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13/05/2014

How to Realize Ukrainian Wood Processing Industry Potential?

The answer to this question was pursued by the attendees of the roundtable discussion held April 29, 2014 at the World Bank Country Office in Kyiv.

The participants -- officials of relevant government agencies, parliament members, businesspeople, scientists and experts -- were presented two reports. President of the Association of Furniture and Wood Processing Enterprises of Ukraine MEBELDEREVPROM Serhiy Sahal analyzed the potential of the wood processing segment of the forest sector in Ukraine and the factors that hinder the development of its innovative development. Director of VANESSA Valery Podkorytov proposed priority measures to improve the rules of roundwood trade on the lumber market of Ukraine.

During the discussion, businessmen suggested that a working group be set up under the State Forest Agency of Ukraine (SFA) to address the most pressing issues in lumber trade and supply of raw materials to the industry. In particular, they offered to participate directly in the development of formulas for determining the starting prices of lumber in the formation of auction lots.

Representatives of woodworkers` associations actively called for other measures, too, to improve the rules of roundwood trade in Ukraine. The proposed innovations included:

  • adopting a regulation for holding auctions for the sale of roundwood for exporters
  • enabling consumers to enter into exchange contracts not only for a quarter but for a longer period of time (a year or more)
  • holding auctions for exporters in Kyiv at year-end after domestic auctions.

Among the radical proposals made at the roundtable was the idea of implementing recommendations of the first phase of the FLEG Program and eventually dividing the functions of SFA, which today continues to combine political, supervisory and managerial functions. This can be done through creating, for example, by the example of Poland, a state holding company, with the SFA retaining only the function of coordinating and shaping forest policy. The SFA can act as an intermediary between the business and foresters and avoiding both temptation and accusations of corrupt practices that (justly or not - the question is not for this roundtable) were and continue to be voiced by many participants in forest relations.

Businessmen and experts were in favor of the introduction of e-commerce roundwood trade on the SFA website, holding of auctions for the sale of high-grade lumber directly by forestry enterprises in their warehouses and strengthening of transparency and social control of the forestry sector of Ukraine.

According to them, the implementation of the recommendations of the roundtable and the results of the EU funded FLEG II Program in the practice of SFA and the forestry sector as a whole will improve the situation in the field of lumber trade and reduce corruption risks, especially in outward lumber trade.

Despite disagreement over some issues, all participants agreed that the government should take drastic measures to provide the domestic producer with wood raw material to meet its needs comprehensively and on a first priority basis. After all, this will help revitalize the wood processing sector of Ukraine; broaden the tax base and thus increase tax collection in local and state budgets and improve the investment attractiveness of the wood processing industry.

"On the agenda is an issue of strategic reform of approaches to wood processing and forestry in this country. Separately from each other, they will not survive. There should be no confrontation here," said Yuri Marchuk, country coordinator of FLEG II (ENPI East), deputy head of the State Agricultural Inspectorate of Ukraine.

"We won’t tolerate the approaches the former management of the SFA took to providing resources to Ukrainian wood processing enterprises, that received just criticism," said Deputy Chairman of SFA Vitality Atamanchuk. "Companies operating in Ukraine will have every opportunity to get raw materials. We are open for proposals from businesspeople and the public and are prepared to jointly develop the necessary regulations."



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