Although the Russian timber industry is expected to report promising results this year, it is estimated that revenue from exports is 10% below the potential.

Miron Tatsun, president of the organisation that covers companies in 46 regions, underlined this fact at the group’s annual conference. According to Mr Tatsun, the situation can be explained by the fact that the government has no input in the management of the industry.

First deputy minister of natural resources, Yury Kukuyev, in his turn declared that timber export revenue would be about US$4.5bn this year, while the export potential of the country was not less than US$70bn. He also said that about 140 million m3 of timber would be harvested this year – 6% more than last year. However, the allowable cut is 451 million m³. Mr Kukuyev believes it is realistic for Russia to double its logging volumes over the next two or three years, and export income will increase accordingly.

For the nine months to the end of September, timber exporters’ profits exceeded US$3.6bn – 12% up on the same period last year. However, the pattern of exports is the same, with round timber predominating. In terms of value, round timber provides more than 33% of export hard currency income, while in terms of volume it accounts for more than 60% of exports. It is expected that more than 40 million tons of round timber, valued at US$1bn, will be exported this year, said Mr Kukuyev.

Increased output

On the whole, Russian timber industry production for January-September was up 3% on the same period last year. Practically all the large vertically integrated forest products holdings increased output volumes, notably the stock com-panies Kondopoga (Karelia), Arkhangelsk pulp and paper mill, Kotlass pulp and paper mill (Arkhangelsk region), Syktyvkar timber industry complex (Komi republic), Volga (Balakhninsky pulp and paper mill, Nizhniy Novgorod).

But according to experts and officials, the financial and economic position of timber businesses is still unstable and nearly half of them are unprofitable. The basic assets deterioration in the industry increased from 45.4% in 1995 to 51% this year. Capital investment has declined markedly.

Minpronauka, the ministry of industry, science and technology, considers that only favourable conditions for foreign investments could provide stability and development for the industry. What is necessary, in particular, are the abolition, reduction or postponement of value added tax and import duties for imported equipment, tax concessions on new manufacturing applications for one to two years, as well as guarantees for investors from the federal and regional authorities.

Government priorities

At the international wood industry forum in St Petersburg last month, deputy minister of Minpronauka Vitaly Usov announced that the pulp and paper industry will be the priority under the ministry’s scheme to develop the timber industry. Plants for the production of wood pulp, thermo-mechanical and chemical thermo-mechanical pulp for container board manufacture are planned. The projects should provide wide use of low-grade wood.

&#8220On the whole, Russian timber industry production for January-September was up 3% on the same period last year. Practically all the large vertically integrated holdings increased output volumes”

Mr Usov added that, in the timber industry, value-added production would grow and the use of hi-tech equipment would become more common.

At the forum, manufacturers and exporters agreed to develop a national wood policy for Russia. The programme, which should be implemented in 2002-2003, will provide for the creation of vertically integrated companies as well as development of the pulp and paper sector and the application of modern technology in the woodworking sector.

Among the measures that could boost wood export revenue, the introduction of obligatory certification of Russia’s forests is the most promising. It could provide an extra US$1m of profit a year. Russian production costs are 20-30% cheaper than for Canadian or Finnish lumber because of the lack of certification. The government intends to pursue certification for all forests.

As Yury Kukuyev declared, timber companies that do not have certification will not be able to export.

Illegal logging

The government is also concerned about the growth of illegal logging, estimated at 1.5-2 million m³, and plans legislation to prevent this.

Meanwhile, the commission investigating tariffs has resolved to abolish the 5% export duty for birch rough wood. The decision was the result of the impracticality of exporting birch pulpwood.

There were numerous suggestions to the government about abolishing this export duty, made both by directors of the biggest timber companies and by leaders of some Russian regions.