Tiwi Islands – Northern Territory

Great Southern on the Tiwi Islands – Timber, Fear, Intimidation and a great tax dodge

Posted by tiwiccbb on May 26, 2009

Great Southern on the Tiwi Islands – Timber, Fear, Intimidation and a great tax dodge
May 26, 2009 – 1:07 pm, by Bob Gosford
Further to last week’s look at the likely fallout in the NT following the collapse of MIS (Managed Investment Schemes) promoters Timbercorp and Great Southern Plantations I want today to have a closer look at the operations of Great Southern on the Tiwi Islands.

Marion Scrymgour has never been one to hold back from a firmly held conviction – she has been fairly quiet since she stepped down to the backbench from her position as the most powerful elected Aboriginal politician earlier this year but in the last week or so she has come out in strong defense of those she says have been left out of the benefits that may flow from resource developments on her homelands, the Tiwi Islands, just offshore of Darwin.

The ABC reported Scrymgour’s latest comments on 19 May:

The Member for Arafura, Marion Scrymgour, is calling on the Federal Government to investigate the Tiwi Land Council’s finances and its efforts to stimulate economic development on the islands. Marion Scrymgour says she is sick of seeing failed commercial projects on the islands, including the marine harvest fish farm and the Matilda Minerals project. Now the future of forestry projects on the Tiwi Islands, which are run by Great Southern, are in doubt after the company went into administration. Ms Scrymgour says the land council was unwise to set up the deal with Great Southern. “I know a lot of Tiwis don’t have confidence in their own land council,” she said. “They’ve never had that confidence and until the Federal Government steps in with a bit more commitment, they’re never ever going to move forward with any economic prosperity.”

And while Scrymgour might be less than happy with the conduct of the Tiwi Land Council, the ABC report of the same day from her Chief Minister, Paul Henderson, could only muddy the waters:

The Northern Territory Government has promised to help the Tiwi Islands deal with the collapse of Great Southern, which has plantations on the Tiwi Islands. The Chief Minister, Paul Henderson, says the Government is willing to pitch in. “We’ll offer any assistance we possibly can to make sure those jobs are maintained on the Tiwi Islands,” he said. He has spoken to the Tiwi Island Land Council and offered to send across a business analyst to look at options for the future of the plantation.

Don’t you just love it when the left hand and the right hand talk from the same page?

The following day the ABC reported that the Senate Committee currently investigating the Tiwi Islands resource industries was concerned that it had taken 3 days for it comprehend how payments related to the forestry program might be distributed and of a climate of ‘fear and intimidation’ on the islands:

The Senate committee inquiry, which is examining the impact of forestry operations on the islands, yesterday held an in camera session because a number of women did not want to put their names on record. The Member for Arafura, Marion Scrymgour, says the women are concerned about the environmental and social impacts of the operations. She says some women have been threatened with physical abuse if they speak out. “The fear and the intimidation is a real thing and that’s what I keep saying,” she said. “People deny that it happens.” Meanwhile, the committee has raised concerns that it has taken three days of hearings for senators to work out how payments from Great Southern’s forestry operations on the islands are distributed to islanders.

But Senator Trish Crossin says the land council has not adequately communicated the royalty payment process to confused islanders. “They certainly need to be getting their message out better on how that money is collected, how you can access that money and how that money is given.” Great Southern was expected to appear before the committee today but its appearance was postponed because of the company’s recent fall into voluntary receivership.

There is no shortage of shills, hucksters and flim-flam men in the NT – sometimes they sit on the Government benches, sometimes they operate businesses big or small and sometimes they walk into the offices of the largest landowners in the NT – the Aboriginal land councils that, between the four established under the Aboriginal Land Rights Act (NT), administer nearly half of the land mass in the NT.

The Tiwi Land Council is one of the smaller land councils and controls just about everything that goes on on Melville and Bathurst Islands to the north of Darwin. The Tiwi people have always regarded themselves, for good reasons, as linguistically, culturally and politically distinct from mainland blackfellas.

Those distinctions have been good for the Tiwi Land Council – they’ve been able to avoid some of the more egregious attention paid to the activities of their mainland counterparts by governments and the often rabid bites of the mainstream press and the Tiwis have been able to get political and commercial support because of their apparent readiness to do business – even it was business of dubious value.

The deal that is currently under the Senate’s spotlight are the arrangements between the Tiwi Land Council and Great Southern, the promoter of broad-acre MIS forestry schemes on the islands, which have seen vast swathes of virgin tropical savanna transformed into a monocrop of the fast growing Acacia mangium.

Crikey readers will be familiar with the controversy that arose around the Tiwi Land Council’s conduct in relation to the contentious 99-year lease deal over the largest township on the Tiwi islands, Nguiu, from reports from reports in Crikey here and here.

Crikey has also reported on the Tiwi forestry concerns before here and here.

In 2007 the ABC’s Background Briefing broadcast the most thorough media report on the timber industry on the Tiwi Islands to date.

Wendy Carlisle noted that the proposal had some serious problems from the start:

…in the ’90s, former Territory Chief Minister, Paul Everingham’s company, Sylvatech, restarted the dream. It was a grand vision of riches for all. They sought and gained under new Federal environmental laws, permission to clear 28,000 hectares of native forest. But there was no independent environmental impact assessment and no public consultation process

The reports also claimed that there would be a nett greenhouse benefit from replacing the forests with the acacias. Yet there was no reckoning with 9-1/2-million tonnes of greenhouse gases that would be emitted by clearing the forest in the first place. Or that they would be replaced with the acacias that would then be harvested for their pulp.

And an important, some say vital, part of the Sylvatech deal was that it would get to sell off the existing Cypress Pine plantations and Eucalypt logs felled by the clearing of the plantation coupes.

Wendy Carlisle spoke to Professor Brendan Mackey Director, ANU Wild Country Research and Policy Hub about the forests of the Tiwi islands. Mackey gives a clear indication of the importance of the forest cleared on Melville Island.

Brendan Mackey: That’s right, Northern Australia, taken as a whole, is one of the most intact natural areas left in the tropical world. Certainly most of the areas that are what we call tropical woodland and the eucalypt forests on Tiwi Islands, fall in that category. They’re not closed rainforest like you find in the Amazon, they have been severely degraded just about everywhere else in the world, and really Northern Australia, and this is the main point we’re making in our report on Northern Australia, is it represents one of the last chances to do something sensible in a tropical woodland environment.
Wendy Carlisle: Your report looks at all the top of Australia, from Cape York right across to the Kimberley, so in terms of the importance of the Tiwi forest, how significant are they in that huge sweep?
Brendan Mackey: They are the most productive, biologically productive forests in Northern Australia. They have the best rainfall and the best soil, so they really are the jewel in the crown.

Background Briefing again:

Wendy Carlisle: In 2003 Sylvatech and the Tiwi Land Council began exporting timber from the old pines, and the best of the timber from the cleared forests to China. There were wild estimates of the value of the deal to the Tiwis.

ABC News report: It’s a deal that’s worth about $1.5-million a year for the Tiwis who will fill more than half of the expected 250 jobs. Canberra says everyone’s a winner.

Wendy Carlisle: Over the next four years, seven barges of Red Tiwi sailed for China. But it was a fiasco. Instead of being worth millions, the shipments made a loss of over $700,000.

In 2005 Sylvatech was bought out by Great Southern Plantations – which collapsed in spectacular fashion nine days ago.

Tiwi Land Council Secretary John Hicks and the Tiwi Land Council appear to be comfortable with timber and other resource companies that fail. As The Australian’s Paul Toohey reported, Hicks told him that:

…the Tiwis had seen their forestry projects fall apart eight times in the past 30 years. They believe they can ride out the collapse of Great Southern, which acquired the project from Sylvatech in 2005.

“The pattern of these receiverships is not something we’re unfamiliar with,” Mr Hicks said. “Great Southern has far more impact upon us (than previous failures); however, Great Southern don’t own the trees. They’re owned by 2700 mum-and-dad investors and Great Southern managed the forests on their behalf.”

In December 2008 the Senate Standing Committee on Environment, Communications and the Arts commissioned an “Inquiry into Forestry and Mining operations on the Tiwi Islands“, the major focus of which has been on the arrangements between the Tiwi Land Council, Sylvatech and, since 2005, Great Southern Plantations.

To date the Committee has received thirty-four submissions. Like all such inquiries the submissions range from the self-serving to the irrelevant, overly long, tedious or just wrong-headed.

But there are a few real gems, including that of Professor Stephen Garnett of the School for Environmental Research at the Charles Darwin University. Garnett points to a recent research paper that indicates the Tiwi may have been dudded big-time and would have been better off leaving their precious tropical savanna untouched rather than signing up to a tax rort:

The paper estimated that the Tiwi Islands forests that were logged by Great Southern Plantations in 2008 could have been worth up to $110 million under a REDD scheme under the Gold Standard of the voluntary carbon market.
…we recommend the inquiry determine why Tiwi Islanders appear to have been denied the opportunity to benefit from REDD opportunities…We think this is because of the way in which Great Southern finance their operations – that the tax savings available under a Managed Investment Scheme could only be attained if the forests were felled.

Dr Ken Eldridge has degrees in botany and forestry and, with more than 50 years experience of research and development in forest genetics and tree breeding, is well qualified to comment on the Tiwi forestry issues.

His submission expressed his personal opinions, and not those of the IFA or of CSIRO:

My impression of the Tiwi plantations, having seen industrial plantations of many species in several countries, was that ‘GSL have achieved good survival and weed control, and the trees were healthy with little damage from insects or fungi. However, stem and branch form was not good, many trees having forks, crooked stems or coarse branches. Such poor form is common when genetically unimproved ‘wild’ seed is used in Acacia mangium plantations elsewhere.’ Such form deficiencies reduce the return at harvest due to reduced yield and the extra cost of delimbing and debarking, prior to chipping for export at age 8 to 10 years.

In other words – they are planting and growing low grade seed-stock that will give poor returns.

Another of the very interesting submissions to the Committee is that of Peter Robertson, who for several years while living in Darwin and working for an environment NGO undertook investigations into the operation of the Tiwi (Melville Island) plantation project.

Robertson makes several important points about the administrative and corporate arrangements, sales and returns to the Tiwi, including that in addition to the MIS proponent Great Southern Ltd, and project ‘partner’ the Tiwi Land Council:

…there are at least four other corporate entities involved in
the Tiwi Island woodchip plantation project:
– Pirntubula Ltd
– Pentarch Forest Products Ltd;
– PenSyl Ltd; and
– Stratus Shipping Ltd.
There is a fundamental lack of transparency about the legal commercial agreements and contracts
that exist between the companies involved in the exploitation of the Tiwi forests and plantations.

There is far too little readily available information about these companies or the project’s
financial structure showing how much income each is making out of clearing the Island’s forests
and subsequent shipping and sale of high quality logs, or how much each will make out of the
woodchip export part of the project when it commences.

‘Commercial confidentially’ cannot be used as an excuse to deprive the Island’s landowners and
communities of clear and understandable information about the commercial involvement of these
companies in the exploitation of the Island’s natural resources, and the risks involved.

In relation to the valuation of the land used by Great Southern Robertson notes that:

There are two crucial issues here:
(a) how was the leasehold value of the Tiwi ‘Aboriginal Freehold’ land for plantation
establishment arrived at;
(b) how does it compare with leasehold land valuations for plantations elsewhere?
The Tiwi Islanders are being paid “~$17/hectare per annum (+ 2% of net harvest proceeds) for
plantation ready land and ~$1/ha pa for land that is not plantation ready”

There is ample evidence that this amount is a fraction of the amount landowners are paid by
plantation companies in southern Australia. An ANU research paper summarised lease payments
across Australia and found that they ranged from $75/ha/pa up to $300/ha/pa. The average is around $150/ha/pa – or nearly 10 times the amount Tiwi TO’s are being paid. These are already old figures and the current rates are likely to be much higher still.

Concerning the shipment and sale of logs clear-felled from the forestry site Roberston says:

According to GSL and the Tiwi Land Council, under the existing commercial arrangement the
Tiwi Traditional Owners will receive “2% of net harvest proceeds” from the eventual sale of
acacia mangium woodchips from Melville Island.
This means that only after all the other corporate parties involved – GSL and its tax minimisation
investors, Pentarch, Stratus Shipping, etc – have taken their cut of the income and profits will the
Traditional Owners receive a potentially miniscule residual income.
In fact, based on the log sale fiasco, it is quite plausible that they will end up receiving nothing at all, especially if there is a fall in the overseas commodity price for woodchips, which is entirely foreseeable.

And local MLA Marion Scrymgour, never one to suffer a fool gladly, has been concerned about the operations of the Tiwi Land Council for some time. As she said in a letter to yesterdays NT News:

There are many other things I have to say about the Tiwi Land Council and its governance but I will leave that for my submission to the Senate Committee.

Watch this space

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One Response to “Great Southern on the Tiwi Islands – Timber, Fear, Intimidation and a great tax dodge”

  1. silence is stupid said

    Northern Territory News
    $ $ Goes South

    NIGEL ADLAM

    May 27th, 2009

    TERRITORY investors lost more than $10 million when the Great Southern agriculture and forestry empire collapsed.

    One man told Business Week he had put more than $100,000 into the company.

    And Great Southern’s Darwin-based sales representative, Vic Minchin, said he lost hundreds of thousands of dollars.

    He refused to give details about losses suffered by other Territorians, except to say that dozens of them had been hit.

    “It’s a distressing time for everyone,” he said.

    Mr Minchin, who was one of 35 sales representatives nationwide, has been made redundant and is now working for a finance firm.

    Great Southern investors are not expected to get any of their money back.

    The company is known to have raised $1.8 billion from 47,000 investors over the past five years.

    One of its main projects was an acacia plantation on the Tiwi Islands.

    The Tiwi Land Council is considering taking over the venture, which employed local people.

    A Darwin investor, who did not want to be named, said he was bitterly disappointed that Great Southern had gone into liquidation.

    “I’m not a particularly rich bloke,” he said. “I put more than $100,000 into the venture on the advice of my accountant and have lost the lot.

    “I hoped the return on the investment would allow me to retire before I was 65.

    “It doesn’t look as though that will happen now.”

    An army of financial planners was employed by Great Southern to bring in investors. They were paid 10c commission for every dollar invested. Receiver McGrathNicol is trying to sell 1.75 million ha of farm and forestry land in a bid to repay debts of more than $800 million. Great Southern leased the Tiwi land, which now reverts to its traditional owners.

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