|
|
|
Joint
ventures and lease arrangements
To help develop commercial forest plantations,
some governments and plantation developers offer joint ventures
or land lease options to farmers. Joint venture arrangements
often involve profit sharing or an annuity based on a percentage
of the expected return. In most cases the partner offering the
joint venture will specify the species, planting pattern, management
and products based on their requirements. Such arrangements
may provide the best opportunity for farmers to participate
in large-scale forestry projects where scale of production,
market power, access to research knowledge and professional
support are critical to its success.
There are risks however, associated with long-term commercial
agreements. For example, a farmer might assume that a plantation
established under a profit share arrangement will be managed
to maximise returns. But it is possible that the forest company
will harvest the trees at a time that best suits its needs rather
than the farmer’s. Even where the farmer enters into a
standard lease arrangement, there can be unforeseen risks. If
the plantation fails after one or two years, or the company
goes into receivership, the landowner might be left with a non-commercially
viable plantation and be liable for the full cost of returning
the land to agricultural production.
Agreements with government agencies can also be unpredictable.
Government forestry programs are often initiated with the aim
of achieving government policy or satisfying powerful interest
groups. Over a 20 or 30-year period while the trees are growing
the motivations behind these programs, like the government itself,
may change many times.In addition to understanding the legal
aspects of any contracts, farmers should think carefully about
what would happen if the government of the day withdrew its
support, changed its emphasis or sold its share to a third party.
By anticipating the risks, and being aware of a project’s
financial, legal or physical flexibility, farmers might be able
to negotiate an arrangement that meets their needs and reduces
their risk.
Back to top
|
|
