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Estimates: Forest and Wood Products Australia

Estimates & Committees
Lee Rhiannon 22 May 2012

Rural and Regional Affairs and Transport Legislation Committee

Estimates hearings, 22 May 2012

Forest and Wood Products Australia

  • Senator Joe Ludwig, Minister for Agriculture, Fisheries and Forestry; Minister Assisting on Queensland Floods Recovery
  • Senator Alex Gallacher, Labor Senator for South Australia
  • Mr Ric Sinclair, Managing Director, Forest and Wood Products Australia

Full transcript available here

Senator RHIANNON: I want to go to your annual report. On page 14 it says that total expenditure for research and development on climate variability and climate change in 2010-11 was 11 per cent of total research and development. Could you tell me what the total amount in dollars was, please.

Mr Sinclair: That would be calculated as 11 per cent times our total R&D expenditure. Sorry, I do not have a calculator with me, but it is just mathematical. The total R&D expenditure for last year was $5.7 million, so 11 per cent of that.

Senator RHIANNON: Eleven per cent of $5.7 million?

Mr Sinclair: Yes.

Senator RHIANNON: You then list a whole number of organisations that you worked with. What was the nature of your role in the research and development, considering there are so many other organisations working on it, or do you just rely on them?

Mr Sinclair: We are an R&D investor. We have set up a series of R&D priorities, of which climate change adaptation is one. We have published an R&D investment plan which describes the activities or research programs that we are seeking in this area. We get research supplies, look at our investment plans and assess what research needs are in those plans, and then they come to us with projects.

Senator RHIANNON: So in fact you do not do any of the research and development yourself?

Mr Sinclair: No, we are only an investor.

Senator RHIANNON: You only invest in? Are the plans that you come up with in conjunction with those various organisations you have listed there or are they the groups that invest in what you are putting forward?

Mr Sinclair: The R&D investment plans are developed in conjunction with a range of stakeholders, both industry and research providers. It is usually undertaken by an expert, such as a retired professor, who looks at the range of issues and identifies criteria for projects or the types of activities that need to occur.

Senator RHIANNON: Do you have a list of the climate change projects that you are suggesting could be invested in?

Mr Sinclair: No, but our R&D investment plan is published on our website.

Senator RHIANNON: I did not find it on your website, so could you take that on notice to provide it to me?

Mr Sinclair: Yes, certainly.

Senator RHIANNON: Thank you. I was also interested in another document on your website about strategies and priority themes. You have an interesting section there on page 15. Under ‘Weaknesses’ you list various issues, but I did not find it very clear. Because of the shortness of time, I might go straight to ‘Threats’. You list a large number of threats and most of them are coming in with a ranking of H and N.

Mr Sinclair: Yes.

Senator RHIANNON: What do you make of these threats and how do they position the industry? It makes it look as though there is trouble brewing.

Mr Sinclair: What we have is a standard strengths, weaknesses, opportunities and threats model there.

CHAIR: Sorry, can I interrupt?

Mr Sinclair: Yes.

CHAIR: What is the word you are using? It sounds like ‘threats’.

Senator RHIANNON: ‘Threats’, yes.

Mr Sinclair: ‘Threats’ is part of a SWOT analysis.

Senator RHIANNON: It is called a SWOT analysis and they have done it for themselves.

CHAIR: ‘Sweats’?

Senator GALLACHER: No, ‘threats’.

Senator RHIANNON: SWOT.

Senator GALLACHER: It is a SWOT analysis.

Senator RHIANNON: You haven’t been to enough of those meetings where they—

CHAIR: Threats?

Senator RHIANNON: I must admit I am wondering too, Mr Chair.

CHAIR: All right, I’ll go back to sleep! Sorry.

Senator RHIANNON: Is it something that you just pulled together, to be frank about it, to fill up the document or is it something that is real and that you are concerned about?

Mr Sinclair: That document was reviewed at a strategic workshop by my board in February last year. We went through a process of whiteboarding the issues that are affecting the sector and then ranking them. It is a real part of our strategic planning process.

Senator RHIANNON: It is not something that just lived on the whiteboard for that day? You are saying that it is now influencing your strategy?

Mr Sinclair: Yes.

Senator RHIANNON: Under strategy 3, you have talked about the industry and government support of education activities as measured by participation in programs. I am picking that one out because again the words are there but it is really hard to sometimes get a handle on what you are meaning. Could you spell out the consultation, the education and particularly the surveys and what that actually means? What kinds of surveys do you do, what do they cost and how are they funded?

Mr Sinclair: Strategy 3 is tech transfer and education, and one of the activities under that is our R&D works seminars, which is about getting industry to understand and uptake research findings that have been completed. Critically, we measure participation in that. We have now organised about 15 regional workshops to make industry aware of research findings. It depends on the location, but we get between 12 and 20 people to each of those seminars. So that is one of our key measures.

Senator RHIANNON: Who attends the regional workshops and how do you advertise them?

Mr Sinclair: Our primary focus is on our industry members and levy payers. We promote it through industry publications. We also publish it on our website and via email to direct participants.

Senator RHIANNON: What has often been said to me about the FWPA is that, while it talks about climate change and a whole range of concerns, it basically is about promoting forestry in a very traditional way. When I hear you say who comes to these meetings, I wonder if there is some validity in that remark. Can you comment, please?

Mr Sinclair: Sure. We deal with climate change in two areas. One is through our generic promotion program, where we are promoting the role of sustainably sourced wood in addressing climate change versus other materials, such as concrete and steel, in the built environment. That is under strategy 1. We also have it as one of our R&D priorities, which is about making sure that industry is able to adapt to a changing environment. For example, one of our research projects was looking at productive forest plantations, determining what was the likely productivity impact of climate change under a range of scenarios. This was undertaken by CSIRO. We are now doing another resource project, taking that down to another level of detail to provide management tools to forest managers to manage genetic stock and site variability related to climate change.

Senator RHIANNON: Back to the annual report, on page 16 you have a table, ‘Reliable source of information about the environment’. It is not a really clear, stand-alone table, although there is some information. I was curious to know how much this cost and why you did it.

Mr Sinclair: That is coming again under strategy 1, which is our generic promotion program. We undertake consumer opinion surveys every six to eight months as a way of tracking the uptake and performance of our advertising and communication activities. The average cost of a survey is around $20,000.

Senator RHIANNON: Is a copy available?

Mr Sinclair: At this stage it is commercial in confidence.

Senator RHIANNON: That means only FWPA—

Mr Sinclair: That is right.

Senator RHIANNON: Only your board gets to see it? Do they get to see it?

Mr Sinclair: The board and management, yes.

Senator RHIANNON: I am checking my notes. I think it was today that your nominations were opened for new directors.

Mr Sinclair: That is correct. We advertised on Friday in the Financial Review.

Senator RHIANNON: So it was Friday. I understand it is to include one independent director. What does that mean?

Mr Sinclair: An independent director, under our constitution, is someone who is not a member of the company or a director or an employee of a member or of an association. We are a skills based board and we are required, under our constitution, to have two independent directors at any time; and there is a skills matrix that is required to be satisfied.

Senator RHIANNON: For the independent directors, does that mean you are looking for a certain skill set?

Mr Sinclair: No, there is no specific skill set that the independents require. In terms of the key criteria which are defined under our constitution and our statutory funding agreement, most of the incumbents cover those skills.

Senator RHIANNON: Can you tell me about the process to appoint board members?

Mr Sinclair: We have an arms-length director selection process which is embedded in our constitution. One-third of our directors stand for renewal every year. We have an arms-length committee, which has a non-voting chair who is a director of FWPA. It has a representative from the four national associations, the Australian Forest Products Association, Australian Forest Growers, Engineered Wood Products Association of Australasia and the Australian Timber Importers Federation, and the board can appoint at least one other person to that committee. We send a notice to all members notifying them that we are seeking directors and we publicly advertise. That committee then makes a recommendation to the board which the board then passes through to the AGM to be voted on by members.

Senator RHIANNON: Could we go back to some more details about your budget. I notice that your fund agreement expires this year.

Mr Sinclair: That is right, in September.

Senator RHIANNON: Therefore, you are talking to the government about the next stage?

Mr Sinclair: That is right.

Senator RHIANNON: In those discussions, in those negotiations for your next round of funding, what sorts of things do you raise or are raised with you? Are you talking about the RFAs, threatened species, green carbon? What is on the table when you renegotiate?

Mr Sinclair: Under our existing statutory funding agreement we need to have an agreement finished by 30 June this year and, as part of the contract, we are required to undertake a performance review, which was due by 1 February. We completed that and that is published on our website. We have undertaken three rounds of negotiation with the department and we have come to an agreement, in principle, for the revised statutory funding agreement, so it is now with the department for their internal processes. The issues that are actually in the agreement are more commercial clauses, such as corporate governance requirements, reporting requirements and structures of how cost allocations are undertaken. The issues that you raised are not in there, other than how they are addressed within the national research priorities.

Senator RHIANNON: I think you made it clear, but I will just clarify: in those negotiations and in the final agreement it is totally commercial?

Mr Sinclair: Correct.

Senator RHIANNON: At any stage are these other issues considered in terms of the transition the industry is going through—environmental issues? Is there any point of engagement on those other issues?

Mr Sinclair: The issues are raised more within the relationship of our research priorities and we have a twice-annual meeting with the department about activities of the organisation. To date these have not been addressed.

Senator RHIANNON: Can you take on notice if you are able to supply, which I hope you can, details of those twice-yearly meetings that you have with the government and what issues you discuss?

Mr Sinclair: I assume that is more with the department. They take the minutes of the meetings.

Senator RHIANNON: Minister, could you take that on notice?

Senator Ludwig: We will, yes.

Senator RHIANNON: Thank you, very much.

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