Expert: why it is disadvantageous for certain deputies to bring forests out of the shadows

27-05-2016

forest

The forest industry has a great development potential in Ukraine. However, today’s forestry operates up to Soviet standards in Ukrainian realities. The current government has no time or desire to deal with forest issues, so it imposes restrictions. The situation is not regulated while state forests are destroyed and dealers who fill their own pockets cash on this activity instead of the state budget.    

The analysis head of the Better Regulation Delivery Office (BRDO) Ihor Lavrynenko told to the Pravda news agency about the problems of Ukrainian forests and most importantly about their solutions in more details.

– Ihor, you mentioned in one of your previous interviews that 80% of sanitary cuttings are made to order. Can you explain in what way this scheme works?  

– There are sanitary cuttings among 60 types of forest felling –  it is cutting of sick and damaged trees. This is a normal process. When does a non-normal situation happen? When a wood worker first selects an appropriate plot in the forest and then specialists prepare documents that it is “infected” and requires to be immediately cut down. Unfortunately, the legislation allows to perform such “tricks”. Forestry legislation has remained unchanged since Soviet times and it is not adapted to the today’s needs. For example, the current regulation on sanitary cutting was adopted in 1995. A new regulation was adopted in 2012, but it was never put into effect. In view of that, the Government chooses the wrong way today. It was initiated to ban sanitary cuttings, but in fact, it was simply needed to implement a new regulation on sanitary cutting.

Why is it not implemented?  

– It is obvious that somebody has benefits from this situation. Actually, as for the sanitary cutting issue, I would like to say that now there is a ban on issuing permits for such works. It is also a mistake. Imagine that the storm has passed, the forest fell, it is necessary to conduct sanitary cutting and remove downed trees. The same is true in case of fire. Therefore, sanitary cuttings can’t be completely banned. The solution is to adopt new rules of sanitary felling.

Why did they decided not to issue permits to conduct sanitary cuttings?

– There is a logic of partisan actions in use. Quite a long time ago, in 2007, it was decided to sell the trees from final fellings through auctions, so a person who offered the best price could buy them. For example, a forest plot –  block 25 should be felled and the wood will be sold at auctions. Nice, honest, European approach. However, we don’t like to move along a straight line, we are looking for by-pass routes.

It is used as follows. Imagine that I buy the wood. I come and see that the wood from the beautiful 25th block is the thing I need. They send me at the auction, but I have no guarantee that I can buy exactly this batch of wood. That’s why I “get” a piece of paper that the forest is sick in this block and, therefore, it is cut down. Then a forestry enterprise sells it to me on a direct contract as it was a sanitary cutting procedure and this wood is not put up for auction. Thus, a customer can buy what he wants for sure.

In order to close this scheme, any wood should be sold at auctions with a clear indication of its quality.

– You said that there was a new regulation that simply wasn’t implemented. What key points does it contain and how does it differ from previous versions?

– It contains some technical changes, which will be interesting for foresters, because there are new tree diseases, new ways to care for the forest. Purely technological innovations. There are also organizational innovations. Now a key person who determines a tree state is a forest pathologist. He comes and puts a stamp: yes, this forest is sick. However, there can be no claims to this forest pathologist.

The first innovation is to involve the environmental inspectorate in the forest assessment process. This step will provide at least some additional guarantees of quality of this inspection.

Secondly, it is publicity –  all these decisions should be public, starting from the fact that all information should be posted on websites, such as the regional forestry administration’s website. Anyone can open and see: the 24th block, there are bark beetles in certain area, it is decided to conduct sanitary cutting. All people from the nearest village can go and see whether there are bark beetles or not. If not –  they should write a complaint. Today, if there are forest cutting procedures conducted, I can’t be aware of its legality. The community and local authorities should have the right to participate in making such decisions, this decision should be made by a commission with mandatory signature of the village council or regional administration representatives.

– Who has the right to conduct these cuttings? Is it a state-owned company or a contractor selected on a competitive basis?

– The truth is that it doesn’t matter. There are two options of how to conduct forest cuttings: by a forestry enterprise or on a tender basis. Innovations implemented now –  decisions on such tenders should be public. Today, there is a ProZorro website, you can find forestry enterprises and information on tenders for forest cuttings. However, not all forestry enterprises do in this way, because they still have the right to choose whether an open tender will be held or not.

– There are both state and communal forests. Should there be some differences in the procedure?

– No, this procedure is universal. There can be additional requirements in case of forest reserves.

Should the wood be sold on the auction principle?

– If the wood after the sanitary felling is put up for auction –  it will be good. As for the current auction procedure to sell the commercial wood, it is imperfect. Therefore, there is a proposal to adopt a new regulation on auctions. One of the elements of this document will be introducing electronic auctions, by analogy with ProZorro.

Today’s auctions are held almost in the same way as we see on TV. People gather and raise the cards. If you didn’t come or got sick, nothing changes. In its turn, the electronic auction will provide equal opportunities for all participants.

Forest agency is ready for this step. It will be easier for them, since now all auctions are held once a quarter, and in this way, it will be possible to sell forests even around the clock.

There is also another innovation. I hope it will be implemented. It is identification tagging. Currently, only state forests are identified by tags. There is an initiative that it is also needed to put tags on communal forests.

A tag –  a bar code –  will contain all information about what kind of wood it is, when and where it was cut down.

– The Verkhovna Rada passed a moratorium on the round wood export last year. Is this moratorium related in some way to regulating the situation on the forest market?

– As in the case of the ban on sanitary felling, export restrictions are an emotional decision, a kind of reaction to the pressure from society. Therefore, its implementation won’t lead to the desired results and declared objectives.

To my mind, this ban should be abolished because it doesn’t work.

Is it still exported?

– Of course. The reason is simple –  they have introduced a moratorium on the round wood export, but there is no moratorium on the firewood export. We still use the Soviet rules. Firewood is not the forest that was specially cut down, firewood is the fuel wood that is burned in power plants or boiler rooms. This can be a beech about 50 cm in diameter and even a one hundred year oak.

– Zakarpattya customs officers are accused of operating fraud schemes –  they allow to export the round wood as the firewood. But can there be any claims to a customs officer if he is provided the documents that this is the firewood?

– In order to solve this situation, we should move to the European standards of forest quality assessment. The relevant decision was adopted in 2005. It has been more than 10 years, but we still didn’t implement anything.

Is it disadvantageous for someone?

– Of course. There are real schemes used in this area. For example, there is a plot that should be cut down (there are a thousand cubic meters of wood according to Soviet standards, but it is a bit more in reality). The reserves are estimated before the forest cutting. Then a forestry enterprise’s director approves the cutting of 1 thousand cubic meters that will be cut down and delivered to him, but woodcutters will keep additional 100 cubic meters for themselves. The woodcutters live off this activity. We have minimal prices for forest cutting works, it is roughly 100 hryvnas per 1 cubic meter. They are lower than the prime cost. Therefore, they earn by selling the wood under the counter. However, this wood is illegal, it doesn’t have any documents. So, they sell it as a communal forest on forged documents.

 

Moratorium for 10 years is a considerable period of time. Are there any prospects that it will be abolished earlier?

– Europeans demand to abolish it, otherwise they won’t provide the macro-financial assistance to us. Moreover, we should abolish the moratorium first and then they will give the tranche. This should be done by the end of May, if we wish to get money in June.

The head of the State Agency of Forest Resources has been recently dismissed. It is planned to announce the date of a new competition for the election of the head in a month. What is going to change in this area with the new head?

– If this competition is conducted in a transparent way, with the implementation of all the conditions, then we will have a chance that some of the problems will be resolved.

– The previous head had a task to integrate all state forest enterprises within a single holding company… 

– This was a coalition agreement’s requirement …

Is it a kind of utopia?

– 50 to 50. Kutovoy (the current Minister of Agriculture and Food –  editor’s note) considers this idea and wants to realize it. If a large holding company is created, a nominee for the head of the State Agency of Forest Resources won’t have any value, because this person will deal with forest science and statistics. However, creating a forest holding company –  as a reform in Naftogaz. This is a difficult political decision and a person with lots of political will can make it.

Is there an approval for such political will?

– When Naftogaz was reformed, dozens of deputies lost weight because they had nothing to live upon. The same situation will be with the forest, but to a lesser degree. It is just that other deputies will lose weight.

Significant changes require a political will of the President, who has to make a decision while knowing who will call him and complain. Probably, it will be a condition of the IMF.

It should be understood that Kyiv doesn’t control the forests now, it appointed a forest enterprise’s director, say, Vasyl Petrovych. That’s all, the only thing that Kyiv will receive in the future is the reports that can’t be verified.

For example, our volumes of lumber exports are twice more than the volume of domestic production. However, this is just a piece of a shadow market. Sawmills show only the legally acquired wood in their statistics, so they report only on legally produced wood boards. At the same time, customs offices show all wood boards physically crossed the border.

– Ukraine has a tradition that when a large state holding company is created, it will be given for sale as time goes by. The example is the State Food and Grain Corporation of Ukraine, which we are actually ready to give to the Chinese. As for the state forest holding company, is there a tendency to privatize the forests?

– There are no preconditions for privatization because now forestry enterprises imply having just buildings and tractors. The forest is not owned by forestry enterprises. They have a legal status –  a permanent forest user. A forestry enterprise becomes a forest owner upon completion of the forest cutting. The state owns the wood before until it is cut down.

State forests can a priori be only state-owned and their legal status can change only when they stop to be forests, their designated purpose is changing. For example, the land is allocated to build a nuclear power plant. Moreover, a big positive in the creation of the forest holding is the capitalization of forests. Today, there are no forests in legal terms. For example, the Dnieper River.

Please, explain…

– The forest is not included to any balance sheet. It is assigned to a forestry entrerprise, but not to its balance sheet. Establishing a forest holding company will allow to introduce the forest into civil turnover, make documents that it is a state property and a forest enterprise is a permanent user. This will allow to capitalize the income from the forest.

For example, now the forestry can’t take a loan to purchase new equipment, since it has nothing to provide as a pledge, except its administrative building. In the future, it won’t be able to use the forest as a pledge, but it will be possible to put revenues from the forest use in pledge. You received a loan, bought a tractor and improved the work efficiency. A forester’s labor productivity in Sweden us 10 times higher than ours. With comparable forest sizes, we employ 50 thousand people, they –  4 thousand.

Today, our forestry enterprise has to work a few years in order to buy a tractor.

What situation is with planting new forests in Ukraine?

–  On the one hand, there is an advantage in law. You cut down the forest, then you have to plant even more. You cut down 10 hectares of forest, you need to plant 11 hectares. However, there are two disadvantages. We have rather archaic technologies of forest restoration, elderly women plant the forest by hand. There is the tractor landing in Sweden, it increases the economic efficiency and trees grow better. In addition, reforestation can become a separate business area. This has been already done in Belarus. Now Belarus has become a major exporter of forest seeding. They earn millions of dollars, create nursery gardens and sell the young forest and seeds to Sweden. We can also perform these activities. Foresters are ready, if there is at least some funding. The problem is that the budget doesn’t provide any money.

What is the current level of financing of reforestation?

– The State budget covered 1 billion hryvnas for the forest in 2013, 500 million –  last year and 0 hryvnas –  this year.

If we don’t manage this situation in the near future, we will have a real problem. Resource areas –  the ones that can exist by selling the forest –  they won’t feel difficulties. However, not resource areas in the south and east of the country, where there was never a forest business, will die. The problem is not with dismissals of foresters, but with the fact that the forest meets the ecological purpose. In particular, these forest plantations located along the fields. If the budget doesn’t provide the money –  while there is a relevant draft law on funding, it is need just to approve it –  it will lead to the fact that artificial forests won’t be recovered and protected, the fires won’t be stopped there. As for the fires –  recently, there was a large fire in Kherson region. Today this situation is very critical. Foresters spent 20 million hryvnas for purchasing equipment to stop forest fires last year, but they were forced to give this equipment back, because there is the resolution of the Yatsenyuk government on banning the purchase of vehicles for state purposes.

Source: Pravda News Agency

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