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Northern lights

By Rod Oram

Saturday 1st March 2003

Text too small?
At first glance, Vonnie Petera and Julian Robertson live on different planets. She's a 47-year-old Maori trying to make something of her 130ha farm 50km south of Cape Reinga. He's a 70-year-old New York billionaire whose idea of a small place is to knock together four apartments overlooking Central Park. For country living, he's bought a chunk of Northland - 6km of Matauri Bay coastline backed by 2400ha of farmland-turned-golf course and exclusive retreat.

Yet they have things in common: New Zealand's land and sea speak powerfully to them, they're dreamers and they are passionate about doing something big, worthwhile and enduring for the local economy and people. Each in their own way represents Northland's great challenge and opportunity: can it put its past - hobbled by physical isolation and local wrangling - behind it and create a strong, sustainable economy? And can it do so without trashing its distinctive attributes through mindless development and mass tourism?

Petera stands atop a small hill on Banjo Farm, shaded from the strong summer sun by some scrubby trees. "We'll build a house here," she says, sweeping a hand from east to west across the summit. "We'll dig a big trench, put glass walls at each end and cover the roof with soil."

The dairy farmer left the far north at age 12 to go to school in Auckland. She stayed for 35 years, returning only on holidays. Two years ago she moved back north and took over the family farm. Now she is full of ideas on how to develop the farm and help her neighbours.

Down below the hill she points to big, old kauri logs recently pulled from a swamp. "People around here used to get $2000 from log companies for access to their swamp, but the companies would get $200,000 from selling the kauri. We're learning how to get the logs out ourselves, sell them and make more money. Then we'll pass the knowledge onto our neighbours."

By dredging the swamps, Petera hopes to create lakes to ease the long, dry summers at Banjo Farm, almost the most northerly dairy farm in New Zealand, with a herd of 147 cows. Using organic fertilisers to improve the sandy soil and raising alpacas for their wool, which is woven into blankets in Kerikeri, are just two more of her ideas.

Some 120km away down the east coast, Julian Robertson has been busy building, too. He says he fell in love with the country when he was a young hitchhiker here many decades ago. Once he got seriously rich (billionaire-rich) from playing Wall Street's high risk/high reward hedge fund game, he began lavishing money - rumoured to be in the tens of millions of dollars - on his Matauri Bay dream.

It hasn't always been easy - the speed and uncertainty of local consent processes have been a particular bugbear - but the result is Kauri Cliffs, one of the most spectacularly sited and best-playing golf courses in the world. In high season a game costs $225 for New Zealanders and $400 if you are an overseas visitor. But this is small change for the guests who pay $1000 each for a night's accommodation in the cottages nestled near the first tee and dinner and breakfast at the sumptuous clubhouse.

A full house is a mere 32 guests. But with nearly three staff for each visitor, it is one of the largest private sector employers in Northland. The local economy reaps the benefits, says Campbell Cormack, Kauri Cliffs' head of marketing. The staff is mostly young Northlanders and the lodge sources most of its needs locally - fresh food, trade skills, high-quality art works and Maori cultural performers.

There's no denying the abundance of Northland or the enterprise of its people. Forestry, tourism, farming, horticulture, aquaculture, boat-building and other key industries are making ambitious plans. They seem poised for brisk growth. It has always been - but so often reality has fallen short.

"The awakening of the north is a suggestive title ... and the awakening means the beginning of a new life, the realisation of possibilities hitherto lying dormant," a New Zealand Herald editorial proclaimed 100 years ago. "Yet strange to say that with all its wonders, advantages and marvellous resources, the north, compared with other parts of New Zealand, has been neglected and despised."

Physical isolation has always been one problem. Northland's roads are among the worst in the country. State highways are narrow and twisting and 70% of rural roads are unpaved. Boom and bust cycles - gum digging and kiwifruit, to name a couple - are another weakness. "Northland has lurched from one idea to another with no lasting effect," says Manuka Henare, a University of Auckland professor who has led a large study of Northland's Maori economy since 1994.

A legacy lives on in high unemployment, low incomes, bad health and poor education in many communities across the region. Some $1.5 million dollars a day of social welfare payments flow into Northland, equal to $70 per resident a week.

The top half of the region, the far north, is worse off: 41% of people are on income support (55% Maori and 40% non-Maori); 6.7% are unemployed (12.6% of Maori and 3.9% of non-Maori); and rates of some major illnesses such as diabetes are up to twice national rates. "Too many people die too young," concluded a report late last year into how health services could be more effectively provided at Kaitaia Hospital. And in socio-economic terms, 87% of Maori and 45% of non-Maori are in deciles nine and 10, meaning 80% of New Zealanders are better off than they are.

What hope is there for a better future? Quite a lot. First, there's a growing awareness among Maori of the opportunities for economic development. "Maori communities do not see Maori culture as an impediment," says Henare. "They see it as a unique thing to offer. They have latched onto the idea that business can be a mechanism for cultural transmission. That's their aspiration but they don't know how to do it yet."

What they're seeking is a new model. In pursuit of opportunities, progressive iwi such as Te Rarawa, Waingaroa and Ngati Hine have improved their governance processes and strategic planning, enabling them to develop social services and business plans.

But there are still high levels of frustration with widespread tribal fragmentation and politicking. For example, the 33,000 Maori living north of Kaitaia belong to five tribes, each with its own administration and structure. Politics within and between iwi make any project tough to get off the ground, says a local business leader, a member of one of the tribes, who doesn't want to be named

The benefit of innovative structures is obvious in the forestry sector. For decades, a thicket of problems has hobbled development, from multiple ownership of land and lack of capital, to politics (national and tribal) and cheap land leases granted by Maori to the major forestry companies providing scanty return to locals.

But Taitokerau Forestry emerged as a new model a couple of decades ago under the leadership of Tom Parore. Today it has some 4800ha of forests it will start to harvest over the next few years. The mosaic of landowners served by the company will start to enjoy a rapidly rising income stream, pumping capital into communities across Northland. One way Taitokerau has generated value is to give landowners the opportunity to do as much of the work on the forests themselves as they have the skills and equipment for, rather than contract it out.

Kevin Prime, Taitokerau Forestry's current chairman and a third-generation forester deeply involved with the venture from the start, is excited by Taitokerau, yet concludes Maoridom need to make a lot more progress on its organisation and governance. "I still don't have a lot of faith in the iwi infrastructures that have been set up."

The message seems to have finally got through to Wellington. Last year the government began to admit that stronger leaders and organisations are needed if local economic development is to show greater speed, effectiveness and durability. As a result, it's planning this year to put a lot more effort into pushing Maori to build better organisations, with selected ministers leading the initiative.

And local government has been working better since the 1998 election brought new mayors to power in the region's three districts, Whangarei, Kaipara and Far North - mayors who are more cooperative with each other and the regional council.

Tapping into tourism

Tourism was the first beneficiary. Up to the mid-1990s, the local tourism industry had badly lagged national trends. Fragmented by intense local rivalries (for example, between Paihia and Russell), local operators never got the message out about their wealth of beaches, forests, rivers and significant places like Waitangi, Kerikeri and Cape Reinga.

Recovery began with the forging of the first regional tourism strategy in the country and the creation of Destination Northland to market it. Key was the Twin Coast Discovery Highway, launched in 1998, which routes tourists around the attractions of the east and west coasts.

Thanks to the coordination and marketing delivered by the strategy, visitors have risen by 30% since 1996 to 1.6 million last year. Foreign tourists' share of the total has risen from 25% to 33%; handy, as they spend about $160 per person a day, double the rate of domestic tourists. Over the past two years, it has been the second fastest growing tourism region in the country after Auckland.

As a result, tourism has been the biggest driver of the Northland economy over the past five years, helping to halve the unemployment rate from the disastrous 13.1% peak recorded in June 1999. Tourism contributes $500 million a year of direct income to the regional economy, although that is still some $50 million a year less than the inflow of social welfare payments. Pastoral farming is the biggest regional earner at $900 million a year. Tourism's robust growth is forecast to continue with income expected to hit $630 million by 2008.

"Queenstown was the hub of tourism development over the past decade. Now that Northland is being discovered by international tourists, I think tourism will migrate north," says John Goulter. Chief executive of Auckland International Airport, Goulter has bought a motel and bed and breakfast in Paihia with his wife, which will serve as their new business base once he retires in August.

Like other parts of the country, Northland needs to make sure the increase in tourists doesn't wreck the very beauty and tranquillity visitors come for. The sector has come up with two possible solutions: updating its 1996 strategy to better address issues of economic and environmental sustainability, and trying to land funding from Industry New Zealand's Major Regional Initiatives programme for three projects. The first of these is a cultural and visitors centre at Cape Reinga, where better amenities are sorely needed. A tiny car park and the sale of soft drinks out of the boot of an enterprising local's car are an insult to the Cape's immense physical presence and spiritual significance. The second project is redevelopment of the riverfront around the Stone Store and Mission House at Kerikeri. The third is a big upgrade of visitor amenities in the Waipoua Forest on the west coast.

Still, Northland has been slower to develop a broad economic strategy than most of its counterparts around the country. It wasn't until late last year that Northland Regional Council completed a plan and created Enterprise Northland as the agency to deliver on it. Only this year will much of the plan be fleshed out or implemented.

Tourism, given its weight and growth, is the core of the strategy, with five other sectors picked for development - forestry, aquaculture, pastoral farming, boat-building and creative industries. Trouble is, the plans for all of them except forestry are still skeletal, and all have massive issues to solve.

Developing sectors

Take New Zealand Yachts. Government funding through Industry New Zealand encouraged ex-pat Allen Lloyd to start building superyachts in Whangarei. It began with a hiss and a roar in 2001, promising to single-handedly create an industry in town. But slow progress - its first boat, Untamed Spirit, is scheduled for launch over the next couple of months - prompted lots of media questions about its viability. The company has seemingly gone to ground, with executives failing to return Unlimited's calls. It's on to its third managing director - the first two quit in quick succession last year. The second, Dennis Maconaghie, a former senior Trade New Zealand employee, remains in Whangarei helping the regional council develop the boat-building cluster.

Aquaculture, after some false starts in previous decades, has finally developed some scale and stability over the past 10 years. For example, Parengarenga Harbour, just south of Cape Reinga, has 10 oyster farms, which constitute about one-fifth of New Zealand's oyster exports. Thanks to them, unemployment is low around the harbour. "Aquaculture is a real future for us," says Ben Waitai. In addition to his own oyster farm in the harbour, which he started in 1986, he is chief executive of Ronan Enterprises, the commercial arm of two local iwi.

The sector will benefit from a newly completed research facility that government-funded aquatic and atmospheric research company Niwa has built at Bream Bay, south of Whangarei. It will, for example, identify new species to farm. But right now sector growth is on hold, caught up in the national moratorium on new leases while regional councils develop new policy frameworks. Even with that in place, there will still be plenty of hard-to-resolve conflict over water use with aquafarmers pitched against tourist operators and recreational users.

Water quality is also becoming a huge headache as house construction booms along the coast. However, responsibility for storm water and effluent are divided between the regional and district councils but there's conflict between them. "They don't talk to each other," says one property developer, who didn't want to be named. He sees it as symptomatic of a bureaucratic mindset that is holding Northland back. Developers - and the public - have to deal with four levels of government if you include community boards, which in the far north have been delegated a lot of power by the district council.

"I'm fed up with dealing with councils," the unnamed developer says. "The simplest way to fix Northland would be to create one council."

The future of pastoral farming is also unclear. Compared with rich farming areas such as the Waikato and Canterbury plains, Northland can boast only pockets of good soil. Moreover, sub-tropical weather is tough on livestock so a good cow can only achieve around 800kg of milk solids per hectare a year compared with 1200-1400kg in the Waikato. However, where conditions are good, dairy farming can be very attractive. A few big projects are underway, such as a massive dairy farm near Kaikohe lead by an Italian investor, Antonio Pasquale.

Ian Walker, who farms just south of Kaitaia, says, "I see agriculture in Northland as being a major industry, but I don't see growth in its existing form contributing much to economic development." Walker, president of Northland Federated Farmers, has virtually doubled his herd to 320 cows over the years but strongly believes the future lies in diversification. The newest building on his property is a tissue culture laboratory for his burgeoning calla lily business. Five years from now, he believes "a couple of paddocks" of callas will generate more income than the rest of his farm. Still, Northland has been slow to investigate other crops.

Immense swathes of Northland, however, are great for growing trees. Thanks to widespread planting in past decades, the region is about to experience a big forestry boom. Harvesting is forecast to rise by about 250,000 tonnes a year to three million tonnes a year by 2010 and to more beyond.

Coping with this "wall of wood" will be one of the region's biggest tests, particularly in terms of infrastructure and employment. It's made a good start. Forestry companies, local councils, training institutions and other interested parties have worked well together and within the national Wood Processing Strategy Steering Group to plan for the rapid ramping up of forestry.

An important achievement last year was securing an additional $30 million a year from central government for road upgrades. The first main projects started this summer. But the question of whether rail should be expanded to help reduce logging truck traffic remains economically uncertain and politically contentious.

However, a critical piece of infrastructure did finally come to fruition last year. Northport, a $65 million joint venture between Northland Port and Port of Tauranga, officially opened at Marsden Point near the mouth of Whangarei estuary last November. Almost 20 years ago, local leaders had the foresight to buy the land but it has taken this long to justify and then realise the project. The deepest water port in the country, it will expand to five berths within five years.

While Northland will earn a reasonable living from shipping out logs, the real money will come from downstream processing. Take the 100-year-old family-owned wood panel manufacturer Legacy (see "Building a Legacy"). Owner Ross Provan and his sons Hagan and Callum have developed unique technology to make vertical grain, knot-free wooden panels. Legacy now includes among its customers the second largest door manufacturer in Japan. Sales have evolved from a 70:30 commodity/value-added split three years ago to 30:70 today.

But small innovative companies won't be enough. A large cluster of processing plants is needed to handle the harvest volumes and to ensure the port can justify a full schedule of shipping services. The investments will be large and the paybacks meagre unless forestry companies can develop sophisticated new products and the sales and marketing channels to deliver them to customers abroad.

Carter Holt Harvey, for example, wrestled with the economics of a laminated veneer lumber (LVL) mill for several years before committing to a $100 million project at Marsden Point. Opened in 2001, the plant will consume about 10% of Northland's tree harvest this year and will account for about 2% of the world's LVL supply.

But the staff will only be able to justify expansion of the plant through constant innovation. "We have a considerable ethic about new product development", says Dean Lawrie, the plant's manager. "Fifty percent of our products by number are less than 18 months old and we have 10 product categories compared with three when we started."

What now? Some local leaders have a more radical proposition than steady advances in forestry and tourism led by Wellington-backed regional councils. In particular, Northland Regional Council's conventional economic development strategy driven out of Whangarei is too tame and remote for some people in the far north.

One of the vocal critics is Chris Mathews, chairman of the Far North Development Trust, the economic development arm of the Far North District Council. He admits he likes to provoke debate but reckons the regional development strategy is fundamentally flawed. "Tourism is a poor aspiration for our children." Rather than rely on building up low-value industries like it and forestry, "the region must attract new industries. If it doesn't, the region won't be viable."

The vision of Mathews and trust colleagues like Walker and Sharp is a radical one. "We have 6700 companies in Northland and 85% of them employ less than six people," says Mathews. "They are a great untethered mass of small businesses. We're preoccupied with shifting the output of many of them from service and domestic markets into productive export sectors."

To achieve that transformation, the trust has been seeking ways to help the companies reach out to potential customers overseas. For example, it is developing an internet portal for local companies. To that end, says Mathews, local boutique cosmetic and soap-makers could work together to crack overseas markets. In total, some 200 far north companies will be on the site when it's launched soon. But it's clear the trust has a long way to go yet in figuring out how the portal will fulfil its grand vision.

One important part of the puzzle is about to be solved. Broadband is coming soon to Northland, thanks to the pioneering work Mathews and the trust have done over the past four years. Mathews was arguably the first local leader in the country to identify broadband as a critical tool for developing not just businesses but education and other sectors, too. In terms of both the technology and economics of broadband, he remains a leading thinker. Here's just one example: with broadband, the 26 Maori health providers in Northland could amalgamate their back offices to achieve high standards of service and much greater efficiency.

This is quintessential Mathews: bold, incomplete, fraught with difficulties and reliant on unprecedented community cooperation. It is also quintessential Northland, as Petera and Robertson also demonstrate.

"The north is awakening and will soon show what it can do by results," the Herald wrote 100 years ago. Maybe this time it looks as though we won't have to wait another century for the payoff.

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