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Holistic and Sustainable Forest Management to Benefit All Fijians Part 1

Government’s philosophy in managing natural resources is to achieve a win-win, no-zero-sum outcome. That is, a win for the economy including the landowners, the licensees, contractors, the value adders, and a win for the environment.


Part 1 of an abstract of the Prime Minister and Minister for Forestry’s statement on the Forestry Sector which was delivered in the August Parliament sitting.


The Ministry of Forestry, with a budget of $13.2 million in the 2021-2022 financial year is focused on achieving optimum results that will further assist our forestry industry to fulfil  its increasingly  important  role  in  our  economy,  while  creating  business  opportunities,  increased revenue for landowners, creating new and sustained jobs based on a legal and administrative framework that is efficient and transparent.


In just the first two weeks of the new financial year, the forestry sector has generated $14 million in export earnings.  The  bulk  of  these  earnings  were  from  pine  chips  exported  by  the  Fiji  Pine Group of Companies. Other products included sawn timber from mahogany, raintree and native species exported by various companies in the sector. 


The  Ministry’s  role  has  been  to  improve  the  way  it  facilitates  private-sector  activity - like approving export licenses within 24 hours - while also monitoring the companies’ operations to ensure  that  our  natural  resources  are  being  sustainably  managed  for  the  long  term,  with minimal impact on our environment. 


These improvements in facilitation are in line with Government’s belief that the private sector is the  engine  of  economic  growth  and  that  Government  agencies  need  to  continue  to  improve  the facilitation processes, including removing red tape and reducing bureaucracy. I am most glad that this is already happening with the Ministry of Forestry, as is evidenced with how the forestry sector is responding positively.


Fiji Pine Group


In addition to improving its facilitation processes, the Ministry of Forestry is also strengthening its working relationship with all stakeholders in the Forestry sector. While there are a number of small, medium and large sized businesses involved in the harvesting, processing and value adding, I would like to highlight recent developments involving the Fiji Pine Group. The Group recorded an operational profit of $35.6 million in the 2020 financial year, compared to $24.9 million in 2019. Despite the fact that 2020 was a very challenging year due to COVID-19, the Group realigned its strategies and delivered a record profit that was $10.7 million higher than in 2019. 


Importantly, the Pine Group is now debt free. This followed a lump sum payment of $2.2 million to Government in February this year to fully settle one of the last loan accounts on the Group’s books. To put it into perspective, in 2008 the Group had a debt stock of $63 million. And in less than 14 years, they have  cleared their debt stock  through  commercial  discipline,  focus  on  removing  corruption,  focus  on  transparency  and investment in technology and its people.


On top of this,  despite  the  challenges  of  COVID-19,  the  Group  continued  to  pay dividends  to  the  pine  landowners.  Prior to 2013, landowners never received a single cent in dividend payouts. In 2013, the Group started with a modest payout of $350,000.  Since then and up until last year the Group has paid out $24.6 million in dividends.


This year the landowners will receive another $6 million, making it a total of $30.6 million – this $6 million will be paid despite the economic slowdown. This year’s dividends will be paid in three instalments. The first instalment of $2 million was made in April. The second instalment of another $2 million will be made this week, on Thursday 19 August, and the final payment of $2 million will be made in November. 


So, from 2013 to this year the total dividend payout equates to $30.06 million dollars, and every last cent of it has gone straight into the hands of the pine landowners. Government did not take a single cent. Apart from these dividends, the landowners receive land lease payments and a stumpage rate of 12%. All these returns to the landowners are unprecedented since Fiji started planting pine about 60 years ago.


Additionally, the Group has already secured markets for its woodchips for next year. This gives the Group the kind of certainty that it needs to plan and operate efficiently. What this means is that the Group will continue to support the landowners, workers, and the many contractors who rely on the industry.  It  also  means  that  the  industry  will  continue  to  generate  economic  activity  and export earnings. 


Pine restocking and sustainable forestry practices are the key focus areas of the Pine Group. The Group targets to plant 2,000 hectares of pine every year, which equates to around 2 million trees a year. Recently, the Pine Group set up a brand-new nursery at Drasa in Lautoka with a capacity of one million seedlings. This has come with an investment of $350,000.


The Pine Group continues to look at ways to diversify its business. In accordance with this vision, the Group has embarked on setting up a brand-new sawmill at Drasa to process other species of logs, like Raintree, Mahogany, and other native species. This will involve a total investment of $15 million, and the Group expects to commence operations from the second quarter of next year. With this  investment,  the  capacity  to  process  and  value-add  resources  domestically  will  increase substantially. This, too, will create economic activity and also generate increased export income. 


From a business-diversification perspective, the Pine Group is also the largest independent power producer in Fiji. Through its biomass power plant, the Group has produced about 93.71 Giga Watt hours of electricity to the national grid since 2018.  There  is  potential  to  contribute  more  to  the national  grid,  and  the  Pine  Group  will  continue  to  explore  options  with  Energy  Fiji  Limited  to realise this.


In terms of corporate social responsibility, the Pine Group contributed $1.3 million to Tropical Cyclone Yasa rehabilitation works in Vanua Levu, including materials for house repairs for the pine landowners.  The  Ministries  of  Forestry  and  Rural  and  Maritime  Development  are  helping repair and rebuild damaged houses, and more than 70 have been completed.


The Pine Group aspires to serve its landowners better. Through open and regular consultations with the landowners, there is now unprecedented bonding between the industry and the pine landowners. The Group shares information in an open and transparent manner, something that was missing in the past. As part of new relationships, the Pine Group has embarked on the restructuring of landowner-based institutions like the Fiji Pine Trust, Forest Base Companies and Forest Based Trusts to bring about more accountability and transparency. And it is doing this with the help of the Ministry of Forestry.


Mahogany Industry


Fiji’s mahogany plantations are considered to be among of the largest planted forests in the world.  Government  intends  to  see  that  we  capitalize  on  this  reputation  and  realise  the  full potential of Fijian Mahogany. The Mahogany Industry Development Act in 2010 was introduced to bring about a transparent, efficient and results-oriented arrangement for the mahogany industry. The Mahogany sector has its governance structures which is critical to ensure transparency and ensure maximum returns for all stakeholders.


Despite having this large valuable asset, the Fiji Hardwood Corporation did not make a single profit until after 2007. It had a burgeoning debt stock and there was hardly any value adding. There was no licensing regime. The Act has led to the reorganization of the mahogany sector, with efficiencies being gained in FHCL, massive reduction in its debt stock and the setting up of the Mahogany Industry Council of which I am the chair of. Government’s philosophy in managing natural resources like Mahogany is to achieve a win-win, no-zero-sum outcome. That is, a win for the economy including the landowners, the licensees, contractors, the value adders and a win for the environment. We already see this happening in the Pine industry.


The Mahogany Act also promotes the branding of Fijian Mahogany in the international markets, and this is where our efforts to certify our Mahogany forests will play a key role. Forest certification is currently in progress. Forest certification has been delayed because of international travel which has restricted visits by certifiers from abroad. But we are not just waiting for the borders to open, FHCL is liaising with the Fiji Pine Group, which is already sharing its forest certification experiences. Certification has given Fiji Pine access to niche markets in Japan, Australia, New Zealand, China and other markets.


And while we are working towards forest certification for Mahogany, we are also supporting the industry to grow. In 2020, total mahogany log production was more than 21,000 cubic metres. Fiji Hardwood Corporation Limited is working with its partners to double the harvesting and exports this year. While all sectors have been affected by the COVID-19 pandemic, Investment Fiji reports that Fijian Mahogany products were among the few of Fiji’s top export commodities to continue to find welcoming markets, especially in the United States of America in recent months. 


Mahogany’s main commodity right now is sawn timber.  Value-adding is also being done.  This includes  production  of  interior  and  exterior  flooring  and  decking,  furniture,  panel  products  and guitar components. There is also further potential in other mahogany value-added products, like interior and exterior furniture components, door components, cable drums and artefacts, which are more capital- and labour intensive. Government will continue to promote value-adding opportunities  in  Fiji  to  ensure  greater  returns  from  our  Mahogany  and  more  employment opportunities for Fijians. Government’s tax incentives and duty concessions are also intended to encourage the industry to import value-adding machinery while encouraging exports. This includes the export tax deduction as announced in the 2021-2022 Budget.


Fiji Hardwood Corporation is working with its stakeholders not only to increase value-adding to our  Mahogany,  but  also  importantly  to  replant  1,250  hectares  annually  and  to  ensure  that harvesting operations are conducted according to Fiji’s harvesting standards, which guarantee the sustainability of the resources and protect the environment. 


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