I was deeply saddened, though not surprised, by news this week of an offer for all of the outstanding shares in ESL Holdings Ltd by the property development group Prudentia Investments Pty Ltd. Directors of ESL recommend that its shareholders accept this offer. The future of the few remaining biodiversity conservation sanctuaries in the ESL stable seems very uncertain.
The former Earth Sanctuaries Ltd was set up by John Wamsley to provide a private sector vehicle for the conservation of biodiversity, specifically mammals, in Australia. As the current Chairman K.P. Lynch says in his letter to shareholders '...our experience has shown that the ESL model, while successful in a conservation sense, is not commercially viable'.
I agree with this. Many of the outputs provided by ESL - in particular biodiversity benefits - were public goods and standard economic theory suggests that private agents will undersupply resources to support provision of such goods. This is particularly problematic if the public sector provides access to substitutable biodiversity resources via national parks and reserves at close to zero cost. Moreover, such parks and reserves receive subsidised infrastructure provision and have most of their operating costs met from the public purse.
The market for viewing our rare flora and fauna is a narrow one and there is simply not a sufficiently 'level playing field' for ESL operations to survive. A final difficulty in promoting private conservation efforts in Australia stems from the prohibition on the sale of captive bred native species.
Does it matter if ESL collapses given that public parks and reserves survive? I think it does because individuals like Wamsley were innovative in terms of developing captive breeding and feral proofing programs - ESL bred the first platypuses in captivity and achieved a number of outcomes with respect to feral-proofing that were more innovative that public management schemes.
Given the success that Wamsley and his group enjoyed it is difficult for me to understand why greater public sector support was not forthcoming. Wamsley has not been associated with ESL since it was delisted but I salute him as its prime mover and as a man of vision who had the guts to have a go at something intrinsically very difficult. Those of us who are interested in conserving Australia's biodiversity have learnt something from this experience.
Sunday, August 27, 2006
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6 comments:
Totally agree with your overall sentiments here and the work that Walmsley did should have been economically viable and sustainable. The fact that it wasn't is not an indictment of the free market economy but an indictment of the constitution of that free market. Our marketplace should have spawned a thousand ESLs and no need for public investment in the environment whatsoever. That is the crucial lesson Walmsley gave us.
"..it would have been fine if they could have sold the animals they bred."
That might have been a way to make the re-creation of a natural environment economically sustainable. ie it was perhaps a necessary condition in the current marketplace, but it should not have been a sufficient condition. I can envisage a constitutional marketplace where it is sufficient that the natural ecosystem be created for its own intrinsic value alone. ie its use or consumption is not a necessary condition, although it could be to some extent. Just as we recognise the valuable incentive of private ownership of land for production and consumption, so it should be for natural conservation and biodiversity. The incentives must be in harmony for that to occur and I believe they easily can be. Walmsley has given us a glimpse of that possibility, but he and his backers didn't appreciate the constitutional market constraints he was labouring under.
BTW I have changed the spelling of the ESL founder twice and now reverted to my original spelling. It is I believe 'John Wamsley' though it is widely mispelled on the web.
Harry, might there be some middle ground between private provision and public support for that private provision, in the form of a "market based instruments" kind of approach?
I'm sort of thinking of a BushTender kind of thing, where auctions are conducted not simply for individual landholders but for private organisations of the ESL type. Could a state government essentially accept a tender for provision of particular services, and clearance of ferals etc. could be bundled into the service provision agreement?
Michael.
Absolutely - all these types of services can be outsourced and private tender used.
There are lots of other intermediate structures too. Club goods structures with infrastructure grants and ongoing subsidies to reflect public good and externality benefits.
But the self-contained ESL model does not see,m to work to me.
Goood to hear from you.
As a small shareholder in Earth Sanctuaries, I think I paid $1-50 [share price was over $2 in 1999 and 50 cents in about 2001 I think]each for the 500 shares I purchased in the late 1990s and I hold in trust for my daughter. It was never a get rich quick scheme. I saw it as a contribution to a worthy idea being put into practice. I wanted my daughter to have a long term interest in Earth Sanctuaries and maby, who knows, even get a monetary return some day. I believe we were given bad information and unrealistic predictions for a long time. This led to the company overextending itself and eventually having to dispose of our assets - the sanctuaries. A series of restructures finally led to the current triumph of economic rationalism. I suspect that the promoters of these various restructures have not lost 90% of the real personal money they contributed. I suspect that is the burden of all us small shareholders. I do not blame bureaucrats or conservationists for the collapse of Earth Sanctuaries. Rather, I feel that our company directors through the various structures and restructures
may have beed a bit lacking in rigorous analysis of the likely return on funds raised from the public floats.
So now in Oct 2006, a compulsory acquisition after the latest takeover bid succeeded in purchasing shares to reach a holding of 90% of the shares. It seems that we small shareholders can consider applying to the Court under section 661E of the Corporations Act for an order that our shares not be compulsorily acquired. This section states that the only grounds for such an order is that the Court is satisfied that the price being offered for our shares "is not fair value".
At 12 cents per sharre, I think we have a moral case that I would like to see put to the Court. Is anyone else out there interested?
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