Russian Forestry and Wood Supply Operations Analysis
FAR EASTERN FEDERAL DISTRICT
PRIMORSKY KRAI
fish, and one third of canned fish production. The food industry's share in
the region's economy is about 40%.
Machine-building and metalworking together amount to about 10% in the
territory's industrial production. The facilities of this sector specialize in
shipbuilding and ship repair, instrument making, and aircraft engineering.
The largest machine-building factories in the territory are the Vladivostok
Ship Repair Yard, Dalzavod, Dalpribor, Radiopribor, and the Metallist factory
in Vladivostok.
Forestry and timber processing is one of the oldest sectors of the region's
economy, providing about 7.1% of the gross regional product. Over 75% of
the harvested timber is exported abroad as raw material.
FOREST RESOURCES
According to the State Forest Register, the total area of forests in Primorsky
Krai is 13,380,600 ha, with protective forests occupying 4,596,900 ha and
commercial forests, 8,783,600 ha. The forest coverage rate of the region is
79.3%, varying from 92% in the northern districts to 6% in the south-west.
The highest proportions of commercial forest are in Chuguevo (88.8%), Arseniev
(87.7%), Dalnerechenskoye (82.6%) and Roschino (81.9%) forestry sections.
The age structure of forests in Primorsky Krai is conditional to a great extent,
because forests growing there are mostly of mixed age. The basis for forest
estimation is the age of predominant stand ages. Taking this into account,
experts believe that mature and old growth stands make 42%; ripening --
18%; middle-age -- 34%; and young stand -- 5%. The total timber reserve
is 1,753.7 million m³, of which mature and old growth, 865.01 million m³.
The overall average increment is 17.5 million m³.
Predominating are softwood forests at over 55%; broadleaved hard-wooded
species account for 28% and broadleaved soft-wooded, for 16%. The wood
species occurrence is as follows: spruce, 22.5%, cedar, 18.9%, fir, 3.7%, larch,
10.7%, oak, 17.5%, stone birch, 6.2%, white birch, 9.8%, ash, 2.7%, lime, 3.5%,
elm, 1%, aspen, 1.8%, and other species, less than 1.7%.
The region's protected forests are made up of spawning-protection and
prohibited belts along water bodies (47.0%). Material parts of the protective
forests are nut-picking zones (21.1%), forests for environmental protection
(16.9%) and green belts around communities (13.8%).
According to the governmental program "The development of forest
management in Primorsky Krai for 2013-2017," about 70% of the region's
forests have a survey age of over 10 years, and on a forest area of over
200,000 ha previously owned by agricultural entities, there have never been
any surveys. The program originators indicate that currently, in 40% of the
forested land (5,352,240 ha) the survey age is over 15 years, and in 35%
of the land (4,683,210 ha) it is 11 to15 years. Given such outdated surveys
and the insufficient accuracy of current field work, an additional check of
record data is required for their use in the analysis of forest management
status and appraisal of its development prospects.
The insufficient accuracy of forest potential estimation, and a rather low
level of use of advanced information technologies in forestry cause problems
which hinder efficient forest management. With the adoption of the program
"Development of forest management in Primorsky Krai for 2013-2017," the
forest survey work in Primorsky Krai has become more active.
The wildfire problem is extremely acute for Primorsky Krai. On January 4
last year, the first wildfire in Russia of that year was recorded there; next,
along with the Republic of Sakha (Yakutia), Transbaikal Territory, Amur
Oblast, and Irkutsk Oblast, the region occupies a place at the forefront
of those that face large fire risks.. According to official RosLeskhoz data,
these regions accounted for about 30% of all wildfires and over 80% of
the area affected by fire.
According to the Primorsky Krai administration, the region annually sees
an average of 345 fires, 20-30% of these develop to the "major" category,
and their area is up to 87% of the total fire-affected area in the region. In
Primorsky Krai, the disagreement between the available firefighting capacities
and firefighting activity and the required scope of fire protection of the
forests is clearly seen. Funds are allocated from the federal and regional
budget to prevent and control fires, but so far, the situation cannot be
overcome quickly.
Today, volunteers are actively invited for wildfire control in Primorsky. 275
associations of voluntary fire guard troops have already been established,
with over 23,000 firefighters in all. In 2015, it is intended to engage them
primarily in control of communities potentially subjected to wildfire threat,
and communities outside the zones of rated arrival time of the primary
firefighting units.
THE FORESTRY AND TIMBER SECTOR
The Primorsky Krai FTS still cannot move beyond its export/raw-material
orientation. The causes are both the general recent situation making timber
exports many times more profitable than working on the domestic market,
and the features of economic development of Primorsky Krai.
As early as in the late 2000s, the region's authorities declared their
commitment to the reduction of raw timber exports and an increase in
the share of domestic added-value product output. However, the proximity
of the rapidly developing China and successful South Korea willing to buy
timber at favorable prices does not at all motivate the Primorsky business
to develop their own timber processing.
Among the investment projects being currently implemented in the territory,
not a single large one is related to added-value timber processing. For faster
development of the region, the authorities focused primarily on building
transport and utility infrastructure, expecting this would push the development
of manufacturing sectors amongst others. However, the construction of
the last two large timber-related factories was completed at the end of
the last decade. First, a three-ply parquet factory was commissioned in
Dalnerechensky urban district. The facility's design output is 1,757,000 m³
of parquet a year, of which 1,600,000 m³ is three-ply parquet and 157,000
m³ is solid parquet; for this purpose, 120,000 m³ of timber per year will be
processed. The official project cost was 2.4 billion rubles.
Two years earlier, in the port of Plastun in Ternei District, Terneiles JSC
along with the Sumitomo Corporation of Japan updated an operating timber
processing complex including veneer and chips production and recycling
softwood and hardwood waste. The design capacity of the facility occupying
over 25,000 m² was 267,000 m³ of veneer and 150,000 m³ of sawn timber
per year as of the commissioning date, after processing 685,000 m³ of
roundwood. The project cost was 4 billion rubles, of which $150 million of
loans was guaranteed by the Japanese partner.
Incidentally, the Japanese show great interest in buying business in Russia
today, when the Russian economy is stagnating - just as in 2008, during
the economic crisis. This February, it became known that the holding
Iida Group Holdings, as part of business development in Primorsky Krai,
expressed its wish to buy Primorsklesprom JSC and Olgales JSC. However,
the settlement of the transaction required the permit by the Federal
Anti-Monopoly Service, which had previously denied similar applications
by the said Terneiles, indicating that "the transaction might result in
limited competition on the timber market in Primorsky Krai and the
dominance of Terneiles, which is against the anti-monopoly law." At the
first glance, the desire of Iida Group Holdings to buy Russian companies
does not imply such a danger, but experts suspect that the Japanese are
in a hurry to secure the Russian assets primarily to use them as a raw
material source. That is, the sale of Primorsklesprom JSC and Olgales
JSC will mean just what the Russian authorities are trying to avoid: an
increase in timber exports.
"The past and present activity of the harvesting segment in the structure of
Primorsky Krai's forest industry is typical for a raw supplier region," note the
developers of the Primorsky Krai Forest Plan. "The economic and geographic
position of the region, and its proximity to the timber markets of the Asia-Pacific
orient the timber companies towards exporting unprocessed timber, which
works against the integrated use of forest/timber resources. In recent decades,
the structure of the forestry and timber sector has noticeably degraded, and
the proportion of harvested timber against the timber processing scope has
greatly increased, making about 80% of the total timber product output today.
The raw export profile of the Primorsky Krai FTS is also explained by the
low solvency and low demand for timber products on the internal regional
timber market. In today's construction, wooden door and window units
are more and more often replaced with plastic steel ones. Sawn timber by
Primorsky manufacturers are not in demand abroad, and shipping them to
the west of Russia is unprofitable.
On a related issue, this situation heavily affects small and medium business.
Many companies previously specialized in harvesting and primary processing
have expanded the scope of their business from simple sawn timber production
to the manufacturing of window and door units, however the sales market
for such products, mostly manufactured in fact by semi-artisan techniques,
is continuously shrinking.
Incidentally, despite the interest of neighboring Japan in the resources of
the Russian Far East, the investment climate of that region, and Primorsky
Krai in particular, is evaluated as rather negative. On the rating of regions'
investment attractiveness published by the Expert RA agency annually,
Primorsky Krai holds the 21st position; as in Yakutia and Khabarovsk Territory,
the risks there are estimated as moderate, and the investment potential
as reduced. At the same time, experts note the high corruption level, and
problems in overcoming administrative barriers.
According to an opinion poll of Primorsky and Khabarovsk businessmen by the
World Bank, the excessive level of bureaucracy provides officials with great
opportunities for delays in performing their function, thus squeezing bribes
from the business. Bribes are squeezed on administrative procedures, without
which it is hard or impossible to conduct business. These procedures are:
tax administering, connection to utility lines and licensing. The respondents
note a higher "time tax" - time lost in overcoming administrative barriers.
The justice system, as was the case earlier, is not trusted by the region's
business. Active efforts have been started in the region to decriminalize the
forestry and timber sector, supported by the territory prosecutor's office. It
is too early to make conclusions as to how successful they are.
Maria ALEKSEYEVA
124 #6 (2015) RUSSIAN
FORESTRY
Government authorities responsible for forest industry
regulation of the Primorsky Krai
Governor Miklushevskiy Vladimir Vladimirovich
Russian Federation, 690110, Vladivostok
Ul. Svetlanskaya, 22
Tel./fax +7 (423) 220-92-53
www.primorsky.ru
Forestry Department
Acting director Gruschenko Oleg Alekseevich
Russian Federation, 690024, Vladivostok
Ul. Belinskogo, 3A
Tel. +7 (423) 238-86-88, fax +7 (423) 238-80-73
[email protected], www.primorsky.ru
Department of Industry and Transport
Deputy Director Reshetnikov Vladimir Mikhailovich
Russian Federation, 690110, Vladivostok, ul. Svetlanskaya, 22
Tel./fax +7 (423) 220-93-34
[email protected], www.primorsky.ru
Department of Natural Resources and Environmental Protection
Director Korshenko Alexandr Igorevich
Russian Federation, 690007, Vladivostok
Ul. 1ya Morskaya, 2
Tel./fax +7 (423) 221-53-99
[email protected], www.primorsky.ru
RUSSIAN #6 (2015) 125
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