Competitive neutrality in forestry

„h States and Territories have agreed to apply competitive neutrality (CN) requirements to their commercial forestry activities. The implementation of CN varies between jurisdictions and encompasses some differences in approach. „h Several studies have pointed to underpricing of logs by State forest agencies in past years. Underpricing can affect the balance between public and private sector wood production. It can also affect the return the community achieves on its forest assets and may adversely influence agency investment and harvesting decisions. „h CN requires forest agencies to act more commercially, including covering all costs and earning a commercially acceptable rate of return on assets. This should reduce the likelihood of agencies underpricing logs, although difficulties in interpreting rates of return and related information can make it difficult to judge if logs have been sold at their full market value. „h To help assess compliance with CN, the market value of logs can be estimated by calculating their residual value ¡X a value derived by subtracting harvesting, transport and processing costs from prevailing international prices of processed wood products.