In Europe with the “firewood”?

Among registered in offshore zones “wood” companies with the minimum possible according to the local law, Charter capital and the English transcription, which increasingly emerge in social networks, it is possible to meet individuals who are “professional advisors in the countries of the former Soviet Union.”

After the adoption of the moratorium on the export of round timber in them there was an urgent need for the Ukrainian “forest” dealers together with companies phantoms with an international jurisdiction, for simplicity, the communication and promotion of Ukrainian “wood” to Western markets.

Why in Ukraine is not the investor?

Future wood-processing complexes in Ukraine with foreign investments will present all the laws of PR. Media quoted an energetic managers, government reports about the next “major investor” are called cubic meters of finished products per year design capacity, the number of jobs, the total area of production workshops, “modern technological” solutions in woodworking, the investment cost of the project, is a symbolic laying of the Foundation stone of the future enterprise, the bustle of journalists, cameras, handshakes and champagne, but… After the “Foundation stone laying” all “investors” and those whom they are going to “invest,” pleased with each other, travel in different directions, and in Europe and Ukraine appear to be a “company” under a little-understood names. This is the “phantoms of darkness” exporting Ukrainian wood.

In the global comparative analysis of the investment climate, which is based on a number of analytical studies conducted by independent organizations, Ukraine occupies a low position compared to the countries in which built a modern wood processing company. Although in recent years they have appeared in Korosten and Kostopil’, Rivne, Transcarpathia and Volyn. The limiting factors are poorly designed administrative framework and the lengthy process of obtaining various permits and approvals. Stability problems of wood supply, too occupy not the last place, and a slight difference in prices does not always compensate for the aforementioned factors.

Is it because today deep wood processing in Ukraine is, unfortunately, one of the weaknesses of the Ukrainian economy, in terms of global competition. Domestic companies of a similar profile difficult, to put it mildly, to compete with Western partners. Their protection from foreign competition is significantly impeded by many factors. But do not forget about the long term. It’s tough competition from Western companies will contribute to concentration in the market of deep wood processing major Ukrainian wood-processing companies that will be able to make significant financial investments in the modernization of production and improvement of local infrastructure.

What is the obstacle? What changes are required of domestic woodworking? Complete modernization of private timber enterprises that minimise consumption and loss of wood raw material, expanding the range of innovative products. In turn, the state of the wood processing enterprises should be privatized, and the export of unprocessed timber from Ukraine should be in legislation and policy are minimized, to finally, he was regarded in our society, in government and in the business community as an action that is contrary to the strategic interests of the state. And competitive products is to recognize only the consumer quality of which can be adapted to market requirements in a relatively short time. The advantages of the development of any industry the forest sector should be considered the number of such resources, which have no competitor and that it is impossible to create, attracting non-traditional sources. In parallel, in order to motivate all participants of the forest relations effective forest management, it is necessary to go to the forest rent.

It should be noted that the Forest code, forest inventory, other forest documents of the government and the Verkhovna Rada of Ukraine is the only legal (not always successful) the mechanisms of realization of state policy in the sphere of forest relations. Their purpose is to provide coordination of positions of all interested parties, so they should be designed taking into account all the constructive opinions and suggestions.

How are the myths?

As from 1 January of the year a moratorium on timber export has extended its action on softwood, his opponents, the vanguard of which are state forest owners (state forestry) and their supporting “experts”, began to artificially raise the price of raw materials and at the same time to shout that in Ukraine, he allegedly there is no demand. Further — more, the price of timber alleged fall, which is extremely negative impact on the economic activities of the SFEs up to the bankruptcies. However, sidestepped or ignored the fact that under the moratorium are subject only to raw timber according to the code 4403 state classifier, or discarded. Wood wood for technological needs and wood fuel have a code 4401 and do not fall under the ban. It is this separation of codes gives rise to abuse in the export of forest products under the code 4401. Here is a recent example. Literally on the border of Ukraine and Romania (in the last) is successfully functioning and powerful manufacturer of chipboard. The company took care of its own energy centre, working on the Ukrainian firewood. Due to this energy production are provided with their own coolants. The so-called fuel wood from Ukraine cheap themselves, and if we consider the low Ukrainian rail fare (for example, transportation of cubic meter of firewood from Zhitomir to the Romanian border is 5-6 euros), in fact the Ukrainian railway transports to Romanian consumer wood is three times cheaper than domestic. Why? But because it is designed as a fuel wood (wood group 4401). As a result of such “economy” in Ukraine, stopped hundreds of processing plants and eliminated thousands of jobs, the state loses considerable profit and acts as a resource base for the West. Value added processing is not established in Ukraine and abroad. There are deposited and money — in the form of salaries and taxes. The enterprise in question, built by famous Austrian firm. First was the idea to build it in the Ukrainian Carpathians. Why it happened: the factory in Romania, and raw materials from Ukraine? And because Ukraine has no export duties. On the other hand, the EU protects the interests of the company against the risks which it would be subjected in the territory of Ukraine. Risks artificially created by the Ukrainian officials.

And another problem — the increase in the price of timber state enterprise forest users. What are their motives? First: to take advantage of the shortage of raw materials to increase their own profits. Second: out of the market, the woodworking small and medium businesses. Third: to provoke the situation, when the cost of wood will be unacceptable to private business. Sales at auctions drops sharply comes automatically a new myth: the domestic market is not able to consume the timber offered for sale. This despite the fact that one of the areas that can demonstrate a marked increase in domestic wood processing, lead in the short term, other sectors of the forest economy and attract investments, is the production of slab materials, plywood and wood pellets (in recent years focuses on the development of bioenergy).

Meanwhile, the forest users (creators of the myths) did not attend the auction and process the wood at cost, which in 1,5-2 times below the market price. At the same time, the State Agency of forest resources of Ukraine (GALR) is constantly said about the prospects of increasing domestic wood production, “clearing” the market from small players.

And since the wood market in Ukraine is a monopoly in which the demand exceeds the supply, do not overdue it necessary to introduce it into the Law of Ukraine “On natural monopolies”, which will allow to regulate the price of wood at the state level? This regulation will allow businesses to develop their production plans and to upgrade the business. In place of the chaos will come the development. There’s no other way. So, at least, believes almost the absolute majority of Ukrainian wood-processing business.

The moratorium entered into force on 1 November 2015, and on pine from 1 January, but the standards by which forest users are given the billet of Ukrainian forest and its exports remained unchanged. The so-called users harvest the wood yourself write out a certificate yourself it choose to bypass the auction. Such a market contributes to the systematic and deliberate distortion of data for customs clearance of forests, the alteration of forest categories under the “right” codes of the Ukrainian classification of goods of foreign economic activity (uccfea) for personal needs of individuals. Perhaps the most eloquent of these problems lit 1 June expert Mikhail Popkov at the round table “State and problems of forest sector of Ukraine: preliminary results analysis” program PROFOR (project technical assistance for promoting reforms in the forest sector of Ukraine) in Ukrainian office of the world Bank. According to figures the state statistics service, in 2016, Ukraine exported 664,2 thousand m3 of sawn oak and made 72 thousand m3 of oak mills and the slats. The production of these products requires at least 1.2 thousand m3 of Plavnica oak. How did you manage to produce such amount of products from oak, if the amount of pieces this type of wood in Ukraine in 2016 amounted to 512 thousand m3? Expert answers and simply says: in Ukraine, produce lumber of the process of raw materials is assigned to code 4401, but it was not always so. Before 2006, output of timber in the state of Ukraine was the same as in neighboring European countries: about 90%. Obstinate lady by the name of “statistics” from 2007 captures the sharp decline in output of commercial timber in 2016, it was only… 40% of the total volume of the prepared liquid, and 60% related to the “fuel wood” (4401). The main reason for the current negative situation, the expert sees in the “politics” GALR Ukraine. For many years the Agency is lobbying for the export, carried out with the use of different corruption schemes, including through the sale of wood through controlled intermediary firms at low prices and, subsequently, its real resale to consumers at market. In the domestic market was formed a typical “seller’s market”, where GALR dictated and continues to dictate prices and the “rules” that make it difficult for residents of Ukraine access to resources. The consequences of dictatorship: low domestic consumption of manufactured products and the export orientation; long-term stagnation of development; lack of adequate assessment of the resource potential and the overall balance of use of wood.

The sad statistics of the syndrome of inferiority

Increasing the share of exports of roundwood in total volume of its official blanks from 18% in 2006 to 26% in 2015 shows that among the main reasons for such growth was the reduction of its consumption of domestic users and illegal logging. In 2015, Ukraine exported fuel wood in 34 countries, and the volumes of its exports reached a record high of 2,055 million m3, 16% more than in 2014, and three times more than in 2006, Reforestation lags behind this rate of consumption is 5-6 times!

If you look at the dynamics of export of fuel wood, we can see that 88% of its volume went to the countries of Europe are either still in the last century, destroyed a forest, or take care of mother nature in Romania — 751 thousand tons, Poland — 124 thousand, Slovakia — 94 thousand, Hungary — 91 thousand, Germany — 64 thousand tons for Many years, Ukraine remains the world’s largest exporter of fuel wood and the only country in the world with export sales of more than 1 million m3 per year. In this context, the service noted another interesting fact: in 2014, the five largest exporters (Ukraine, Croatia, Bosnia, Bulgaria, Slovenia) exported 1679 thousand tons, or approximately 2317 thousand m3 of fuel wood for the sum of 243 million dollars. USA. Exports of the four countries (excluding Ukraine) reached 23% in volume terms and 72% in value. If the reader is interested in how the export of “wood” enriching private businessmen and senior officials, then doing basic math, it’s easy to calculate that Ukraine exported 1774 thousand m3 of fuel wood in the amount of us $ 68 million, and the value of exports of the four countries of 0.53 million m3 of the same product pulled in 175 million. This begs the question: at what price we give Europe the Ukrainian “wood”?!

The syndrome of inferiority still beat Ukraine. The disparity between exports of fuel wood and its proposal is the fact that limits the ability to meet the needs of its users, not only in wood but also the wood raw material for the production of charcoal and wood pellets, which are in demand in the market of foreign trade and exhibit similar trends in the export of fuel wood.

Who wood? Ukraine traded “bezviz” on “treeless”. In may 2016 at the station khodoriv activists detained 53 of the boxcar, loaded with buck. The ultimate destination of this valuable timber under the guise of “pine wood” means Romania. When calmed down the media, the echelon still got to foreign consumers.

At the end of December 2016 at the international checkpoint Kuchurhan on the departure from Ukraine entered 29 cars of timber, which is documented as “wood fuel”. It was later revealed that these “firewood” was 56 cars. Masking them distributed to different stations of the Odessa railroad. Only in March 2016, the Romanian company SC for holzindustrie SCHWEIGHOFER S. R. L. has received from Ukraine of sawnwood in the amount of 115 million UAH. Its suppliers were all the regions of Western Ukraine. It is noteworthy that in the forest “horizon” of Ukraine in a short time the presidency of GALR Christina Yushkevich and its numerous “advisers”, a new “phantom”: “Osuna”, “Nepal”, a longtime player in the market of timber export “PSB Volyn”. Isn’t it time to explain to investors that cheap raw materials from Ukraine exhausted? That Ukraine can no longer serve as a raw materials appendage of Europe. Because year after year it becomes more expensive. Save the situation wood processing enterprises of domestic companies that create high added value. They are already in Ukraine. There will be jobs and tax revenues will receive a boost to the development of related industries. And the export of finished products is much more profitable for vnutridiskovogo balance of the state. But business has direct enemy — the state. Who will resolve this conflict? Undermined the resource base of the Russian forest industry. Wood is exported abroad. There is an active attack on the protected natural area. Ukraine suffered economic and environmental damage, permanently lost the prestige of the profession of Forester, in fact, liquidated unclaimed government forest science, a difficult situation was branch educational institutions and their graduates, who often go to work not on a speciality. To at least partially flatten a permanent conflict of private companies for wood processing and forest users, businesses today expect the state will solve for a range of activities: legal support of business the wood for a long period (act on the wood market for planning sustainable production), the principle of pricing of wood under constant control by the Antimonopoly Committee of Ukraine, the state balance of wood (no one knows how much it is Ukraine), the justification of its exports or total ban. But instead — a new proposal: concession. The impression that the Cabinet of Ministers of Ukraine there were a lot of officials with a diagnosis of “severe concussion”.

Quo vadis? Where are you going, Ukraine? Where are her gentlemen with the Kiev hills?! You wonder whether these problems are new teams that supposedly should come to the offices of the Ministry of agrarian policy of Ukraine and GALR? Or, conversely, as “successors” will worthily continue the “forest policy” of the state “business” once and is now involved in the forestry sector: Viktor Siwiec, Alexander Kovalchuk, Taras Kutovy, Christina Yushkevich, Vladimir Bondar? And their advisors, without the mediation which abroad is not shipped any one cubic meter pellet preparations and other timber. The question is not rhetorical.