BRDO: The budget of Ukraine loses 200 million hryvnas annually because of illegal sawmills

27-06-2017

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The forest cover indicator in Ukraine is one of the lowest in Europe – 15.7%. In neighboring Poland, it is about 30%, in Belarus – 42%. Losses from illegal logging in the country has increased by 77% reaching a total of 400 million hryvnas over the last 6 years. However, a single fine for illegal logging is only 170 hryvnas, while mechanisms to bring to justice do not work.

The representatives of government, business, community and expert circles discussed the forest industry problems during the roundtable “Regulatory jungles: is forest a commodity or a resource?” as part of the Public dialogue #PRODialogue in Zhytomyr on June 8.

The Better Regulation Delivery Office (BRDO) conducted a comprehensive analysis of the industry regulation and presented it in the Green Paper “Regulation of timber market”. According to the study, 50% of instruments regulating the forest industry carry high corruption risks due to their out-of-dateness, while 6 of 44 acts are illegal. The existing legal regulation can not provide the state recording of forests and their use as well as can do nothing with illegal logging and does not provide effective mechanisms to protect forests and sell the timber in a transparent way.

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“The existing legislation and the complexity of procedures provoke the shadow market. Today, there are 9200 sawmills operating legally and about 12,000 illegal sawmills in Ukraine. If they are legalized, the amount of single social contribution from them will be 101 million hryvnas even before they will start to conduct business activities. Overall, the state loses 200 million hryvnas annually because of this,” the Head of the BRDO’s Agriculture sector Andriy Zablotskyi said.

In addition, the country still does not have any development strategy in the field of forest relations that would define priority areas of forest use for the state and businesses. The Director of the Economic Development, Trade and International Cooperation Department of Zhytomyr Regional State Administration Oleksiy Shatylo also emphasized this aspect. “Zhytomyr forest resources allow to provide the sustainable economic development of the region. In particular, due to the greater efficiency of the processing industry. But we need clear transparent market operation rules,” the representative of the regional administration said.

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Currently, the forest cover in Zhytomyr region is 33.6%, in total, the region provides 20% of all timber in Ukraine. “Addressing the problems of insufficient budget funding, ineffective forest protection and its recovery is an important task for the region. Now the interests of foresters, processors and the public are in the clinch. Our common responsibility is to find solutions to complicated issues,” the Head of Zhytomyr Regional Forestry and Hunting Administration Andriy Kurinskyi said.

The leader of the EU4Business / FORBIZ project in Ukraine Matthias Halder emphasized the importance of involving all participants of the process into creating the effective regulation: “The effective regulation means that it is effective for the majority of Ukrainian enterprises, in particular, for SMEs, and that they have “equal playing field” in the market. Thus, it is possible to develop effective regulatory changes only through the dialogue between the government and businesses. We are ready to share the European experience in the field of forestry regulations with Ukraine – and today with Zhytomyr.”

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During the roundtable, the representative of the Environment Agency of Austria Michael Zutter presented the best practices of foresters of Bulgaria, Romania, Austria and some other European countries to the participants. “Ukraine has great potential in forestry. The key to its implementation lies in resource efficiency, strategic partnership of the state with industry representatives and building the value chain,” he said.  

The representatives of the Ministry of Agricultural Development, the State Regulatory Service in Zhytomyr region, business representatives, experts, heads of forestry agencies and wood processing enterprises of Zhytomyr region and the public also attended the event.

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