Despite the government’s recent attention to Russia’s timber industry problems there are still no stable game rules or a strategy for development. Even the prime minister Michail Kasyanov has admitted that during the 18 months since the government adopted the development concept, the industry’s rate of growth has remained low. The first results for this year also show that the government’s expectations were too optimistic.
The index of the production of timber, wood processing and pulp and paper for January-August was 101% compared with the same time last year, and 108% for September. Harvesting output was down 6.3% for the first nine months compared with 2002. In September, timber removal fell by 5.2% to 5.9 million m3 and production of merchantable wood was down by 3.9% to 5.7 million m3. The production of wood chips for cellulose and wood pulp from raw waste lumber and woodworking waste rose by 9.9%.
From January to September the woodworking industry’s output was down by 2% compared with the same period last year. In September, plywood production increased by 4.8% to 161,000m3, particleboard rose by 11.4% to 278,000m3, and fibreboard was up 13.1% to one million m3. Sawn timber production decreased by 4.1% and production of factory-made timber houses fell by 67.1%.
In contrast, pulp and paper production increased by 4.6% during the first nine months of the year.
Government investment
Analysts believe that the timber industry will generate US$8-9bn in revenue for 2003 but it has the potential to earn US$70-78bn. They hope that the state will take a more active role in investing in the industry: at least US$1bn is needed just to renew the industry’s basic assets. There has been considerable investment in the pulp and paper industry but little has gone into timber processing. The main reasons are because there is no long-term state policy for the timber industry that automatically increases investment risks and there have been numerous corporate conflicts over attempts to redistribute property in the industry.
The government, in turn, continues to improve tax policy and promises to adopt a new and more progressive Forest Code. This year Russian timber businesses will save US$100m as a result of the abolition of export taxes. On September 1, export taxes were removed on more than 220 timber products. The government is now considering abolishing duties for another 180 products and withdrawing import taxes for foreign harvesting and woodworking equipment in order to support Russian producers. According to the Ministry of Industry, Science and Technology, these measures will allow timber enterprises to save up to US$5bn that could be invested in production development. This is about 22% of the investment that the industry needs.
Forest Code
The new Forest Code is to be adopted next spring and all outstanding issues, such as the government’s areas of responsibility, regions and local power and concessions, are supposed to be settled by then. However, some industry observers are not convinced that the new document will really answer the industry’s need for development. The current draft is still far from being perfect. For example, the main amendments – the issues of private prop-erty for timberland and concessions – are still not clearly elaborated. Many believe that the government’s hopes that the new code will really help the industry out of the crisis may remain just that.
