September 5, 2012
Changes are afoot in Tasmania.The Tasmania, where the old resource industry's dominated the economy, is fading. This is a state in transition--economically and politically.
Fred Gale says that the Tasmanian forest industry is experiencing its worst downturn in a decade. There is a sea of red ink, failed investments, lost contracts and redundancies everywhere. He spells out the reasons:
Structural factors are at work. These include a historically high Australian dollar; a decline in per capita paper demand thanks to computerised workplaces; the superiority of plantation over native hardwood woodchips coupled with a significant increase in plantation woodchip volumes; and the growth of third-party, Forest Stewardship Council, certification.
He adds that though there can be much debate over the relative importance of these factors they have collectively placed a greater load on Tasmania’s forestry model than it can bear. A debt ladened Gunns cannot afford to proceed with the Bell Bay pulp mill--its a zombie company--- and Forestry Tasmania is loss making and faces major restructuring.
One inference to be drawn from this episode is the need to transition the forest products industry around sustainability--the brand that is Tasmania - clean and green--- and to diversify the broader economy.
Saul Eastlake argues that a single ‘mega-project’, particularly one based on commodity-processing (ie., selling large volumes of essentially undifferentiated commodities at the lowest possible price), is never going to be ‘the’ solution to Tasmania’s economic and other problems. He then refers to the smart state:
Tasmania’s future economic success is far more likely to be found in the production of highly differentiated goods and services, embodying a significant intellectual content (for example in their design or branding), for which customers can be persuaded to pay premium prices. There are many successful examples of that strategy working in Tasmania – but they are all relatively small enterprises, not mega-projects.
One problem in embracing innovation to create the highly differentiated goods and services embodying a relatively high intellectual content and for which customers are willing to pay premium prices is Tasmania’s relatively low levels of educational participation and attainment. Another is that it needs to attract and retain people with creative skills and aptitudes. A third is the low investment in infrastructure.