Russia: Amendments to Forestry Code proved inefficient
22/02/2008 - 14:41
The amendments introduced to the Russian Forestry Code in 2007 have not proved to be efficient and some of the modifications are difficult to implement, according to Valeriy Roshchupkin, head of the Forestry Agency. Furthermore, there is poor understanding of the new legislature
while the lack of coordination between federal and regional authorities continues.
Roshhupkin stated that the measures introduced by the government to amend the new Forestry Code were not sufficient to attract significant foreign investments to the forestry sector. In fact, according to him, the preferential approach for investors has failed. Currently the government is in the process of reviewing 86 investment projects valued at $2.5 billion, of which 40 percent are in Siberia, 10 percent in the Far East and 30 percent in Northwestern Russia. However, none of the projects will be fulfilled within the next year, as not all the
measures in the Code are implemented yet due to the lack of legislation to support it.
Exports of raw material continue to soar despite government expectations to significantly cut down shipments of unprocessed wood by increasing export taxes. Experts believe that exports will remain high as companies are aware of the tax increase and will sell as much unprocessed wood as possible. According to Rosstat, Russian exports of wood and products
of HTS 44 for Jan-Sept 2007 increased by 36 percent in value to $6.7 billion compared with the same period in 2006. Exports of rough non-treated wood HTS 4403 increased by 28 percent to $3.2 million from Jan-Sep 2007 versus the same period of 2006.
In summer 2007, the government passed a resolution on priority investment projects in forestry. The resolution stipulates preferences to investment projects estimated above $300 million in value, such as providing a future investor with forestry plot without auction,
reducing rent fee more than double from the minimal cost, and zero import tax on technological equipment. According to trade sources, the idea of setting a minimum threshold for priority projects of $300 million dollars is too low and would create a shortage of accessible forestry resources that are economically efficient to exploit. According to the
trade, one way for the government to improve efficiency of the forestry industry is to pass a
decree subsiding interest rates for forest producers, similar to the program that focused on
interest-rate rebates for loans to agricultural producers under the National Priority Project.
According to market players, the first export tax increase was not effective. Knowing that
the export tax will continue to increase, forest producers increased exports while export
tariffs were relatively low. According to the regional Forestry Agency in Chita oblast, export
of unprocessed wood has increased by 40 percent for the period Jul-Dec 2007. Aleksandr
Belyakov, Head of the Committee of Trade and Industrial Chamber of Russia advocates for a
complete export ban of valuable species but is in favor of a more flexible export policy for coniferous species.
According to Valeriy Roshhupkin new government incentives should be introduced to attract investments to the industry. According to him, it can be achieved by providing subsidized interest rates to forestry producers and government assistance in building infrastructure such as roads.
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