Critical lessons from the mill debacle

Improving government

One serious problem facing Australians today is the declining quality of service from State governments. Many (or all) of these governments appear to have lost the ability to provide efficient and worthwhile services.

There are many reasons for this, but one of the core reasons is a loss of focus on what the taxpayers need, and a growing focus on what lobbyists argue for.

Our representative system is intended to represent taxpayers’ needs to decision makers so they can be considered, and hopefully included, in the decision process. First must come some dedication to actually considering and meeting taxpayer requirements. In Tasmania this is a serious problem as the state government seems to believe that it determines what’s in the taxpayers’ interests, rather taxpayers themselves.

Who is driving our bus?

Government’s rush to spend our tax monies has reached a new fever pitch with the Gunns pulp mill proposal. The “fast track” process threw out any semblance of fiscal or taxpayer responsibility by asking the pulp mill industry to “approve” its own pulp mill.

Of course pulp mill suppliers will approve a pulp mill. What would any normal person expect? Lennon paid around $500,000 for that!? What benefits could that same $500,000 have afforded our hospitals and schools?

The Finnish sales organisation for the mill, Jaakko Poyry, stands to make nearly $2 billion off the sale, plus huge on-going project management and trouble shooting payments for the 100-year life of the mill.

Yes … Gunns will be in debt over their heads for a while, and … yes, the taxpayers are likely to cop all of the impacts and risks and pay hefty subsidies for decades, and … yes, there’s all kinds of “collateral damage” not yet recognised, like the loss of our food farms to tree plantations and water catchments running dry. But none of those considerations means anything to Jaakko Poyry. Their job is to sell us a mill and rake in the income.

Due diligence

Normally the purchaser, their financiers or the government, would undertake some form of “due diligence” analysis to be sure that they weren’t making a huge mistake or being sold a “bill of goods”. This might take the form of independent studies of the proposal and its risks, coupled with a complete opportunity costing to assure that the idea was one of the better ways of using whatever resources it needed, and that it wouldn’t create huge problems for other people and businesses.

Even then, we cannot be certain that we’re protected but at least it’s a good first line of defence (see here). Due diligence was the role of the RPDC (Resource Planning and Development Commission) of course, until both Labor and Liberal decided taxpayers didn’t need all that protection because Gunns was in a hurry.

There has been no due diligence in the case of the pulp mill, or the federal 2020 Vision program that determined that Australia needed 3.3 million hectares of plantations. In the latter case, there was no checking of the potential downstream risks, like trees taking too much water and food farms disappearing.

Poyry is a huge pulp and paper mill supplier that has a consulting arm that pushes any activity that leads to the customer “needing” a pulp and paper mill. From the mid-90s onwards, Poyry has predictably been recommending that Australia grows more tree plantations.

They also recommended Tasmania as an ideal location for a “world scale” pulp mill, throwing out all kinds of job and economic carrots as they did so. It also seems that Poyry supplied the financial models that were used by Gunns consultant, Jonathon Stanford, to create their “economic” case. Poyry has done whatever it takes to get a sale.