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Dublin: 1 °C Sunday 23 November, 2014

Sale of Irish forest ‘cannot be justified’ on economic grounds

Economist Peter Bacon says the rationale for the proposed sale of Coillte harvesting rights “no longer stands up”.

Image: Hugh Rooney/Eye Ubiquitous/Press Association Images

ECONOMIST PETER BACON has said there is no justification for selling Coillte’s harvesting rights to raise money to pay off State debts.

According to his company’s analysis, the economic rationale for the proposed sale of the State-owned forests “no longer stands up and cannot be justified”.

The report, commissioned by the Coillte branch of the Impact trade union, says the State would remain liable for costs of €1.3 billion following a sale of harvesting rights. To cover these costs, which include the funding of the agency’s future deficit and its pension deficit, Coillte would need to sell at €78 per square metre, which is “well above current or recent prices”.

The Government’s “decision in principal” would see the future sale of 75 per cent of Coillte timber for a period of 80 years.

“There is no basis in these prices for assuming that this would be achieved,” continued the report, entitled Assessment of the Consequences of the Proposed Sale of Coillte’s Timber Harvesting Rights. “This means that, rather than generating State income, a sale of Coillte harvesting rights would represent a substantial cost to the exchequer.”

The report emphasised that the proposal has not been “fully articulated” and the representations made are based on the consultants’ understanding of statements made thus far.

“At the start it is important to be clear that the only rationale that has been put forward is that this would raise liquid funds and there is nothing in existing Irish forestry policy nor in any strategic review of the sector that would support such a sale.”

There is also little in the way of international experience to guide the Irish decision, according to Bacon.

The report says the overall result of the Government’s proposal would effectively liquidate Coillte as a viable entity.

The analysis shows that the actual gains from the proposed sale would be limited, even in the short term, while there would be considerable longer term liabilities created with a lot of uncertainty regarding the full range of impacts.

“Given the non-commercial activities of Coillte and the residual land and forest that would need to be managed, it should be seen as a proposal to restructure Coillte as a National Parks Service that will depend on a state subsidy to carry out its obligations. However, no argument has been formulated to support such a move and, when viewed as such, the economic rationale for the sale disappears.”

The research also outlines other economic risks associated with the proposals including the potential to disrupt the Irish timber processing sector, due to lack of certainty over future supply. It says job losses, which could arise in the processing industry if timber were exported without processing in Ireland, would add to future costs to the State.

The proposal is an abrupt change in Irish forestry policy to the extent that it could greatly disrupt the sector and make the objectives that have been set unattainable. There are risks associated with this that go beyond the normal risks that can be associated with projections of timber prices.

“These include the potential to disrupt the processing sector, a possible cost factor that was not included in the assessment of costs. It is possible to envisage some options to minimise this potential, such as a piecemeal approach to the sale using a policy that could be soon reversed or a conditional sale, but it is unlikely that such options would have any real value in practice.”

(Image: Photocall Ireland)

Last week, RTÉ’s Ear to the Ground examined the Troika’s recommendation for Ireland to sell of State assets, including Coillte land and timber harvesting rights.

Reporter Darragh McCullough travelled to Ballybofey in Donegal to look at how 1,100 acres of forest has been put up for sale to help raise money to pay down the State’s debt.

“They seem to be selling off the family silver, without looking at what could have been left behind in the community,” John Gallagher of Glenfin Area Council told the programme. “Of course it’s about money….any semi-State organisation will have some conscious about the local environment and the community. Someone there for profit will not have the same conscience.”

(Image: Photocall Ireland)

The programme also heard that access to private forest in Ireland is much more restricted than in other countries, which could impact people’s recreational habits if more land was sold off.

Coillte is currently quite lenient and provides a public service but private owners would not be under any legal obligation to allow members of the public into their forests.

Watch Ear to the Ground from Thursday, 24 January>

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