the process has resulted in not only contributing to the abysmal outcome stemming from the MIS arrangements; but has itself undermined the objectives of the TFA.

Any other related matters.

The forestry MIS arrangements have produced perverse outcomes within the broad forestry industry; and particularly within the private sector.

At its height, the land grab became frantic as companies sought to plant as many trees as they could.
This resulted in a complete distortion of land values within certain areas of Tasmania.

The laws of supply and demand ensured that the price escalated rapidly; which resulted in many farmers who wished to expand their farming enterprise unable to compete with the tree companies.

Obviously, some benefited from this by way of increased prices for their land when sold to these companies.

However, on balance, the agriculture sector in Tasmania was not well served by this phenomena.
The excessive haste in which the schemes were implemented without any overlying strategy is a testament to poor public policy, executed in an ad hoc and detrimental way, not only to the forest industry but the agriculture sector and more broadly the Tasmanian community.

TFGA – Submission Forestry Managed Investment Schemes-September 2014 P a g e | 5 Forestry managed investment schemesSubmission 24 Summary.
The TFGA is supportive of encouraging investment in the forestry industry and we recognise the investment that many of our members have undertaken in establishing in plantations on their properties.

However, the MIS arrangements have clearly demonstrated that attempting to drive investment via tax incentives is a potentially risky strategy that often has unintended negative consequences.
We believe that the market should be allowed to set its own levels and, in doing so, strengthen the sustainability and profitability of the industry as a whole.

Any other drivers of investment should be avoided, as they have the potential to have long-lasting and devastating impacts, on not only the forest industry, but also to allied industries and beyond.

TFGA – Submission Forestry Managed Investment Schemes-September 2014 P a g e | 6 Forestry managed investment schemesSubmission 24