Financing methods for small-scale hardwood plantations in Queensland, Australia

Under Vision 2020, a target was set in 1997 for trebling the forestry plantation area in Australia by the year 2020. Government subsidies and extension for plantation establishment have largely disappeared, hence forestry expansion is highly dependent on access to private finance. Plantation expansions throughout Australia has occurred predominantly through managed investment schemes, and to a lesser extent by joint venture schemes between landholders and government or private enterprise. Relatively small-scale hardwood plantations have been established, designed to replace the hardwood timber from the native forests that will be protected from further logging after 2024 under the Regional Forestry Agreements. Views on financing methods for forestry expansion in Queensland were investigated through by an email survey of 12 forestry and finance professionals, followed by in-depth personal interviews of the same group of key informants. Issues identified include lack of transparent information, inequitable taxation system between Managed Investment Scheme (MIS) companies and small-scale forest owners, need for further R&D on all aspects of the industry, and design of a strategic alliance model for forestry investors. Participants took the view that adoption of a strategic alliance model would encourage further investment in small-scale forestry and argued that this model could protect the interests of all the stakeholders through reducing investment risk and creating competitive advantage. The potential introduction of a carbon trading scheme also attracted interest from investors, who look for recognisable structures that may alleviate the risk of investing in an industry with which they are unfamiliar. The participants considered that further R&D should be the main focus for government participation in small-scale forestry, although recognizing current difficulties with information sharing. © Steve Harrison, John Herbohn 2009