Proposed Forestry Code continues to cause divisions

The situation in the Russian timber industry has changed little during the past few months. Discussions have continued, promises have been made but there is no national policy, no realistic programmes for development and no money to realise such programmes. There is growth in the timber industry but it is less marked than in Russian industry as a whole.

According to the Federal Service of State Statistics, wood, woodworking and pulp and paper production during January-August grew by only 3.8%, while in August it was up 5.4% on the year. From January-August log removals increased by 0.1% compared with last year (7 million m³ in August); sawn wood production was down by 2.1% (1.7 million m³ produced in August); plywood production rose by 12.7% (189,000m³ in August); and chipboard production increased by 13.2% (315,000m³ in August).

Abolishing export duties will not solve all the industry’s problems but it could help its development, many industry players believe.

Protection measures

At the September meeting of the interdepartmental commission on protection measures in foreign trade and customs-tariffs policy it was recommended that export duty on newsprints be reduced from 5% to zero. The idea was put forward by the pulp and paper association which argues that the move would be worth US$19.4m a year, which could be invested in modernising the industry. Experts agree that legislation is needed to attract investors to the timber industry.

In September, after a year of fine-tuning, the government announced that the new Forestry Code was nearly ready for implementation. The legislation will be introduced to the state duma soon and, according to the minister of economic development German Gref, the document has already been co-ordinated with all governing institutions. He believes that the code will enable Russia to become a world leader in timber production.

But even the latest version of the code has brought criticism from public organisations, regional and local authorities, ecologists, experts and the timber industry. According to them, the authors of the project did not pay some aspects enough attention. For instance, the code should contain special conditions to encourage downstream manufacturing.

In addition, some experts say that the provision to assign wood lots on lease only via auctions gives financial speculators and foreign companies the opportunity to obtain large areas of forest – very often just for resale. According to the last version of the document, leaseholders who obtained their wood lots without auction will have no rights to a new contract when their old contract expires.

Today only 25-35% of wood lots are taken on lease via auctions, and 65-85% of lease contracts are short-term. The new rules could provoke the redistribution of property in the industry and remove some of the smaller players who provide up to 85% of logging. The impact on the industry could be disastrous.

Many foreign timber specialists are not satisfied with the Code. Lease terms for foreign companies are limited to only one year, and the choice of forests will be limited by a special presidential decree which means the list of wood lots will not be available for foreigners.

Uncertain future

As a result, the future of this unpopular new Forestry Code is still uncertain. Experts have drawn attention to a lack of co-ordination and contradictions within the project and suggested that a special group of scientists, timber industrialists, ecologists and other concerned parties be set up to produce a more qualified and professional version of the document. But even if the existing document is approved by the end of the year, the new Code will not be implemented until departmental regulatory documents for timber are brought in line with the new rules. This could take several years and by that time the new Forestry Code could be out of date.

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