Code Aims to See the Wood for the Trees

Staff Writer

Published: October 15, 2004 (Issue # 1012)

ALEXANDER BELENKY / The St. Petersburg Times The confusion and corruption of current logging laws resulted in less than a quarter of legally authorised trees felled last year.

The new edition of Code for Forests and Timber is due to be presented to the State Duma for approval at the end of the month, making it the 18th amended version of the legislature presented to the officials in the last six months.

The code, which regulates the use of woodland in the country, has been heavily criticized for its lack of clarity, concrete formulation and for almost completely failing to provide any federal industry regulations, thereby leaving the issue for the regional authorities. It has also been blamed for the overall poor state of the industry: lack of serious investors and low timber processing volumes.

"Out of total investment made into the Russian economy last year, the Forest and Timber industry (LPK) received only 3 percent," said head of forestry commission at the natural resources ministry, Valery Roschupkin at the Sixth International Timber Production Forum that opened in the city on Tuesday. "And the industry holds much more potential than that," he said.

According to the official figures, Russia has the largest woodland resources in the world with 22 percent of the world's forestland. Most of it is located in the Northwest region and in Russia's far east. Besides domestic demand for Northwest and, in particular, Leningrad Oblast timber, it is exported all over Europe. Russia's far eastern reserves are transported to Asia. According to statistics, however, after felling, only 20 percent of the trees are processed.

"In 2003, out of 554 million cubic meters of trees allowed for felling, only 128 million was realized. The total volumes growth was 1.5 percent last year, although exports grew by 12 percent and the total investment neared $825 million," said Roschupkin.

According to industry insiders, a whole chain of factors impedes industry development: illegal wood felling, practiced heavily in the Oblast, lack of investments in timber-processing industries, and the ambiguous position of the government in regards to forest ownership and investor relations.

"It is not even clear which area of the law the land code belongs to and who carries the responsibility to enforce it," said Ernst&Young manager, Ivan Smirnov.

The newly amended code, expected to come into action next year, attempts to solve some of these issues. "It should have a more detailed explanation of each of the code articles and shape the industry into a civilized one," said Smirnov.

Overall, there are no negative factors for business in the proposed code. It provides an auctioning of lease rights to land plots for a period of 99 years, said Smirnov. Much like the real estate land auctions, such practices should help making the industry more transparent and open it up to competition. Currently, there are no serious players involved in the early stages of timber processing and development.

It remains to be seen, however, whether the newly proposed code can even make it to a reading in the Duma readings. It has already sparked many negative remarks from ecologists and government officials, who call for more state control and say that once opened up for auctions, forests will be monopolized by oligarchs.

"Only a few people in Russia will have the money to buy the renting rights, estimated at $100 per hectare," said the deputy head of the Duma's natural resources committee, Alexander Belyakov at the forum, adding that as the code stands now, it leaves forests open for misuse.

Rashid Aliyev, the deputy editor of "Law and Ecology" magazine agreed with the need for corrections. "There should be serious corrections made to the existing code project to enforce state control for better forest preservation," he said,

However, Smirnov called these fears unfounded. With a new code, forest preservation terms would be stated in the contract made with auction-winners, as opposed to being enforced by Ministry of Natural Resources officials or by some other governmental bodies, the way it was done in the Soviet era, he said.

"The contract would outline the profile of leasee activities and set out the guidelines for sustainable forestry, allowing the same administrative or even criminal sanctions to be imposed should rules be broken," said Smirnov. Complaints from ecologists and officials come from a fear of being left out of the process, he said.