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Pulp mill mistakes mustn’t be repeated in the Tarkine

Publications, Tasmania | 4th September 2012

Saul Eslake | Launceston Examiner | 4th September 2012

Op-ed article originally published in the Launceston Examiner newspaper on 4th September 2012.

Now that it seems increasingly likely that the mill will not be built, it seems to me that there are a couple of important conclusions to be drawn from the experience.

The first of these is that the ‘crash through or crash’ approach to seeking approval for inherently controversial projects simply doesn’t work.

Indeed, one might have thought that Robin Gray, whose time as Premier of Tasmania was book-ended by the miserable (and from the standpoint of the Tasmanian economy, costly) failure of precisely this approach to secure either the Gordon-below-Franklin Dam or the Wesley Vale pulp mill, would have been better placed than anyone else to have counselled his fellow Gunns directors as to the folly of trying that approach a third time.

Robin Gray once said, of his own Party’s constitution (which he had breached by campaigning against endorsed Liberal Party candidates in the 1983 Queensland state election), that ‘rules are made for the obedience of fools and the guidance of wise men’, the unstated assumption being that he fell into the latter category rather than the former.

The previous board and management of Gunns seemed to be of the same view regarding the laws and processes for determining whether the proposed pulp mill would go ahead. It sought, successfully, to circumvent the established procedures for assessing, in a transparent and ‘arms length’ fashion, whether the mill would have met all the relevant environmental and other criteria. And it sought, rather less successfully, to bully and intimidate people who expressed a different view.

The result of all this was that, while Gunns may have gained legislative approval for the mill to go ahead, it forfeited whatever chance it had of gaining the ‘social licence to operate’ that is increasingly important to investors and financiers (among others). Hence, even after Mr Gray and others left the Board, and Greg L’Estrange took over as CEO, leading to a sea-change in Gunns’ modus operandi, the company has been unable to persuade skeptics that the leopard has changed its spots.

One hopes that this lesson will finally be absorbed as Tasmania considers the mining ventures now proposed for the Tarkine. I know the Tarkine reasonably well, as a result of the time I’ve spent in Circular Head over many years. Some of it is pristine wilderness, and deserves the highest level of protection. But not all of it is. And the North-West, and Tasmania more broadly, would benefit from the jobs and income which appropriately regulated mining ventures in the non-pristine parts of the Tarkine would bring. However the proponents of those ventures, and the Government, need to avoid the mistakes made in dealing with the pulp mill if any of these projects are to go ahead.

The second conclusion to be drawn from what looks like being the failure of the proposed pulp mill is that a single ‘mega-project’, particularly one based on commodity-processing, is never going to be ‘the’ solution to Tasmania’s economic and other problems.

Tasmania’s resource base is simply too small, and the costs of transport to principal markets too great, for Tasmania to base its economy on selling large volumes of essentially undifferentiated commodities at the lowest possible price – that is, unless we’re all willing to work for third-world wages, to have most of our rivers looking like the Queen and King on the West Coast and our beaches looking like the one at Sulphur Creek near Burnie used to, and to give what resource endowments we have away without levying any taxes or royalties.

Rather, as I’ve written many times before, 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.

A ‘cargo cult’ mentality is not an economic development policy. And if Tasmanians can come to terms with that, there will be far fewer shattered hopes and dreams than there have been as a result of the economic development failures of the past three decades.

Saul Eslake is Chief Economist at Bank of America Merrill Lynch Australia, and a non-executive director of Hydro Tasmania. However the views expressed here are entirely his own, and not necessarily those of either of these organizations.


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