Economists welcome end of native forest logging in WA
If a taxpayer subsidy falls in the forest, and no one hears it…
The Forest Products Commission (FPC) is a statutory body wholly owned by the Western Australian government. Its primary function is to conduct forestry activities on a commercial basis in state-owned forests, including softwood plantations, sandalwood and native forests.
The FPC is responsible for most of Western Australia’s (WA) native forestry, which occurs in the state’s South West (SW) forests. The SW forests of WA lie within one of the world’s 36 Global Biodiversity Hotspots and include jarrah and karri forests found nowhere else. While some areas are off-limits, logging and forestry operations continue in other areas.
Native forestry in the SW forests is a small part of the overall WA forestry industry, and one that has seen declining production and quality. WA forestry is dominated by the growing output from plantations.
While the FPC has a primarily commercial function, it has struggled to make a profit over its 16 years of operation, with losses in many years.
Around half of the accumulated profit since inception is accounted for in an unusually high profit in 2016, a result driven almost entirely by sandalwood. Native forestry posted a loss for the fourth year in a row.
Government contributions to the FPC have exceeded profits and far exceeded dividends. To 2015 FPC paid just $19 million in dividends, an average of 0.45% of equity. Yet the WA government has provided numerous payments to the FPC. The Annual Reports show net cash payments from the government of $111 million to the FPC. By comparison, the FPC’s accumulated net profit is $45 million.
The WA government has made numerous ‘equity injections’ to the FPC. One large equity injection in 2012 left the FPC without its former loans to WA Treasury. Since the WA government wholly owns the FPC, this is equivalent to a debt write-off. Net of equity injections, equity in real terms has declined substantially since 2003. There have been other forms of government assistance.
The native forestry division has benefited from the government support to the FPC. Despite this, it has seen profits decline to low levels over the past decade, and net losses over the last four years totalling $34 million.