The brave new world of forestry as a service provision profession in Australia

When the ForestrySA forward rotations sale settles later this year, more than half of Australia's plantation estate (measured by either area or value) will be owned by institutions, with greater than AUD 3 billion funds invested. It seems likely that the bulk of the remaining assets will be sold within the next 5 years.

During the many decades when plantation forestry was dominated by the State forestry agencies, forest management objectives were driven by an evolving suite of policy settings from domestic wood supply security to employment creation, and ultimately to a range of often competing objectives (industry supply, commercial imperatives, environmental and community good). Forest management was guided from the proprietorial relationship that foresters and forestry agencies had over state–owned assets and foresters provided advice which they expected would be heeded by governments.

With the emergence of the Managed Investment Schemes (MIS) era, from the 1990s until recently, forest management objectives were designed around the financial services imperatives of tax regulation, marketing to retail investors and rapid growth of area planted. Forestry was essentially the technical add-on to the investment business.

The shift to institutional ownership brings a more tightly–defined and monitored set of forest management objectives. The focus is on medium-term investment performance measures – capital growth over the life of the investment; opportunities to improve cash-flows during the life of the investment; minimising risk through safe and sustainable operations. It also brings a difference in the way forestry management is delivered. In the Institutional era, forests will be managed either by internal or third-party service provision companies – that is, forestry is becoming a service provision business in Australia.

This has already started happening. Four years ago there was very little Australian forest under third-party management. Now, two third-party providers (of which PF Olsen Australia is one) are among the largest forest managers in Australia, and several other competent and professional service providers are generating strong competition along the east coast and increasing area under management.

In this environment, clients expect a very high level of accountability, reported against tightly defined criteria with little scope for serious error. There is emphasis on managing commercial and statutory risks (e.g. health and safety and the environment) and a total-system approach to land, crop, yield and sales management. Service providers must also be flexible and responsive to both changing client needs and shifts in the external environment which might influence the success or otherwise of the client's investment.

A significant challenge which will emerge from this new paradigm is how forest managers that are more clearly competitors than has historically been the case, continue to collaborate on and support industry good initiatives – research, certification, advocacy and the like.

Responding to this shift in focus presents a challenge to the profession in Australia. However, it also opens up opportunities for the small, but still significant, other forest owners – such as timber processors and individual forest owners. Third-party forest managers with a service provision ethic present small forest owners with new options to realise their investment and maximise returns while minimising the risk of regulatory non-compliance, or being short-changed through commercial inexperience.

Investment in blue gums in Australia has established a large resource. However, ownership and management of the forests will be quite different than originally anticipated.