Joyce on Economic Development

January 7th, 2013 at 12:00 pm by David Farrar

Adam Bennett at NZ Herald reports:

Speaking to the Herald about economic development prospects that he believes will drive growth and job creation, Joyce said there were significant opportunities in forestry and wood processing.

While the opportunities to add value to the logs produced here rather than simply exporting unprocessed timber had been talked about for years, Joyce said Chinese interest in the industry made the prospect more likely.

The topic had been discussed during the recent visit by senior Chinese politician Liu Yandong.

“Their view is they have to do something about their electricity consumption so they’re looking to offshore effectively some of the processing cost of some of their industries. So they’re looking and saying well, maybe we should invest.

“New Zealand has renewable energy, maybe we should invest there. If it’s competitive it also reduces the amount of stuff we’re bringing into China.”

Sounds excellent. No doubt the xenophobes will oppose anything to do with China.

Joyce believes New Zealanders now “are pretty awake and pretty realistic” about economic development opportunities. That, he says, could prove an increasing problem for Labour and the Greens. “For a start the Labour Party is now scared of its shadow when it comes to oil and gas – it doesn’t know what to say. A year ago they were bashing the hell out of us for it. The Labour Party is embarrassed by the Greens always turning stuff down.”

Joyce says polls suggest public attitudes to development opportunities have moved so far in the past two years that a Labour and Greens coalition that continues to oppose them as strongly as they have will find itself offside with a significant proportion of voters at the next election.

“The punters will turn around in 2014 and say, we’re not that interested because you guys are actually anti-.”

Can anyone name a commercial development opportunity they have not opposed?

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32 Responses to “Joyce on Economic Development”

  1. Redbaiter (6,478 comments) says:

    For Christ’s sake Farrar, why do you label everyone who has anything critical to say about business relationships with China (or the Chicom Generals) as a “xenophobe”..????

    This is the kind of propaganda tactic that demonstrates very little difference between your mindset and the mindset of the average left winger who describes anyone who opposes left wing ideas as mentally deficient.

    You should know better.

    I wonder why you don’t.

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  2. SPC (4,639 comments) says:

    The xenophobes simply opposed foreign land ownership.

    Apparently commercial development opportunities have only emerged since 2008 and have been so successful they have generated so many jobs that unemployment has fallen to record lows since then.

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  3. kowtow (6,701 comments) says:

    Extraordinary!

    We rely on Chinese communists to add value to our primary products here at home!

    kowtow kowtow to the Emperor in the Celestial Kingdom.

    National and Labour were desperate to get on board with these guys. The plan is coming to fruition. But don’t put all your eggs in the Chinese basket. There’s is not a stable proposition at all.It is held together only by the might of the PLA,how long will the Chinese people lay quiet?

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  4. Nostalgia-NZ (4,686 comments) says:

    A forester I know talks about the log price having hit the bottom and leveling out and being flat out with exports to China, in particular to make ‘cot’s as odd as that sounds. He also says the mills are closing down all over the place. Maybe Joyce needs to be looking at that, they’ve been battling for 4 years. Are we to assume Joyce is/was waiting for China to rescue the industry while the Government has been pushing up transport costs?

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  5. redeye (626 comments) says:

    I remember listening to David Lange saying he was sick of logs going overseas to be processed into furnuiture etc. That was 1984.

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  6. Brad (75 comments) says:

    So Joyce reckons he is going to recover the thousands of forestry/wood jobs that have been lost under his watch? I’ll believe it when I see it

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  7. SPC (4,639 comments) says:

    I’d place my money on China taking our logs and processing them in South East Asia rather than here – if they don’t want tto use power generation in China for this.

    Of course they may have been sounding out whether the government was prepared to offer cheaper subsidised power to get the jobs.

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  8. Graeme Edgeler (3,216 comments) says:

    Can anyone name a commercial development opportunity they have not opposed?

    Didn’t they open a Burger King?

    I also believe they want to rebuild Christchurch.

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  9. KevinH (1,128 comments) says:

    Sounds good but of course the devil is in the detail. The irony being is that both Carters and Fletchers rationalised their timber processing plants some years ago and to resurrect that industry would be expensive and cost /profit marginal.
    I would agree with SPC in that China would have to look elsewhere in S.E. Asia to do the processing ie the Phillipines, Indonesia or India. India is also a future growth partner for the sustainable timber processing industry.

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  10. Redbaiter (6,478 comments) says:

    “Joyce says polls suggest public attitudes to development opportunities have moved so far in the past two years that a Labour and Greens coalition that continues to oppose them as strongly as they have will find itself offside with a significant proportion of voters at the next election. ”

    Joyce is talking crap anyway, the Watermelon vote is growing.

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  11. Rex Widerstrom (5,125 comments) says:

    Brad points out:

    So Joyce reckons he is going to recover the thousands of forestry/wood jobs that have been lost under his watch? I’ll believe it when I see it

    To be fair, not just him but a succession of Quisling politicians who’ve obediently stood there while being dictated to. As redeye says, Lange was going on about the stacks of raw logs on Wellington wharfs in the 80s. When I got an office in Parliament a decade later I could look out and see stacks of more unprocessed timber on the same wharfs.

    When I enquired of the public service how Japan could absorb so much wood so quickly I was told they were stockpiling it underwater – which had the added advantage of increasing its value for furniture manufacturing (something to do with chemical changes). However a lot of it was used for chopsticks, the demand for which Japan could not hope to meet from its domestic industry.

    And almost two decades later the only thing that’s changed is the name of the buyer.

    Yes China is having trouble keeping up with electricity demand, mainly because Australia hasn’t been smart enough to insist on value-adding to the metals it sends over, instead shipping trainloads of crushed rock straight out of the ground and the Chinese need energy for their smelters.

    But even so, how are the comrades from the Politburo likely to view the inconvenience of things like a minimum wage and the 40 hour week when it looks at the cost of onshore processing in NZ versus China? Either Joyce is just thinking aloud or he underestimates who he’s dealing with.

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  12. backster (2,000 comments) says:

    The ideology of the Labour/ Greens is to avoid development opportunities and give stuff to create dependency. Their method is to borrow and/or print more money.

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  13. dime (8,752 comments) says:

    misread it the first time. thought it said “word processing” heh was thinking – that will save the economy!

    holiday dime .. slower than usual :P

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  14. Redbaiter (6,478 comments) says:

    “Either Joyce is just thinking aloud or he underestimates who he’s dealing with.”

    Joyce ran radio stations before being a politician, and was lucky to sell out at the right time.

    Now he’s Minister for Economic Development as well as being Minister of Transport. In the latter role he’s raised the minimum driving age by a year and introduced legislation to ban talking on cellphones while driving.

    Pretty soon he’ll most likely cave on reducing the drink driving limit to zero alcohol.

    We really needed to have Steve in parliament so badly.

    All that said, he’s got to be a better option than Russell Norman, who up against Joyce’s limited business experience only has membership of the Socialist Worker’s party on his CV. Not that that will worry most NZers, if they ever even hear about it while the mainstream media so willingly does Green Pary propaganda for them.

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  15. SPC (4,639 comments) says:

    backster, the only people actually printing money – the Bank of Japan, the Natonal Bank of Switzerland, the Fed Reserve of the USA, the Bank of England and the European Union via the ECB.

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  16. Jack5 (4,220 comments) says:

    rocessing timber in NZ rather than exporting logs makes sense. More cash for NZ, and jobs for the suffering timber towns such as Kawerau. Lack of such jobs for the semi-skilled and unskilled is dry rot in society.

    One reason the Chinese are interested in the NZ industry is that Russia has clamped down on unprocessed timber exports from the vast Siberian forests, and Russia is far, far tighter on foreign investment inits country than NZ is.

    Foreign owners understandably are more fickle investors here than New Zealanders. Americans, Canadians, Norwegians have retreated or shrunk in forestry when markets changed or demand tightened.

    Redbaiter is right on indiscriminate branding of those who question People’s Republic investment in NZ. as xenophobes or racists. That is as stupid as saying everyone who supports it is a communist.

    It’s sad that Kiwisaver, fostered by both Labour and National, channels billions of New Zealand savings overseas, leaving to foreigners too many local good pickings. The tiny NZ financial sector benefits by clipping the ticket, typically around 1 per cent. It’s difficult to tell how good the Kiwisaver foreign investments are because of fluctuating exchange rates and the diversity of the ultimate investments. There is trumpeting to justify the big fund managers’ bonuses when the wind is blowing in the right direction, but little publicity when things aren’t going so well.

    Some foreign investment has been excellent for NZ. The Bluff aluminium smelter, NZ’s largest non-farm exporter, is an example. Many smaller examples can match that. When foreign investors bring in new industries and new expertise they should be welcomed, and I’m sure they always will be

    When their capital just buys land or stands in for savings NZ fund managers pipeline abroad, you can be less sure of the ultimate benefit.

    It often seems NZ is too small to be a viable economic unit. Perhaps we should have been a state of Australia, after all. I’m not an Aussie, but the reaction to this suggestion usually surprise. NZ was Britain’s poodle for more than a century and a half, then America’s, and nowl, rather than being fiercely economically independent we are barking outside China’s big house, seeking a new kennel.

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  17. Colville (1,771 comments) says:

    I would expect that if the Chinese were to step into value added wood in NZ then they would do it in a place where they could purchase large areas of ready to go standing timber so that they could control all aspects of the process and export as much value as possible. JNL in Masterton are like that and the Tiong family in Earnslaw One and Winstone pulp are planting to marketing one stop shops.
    Approx 60% of a tree ends up as timber and if its dried its only 40% of the tree weight so it makes sense from a freight point of view.
    I own 60 Ha in the Manawatu and was recently phoned by a manager from a large forestry concern looking for info on harvest expectations. Mine are 5 to 8 years away. I was told there are 388 private forests between 20 and 100 Ha in the Manawatu and there is no local processing facility at all.
    Please build one!

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  18. Ed Snack (1,535 comments) says:

    Oh nice Rex, so the Aussies should just say to the Chinese “you can’t buy our competitively priced iron ore, you must buy our expensively priced iron and steel ! Nice one, can’t fail, I see why you’re such a business consulting success, tell your customer what you want them to buy, and bob’s your uncle, jobs and money for all ! Sounds easy, now just do that, OK, and come back and tell us how you got on…

    We sell radiata logs overseas because the customers buy them, and won’t necessarily (read won’t in many cases) buy processed products. A lot of the logs are turned into cheap plywood for forms or for packaging. The same manufacturers purchase logs from other places, primarily the Russians but also the US and Canada and do the same, they have a factory already built, it is probably a lot larger and cheaper to run than an NZ factory.

    To export a lot of processed product means to become far more specialized, it needs a lot of local market understanding plus contacts, in a big way, plus capital. The easy way to achieve that in NZ for the China (and Korea) market is a partnership deal. It’s not like we haven’t been trying BTW, it’s just that it a lot harder than standing there opining on how clever it would if we just… (insert quack idea of choice here). Of course you could take the way some seem to be suggesting, legislate and ban the export of unprocessed items, good luck with your economy though.

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  19. Ed Snack (1,535 comments) says:

    Colville, sell your timber cheap then, so someone can afford to process locally. Or do you prefer to get the best price you can even if that means export ?

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  20. Colville (1,771 comments) says:

    Ed, gimme the best price thanks!

    I sold the prunes of the last lot to JNL at primo prices and the rest went to local and international markets. JNL is pretty much self suficient now tho so it takes away that option.

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  21. Jack5 (4,220 comments) says:

    Two points as we debate Chinese investment in timber processing.

    First, remember the famous Wall of Wood that was going to take over from agriculture as New Zealand’s premier export industry? What happened? Was it always just bullshit about a bullshit wood that has since caused a plague of leaky houses?

    Second, we can talk free market all we like, but the radiata pine business really picked up strength through subsidies: that is tax breaks. And I think one of those who instituted them, or at least at one stage, supported them, was Sir Roger Douglas. Perhaps he helped axe them later.

    Our national ambition knows no bounds. South-East Asian countries clamour to build high tech industries, and we stuff around with trees and cows, and send our savings overseas to countries that prize advanced technology industries.

    It’s not just the politicians. As soon as a tech business starts to fly, the owners get their just reward by flogging it off to foreignerss. Where are the Kiwi development entrepreneurs and their Kiwi finanical backers to pick up these promising enterprises and make them NZ-based multinationals. Often the start-up entrepreneurs say they have to sell to get into big markets. What does this say about our business expertise?

    How come these big foreign companies expanded without selling themselves overseas for capital or to get into markets: Ford and General Motors, Coca-Cola and Boeing, Apple and Microsoft, Toyota and Canon, Haier and Huawei?

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  22. Rex Widerstrom (5,125 comments) says:

    Ed Snack:

    According to the latest USGS data, China itself produced 1200 million metric tons (MMT) of ore in 2011, followed by Australia with 480 MMT and Brazil with 390 MMT. India produced 240 MMT but needs it for its own expansion (and is also importing from Australia). Next comes Russia with 100 MMT and a range of countries with even less.

    If China is to sustain growth at the current rate – or even higher, so as to keep the peasants happy by urbanising them and giving them cheap cars, thus avoiding a repeat of what happened in Russia – it needs more ore than it can produce, and a need can always be exploited.

    If Australia and Brazil were to agree to impose a requirement that a degree of processing took place onshore China would either need to try to source additional ore from a myriad of small producers on the other side of the world (most of whom already have contracts in place) or slow its rate of growth.

    This is the only time in history where adundant supply in Australia and virtually endless demand in China puts Australia in the position to make such demands, and yet they don’t have the guts to.

    The Aboriginal people have no such qualms, however. They claim Native Title and know they’ll be paid to relinquish it because China just wants the ore, and will just throw a few million extra here or there to get round any obstacles. When the boom ends – an d it will end – the Aboriginal communities who’ve invested in non-mining job creation for their members will be the ones laughing at the “cashed up bogans” from the mining industry, who’ll be wondering what their future is on a lump of rock which has been hollowed out of any valuable mineral, leaving them with the dust.

    So it’s the Aboriginal people (or a small part thereof) to whom I provide business consulting since they have the brains and the courage to stand their ground, and yes thanks, I’m very successful at it.

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  23. Monique Watson (1,062 comments) says:

    Rex W: “This is the only time in history where abundant supply in Australia and virtually endless demand in China puts Australia in the position to make such demands, and yet they don’t have the guts to” .

    Brilliant statement. If you can imagine an age where the value of the USD/AUD currencies were reversed it would be due to the installation of a government that understood this relationship.

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  24. Jack5 (4,220 comments) says:

    Rex Widerstrom posted at 4.51:

    …the Aboriginal communities who’ve invested in non-mining job creation for their members will be the ones laughing at the “cashed up bogans” from the mining industry, who’ll be wondering what their future is on a lump of rock which has been hollowed out of any valuable mineral, leaving them with the dust…

    What sort of jobs are they setting up, Rex? What sort of industry are they getting into?

    Also it will surely take a long time to get all of the minerals out of the Australian continent – centuries????

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  25. Nostalgia-NZ (4,686 comments) says:

    That’s right Jack, I think Rex over cooked things.
    If you’re happy with your selling price most times you’re selling and looking to edge the price up.
    Whatever your inventory is, and future prospects are, you’re keeping an eye on that as well. It’s sort of basic english away from the biblical sense of feast and famine, nice prose from Rex though. Right out of the good book.

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  26. Rex Widerstrom (5,125 comments) says:

    Jack5 asks:

    What sort of jobs are they setting up, Rex? What sort of industry are they getting into?

    That’s a broad question, Jack5, and answering it only in terms of the ones I work with would give too narrow a view. I know personally of enterprises from cleaning to earthmoving, indigenous art and tourism to video production and construction. The WA Aboriginal business directory is still fledgling, but a scan of the more established NSW directory will give you some idea. Everything there from transport to clothing manufacture, from lawnmowing to computers.

    Also it will surely take a long time to get all of the minerals out of the Australian continent – centuries????

    The exact answer to that depends upon the price. When the ore price is high the miners will spend a lot to get it out of the ground because they’ll recover it on the sale price; when the price falls, as it has lately, then some deposits become uneconomic. The academics say it won’t run out “for several decades at least” but that’s not long in planning terms – Australia needs to be creating businesses now which will grow to employ its increasing population over the next 30 or so years, and be looking to train people to fill jobs in those industries. Yet the only really active new business / new job creation going on is in the Aboriginal sector.

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  27. BlairM (2,266 comments) says:

    Some foreign investment has been excellent for NZ. The Bluff aluminium smelter, NZ’s largest non-farm exporter, is an example.

    I’m all in favour of any foreign investment in New Zealand, but seriously, that’s your “good example”? Allowing one company to use up 1/6th of NZ’s generating capacity? Building a dam in the middle of nowhere at the cost of several lives, for a smelter that is thousands of miles away from the bauxite it processes? Giving a foreign multinational rock bottom priced electricity so that they stay, while hundreds of thousands of pensioners have to pay rates far in excess? For what, a pissy 400 subsidised jobs in Southland, the most economically affluent region in the country? No, hell no, it’s a joke. Take the subsidy away, shut the plant down and bring Manapouri back on the grid so we can get power prices down.

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  28. Camryn (549 comments) says:

    Would be nice to make Ikea furniture in New Zealand, say for NZ and Australian consumption, so we could actually have an Ikea.

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  29. Anthony (736 comments) says:

    Chinese investors in particular have an aversion to paying any income tax, which is another good reason for introducing a land tax that they can’t avoid. Make it able to be credited against income tax to avoid extra tax on those who do pay tax.

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  30. KiwiGreg (3,129 comments) says:

    In addition to BlairM’s comments about the Bluff smelter, the only NET export is the electricity – we import all the alumina from Australia.

    Any evidence on the “Chinese investors in particular have an aversion to paying any income tax” claim Anthony?

    @ Rex, Japan takes only a very small percentage of raw logs – China takes 62% of our log exports South Korea 20%, India is about 12% and Japan around 5%. By value we export about $3b of forest products of which around 1/3rd is raw log. That’s not to say there is no value add in a raw log (it is after all grown, harvested and transported). Log exports to China have increases spectacularly in the last 5 years, we now make up 20% of all of China’s log imports (but less than 3% of their lumber imports; we just aren’t cost competitive versus, Western Canada for example).

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  31. Rex Widerstrom (5,125 comments) says:

    Thanks KiwiGreg, I suspected the proportion had changed away from Japan in favour of China (as have the exports of many things from many places) but didn’t have the figures.

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  32. Jack5 (4,220 comments) says:

    Kiwigreg posted at 9.08

    …the only NET export is the electricity – we import all the alumina from Australia…

    And how else can we turn so much electricity into export earnings? Not by killing the smelter and transmitting the power to Auckland with at least 25 per cent transmission loss. The rest then goes into domestic consumption in Auckland, whose consumers gobble up most of our export earnings but provide very little of these.

    The smelter also supplies aluminium for NZ industry and building without adding to our balance of payments deficit. Other NZ firms use the aluminium as the basis for added-value exporting.

    If you want to get into net exports, Kiwigreg, you need for agriculture to deduct costs of importing fertiliser, diesel, chemicals, tractors etc for our farms. For horticulture you need to deduct the costs of wages that go to pickers’ homes in Melanesia. For electronics, you need to deduct the cost of imported componentry.

    Bauxite bulk shipped from Australia must be costing the smelter at most $140 a tonne, while aluminium sells for around $2400 a tonne.

    Some of the margin goes into wages which are of major importance to Southland, and have a strong multiplier effect on the region’s overall employment. Some margin goes into engineering around the country that services the smelter.

    Earlier-decades Governments fought hard to get the smelter sited in NZ. It was lured here. Those were the days when NZ paid its way in the world from its own earnings, and politicians and commentators wanted this to be the pattern for the future.

    Blair M says (4.19 post) “take the subsidy away”. What subsidy? Who else is going to buy such a chunk of power? Will Auckland households buying the three-quarters left after transmission losses, and after the administration costs of selling to hundreds of thousands of householders, really equate to what NZ gets from a bulk sale to an industrial customer?

    The smelter generates big chunks of foreign exchange for NZ. So does the forest industry, which has a high net proportion of export value. However, forestry earns NZ far, far less than was promised by the Wall of Wood propaganda two and three decades ago. In that, trees were going to overtake agriculture. In recent years, I think, trees have been felled in some places to make way for dairy pasture.

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