Forest Industry of Russia: Smart Innovations and Success Stories (Advances in Sustainability Science and Technology) 9811698600, 9789811698606

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Advances in Sustainability Science and Technology

Sergey V. Zykov Dennis V. Dayneko

Forest Industry of Russia Smart Innovations and Success Stories

Advances in Sustainability Science and Technology Series Editors Robert J. Howlett, Bournemouth University and KES International, Shoreham-by-Sea, UK John Littlewood, School of Art & Design, Cardiff Metropolitan University, Cardiff, UK Lakhmi C. Jain, KES International, Shoreham-by-Sea, UK

The book series aims at bringing together valuable and novel scientific contributions that address the critical issues of renewable energy, sustainable building, sustainable manufacturing, and other sustainability science and technology topics that have an impact in this diverse and fast-changing research community in academia and industry. The areas to be covered are • • • • • • • • • • • • • • • • • • • • •

Climate change and mitigation, atmospheric carbon reduction, global warming Sustainability science, sustainability technologies Sustainable building technologies Intelligent buildings Sustainable energy generation Combined heat and power and district heating systems Control and optimization of renewable energy systems Smart grids and micro grids, local energy markets Smart cities, smart buildings, smart districts, smart countryside Energy and environmental assessment in buildings and cities Sustainable design, innovation and services Sustainable manufacturing processes and technology Sustainable manufacturing systems and enterprises Decision support for sustainability Micro/nanomachining, microelectromechanical machines (MEMS) Sustainable transport, smart vehicles and smart roads Information technology and artificial intelligence applied to sustainability Big data and data analytics applied to sustainability Sustainable food production, sustainable horticulture and agriculture Sustainability of air, water and other natural resources Sustainability policy, shaping the future, the triple bottom line, the circular economy

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Sergey V. Zykov · Dennis V. Dayneko

Forest Industry of Russia Smart Innovations and Success Stories

Sergey V. Zykov Higher School of Economics National Research University Moscow, Russia

Dennis V. Dayneko Irkutsk Scientific Centre Irkutsk National Research Technical University Irkutsk, Russia

ISSN 2662-6829 ISSN 2662-6837 (electronic) Advances in Sustainability Science and Technology ISBN 978-981-16-9860-6 ISBN 978-981-16-9861-3 (eBook) https://doi.org/10.1007/978-981-16-9861-3 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

To God, our teachers, colleagues, and families

Preface

This book investigates the Russian Forest industry specifically focusing on its unique Baikal region famous for its ecology. Being a very old commercial area, this sector essentially contributes not only to major home clients but also to key foreign customers including multinational corporations. Importantly, this industry drives the national economy as it supplies raw timber and wood products to a number of businesses including agriculture, construction, and furniture making, to name a few. Moreover, its impact on the Russian and world ecology is also dramatic as forests are often referred to as the “lungs” of the Earth. Besides, this business is literary “green” due to its huge recreational power, and therefore critically important for the humanity to survive in the current environmental crisis. Another crisis the Russian Forest industry faces is the digital transformation. To manage this critical transformation and remain competitive nationwide and world over, the business has to responsively adjust by immediately adopting innovative strategies, patterns, and practices. Therefore, Chap. 1 of this book discusses theoretical aspects of innovative changes in general and outlines their application scenarios to the Forest industry transformation in particular. Based on the findings of Chap. 1, the next chapter examines the history and prospects of the Russian Forest industry. This analysis of the strong and weak points, together with possible options and threatening factors (SWOT), reveals the challenges of this critically important sector and suggests an innovation-based framework to mitigate the acute digitalization crisis. This SWOT framework identifies these four kinds of systemic pain-point areas of the Russian Forest industry: (i) (ii) (iii) (iv)

Institutional and organizational Technological and productional Natural and environmental Protective and reproductive

The suggested framework is reinforced by an extensive case study of the Baikal region, which is both a mission-critical area for the industry and the homeland of Dr. Dayneko, one of the authors. This large area of over 12,000 square miles or nearly vii

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Preface

32,000 km2 embraces Irkutsk province, Zabaikalsky Krai, and Buryatia. The SWOT analysis approach applied to the facts of this case study identified the three critical challenges in this valuable territory: (i) (ii) (iii)

Supervision Fire protection Recultivation

In digitalizing the Russian Forest industry, one of the recent innovative practices is intensive implementing of unmanned aerial vehicles (UAV) for surveillance and monitoring. Ubiquitous UAV adoption essentially improves forest supervision as it overcomes local crisis events by efficient predicting, preventing, and responding to them. Along with new technology introduction, the chapter suggests further strategic improvements based on carefully selected and thoroughly analyzed case studies of forest industries abroad. The key areas of such SWOT-based analysis are: (i) (ii) (iii)

Process improvement Innovative management Sustainable development

These concise case studies embrace continuous institutional changes in the USA, Canada, China, and a few EU countries such as Austria, Germany, Finland, Norway, Poland, and Sweden, to name a few. All these typically develop and implement their forest policies at the state level. The idea is to determine the recommended principles and best practices for their further implementation in Russia as a part of development strategy for the national forest industry. Based on the outcomes of the two previous chapters, the final ones suggest innovative development framework for the Russian Forest industry. The principles and practices outlined earlier are combined and enhanced by a formal model for the forest industry in terms of its key components and interactions. The ultimate objective of this smart framework is sustainable, innovation-driven development of the entire Russian Forest industry. To form the framework, SWOT analysis of the industry is performed to detect the factors that potentially help and hinder its innovative development. As a result, the key groups of factors affecting sustainable development of the industry are: (i) (ii) (iii) (iv)

Technological Product-based Institutional Innovative

The latter cluster includes entrepreneurial and ecological components. To efficiently manage the industry development crises, the framework developed also requires the methods for:

Preface

(i) (ii) (iii)

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Presentation, e.g., case studies Analysis, e.g., SWOT Evaluation, e.g., cross-sectional regression

Taken together, this set of methods provides an adequate framework to monitor, assess, plan, and improve efficiency of the innovative and structural changes of the forest industry, including its strategic sustainable development. Based on the above ingredients, the approach addresses the digital transformation crisis of the Russian Forest industry in view of its sustainable development. The models cumulatively assess the innovative efficiency; these are based on cross-sectional regression analysis of the data including the expert opinion polls. Finally, the book offers a roadmap of the forest industry institutional improvements. These guidelines stimulating industry innovation activities are framed as a sustainable development program arranged in four sequential phases with certain overlaps (2021–2023, 2022–2024, 2024–2025, and 2025–2026). The authors sincerely hope that their contribution will promote innovative and sustainable development of the Russian Forest industry and support the global environmental progress. Moscow, Russia Irkutsk, Russia

Sergey V. Zykov, Ph.D. Dennis V. Dayneko, Ph.D.

Acknowledgements

We would like to thank the colleagues who essentially contributed to this book and helped us significantly with our efforts to present the institutional structure and innovations of the forest industry of Russia with specific accent on Baikal region as the richest and most prospective forest business area. They have helped us to tailor initially vague ideas and helped with translation, copyediting, proofreading, diagramming, etc. Many of them, being renowned experts in the forestry and forest industry businesses, participated in our questionaries and provided profound feedback. Our special thanks to Profs. Irina Dumova, Nadezhda Kaluzhnova, Vitally Peshkov, Natalya Syssoeva, Dr. Eric G. Gustafson, Dr. Christina Schmullius, Assoc. Prof. Alevtina Dayneko, and Assoc. Prof. Victoria Dayneko, our collaborators in many relevant publications. Some of their findings have been transformed and included into this book as evaluations and recommendations on further improvements of the Russian Forest industry. We would like to thank the Springer Senior Executive Mr. Ashok Kumar, the Springer Senior Editor Mr. Aninda Bose, and the Springer Project Coordinator for Books Production Mr. Ramamoorthy Rajangam, for their continuous availability and prompt assistance. In addition, we would like to express our deep appreciation and sincere gratitude to the Editors-in-Chief of the Springer Series in Smart Innovation, Systems and Technologies, Profs. Lakhmi C. Jain, and Robert J. Howlett, for their cooperative efforts in supporting our initiatives.

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Introduction. Relevance of the Research Topic

Today, the economy is undergoing global changes due to the focus on innovation development. This is the period of new relations formation based on innovations, both in the economic and socio-cultural sphere, which eventually form stable patterns of behavior. We are talking about institutional factors, whose impact on economic development is not disputed today. However, it would be incorrect to discuss only general institutional conditions for development, without revealing their specifics for a particular industry. The relevance of the study of institutional aspects of innovative development of the forest industry is substantiated by the urgent need to improve its efficiency. The processes of reforms and markets globalization resulted in the squeezing out of inefficient domestic producers from traditional domestic and world markets, which also relates to the forest industry of Russia. The statistics indicate a decrease in the efficiency of functioning of the timber industry. The share of unprofitable enterprises is growing, the level of tax payments is decreasing, and the depreciation of fixed assets in the industry is increasing. At the same time, there is a good resource potential, scientific researches, and innovative projects that can serve as the basis for innovative development of the industry under appropriate institutional conditions. The study of innovations and institutional changes in the forest industry is particularly relevant due to the special role of this industry in the national economy. Russia is the world’s leading producer of lumber. The prospects for international cooperation in this area are expanding. The ecological importance of the forest resources related to the aggravation of global warming problems is increasing. The forest resources are decreasing in international consumption. The problems of forest fires, restoration, and conservation and other aspects of forest management are very acute and on the agenda in the forest regions of Russia. The changes in the forest industry are determined by forest policy. The existing institutional structure of forest industry for many years did not allow the forest business to function effectively and did not contribute to the development of innovative activities in this area. Over the years of reforms, the forest management system has experienced a significant transformation, what is associated with issues of ownership

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Introduction. Relevance of the Research Topic

and proper management, organizational restructuring, and changes in forest legislation. In order to stimulate the development of innovations and effective entrepreneurship in the forest sector, the whole system of forest policy measures is required, which assumes implementation of a thorough analysis of the institutional environment of the industry and the identification of the necessary institutional changes specific to this industry. Institutional transformations are innovations that are influenced by various factors during their implementation. These issues, study of institutional transformations as of innovations and evaluation of the effectiveness of these innovations, have not been sufficiently studied yet.

Contents

1 Theoretical Aspects of Innovation Development and Institutional Transformations in the Forest Industry . . . . . . . . . . . 1.1 Concept, Types, Classification of Innovations and Elements of the Innovation Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 Institutions and Institutional Transformations as the Form of Innovative Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 7 13

2 The Analysis of the Russian Forest Industry . . . . . . . . . . . . . . . . . . . . . . 17 2.1 Problems of the Forest Industry and Institutional Framework for Its Innovative Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 2.1.1 Production and Technological Problems . . . . . . . . . . . . . . . . . 24 2.1.2 Nature and Ecological Problems . . . . . . . . . . . . . . . . . . . . . . . 25 2.1.3 Institutional and Organizational Problems . . . . . . . . . . . . . . . 25 2.1.4 The Forest Protection and Reproduction . . . . . . . . . . . . . . . . . 28 2.2 A Case Study of Baikal Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 2.2.1 The Analysis of the Forest Industry in Irkutsk Province . . . . 39 2.2.2 The Analysis of the Forest Industry in Buryatia . . . . . . . . . . . 72 2.2.3 Enterprises of the Forest Industry in Zabaikalsky Krai . . . . . 78 2.2.4 SWOT Analysis of Strengths and Weaknesses of the Forest Industry Enterprises in Baikal Region . . . . . . . 81 2.3 The Use of Unmanned Aerial Systems in the Forest Industry in Russia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 2.4 The Foreign Experience of the Forest Industry Management and Innovative Development Considering Institutional Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 3 Development of the Theoretical Model of the Forest Industry Innovation System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 3.1 Forest Industry Innovation System, Its Components and Interactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 xv

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Contents

3.2 The Problem of Evaluating Innovations and Institutional Transformations in the Forest Industry: Analysis and Development of Evaluation Methods . . . . . . . . . . . . . . . . . . . . . . 3.3 Modern Methods of Institutions and Institutional Changes Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3.1 Evaluation of Innovations Effectiveness in the Forest Industry of Russia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4 Development of the Forest Industry Innovative Transformations Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4.1 Stage 1: 2021–2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4.2 Stage 2: 2022–2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4.3 Stage 3: 2024–2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4.4 Stage 4: 2025–2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5 Development of Methods for Stimulating Innovation Activity in the Management of Enterprises in the Forest Industry . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

115 134 143 146 146 148 155 159 173 178

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 Appendix A: Institutional Changes in the Organizational Structure . . . . 189 Appendix B: Wood Products Production in Irkutsk Province . . . . . . . . . . 191 Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229

About the Authors

Dr. Sergey V. Zykov completed his M.Sc. and Ph.D. in Computer Science from the MEPHI University and received his Dr. habil. in the same field from the the USATU University in years 1994, 2000 and 2017 respectively. Presently, Dr. Zykov is working as Professor in the HSE University, Russia. He is Member of many professional organisations like IWA, IIIS, and KES Intl. He is Member of many reputed journal boards—International Journal of Knowledge-Based and Intelligent Engineering Systems, and Intelligent Decision Technologies. He has published 05 books including 04 monographs by Springer. Dennis V. Dayneko has Master’s degree in Urban Planning (Restoration and Reconstruction), and his Ph.D. in Innovative Economics (2015). Currently, Dennis is Senior Researcher at the Irkutsk Scientific Center of the Siberian Branch of the Russian Academy of Science. He teaches as Associate Professor at the Irkutsk National Research Technical University too. Dennis is Member of the New Economic Association (Russia), Free Economic Society of Russia, SIOE, and other organizations. He has over 90 publication, including 12 indexed by Scopus and Web of Science.

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Acronyms and Abbreviations

AIC Avialesokhrana CIA CIS CMER CUUF EIS EPA EPSIS FAO FBA FC FChS FFA (Rosleskhoz) FGIS LC FSC FSF GDP GIS GPP IADF ICC ILO IPRI IRIS ISC IUS JSC LesEGAIS

Agro-industrial complex Aviation forest guard (airborne forest fire service) Comparative Institutional Analysis Commonwealth of Independent States Complex of measures for extended reproduction Continuous, non-destructive use of forests European Innovation Scoreboard Environmental Protection Agency European Public Sector Innovation Scoreboard Food and Agriculture Organization Federal budgetary agency Forest complex Fire Chemical Stations Federal Forestry Agency Federal State Information System for the Forest Complex Forest Stewardship Council Moisture-resistant large-size birch plywood brand Gross domestic product Geographic information systems Gross primary productivity Institutional analysis development framework Industrial and commercial combine International Labour Organization International Property Rights Index Irkutsk Regional Information System for environmental protection Irkutsk Scientific Center Innovation Union Scoreboard Joint Stock Company Unified state automated information system for accounting of the wood and transactions with it xix

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LI LIC LLC MDF MNR NPP NRCS OECD OSB P&PP PASW PEFC PIIT PPI PPP PRS R&D RF RIS RNCFC Rosleshoz Rosstat RSFMM SB RAS SIFIBR SPSS SWPI UAV UAVS USDA FS

Acronyms and Abbreviations

Logging industry Lumber Industry Complex Limited liability company Medium-density fiberboards Ministry of Natural Resources Net Primary Productivity Natural resources conservation service Organization for economic cooperation and development Oriented strand boards Pulp and Paper Plant Predictive Analytics SoftWare Programme for the Endorsement of Forest Certification Program of innovative and institutional transformations Pulp and paper industry Public private partnerships Political risk services Research and development Russian Federation Regional Innovation Scoreboard Russian National Council for Forest Certification Russian Federal Forestry Agency Russian Statistics Agency Regional system of forest management measures Siberian Branch of the Russian Academy of Science Institute of plant physiology and biochemistry Statistical Package for the Social Sciences system Sawmill and wood processing industry Unmanned aerial vehicles Unmanned aerial systems Forest Service of the Department of Agriculture

Chapter 1

Theoretical Aspects of Innovation Development and Institutional Transformations in the Forest Industry

1.1 Concept, Types, Classification of Innovations and Elements of the Innovation Process The term “innovation” was first introduced back in 1912 by the economist J. Schumpeter in his work Theory of Economic Development, where he defines innovation as a scientifically based combination of new production factors, motivated by the entrepreneurial spirit [1]. The main feature of innovation is transformation, and the specific function of innovation is the function of change. According to J. Schumpeter, innovation appears: (1) when a new product and/or service, previously unknown to the consumer market, is introduced; (2) a new production method is introduced; (3) a new market is being searched for; (4) new raw materials are used; (5) a new organizational structure is created. Later, in the 1930s, J. Schumpeter defined the concept of innovation as a change to use new production assets, new types of goods and means in markets, as well as forms of organization in an industry. The innovation is considered by him as a process in which innovation develops over time and has corresponding stages [1]. Group [2] and Tigre [3] note the merit of J. Schumpeter’s definition of innovation as the main driving force of the capitalist system due to the possibility of creating new markets for firms. Thanks To J. Schumpeter, who discovered various facets of innovation, they have started to interpret it as a process stimulated by firms [1, 4]. The concept of innovation in the modern world is interpreted by scientists in different ways, depending on the context of the object and subject of research. F. Nixon defined that innovation is a combination of various technical, production and commercial activities that result in the appearance of new or improved production processes and equipment in the market [5]. B. Twiss interprets innovation as the process in which an invention or new idea acquires economic meaning [6]. According to another researcher and economist, B. Santo, innovation is a socio-technical and economic process that leads to the creation of the best, in terms of their properties, goods and technologies, by means of the practical use of innovations and inventions, © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 S. V. Zykov and D. V. Dayneko, Forest Industry of Russia, Advances in Sustainability Science and Technology, https://doi.org/10.1007/978-981-16-9861-3_1

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1 Theoretical Aspects of Innovation Development …

and if the innovation is focused on the profit or economic benefit, than its appearance in the market can result in additional income or excess profit [7]. There is a widespread approach that interprets innovation as “the result of a creative process or of scientific researches, embodied in the form of new or improved products sold in the market, or a practical technological process, or in a new approach to services” [8]. This definition is contained in the documents of the OECD countries “Frascati Manual” and “Oslo Manual” and is understood as a kind of international standard for innovation. Most scientists and economists adhere to this understanding of innovations, such as Fatkhutdinov [9], Zavlin [10], Sukhovey [11], Balabanov [12] and others. Practically the same definition of innovation is given in The Concept of Innovation Policy of the Russian Federation for 1998–2000, as well as in the regulatory documents of the US Department of Defense [13]. In this approach, the concept of “innovation” is equated to the concept of “novation” (“novelty”) and differs significantly from the definition provided by J. Schumpeter. Sokolov and others [14] interpret the concept of innovation (novation) as the result of creating and mastering a fundamentally new (modified) means that meets specific social needs and gives a number of effects. Another researcher, R. A. Fatkhutdinov considers innovation as a result of a novelty introduction in order to change the object managed and to acquire various types of effects [9]. In our expert opinion, it is very important to note that innovation is not just the final result of implementing various novations, but a process focused on results also, which can be expressed in new products, new production, transport and management systems, the development of new sources of raw materials supply and new sales markets, so that these innovations will provide financial results. The understanding of innovation as a process requires understanding the elements of this process, which can be influenced to stimulate innovation. We have also noted the correlation of the concepts “novelty”, “novation”, “pioneer work” and “innovation”. In practice, they often coincide, but there are differences among them too. A novelty is a new invention, a new order or method of operation. A novation means that a novelty is being used. When a novelty is accepted for implementation, it acquires a new quality and becomes an innovation [15]. In general, innovation means the successful implementation of the novelty. J. Schumpeter defines innovation much broadly, as the continuous application of new combinations of means of production. The transition of the novelty into the innovation is the basis of the innovation process [16]. Innovation as a process is studied in a number of sources. The innovation process is defined as the period from the creation of an invention to its commercialization. The innovation process is always unifying for science, technology and economy, as well as for entrepreneurship and management, covering the entire chain of relations from production to exchange and consumption [17]. Note that even technological innovations are considered as processes. So, R. R. Nelson and S. J. Winter define technological innovation, in their institutional analysis, as a non-trivial change in products or processes that had no previous experience, [18]. Thus, another approach to innovations is to understand innovation as a process, which is important for the business context of creating innovation.

1.1 Concept, Types, Classification of Innovations …

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Innovation processes combine scientific and technical, production, and marketing activities of innovative enterprises to meet the needs and demand of the market. These processes operate within the framework of the innovation system, which will be discussed later. So, innovations are related both to the result of research and production, as well as commercial activities, and to the process of producing this result itself. To characterize innovation as a process, the term “innovation activity” is usually used. It should be clarified that the concept of “innovation” includes not just an activity and/or its product in the form of goods, services and technologies, but also the result of applying the novelty. The result of implementation are changes in society, which can be changes in the structure of needs, changes in life habits and values (for example, a change in attitude to time or to production wastes, which many now consider as important economic resources). As a result, there are changes in the structure of production and shifts in the economic balance. Any innovation activity is the activity of innovative enterprises to create, distribute, and use innovations, and can be allocated among few economic entities, where a particular entity performs one or another type of innovation activity: creation, use, and other. Another aspect of innovation analysis is the dynamic and static aspect, i.e. innovation is presented as the final result of scientific and production activities, which are characterized by scientific and technical novelty, industrial applicability and the possibility to commercialize. In the dynamic aspect, innovation is the process of novation development and further use. N. Kalyuzhnova substantiates that innovation is the process of dialogic interaction, in which new opportunities and ways of their application are discovered [19, 20]. Taking into account the modern features and needs of the market economy, the modern definition of innovation appeared, defined as a result of innovative entrepreneurship to create a new product based on improving the ways and opportunities to transform production cycles in order to make a profit. To study the object of our research, which are innovations in the Forest industry, the concept of innovations related to the use of natural resources, which are ecoinnovations, is important. Eco-innovation is an abbreviated term standing for “ecological innovation”. Its use is aimed to associate the innovation process with issues related to the environment, in relation with the commonality with the concept of innovation [21]. Since the environmental crisis, numerous investments in innovations have been associated with environmental requirements, i.e. the need to develop products or processes, which impact on the environment is minimized or eliminated. Various terminology is used to define innovations aimed at stopping or minimizing human impact on the environment due to their activities: environmental Innovation, ecoinnovation [22], “clean” innovation [23], “green” innovation [24] and sustainable innovation [25], ecological technology or green technology [26]. The term “eco-innovation” will be used in this study, the way it is presented in specialized literature and reports covering the entire range of variations provided, described in other sources. The term “eco-innovation” was proposed in the mid-1990s [27], and its first definition was presented in the work of the famous economist P. James (1997) [28].

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Eco-innovation is associated with a new product and/or process that creates value for the organization, as well as has a lower impact on the environment. A. Reid and M. Miedzinski define eco-innovation in the following way: “Eco-innovation means the creation of a previously non-existent and competitively priced product, process, system, service, and procedure that can meet human needs and bring quality of life to all people with minimal consumption of natural resources (including energy and space) throughout the entire life cycle for each unit of output and with minimal emission of toxic substances” [29]. The Organization for economic cooperation and development (OECD) defines eco-innovation as an activity that produces a product or service to identify, prevent, limit, minimize or correct damage to the environment, water, air, soil, and problems related to the pollutants emission, noise, and ecosystems. It includes technologies, products and services that reduce the risks associated with the environment and minimize pollution [30]. In all these cases, eco-innovation is an “eco-efficient” innovation resulting through the use or development of technologies that minimize the negative impact on the environment. This condition is significant and as a result, the conservation of nonrenewable natural resources, water, soil and atmosphere is achieved [25]. Therefore, any work on an eco-innovation should cover the entire life cycle of products from the initial source of raw materials to the destination [31]. The concept of innovation is closely related to the concept of productivity. Throughout the era of industrialization and up to our days, business has paid attention to scalable productivity. From a business perspective, innovations provide an increase in productivity primarily through scaling, producing large volumes to increase margins and reduce costs. Today, it is necessary to maintain the balance between productivity and the ability to learn and implement innovations. This is especially important during difficult economic times or unstable geopolitical relations, which are difficult to adapt to. The great globalization of business has happened during the last few decades, which has led to an exponential level of change. New IT technologies have changed the way we do business and trade forever. Companies that have failed to implement innovative processes in their core businesses have found themselves increasingly moving away from the concept of sustainability and are losing many opportunities to meet the needs of their customers. These companies thrive when the situation is stable, but a careful balance between innovation and productivity is required. Institutional innovation plays an important role in ensuring productivity. “Institutional innovations”, i.e. changes in institutions (rules, norms, mechanisms for their provision) are the main type of innovations. Institutional innovation, as a such, allows organizations to rebuild themselves to scale learning processes and generate better innovations at other levels, including products, services, business processes, and management systems to better adapt to market conditions [32]. It gives an organization the ability to change processes and adapt to market conditions. The possibility of institutional innovation allows companies to adopt a more innovative worldview that will help them to get adapted to this changing world. With this

1.1 Concept, Types, Classification of Innovations …

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opportunity even more open, companies focused on scaled productivity can rely on institutional innovations as a means to implement other innovations. Since the attribute of institutions is learning, institutional innovations allow organizations to generate the necessary innovations in products, services, business structures, and management hierarchies. The problem of institutional innovations and their significance in revealing the mechanism of institutional changes is reflected in the theory of “induced institutional innovations” By Rutten [33] and Y. Khayyami, in the “distributive” theory of institutional changes by G. Laibkep and in various concepts of such researchers as Knight [34], North [35], Tambovtsev [36], Oleynik [37] and others. The institutional context of innovation is considered in the works of researchers such as Schumpeter [38], K. Freeman, F. Hayek, and others [39]. Most researches on innovation suggest that innovation is a panacea for a number of economic and social problems. The literature on innovation assumes that innovations should contribute to economic growth, making the country more competitive, and create new jobs [40]. Innovation policy becomes the main political doctrine of economic policy. There is an increasing importance of innovation as a driving force of competitiveness observed. Let’s study the types of innovations to determine the place and role of institutional innovations. Since innovations can be combined according to a great variety of grounds, a fairly significant number of innovation groups is proposed, which number reaches 25 [41]. As the main features of classification can be used the following: the degree of novelty or radicalism; scope of application; content; purpose; scale and degree of impact, effectiveness; and features of use; role in the reproduction process; level of monitoring, regulation and management; specifics of public goals; sources of manifestation; features of innovation and others. Based on the innovation management in production grounds, we can distinguish commodity-product, technological-technical and organizational-managerial innovations. Commodity-product innovations refer to changes made to a manufactured good to meet new needs and reduce costs. Technological innovations are changes in engineering and technology of production and consumption of goods. Organizational and managerial innovations are associated with organizational changes in production. These include, for example, updating the organization structure, increasing production volumes, new specialization of production processes, new interaction of forms of production organization, new methods of production organization, updating the production and organizational structure of the enterprise. The novations in management refer to any purposeful change in management technology, aimed at replacing the entire management mechanism, as well as of its components in order to speed up, facilitate or perform tasks. Management novations for the object of influence are divided into two groups: those that affect the production and implementation process and those that affect the management process. Managerial innovations differ from activities in the production sphere. The use of new techniques and technologies aimed directly to change the processes of material production and product realization is characterized by the following important features: (1) assessment of changes in production and consumption processes via an

6

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increase or decrease in material, financial and labor costs; (2) determining (in most cases) the causal relationship between technological progress measures and changes in production costs; (3) the immediate onset of the expected effect, if the scientific and technical event has passed the implementation stage. Innovations in the field of management have their own specifics. It is worth noting that material processes are also affected by innovations, but not so clearly and unambiguously, though the above features do not apply in this area. In fact, management innovations are close to institutional ones, since management creates rules and regulations that work in certain structures. There is a widespread division of innovations by the degree of novelty into radical and improving ones. It is related to the theory of cyclical systems development, which considers revolutionary innovations that implement major inventions arising and acting within existing production systems. Innovations are also divided into two groups according to their scale of distribution: local and global. Local innovations have almost no significant impact on industries, organizations, and social conditions, but they are essential for the survival of any enterprise. As a rule, they are associated with the appearance of new machines and equipment, improvement of their parameters or modifications, as well as with the improvement of technological processes and production cycles. Global changes are the basis of revolutionary transformations. As a result of such innovations, significant qualitative changes occur both in the means of production and in consumer products. In fact, this is a transition to new technological and organizational innovations that spread evolutionarily. A very complete classification of innovations was proposed by Russian scientists Prigozhin and Yershov [42]. They have distinguished the following groups of innovations according to their characteristics: (1) by the level of development and application: State, regional and municipal, industrial, corporate; (2) by the field of innovation changes: institutional and managerial, technological, commodity-product, mixed; (3) by the impact on the production process: institutional (organizational, social, managerial changes), production (changes in the production process); (4) degree of substitution: improving and radical; (5) extent of change: local and global; (6) by prevalence: diffuse and isolated; (7) by volume: system and point; (8) by the implementation stages of innovations: institutional (organizational and managerial), technological, research and design, production, service and sales; (9) structural characteristics: input and output, as well as internal; (10) relative to the previous state: repealing, replacing, opening and retro innovation. It is worth to stress that in any classification there is a group of institutional innovations associated with organizational, social, and managerial changes. Hence institutional innovations play crucial role in the development of any industry managed. Let’s now consider eco-innovations in terms the presence of an institutional element. There is a classification of eco-innovation by G. Haber and A. Arundel [43], which is highlighted in the following types: (1) eco-innovation in the lifecycle, which is related to creation of a new product and to a significant improvement at any stage of the life cycle; (2) product eco-innovation, which is the creation of a new

1.1 Concept, Types, Classification of Innovations …

7

and/or improvement of an existing product to minimize global impact on the environment; (3) eco-innovation in the process, which is aimed to reduce the consumption of water, energy, raw materials, emissions; (4) organizational eco-innovation, which includes the use of special environmental management tools, such as the implementation of ISO 14000 f standards or voluntary agreements (for example, the Global reporting Initiative); (5) eco-innovation in marketing, which is the use of new marketing methods that contain significant changes in product design, packaging, product promotion, instructions and training for product use, and other; (6) incremental eco-innovation, which are changes in technology, its improvement, which contributes to improving the efficiency of resource use. M. Andersen identified the other five categories of eco-innovation classification [22]: (1) Supplemental eco-innovation is aimed at products in order to make them more eco-efficient; (2) Integrated eco-innovation-combines efforts in the production process and in products with the least impact on the environment possible; (3) Alternative product is radical innovations to create a new product based on clean technology; (4) Macro-organizational corresponds to the fourth type of classification presented above; (5) General-purpose innovations change the structure of the economy, such as, for example, sugarcane ethanol production. It can be concluded that institutional innovations are reflected in organizational eco-innovations that introduce new standards of activity, reporting, and interaction of participants, which thus form new rules and, consequently, new models of behavior. At the same time, the wide spread of eco-innovations is possible only if the institutional terms and conditions change in general. Figure 1.1 shows the evolution of the eco-innovation approach proposed by researcher Machiba [44]. If first stages of eco-innovations are associated with modifications in products and processes with cleaner technologies, then the subsequent more advanced stage requires better competence of managers. Implementation of environment oriented industries demands for developed mature institutional environment in the country [45]. A more mature institutional environment should include a developed environmental education, integration of the environmental approach into various spheres of social production and life activity of the society, and social respect to activities based on an eco-innovation approach. Thus, the development of the institutional environment is a prerequisite for strengthening of the eco-innovation approach in social production.

1.2 Institutions and Institutional Transformations as the Form of Innovative Activity The purpose of this section is to define the concepts of institution, institutional structure, institutional relations, institutional changes, disclosure of structural components, levels, as well as tools and methods of institutional transformations.

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Closed Cycle production Marketing methods

Eco Innovative impact

Life cycle Ecoefficiency

Processes

Technological

Goals of eco-innovation

Organizations

Non technological

Industrial ecology

Clean Production Products

Emissions control Modification

Reconstruction

Alternatives

Creation

Eco-innovation mechanisms Fig. 1.1 Goals and mechanisms of eco-innovations

Let’s study the concept of the institution in more detail. Institutions can be considered, on the one hand, as a set of customs and mores, norms, rules of behavior, political and economic rules of society, fixed in legislation, regulations and instructions. The most frequently quoted definition is by D. North: institutions are the “rules of the game” in any society, the restrictive framework that organizes relationships between people, reduces the uncertainty of these relationships, and brings order to everyday life [35]. On the other hand, it is the mechanisms that have been established in the country and region to coordinate political and economic processes, such as political elections and/or markets. The modern economic science defines the institution as a stable complex of role relationships and behavioral features of social and economic agents [46]. J. Knight believes that institutions are a set of rules that structure social relationships in a special way, and that all members of a given community should know about them [34]. Socio-economic institutions also arise when individual habits are adapted by society and/or a group. Institutionalists define institutions not in the narrow sense of formal organizations, but in the broader context of socially determined behavior as “a common and unchangeable way of thinking or acting that is entrenched in the habits of a group or in the customs of a people” [47]. Institutions can be considered as social capital, which can change through depreciation and new investments.

1.2 Institutions and Institutional Transformations …

9

Institutions are designed to organize mutual activities of people in order to meet certain social needs. Institutions influence economic activity by determining transformational (production) and transaction costs associated with the collection and processing of information, negotiations and decision-making, costs of monitoring and legal protection of contract performance [48]. Institutions include both formal rules and informal restrictions, such as generally accepted norms of behavior, agreements reached, internal restrictions on activities, and certain characteristics of enforcement of both. Formal institutions are often developed to serve the interests of those who control institutional changes in a market economy. Since we are going to talk about institutional transformations, we will focus on the types of institutions that are reflected in different typologies, made up of different characteristics. There are the following types of typologies of institutions distinguished: 1.

2.

3.

The typology of institutions, depending on their functional role, includes two types of institutions: “system” and “local-organizational”. System (or external) institutions are those that define the type of economic order, i.e. the type of economic system. Such institutions set the rules of economic activity. They include not only economic rules, but also political and ethical norms, i.e. institutions required for the effective functioning of the entire economic system. As an example of system institutions, we can cite regulatory and legal support, norms of business ethics, etc. [49]. System-forming institutions include all types of institutions that arise in the process of developing a market economy that provide the possibility of institutions functioning of the highest order. These institutions include money, the financial system, and so on. Local organizational (internal) institutions are institutions that define, for example, interactions in informal institutions such as transactions and contractual obligations, presented both in the open market and within organizational structures. These are also institutions such as stock and commodity exchanges, banks, and firms. They are developed not only to implement transactions between various economic entities, but also to reduce the degree of uncertainty and risk, reduce transaction costs. The formal and informal institutions are distinguished according to the degree of formalization of rules and regulations. Though, there is a disagreement about the composition of formal and informal institutions. In this paper we differentiate formal institutions, which include laws, charters, administrative rules, regulations, and organizational and legal structures, and informal institutions, which include contracts, transactions, rules of conduct, customs, ethical and ideological norms. Social, economic, and political institutions are distinguished according to the scope of action, which are combined in the “concept of institutional matrices”. The “institutional matrix” refers to a stable, historically established system of basic institutions that regulate the interrelated functioning of the main social subsystems: economic, political, and ideological. The institutions, that form

10

4. 5.

1 Theoretical Aspects of Innovation Development …

the matrix, form a sustainable structure, that ensures the integrity of society. The institutional matrix is reproduced together with the society and sets the boundaries, nature and direction of socio-economic development. According to the specificity of the scope of action, there are general economic, industrial, regional, and local institutions. According to the degree and effectiveness of enforcement of institutional rules and regulations, there are strict, for example, the judicial and clan systems, and soft, for example, the tax system existing in a number of countries.

To define the concept of “institutional structure”, the concept of “institutional agreement” should be introduced first. The term “institutional agreement” refers to a specific set of behavioral rules that govern behavior under specific conditions in a given field of activity. “Institutional structure”, as defined by D. North, refers to the entire set of institutional agreements in the economy, including organizations, legislature, customs, and ideology. In this paper, we include organizations in the concept of institutional structure as a type of institutional agreement. The term “institutional change” is usually used in relation to changes in a particular institutional agreement, or sometimes to changes in the entire institutional structure [50]. The relationship between institutions, institutional agreements, and institutional structure is shown in Fig. 1.2. It is the institutional structure that determines the type of economic structure of the economy and the effectiveness of individual industries in particular. The development of the institutional system, its flexibility and ability to respond to evolutionary changes significantly contributes to the development of both the economy and society as a whole, as well as the industry and individual enterprises, and directs it, creates favorable conditions for the formation of new enterprises. Now, let’s focus on the content of the institutional structure, which is required to determine possible institutional changes in the industry and let’s present the most complete list of rights, rules and procedures that make up the institutional structure specific to a particular sector of the economy: Fig. 1.2 The relationship among the basic concepts of institutional economics Instuonal Changes

Instuon

Instuonal agreement

Instuonal structure

1.2 Institutions and Institutional Transformations …

1.

2. 3. 4. 5. 6.

7. 8. 9.

10.

11

The institution of ownership is the most important category of social institutions for so-called resource regimes, i.e. based on the dominance of natural resources. The property rights for natural resources always include restrictions of their use by owners, and there is a tendency to expand such restrictions under modern conditions [51]. Contractual relations and the contracting method [38]. Investment institutions (banks, insurance companies, funds, etc.). The regulatory and legal framework for the Forest industry is one of the most important institutions. The organizational structure of the industry as a whole and the organizational structure of individual enterprises. Information support for the industry and organizations which activities are directed at providing enterprises and administrative structures with the necessary information about the activities and prospects of the industry, i.e. providing information support to interested participants in economic and administrative relations. Institutions that ensure the development, implementation and realization of regulatory documents. Institutions that provide professional training and education for personnel involved in this industry. Among the informal institutions that support industrial enterprises, social norms such as the ability to cooperate, consciously obey, take initiative, keep discipline, behave purposefully, and so on are important. Alternative institutions. This is a separate category of informal and often illegal entities, often referred to as “roofs” (protection rackets) and “gangs” [52].

An important concept of institutional structure is “institutional relations”, which had been an independent issue to study for several decades. This concept was not always distinguished. First, scientists identified the presence of various noneconomic mechanisms in the structure of economic relations. Further, many researchers have concluded that economic relations are a set of methods and forms of management and impact on production. The next stage was an attempt to separate institutional relations from economic relations in a methodological way. At the same time, each business sector developed its own specific relationships in the process of resolving contradictions that arise among different stakeholders. Today, we can characterize institutional relations as a special sphere of interaction and resolution of contradictions that arise regarding the distribution of responsibilities and the assignment of benefits resulting from economic activities. Institutional relations have two common characteristics: (1) institutional, which is manifested through a system of norms, restrictions and rules; (2) economic, since institutional relations are a structural component of economic relations. The need to study institutional relations is substantiated by the fact that there is a question of strengthening institutions in industry systems and in activities of economic entities. The correct institutional relations, which are a functional subsystem and a corresponding section of economic relations, determine and create

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conditions for stable work of economic entities in a given industry. At the same time, they consolidate the emerging economic relations by law and contribute to the effective implementation of the goals and objectives set by economic relations. Institutional relations are an integral structural section of economic relations, including intra-industry ones, which are based on horizontal and vertical management structures of enterprises in a given industry to ensure their effective operation and form an effective relationship within the entire economic system. The approaches to the analysis of institutional relationships as the existing phenomenon of economic reality are presented in the context of research in the following areas: organization theory, which assumes that decisions are the result of a choice influenced by the prevailing organization of rules and regulations; well-known theory of social choice, which actually indicates the necessity of turning informal rules into formal; the neo-institutional theory, focusing on the role of routines in the institutionalization of interacting economic agents; the new institutional theory, which states the necessity of an institutional mechanism formation that ensures the transfer of rules in the organization. To determine the composition of institutional relations, we should focus on the ratio of institutions and organizations. In our study, we differentiate these concepts. Any institution, being a system of relations that regulate the interaction of economic agents based on the limitations of their activities, implements its influence through organizations. The organization, in turn, acts as an association of economic agents. Moreover, it is through organizations and in organizations that the institutions themselves are implemented and modified. Organizations facilitate the adaptation of norms and rules, development and fixing of behavioral patterns through communication with the environment, and promotion of norms, values, functions, and services offered by new institutions. The organization in our case is the subject of the institutional mechanism. The flexibility, inherent in organizations that are able to adapt to changes in the environment and have to adapt the behavior of economic actors, creates the basis for the transformation of institutions in the medium and long terms. The organizations themselves, as noted by D. North, change institutions as they get developed [35]. Any deviations from the established norms and rules, being a reflection of the interests of certain social groups, can change the content of the institution, by modifying or transforming the restrictions and preferences of participants in economic relations. Any economic entity, that joins an organization, gets access to information that used to be previously unavailable to him/her. Participation in the activities of different organizations (“co-ownership”, ownership of shares, other participation systems) provides an individual with access to different institutional systems that increase the degree of optimality of his/her choice and reduce the risk of uncertainty, and helps to obtain information about competitors. It is emphasized that there is a feedback channel through which the subjects of institutional relations adjust and create new institutional parameters of management, provide the possibility of interaction of participants for the production of goods and services. An organization as a subject of institutional relations performs a number of functions and acts as a means of institutionalization of economic relations among subjects;

1.2 Institutions and Institutional Transformations …

13

as a condition for the effective implementation of formal and informal institutions in economic activity; a source of capitalization and a channel for transmitting institutional transformations to the level of the institutions themselves. Hence, changes in institutions can begin with changes in organizations, including public organizations and private enterprises. Now, based on the theoretical constructions considered, we will focus on the issues of institutional changes, their occurrence, dynamics and impact on the course of economic processes. Institutional changes, i.e. institutional transformations, are changes to a set of rules. A rule change is a change in one or more of its components [53]. A rule change is a change in the content of the rule components that allow individuals to make decisions about their actions. In institutional changes, a change in the rules may apply not only to the addressees, but also to the guarantors of the institution, i.e. it also affects the mechanism for enforcing compliance with the norm. Institutional change is related to the concept of institutional innovation in the following way. When we talk about an institutional innovation we mean the emergence of new forms in the system of interaction of agents or recombination of elements of existing forms that cause significant changes in the status and functions of an institution or institutional structure as a whole, which make a certain private, collective or public benefit. At the same time, the obtaining of such benefits by economic agents, as the practice shows, does not necessarily imply the receipt of public benefits. Institutional transformation is an institutional innovation that benefits both economic agents and society as a whole. In order to characterize institutional innovations as institutional transformations, they (the innovations) must meet the following requirements: (1) subjectivity and regularity of institutional changes, which are the basis of transformations (who, in whose interests, and how has implemented innovations); (2) fixation of significant results of institutional changes in terms of private, collective, and public benefits resulting from institutional innovations and their correlation; (3) the possibility of institutional innovations competition. Of particular interest in this study of innovation are institutional transformations in the organizational structure. Organizational forms of innovation are, for example, engineering firms, venture firms, consortia, business incubators, financial and industrial groups and holdings. Table A.1 in Appendix A shows the advantages and disadvantages of large and small firms in mastering innovations both for the entire industry and for individual enterprises.

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4. Information about the situation in the Lumber industry complex of the Zabaykalsky krai in 2016, Ministry of Nature resources and Industrial policy of the Zabaykalsky krai. http://minppip.zaba˘ikalcki˘ikpa˘i.pf/punkty_priema_i_otgruzki_drevesiny/nez akonka.html. Last accessed 2 Nov 2020 5. Nixon, F.: Innovation Management. Moscow, Economics (2002) 6. Twiss, B.: Management of Scientific and Technical Innovations. Moscow, Economica (1989) 7. Santo, B.: Innovation of Economic Development. Moscow, Progress (1990) 8. Statistics of science and innovation. Quick terminology dictionary / edited by L. M. Gokhberg. – Moscow: Centre for science research and statistics, 1996. 9. Fatkhutdinov, R.A.: Innovative Management: Textbook. Sankt Petersburg, Peter-Print (2005) 10. Zavlin, P.N.: Innovations in the market economy. Gumanitarnie nauki 3, 3–10 (1997) 11. Perevalov, Y.V.: Innovation policy in the region: organizational and legal aspects. In: Perevalov, Y.V., Golova, I.M., Sukhovey, A.F. (eds.) Ekaterinburg, EI UDRAS Publishing House (2006) 12. Balabanov, I.T.: Innovative Management: Textbook. Sankt-Petersburg, Peter (2001) 13. Leontiev, V.F.: The role of innovative technologies in ensuring the quality of products. Probl. Forecast. 1, 15–19 (2001) 14. Sokolov, D.V.: Prerequisites for analysis and formation of innovative policy. Sokolov, D.B., Titov, A.B., Shabanova, M.M. (eds.) Saint Petersburg, SPSUU Publishing House (1997) 15. Kruglova, N.Y.: Innovative Management: Textbook, 2nd edn. Moscow, RDL (2001) 16. Kovalenko, G.: Russian entrepreneurs in innovative business. Russ. Econ. J. 4, 110–112 (1997) 17. Gracheva, M.V.: Innovative entrepreneurship, its risks and security. In: Gracheva, M.V., Kulagin, A.S., Simaranov, S.Y. (eds.) Innovations, vol. 1, pp. 59–64 (2002) 18. Nelson, R.R.: Evolutionary theory of economic changes. In: Nelson, R.R., Winter, S.J. (eds.) Moscow, Delo (2002) 19. Kalyuzhnova, N.Y.: Institutional Economics: General course: studies manual. Kalyuzhnova, N.Y., Dolgov, Y.V., Osipov, M.I. (eds.) Irkutsk, ISU Publishing House (2012) 20. Kalyuzhnova, N.Y.: Institutions of regional development and competitiveness under the conditions of modernization. Econ. Reg. 2, 57–65 (2011) 21. Rennings, K.: Redefining innovation: eco-innovation research and the contribution from ecological economics. Ecological Economics (2000). http://www.sciencedirect.com/science/ article/pii/S0921800999001123. Last accessed 17 Nov 2021 22. Andersen M. Eco-innovation indicators. Report for Risö National Laboratory. Copenhagen: European Environment Agency (2006) 23. Veugelers, R.: Which policy instruments to induce clean innovating? Res. Policy 41, 1770–1778 (2012) 24. Dangelico, R., Pujari, D.: Mainstream green product innovation: Why and how companies Integrate environmental sustainability. J. Bus. Ethics 95(I.3), 471–486 (2010) 25. Inovação e Sustentabilidade: Novos modelos e proposições. J. Barbieri [et al] Revista de Administração de Empresas 50(I.2), 146–154 (2010) 26. Sarkar, A.: Promoting eco-innovations to leverage sustainable development of eco-industry and green growth. Eur. J. Sustain. Dev. Rome 2(I.1), 171–224 (2013) 27. Kemp, J. Horbach, R.: Measuring of competitiveness eco-innovation. In: MEI project: Measuring Eco-Innovation. European Commission (2008) 28. James, P., Fussler, C.: Green marketing: Eco-innovation references including driving ecoinnovation: A breakthrough discipline for innovation and sustainability. London, Pitman Publishing (1997). http://www.cfsd.org.uk/eco-i-net/eco_innovation.htm. Last accessed 17 Nov 2021 29. Reid, A., Miedzinski, M.: Eco-Innovation, Final Report for Secondary Innovation, Brussels: Technopolis Group (2008). http://www.technopolisgroup.com/resources/downloads/661_rep ort_final.pdf. Last accessed 17 Nov 2021 30. Organization for Economic Cooperation and Development—OECD. Sustainable manufacturing and eco-innovation: Framework, practices and measurement. Synthesis Report. Paris: OECD. http://www.oecd.org/dataoecd/15/58/43423689.pdf. Last accessed 17 Nov 2021

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31. Kemp, R., Foxon, T.: Typology of Eco-Innovation. MEI project: Measuring Eco-Innovation— European Commission (2007) 32. Dayneko, D.V., Gustfson, E.G.: Institutional innovations in the forest industry in Russia: a case study of Irkutsk province, miscellanea geographica. Regional Studies on Development, vol. 18, I.4 (2014) [Electronic resource]. http://www.degruyter.com/view/j/mgrsd.ahead-of-print/ mgrsd-2014-0027/mgrsd-2014-0027.xml?format=INT. Last accessed 7 Nov 2019 33. Ruttan, V.W.: Social Science Knowledge and Induced Institutional Innovation: An Institutional Design Perspective (2005). http://www.indiana.edu/~workshop/Colloquium/materials/docume nts/ruttan_paper.pdf. Last access 19 Oct 2020 34. Knight, J.: Institutions and Social Conflict. Cambridge, Cambridge University Press (1992) 35. North, D.: Institutions, Institutional Changes and Functioning of the Economy. Moscow, Nachala (1997) 36. Tambovtsev, V.L.: Theory of Institutional Changes: Textbook Manual. Moscow, Infra (2008) 37. Oleynik, A.N.: Institutional Economics: Textbook Manual. Moscow, Infra-M (2002) 38. Schumpeter, J.A.: Capitalism, socialism and democracy. Moscow, Nauka (2007) 39. Zarkovich, A.V.: Theory of innovative development: the concept of regional innovation systems. Humanities Researches, vol. 6 (2013) [Electronic resource]. Access Mode. http://humans. nauka.ru/2013/06/3404 40. Edquist, C.: Systems of innovation approaches: their emergence and characteristics. In: Edquist, C. (ed.) Systems of Innovation: Technologies, Institutions and Organizations, pp. 1–35. London, Pinter (2001) 41. Utkin, E.A.: Innovation management. In: Utkin, E.A., Morozova, N.I., Morozova, G.I. (eds.) Moscow, Akalis (1996) 42. Yershov, V.F.: Classification of innovations for restructured enterprises. Innovations 5, 58–61 (2003) 43. Huber, J.: Technological environmental innovations (TEIs) in a chain-analytical and life-cycleanalytical perspective, pp. 1–7. The Journal of Cleaner Production XX, A. Ar-undel, Measuring Eco-Innovation. Working Paper Series (2009) 44. Machiba, T.: Radical & systematic eco-innovation and the role of business models. OECD Project on Green Growth & Eco-innovation (2011) [Electronic resource]. http://cfsd.org.uk/ site-pdfs/si11/presentation-pdf/2011-10-24--12-00--Machiba-presn-to-SI11.pdf. Last access 19 Oct 2020 45. Barsoumian, S., Severin, A., Spek, T.: Eco-innovation and national cluster policies in Europe. In: A Qualitative Review. European Cluster Observatory. Brussels, Europe Innova (2011) 46. Grebenshchikov, V.: Associations on the topics which passed. Econ. Sci. Mod. Russ. 1, 23 (1998) 47. Hamilton, W.: Institution. In: Seligman, E., Johnson, A. (eds.) Encyclopedia of the Social Sciences, vol. 8, p. 84 (1932) 48. Couse, R.: Firm, Market and Law. Moscow, New Publishing House (2007) 49. Weber, M.: Selected Works. Moscow, Progress (1990) 50. Lin, J.Y., Nugent, J.B.: Institutions and economic development. Handb. Dev. Econ. III(38), 2307 (1995) 51. Young, O.: Resources Regimes. Natural Resources and Social Institutions. Berkeley, Los Angeles, London, University of California Press (1982) 52. Kuzminov, Y.I., Bendukidze, K.A., Yudkevich, M.M.: Course of institutional economics: institutions, networks, transaction costs, contracts: textbook for University students. In: Kuzminov, Y.I., Bendukidze, K.A., Yudkevich, M.M. (eds.) Infra-M (2008) 53. Auzan, A.A.: Institutional Economics. New Institutional Economic Theory: Textbook. Moscow, Infra-M (2005)

Chapter 2

The Analysis of the Russian Forest Industry

2.1 Problems of the Forest Industry and Institutional Framework for Its Innovative Development The Forest industry is an important part of the Russian economy, so its condition has a great influence on the Russian economy in generfal and on various aspects of life, from the production of raw materials for various industries (such as construction, agriculture, furniture production, etc.), ending the recreational role of forests in people’s lives. Russia is considered the world’s largest forest country with Irkutsk province as one the largest forest region. Forests occupy 70% of its territory (Fig. 2.1) and are one of the main competitive advantages of the country. According to the UN, the country accounts for about 20.5% of the world’s total forest area and half of coniferous forests. Most of the forest areas (29%) are occupied by small-leaved and mixed forests that have grown on the site of old cuttings, hares, and agricultural land, as well as Northern and mountain woodlands. A slightly smaller area (21%) is covered by larch forests. The coniferous forests cover approximately 19% of the forest land (with 11% of spruce, cedar and fir forests and only 8% of pine forests). The biggest rarity is broad—leaved woodlands. Their share is only 3% [1]. The total land area of the forest fund exceeds 1.1 billion hectares, which is 1/4 of the world’s wood reserves. Wood reserves in Russian forests are estimated to be about 75 billion m3 . If we make a generalization, each Russian has ten times more forests than an American, and 35 times more than the average European. More than 20% of logs and lumber products are exported from Russia. The volumes of lumber and plywood production volumes in Russia in 1980-2019 are presented in Figs. 2.2 and 2.3. The total volumes of lumber exports in Russia in years 1980-2019 are presented in Fig. 2.4. The main user of wood is the Wood Processing industry. The Russian Federation exports the following types of lumber products: roundwood, lumber, fuel wood,

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 S. V. Zykov and D. V. Dayneko, Forest Industry of Russia, Advances in Sustainability Science and Technology, https://doi.org/10.1007/978-981-16-9861-3_2

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2 The Analysis of the Russian Forest Industry

Fig. 2.1 Forest cover of the Russian Federation territory, in %

Lumber production in Russia in 1980-2019, mln cubic meters According to FAO since 1992 According to Russian Statisitcs Department since 2010

Fig. 2.2 Lumber production in Russia in 1980–2019 (mln cubic meters)

2.1 Problems of the Forest Industry and Institutional …

19

Plywood production in Russia in 1980-2019, thousand cubic

Fig. 2.3 Plywood production in Russia in 1980–2019 (thousand cubic meters)

Lumber exports in Russia in 1980-2019, mln cubic meters

business wood

fire wood

Fig. 2.4 Commercial and fire wood exports in Russia in 1980–2019 (mln cubic meters)

20

2 The Analysis of the Russian Forest Industry

sleepers, chipboard and fiberboard, wood, paper and cardboard containers, pulp, paper, cardboard, wallpaper, paper hygiene products, paper and cardboard labels, etc. The economic importance of forests in meeting the demand for wood is well known. However, along with the important role of forests in the socio-economic development of society, the ecological significance of forests is of great relevance. The ecological resource of forests implies regulatory functions (water and heat regimes of the earth’s surface, water protection and water regulation functions); formation and preservation of soil cover; regulation and conservation of biodiversity; climate and weather changes; global carbon cycle; sanitary and hygienic, balneological and recreational roles. The characteristics of the forest fund of Russia in comparison to other countries is presented in Table 2.1. Russian forest resources were a trigger for the creation of many branches of the national economy. The Russian forest complex is represented by the following industries: 1.

2.

3.

Forestry (leskhoz) is intended for reproduction of the used resources and utilities (services) of forests, their protection from fires, protection from pests and diseases, various kinds of negative natural and anthropogenic impacts, ensuring the needs of society in forest products, preserving and improving the natural environment, resource and environmental potential, biodiversity for current and future generations. Lumber industry complex (LIC) including the following: (1) Logging industry (LI), which priority tasks include harvesting and export of different types of wood; (2) Sawmill and Wood processing industry (SWPI), directly engaged in the production of lumber, fiberboard, hardboard, MDF, chipboard, OSB, plywood and other products; (3) Pulp and paper industry (PPI), production primarily of such products and materials as pulp, paper, newspaper, cardboard, paper bags, etc. PPI is a key and strategically important industry; (4) Forest chemical industry based on chemical processing of wood. It includes: dry distillation of wood, carbonation and various types of rosin-turpentine production. Industries such as the agro-industrial complex (AIC) and the pharmaceutical industry are linked to the forage, food and medicinal resources of the forest. The importance of the Forest industry for all segments of the population is due to the social, protective and cultural benefits (services) of the Forest industry. The economy of the Forest industry develops its economic relations with a wide range of stakeholders, including producers, consumers and the population in general.

The ecological value of forests is not limited to the territory of the State where they mature. Russian forests have a planetary significance and play an important role in global processes of environmental regulation and prevention of negative climate changes. Forests sequester a large share of the world’s carbon dioxide emissions, For example, forests of Irkutsk province account for up to 1/3 of the net carbon deposition of all the world’s forests [2].

849

Oceania

933

including China

38

3073

Asia

Japan

922

Canada

297

916

including USA

181

2103

North and Central America

Indonesia

1710

Russia

India

571

6,5

0,3

1,4

2,3

7,1

23,6

7,1

7,0

16,1

13,1

4,4

91

24

105

65

133

503

245

212

537

774

170

mln ha

mln ha

%

Forests area

Total area

Europe (without RF)

Regions and countries

2,6

0,7

1,9

3,9

14,6

7,1

6,1

15,5

22,4

4,9

%

Table 2.1 Forests area and reserves by regions and countries

10,7

66,8

60,6

21,9

14,3

16,4

26,5

23,2

25,5

45,2

29,7

%

Forest cover

60

18

120

319

287

999

187

500

783

115

577

30

126

209

918

1,274

3634

30

272

478

147

582

mln people

mln m3

0,5

2,1

3,5

16,7

21,3

60,8

0,5

4,6

8,0

2,5

9,7

%

Population (1997)

Volume of forest harvested (2000)

34

119

322

303

1,033

189

490

774

127

569

mln m3

(continued)

0,268

0,561

0,319

0,236

0,281

6,160

1,73

1,589

0,872

0,978

m3 per person

Volume of consumption

2.1 Problems of the Forest Industry and Institutional … 21

846

2,978

13,064

including Brazil

Africa

Total

100

22,5

6,5

13,4

3,454

52

551

871

100

15,1

16

25,2

%

26,4

17,7

65,2

49,7

%

Forest cover

3,357

596

235

338

5978

767

168

341

mln people

mln m3

1010

12,8

2,8

5,7

%

Population (1997)

Volume of forest harvested (2000)

Source Moiseev N. A. Economics of the Forestry, Moscow: Moscow State University of Forest Publishing house, 2004

1,752

mln ha

mln ha

%

Forests area

Total area

South America

Regions and countries

Table 2.1 (continued)

3,354

591

235

336

mln m3

0,554

0,745

1,377

0,972

m3 per person

Volume of consumption

22 2 The Analysis of the Russian Forest Industry

2.1 Problems of the Forest Industry and Institutional …

23

Another global role of the forest is photocatalytic transformation, carbon dioxide sequestration, and oxygen release. Thus, according to approximate calculations, the forests of the Irkutsk province only produce more than 72 billion m3 of oxygen annually [3]. In addition, the forests of the region growing in the catchment area of the lake Baikal and along the river banks play the water protection role, provide regulation and filtration of waste water and a constant water level. Forests that grow in mountainous areas protect weak soils on the slopes from flushing, weathering, snow avalanches and mudslides too. It is worth noting the sanitary and hygienic significance and protective function of forests from dust, soot, and noise. Forest plantations protect crops and gardens from cold winds and improve the climate. Forests largely neutralize the effects of harmful emissions from industrial enterprises. It is known that staying in the forest has a beneficial effect on human health and creativity. Given the diverse significance of forests, they should be considered not only natural, but also cultural heritage of the country. Now let’s study the problems and dynamics of the development of the Russian forest complex. Haphazard actions in forest management have led to the destruction of most of the forests in Western Europe and in central regions of Russia. As a result of excessive use of natural resources, there is a threat of destruction of the existing ecosystem, climate and water balance degradation, and from the economic point of view, the strategic potential of countries worsening. Forest conservation is the condition required to contain the ecological crisis on Earth. Forest as an exhausted but renewable resource is in the sphere of close attention of ecologists and economists. In the era of globalization of commodity and raw materials markets, when most of the forests in the United States and Europe are undergoing conservation and preservation, the sustainable environmental management practices are especially relevant for Russia and its regions, such as the Irkutsk province, which is the first among the country’s logging regions. The problem of nature degradation is related to the anthropogenic impact on forests. First, direct impact (deforestation, forest fires, construction of facilities, tourism, atmospheric emissions). Secondly, indirect, when the living conditions change as a result of air and water pollution, the use of mineral fertilizers and pesticides, which leads to changes in the plants composition). In addition, radioactive contamination is becoming a new factor in forests and vegetation degradation. Currently, the complexity of forests management and reforestation is due to specific factors. First of all, a long period of forest cultivation. The age of mature large-sized valuable trees is at least 70 years. It is necessary to observe the proportionality of forest use to the scale and timing of its reproduction. Compliance with the principle of “continuous, non-destructive use of forests” (CUUF) is stated in the Forest code [4] and is the main postulate of the organization of sustainable forest management [5]. Another specific factor is the multi-purpose use of the forests. Russian forests and the land they occupy perform various functions, ensuring the reproduction of resources, commodity and non-commodity products. Using the forest as a source of wood, it is necessary to take into account other previously noted useful functions:

24

2 The Analysis of the Russian Forest Industry

protective, recreational, and other. The multi-purpose forest management approach is the basis for sustainable biodiversity conservation and is consistent with international agreements on forests. The organization of forestry on the principles of sustainable and multi-purpose forest management can be effective in the form of multi-level forest management. In this case, forest resources and products are divided into two groups: market resources, which have the market value, and public goods, which are indivisible between individual consumers. Let’s highlight the typical problems of the Russian Forest industry. They can be subdivided into: 1. 2. 3. 4.

Industrial (production) and technological; Nature related and ecological; Institutional and organizational; Related to problems of forest protection and reproduction [6].

2.1.1 Production and Technological Problems The production and technological problems in the Forest industry of Russia include the following. Imperfection of logging and reforestation technologies, low efficiency of the forest reproduction system, due to the significant excess of logging areas over reforestation. In some areas, forests lose their climate and water-regulating significance. There is a decrease in the share of coniferous forests and an increase in the share of soft-leaved plantations due to improper exploitation of forests. Poor reforestation is explained by the termination of self-seeding, destruction of undergrowth, soils degradation during logging and transportation of wood. Outdated processing technologies and inefficient use of wood. Rational use of wood while harvesting implies the full utilization of the resource. However, in practice, losses are at least 30% of the total wood output. They occur due to incomplete logging, under-logging, and abandoned trees. The applied cutting technologies lead to the destruction of undergrowth. In addition, bark (10% of the volume of wood), twigs (12%), stumps (8%) are lost when harvesting wood. The use of outdated wood processing technologies leads to the loss of wood and, as a result, to the high cost of forest production. The unavailability of huge forest areas for intensive development of the Forest industry due to the lack or absence of roads, the construction of which for the maintenance and operation of forests in existing conditions is highly costly for existing and potential forest users. The lack of capacity for deep processing of wood. In order to ensure more rational use of natural resources and generate greater export revenues, it is necessary to develop capacities for deeper processing of raw materials. For many decades, Russia has been exporting mainly roundwood (more than 15 million m3 annually), which accounts for about 20% of the business timber harvest. In the second place is cellulose.

2.1 Problems of the Forest Industry and Institutional …

25

Lumber, paper, cardboard and plywood and other wood processed products are sold in smaller volumes. Low technical level of production and non-compliance with international standards. The most urgent task of forest management is to create a national system of forest certification necessary for effective supply and management of forests. The border for non-certified forest is almost closed today. Russian lumber producers have limited access to world markets. High degree of depreciation of the main industrial and production assets. The depreciation of main technological equipment in the Forest industry in some regions, such as, for example, in Irkutsk province reaches 80%. Thus, in the most capitalintensive Pulp and paper industry, most of the equipment was physically and morally outdated. Productivity at the best enterprises is 30–40% of the Scandinavian level, and at others about 10%. The problem is further complicated by the lack of competitive domestic equipment, insufficient attraction of private investments, including foreign investment too.

2.1.2 Nature and Ecological Problems The nature related and ecological problems include the following. The diseases and harmful insects impact on forests for which it is assumed to use physical, mechanical, chemical and biological methods of control, and forestry measures. Forest fires are one of the most serious problems of Russian forests [2]. The main reason for their occurrence is the careless handling of fire by individuals. Ecological aspects of forest management by large lumber companies in Russia. Today, we have environmental requirements for forest exploitation and priority measures for forestry established, and forests requiring restoration have been identified, including at the expense of state subsidies. Forest users are obliged to preserve the flora and fauna. The contradiction between the interests of economic development at the expense of forest raw materials and ecology based on forest conservation is one of the main problems of environmental protection. The administrative-legal influence, restrictions, administrative and criminal penalties are the tools for solving this problem for many years. The main lever of administrative and legal influence and economic mechanism here are the institutions that have been operating for a long time and are being newly created in the Forest industry [2]. Depletion of wood reserves in areas where existing forest enterprises are located.

2.1.3 Institutional and Organizational Problems Institutional and organizational problems are those that affect the effectiveness of the use of resources. The existing institutional structure of the Forest industry did not

26

2 The Analysis of the Russian Forest Industry

allow the forest business to function effectively for many years and contribute to the sustainable socio-economic development of territories. Over the years of reforms, the forest management system has undergone significant transformations. This has happened due to issues of ownership, organizational restructuring, and changes in forest legislation. The institutional structure and institutional changes in the forest sector are closely linked to forest policies that regulate the economic, social and environmental consequences of forest management, including ownership and management issues., There is a need for the system of national and regional forest policy measures to encourage effective entrepreneurship in the forest sector, which requires a thorough institutional analysis. The defining institutions in the use of forest resources are: the ownership institution; investment institutions (banks, insurance companies, funds, etc.); the legal framework for forest management (laws, regulations, decrees, projects, standards and regulations); the taxation system, including rules and regulations that determine how the State collects the part of the forest income; the organizational structure of the industry as a whole and the organizational structure of individual enterprises; information support for the industry and organizations; institutions that ensure the development and implementation of regulatory documents; institutions that provide professional training and education of personnel; informal institutions that support manufacturing enterprises. The main institutional problems of the Russian forest sector are related to both the legitimacy of forest resource consumption and non-compliance with environmental standards, delays in their adoption and implementation. There are significant contradictions in the forest legislation and there are conflicts with other laws of the Russian Federation. This leaves open the question of allocation of rights to forest management. A number of sources also note the complexity of tax policies that do not promote economic activity or new investment; the problem of forest payments return back to the forest sector; the presence of corruption schemes that become a serious obstacle to the development of business activity in the forest sector; the closeness or lack of financial information and statistics [2]. However, the imperfect Federal legislation is the obstacle to effective use of forests. The entities of the Russian Federation had received powers in the field of forest management, as the new forest legislation was introduced. In particular, they are entrusted with forestry planning, providing forest lots within the borders of the forest fund lands, organizing the protection, forests conservation and reproduction of, and implementation of the State forest control and supervision. However, the issues of solving the problems of lack of raw materials, reduced investment, technical backwardness, shortage of highly qualified personnel, poor use of technologies for deep processing of wood and others are still present. The effective development of the industry is possible only on the innovative basis, which requires, first of all, the restructuring of institutional relations. The list of problems presented shows that inefficient use of forests is primarily due to ineffective institutional relations in the industry. First of all, this relates to inefficient ownership rights to forest resources.

2.1 Problems of the Forest Industry and Institutional …

27

According to the theory of ownership rights, effective can be called such property rights, in which the owner makes the best use of his property of all possible ways of use [7]. The most effective use of property rights is provided, on the one hand, by the properties of the property rights themselves, on the other by external incentives. The properties of effective property rights are the following: (1) clarity and unambiguity, i.e. clarity (transparency) of the property rights, it is when it is clear which object belongs to whom (this also includes the specification of property rights, i.e. an accurate description of property rights in relation to the properties of the object of property rights); (2) enforceability or realizability, which is provided by the State system of property rights protection and enforcement, customs, criminal methods, contracts; (3) exchangeability, i.e. the ability of the owner to sell, gift, i.e. there should be a market for property rights. External incentives for effective use of property rights are provided by the following: (1) the specification of property rights, which is provided by the owner’s protection from violation of property rights, including violations by the State; (2) reliable protection of property rights of the owner’s assets. Among certain property rights, the most important are the following: • the ownership right, i.e. physical control over property and assignment of rents; • the right of disposal and management, i.e. the right to make decisions about who can use the resource and how; • the right to use, i.e. the right to personal use of a resource. In fact, until the ratification of the Forest code, there was no institution of ownership for forest resources in Russia. The first legal document that became the basis of the formal institution of ownership of forest resources was the Forest code of the Russian Federation, introduced back in 1997. In the Forest code the right of possession was reserved for Russian Federation for the first time, i.e. actually the Federal form of forest ownership was established and the right of control was transferred to the constituent entities of the Russian Federation, the right of use was granted to forest enterprises and other commercial structures as the rent. It is the Forest code that had become a tool for specifying ownership rights to forest resources. According to the theorem of R. Coase, the right of ownership is fully defined when each right has its own exclusive owner. This right is currently legislated to reduce the risk of alienation of property. Thus, the scheme of specification of property rights in the Forest code was outlined and the entities for the laws were defined. However, entitlements were not transparently defined among entities. The right of management was divided among the Russian Federation and its entities. The interests of the parties involved clashed and came into conflict. Many business people wanted to get access to forest resources, and after getting forest tickets, they wanted to make the maximum profit without taking into account public interests and the environmental issues. The question of whether it was the right decision to refuse the forests privatization and solve all production issues exclusively on terms on the rent remains open too. In any case, attempts to form a model of private forest ownership in Russian society proved to be inadequate to the models in developed countries. The attempt

28

2 The Analysis of the Russian Forest Industry

to privatize Russian forests became an example of a failed economic experiment in Russia with negative social and environmental consequences. The readiness of the Russian society for private ownership of forests has not been defined, nor have the terms and conditions for social responsibility of forest businesses been defined. The analysis of the transformation processes happening in the country confirms that with maintaining of the State ownership for forest resources, there may be a conflict related to the “right to manage” forest resources, which is caused by the redistribution of this right in favor of the Russian Federation or regions as entities of the Russian Federation. Relations among entities were formed empirically during 2005–2013, when there was a significant tendency to centralize Federal power in the forest sector. Regions have lost the ability to participate independently in joint management in relation to the management of the forest fund as the State property. This initiative provoked a strong negative reaction locally. The powers that belonged to the entities of the Russian Federation in accordance with the Forest code were returned and expanded by Federal law no. 199 dated December 31, 2005. It included almost all the functions of State and economic management of the forest fund. Subsequently, the authorities in the region tried to consolidate and expand their rights, sought to tighten the conditions for forest use, and proposed to cancel auctions and replace them with competitions. The forest business itself opposed such changes, considering them as an infringement on the freedom of economic relations [8]. The question of which entities will conduct forest business or implement its individual activities is still open and depends on the forms of forest relations adopted at each stage, taking into account specific conditions. However, knowing that the Russian forests are federally owned, the Federal state authority is responsible for conducting forest activities, taking into account the legally accepted requirements too. So, it delegates the functions of State forest management to the authorized bodies in all executive power blocks. The organizational structure of the Forest industry is presented in Fig. A.1 of Appendix A. Today, we can note that the State’s influence on the development of the forest sector of the economy is generally not effective enough. The State can and should intervene in the distribution of income through the taxation system, regulation of prices and wages, and can influence the balance of supply and demand through the distribution of income, creating conditions for the reproduction and renewal of forest goods necessary for society. The problems of the Forest industry are related not only to the operation of market mechanisms, but also to measures of the State regulation that ensure the balance between economic development and protection of the environment.

2.1.4 The Forest Protection and Reproduction There is a number of shortcomings in this area which should be noted. The first official nature protection document concerning forests appeared on April 4, 1888, when the tsarist government, influenced by public opinion, issued the Forest Protection law

2.1 Problems of the Forest Industry and Institutional …

29

that regulated forest management in forests that perform primarily nature protection functions, and restricted certain rights of forest owners. The modern Federal law “About specially protected natural territories”, signed by the President of the Russian Federation [9], distinguishes the following categories of specially protected natural territories: State nature reserves; national parks; natural parks; State nature reserves; natural monuments; dendrological parks, and botanical gardens; health-improving areas and resorts. In addition, the government of the Russian Federation, executive authorities of constituent entities of the Russian Federation, and local governments may establish other categories of specially protected natural territories (for example, green zones, urban forests, urban parks, protected coastlines, protected landscapes, biological stations, micro-reserves, and others). Today, forest management, as well as Forest legislation itself, is still complex and confusing in Russia. This problem is faced by forestry workers themselves too when deciding on the application of certain forest regulations. Furthermore, certain provisions of forest legislation and regulations conflict with land, water and environmental legislation often too. According to the industry employees themselves, the draft of the new Forest code of the Russian Federation did not avoid these shortcomings. The transition from a centrally planned to the market economy without a well-founded program worsened the existing nature of the structure and location of the Forest industry and forestry, causing in the late 1990s and early 2000s unprecedented for the history of Russia collapse of production in the Forest industry. Thus, innovative changes in the Forest industry that can increase the efficiency and productivity of the industry are not possible and must begin with institutional changes in ownership and in other institutional relationships. The primary condition for the Forest industry transformation on the innovative basis is the formation of the innovative system for the industry. Now we will study the advanced experience in the field of forest management and development of the Forest industry in Russia to analyze the concept and composition of the innovative system of the Forest industry.

2.2 A Case Study of Baikal Region In this section we present the analysis of the Forest industry activity in Baikal region, one of the major forest regions of Russia in terms of the forest harvesting and. It has been figured out that the basis of the production of successful lumber enterprises in Irkutsk province, the Republic of Buryatia, Zabaikalsky Krai, which comprise Baikal region, are companies with a significant share of foreign capital. The dynamics of the number of employees, their average monthly salary, production volumes in the branches of the Lumber industry comples (LIC) of the Baikal region, the volume of exports of the most important types of LIC products in the context of the Russian Federation (RF) entities are shown. The main priority directions for the further LIC development, which are based on sustainable forest management, are outlined. The existing concentration of the significant wood reserves on the territory of the Baikal region, in the amount of 13.8 billion m3 or 16.7% of total Russian reserves, and

30

2 The Analysis of the Russian Forest Industry

41.5% of the reserves of the Siberian Federal district [10], has determined the establishment of over two thousand lumber processing enterprises in Irkutsk province, in the Republic of Buryatia and Zabaykalsky Krai. Taking into account their importance for the regional economy, we note that the sustainable development of the Forest industry should increase the economic indicators of these entities of the Russian Federation, as well as serve as the basis for improving the quality of life of the population, especially in entrenched reach of wood areas, where wood harvesting and processing enterprises are located. In this regard, the task to analyze the current functioning of the Forest industry, to determine the most successful enterprises in Russia, is the urgent one in this research. According to Irkutskstat, the share of the wood processing and pulp and paper sectors, in the total volume of products manufactured and shipped by the processing industries, is 16.6% in the Irkutsk province, 8.2% in Buryatia, and 4.5% in Zabaikalie (Transbaikalia) [11]. The leading branch of the Lumber industry in Baikal region is the logging industry. The number of enterprises in Baikal region, since year 2010 till 2019, for this type of activity has steadily decreased (please see Tables 2.2, 2.3, and 2.4). So, according to the data, their number decreased by 1229 units in Irkutsk province only by year 2015, compared to year 2010 (or by 53.8%). It decreased by 88 enterprises (or by 28.9%) in Republic of Buryatia, and by 71 enterprises (or by 49.7%) in Zabaikalsky Krai (Transbaikal territory). Table 2.2 Change in the number of logging enterprises in the territory of Baikal region, units* RF entity

2010

Irkutsk province

2 285 1 654 1 329 1 198 1 157 1 056 1986 1950 1980 86,7

Buryat Republic

304

290

263

251

223

216

297

254

245

80,6

Zabaikalsky 203 krai

198

163

146

141

132

210

209

198

97,5

Total *

2011

2012

2013

2014

2015

2016 2017 2018 2019–2010, %

2 792 2 142 1 755 1 595 1 521 1 404 1298 2413 2423 86,8

Compiled according to [11–14]. Note the data in the table is as of January 1

Table 2.3 Dynamics of production of certain types of forest products in Baikal region in 2010– 2019* RF entity

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019–2010, %

Production of raw wood, in million dense m3 Irkutsk province 17,5

18,7

18,9

19,9

21,2

22,2

27,4

26,7

21,8

124,6

Buryat Republic

1,5

1,7

1,7

1,7

1,8

1,9

1,9

2,1

1,9

126,7

0,5

0,6

0,5

0,4

0,4

0,5

0,5

0,5

0,5

100,0

19,5

21

21,1

22

23,4

23,6

23,8

29,3

24,2

124,1

Zabaikalsky krai Total *

Compiled according to [11–16]

2.2 A Case Study of Baikal Region Table 2.4 Change in the number of enterprises in Baikal region by type of activity “wood processing and production of wood products”, in units*

31

RF entity

2014

2015

2015–2014, %

Irkutsk province

918

904

98,5

Buryat Republic

150

162

108

Zabaikalsky krai

85

82

96,5

Total

1153

1148

99,6

*

Compiled according to [12, 13, 17]

The number of logging companies has been decreasing for several years. At the same time, the growth of raw wood production in Baikal region, as the whole, is increasing due to the increase in the value of this indicator in Irkutsk province and the Republic of Buryatia. For many years, actually for decades, illegal logging remains the main problem in Russian forests. Russia’s forest business, especially in Siberia, become deeply criminalized, with poor law enforcement, allowing illegal loggers to plunder valuable timber stocks of larch, pine, fir, birch, and aspen with impunity. Usually, it takes them less than five minutes to log and fully load a truck with the round wood (please, see Fig. 2.5). There were 9,026 violations of forest legislation detected, including 2,636 cases of illegal logging of forest stands in the amount of 569.7 thousand m3 , which is

Fig. 2.5 Black lumberjacks harvesting, loading, and transporting round wood

32

2 The Analysis of the Russian Forest Industry

Fig. 2.6 Illegal harvesting of Siberian wood in Tukolon’ State Nature reserve in Irkutsk province in 2017–2018. (Photo provided by the press service of the Baikal Interregional Environmental Prosecutor’s Office https://www.irk.ru/ news/20190520/greenpeace/)

47.3% less than in year 2017 in the amount of 1,098.9 thousand m3 , with a total damage of 4.3 billion rubles. The Investigative Committee of Russia in Irkutsk province has charged cases against few defendants, including administration officials, suspected in organization of illegal logging in the Tukolon’ State Nature Reserve. According to investigators, starting with September 2017 till April 2018, the accused illegally appointed, coordinated, and performed a continuous sanitary logging in the Tukolon’ State Nature Reserve. As a result of illegal logging 748 million rubles worth of damage was caused to the forest fund, hunting resources and their habitat, soils, wildlife objects in the total area of over 119.4 hectares (please, see Fig. 2.6) [18]. Since the beginning of 2020, thousands of illegal logging operations have been detected again in the Baikal region. Despite the fact that the average volume of one such felling is only 6.9 m3 , the total damage is measured in billions of rubles. Only in the Irkutsk province, as of July 8, 2020, one thousand 48 facts of illegal logging in the amount of 194 thousand 694.57 m3 with the total damage of one billion 224 million rubles had been recorded [19]. A significant reduction in illegal logging in Baikal region should also be noted. According to representatives of the authorities, this result has been achieved via monitoring and effective interagency cooperation with law enforcement agencies to identify violations. According to the results of forest land patrol raids and measures to check wood transporting vehicles, the protocols on administrative offenses are written out, and signs of a crime under article 260 of the criminal code of the Russian Federation, which is illegal logging of forest stands, are determined on sites. The materials are sent to law enforcement agencies. Criminal cases have been initiated on several thousand facts, and another 142 are being checked. Only in Irkutsk province 296 people have already been brought to courts for criminal activities. Actually, timber harvesting remains the main method of using forest resources in Baikal region, as it is in most regions of Russia too. According to experts, this is the priority direction, since timber production is one of the leading sectors of the economy of many Russian regions, including Irkutsk province, Buryatia and Zabaikalsky krai. A large share of the wood harvested in Baikal region is exported to

2.2 A Case Study of Baikal Region

33

China and other countries. All related industries: logging, wood processing, pulp and paper, and wood chemical, are united by the consistent use of wood raw materials and technological chains of relations. The huge reserves of forest resources in Baikal region predetermined the creation and development of the timber industry. The largest number of LIC enterprises is registered in Irkutsk province. The rapid industrial development of Siberia, which began in the mid-1950s, contributed to the development of the Forest industry in the Baikal region too. The volume of logging increased sharply, and large lumber processing plants were put into operation in the region. For example, the Baikal pulp and paper mill, Bratsk and Ust-Ilimsky LICs. According to the Ministry of Industrial Policy and Forest Complex of Irkutsk province, these enterprises now produce about 70% of the total production of the Angara forest complex. The more detailed analysis of the forest enterprises in Irkutsk province, in the Republic of Buryatia, and in Zabaykalsky Krai, presented in the following sections: “Analysis of the forest enterprises in Irkutsk province”, “Analysis of the Forest industry of Buryatia”, “The Enterprise of the forest industry of Zabaikalie”. To ensure the sustainable development of the lumber industry in the region, it has been proposed to create the LIC cluster. The participation in which allows companies to find new investment niches and partners in industrial cooperation, as well as increases investments in the lumber industry and the volume of production of finished products. On the one hand, this is an increase in the tax base of budgets, and on the other hand, it is the effective use of forest resources. As the part of the cluster initiative, investment projects have been launched to modernize and expand production. The use of the recreational potential of forests is proposed as new directions for the development of the forestry in the region. National parks and specially protected natural areas (SPNAs) are recognized as the most promising for all types of recreation. For this purpose, it is proposed to lease forest lots located in parks and forest areas. Here we can rely on the development of ecological tourism in Baikal region too. Recreational and tourist resources should become an important factor in the economic development of the Baikal region when used in an environmentally friendly manner. In this regard, the regulation of nature management in recreational areas is of particular importance. Therefore, an important aspect for the protection and reproduction of components and elements of natural complexes is the control of the regional authorities. First of all, the SPNAs and nature reserves require attention. Since many of them have been places of spontaneous recreation for citizens for many decades. As a result, the irreparable damage is caused to animals and plants, garbage is practically not removed, and forest fires often occur. Despite prohibitions and restrictions, the authorities cannot completely restrict or prevent unwanted visits to protected areas. So, it is especially important to provide environmental information and education, as well as to accompany tourists to specially equipped places of stay. For example, they are placing information boards with rules of conduct on the territory, are laying down ecological trails, organizing specialized tourist centers and creating the necessary

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tourist infrastructure in Olkhon island, in Baikal biosphere reserve, in Baikal national park, and in other most popular natural areas. There are also other environmentally sound options for using forests for agricultural use. For example, for grazing and setting up apiaries, hunting farms, research and educational activities. For example, scientists from Irkutsk Scientific Center (ISC) and the Institute of plant physiology and biochemistry (SIFIBR) of the Siberian Branch of the Russian Academy of Science (SB RAS) conduct scientific surveys in selected forests and research in specially designated test areas. Regional leaders and the President have repeatedly discussed the issue of creating protective measures for the export of raw wood from the region. In September 2020, Vladimir Putin instructed the government to ban the export of raw or rough wood from Russia starting with January 1, 2022. The President also stated the need to reform the forest management system as a basis for accounting, planning, inventory and assessment of forests, clearly delineating the powers of Federal, regional and local authorities, and proposed to introduce a legal Institute for administrative survey of forest areas, where advanced, modern remote sensing methods and unmanned aerial vehicles should be widely used. The President proposed to introduce the post of the chief Federal state forest inspector in the regions of Russia too [20]. On October 14, 2020, the government of the Russian Federation approved the action plan for decriminalization and development of the Forest industry. The solutions of which are aimed to eliminate important for the Forest industry problems. The Ministry of economic development was instructed to prepare a regulatory act on the introduction of a complete ban on the export of raw materials from the country. According to the planned measures, the Unified State automated information system for accounting of the wood and transactions with it (LesEGAIS) should become a part of or be completely transformed into the Federal State information system for the forest complex (FGIS LC). All the work for the development of FGIS LC is planned to be completed no earlier than at the end of 2022. A brief overview of the largest forest enterprises in Baikal region allows us to conclude that the majority of producers in the Forest industry in all three entities are presented by companies with a significant share of foreign capital. This indicates the strong dependence of the Irkutsk province, the Republic of Buryatia and Zabaikalski krai on foreign partners that might result in a fundamental threat to sustainable development of forest enterprises of Baikal region in the future, as experts believe, and in the deterioration of the forest ecology. As the certain measures to correct the current situation, some experts suggest implement urgent concentration of the main part of the capital of the Lumber industry enterprises located in the territory of Russia with residents of the country [21]. Since excessive concentration of management functions by foreign persons can cause environmental disasters and a serious obstacle to the development of the industry and to the ensuring of economic security of the territory. The Lumber industry in Baikal region annually employs more than 35,000 people, of which almost 90% are employed in the Forest industry of Irkutsk province. Employees are distributed by type of activity as follows: 13,585 people (or 39% of the total number of employees in LIC of the whole Baikal region) employed in

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35

logging; there are 13,148 people (37%) employed in wood processing and production of wood and cork products; 6,155 people (17%) in production of pulp, wood pulp, paper, cardboard and products made from them; 2,432 people (7%) in furniture production [22]. Analysis of the number of employees in the Forest industry of Baikal region for years 2010–2020 showed that in general, the average number of employees (without external part-time employees and non-registered employees) has decreased by 25.5%, or by 12 thousand people. This was due to a decrease in a number of employees in the types of activities stated as “logging” in statistics (by 35.9%, or 7.6 thousand people), “wood processing and production of wood and cork products, except furniture” (by 13.4%, or two thousand people), “production of pulp, wood pulp, paper, cardboard and products made from them” (by 27.6%, or 2.3 thousand people), “furniture production” (by 4.6%, or 118 people) [23]. It should be noted that the largest number of employees has been concentrated in logging for many years, so the nature of changes during the period analyzed in the Forest industry of the Baikal region as a whole was determined mainly by changes in this type of activity. The reduction in the number of LIC employees of the Baikal region in the period from 2015 to 2020 had happened with a systematic increase in wages for all types of the Forest industry activities. Average monthly wages in the LIC grew at a faster pace than in other industries of Baikal region as a whole, but in absolute terms, the level of wages in the Forest industry for many years remained below the level of the average salary in general for each of the entities of the Russian Federation. For many years, the Forest industry products of the Baikal region have been the main export component of the Irkutsk region, the Republic of Buryatia, and Zabaikalsky krai. The value of exports from the region of wood and pulp and paper products is only growing. So, in 2015, it accounted to 2,445,346.9 thousand US dollars, or 32% of the total volume. In the context of the Russian Federation entities, the largest share of wood and pulp and paper products in the export structure of Baikal region is registered in Irkutsk province, and comprise up to 38%. These products accounted for 36% in Zabaikalsky krai, and 5%. in the Republic of Buryatia. The main consumer of forest products of Baikal region is China (Table 2.5). The Baikal region should not remain a raw material appendage for other countries. There is a need to create terms and conditions for deep processing of wood and the production of competitive products in this territory that will be in demand both in the domestic and foreign markets. There is a need to ensure the sustainable development of the Forest industry in Baikal region, which should be implemented via improving the efficiency of the forest resources use by increasing the share of wood used for processing. Experts suggest the formation of regional lumber industry clusters, which will allow the following [22]: • to develop deep chemical and mechanical processing of the wood in order to involve small-scale, low-quality and soft-leaved wood in processing and produce highly cost-effective products; promote the development of biofuel production;

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Table 2.5 Changes in the objects of export from Baikal region of the most important LIC goods to China in years 2014–2015 RF entities

2014 Net weight, thousand tons

2015 Share in total exports of goods from the region, %

Net weight, thousand tons

Share in total exports of goods from the region, %

Untreated wood, with bark or sapwood removed or not removed, roughly edged or not edged Irkutsk province

3 595,2

98,3

3 131,3

99,1

Republic of Buryatia

139,8

99,3

104,2

99,9

Zabaykalsky Krai

22,3

100,0

24,9

100,0

Total

3 757,2

98,3

3 260,4

99,1

Timber sawn or split lengthwise, more than 6 mm thick Irkutsk province

2 710,3

56,6

3 252,0

64,6

Republic of Buryatia

560,1

97,4

698,2

98,4

Zabaykalsky Krai

301,4

99,9

400,9

99,8

Total

3 571,8

63,0

4 351,1

70,8

• to restructure exports structurally in the direction of increasing products with a higher degree of processing; • to encourage an increase in the number of high-performance jobs and increase the level of wages at the lumber industry enterprises; • to create conditions favorable for attracting investment in the Baikal region’s LIC for the modernization and construction of processing facilities to produce new types of import-substituting products (modern wood board materials, pulp and paper products, sanitary products, furniture). In September 2018, the Russian government approved the LIC development strategy till year 2030, developed to increase the competitiveness of the Russian Forest industry. According to the results, the total export of the LIC products reached an absolute historical maximum and amounted to 13.4 billion US dollars. In 2019, the positive dynamics in the industry continued, and the Forest industry follows the goals set by the Strategy. Despite the existing achievements, the industry has a significant unrealized development potential both in terms of resource provision and in terms of increasing the depth of wood processing. Much support is provided by the State (support of priority investment projects, special investment contracts, trade duties to protect domestic producers, stimulation of certain segments of the industry development, and so on). Nevertheless, investments in the Russian Forest industry are mostly private, and it is

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necessary to ensure its investment attractiveness for the industry to develop ahead of schedule. In accordance with the Strategy for the development of the Russian Federation Forest industry till year 2030, which was developed and ratified in 2017 and 2018. Two following priority tasks were identified: • Protection and conservation of Russian forest resources (including fire protection); • Establishing the reforestation system. However, many experts believe that the Strategy for the development of the Forest industry, approved back in September 2018, largely does not correspond to existing realities. The contribution of the Forest complex (FC) to the country’s GDP is 10 times lower than, for example, in the United States, despite the fact that the amount of forest resources in the Russian Federation is twice as large as the United States. Russia accounts for only 3% of the global volume of the LIC production. Russia is significantly inferior to countries such as Finland with 8.4% of the forest production, Sweden (10.1%), America (12.7%), etc. According to the project, pulp and lumber are to be the main export goods. At the same time, during the recent years, analysts have noticed an increase in the production of cardboard containers, while the rate of pulp production has significantly decreased. The acting Strategy for the development of the Russian Forest complex till year 2030 represents Russian forests mainly as a source of raw materials. Such a consumer attitude, experts say, is wrongful. This approach devalues the forest, turning it only into a constantly consumed resource, but any forest area is both a carrier of a certain ecosystem and an object of cultural heritage. The Strategy also does not take into account the fact that the current climate is gradually changing. Warming will lead to an annual increase of fire danger in forests and entails the need for changes in the field of reforestation and sanitary measures. On July 2020, at a meeting of the Federation Council, a draft decree of the Government of the Russian Federation on approval of the Strategy for the development of the Forest complex of the Russian Federation till year 2030 was adopted for consideration. The meeting resulted in a list of recommendations in the field of agricultural production, among which we will highlight several new provisions for updating this Strategy: 1. 2.

3. 4.

To appoint the Ministry of economic development of the Russian Federation as the coordinator for creating and monitoring the implementation of the project. To create a joint body in the structure of the Executive power, the purpose of which will be the management of the Forest complex (FC) of Russia, focusing on the practice of forest management in various regions of the country. To specify the actual figures of the contribution of the FC to the gross domestic product of the country. To add a new section to the project under discussion, which will help to provide stable raw materials to southern wood processing enterprises, as well as significantly reduce the burden on the forests of the European part of the country.

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5.

To stop the process of liquidation and consolidation of multi-level educational institutions that train personnel for the LF. Additionally, develop a set of actions to provide institutions with the material and technical base, as well as to secure graduates in the industry. To consider the operation of the State program system for stimulating and implementing new investment projects, as well as improving logging and woodworking industries. To create a State program for the development of specialized mechanical engineering. To develop an industry-specific approach to the export of Russian wood products (in particular, wood processing). To update the action plan for the development of infrastructure in forests. Review the status of forest roads at the Federal level.

6.

7. 8. 9.

Fig. 2.7 Modern harvesters operating in remote logging sites in Russia

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Fig. 2.8 Round wood piled up in harvesting sites and timber bases for the further transportation

The initiative to amend the current development Strategy was adopted by the decision of Russian Prime Minister Mikhail Mishustin. New timber enterprises had been created and modern harvesting equipment purchused abroad (Figs. 2.7, 2.8).

2.2.1 The Analysis of the Forest Industry in Irkutsk Province The Forest industry is one of the basic industrial branches in Irkutsk province and makes a significant contribution to the region’s economy. The share of LIC industries in the total volume of processing production only in Irkutsk province in year 2018 was 27.5% (including wood processing and production of wood products in the amount of 10%, and production of pulp, wood pulp, paper, cardboard and products made from them contributing 17.5%). Irkutsk province has unique forest resources. According to the forest fund accounting data, the land covered with forest vegetation occupies 60.1 million hectares. According to this indicator, the region is one of the most multi-forest among all the entities of the Russian Federation. Here we have concentrated 12% of the country’s mature wood, and the share of especially valuable coniferous species, such as pine and cedar, is significant even on a global international scale. In general, forest lands in Irkutsk province comprise about 86.0% of its territory, of which forest areas are 71.3 million ha, forest lands are 68.5 million ha, and covered with forest vegetation 62.9 million ha, not covered with forest vegetation-2.9 million

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2 The Analysis of the Russian Forest Industry

ha, non-forest lands −5.5 million ha, hunting lands −0.5 million ha, special purpose lands −0.6 million ha, reserve lands −4.4 million ha. Forest lands occupy about 92.2% in relation to the total land area of the forest fund, and only about 8% of the land is not intended or suitable for the wood growing. This indicates the favorable structure of forest land for the forest management. The pine brand, which is in constant demand not only in the forest industry, but in the sphere of consumption in our country and in the world market too, occupies 15.1 million hectares or 25% of the forested land under the management of enterprises of the Ministry of Natural Resources of the Russian Federation, and only slightly inferior in area to stands with larch predominance. The share of pine forests in the region accounts for 13.1% of the total area of Russian pine forests (115.2 million ha). No other region, province or republic of the country can boast of such wealth. Only the Tyumen region and the Krasnoyarsk krai (territory) are more or less close to this amount of mature forests stands. The representation of the region’s pine forests is significant even on a global scale. Pine forests occupy about 325 million hectares on the planet. 7 148 thousand hectares of taiga, or 12% of the land covered with forest vegetation, are occupied by cedar forests. The share of cedar forests in Irkutsk province is 18.0% of the total area of the country’s cedar forests (39.7 million ha). Only in Krasnoyarsk krai, the area with the predominance of cedar exceeds that which is in Irkutsk province. The main area of the region’s cedar forests of 5.6 million hectares (81%) is located in mountainous areas, where the share of cedar stands increases up to 22%. The total supply of the wood only in the province’s forests is 9.05 billion m3 , including 5.22 billion m3 of mature and overgrown forests, of which 4.54 billion m3 is in stands with the predominance of coniferous wood species. Mature forests that can be exploited grow on an area of 11.6 million hectares, which is 20% of the land covered with the forest vegetation. They are represented by pine trees with about 34%, larch trees of 30%, spruce trees contribute 8%, fir trees—6%, birch trees −14%, and aspen and poplar trees about 8%. The share of stands with the predominance of coniferous species accounts for 78% of the area of the operational fund, which characterizes it as having a high value for loggers. The remaining forests are currently not allowed to be involved in commercial exploitation, since they either have not reached the age of felling, or perform specific functions with a strict regime of management, where felling for main use is prohibited, or are located in a transportinaccessible part of the province. The wood resources available for the exploitation of forests in the whole region amount to 2697 million m3 , of which 40% is accounted for especially valuable pine stands, which are in the highest demand among loggers. However, it should be noted that woodlands suitable for logging are located very unevenly in the territory of Russia and in particular regions, such as the lucrative in terms of the forest stands Irkutsk province too. In the areas of traditional logging along the TRANS-Siberian railway, around the Bratsk reservoir, forest resources are depleted; conversely, in the Northern and Eastern regions of the region, forest management is not developed enough. There

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is a predominance of the mature and over-mature plantations. The results of the State accounting of the forest fund in many Russian regions, including the Irkutsk province, indicate a continuing trend of improvement of its main indicators. In the total area of the mature forests available for exploitation, accordoing to the estimations, pine occupies 42.9%, larch—25.0%, spruce—7.1%, fir—7.1%, birch—10.7%, aspen— 7.1%. Mature and overgrown stands cover 25.7 million hectares, or almost half of the forested land in Irkutsk province only. The proportion of mature forests is insignificant. In the Northern and Eastern regions of the province, on the contrary, there is a predominance of the mature and overgrown stands. There are 12.4 million hectares of forest available for exploitation, which is 21% of the total forest area. The coniferous section makes up 77.8% of the area of the operational fund. Gross Primary Productivity: MODIS Gross Primary Productivity (GPP) and annual Net Primary Productivity (NPP) (MOD17A3) are describing the rate at which light energy is converted to plant biomass. This is termed primary productivity. The sum total of the converted energy is called gross primary productivity (GPP). Net primary productivity (NPP) is the difference between GPP and energy lost during plant respiration (Campbell 1990). MOD17A3 data are available for the years 2000— 2005. Enhanced NPP for 2006 over Irkutsk region is presented in Fig. 2.9 (middle right). NDVI (SPOT-VGT): The data source of this time series analysis is based on S-10 standard products from the SPOT-4 Vegetation sensor. The Vegetation sensor was especially designed for vegetation mapping and monitoring and was launched in 1998 onboard the French SPOT-4 satellite. The data has been providing by the TerraNorte Information System (Russian Academy of Science’s Space Research Institute). Time series analyses of 6 year record satellite observation of seasonal SPOT-VGT mosaics for Northern Eurasia were carried out and trends in vegetation photosynthetic activity were assessed. SPOT-VGT time coverage is 1998–2005 for summer and fall, 1999–2005 for spring season with a ground resolution of 1 km. Mosaics were derived for spring (March–May), summer (June–August) and fall (September–November). Trends are the increase/decrease of NDVI per year. Tundra or disturbed areas show an increase or “greening” of vegetation (Fig. 2.2, down right). Districts most affected are Katangskij, Nizhneudinskij and Ust’-Ilimskij. In contrast, and after excluding impacts like clear cuts, fires or insect calamities, there are areas with decreasing photosynthetic activity, also called “browning” of vegetation. Most notably affected areas are in Ust’Kutskij, Kirenskij and Bodajbinskij district. Together with the LST data, this multi-scale data set hasn’t full explored yet. It is planned to compare and extent this time-series with the MODIS monthly Vegetation Indices CMG (MOD13C2) product. Figure 2.10 shows coverage of Envisat ASAR/AP images for 2006 for the Irkutsk province. For future SAR acquisitions it is of special interest that the participant FSU is Principal Investigator for ALOS PALSAR (L-Band-SAR) and therefore entitled to receive data for the Irkutsk province. Clear-cut delineation has been performed on Resurs-DK and Meteor-3 M Russian satellites (Fig. 2.11). Monitor- RDSA data (down left) show very good discrimination of forest/non-forest areas. Map grid represents MODIS with CMG ground resolution.

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2 The Analysis of the Russian Forest Industry

IGBP Land Cover

Monthly Land Surface Temperature July 2006

Forest Fire distribution 2000-2005

VCF Percent Tree Cover

Annual Net Primary Productivity 2006

Trends Photosynthetic Activity (SPOT-VGT)

Fig. 2.9 Land surface parameter monitoring on the regional scale: the MODIS Product Suite

In contrast, Monitor-PSA data (down right) show significant striping artefacts that make an automated classification difficult. Figures 2.12 depicts information about Gas flares in Irkutsk province and their increase in Russia. Land classes according to the forest inventory are presented in Fig. 2.13 and sources of environmental risk in Fig. 2.14 and forest cover is shown in Fig. 2.15 by the area covered with the forest vegitation, including shrubs. As of January 1, 2004, the average forest cover in Irkutsk province was 81.1%. The deviation from this figure by administrative districts is large: from 25.7% in the Nukutsky district to 95.5% in the Ust’kutsky district. More than half (63%) of the province’s territory has a forest cover of over 80%, whereas 13% of the territory has from 70 to 80%, and 19% of the territory from 60 to 70%, and only 5% of the territory has less than 60% covered by forests. On average, there are 20.7 hectares of

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Fig. 2.10 Forest area change map 2000–2006. Top left: clearcut pattern, top right: burnt areas

forests per person, and taking into account shrubby thickets over 22 hectares, which is four times more than in the Russian Federation as a whole. In some areas, the availability of forests per resident ranges from 0.2 hectares (for example, in the Angarsk district together with the city of Angarsk) to 1949 hectares (in the Katanga district). In recent decades, there has been a progressive reduction in the area of forests in places with high population density due to the transfer of some of the lands for industrial and residential construction, agricultural production, gardening, and horticulture. Products of the Forest industry produced in Irkutsk province are in high demand, since the quality of production meets the requirements of Russian and foreign customers. So, according the Irkutsk customs service of Russia, in 2018 along, forest products have been exported from Irkutsk province for a total sum of 2.8 billion US dollars, which is 8.9% more than in 2017. The major share of exports is accounted for the supply of lumber, plywood, wood biofuels: 55.5%, and pulp and paper products contribute up to 44.5% in the export structure (Fig. 2.16). Timber export operations are carried out with more than 40 countries of the far and near abroad. The main consumers of regional timber products are the following countries: the people’s Republic of China, Japan, the Republic of Korea, Germany, Egypt, and the CIS countries. The average number of employees in LIC for 11 months of 2018 was 33,911, which is 6% more than in the same period of 2017. The average monthly salary of employees in the Forest industry for 11 months of 2018 was the following: 29,606. 9

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2 The Analysis of the Russian Forest Industry

Resurs-DK

Monitor-RDSA

Meteor-3M

Russian EO data coverage

Monitor-PSA

Fig. 2.11 Forest area change using Russian satellites Resurs-DK, Meteor-3 M (MSU-E device) and Monitor-E (RDSA and PSA devices)

rubles (105.9% if compared to 11 months of 2017) for wood processing and production of wood products, 56,767.4 rubles (105.1%) for the production of pulp, wood pulp, paper, cardboard and products made from them, 46,996.6 rubles (107.8%) for logging. According to preliminary data, tax revenues to the regional budget from forest enterprises in 2018 amounted to 10.3 billion rubles, which is 56.7% more if compared to year 2017. As part of the implementation of priority investment projects in the field of forest development, the volume of actual investment amounted to 78.142 billion rubles (since the beginning of the projects), 2,581 new jobs were created, and the consolidated budget of the Irkutsk province received more than 16.484 billion rubles of tax

2.2 A Case Study of Baikal Region

45

Fig. 2.12 Stable lights 2003 for Irkutsk region (top left) and for the Greater Irkutsk (top right) as well as three Gas Flares detected for districts Kirenskij and Zhigalovskij (Kovykta Gas Condensate Deposit). Down right: Increase of Gas Flares over Russia (Source http://www.ngdc.noaa.gov)

revenues. Currently, the region continues to implement 3 priority investment projects in the field of forest development [24]. The Lumber industry complex (LIC) of Irkutsk province is represented by logging, wood processing, pulp and paper and wood chemical industries. The LIC, including furniture manufacturing, employs more than 20% of the average annual number of workers in the manufacturing sector, which is twice the average for Russia. The share of people employed in logging was more than 17.5 thousand people. The area of the Irkutsk province is 767.9 thousand km2 (4.6% of the territory of the Russian Federation). This is the largest region of Russia that has no access to the sea; Irkutsk province occupies the second largest area among the regions of Siberia and the fifth largest in Russia. It borders the Krasnoyarsk Krai to the West, the Zabaikalsky Krai to the East, the Republic of Buryatia to the Southeast, the Republic of Tyva to the Southwest, and the Republic of Sakha (Yakutia) to the Northeast. The total length of the borders of the Irkutsk province exceeds 7240 km, of which more than 500 km is in the water area of lake Baikal. The Irkutsk province has not only unique quality and volume of forest resources, but also conditions for their use: a developed wood processing industry, energy and human resources, transport communications, as well as scientific potential [24]. According to the concept of development of the region’s LIC, the strategic vector is the priority expansion of deep chemical and forest-chemical processing of wood in order to involve small-scale, low-quality and soft-leaved wood in processing and

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2 The Analysis of the Russian Forest Industry

Fig. 2.13 Land classes in Irkutsk province according to the forest inventory

obtain highly profitable products. At the same time, one of the mandatory conditions for justifying the increase in the volume of lumber harvesting and transportation is their full compliance with the requirements of inexhaustible and permanent forest management and environmental protection. The main activities of the LIC in Irkutsk province are the following: • organization and signing of agreements on social and economic partnership at the level of the regional administration and municipalities of districts with enterprises of different forms of ownership; • creation of exchange warehouses and assistance in the organization of exchange trade of lumber;

2.2 A Case Study of Baikal Region

47

Fig. 2.14 Point like, linear, and areal sources of environmental risk in Irkutsk province

• attracting Russian and foreign capital to create production facilities for deep mechanical and wood chemical processing of wood in order to involve small-scale, low-quality, soft-leaved wood in processing; • development of small and medium-sized businesses based on small logging enterprises and wood processing enterprises. According to the Federal Sate statistics service for the Irkutsk province, as of January 1, 2019, 1,792 timber enterprises were registered in Irkutsk province only. The Irkutsk region is the leader among Russian regions in terms of timber harvesting volumes. In year 2018, the following main forest goods have been produced in Irkutsk province:

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2 The Analysis of the Russian Forest Industry

Fig. 2.15 Forest-land percentage as printed and scanned but not GIS-compatible map

Fig. 2.16 Veneer and plywood production in Irkutsk province

2.2 A Case Study of Baikal Region

49

• sawn timber (transported by the East Siberian Railways): 7,038.5 thousand m3 or 87.9% if compared to year 2017; • glued plywood: 211.7 thousand m3 or 101.7%; • pulp: 1,799.1 thousand tons or 101,9%; • cardboard: 198.6 thousand tons or 102.9%; • fuel pellets (pellets transported by the East Siberian Railways): 258 thousand tons or 116.2%. • 35.7 million m3 of wood was harvested in the forests of the Irkutsk province in 2018, including 31.1 million m3 by the forest rentees. The development of the estimated cutting area for all types of logging was 48.5%. • The share of the Lumber industry in the total volume of processing production in Irkutsk province in 2019 was 22.1% (of which wood processing and production of wood products: 9.8%, production of pulp, wood pulp, paper, cardboard and products made from them: 12.3%). • In year 2019, Irkutsk province produced the following main forest products: • sawn timber (transported via the East Siberian Railway) in the volume of 6,070.4 thousand m3 or 86.2% if compared to year 2018; • glued plywood: 193.2 thousand m3 or 91.3%; • pulp: 1,686.5 thousand tons or 93.7%; • card board: 98.4 thousand tons or 49.6% of (the company carried out reconstruction of the carton flow); • fuel pellets (pellets transported by the East Siberian Railways): 328.4 thousand tons or 127.3%. The average number of employees in the lumber industry in year 2019 was 32,737, which is 2.8% less than in year 2018. In 2019, the regional budget received tax payments in the amount of 7.7 billion rubles from the activities of forest enterprises, which is 74.9% compared to 2018. The main uses of forests in multi-forest regions, which include the Irkutsk province, are wood harvesting and processing. However, the transport and processing infrastructure of the region, as well as the social component of business, impose their own restrictions on the development of the Forest industry. Thus, non-core types of forest management, including harvesting of medicinal plants or hunting activities, and farming do not significantly affect the amount of fees, received for the forest usage, however they do play a certain role in ensuring employment. Therefore, the main provisions of the small business development Concept of the Irkutsk province have been used in determining the zones of promising small business development, when developing the Forest plan of Irkutsk province, which outlines the major ways of the Forest industry development. To determine the prospects for the development of LIC, the major significance is the volume of the estimated cutting area. The most significant operational reserves of wood are concentrated in the zone of the Baikal-Amur railway of the East Siberian railway, in Ust-Kutsky (12.9%), Kirensky (11.2% of regional volumes), Kazachinsko-Lensky (7.1%), Chunsky (7.1%) and Nizhneilimsky (7.1%) forest areas. Based on these data, of the priority types of the wood use, the degree of the

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LIC development and the availability of transport ways, experts suggest dividing the region into seven zones of forest development: Severnaya, Bratskaya, Zhigalovskaya, Irkutsk-Cheremkhovskaya, Sayan, Taishetskaya, Ust-Kutskaya. The most effective form of forest management is the transfer of forest land lots for rent to interested organizations and individuals via contests and auctions. The development of the rent relations contributes to the rational use of resources, ensures the coordination of economic interests between forest users and forestry authorities and the receipt of funds to the budget of the Federation entities.

2.2.1.1

Protection of Forests from Fires

There are 632 forest fires that had been registered in the forests located in the serviced lands of the forest fund of Irkutsk province since the beginning of the 2018 fire season. The area covered by fires was 88,130.2 ha, including 77,034.4 ha covered by forests. In addition, 128 forest fires were registered in the forest fire control zone with a total area of 225,061 ha, including 207,173.9 ha covered by forests. If compared to last year, the number of forest fires actually had decreased 1.7 times, and their area had decreased by 3.2 times. Last year, during the fire season, 1,061 fires were registered, damaging an area of 284,554.4 ha (including 235,925.2 ha covered by forests). The main causes of forest fires are the following in percentages: 49.2% are due to careless handling of fire by visitors; 41.1%, are from thunderstorms; 7.0%, are due to transition of forest fires from lands of other categories; and 2.7%, are due to other reasons. The fire situation in Irkutsk province is monitored both by ground services and by aerial and space monitoring. The latter is used in territories with vast arrays of loaches, stony placers, and other hard-to-reach areas in Taishet, Tulun, Ust-Kut and a number of other forest areas. The action plan for the protection of forests from fires for the period from 2016 to 2018 considers the following: construction of forest roads designed to protect forests from fires, with a length of 974 km; reconstruction of over 1963 km of forest roads designed to protect forests from fires; laying of glades, fire breaks, the arrangement of mineralized strips against fires, over 2983 km; clearing of glades, fire breaks and fire mineralized strips and their updating, 3256 km; carrying out of preventive controlled fire-fighting burning of brushwood, forest litter and other forest combustible materials on an area of 24,456 ha; creating and maintaining fire barriers with a length of 20.2 km; organizing and maintaining Fire Chemical Stations (FChS), which are specialized division of forestry, equipped with forest fire equipment, vehicles, extinguishing equipment and specially trained teams (brigades) of forest firefighters, in the amount of 71 units. However, one of the most acute problems in this area remains the lack of personnel for firefighters and the low level of organizational interaction between the heads of municipalities, various departments and organizations involved in extinguishing

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Table 2.6 Work plan for the forest restoration in Irkutsk province in 2016–2018 Name of the activity

2016

2017

2018

Total for planned period

Artificial reforestation (recreation of forest crops), ha

8000

8000

8000

24 000

Combined reforestation, ha

1625

1625

1625

4875

Promotion of natural reforestation, ha, including the following

69475

69475

69475

208425

• Conservation of undergrowth 53559 and agrotechnical care of it, ha 15916 • Soil surface mineralization, ha 4363 • Seeds procurement, kg

53559 15916 4363

53559 15916 4363

1607 4748 13089

Cultivation of planting material, 16601,7 seedlings, in thousand pieces

16601,7

16601,7

49805,1

Soil preparation for forest crops, 8000 ha

8000

8000

24000

forest fires. The mayors of territories should be like masters regardless of the presence of Federal or other organizations and enterprises on the district lands. There is the need to patrol the places of mass recreation and recreational activities using unmanned aerial vehicles during the fire season too. In addition, the Federal forestry Agency of the Russian Federation has to allocate additional funding to strengthen and expand the material and technical base of the regional fire service, in particular, to create three new types of FChS in Osinsky, Nizhneudinsky and Chunsky districts. It has been also decided to strengthen the group of the airborne forest fire service of the Federal budget institution “Avialesokhrana” by increasing the number of paratroopers up to 500 people. The work to strengthen coordination between departments, organizations, enterprises, forest protection officers and volunteers in extinguishing forest fires has to be realized soon.

2.2.1.2

Reforestation Activities in Irkutsk Province

In fact, in 2018, reforestation was carried out on an area of 122.8 thousand hectares, including artificial 13.5 thousand hectares (or 117% of the annual volume). There were 52 school forest districts with more than 1,100 students operating in year 2018, “year of the volunteer” in Irkutsk province, under the leadership of the Ministry of the Forest complex of Irkutsk province and the Center for the development of additional education of children of Irkutsk province, in order to attract public attention to the problems of forest protection and reproduction and to foster a careful attitude to forests. The Ministry of the Forest complex of Irkutsk province held the following promotions and competitions in 2018: “Forest pain”, “Take care of the forest beauty”, “Children about the forests”, “Let’s keep the forests alive”, “Forests of the native land”, “Spruce»; “Youth of the Baikal region against fires”; “Life grows with you”, “Save the forests of the Baikal region”, “Live, forest!” and other. Please also see Table 2.6 with the relevant data for years 2016–2018.

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2 The Analysis of the Russian Forest Industry

Regional authorities had planned the volume of forest reproduction within the framework of the subprogram “Preservation, protection and reproduction of forests of Irkutsk province for years 2014–2018”, which is an integral part of the State program of Irkutsk province “Environmental Protection”. However, serious fires that raged in Siberia back in 2015 made adjustments to these plans. According to official data, 1604 fires were registered only in Irkutsk province, where the fire season of 2015 began in April, with the total area of burned forests exceeding 522 thousand hectares. Irkutsk province had become the leader among the regions of the Russian Federation in terms of reforestation, where the reforestation work was carried out on a total area of 100 thousand hectares. Every year the reforestation activities are carried out in Russia. For example, only in the fall of 2015, acting head of the Forestry agency of Irkutsk province stated that the existing base of forest nurseries allows to grow the necessary amount of planting material for creating forest crops: 35.7 million coniferous seedlings were grown, of which 14.8 million were planted in 2015, and the remaining seedlings were planted in 2016. However, when planning the volume of reforestation in the future, experts urge to take into account the economic situation in the country and the fact that funds from the Federal budget for forest reproduction are insignificant and are being reduced from year to year. According to preliminary plans of the profile Forestry agency of Irkutsk province the volume of reforestation in the region is proposed to be fixed at the level of 2012. The Federal center can partially correct the situation. Rosleskhoz (Federal Forestry Agency [FFA]) has published a draft of a three-year program for restoring the forests of lake Baikal, which was developed jointly with the forest services of the Republic of Buryatia, the Irkutsk region and Zabaikalsky Krai. Almost every year the entire territory damaged by forest fires undergo a forest pathology examination, and continuous sanitary logging. FFA reports that in the future, reforestation works will begin on these sites, which include clearing and uprooting of the areas, tillage, and creating forest crops.

2.2.1.3

State Forest Supervision

As part of the Federal State forest supervision (forest protection) and Federal State fire supervision 27,943 inspections were conducted in forests only in year 2018, including 17,451 checks on forest users compliance with mandatory requirements of forest legislation and terms of contracts, 8,076 patrols of forest areas were conducted, 1,634 planned (raid) inspections of forest areas, including 1,850 inspections together with law enforcement officers. In order to reduce the number of cases and volumes of illegally harvested wood, as well as the possibility of applying additional measures to control the harvesting and turnover of wood, a pilot project is being implemented on the territory of the Irkutsk province to mark all harvested wood. The government of the Irkutsk province has ratified the Law No. 100-OZ and Law of Irkutsk province No. 133-OZ “About

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53

administrative responsibility for failure to follow the requirements for organization of points of reception, processing and shipment of wood in Irkutsk province” (hereinafter—the Law No. 133-OZ). Since the adoption of the law No. 100-OZ, 1,812 reception points have been registered in Irkutsk province only, which have submitted more than 56,000 reports on accepted, processed and shipped wood. To implement the pilot project, the government of the Irkutsk province has purchased identification cards in the amount of 1,491 thousand pieces. Issuance of which to loggers is carried out since August 25, 2017. Currently, 879,992 identification cards have been issued, accompanied by more than 20.7 million cubic meters of wood exported to the points from the wood harvesting sites. In addition, a new type of identification card has been introduced in Irkutsk province, which contains complete information about the transported wood, in accordance with the Law No. 415-FZ. This technology is undergoing the final stage of testing at the Cheremkhovsky branch of the Forestry enterprise of Irkutsk province. 1,413 verification activities were carried out, including 53 unscheduled field inspections by specialists of the Ministry’s territorial departments on various grounds. For the entire period of operation of Law No. 100-OZ, 1,032 protocols on administrative responsibility for non-compliance with mandatory requirements for organizing the activities of points were drawn up. The world court issued 733 decisions, of which 233 administrative fines in the amount of 36.315 million rubles, 36 oral comments, 197 warnings, and 267 administrative proceedings were terminated due to the expiration of the period for bringing to administrative responsibility. The budget of Irkutsk province collected 7,045 million rubles.

2.2.1.4

The Leading Forest Industry Enterprises of Irkutsk Province

At present, more than 2000 enterprises operate in the lumber industry in Irkutsk province, including 7 large (with more than 250 employees) and 5 medium-sized (with more than 100 employees). The rest of the enterprises belong to the category of small ones, the number of employees does not exceed 100 people, or they are noncore enterprises engaged in lumber production as an additional type of activity. Table 2.7 shows the list of leading enterprises of the Forest industry in Irkutsk province. Now we will briefly present the most successful enterprises of the LIC in Irkutsk province. The most successful enterrises in the Forest industry of Irkutsk province are the following: 1.

Branch of Ilim Group, JSC in Bratsk: Ilim group is the leader of the Russian pulp and paper industry. The volume of commercial pulp produced at the plants in Koryazhma, Bratsk and Ust-Ilimsk is 66% of the total production of Russian pulp; 17 thousand people work at the enterprises of the Ilim Group. The strategic partner of the Ilim group and the owner of 50% of its shares is the world’s largest pulp and paper company International Paper (USA). Ilim group’s enterprises are

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2 The Analysis of the Russian Forest Industry

Table 2.7 List of leading enterprises in Irkutsk province LPC #

Name

Main activity

Address

1

Veles, JSC

Lumber production

666,780, Irkutsk province, Ust-Kut, Geologicheskaya str., 32

2

TM Baikal, Ltd

Lumber production

665,420, Irkutsk province, g. Svirsk, Profsoyznaya str., 1

3

Direct-2000, Ltd

Lumber production, Forest export

Irkutsk province, Ust-Ilimsky district, Zheleznodorozhny, Pionerskaya str., 22/2

4

Ldk Igirma, CJSC

Sawing and planing of wood

664,007, Irkutsk, Karl Marx str., 40, Floor 5

5

Ilim Bratsk, Ltd

Production of plywood, fiberboard

Irkutsk province, g. Bratsk, industrial site of BFIC

6

Lesprom, Ltd

Wholesale trade of timber, ction materials and sanitary equipment

665,700, Irkutsk province, Bratsk, Industrial District P 06, Bld. 42/1

7

Lesresurs, Ltd

Sawing and planing of wood

664,022, Irkutsk, Kozhova str., bld. 11/1, of. 4–1

8

Madera, CJSC

Production of timber and lumber, wood export

Irkutsk, Polyarnaya str., 201A, a / z 78

9

Niksvic, Ltd

Lumber production

Irkutsk region, Ust-Ilim, Ust-Ilim highway, house 17

10 Novoles, LTD

Sawing and planing of wood

666,677, Irkutsk province,Ust-Ilim, Ust-Ilim highway, house 19

11 Osetrovskaya LDK, Ltd

Sawing and planing of wood

666,781, Irkutsk province, Ust-Kut, Kirov str., 136-41

12 Rusforest Magistralny, Ltd

Sawing and planing of wood

666,505, Irkutsk province, Kazachinsko-Lensky district, Magistralny, Zavodskaya str., house 2/5

13 Severny Les, Ltd

Lumber production

Irkutsk province, Ust-Ilimsk, Mira Ave., h. 69, ap. 64

14 Sibirskie Terema, Ltd

Production of wooden glued structures for low-rise housing construction

Irkutsk province, Shelekhov, Stroiteley & Montazhnikov ave., h. 15

15 Sibirconsult, Ltd

Preparation for certification

Irkutsk province, Bratsk, Pionerskaya str., 15a, p.o.box 655

16 Sibmix International, Ltd

Lumber production

665,104, Irkutsk province, Nizhneudinsk, Vostochny perezd str., 13

17 Spetsservice, Ltd

Production of lumber and molded products from larch

Irkutsk province, Angarsk, p.o.box 5932 (continued)

2.2 A Case Study of Baikal Region

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Table 2.7 (continued) #

Name

Main activity

Address

18 Studia Lesa, Ltd

Wooden houses construction, Irkutsk province, Irkutsk, manufacturing of products, Polyarnaya str., TSLK207 including furniture from valuable breeds of wood

19 Tslk, Ltd

Sawing and planing of wood

664,011, Irkutsk, Gorkogo str., h. 31, of. 61

20 Usolsky Playwood Mill, Ltd Manufacturing of plywood, particle Board, parquet

Irkutsk province, Usolie Siberian, Molotov str., 103

21 Ust’-Ilimsky LIC, JSC Pulp and paper and wood (Branch of Ilim Group, JSC) chemical industries 22. The PAC

Irkutsk province, Ust-Ilim, p.o. box 353

22 Uspekh, Ltd

Lumber production, production of untreated wooden railroad sleepers

665,702, Irkutsk province, g. Bratsk, Padun district, Gidrostroiteley str., h. 55, of. 303

23 Chunales, Ltd

Harvesting, Lumber production

Irkutsk province, Chunsky district, Chunsky village, Severny microdistrict

24 Chunsky timber processing plant, JSC

Logging, production of timber and lumber, joinery and mouldings

Irkutsk province, Chunsky village, Frunze str., 15

25 Exportles Company, Ltd

Lumber production, glued beams moldings

Irkutsk province, Bratsk, p.o.box 534

26 Yunik, Ltd

Sale of wood processing equipment and tools

Irkutsk province, Irkutsk, Traktovaya str., 24

located in Leningrad, Arkhangelsk and Irkutsk regions. The branch in Bratsk city is the legal successor of the soviet Bratsk LIC, where the first launch of bleached coniferous and cardboard lines took place in 1965, and construction continued in the 1970s. Currently, the Ilim plant in Bratsk produces sulfate bleached and unbleached coniferous and deciduous pulp (more than 22% of all Russian commercial pulp), container cardboard for flat layers of corrugated cardboard (kraftliner), as well as wood chemical processing products. The main markets are China (up to 80% of total exports) and Southeast Asia. The company’s production capacities are capable to process up to 7 million m3 of wood per year. The total annual output of pulp and paper products is 724 thousand tons. The company has achieved such volumes of production after the implementation of the “Big Bratsk” project under the “Ilim-2014” investment program. By investing over than $800 million, the Ilim group has created the largest pulp production in the world on the basis of the operating enterprise. The total annual production volume in Bratsk after the new plant reaches its designed capacity will exceed 1 million tons. The main characteristics of the project include equipping the

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2 The Analysis of the Russian Forest Industry

enterprise with the most modern equipment, using the best available technologies, reducing the burden on the environment, and creating new jobs. There is a division of the Ilim group in Bratsk district of the Irkutsk province, established on the basis of the Department of logging and timber rafting, which is engaged in the forest supply of the Bratsk enterprise. The total annual volume of own logging is about 2.7 million m3 . The quality, environmental and industrial safety management systems of the Bratsk branch meet international standards ISO 9001, ISO 14001 and OHSAS 18,001. The company’s products are certified to meet the international requirements of the Forest Stewardship Council. Ilim Timber, in Bratsk and Ust’-Ilimsk: The Ilim Timber company, which production assets are concentrated in Russia, Germany, and United States, has been listed among the top ten largest sawmills in the world for the third year. The total production capacity of its enterprises is 3.9 million m3 of lumber and 200 thousand m3 of plywood per year, and the number of employees is about 4 thousand people. The company’s head office is located in Saint Petersburg. The company’s products are supplied to the domestic market of Russia, Europe, the middle East, North Africa, the Asia–Pacific region, and the Chinese market (Ilim Timber is the largest Russian exporter of lumber to the market of this country). There are three enterprises of the company Ilim Timber in the territory of Irkutsk province, and it has its own forest resource base to meet the needs of enterprises. The lumber and plywood produced in Russia are sold under the “Taiga” and “Belka” brands. The raw material for them is the wood of Angara pine and Siberian larch. The high quality of Angara pine is well known all over the world. First, it has high density and strength of wood, and secondly, the ordered structure: no roll and tilt of the fibers. Angara pine wood is an absolutely ecologically clean construction material with antibacterial properties. Angara pine is perfectly amenable to mechanical processing. It does not crack when drying, and perfectly keeps the warmth inside. The Siberian larch has a special density (650 kg/m3 ) and durability. The larch wood is one of the best materials in terms of resistance to external influences. Due to the combination of high density and high resin content, this breed is resistant to rot. There are 12 shades in the color scheme of this larch, and, in this regard, it is superior to such breeds as oak, beech, ash, maple. The range of its colors is from light yellow to orange and golden-brown shades, its beautiful texture and silky shine of the wood let not to apply additional finishing and processing. There are the following successful enterprises of the company Ilim Timber in the territory of Irkutsk province, where more than 3 thousand people are employed every year: (1)

(2)

Ust’-Ilimskiy LDZ: Products are softwood lumber of the Taiga brand. The designed capacity is 600 thousand m3 per year. The products are exported to Europe, to the Middle East, North Africa, China, Japan, USA, and Canada. Ilim Bratsk LDZ: Products are softwood lumber of the Belka brand, technological chips for the pulp and paper industry. The designed capacity is 400

2.2 A Case Study of Baikal Region

(3)

57

thousand m3 of lumber per year. The products are exported to Western Europe, the Middle East and North Africa. Uspekh, LTD in Bratsk: The industrial and commercial combine (ICC) Uspekh (Success) was established in May 2010 on the basis of the Bratsk factory of joinery. The company produces window blocks made of three-layer bars with double-glazed windows (up to 5000 m2 per year), door blocks of paneled construction made of solid wood (up to 4000 m2 per year), mouldings (clapboard, skirting board, trim, etc.—up to 3000 m3 per year), carpentry and furniture boards (600 m3 per year), lumber (up to 20,000 m3 per year).

The plant includes the following: sawmill with processing capacity of up to 15 000 m3 softwood lumber per year; warehouse of roundwood with a volume of simultaneous storage of 5000 m3 ; two drying facilities with a single load volume of 300 and 220 m3 of lumber correspondently; storage and sorting of timber with the volume of simultaneous storage of up to 2500 m3 ); the processing workshop with the total area of 7800 m2 . The procurement section of the deep processing shop is equipped with two Cosmec SM 400 multi-saw machines made in Italy, a Weinig Hydromat 23C planing machine made in Germany, four Bottene R400 miter machines made in Italy, a GreCon Dimter Combipact splice line made in Germany, and with hot gluing presses too. The finishing work for ready joinery items, such as double-chamber double-glazed windows complying to European standards, including the installation of accessories, is carried out at the site of repeated mechanical processing. Painting is performed with weather-resistant paints Zowosan made in Sweden and with polyurethane paint materials Hesse made in Germany. The plant carries out main volumes of deliveries by automobile roads in 20-ton containers. There are also access railway tracks, which makes it possible to ship products in closed and open wagons. 2.

Lesresurs, Ltd. in Irkutsk: Lesresurs plant was established on the production base of Igirma-Tairiku company, which became one of the first joint RussianJapanese enterprises in Eastern Siberia in the late 1980s and supplied Angara pine lumber to Japan. In early 2000s, Igirma-Tairiku went bankrupt, and its property was bought out by Lesresurs. Ltd. The specifics of the former company’s work had been saved. Production is still focused mainly on the Japanese market (Lesresurs, Ltd. contributes more than 10% of the total volume of deliveries of Russian products to Japan). One of the main types of products is “taruki”, a bar with a cross section of 30 by 40 mm, which is used in traditional Japanese housing construction.

In 2011, the new owner of the plant invested more than 100 million rubles to repair and replace old equipment. In the coming years, the company’s management intends to maintain approximately the same annual level of investment. Lesresurs has its own forest resource base with a harvesting volume of 350 thousand m3 per year. At the end of 2011, the company received the FSC forest management and internal supply chain certificate.

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2 The Analysis of the Russian Forest Industry

The company processes 330–350 thousand m3 of wood per year and produces 155–160 thousand m3 of lumber, of which 60% is dry products. In addition to Japan, the company ships products to Europe, Egypt, and Uzbekistan. In 2012, Lesresurs LTD was awarded the IX all-Russian timber industry award Lesprom Awards in the category “Exporter of the year in the wood processing and sawmilling segment”. 3.

Lesprom, Ltd. in Ust’-Ilimsk: Lesprom is engaged in logging, production and supply of forest products since 1988. Since 2002, the company has rented forest fund with an estimated volume of use of 176.3 thousand m3 per year. The wood harvested and used is mainly Angara pine and Siberian larch. Their own forest fund provides 100% of raw materials for the lumber production.

The main types of products are planed lumber for Japanese housing construction, profile products for interior and exterior decoration, edged lumber, sawn timber. The equipment of the Italian companies Artiglio and Storti is used for the production of edged lumber. All lumber is dried to a humidity of 10–14% in convective drying chambers of European manufacturers Muehlboeck Vanicek made in Austria, and Nardi (Italy). Most of the edged board is used as a semi-finished product for the production of planed products, which are produced on the universal equipment of Michael Weining AG (Germany). Lesprom’s products are supplied to Japan and are in demand in the Russian market too. The successful development of the company is related to loading of the available capacities and organization of a new type of activity, which is production of OSB plates. The latter project is currently at the stage of attracting more investments. 4.

Chunsky Lumber Processing Plant, JSC in Chunsky village: Chunsky LPP was established back in 1946. The JSC company rents forest land plots in Chunsky forest district and performs a full cycle of work: from raw material harvesting to the production of lumber, joinery and mouldings. The plant has undergone a large-scale reconstruction in the mid-2000s, equipment has been purchased, and new wood processing lines have been built. The products are exported to Egypt, Germany, Japan, and China.

According to data provided by Chunsky LPP, the volume of lumber sales amounted to 370 million rubles for the first nine months of 2012, which is slightly less than in the same period of the previous year in the amount of 427 million rubles. According to the rent agreement with the territorial administration of the Forestry agency of Irkutsk province, the estimated harvesting area of JSC Chunsky LPP is 300 thousand meters. 5.

TM Baikal, LTD in Svirsk: The joint Russian—Japanese venture TM Baikal has been established in May 1991. It was founded by the Ministry of State property of the Russian Federation and two Japanese companies: Tajima Lamber Co., Ltd. and Mitsui & Co., Ltd. The possibility of delivering timber by water has been taken into account when choosing the site near Svirsk, as well as the presence of a railway line connected to the Trans-Siberian railway. The company has shipped the first batch of products to Japan already in March 1994.

2.2 A Case Study of Baikal Region

59

Currently, the company processes about 250 thousand m3 of roundwood per year (raw wood is purchased from logging organizations in Irkutsk province) and produces 120–125 thousand m3 of lumber from it. Two-thirds of the production is dry lumber and almost all products are exported to Japan. There are single deliveries to Turkey, China, and Syria too. The construction workers in Japan are taking TM Baikal timber without any additional treatment. The company’s sawing accuracy is of up to 0.5 mm in thickness and width along the entire length of the sawed wood. The level of automation and mechanization of the production process is 95% according to TM Baikal officials. The basic assortment is represented by “taruki” and “dobuchi”, the timber used in Japanese housing construction. If highlighting the company’s equipment, they have RB debarking machine made by Fuji Kogyo (Japan), the two-saw vertical belt machine TC from Kikukawa (Japan), the high-speed four-saw edging machine OM made by Ahlstrom (Finland), the NS sorting line from Newnes (Canada), and the Signode strapping machine (Canada). The company also operates 18 drying chambers with the total volume of 1.5 thousand m3 of a single load, manufactured by Muehlboeck Vanicek (Austria), Shin-Shiba (Japan) and Huai (China). The delivery is carried out mainly by gondola railcars to port Nakhodka, and then by ships by the sea. Some dry products are shipped in containers. 6.

Madera, CJSC in Irkutsk: The Madera company produces lumber (edged board, clapboard, lining, plank, imitation timber, decking, etc.), using Siberian larch as the raw material, the wood of which is strong and durable. The main office of the company is located in Irkutsk, and a branch has started operating in Moscow.

Madera CJSC consists of two companies: Beregovoe, Ltd. and Siberian processing company, Ltd. Beregovoe is an enterprise for the wood harvesting in rented forests in Osinsky district. The delivery of roundwood is carried out by own balance wagons to the address of the Siberian processing company located in Irkutsk. The company works using Swedish equipment made by AriWislanda company, a disk automatic sawmill line, which performs the full production process from the raw materials feeding to the sawing line to packaging the finished lumber. The annual volume of roundwood sawing is 300 thousand m3 per year. One-time volume of the used drying chambers Secea made in Italy is 3500 m3 . Madera products are delivered to Japan, USA, and European countries. 7.

Sibirskie Terema, Ltd. (Siberian towers) in Shelekhov: The Sibirskie Terema company is a part of the large construction company East Siberian plant of reinforced concrete structures. Company profile is production of glued beams and products made from it.

The raw material is edged board made of Angara pine, which grows in the North of Irkutsk province. Its wood has a very dense structure and is not susceptible to rot. According to company officials, the production uses AkzoNobel (Sweden) and Klebchemie (Germany) adhesive systems that meet high health safety requirements.

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2 The Analysis of the Russian Forest Industry

They can produce cross-section bars that meet the requirements of an individual orders. The choice depends on the purpose of the building and the climatic conditions of the region in which it will be used. In particular, for Irkutsk province, Vladivostok and Sakhalin regions, the recommended thickness of glued beams for residential buildings is 210–230 mm. The company not only sells glued beams, but makes structures from them for lowrise housing construction. Another area of activity is carpentry. These are wooden doors and arches, stairs, furniture, mouldings. The blanks from the spliced array of Angara pine, larch, beech, ash and other species are used in carpentry production. The geography of sales of products of Sibirskie Terema, Ltd is spread mostly to Moscow, Tuapse, Perm, Saratov, Irkutsk, Baikal region, Vladivostok, etc. 8.

Fanerny Kombinat, Ltd. (Plywood plant) in Usolye-Sibirskoe: The plant is based on the oldest wood processing enterprise in Irkutsk prpvince, Baikal Plywood and Match Factory. The main products of Fanerny Kombinat, Ltd. are softwood plywood of the FSF brand, characterized by increased water resistance.

FSF coniferous plywood is intended for use in aggressive environments with changing humidity and temperature. In addition to processing thin layers of veneer with special glue, coniferous wood is full of resin. This ensures a high degree of resistance of plywood to fungal infection and rot. Coniferous plywood is light in weight. It is 25% lighter than birch plywood, and it retains almost the same strength characteristics. In addition, the plant produces construction chipboard and parquet board made of solid Angara larch and bamboo with UV-curing varnish Votteler (Germany). Products are delivered by rail in 5-, 20-and 40-ton containers and in covered wagons, as well as by road trucks. 9.

Russkaya Lesnaya Gruppa (Russian Forest Group), Ltd. is an association of companies that produce lumber and fuel pellets, including SEL–Tairiku joint venture, Igirma LDK and TRANS-Siberian forest company. The company’s history has begun back in 2004 with the launch of the joint Russian-Japanese plant JV “SEL-Tairiku” for processing sawn wood with a diameter of 12–26 cm and the supply of lumber to the Japanese market. In year 2015, 14% (115 thousand. m3 ) of manufactured products sold on the territory of Russia, and 86% (over 700 thousand. m3 ) sold outside the country (35%—to China, 30%— to MENA countries (middle East and North Africa), 8%—to Japan, 6%—to Europe, 4%—to Korea, 3%—to the CIS countries [25].

The history of JSC “LDK Igirma “(part of the company Russian Forest Group) has started with the construction of the plant back in 2006. In 2008 the company released the first trial batch of products, and in year 2011 the official launch of production line has happened. The plant “LDK Igirma” has been included by the order of EMERCOM of Russia into the list of the priority investment projects in forest development, as well as in the “Strategy for socio-economic development of Siberia till 2020”.

2.2 A Case Study of Baikal Region

61

The plant specializes in processing wood raw materials of large diameter—from 220 to 500 mm. The wood processing equipment of the world’s leading manufacturers, such as Linck, Valon Kone, Springer, WSAB, allows processing of 700 thousand m3 of raw materials annually and producing 350 thousand m3 of lumber. The company’s priorities are the development of technologies for deep wood processing and waste-free production. Wood chips are sent to pulp and paper mills for use as raw materials, bark is used in the boiler room to heat the sawmill and the New Igirma village. The structure of deliveries is dominated by exports with geography to the following countries: Japan, China, Egypt, Europe and the CIS, some products are also delivered to the regions of the Russian Federation. SEL-Tairiku and Sibexportles-Tairiku, Ltd. is part of the Russian Forest Group company in village New Igirma in Nizhneilimsky district. SAL-Tairiku and Sibexportles-Tairiku have been established in 2004 as joint Russian-Japanese enterprises. In 2006 the plant reached its design capacity, and in 2010–2011 it underwent modernization. It specializes in processing of fine-grained raw materials with a diameter from 80 to 260 mm. The annual capacity of the plant for processing raw materials is 390 thousand m3 per year and for the production of lumber 150 thousand m3 . The compliance with international standards is confirmed by the FSC certificate. According to official information, the company has installed equipment from Veisto, Tekmawood Jartek Group, and Ledinek. 10.

TSLK, Ltd. (Trans-Siberian Forest Company) in Irkutsk, and a separate division of TSLK Ltd. “LDK-Ust-Kut” in Ust-Kut: Construction of the enterprise had begun in 2008, and the official launch of production took place in 2012. By the Order of the Ministry of Industry and Energy of the Russian Federation, TSLK was included in the list of priority national investment projects in the field of forest development.

The company operates with German equipment: the Esterer WD GmbH & Co sawmill line, the round timber sorting line and the sawmill feed equipment Holtec GmbH & Co. KG, the equipment for crushing lump waste and removing bulk sawmill waste by Vecoplan Maschinenfabrik GmbH & Co, as well as the raw and dry lumber sorting lines and drying chambers by Jartek Oy (Finland) and boiler plants manufactured by Polytechnic Luft -und Feuerungstechnik GmbH (Austria). The capacity of the plant for processing raw materials is 1 million m3 per year, the volume of production of dry high-quality lumber is up to 500 thousand m3 per year. 11.

RusForest Magistralny, Ltd. in Magistralny village of Kazachinsko-Lensky district: The company has been operating since 2008. The rented forest plots are located in the Kazachinsko-Lensky district of Irkutsk province. The estimated cutting area is 958,700 m3 .

In 2011, the project “Construction of a timber processing plant for the production of dry lumber” was included in the list of priority projects in the field of forest development by the Order of the Ministry of Industry and Energy of Russia. Currently,

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2 The Analysis of the Russian Forest Industry

according to official data of the company, the annual capacity of the sawmill, built in 2011, is 90 thousand m3 of lumber per year. The processing of harvested wood is provided with the maximum use of wood pulp. The bark and wood waste generated during the technological process is used to meet the technological needs and energy needs of production. In 2015, the company launched a project to build a plant for the production of wood pellets. The capacity of the enterprise should be 30 thousand tons per year, and the production of wood pellets is currently being certified according to the SBP system.Over the past few years, the region’s LIC enterprises listed above, have implemented major investment projects in Irkutsk province and invested millions of dollars in the region’s economy. The implementation of investment projects will allow to increase the volume of forest management, to ensure deep processing of the harvested wood and the production of high quality timber for markets in the region and neighboring regions to increase exports of products with high added value, significantly reduce the supply of round lumber for export, to increase income taxes at the Federal and regional budgets from forests, as it stated in the Forest plan of Irkutsk province. There are six priority investment projects in the field of forest development which are implemented in Irkutsk province: Sawmill and wood processing complex in New Igirma village of Nizhneilimsky district. The investor is LDK Igirma, CJSC with investment volume of 3 billion rubles. Main products are sawn lumber, with annual production volume of 434,000 m3 . The size of the estimated cutting area is 413 thousand m3 . The volume of consumed raw materials is one million m3 . “Big Bratsk” is the enterprise for the production of softwood pulp. The investor is Ilim Group, OJSC with an investment volume of $700 million. The productivity is 720 thousand tons of commercial bleached softwood pulp per year. The production of large-format glued laminated softwood plywood. The investor is “Osetrovsky LDK”, Ltd. with investment volume of 1,938 million rubles. The main products are plywood, the production volume is 100 thousand m3 per year. The size of the estimated cutting area and the volume of raw materials consumed is 787 thousand m3 . The production of biofuels made from renewable sources. The investor is East Siberian Plant of Biotechnologies, JSC. The investment volume is 1048 million rubles. The main products are pellets. The production volume is 106 thousand tons per year. The size of the estimated cutting area and the volume of raw materials consumed is 530 thousand m3 . The Sawmill and Wood Processing Complex. The investor is Trans-Siberian Forest Company, Ltd. The investment volume is 5887 million rubles. The main products are the following: lumber (500 thousand m3 per year), wooden structures (94 thousand m3 ), wooden houses (122 thousand m2 ), glued beams (100 thousand m3 ), OSB plates (300 thousand m3 ), pellets (160 thousand tons). the size of the estimated cutting area and the volume of raw materials consumed is 1971 thousand m3 . RusForest Magistralny Sawmill. The investor is RusForest Magistralny, Ltd. The volume of investments in timber processing is 600 million rubles and in logging 750

2.2 A Case Study of Baikal Region

63

million rubles. The main products are dry lumber (150 thousand m3 per year) and technological chips. The size of the estimated cutting area and the volume of raw materials consumed is 599.7 thousand m3 . Analysis of the activity of the LIC enterprises in 2020 allows us to state the fact that the dynamics of production indicators of most enterprises is negative. Thus, a decrease in production volumes is observed for the indicator “Wood harvesting” (both for whiplash and assorted logging). We assume that the reduction in logging volumes has been partly influenced by the Covid-19 pandemic and the financial crisis, which resulted in lower world prices for round timber and reduced demand from wood processing industries. However, the impact of the global crisis as a result of the pandemic was not the only reason for the decline in logging. According to experts, the dynamics of the “Wood harvesting” indicator was also affected by the transition to the rent form of forest management (provided for in the new Forest Code), which significantly complicated the procedure for getting access to forest resources. At the same time, despite difficult economic conditions, some enterprises of the region (Ilim-Timber, Ust-Ilimsky LDZ, Lesresurs, Ltd., Sibirskie Terema, etc.) have achieved an increase in logging and/or production. The development of the wood processing industries over the same period of time is characterized by multidirectional dynamics of indicators. Despite the low demand for sawmill products, both in domestic and foreign markets, sawn timber production had a steady positive growth rate, and by the end of the year there was a positive trend in the export of sawn timber and the production of joinery. However, many enterprises, especially small ones, show negative dynamics in the production of lumber and other types of the wood processed. Actually, there had been a decrease in the production of MDF and chipboards in 2020. The Reason for that, we assume, was a decrease in demand for furniture production, as well as a “chain reaction” of the crisis phenomena in the financial and manufacturing sectors of the world economy. The negative dynamics was also observed in the indicator “Number of employees”. Most of the timber industry enterprises in the region had reduced the staff. In total, more than 1,000 people were laid off in 2020, and only 125 were hired (data for the enterprises surveyed). The dynamics of financial indicators over the time period under study is negative too. Thus, the growth rate of commercial products at any of the enterprises did not reach the level of the previous year. In 2020, due to the difficult economic situation of the Forest industry, some timber companies were forced to reduce the salaries of their employees. At the same time, the reduction in average earnings was from 100 to 4761 rubles per employee. Meanwhile, some enterprises not only reduced wages, but also managed to significantly increase it by 2–5 thousand rubles per employee. Thus, the average salary for the timber industry in the region in 2020. The analysis of the financial results of large and medium-sized forest enterprises in the region for year 2020 revealed the presence of losses for most of the surveyed enterprises: only 4 enterprises are profitable out of 11 enterprises, (their total profit

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for the year was 75,955 thousand rubles), 7 enterprises ended the financial year with losses totaling 477,349 thousand rubles. Thus, the overall financial result of large and medium-sized timber enterprises, and, consequently, the average industry result, is negative. During the previous years (2014–2019), the financial results of LIC enterprises had been the same. Over the past five years, the number of large and medium timber enterprises decreased from 17 to 11, while the number of profitable enterprises decreased by 4 and unprofitable by 2 enterprises. In monetary terms, the amount of loss is quite high and tends to grow. Table 2.8 sums the production of basic materials in the Forest industry of Irkutsk province for years 2017–2018. Table 2.8 Production of basic materials in the Forest industry of Irkutsk province for years 2017– 2018 Year indicator

Production change in % 2017 in thousand m3 2018 in thousand m3 2018–2017 in percent

Round untreated wood

26,712.48

21,863.22

−18.15

The coniferous lumber

23,070.06

18,157.22

−21.30

Round softwood timber for 14,684.53 sawing and planing

10,382.48

−29.30

4244.83

−11.72

Round timber of coniferous breeds for peeling

29.26

Round timber of 4808.61 coniferous species for the production of cellulose and wood pulp (balances) Softwood logs for piles of hydraulic structures and bridge elements

−100.00

0.07

Softwood timber for cutting into the mine rack

4

Construction logs and logs for goods made from softwood

0,72

The timber hardwood, with 3427.24 the exception of tropical

3405.08

−0.65

Round hardwoods for sawing and planing

413.84

+60.36

258.07

Round timber of deciduous species for the production of cellulose and wood pulp (balances) Timber hardwoods for use in the round shape (other)

2654.16

14.31

61.16

+327.39

2.2 A Case Study of Baikal Region

65

More than 800 companies had been registered and operated in the field of wood processing only in Irkutsk province at the end of 2018.However their number has decreased later. For many decades, the following types of logging operations have been carried out in Irkutsk province, presented in Table 2.9 with production volumes up to 2011 by main producers. The “UI DZ”, Ltd., which operates in the region too for many years, and is engaged in the production of particle boards, has shown the following dynamics of production presented in Table 2.10. The furniture and household items made from wood, turpentine, gum, wood, sulphate, sulphite, pine oil and similar products, charcoal, fuel wood, wood chips and wood chips are produced in Baikal region, as well as plywood, panels, wood veneered and similar materials from layered wood other, wood chip boards and similar boards of wood or other ligneous densified materials. Other products made in the region are: wood, in blocks, plates, strips or shaped articles, wood pulp, obtained by mechanical means; polycellulose wood; pulp of other fibrous materials in addition to wood and more. There are more than 750 active enterprises involved in wood processing only in the territory of Irkutsk province The main activities of the wood processing enterprises and the number of their activities are presented in Table 2.11. The manufacture of pulp and timber for pulp production is presented in Table 2.12. According to Rosstat (Russian Statistics Department) data, from 2010 to 2018, the regional Forest industry also produced the following pulp and other products made of wood presented in Tables 2.13 and 2.14. The following pulp materials such wood pulp, cellulose and other were produced in Baikal region since year 2017 and in 2018 are presented in Table 2.15. Wood pulp and cellulose from other fibrous materials have been produced in Irkutsk province since 2010 till 2013, in the following volumes: 1,660,938, 1,715,430, 1,715,742, 1,592,224 tons, each year respectively. The range and volume of production of cellulose products significantly varies and is presented in the Table B.1 in Appendix B. Statistics on the production of logs from different types of wood in the assortment is presented in the Table B.2 in Appendix B. Volumes of production of wooden houses, log cabins, banya houses and sets of parts for standard houses with walls made of local building materials are presented in the Table B.3 in Appendix B too. The assortment and volumes of cardboard products produced in Irkutsk province are shown in the Table B.4 in Appendix B. The production of paper in year 2000 till year 2018 inclusively is presented in the Table B.5. The data on the production of wood chips in Irkutsk province is presented in Table B.6 and the furniture production in Table B.7. The consumption of basic lumber materials by residents of Irkutsk province according to official data is presented in the Table B.8 in Appendix B too. Today the drivers of the industry’s growth in Irkutsk province are 11 priority investment projects in the field of forest development with a total investment of 105.2 billion rubles. Four priority projects have already been implemented, more than 3.2 thousand new jobs have been created. Seven more projects will be implemented

26.6

6.5

6.5

Business wood

Lumber. including lumber from raw materials

Softwood lumber

6.4

8.9

Softwood timber for pulp and wood pulp production

Technological wood chips for the production of pulp and wood pulp from sawmill and woodworking waste

Export lumber

17.7

100.4

Wood harvesting

Export of round timber

PKP Niksvik, Ltd

Name thousand m3

104.6

173

173

173

TSLK Ltd

0.6

8.3

8.4

13.3

13.3

30.8

Kapenskiy LPH Ltd

10.97

10.97

10.97

35

32.9

35

Veles, JSC

104.6

104.6

233.9

233.9

TM Baikal Ltd

26.7

34.1

34.1

34.1

26.7

18.3

26.5

38.5

38.5

18.3

Ilim Bratsk Sibmix LDZ Ltd international, Ltd

Table 2.9 Production of wood and wood materials in Irkutsk Province by leading enterprises

0.6

6.2

6.2

6.2

0.6

Rusforest International, Ltd

7

7

Sibirskie terema, Ltd

(continued)

0.68

2.5

2.5

PKP Novoles,Ltd

66 2 The Analysis of the Russian Forest Industry

Firewood for heating for household needs

Wood for technological needs

Technological wood chips for hydrolysis production of wood boards

Name thousand m3

1.6

PKP Niksvik, Ltd

Table 2.9 (continued)

TSLK Ltd

Kapenskiy LPH Ltd

2.1

Veles, JSC 83.3

TM Baikal Ltd

Ilim Bratsk Sibmix LDZ Ltd international, Ltd

Rusforest International, Ltd

Sibirskie terema, Ltd

PKP Novoles,Ltd

2.2 A Case Study of Baikal Region 67

2002

2003

2004

2005

2006

2007

2008

2010

2011

Particle Board periodic pressing

120,199 148,189

Particle Board and similar boards of wood and other lignified 109,818 137,029 157,835 160,608 146,927 166,043 168,282 120,199 148,189 materials

Year indicator

Table 2.10 Production volume of particle boards in Irkutsk province (conventional cubic meters)

68 2 The Analysis of the Russian Forest Industry

2.2 A Case Study of Baikal Region

69

Table 2.11 The number of wood processing enterprises in Irkutsk province by type of activities ## Type of activity

Number

1

Wood sawing and planning

376

2

Production of sawn timber, other than profiled, with a thickness more than 6 mm; 87 production of unpaved railway and tram wooden sleepers

3

Production of wooden building structures and joinery

29

4

Manufacture of other wooden building structures and joinery

62

5

Production of sawn timber, profiled along the edge; production of wood cloth, wood flour; production of technological chips or shavings

16

6

Furniture manufacturing

70

7

Production of furniture for offices and trade enterprises

51

8

Manufacture of other furniture

36

9

Production of kitchen furniture

10 Individual order kitchen furniture production for the population

13 2

11 Production of kitchen furniture by individual order of the population

11

12 Production of fuel pellets and briquettes from wood processing waste

11

13 Production of prefabricated wooden buildings

6

14 Plywood, wood veneered panels and similar laminated materials, wood boards and other lignified materials manufacturing

4

15 Manufacture of other wood products

7

16 Manufacture of other wood products; manufacture of cork, straw and weaving materials

6

17 Mattress manufacturing

6

18 Production of wooden containers

3

19 Manufacture of wooden frames for paintings, photographs, mirrors or similar items and other wood products

5

20 Production of wood impregnated or treated with protective or other substances

2

21 Production of pressed wood

1

22 Manufacture of chipboards made of wood or other lignified materials

1

23 Manufacture of wooden statuettes and ornaments made of wood, mosaics and inlaid wood, caskets, cases for jewelry or knives

2

24 Manufacture of wood products, cork, straw and weaving materials

1

25 Manufacture of products made of cork, straw, and materials for weaving; production of basket and wicker products

1

26 Production of wooden table and kitchen accessories

1

27 Wood impregnation services

1

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Table 2.12 Manufacture of pulp and timber for pulp production Year indicator

2010

2011

2012

2013

2014

2015

2016

Wood pulp and 1,660,938 1,715,430 1,715,742 1,592,224 cellulose from other fibrous materials, in tons Commodity cellulose, tons

1,300,265 1,348,314 1,356,374 1,301,993

Round softwood timber for the production of pulp and wood pulp, thousand cubic meters

4484,85

4706,36

4642,49

4728,38

5241,43 5378,49 5224,9

Round hardwoods for the production of pulp and wood pulp, thousand firm cubic meters

1825,63

1789,84

1755,49

1789,62

1983,31 2334,86

933,64

975,57

964,38

1009,35 1185,74 1530,2

Technological wood 826,64 chips for the production of pulp and wood pulp, thousand firm cubic meters

Table 2.13 The volumes of the pulp products produced in year 2010 Wood pulp, soluble grades, in tons

36,634

Viscose cellulose, in tons

36,634

Wood cellulose, sodium or sulphate, except soluble grades, in tons

1,624,304

Unbleached wood pulp from coniferous species, sodium or sulphate (except soluble 545,254 varieties), tons Semi-bleached or bleached wood pulp from coniferous species, sodium or sulphate 765,894 (except soluble varieties), in tons Unbleached wood pulp from hardwoods, sodium or sulphate (except soluble varieties), tons

313,156

before the end of 2023. These will be modern factories with the latest equipment for the production of a wide range of products: from tree bark for landscaping, lumber, fuel pellets, to pulp and cardboard. In year 2021, 650 enterprises in the field of wood processing and pulp and paper production operate in the region in total. They employ 33 thousand people and collaborate with 274 rentees of forest lots involved. The products of the LIC of the Irkutsk province participate in global production chains and are directly supplied to

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71

Table 2.14 The volume over products produced in years 2010–2016 Year indicator

2010 2011 2012 2013 2014 2015 2016

Tablecloths and table napkins made of paper pulp, paper, cellulose wadding and fabrics made of cellulose fibers, in thousand pieces

345

295

230

414

1490 1050 1614

Sanitary towels, tampons and similar products made of paper pulp, paper, cellulose wool and fabrics made of cellulose fibers (bundles) (from 2010 to 2017), thousand pieces

287

3765 2585 1552 2320 3272

Artificial shells of cured proteins or cellulose materials, pipes, tubes, hoses, sleeves, rigid, polymer, in tons

1,2

31,2

31,2

Table 2.15 Pulp materials produced in Baikal region and their volume in years 2017–2018 Year indicator

2017

2018

Round softwood timber for the production of pulp and wood pulp (balance), in thousand cubic meters

4808,61

4244,83

Round hardwoods for the production of pulp and wood pulp (balance), thousand cubic meters

2654,16

Wood pulp obtained by mechanical means; wood semi-cellulose; pulp from other materials. fibrous materials, other than wood, in tons

212

245

Cellulose from other fibrous materials, except wood, t

212

245

Toilet paper from paper pulp, paper, cellulose wool and cellulose fibers and cloths from cellulose fibers, thousand rolls

14,146,47 19,344,03

Tablecloths and table napkins made of paper pulp, paper, cellulose wool 2717,1 and cloth made of cellulose fibers, thousand pieces

2248,97

Sanitary towels and tampons, diapers and diapers for children and 17,826,53 13,264,49 similar products for sanitary purposes and clothing items and accessories made of paper pulp, paper, cellulose wool and fabrics made of cellulose fibers, thousand rubles Sanitary towels and tampons made of paper pulp, paper, cellulose wool and fabrics made of cellulose fibers, thousand pieces

1927,02

1743,05

Artificial shells of cured proteins or cellulose materials, pipes, tubes, hoses, hoses, rigid, plastic, tons

975,9

1045,9

the stores of world brands. The region has the leading position in the world in terms of production of forest chemical products too. According to Igor Kobzev, the governor of Irkutsk province, the further economic development of the Forest industry requires to improve business relations in the industry on the principles of openness, accessibility, clarity of intentions. That is that if anyone who enters the forest sphere must adhere to certain rules. If this is an investor, then he or she must realize the project proposed fully up 100%, which is, first of all, the declared number of jobs, economic and tax returns. Secondly, it should

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be participation in extinguishing forest fires. And the third and most important thing is the fulfillment of reforestation obligations [26]. The head of the region stressed that the authorities should improve the efficiency of public administration in the Forest industry. In particular, the issue of modernization of the forest fire protection system was discussed at the board meeting. So, in the north and northeast of the region, it was decided to create four new aviation departments for monitoring and extinguishing forest fires. In addition, proposals were heard on the development of reforestation infrastructure, the creation of greenhouse complexes for growing planting materials. The governor also discussed the need to improve the federal and regional roads, since damaged by the trucks transporting the logs, and to ensure the rights of local citizens to harvest wood for their own needs. This topic will be included in the decision of the board of the Ministry as an independent block with the approval of specific measures for the organization of such work.

2.2.2 The Analysis of the Forest Industry in Buryatia There were six large and medium-sized enterprises and 117 small enterprises (including 111 microenterprises) with types of activity “wood processing and production of wood products” and “pulp and paper production”. In Republic of Buryatia, according to statistics as of January 1, 2015 [27]. In year 2018, the lumber processing industry of Buryatia shipped goods worth 573.4 million rubles (and 572.3 million rubles in 2017) [28]. The list of leading enterprises of the LIC in the Republic of Buryatia is presented in Table 2.16. The largest producer and exporter of timber products is Baikal Forest Company, JSC. It includes logging enterprises, timber processing bases, and a sawmill and woodworking plant. The company’s forest resource base is 368.4 thousand hectares. The company implements the sorting technology of logging using the “Harvester” and “Forwarder” complexes of the Komatsu brand (Japan). The main types of products are lumber (up to 150 thousand tons), sawmill products (up to 200 thousand m3 per year), railway sleepers (up to 70 thousand units per year) and joinery products [29]. Since 2011 Forestinvest, Ltd. had implemented the investment project “Creation of forest and timber processing infrastructure in the Severobaikalsky district of Buryatia Republic” at the cost of 404 million rubles (included in the List of priority projects in forest development by Order of the Ministry of industry and trade of the Russian Federation dated August 17, 2011 No. 1108), which considered the establishment of lumber processing enterprises with organization of production of lumber, fuel briquettes and wood-plastic composites [30]. In 2015 Forestinvest, Ltd. has been working on the creation of the forest and timber processing infrastructure in Severobaikalsky district, within which it is planned to put into operation a sawmill with a drying complex for the production of lumber. However, companies that have priority investment projects and actually use forest resources on preferential terms are not

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73

Table 2.16 List of leading Lumber industry complex enterprises of the Republic of Buryatia No.

Name

Main activity

Address

1

Baikal Nordik, Timber company, Ltd

Wood processing industry, wooden house construction, logging industry

Republic of Buryatia, Ulan-Ude, Babushkina str., 13A

2

Sem’ zvezd (Seven stars), Ltd

Wooden houses (villas, Republic of Buryatia, cottages, rural housing using Ulan-Ude, SIB technology) Shirokih-Polyansky str., d. 20

3

Pribaikalsky les (Baikal Forest), Ltd

Logging industry, wood processing, production of sawn timber

Republic of Buryatia, Pribaikalsky district, s. Turuntaevo, Patrakhina str., d.31a

4

Les Sibiri (Forest of Siberia), Ltd

Logging industry, wood processing, lumber production

Republic of Buryatia, Ulan-Ude, Matrosova village, Shevtsova str., 3b

5

Zabaikal-Interbusiness, Ltd

Logging industry, wood processing, lumber production

Republic of Buryatia, Ulan-Ude, Bortsoeva str., 13, office 13

6

Baikal Metek, Ltd

Logging industry, lumber production

Republic of Buryatia, Maussky district, Taksimo village, Pritrassovaya str., 10

7

Stroykomplekt, Ltd

Logging industry, lumber production

Republic of Buryatia, Ulan-Ude, village Silicate, Domostroitelnaya str., 2B

8

Limin, Ltd

Lumber harvesting, wood processing, production of sawn timber

Republic of Buryatia, Ulan-Ude, Mokhovaya ul., d. 8a

9

Baikal Forest Company, JSC

Lumber harvesting, wood processing, production of sawn timber

Republic of Buryatia, Ulan-Ude, Klyuchevskaya ul., d. 21

10

Lespromservis, Ltd

Lumber harvesting, wood processing, production of sawn timber

Republic of Buryatia, Ulan-Ude, Polygon, 502 km

11

Selenginsky Pulp and Paper Mill, JSC

pulp and paper industry and wood chemical industry

Republic of Buryatia, Kabansky district, Selenginsk village

12

Zarechnoye, Ltd

Logging industry

Republic of Buryatia, Pribaikalsky district, village Turuntaevo, Patrakhina str., d.31a

13

Lukondra, Ltd

production and sale of lumber

Republic of Buryatia, Ulan-Ude, Stroiteley str., 11a

14

MK Postulat, Ltd

Furniture production

Republic of Buryatia, Ulan-Ude, Klyuchevskaya str., 43 (continued)

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Table 2.16 (continued) No.

Name

Main activity

Address

15

Belykh A.M., sole proprietor

Logging industry, timber processing, production of joinery, trade in timber and lumber

Republic of Buryatia, village. Ust-Barguzin, Komarova str., 17

16

Verkhneudinskoe, JSC

production of lumber

Republic of Buryatia, Ulan-Ude, Zarechny village, Svetliy str., d. 2

17

Ikatles, JSC

logging, but main activity is road construction

Republic of Buryatia, Ulan-Ude, Kuibyshev str., 5

18

Cajun Alexander, sole proprietor (Maral)

Logging industry, lumber production, forest products trade

Republic of Buryatia, Ulan-Ude, settlement Zarechnyj, Svetlaya str., d. 2

19

Solios, Ltd

Logging industry, wood processing, foreign trade, shipment services

Republic of Buryatia, Ulan-Ude, Strelka, 502 km, Botanical str., 74

20

Buryatavtoservis, JSC

Supply of tractor, logging, and delivery equipment and vehicles

Republic of Buryatia, Ulan-Ude, Strelka, Botanicheskaya str., 35a

21

Zakamensk, Ltd

Logging industry

Republic of Buryatia, Zakamensk, Lenin str., 39

22

Buryatmebel, Ltd

Furniture production

Republic of Buryatia, Ulan-Ude, Klyuchevskaya str., 21

23

Buryatenergo remont, JSC

Wood processing equipment

Republic of Buryatia, Ulan-Ude, village Energetik, 90

24

Forestinvest, Ltd

Sawing and planing of wood Republic of Buryatia, Severo-Baykal’skiy district, Novy Uoyan, Rabochaya str., 6a

25

Lesnaya birzha, Ltd

Wholesale trade in timber, construction materials and sanitary equipment

Republic of Buryatia, Ulan-Ude, Namzhilova str., 6–10

always able to fully implement such projects. In January 2020, this legal entity was declared insolvent (bankrupt). Bankruptcy proceedings had been opened against it. Another project of Lesnaya Birzha, Ltd the “Construction of the plant for the production of oriented particle boards (OSB) in Zaigraevsky district of the Republic of Buryatia” with the total cost of 2.7 billion rubles, was included in the list of priorities in the field of forest development by the Order No. 986 of the Ministry of industry and trade of the Russian Federation dated July 22, 2011 and considered the harvesting of forest resources in the amount of 276.7 thousand m3 per year with the creation of about 400 jobs. In 2013, a stone laying ceremony was held on the occasion of the construction of the Baikal wood processing complex (Baikal DOK)

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in the village Il’ka of Zaigraevsky district within the framework of this project [31], with the planned project implementation period till year 2019 and a total investment of 4.6 billion rubles. However, even in three years after the start of the project, there was no information about significant changes in its implementation. Only in April 2016, the Ministry of industry and trade of Russia excluded this investment project of Lesnaya Birzha, Ltd. from the priority list. Lesnaya Birzha, Ltd. was liquidated in November 2015. The Buryatia Arbitration court ruled on the claim of the Republican forestry Agency against Baikal DOK, Ltd. The Agency demanded to recover 13 million rubles, the debts for the forest lots rent allocated to the company for timber harvesting. The Agency’s claim was fully satisfied, the defendant agreed with the plaintiff’s claims, but at the same time filed a request to reduce the amount of the State fee due to the difficult financial situation, presenting as evidence documents on the absence of funds in the accounts [32]. Selenginsky pulp and cardboard mill (Selenginsky PCM), JSC is an entity of the pulp and paper sub-sector of the Forest industry in Buryatia. The construction of the plant had begun in 1959 and was justified by the need to create an enterprise for the disposal of sawmilling and wood processing wastes in the lake Baikal basin. At present, the plant has workshops of the main production, a well-developed repair base, a railway station connected to the Trans-Siberian railway, and has its own rolling stock. Selenginsky PCM is a part of one of the largest timber companies in Russia—“LIC Continental Management”, Ltd. and provides employment to about 2 thousand people. The products produced by the plant are cardboard (100 thousand tons of cardboard per year), corrugated packaging, paper bags, cardboard sleeves, wood chemistry products (raw turpentine, raw tallow oil). Since August 1990, the Selenginsky PCM has been operating on a drainless scheme in a closed water cycle (no waste water is discharged) [33]. In 2015 and 2016 “Selenginsky PCM”, JSC upgraded its cardboard-making equipment and increased its own timber resource base [34]. The most negative trend is the reduction in the forests area. According to the documents, the functional purpose of land changes and forests are transferred from one category to another, but in practice, forests are destroyed by fires and “black loggers” [35]. In 2008, Buryatia, as well as other regions of the Russian Federation, developed and started implementing the Forest plan. This year, the document has expired and the Forest plan developed for years 2019–2028 came into force. As it turned out, the forest area of one of the most multi-wooded regions of Russia has decreased, although only slightly. The total area of the forest land has decreased by 0.2%, if compared with the previous Forest plan, as the developers of the current Forest plan state, and mainly due to the transfer of lands of specially protected natural territories and objects for creating in the territory of the Republic of Buryatia of special economic zone of tourist-recreational type and to refine the forest area previously belonged to the rural forests included in forest Fund in 2008.

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However, according to documents, part of the reserve forests, only 16,825 ha, was transferred to the operational category. There are also cases of transferring forest lands to settlement lands, and logging has become possible in nature reserves. According to the developers of the Forest plan, currently the forest areas located within the borders of the Altachey reserve of Federal significance and the Angir, Kizhinginsky, Kondo-Vitim, Muysky, Pribaikalsky, Uzkolugsky, Khudaksky and Snezhinsky reserves of regional significance are classified as operational forests. And in 2018, the Ministry of natural resources of the Republic of Buryatia describes the location of the borders of protected areas of regional significance and enters this information into the Unified State Register of the Real Estate. By the way, according to the official information, during the period of the previous Forest plan, the volumes of wood harvesting in the Republic of Buryatia have been realized by 99.4%, while the indicators for wood processing and other forest resources are only 1.5%, and for growing planting material of forest plants such as seedlings 2.6%. The official explanation is that the planned volumes for the period of the previous Forest plan were not reached due to lack of demand. In year 2017, and according to the latest data at the time of development of the Forest plan, 99% of raw wood harvested in Buryatia was sold to China [36]. At the same time, according to the government of the Republic, there are lumber industry 700 enterprises working in the region. However, it is obvious that most of them are small sawmills. There are only two LIC enterprises: “Selenginsky pulp and cardboard plant”, JSC and “Baikal forest company”, JSC listed on the official of gthe regional administration. Both are the legacy of the Soviet period. It is planned to create at least four new production facilities by year 2025. Vostochno-Baikalskya lesnaya kompania (East-Baikal forest company), Ltd. intends to launch a modern wood processing complex for harvesting and deep processing of roundwood, sawn wood and balance wood, including wood wastes. The estimated volume of annual timber harvesting in the Khorinsky, Kizhinginsky, Yeravninsky, and Barguzinsky districts for the needs of the new enterprise is 285 thousand m3 . Investment in the project is estimated at 1.18 billion rubles. LLC “Baykallesprom” plans to create a forest and timber processing infrastructure in the Zaigraevsky district of the Republic. The volume of harvesting is planned to be almost the same, about 295 thousand m3 of wood per year, and investments are much more modest: 752.8 million rubles. KR Dzhenkey, Ltd. plans to invest 753 million rubles in the production and logistics complex for deep wood processing in the Zakamensk and Yeravninsky districts, and IT-Almak-Baikal, Ltd. invests 803.5 million rubles in the creation of an enterprise for the production of lumber, frame houses, glued wooden structures and parquet boards. However, there is no up-to-date information about the implementation of these projects in the public domain. Meanwhile, the law of the Republic of Buryatia dated March 18, 2019 № 360VI “About the strategy of socio-economic development of the Republic of Buryatia for the period up to year 2035” states that the government does not intend in the near future to provide business assistance in the development of the LIC in the region: the first stage, in 2019–2024, the development of the industry will be

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carried out through the implementation of investment projects of industrial enterprises for attraction of own and borrowed funds, including commercial bank loans and concessional loans from the Fund of industrial development. In 2025–2035, it is planned to allocate land lots by municipalities on rent terms for the creation of large wood processing complexes that will unite small and medium-sized enterprises on specialized industrial sites. However, the main tasks of the development of the wood processing industry is identified as the formation and development of the forest cluster, which will allow to expand cooperation of the small businesses with the big business, to attract educational institutions and organizations and to relocate wood processing industries far away from the central ecological zone of the Baikal natural territory and hence create industrial complexes beyond it. In this regard, it is important to note the role of the State in addressing these challenges. Along with the modernization of enterprises, the strategic goal of the industry development is stated as “solving the problem of unauthorized deforestation”. The Prosecutor’s office of the Republic of Buryatia monitors such cases, and the last case is being prepared for transfer to the court. Local authorities see the solution to the problem of illegal logging primarily in increasing civil responsibility of citizens and strengthening control. In 2017, the number of illegal logging increased by 7% if compared to year 2016, but the volume decreased by 4.7%, while the damage was reduced by 9.2%, according to experts of the Forest plan. They attribute the improvement to an almost twofold increase in the number of control and supervision measures: there were 10,128 of them in 2016, and 14,102 in year 2017. However, this is not enough, because there is a lack of workers. Experts believe that one of the ways to improve the effectiveness of control and supervision activities is to increase the number of employees who carry out State forest supervision until the patrolling of the area controlled is ensured in accordance with the forest patrol standards approved by the order of the Ministry of natural resources and ecology of the Russian Federation. The volume of the estimated harvest area on the lands of the forest fund of Buryatia is set at 10,585. 7 thousand m3 in the Forest plan for years 2019–2028. The estimated cutting area in 2008–2017 was used by 25.7% (for coniferous farming by 29.0%, for soft-leaved brands by 11.3%). Its development should also grow slightly: from 21.1% in 2017 to 26% (or 2.7 million m3 ) by year 2028. However, for example, in the year preceding the development of the Forest plan, loggers exceeded the plan and harvested 28.4% of the wood. The main drawback of the Forest plan of the Republic of Buryatia, as well as the plans of most regions of the Russian Federation, is the lack of step-by-step programs for achieving goals. The appendixes of the document contain many forecast indicators, but do not explain how they will be achieved. It is possible that specialists of relevant departments will prescribe the necessary measures in State programs for short-term periods of up to three years. However, the State program “Development of the Forest industry” in Buryatia is valid from 2016 till 2021, and it is mentioned only once in the Forest plan, and in relation to summing up of the previous plan.

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The State program assumes the creation of the State forest inventory system by 2021, the formation of an effective system of a single genetic and selection complex, the introduction of scientific researches and innovative re-equipment of the Forest industry, but none of these tasks are listed in the Forest plan of the Republic of Buryatia for 2019–2028 [37].

2.2.3 Enterprises of the Forest Industry in Zabaikalsky Krai According to the Ministry of natural resources and industrial policy of Zabaikalsky krai, more than 190 enterprises were engaged in harvesting, processing and selling of wood in the territory of the region as of January 1, 2016 [38]. It should be noted that the share of foreign capital and founders is high. At least 20% of the total number of enterprises are indirectly financed by foreign companies or citizens. Such companies on the territory of the Zabaikalsky krai are focused exclusively on the export of wood. The volume of lumber exported by them is 10% of the total volume of wood exports from the territory of the region. Other enterprises of the Forest industry In Zabaikalsky krai belong to small and medium-sized businesses. The list of leading LIC enterprises in Zabaikalsky krai is presented in Table 2.17. According to LesPromInform magazine, among the most significant LIC companies in Zabaikalsky krai are Arsenalstroy, Ltd. (producing lumber and timber made houses), Danko-Express, Ltd. (logging; production of lumber, joinery; construction of houses made of rounded logs and timber), Emmanuel, Ltd (production of lumber, wooden housing construction), Zabaikalskaya lumber industry company Botay, Ltd. (production of lumber), Kadales, Ltd. (production of lumber), SintaKedr, Ltd. (specializing in logging; production of lumber, joinery, such as windows, doors, stairs; construction of houses made of logs and beams), and Chitinsky MDK, Ltd. (specializing in wood production). In October 2012, the Ministry of industry and trade of the Russian Federation included in the List of priority investment projects in forest development project “Establishment of the timber industry complex PPM “Polyarnaya” in the NorthEastern districts of Zabaykalsky Krai” (according to the Order of the Ministry of industry and trade of the Russian Federation dated October 17, 2012 No. 1508; the status of the priority investment project of the Zabaikalsky Krai was assigned by the Order of the government of the Zabaykalsky Krai No. 236-r dated April 25, 2014), which considers the construction of three objects: (1) the pulp mill for production of kraft pulp with capacity of 200 thousand tons per year in the first phase and a maximum capacity of 400 thousand tons at the start of the second stage; (2) woodprocessing plant with the capacity of 125 thousand m3 per year; (3) logging company with capacity of 1,600 thousand m3 per year. According to the report of PPM “Polyarnaya”, Ltd., the project with a declared cost of 28 billion rubles, is the largest in the field of forest development in the history of Russian-Chinese cooperation. Its investor is Heilongjiang “Sinban”, CJSC, the resource development corporation with 100% Chinese capital. According to the data

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Table 2.17 List of leading Lumber industry complex enterprises In Zabaikalsky Krai No.

Name

Main acitvity

Address

1

Ant, furniture factory

Furniture production

Zabaykalsky Krai, Chita, village Antipikha

2

Arsenalstroy, Ltd

Construction of residential and 672,000, Zabaikalsky Krai, non-residential buildings Chita, Butina str., 10, room 1

3

Art-Terminal, UPTK, Ltd Furniture and windows product

4

Botay, Zabaikalskaya LIC, Ltd

Logging. Production of lumber Zabaykalsky Krai, Chita, Bogomyagkova str., 53

5

Danko-Express, Ltd

Logging. Production of lumber. Wood processing. Wooden housing construction

Zabaykalsky Krai, Chita, Romanovsky tract, 38

6

Dauria, Chitinsky MDK

Furniture production

Zabaikalsky Krai, Chita, Vokzalnaya str., 3

7

Drovynaya, Wood processing plant

Business wood, lumber

Zabaykalsky Krai, Chita, Dugovoy Ave., 5

8

Zabaykalye-1, CJSC

Harvesting, wood processing

Zabaykalsky Krai, Chita, 9-th January str., bld. 6, p.o.box 1191

9

Zabinkom, JSC

Timber, removal of whips to China

Zabaykalsky Krai, Chita, street Industrial str., d. 7

10

Emmanuel, Ltd

Logging

672,535, Zabaykalsky Krai, Chitinsky district, Makkaveyevo, 1-st Dorozhnaya str., d 12,

11

Kadales, Ltd

Logging

672,042, Zabaykalsky Krai, Chita, Stroiteley str., house 1, bld. 17

12

Kami-Iks, Ltd

Wood processing equipment

Zabaykalsky Krai, Chita, Vokzalnaya str., h. 3

13

Chikoiskoe LIC, Ltd

Production of sawn timber, round logs

Zabaykalsky Krai, Krasnochikoyskiy district, Krasny Chikoy, Molodezhnaya str., 3

14

Manchuria, Ltd

Business wood, saw-timber

Zabaykalsky Krai, Chita region, Hiloksky district, L-Ozero village, Khludneva str., d. 6

15

Novoles, Ltd

Timber, lumber, glued laminated constructions

Zabaykalsky Krai, Chita, p.o.box 416

16

Novomir, Ltd

production of sawn timber

Zabaykalsky Krai, Chita, Zhuravleva str., 71

Zabaikalsky Krai, Chita, 1st Lineanaya str., bld. 88

(continued)

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Table 2.17 (continued) No.

Name

Main acitvity

Address

17

Pilomaterialy Bada, Ltd

Logging, production of lumber, export of timber

Zabaykalsky Krai, Khilok district, Bada station, Lesnaya str., 55

18

PK Stolyar (Popov S. D. entrepreneur)

Manufacture of joinery

Zabaykalsky Krai, Chita, SInstrumentalnaya str., 6

19

Rassvet, furniture factory, Ltd

Wood processing: manufacture Zabaikalsky krai, of sash lumber, furniture, wood Petrovsk-Zabaykal’skiy district, Novopavlovka village, Sovetskaya str., 5

20

SV Stroy, Ltd

Construction, production and sale of lumber, construction materials

Zabaikalsky Krai, Chita, Nadezhda str., 17

21

Sinta-Kedr, Ltd

Construction, logging, deep processing

Zabaikalsky Krai, Chita, village. Vostochny, Staroshakhterskaya str., 1

22

Joint venture Richen, Ltd Logging. Production of lumber Zabaikalsky Krai, Chita, Amurskaya str., 26, p.o.box 389

23

Tagvi, Ltd

Logging, umber production, timber export

Zabaikalsky Krai, Khilok district, Bada stattion, Pionerskaya str., 2

24

Transsnab, CJSC

Business wood, lumber

Zabaykalsky Krai, Karymsky district, village. Darasun, Stadionnaya str., 3

25

Universal Ltd

Logging, lumber production

Zabaykalsky Krai, Chita, Traktovaya str., d. 29

26

Kharagunles, Municipal Unitary Enterprise

Business wood, sawed timber

Zabaykalsky Krai, Khilok district, village of Kharagun, Dorzhnaya str., d. 2A

27

Chitalesholding, Forest chemical plant, JSC

Logging, lumber production

Zabaykalsky Krai, Chita, Ingodinskaya str., d. 19, p.o.box 417

28

Cellulose-industrial complex “Polar”, LTD

Logging, Sawmilling and planing of wood, Production of pulp, wood pulp, paper and cardboard

673,775, Zabaikalsky Krai, Mogochinsky district, Amazar village, Berezovaya str., 1a

provided back in the end of 2015, during the project implementation period, a number of necessary workshops, buildings, auxiliary facilities were constructed (mainly with the foundation filling), and the installation of specialized German equipment was completed too. In May 2019, the investment project was excluded from the list of priority projects, which is the basis for early termination of lease agreements for forest lots [39]. As the developers plan, the project will increase the output of deep

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processed products and will create 2,524 jobs. As of December 31, 2019, the average number of employees was 142 only [39].

2.2.4 SWOT Analysis of Strengths and Weaknesses of the Forest Industry Enterprises in Baikal Region It involves analyzing the strengths and weaknesses of the Forest industry enterprises in Baikal region, of external favorable opportunities and potential threats to their development. In order for the forest resources of the region to become a real competitive advantage for the domestic Lumber industry complex, which arises as a result of effective and rational use of resources, it is necessary to determine the positive potential for the development of logging enterprises. This can be done by conducting the SWOT analysis of loggers in the region, which is presented in Table 2.18. The SWOT analysis identifies the strengths and weaknesses of the Forest industry, existing threats and prospects for its development. The results of the SWOT analysis show that forest enterprises of Baikal region, being in a state of crisis, nevertheless have a significant positive potential, provided that the competent and effective use of which in the middle run is possible to solve the current problems in the industry and increase the competitiveness of the LIC of the region as a whole.

2.3 The Use of Unmanned Aerial Systems in the Forest Industry in Russia Today, the unmanned aerial systems (UAVS) are dynamically developing technologies in Russia. When Russia ranks first in the world in logging and undoubtedly has the most extensive forestry, UAVS are becoming increasingly important in the Forest industry too, because thanks to them, monitoring, control, and coordination of actions in forestry have become much more available and effective. The examples of first UAVS used in Forest industry in Russia are shown in figures in this section. The first large scale experiment with use of UAVs in the Forest industry in Russia was conducted by the Federal Budget Organization named “Avialesokhrana” (Aviation forest guard) and Enix, JSC company from Kazan city, producing UAVs, back in August 7, 2006 (Fig. 2.17).

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Table 2.18 SWOT analysis of strengths and weaknesses of logging enterprises in Baikal region Internal strengths (S)

(1) Availability of high-quality forest resources in Baikal region; (2) Large reserve of the estimated cutting area; (3) A powerful timber processing base; (4) High potential capacity of the domestic market

Internal weaknesses (W)

(1) Poor transport infrastructure (2) Lack of own funds to increase the volume of production and primary processing of wood (3) The use of outdated technologies and a high degree of wear and tear of equipment, leading to the depletion of the resource base (4) Low level of harvesting in the estimated cutting area (5) The growth of illegal logging and criminalization of the industry (6) Lack of the industry development strategy

External enabling opportunities (O)

(1) Adoption of the Strategy for the LIC and the Forest Code development; (2) Favorable tax climate in the region; (3) Implementation of the Federal and regional projects to support the development of the LIC; (4) Growth of demand for LIC products in the world market; (5) Growth of investment activity of domestic companies

Strength and opportunity (SO)

(1) Implementation of the system of the forest fund lots renting (2) Activation of integration processes by connecting timber farms with large pulp and paper mills and wood processing enterprises (3) Increase in the share and efficiency of the development of the estimated cutting areas during the logging activities

Weaknesses and opportunities (WO)

(1) Increased construction of logging roads that provide access to resources; (2) Increase in production volumes; (3) Introduction and use of new generation equipment and machines; (4) Participation in State investment projects and programs; (5) Strengthening the control of forest management; (6) Development and implementation of the Forest plan, forestry regulations, and a strategy for the development of the logging industry (continued)

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Table 2.18 (continued) Internal strengths (S)

(1) Availability of high-quality forest resources in Baikal region; (2) Large reserve of the estimated cutting area; (3) A powerful timber processing base; (4) High potential capacity of the domestic market

Potential external threats (T)

(1) The global financial crisis; (2) Fluctuations in the global forest products market; (3) Russia’s participation in WTO will exacerbate the competition with foreign producers; (4) Increase in energy prices

Strengths and threats (ST)

(1) Attracting foreign investors; (2) Increase in the specific weight of high-quality processed wood; (3) Development and implementation of the latest technologies for processing logging wastes for energy use; (4) Creation of the wood processing production in logging companies

Weaknesses and Threats (WT)

(1) “Freezing” of the majority of investment and innovation projects and programs during the crisis, a sharp decline in innovation activities; (2) The growth of exports of unprocessed timber

Fig. 2.17 The first UAVS used in the forest industry in Russia

The unmanned aerial vehicles (UAVs) are an important tool in the Forest industry. It should be noted that the use of drones in the Forest industry is rapidly developing. The UAVs are of great benefit in the Forest industry today. Today, there is a number of various UAVs used in the Forest industry. The processes of assembling, lunching and catching some of the most common UAVs currently used in the Forest industry of Russia is presented in figures in this section (please see Figs. 2.18, 2.19, 2.20, 2.21 and 2.22). For many decades, work has been actively carried out in various countries to create UAVs mainly for military purposes, but now many of the modern UAVs are used in the forestry industry too, especially for routine, dirty and dangerous work.

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Fig. 2.18 Forest guards assembling and lunching UAVs

Fig. 2.19 EMERCOM officer assembling and checking UAV before lunching

Fig. 2.20 Forest industry and EMERCOM employees lunching and operating DJI quadcopters in the forest sites

All existing types of UAVs, the use of which is possible in the forestry industry, are divided into four categories: unmanned aircraft (Fig. 2.18), quad (Fig. 2.19), multicopters (Fig. 2.20), and helicopters (Fig. 2.21). The design and constructive features of all UAVs depend on the tasks performed. The prospective UAVs, which can be used in the Forest industry of Russia are summed up in Table 2.19. Along with the differences in weight and size, the drones, the use of which is possible in the Forest industry, are distinguished by the types of engines used

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Fig. 2.21 Multicopters equipped with cameras for the forests observation

Fig. 2.22 Helicopter type UAVs Table 2.19 UAVs classification by weight Specification

Weight (kg)

Type of UAV (Name)

Very heavy

>2000

Hawlk, Predator, Reaper, Black Knight Transformers, Heron, Neuron, X-45, X-47B, MiG Ckat, TU-300 Kopxyn, Opion, Fpegat

Heavy

200–2000

Outrider, Ehang-184, Scan Eagle, Sea Hunter, S-100 Camcopter, Ipkyt-850, Bega CB-06 «Aict», Tpanzac Dozop-3 (600)

Medium

50–200

Phoenix, Ipkyt-200, kovlev Xmel-1, Pqela -1, GpAHT, Dozop-4 (85), Dozop-5, HIKC E08, ZALA 421–20,

Light

5–50

AEE- F100, AVI, CyberQuard Maxi, Matrice, Supercam S350, Yamaha RMax, Agpockan, Atlac-180, Ipkyt-10, Dozop-2, Apokon Incpektop-301, Lyq Tipqak, Pycgeokom, nikc T10, Supervisor SM2, ZALA 421–16, ZALA 421–22

Very light

1, then the innovative project is considered cost-effective. Ecli IR < 1, then the project is not effective. Under conditions of the severe shortage of funds, the preference is given to those innovative projects for which the IR is higher 3. The rate of return (Ep)

Is the discount rate at which the amount of discounted income for a given period of time is reached, and which becomes equal to innovative investments. In this case, the costs and revenues of an innovation project are determined by discounting it to the estimated year or month. It is also called the internal rate of return, rate of return, and rate of return on investment

4. Payback period (To)

Is an investment performance indicator that, unlike the “payback period of capital investments” indicator, is based on cash flow with the reduction of invested funds in innovations and the amount of cash flow to the present value, and not on profit

Any investment involves significant risks. The longer the payback period for investments, the greater the risk. The longer the term, the more significantly the market conditions and prices may change. This approach is also relevant for the Forest industry, where the pace of scientific and technological progress is high and where the emergence of new technologies or products can devalue previous investments. Moreover, the focus on the indicator “payback period” is appropriate even in the case when there is uncertainty of the innovation event itself. Therefore, investors do not risk to trust investments for a long time. Revenues resulting from innovations determine the effect in the social sphere too, which consists in a fuller satisfaction of public needs and in increase in the life safety [39]. At the same time, the social effectiveness of innovations is considered in two dimensions: (1) in scale of public significance; (2) in scale of a specific enterprise. Socio-economic results in the scale of social significance are estimated as an increase in the national wealth of the economy by increasing the technical level, modernization of production assets, which determine the opportunities for growth of the public good. The continuously growing needs of the population for new products are met through innovations. The population’s free time is used more effectively too. At the level of an enterprise, the results are associated with increased payment, improved working conditions, and improved skills.

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The “scientific-technical assessment” allows to identify how the adopted technical solutions meet modern technology requirements of industrialized countries; how they contribute to the technological progress; what is the scale and level of novelty of the project and of parts it is comprised of; protection by patents of intellectual property; how promising proposed project technologies and technical equipment is; what is the market for the production of new products (internal, external, developed or developing countries). “Social assessment” is designed to determine the effectiveness of the project in improving social environment and improving the quality of life of the population, which is characterized by such values as the standard of living, defined via changes in incomes; prices, availability and consumption of goods and services; lifestyle; changes in the level of employment; personnel qualifications; presence of art objects, culture and education, sports, preschool institutions; health and life expectancy, including improved working conditions; improvements in the health sector. The “environmental assessment” of an innovative project usually includes the calculation of possible harm to the environment, i.e. to the water and air basin, soil, forest, and wildlife, resulting from production wastes and emissions. This assessment is made in three stages. The comparison is made with MPC and MPL of environmental impacts, as well as using other indicators and data that you are monitoring; The assessment of the impact of the object on the environmental capacity of the territory, as well as the environmental risk, is performed. Moreover, the level of environmental capacity should not decrease when implementing innovations. The environmental risk of innovative projects is the probability and degree of possible disasters associated with the implementation of innovations; The possibility of waste-free production cycle is determined based on closed technologies of resources processing or due to the processing of wastes generated. The assessment determines waste-free technologies or the possible degree of utilization of industrial wastes, the possibility of closed water supply, wasteless and drainless production. In practice, they determine the potential and actual (commercial) effect. Depending on the time period, you can determine the annual effect and the effect for the estimated period. The estimated period is determined by the following factors: the duration of the innovation period, the service life of the innovation object, the degree of reliability of the source information, and the expectations of investors. Effectiveness is evaluated by the effect (result) and costs comparison. This ratio is expressed in both physical and monetary terms, and the effectiveness indicator may be different for the same situation. The existing problem of determining the economic effect and choosing the most preferable options for implementing innovative projects requires both increase of the final results resulting from their use, and comparison of the results gained with the results of applying other similar innovation options. The emerging need to evaluate and choose the right option arises, first of all, in enterprises that use accelerated

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depreciation schemes. The existing method of calculating the effect of innovations by comparing the results of their implementation and costs allows us to draw correct conclusions about the feasibility of using innovations. Therefore, the second approach for the evaluation of innovations effectiveness, developed by E. I. Krylov, V. M. Vlasov, and I. V. Zhuravkova, offers a system of indicators that take into account not only absolute, but also relative efficiency, i.e., evaluation of the effectiveness of innovations in comparison with similar ones [34]. They also proposed a method for calculating the integrated effect of the development, production and implementation of innovations, and a methodology to determine the economic effect for each stage of the useful use of an innovation project [20]. The methods for the evaluation of the effectiveness of innovations, in the work of E. I. Krylov, are based on a system of evaluation indicators that consider the interests of the State, the budget, the interests of developers, manufacturers and consumers. The methodological recommendations assess the effectiveness of the innovation project from the investor’s point of view. The impact of innovation on the effectiveness of economic activities of enterprises is analyzed in E. I. Krylov’s work for evaluating the effectiveness of innovations and the system of estimates for the economic, also called “integrated effectiveness” of innovation is proposed [34]. The classic system of economic effectiveness indicators based on innovations includes: 1. 2. 3.

4. 5. 6. 7. 8.

The total amount of added value, depreciation, and their growth in comparison with a similar innovation; The total amount of added value, as well as its growth in comparison with its analog; The total return on capital allocated to the development, production and use of innovations, calculated on the basis of annual income, and its growth in comparison with its analog; The total amount of income, as well as its growth in comparison with the analog (base level); The economic effect of innovation, calculated on the basis of net income, and its growth; The economic effect of innovation, calculated on the basis of net output, including depreciation, and its growth; The payback period of capital investments aimed at implementation of innovation and its change in comparison with the same values; The total amount of taxes received by the budget due to the implementation of the innovation, and their increase in comparison with the analog.

There is the following system of evaluation indicators for production, financial and investment effectiveness of innovations: Estimates of production effectiveness of innovations: added value (net production), including depreciation, obtained due to implementation of innovations, and its increase in comparison with an analogue; pure products obtained through innovations, and its growth in comparison with the analogue; the income (profit and depreciation) duet to innovations, and its increase in comparison with the analogue;

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the savings from the reduction of production costs generated by innovations; potential profits from innovations implementation and its increase in comparison with an analog. The indicators of financial effectiveness of innovations: net income resulting from an innovation and its growth in comparison with an analogue; the net profit resulting from the innovation and its growth in comparison with the analogue; the share of net income in total income resulting from the innovation and its change in comparison with the analogue; the share of net profit in total volume of profits generated by the innovation, and its change in comparison with the analog; product profitability, calculated on the net income from the innovation, and its growth in comparison with the analog, product profitability, calculated on net profits from production, creation or use of innovations, and its increase in comparison with the analogue; the total volume of profits generated by innovation, and its growth in comparison with the analog. Indicators of investment effectiveness of innovations: the economic effect calculated on net production, including depreciation, and obtained with innovation and its increase in comparison with the analog; the economic effect calculated on the basis of income obtained via the production, creation or use of innovation, and its increase in comparison with the analog; the economic effect calculated on net profit obtained via innovation, and its increase in comparison with the analog [34]. These methods are used to determine the effectiveness of innovations and have contributed to the improvement of the system of their evaluation. The main interest is the commercial effectiveness of the project, when evaluating the economic effectiveness of innovations of any forest enterprise, regardless of its main type of activity (forestry, logging, wood processing) and ownership forms. This is important for determining the prospects of the company’s financial position and its development. At the same time, it should be taken into account that most of the innovative developments in the Forest industry, which have been implemented recently at enterprises and organizations, they have a small scale, are limited in investment volumes and aimed to create and master, as a rule, product and technological innovations, targeted to increase revenues and to gain or increase market share. Therefore, individually, they can not affect directly the indicators of national economic and budgetary efficiency, which can be calculated only for large innovative projects (target programs, megaprojects, international projects). Thus, this paper presents indicators that are used (or may be applicable) to assess the commercial effectiveness of innovations. We propose the comparison of the effect (incomes or cash flows) with costs (investments) when assessing the effectiveness of innovations. The life cycle of innovations, inflation, changes in interest rates and taxes, all these lead to economic inequality of the costs incurred and results (cash flows) gained at different times. Therefore, it requires to bring them into a comparable form. The issue of the comparability is solved by bringing costs and results to a certain time, for example, to the year when the innovations have begun. This is called the present value method, or discounting. The discounting is based on the fact that the sum that will be spent or received in the future, currently has a lesser value.

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Let’s focus on the theoretical and methodological issues of the institutions and institutional changes effectiveness evaluation in the Forest industry. According to the previous analysis, forest resources can be used effectively only if there is a working system of institutional terms and conditions that include social norms and rules along with formal laws. For the successful implementation of any technological, product, social, and/or environmental innovations, an appropriate developed institutional structure is required, which can be formed through the successful implementation of institutional innovations. Based on the previous analysis, it is possible to formulate the requirements or characteristics that a developed institutional structure in the Forest sector should comply with: • • • • •

ownership rights are established and clearly defined; the rules specified are legitimate and apply to all active agents; decision-making is deliberative and decentralized; environmental and resource-saving rules and laws apply; private investors have the ability and are able to provide a return on their investment; • structures and organizations that take action against violators of the rules are identified. Such institutional norms have to determine the behavior of all economic agents involved in the forest business. As have been defined earlier, they include both formal and informal rules. To determine the effectiveness of institutional innovation, it is important to determine how these institutions interact, which of them is dominant, whether they complement each other or are mutually exclusive. In our case, institutions act as mechanisms that regulate access to the legitimate use of a valuable forest resource, as well as define the principles of this access. They determine the interests of the parties and participants in the relationship, taking into account the fact that the resource itself makes it difficult to access it and forms the basis for competition and even conflicts in the struggle for the use of the forest. However, the sphere of institutions’ influence is not limited to this. The complexity of the research object is explained by the set of subjects and their relations related to forest management, which include the population, enterprises of the Forest industry, federal, regional and municipal authorities, and forest services. To form the model of sustainable forestry as a reference point for innovative and institutional changes, the following methodological approaches to Forest industry research should be implemented: • system analysis, for which to analyze the socio-economic situation of the industry; • macroeconomic analysis to determine the place of the Forest industry in the socioeconomic development of the country, region, and municipalities; • microeconomic analysis, i.e. analysis of forest enterprises and organizations: financial and economic indicators, administrative and managerial structure, personnel, development prospects;

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• institutional analysis, including a description of the institutional structure of the forest industry, the economic behavior of individual enterprises, an assessment of the effectiveness of the institutional structure, as well as the required institutional changes. The use of system analysis is substantiated by the need to assess the complex socioeconomic system of forest management and consumption, the features of its development, structure and mechanisms of functioning. The understanding of the main mechanisms of sustainable development of the forest sector as the socio-economic system is possible with the help of the system analysis of the main subsystems (economy, society, nature) and an assessment of their current state and relationships in their interaction. At the macro level, it is important to highlight such characteristics of sustainable development of the Forest industry as viability, productivity, and harmony. Here we are talking about stocks of raw materials and its quality on economic activity and labour potential of the population, as well as the importance, opportunities and need for the Forest industry in the region. At the micro level, enterprises and some organizations are considered as an element of the economic subsystem. At the same time, the main socio-economic goal of the forest sector enterprises is to meet the needs for forest products, as well as to provide jobs. It should be noted that forestry activities in the region have been carried out over the past decades by State forestry and logging enterprises, joint-stock companies and limited liability partnerships, as well as individual enterprises that represent the interests of both loggers and pulp and paper mills and combines, wood processing and sawmilling enterprises and firms. The socio-economic state, from the point of view of sustainability, can be studied through the behavior of forest enterprises and organizations in the context of institutional changes, as well as the socio-economic situation of the population in the forest region. In this regard, the key factors determining institutional changes will be the formal institutions of the forest industry and, first of all, legislation, improving business standards and tightening the requirements of the global forest market, taking into account the principles of sustainable forest management. In recent years, the authors have conducted a comprehensive study of the forest resource area and the Forest industry of Russian regions. The empirical material accumulated served as the basis for developing a methodology and evaluating the effectiveness of institutional changes. It is based on the need to achieve sustainable forestry. The model of sustainable forestry assumes the balanced functioning of economic, social and natural subsystems. The design of such a model is possible only if applying interdisciplinary approach based on macroeconomic, microeconomic and sociological components. The use of the socio-economic approach is due to the need to design a model of socio-economic development. In addition, in the process of sociological research the necessary experience accumulates in planning, conducting, and interpreting empirical surveys. We observe In the studied Forest industry a combination of anthropogenic, natural and business factors. In this case, the subjects of environmental

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management are the legislative and executive authorities, local self–government bodies and natural resource management entities, enterprises engaged in economic activities in the field of forest resources. The authors suggest a methodology for studying the Forest industry as the basis for developing the model of sustainable forestry, based on the interdisciplinary approach. So, it includes: • research of economic and social subsystems of forest socio-economic systems taking into account environmental factors of development; • research of innovative transformations of the Forest industry enterprises; • research of the institutional structure of the forest management system; • use of methods for analysis and data evaluation about each subsystem based on qualitative and quantitative methods. • The main scientific approach of the research is the institutional analysis that can be implemented via the following [28]: • through analysis of the institutional environment in regions and in the Forest industry; • by analyzing the behavior of the Forest industry enterprises in the context of institutional transformations; • through the analysis of the formation of institutions and management systems in the forest sector; • through the analysis of the formation of the institute of social responsibility of enterprises in the forest industry; • through the analysis of the behavior of the population in forest areas when they interact with the forest management system. The basic methodological position of this approach is the condition for analysis of institutions and/or institutional changes as the main subjects of research. The institutional analysis conducted, based on the study of the selected institutions, allows us to identify complex socio-economic relationships that are integral parts of modern institutional processes. The most difficult element of this analysis is to assess the effectiveness of institutions and institutional changes. The analysis of modern literature confirms the fact that there is currently no agreement on the issue of empirical assessment of institutions. Determining how much better or worse economic institutions are in the United States, France, or in other developed countries is a very difficult task. Differences in the quality of the institutional structure in these countries are too the reason for differences in economic results, which can be quite large. So, for example, in the time of Adam Smith, it was determined that differences in institutions may possibly explain differences in income in different countries due to differences in how they affect the growth process. Although, many institutional changes can be formally implemented in a short period of time through political and/or legal decisions, and in practice such formal rules are not implemented immediately, especially in Russian realities. And if we are talking about informal restrictions related to customs, traditions, and codes of conduct, these cultural restrictions are even less susceptible to the efforts of reformers. Therefore, it is difficult to quantify the results of these changes in the short and medium run.

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Therefore, many researchers use the sociological approach to evaluate institutions. Its use is substantiated by two circumstances: (1) modern sociological theory is the basis for the design of models of the socio-economic systems development of; (2) the experience in planning, implementation, and interpreting of empirical surveys has been accumulated within the framework of sociological researches [40]. Economic sociology studies both, the economic prerequisites, opportunities and limitations of realizing the interests of groups in society, as well as social factors and conditions for the functioning of the economy. In our case, it is the sociological approach that can be effectively implemented to analyze the socio-economic sphere, where such subsystems as society, economy and nature intersect. The aspect of the relationship between the institutional structure and the issue of sustainable development of the Forest industry can be most effectively considered with the use of sociological methods for analyzing qualitative and sometimes quantitative indicators. Sociologists have used several methods of research that capture the differences in formal constitutional entities, and the differences in the informal institutions. The most frequently used criteria for evaluating such a plan are based on the opinion of the panel consisting of experts, academics, practitioners, or consultants. Among them are the Q-method, Institutional Analysis Development Framework (IADF) method, discursive analysis, and Political Risk Services (PRS) measures of country risk (risk assessment criteria for the country by the Political Risk Prevention Service), including the widely used property confiscation risk criterion; the corruption index used in researches conducted by Transparency International; and the World bank’s global business environment survey (please see Sect. 3.3. Modern Methods of Institutions and Institutional Changes Evaluation). Today, it is possible to trace the dependence of criteria and tools for evaluating effectiveness by determining correlation dependencies. While studying the correlations among the tools for institutions assessment, which are usually used in the scientific literature, we can find out that tools using the general measurement method are generally highly correlated. Conversely, the correlations are less evident when we compare the instruments using a variety of assessment methods. On this topic, the most significant contribution was the work by Acemoglu et al. [41], Engerman and Sokoloff [42]. These authors address the problem of causation by examining the deep historical differences that affected the formation of institutions in European colonies, namely the death rate (D. Acemoglu, S. Johnson, and J. Robinson) and the inequality caused by the growth of scale of production (S. Ingerman and K. Sokoloff). There is no unambiguous opinion among researchers that the institutional assessment was conducted properly in these works. E. Glaeser and other authors argue that most of the modern criteria for evaluating institutions, used in the literature, are criteria for evaluating the results, rather than the institutions themselves [43]. They suggest that differences in institutions can be assessed by means of “objective institutional rules”, which are essentially reduced to differences in constitutional structures: judicial supervison, timing of appointments of Supreme court judges, etc. Glaeser and coauthors show that these criteria have little to do with aggregated economic results.

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There is a special problem, which is the fact that innovations have the impact on economic growth. Though, we do not know which innovations have a greater impact in this process. Another problem, as we will see later, is that the various criteria for innovations evaluation are closely interrelated. It makes the impact of various innovations determination extremely difficult. Recently, there have been a number of attempts made to identify specific institutions that are responsible for improving productivity, including an attempt by D. Acemoglu and S. Johnson to “pinpoint” institutions, who studied the influence of the “broad” institution of the property rights and the “narrow” institution of contracting, finding out that only the latter are important for economic results [44]. K. Woodruff argues that different methods of measuring institutions actually evaluate different criteria. Empirical tools for evaluating institutions can be divided based on several grounds. Here K. Woodruff [27] distinguishes between formal and informal institutions, and between broad and narrow institutions. Usually, the criteria for evaluating formal institutions are “strict”, while informal institutions are “soft”. The strict evaluation criteria are based on written documents, the reliability of which can be easily established and not questioned. The soft criteria are concepts presented by experts or participants of economic operations. A clear discussion and explanation of the measurement of formal institutions were provided by E. Glaeser, who argued that the assessment of institutions should be guided by “objective institutional rules” [43]. In their works, they provide several examples of this approach, including differences in electoral legislation (the proportional representation versus the majority electoral system) and the independence of the judiciary. E. Glaeser and others use two different criteria to measure the independence of the judiciary power, to analyze the last question. These criteria were presented by R. La Porte and others [45]. One of them relates to the appointment of Supreme Court judges. The second one is related to judicial supervision of compliance with the law. Strict objective criteria for evaluating constitutional differences are quite obvious. As a result, they are not subject to criticism and are influenced by results that are supposed to predict. Experts, for example, may judge a country to be more corrupt after the economic crisis, but the criteria for the term of appointment of Supreme Court judges cannot be affected in the same way. Another significant problem is endogeneity caused by reverse causation or unappreciated differences, which can be resolved by using appropriate tools. Today, it is obvious that many differences in political institutions are closely related to the legal basis (legal origin). By using this tool, E. Glaeser and others have shown that the relationship between these criteria and economic results is not so strong. The evaluation of institutions conducted using formal and strict criteria solves the problem of subjectivity. However, the extent to which these criteria cover the full picture of the institutional environment stays unknown. Once again, we are faced with a problem where formal criteria for evaluating institutions used, for example, in the analysis of constitutions, do not allow us to cover the entire problem. Therefore, the alternative is actually the fact that the institutional environment is constantly changing both in terms of the formal laws, which

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manage interactions, and in terms of how formal laws and regulations are implemented and enforced in the country or region. This is about differences in the way the laws are enforced, as well as differences in the informal institutions that govern the country. The researchers argue that there are undoubtedly fundamental factors in the institutional environment that are not captured by formal evaluation criteria. From the empirical point of view, the existence or importance of differences in informal institutions is only part of the problem. Another question is whether it is possible to develop a criterion for evaluating informal institutions, which is independent of the results we are trying to describe. As have been noted earlier, the current institutional structure and ongoing reforms do not encourage innovative development of enterprises in the forest industry. The research shows a significant increase in transaction costs due to the inconsistency and incompleteness of the forest policy realized and due to the opportunism. They also allowed us to give a quantitative assessment of the factors that affect the innovative activity of the entrepreneurship in the Forest industry. The whole system of measures is required, to increase the effectiveness of innovative development of the Forest industry, and which is the integral part of the forest policy. At this stage, it is important to conduct the institutional analysis. It is necessary to find out how and which institutions regulate the real behavior of economic entities of the forest management in the selected region, and to predict their reaction to innovations (please see in Sect. 3.3. Modern Methods of Institutions and Institutional Changes Evaluation). Innovative institutional transformations are usually associated with the reorganization of institutional structures, formal and informal rules, property rights, individual entrepreneurship, organizational innovations, and implementation of technological and production improvements. There are many methods of multidimensional analysis, such as cluster analysis, taxonomy, and factor analysis, which are usually an effective tool to quantify socioeconomic processes with a sufficiently large number of characterizing factors. Moreover, to measure quantities of a qualitative nature, such as expert assessments or attitudes to existing “rules of the game”, it is necessary to address the methods of qualitative analysis or use methods of converting data of a qualitative nature into quantitative ones. It has been previously determined that formal and informal institutions are intended to regulate relevant business practices. The correction of formal and informal rules of the existing institutional structure is the basis for institutional changes. Many mathematical methods and models have been developed to evaluate the effectiveness of institutions and of institutional changes. The most interesting of them are presented in Sect. 3.3. Modern Methods of Institutions and Institutional Changes Evaluation. Due to the lack of quantitative data, we propose to evaluate institutional changes using methods for evaluating qualitative information. Both informal and formal institutions in the forest sector are often non-transparent. This can lead to unpredictable errors in the management of enterprises. Since managers of the forest companies are often not just unsure of their decisions, but even do not know how to behave under the circumstances. This imperfection was also demonstrated by the new Forest code, introduced back on January 1, 2007, when

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the regulatory support was not ready. As a result, the economic activities of many forest enterprises were paralyzed, they suffered significant losses, and a number of enterprises closed, and others were left without the forest resource base. At the same time, there are problems with the formal institutions too that are being created, which increase transaction costs and generally reduce the efficiency of the economic system. Graphically, the relationship between the effectiveness of the institution and its transparency, adaptability, and excellence is shown in Fig. 3.6 in Sect. 3.3. Modern Methods of Institutions and Institutional Changes Evaluation. Based on the analysis of various approaches to assessing institutional changes, it can be stated that there are no methods for evaluating the effectiveness of institutional relations in the economic literature. The clarification of institutional relations and disclosure of their features allow us to develop a model for evaluating the effectiveness of institutional relations in innovative transformations. Institutional relations are developed to implement new formal and informal norms and rules into the activities of economic entities. The informal rules arise as a result of the ineffectiveness of formal rules that has been previously shown. Often the action within the framework of the informal rules allows the economic agents to operate more efficiently. Therefore, it is necessary not only take into account formal rules, but also to develop the most effective informal rules; to carry out their formalization and implementation in economic entities. Let’s focus on the concept of the effectiveness of institutions. The effectiveness of institutional relations is manifested through the components of the effectiveness of institutions and economic relations. There are two aspects of the effectiveness of institutions: adaptive and allocative. Adaptive effectiveness of institutions is the ability to distribute powers among economic agents depending on the current situation. The allocative effectiveness of institutions refers to the ability of institutions to distribute power among economic entities in an optimal way. Thus, the effectiveness of institutions determines the optimal structure of entitlements in the existing context in a given period of time to reduce losses and reduce the level of transformation and transaction costs [46]. Powers are seen as an integral part of the competence of the responsible body or another party of the legal relationship, i.e. the existence of subjective right to conduct certain actions in the existing situation, and to demand appropriate action from other participants in the relationship. At the same time, the powers of the State bodies or management bodies of the organization involved and other participants in legal relations include the corresponding rights and obligations to perform the actions required, depending on the situation, within their competence. This obligation, depending on the situation, is provided by the presence of counter-powers of other participants in legal relations for its implementation by means provided for by laws, requirements to perform obligations, including judicial by court. Powers may be provided by law, other legal acts, constituent and internal documents of a legal entity, or title documents.

3.2 The Problem of Evaluating Innovations and Institutional … Fig. 3.4 Institutional relations in the form of the “black box”

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Business entity 1

Institutional reations

Business entity 2

In this case, institutional relations act as means of obtaining benefits for economic entities in the Forest industry as a result of their interaction, for example, among the institutional sectors of public administration, entrepreneurs, enterprises and nonprofit organizations whose activities are related to the service of enterprises. The nature and process of various agents of economic interaction within the framework of institutional relations are unknown. Based on this interaction of various actors through institutional relations, we present the model of the so-called “black box” (Fig. 3.4). The “black box” is defined as a system in which input and output data are known, but its internal structure and processes are not known. You can analyze the system only by its input and output values. It should be noted that such a study does not provide a complete picture or understanding of the internal content and mechanisms of a separate system, since the behavior of different closed systems may be the same. Institutional relations are the system of interaction between various actors, the contents of which we do not know. Economic entities interact with each other via institutional relations regarding the forest resources included into the system. The main goal of their interaction is to produce the benefit and maximize it. Therefore, the criterion for the effectiveness of institutional relations can be considered the income of economic entities operating in the Forest industry. The criterion for the effectiveness of institutional relations, based on the effectiveness of institutions and economic relations, is the optimal interaction of all the business entities, which leads to an increase in their income. Statistical observations and accounting reports are used to evaluate corporations. Thus, institutional relations should take into account at least two components of efficiency: economic and social (please, see Figs. 3.5 and 3.6). When analyzing the effectiveness of institutional relations, the following features should be taken into account: • the level and direction of the costs of transformation and transactions that occur during the transition from one rationing to another; • the costs of transformation are affected by stable, but usually ineffective regulations that lead to “institutional traps”;

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Effectiveness of institutional relations

Institutions

Business relations effectiveness

effectiveness Effectiveness of powers

Increase of the State income

allocation among economic agents in a

Increase of an enterprise income

specific situation Increase of

Increase of

Increase of income of

social needs

economic

economic agents

expenses

expenses and savings

Decrease of Increase of profit

transaction costs

Fig. 3.6 Relationship between effectiveness and performance indicators

Effectiveness indicators

Fig. 3.5 Effectiveness of institutional relations

Institutions Effectiveness 15

Transparancy

10

Adaptability

5 0

Perfection 0

1

2

3

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• the analysis of the effectiveness of institutional relations involves taking into account the influence of cultural inertia and the need to avoid the emergence of institutional conflict, which leads to the emergence of stable but ineffective rules and regulations; the allocation of transaction and transformation costs among business agents can be unfair, resulting in inefficient informal rules and institutions. Among the private indicators for evaluating the effectiveness of institutional relations in the Forest industry, the following can be distinguished: • growth rates of the balance of primary income of institutional agents; • income from placement of financial capital and tangible non-financial assets by institutional agents; • the share of institutional agents in the formation of gross national income; • demographic coefficients of agents of institutional relations; • transfers growth rate. An important aspect in the process of evaluating the effectiveness of institutional relations is the presence of competitive institutions. One of the works by V. Kerber and V. Vanberg declares: “What we really mean by ‘competition among rules’ is competition between individuals and groups, which is carried out through rules and institutions. We want to understand how the distribution of population, individuals, or groups according to the gradations of the ‘rule scale’ is determined by the relative success that different rules help their respective users to achieve” [47]. The comparative effectiveness of institutional relations depends on the specific conditions for performing the action. The prevalence of an institution at any given moment or a period of time is mediated by the functioning of the institutional market. This mediation is manifested even if the institution in question is the object of a previously concluded transaction in the political market, i.e. individuals are forced to follow the relevant rule by the power of the State (or at the level of the industry and specific enterprises by contract). The emergence of a new economic rule is possible only when the algorithm of actions included in this rule is implemented systematically, i.e. economic agents who make transactions in commodity markets choose this rule in situations that correspond to the conditions for applying the rule prescribed by such a law. The “engineering approach to institutions” is often used in modern Western political economy [32], according to which institutions should be evaluated from the point of view of performance and ensure that the effectiveness increases, not only of the action as such, but of the institutional structure too (property rights, contract rules, relations in an industrial organization, etc.) in which this action is performed. The task of institutions can be formulated as the creation of such zones of trust, in which it is possible to save on transaction costs (the cost of securing their transactions, obtaining information) and use the funds saved for investment into production. Maximizing savings is a problem of institutional efficiency. The effectiveness of institutional transformations can be characterized by the ratio of the cost of achieving goals, i.e., solving the tasks set in the process of

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transformation to the result achieved, if it can be quantified. The effectiveness of institutional changes depends on the cost of maintaining the relevant institutions and/or implementing the relevant institutional changes, which are reflected in the success of the enterprise/industry. Thus, improving the effectiveness of institutional change can be achieved by improving (perfection of) the programs of institutional changes, development of new and use of proven tools and methods of institutional changes. When evaluating the effectiveness of institutional changes, along with the costs, the timing of achieving the goals and the solution of specific tasks set within the specified time frame should be taken into account. If the deadlines are not met, this indicates that they are ineffective. Along with the economic effectiveness of institutional changes, the importance of social efficiency should be noted, which characterizes the extent to which the potential of management and the workforce, the creative abilities of the parties involved, and the improvement of production conditions are used. The effectiveness of institutional transformations is reflected in the level and dynamics of labor productivity, product quality, the use of modern technologies and material resources, and others. It is possible to quantify the effectiveness of innovations and institutional transformations by using cross-sectional regression models. To assess the effectiveness of innovation and institutional transformation, we propose the following model:   Ef . = f Itz , Ito , IIT , Ipro , Inano , Ibio , Iinstform , Iinstinform , Iorg , Ieco ,

(3.1)

where Ef. is criteria for the effectiveness of the development of the Forest industry; I tz : I to : I IT : I pro : I nano : I bio : I instform : I instinform : I org : I eco :

technological innovations in logging; technological innovations in wood processing; IT-innovations; product innovations; product nano-innovations; product bio-innovations; institutional innovations in the formal institutions; institutional innovations in informal institutions; organizational innovations; eco-innovations.

The quantitative indicator of industry development is chosen as a criterion for the effectiveness of industry development. This model meets all the requirements and can be used to explain (analyze) the effect of innovations on the sustainable development of the Forest industry. It allows us to evaluate: (1) how effectively these innovations are implemented in the forest business of a country or region; (2) assess the role of institutional innovations; (3) determine the importance of these innovations in the Forest industry development. The model for evaluation of the role of institutional innovations in the Forest industry can be presented in the following way:

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  IMP = f Nfed , Nreg , Gfed , Greg , Ifin , Iprof , Iorg , Iinfo , Iinfinst ,

(3.2)

where the IMP indicator characterizes the progress in the field of industry reforming in the context of globalized markets in general (it is an expert assessment of the volume and quality of new legislation and institutions); N fed : N reg : Gfed : Greg : I fin :

I org : I prof : I info : I infinst :

Federal regulatory framework, i.e. Federal norms and legislature; regional regulatory and legislative provision; the role of the Federal government; the role of Regional government (the market orientation of the government and the effectiveness of management at the regional level is evaluated); financial sector (assesses the level of independence, business skills, and financial resource allocation practices, as well as the level of monitoring and payment systems); organizational structure of the industry and enterprises; professional training and educational programs for personnel; information and analytical support; informal institutions (methods of contracting and contractual obligations, norms of ethics and morals, traditions).

The questionnaire Forest Industry Development presented to interview the Forest industry experts to evaluate the role and effectiveness of innovations in the Forest industry of Russia and to obtain their expert opinions is presented bellow. This questionnaire distributed among experts in the Forest industry consists of three parts: • Part I: questions addressed to experts to figure out their level of expertise and to evaluate the role and importance of innovations in the Forest industry, presented in Table 3.3; • Part II: questions developed to evaluate the main indicators of institutional innovation in the Forest industry; • Part III: the question to figure out what is the the priority for the further development of the Russian forest industry (short essay question). The qualitative values provided by respondents help us to analyze and explain the effects of innovations on the sustainable development of the Forest industry and once converted into quantitative numbers in the models 3.1. and 3.2. presented above, can allow us to evaluate the effectiveness of all the named innovations implemented in the forest business, as well as assess the role of institutional innovations and determine the importance of these innovations in the Forest industry development. Part II: Please evaluate the main indicators of institutional innovation in the Forest industry for the period from 2010 to 2021 on a 10-point scale. Element of institutional reform of the Forest Industry

Score

Progress in the field of industry reform in the context of globalization* Regulatory framework at the regional level* (continued)

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(continued) Element of institutional reform of the Forest Industry

Score

Legal framework at the federal level* Role of the Federal government** The role of the regional government** Financial sector*** Organizational structure of sub-sectors and enterprises**** Professional training and educational programs of personnel Information and analytical support Informal institution***** * Evaluate the volume and quality of new legislation and institutions from 0 to 10: 1–3-small progress in legislation and institutions; 4–5-some progress in legislation, small in institutions; 6–7—some progress in legislation and institutions; 8–9—significant progress in legislation and institutions; 10—perfect legislation and institutions ** the government’s market orientation and the effectiveness of public sector management is assessed: 1–3: small changes; 4–6: noticeable reform; 7–9: significant reform; 10: deeply advanced reform *** the level of independence, business skills and credit resources, the level of supervision and the financial system is evaluated: 1–3: small changes; 4–6: some initial progress; 7–9: the system is functioning well, but with some limitations; 10: the system is functioning well and there is a large segment of successful banks **** the effectiveness and adequacy of the existing organizational structure of sub-sectors and industry enterprises is evaluated (0–10) ***** the role and influence of informal institutions in the process of formation and development of enterprises and the industry, such as contractual obligations, ethics and morals, traditions, etc., are evaluated both at the industry level and in the enterprises themselves (0–10)

Part III. What development path can become the priority for the Russian forest industry? Considering a case study of Baikal region and Irkutsk province, as the leading forest region of Russia, in particular, depending regressions have been developed based on the survey of over 50 experts opinions in the Forest industry of Irkutsk province and along with the further explanations of the models and presented in the next section Modern Methods of Institutions and Institutional Changes Evaluation.

3.3 Modern Methods of Institutions and Institutional Changes Evaluation The issue of innovations’ effectiveness evaluation is one of the most difficult and challenging tasks for the economists. The most complicated task is evaluation of institutional changes effectiveness. In this paper we take an attempt to figure out the basic problems related to the transformation of the institutional structure, and will determine major factors and conditions influencing dynamics of institutional structure transformation in the Forest industry. The major task of the research is to

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Table 3.3 Part I: Questions for experts in the Forest industry of Russia No Questions 1.

Are you one of the following An entrepreneur? A representative of a small business? A representative of a large business? An administrative employee or of authorities? A science employee? Another expert in the forest industry (please explain)? Please rate it on a 10-point scale

2.

How competent are you in the field of innovation and institutional transformation?

3.

How effectively are the following innovations implemented in the forestry business? • Technological innovations Including (a) in logging (b) in woodworking (c) IT innovations Computer networks GIS Models of forest management and dynamics • Commodity innovations Including (a) chipboard (b) OCP (c) nano(d) bio(e) other products and materials made of cellulose and forest chemistry • Institutional innovations Including (a) in formal institutions (regulatory and legislative support) (b) in informal institutions (contractual obligations and methods of contracting; social norms) (c) organizational and managerial • Environmental innovations

4.

The importance of implementing the following innovations • Technological innovations in logging • Technological innovations in woodworking • Institutional innovations in general (in formal and informal institutions, organizational and managerial, social, etc.) (continued)

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Table 3.3 (continued) No Questions • IT innovations (including computer networks, GIS, computer modeling) • Commodity innovations (nano, bio, etc.) pulp production and forest chemistry 5.

If you do not use innovations, how much do you feel the need to use them?

6.

What in your opinion prevents the use and introduction of innovations to a greater extent Lack of innovative projects? There is no market for innovative projects? There is no information about innovative projects? There is no need to use them? There is no interest in using them? There are no financial resources for the acquisition and development of innovations?

7.

If you use innovations, evaluate what effects you have and to what extent: Ecological? Social? Industrial? Scientific?

8.

In your opinion what is more influenced by the use of innovations: The increase of the market value of the company? The formation of new markets and new needs?

9.

In your opinion to what extent do innovations have an influence on Investment activity (the growth of innovation activity causes an increase in investment attractiveness)? Financial activity and competitiveness (the growth of innovation activity strengthens financial stability and competitiveness)?

10. How strongly do you assess the need for closer scientific cooperation in the form of conferences, seminars, symposiums, round tables? 11. How do you assess the need for the State participation in innovation processes? The need for the influence of regional and municipal authorities on the innovative activity of enterprises? The need to raise interest and stimulate regional and municipal authorities in the application of innovations? The need for regional and municipal authorities to provide support (financial, provision of benefits)? 12. To what extent do you think the use of innovations has an impact on reducing unemployment and increasing the income of the population? 13. What do you think are the priority tasks for forest management bodies in the constituent entities of the Russian Federation? (10 is the highest priority) Protection of forests from illegal logging and other violations, identification of violators Protection of forests from illegal development, seizure of forest land Fire-fighting arrangement of forest territories, fire prevention (continued)

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Table 3.3 (continued) No Questions Forest protection education of the population, education of the careful attitude to the forest Clearing forests of garbage, countering forest littering Extinguishing forest and peat fires, as well as grass fires threatening the forest 14. How developed and effective is the current Forest Code? 15. Which of the listed bodies are the most important in your region (locality)? (a) State authorities that manage forests (b) State Forest Inspection (c) The State Environmental Inspectorate (d) State structures engaged in combating forest offenses (illegal logging, construction, poaching, etc.) (e) State structures that must provide citizens with information about the state of forests and plans for their use (f) Public organizations engaged in the conservation of Russian forests 16. How do you assess the idea of a complete ban on the export of roundwood? 17. How profitable is logging today? 18. What is the probability that Russia will turn from an exporter into an importer of timber? 19. What is the situation with the provision of personnel in the industry? 20. How much has the volume of illegal logging increased or decreased in recent years? 0 -the volume of illegal logging has significantly decreased; 1–2-the volume of illegal logging has decreased rather than increased; 3–4-the volume of illegal logging has remained at the same level; 5–6-the volume of illegal logging has increased rather than decreased; 7–9—the volume of illegal logging has significantly increased; 10-the volume of illegal logging is very large 21. To what extent is the State forest protection visible to visitors of the forest? 0-invisible at all, the forests look unattended and not protected by anyone; 1–3-practically invisible, you can not guess about its existence; 4–6-not noticeable enough, the forests are perceived as poorly protected; 7–9 is well visible, the forests are perceived as reliably protected; 10-perfectly visible, the forests are protected most effectively 22. How effective is the development of the forest industry from an economic point of view? (0–10, 1—least effective, 10-most effective)

find out the ways to evaluate and measure Institutional Changes at the regional level. Therefore a profound methodical and theoretical substantiation is required. There is a need to determine the levels of Institutional Changes Effectiveness and to measure the Institutional Changes applying different methodologies, Q-methods, for example. A special questionnaire was developed and distributed among local officials, authorities and business people who’s work is related to the development of the Forest industry. Other measures applied could be Polity IV, Comparative Institutional Analysis (CIA), Institutional Analysis Development Framework (IADF), and Cross-sectional models: 1.

The research uses the method of institutional analysis based on the theory and methodology Institutional Analysis Development Framework (IADF). The

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IADF methodology is a repeatedly tested tool for institutional analysis. This tool can be used in conjunction with such theories as game theory, constitutional choice theory, transaction costs, and other. The structure of the IADF was first described in detail by Elinor Ostrom back in 1995 and has been further developed in the works of other researchers of political theory and political analysis [48]. We will present only its main provisions in the context of our research. In our case, the arena of action is the Forest industry, which includes two groups: action situations that include positions, actions themselves, information and participants who have preferential rights, information processing capabilities, etc. The IADF structure is designed to understand such an arena of action, and is based on rules and attributes, i.e. attributes of the physical world, attributes of society, and rules of use. All of them make up the complex sample of relationships, which is studied as a model of interactions. It is assumed that the structure and quantity of forests, which are physical attributes, have the major impact on the Forest industry, i.e. on the arena of our actions. Similarly, a number of attributes such as the level of education of people, their skills, customs and norms, methods of contracting, and contractual relations affect how the Forest industry operate. Thus, the analysis of the institutional environment allows us to understand the economic, social and political order, i.e. to find out how and for what purpose various actors organize their ties with the Forest industry. The specific results are generated as a result of various activities, and by applying a number of evaluation criteria, such as financial and economic performance, these results can be evaluated. The Q-method and discursive analysis are important tools for assessing institutional relations in the Forest industry, which are proposed in this research. Within the framework of this research methodology, we developed: a questionnaire for interviewing business leaders, representatives of executive and legislative authorities, scientists and other experts in the field of Forest industry; schemes of semi-formal interviews with business leaders and representatives of administrations and forest services. The subject of the discourse analysis and the Q-method for assessing the effectiveness of institutional relations the positions and opinions on the legal framework, formal and informal practices in the forest sector were selected and evaluated. In total, more than 50 expert questionnaires, received from professionals and managers of forest companies, scientists in the field of forestry, representatives of the executive and legislative authorities of the Russian Federation and Irkutsk province, associations, trade unions, and managers, were analyzed. The results of the discursive analysis confirmed the assessment of the processes of formation of institutions in the Forest industry, obtained within the framework of institutional analysis, as well as the need to implement innovative programs along the entire vertical of production. The questionnaire survey was carried out with the formation of a stratified sample of respondents, taking into account the requirements of representativeness of the sample and further methods of mathematical and statistical

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processing of the results. The basis of the methodological approach to the study of economic and social behavior of enterprises was the following sequence of the work: collecting data on enterprises and the industry as a whole, assessing the expectations of enterprises and their impact on results, assessing the costs and benefits that they receive in the course of their activities. For this purpose, we used data from questionnaires and informal interviews with heads of enterprises and administrative structures, and other professionals and industry experts. The interview scheme for forest service employees, scientists and other experts in the Forest industry was aimed at identifying the role of institutional transformations and prospects for innovative development of the industry, including the most important property institutions, regulatory and legal framework, educational programs, i.e. all formal and informal institutions. Information about the institutional structure and changes is usually not sufficiently clear and structured and is of a qualitative nature. The evaluation methods used should take into account this feature of the data analyzed. The Q-methodology is considered to be the right tool for assessing the dynamics of institutional changes and their impact. The grouping of economic entities based on the Q-methodology in relation to the institutional environment and, in particular, to the ongoing reforms and development of the market situation, allows the targeted support of innovative entrepreneurship. It is well known that changes in motivation are at the basis of institutional changes. Therefore, the Q-methodology is proposed for the analysis, which classifies not just the influencing features and subjective preferences, but explains the subjective behavior. The Q-methodology is even more preferable in some cases than all other methods, since it has a well-established mechanism for working with fuzzy qualitative data, grouping preferences and obtaining appropriate typologies [49]. The preference for the Q-methodology is due to the fact that this method is suitable for analyzing our type of data and allows us to obtain non-obvious, interesting results, as well as for studying issues such as conflicts, roles, and changes in social and economic policies. Besides that, it allows us to explore issues deeper and for each participant. It is especially important to highlight the possibility while using the Qmethodology to determine how much subjects with similar views perceive and relate to the particular problem or issue in the same way. Usually, the Q methodology is used to analyze data received from a small number of respondents. A small amount of data allows for detailed analysis and interpretation of the results. Q-methodology was used in research of the Forest industry to study the attitudes of business leaders to the problems of the Forest industry. Many statements obtained from interviews with managers of forestry enterprises were analyzed using the software PQMethod. The program selects eight factors by default, which are then analyzed for significance. As a result, three factors with the level of explained variation greater than 10% were considered as the main explanatory factors. Since they carry the defining perception of respondents of institutional problems of the forest complex and determine the “ideal” representative of the type.

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4.

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Each of the interviewed participants may belong to more than one type, which is more natural and closer to reality. That is, representatives of each type share the characteristics of the ideal representative, and the greater the individual factor loads, the closer each representative is to its ideal type. Several types were identified based on three factors and presented as “ideal” types of entrepreneurs such as: (1) “Post-Soviet entrepreneur”; (2) “Advanced entrepreneur”; (3) “Virtual economy Entrepreneur” [49]. It is possible to discuss indicators provided by the Political risk prevention Service (PRS), the consulting firm that provides information to investors such as multinational firms. PRS considers various criteria for evaluating investment risk. One of the most widely used is the “expropriation risk criterion”, which assesses the likelihood that private investment will be captured by the State. The ability of private investors to protect their investment depends in part on the formal institutional structure of the country, such as the constitutional rules regulating the independence of the judiciary power. However, the risk of expropriation also depends on the implementation of constitutional norms and how laws are implemented, in other words, on informal institutions too. Thus, the risk of expropriation allows us to assess the combination of formal and informal institutions. There are strict criteria for evaluating formal institutions, and soft criteria that represent a combination of formal and informal institutions. There are also criteria that fall between these two extremes, that is, those that are “tougher” (“weightier”) impressionistic criteria, but milder than constitutional ones. Let’s consider two of them. The first criterion, which is widely used in the scientific literature on economics and political science, and called “Polity IV measure of constraint on the executive”, is an indicator of the restrictions imposed on the executive power. According to the description of this criterion in the reference book “Polity IV”, it determines the degree of independence of the legislative and judicial authorities from the control by executive authorities. Drawing attention to the limitations of the executive power can easily be explained by the fact that this branch of government is in a better position to unilaterally reject the State power for its own benefits. Another important set of criteria for evaluating the institutional environment, which can be classified as hard-soft criteria too, is related to the Doing Business project implemented by the World bank. They include analysis of the formal characteristics of the costs of starting a business, labor relations, contract enforcement, and other aspects of doing business. Most of the criteria for the Doing Business project have been developed by legal and consulting firms and are comparative criteria for the time required for an enterprise to undertake appropriate well-defined activities. Among other foreign indicator or index methods for evaluating the effectiveness of institutions and institutional changes in the field of innovations, we can also highlight the European Innovation Scoreboard (EIS)[50] and Innovation Union Scoreboard (IUS)[51], which are widely used for evaluation and comparison in EU States and in other developed countries.

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7.

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Here we discuss such indicators as the following: (1) Innovation input (input indicators): Innovation Drivers (innovative drivers), Knowledge Creation, Innovation and Entrepreneurship; (2) Innovation output (output indicators): Applications, Intellectual Property. Indicators at the entrance show the availability of resources for implementing innovations (finance, personnel, administrative). Output indicators are designed to display the results of innovation activity. So, based on the analysis, we get the Summary Innovation Index (final innovation index), which allows us to compare countries. The countries themselves are divided into the appropriate categories: Innovation leaders, Innovation followers, and others. The final innovation index is calculated as an unweighted average of all indicators. The IUS method also allows to conduct a comparative assessment of innovation activities and their results in EU member States. As the continuation of the EIS method and together with the Regional Innovation Scoreboard (RIS) indicative assessments and the European Public Sector Innovation Scoreboard (EPSIS) pilot project, which is currently being developed, it forms a comprehensive system for benchmarking and monitoring trends in research and innovation in Europe. According to recent reports, EU countries have become more innovative and are closing their innovation gap relative to the US and Japan, but the differences in the results of EU member States still remain high and are slowly decreasing. According to the EIS and IUS reports, Switzerland, Sweden, Finland, Denmark, and Germany are among the leading countries in innovative development. The leaders are followed by: Great Britain, Iceland, France, the Netherlands, Belgium, Austria and Ireland. The quality and compliance of the legal framework for the protection of intellectual property rights is evaluated in european practice using the International Property Rights Index (IPRI). First of all, it is determined how much it meets international standards. It also assess the political and legal environment. Namely, the independence of the judicial system, confidence in the courts, the presence of corruption, and the political stability of the system. Along with the methods and criteria of indicative assessment presented, it is possible to use the Statistical Package for the Social Sciences system (SPSS) too, also known as the Predictive Analytics SoftWare (PASW) Statistics. This package can be used for processing questionnaire data and expert opinions. This system has a wide range of features for defining the data structure, is efficient and simple system for entering data, allows you to read information from files of almost any type, provides great convenience in data processing, includes options to construct of graphs, charts, and full statistical analysis of data. According to some authors, SPSS “occupies the leading position among programs designed for statistical processing of information” [52]. Regression analysis

The effectiveness of institutional changes can be determined using the following model:

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Eichit = Fedpit · FBdgGrmit + Regpit · RBdgGrmit + u(∗), where E ichit is the relative effectiveness of institutional changes in a region i in year t; FBdgGrmit is the indicator of the economic potential of institutions in region i in year t, which is measured as the ratio of regional budget expenditures to GRP in region i in year t and is used in r measures relative to the national average. Accordingly, F Fedpit·FBdgGrmit is the influence of Federal policy, Re Regpit·RBdgGrmit is the influence of regional policy in the region; u is the error symbol. In this model, i is the specified institution and t is the corresponding time period. Today, we can talk about at least three other factors that affect the effectiveness of institutional relations in the Forest industry. This is the transparency of institutions, their adaptability and perfection. Transparency of institutions is important because they create terms and conditions for interaction among economic actors and the more transparent they are, the more effective the institutions are. Adaptability is the applicability of an institution in a given country, economy, industry, or enterprise. Here it is important to take into account the compliance of the institution selected (imported) with realities of Russian economy, as well as the perception by economic agents and government agencies of this adapted and/or imported institution. The perfection of the institution can be characterized by its telaboration and compliance with the requirements imposed by the current situation in the industry, and taking into account the time issues. Figure 3.6 shows three basic levels of institutions effectiveness (0: ineffective, 1: little effective, 2: effective, 3: very effective), based on expert assessments of performance indicators (from 0: the lowest rating, to 10: the highest rating), corresponding to each level of effectiveness. Thus, in our model for evaluating the effectiveness of institutions, the following variables can be presented: Transp(ip), the relative transparency of the i-th institution in time period p; Adopt(ip), adaptability of the institution; Perf(ip), relative perfection of the i-th institution in time period p. Other factors that can be included in the justification of the effectiveness of institutional transformations are ExpRisk: expropriation risk (investment risk assessment) in region i in year t by risk assessment (Polor), level of Bank deposits in year t–1 (Ostvkladr it–1 ), potential of entrepreneurial activity in the region (Polor*Ostvkladit ), Criminalit : crime level, I InformInst rt : informal institutions, Regpower it : regional power, Fedpower it : Federal power, BudGRmrt : indicator of the economic potential of institutions in region r in year t. Therefore, Regpower rt *BudGRmrt , is regional policy in region r in year t, and Polor: risk propensity assessment, Ostvklad it-1 : deposit balances in savings accounts in banks in year t–1. Polor*Ostvkladit : entrepreneurial potential in a region i in year t. The BudGRm (rt) indicator was first proposed by V. V. Popov, who noted that the dynamics of public spending during the transition period is an important factor for successful transformation [53]. The data are taken from working documents of the Ministry of Finance of the Russian Federation on regional budgets expenditures.

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Then, the analysis of the effectiveness of institutions can be carried out using the following cross-sectional regression model: Eff =IMPROV EMENTvf = b0 + b1 Forestr + b2 Institutionsrt + b3 InformInstitutionsrt + b4 Forestr ∗ Institutions ∗ InformInstitutionsrt + b5 RegPowerit + b6 FedPowerit + + b7 Polor ∗ Ostvkladit−1 + b8 ExpRiskrt + u(∗), where improvement (Improvement) of social, economic, or business results (v) related to the Forest industry (f ) in the region (r) is proposed to be determined by the presence of the resource (Forest), the total variable of formal institutions (Institutions), the variable of informal institutions (InformInstitutions), the investment risk assessment (ExpRisk), taking into account the parameter of regional authorities (RegPower it ), Federal authorities (Fedpower it ), risk assessment (Polor), the level of Bank deposits in the year t–1 (Ostvkladr it–1 ), the potential for entrepreneurial activity in the region (Polor*Ostvklad it ). (u) is the error symbol. In this model, (i) is the specified institution and (t) is the corresponding time period. Thus, the level of improvement (Improvement) is regressed by the resource (forest), institutions and interaction members that are the product of the forest and institutions. The probability of other interactions can be studied too.

3.3.1 Evaluation of Innovations Effectiveness in the Forest Industry of Russia The suggested tool for evaluation of innovations effectiveness, including institutional innovations, is the cross-sectional analysis. Considering a case study of Baikal region the following model is suggested:   Eff = f Itz , Ito , IIT , Ipro , Inano , Ibio , Iinstform , Iinstinform , Iorg , Ieco ,

(3.1)

where Eff is a generalized indicator evaluating effectiveness of the Forest industry development. As the explaining variables the following evaluating characteristics of particular innovations usage in the Forest industry are used the following: I tz : I to : I IT : I pro : I nano I bio :

technological innovations in forest harvesting, technological innovations in wood processing, IT-innovations, product innovations, – product nano-innovation, product bioinnovation;

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I instform : I instinform : I org : I eco :

institutional innovation in formal institutions, institutional innovations in informal institutions; organizational innovations; eco-innovations.

The numerical identification of (3.1) allows us: (1) (2)

to evaluate how effective the innovations are realized in the forest business of a region or a country; determine the importance of various types of innovations in the development of the Forest industry.

The model of institutional innovations in the Forest industry is presented in the following way:   IMP = f Nfed , Nreg , Gfed , Greg , Ifin , Iprof , Iorg , Iinfo , Iinfinst ,

(3.2)

where indicator IMP is a generalized estimation of the progress in the sphere of the industry reforming under the terms of the markets globalization, which is obtained as an expert value of the volume and quality of the new legislature and institutions. As the potential factors influencing IMP indicator the following estimators of the development can be selected the following: N reg : N fed : Gfed : Greg : I fin :

I org : I prof : I info : I infinst :

regional norms and legislature; federal norms and legislature base; role of the federal government; role of the regional government (the market orientation and effectiveness of the State sector management by the government); financial sector (the degree of independence, business skills, and practices of credit resources allocation, as well as, level of monitoring and payment system); organizational structure of industry and of enterprises in general; professional training and educational programs for employees; information and analysis support; informal institutions (methods of contracting and contractual obligations, norms of ethics and morality, traditions).

The following depending regressions have been developed based on the survey of over 50 experts opinions in the Forest industry of Irkutsk province [54]: Eff = 0, 103Itz , +0, 295Ito , +0, 117IIT , +0, 987Ipro , +0, 634Ibio , +0, 152Inano + 0, 359Iinstform , +0, 368Iinstinform , +0, 069Iorg , −0, 037Ieco (3.3) R2 = 0, 986.

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The value of the multiple determination coefficient (R2 ) confirms the precision of the model build, which allows to interpret its content. This model shows the summed influence of innovations based on variations of values obtained. This model shows, and according to experts’ opinions, that the sustainable development of the Forest Industry of Irkutsk province requires the development of new products, including bioand nano- products. The most important to mention for improvement are the wood processing technologies, and further implementation of the modern forest harvesting methods and using IT- technologies in the Forest industry. The I eco coefficient has a negative sign in this regression dependence, which is finally presented without the free term. It can be explained by a weak correlation of the sustainable development of the Forest industry with eco-innovations in the short run and even by its negative influence onto the economic development of the whole Forest industry. In case of the long-run development of the Forest industry of Irkutsk province, and considering many other factors not included into the final model and influencing the Forest industry sustainability, a special attention should be paid to the eco-innovations in particular. The negative value also shows the ecological load and Forest industry business people responsibility, which requires extra investments into the ecological projects. There is a need to increase the expenses related to high technology eco-oriented projects, directed to recover and multiply the forest resources. IMP = − 0, 046Nfed + 0, 394Nreg + 0, 699Gfed + 0, 043Greg + 0, 317Ifin + 0, 284Iprof − 0, 244Iorg − 0, 055Iinfo + 0, 513Iinfinst (3.4) R2 = 0, 972. The value of the multiple determination coefficient (R2 ) for this model confirms quite a precise model for evaluation of institutional changes developed. The calculated Fisher coefficient is 184.46. It also confirms the high value of the factors included and good characteristics of the regression dependency. This model shows the summed influence of the changes in the institutions selected as a result of variations of the values derived. According to the experts evaluations, innovative and sustainable development of the Forest industry of Irkutsk province depends more on the informal institutions, including agreements and traditions of the forest business in the region. The decisions of the federal government play a crucial role in the development of the Forest industry, whereas, the regional power is significantly less important in the forest business development according to the model. The N fed coefficient has a negative value, which confirms the imperfectness of the norms and legislature provision of the federal level. Whereas, the decrees and regulations of the local authorities, according to the experts opinions, have strict and consequent realization. The local financial institutions reliability is of a particular importance for sustainable work of the Forest industry. The educational programs

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implementation and informational support of the industry, as well as improvement of the organizational structure are very important in the Forest industry of Baikal region.

3.4 Development of the Forest Industry Innovative Transformations Program The analysis of the current situation and trends in the Russian Forest industry, as already noted in the first Chapter, allowed us to identify the negative impact of industrial expansion on the state of forests. The modern economic development requires a new paradigm for the development of human relations with the environment, which sets the vector of sustainable forest management. The need for sustainable forest management becomes especially urgent in the context of the modern globalization of sales markets, the consolidation of forest business and growing economic, social, and environmental problems. This implies not only stable procurement of high-quality raw materials and their deep processing, but reproduction, conservation, and protection of forests too. Therefore, the main idea of sustainable forest management is to have a well-organized forestry that functions without compromising the environment, economy, and forest users. Sustainable development of the Forest industry involves, in particular, economic, ecological, and social sustainability. All these components are closely interrelated. Economic sustainability ensures social sustainability, and environmental-oriented forest management depends on economic and social stability. At the same time, excessive economic motivation to use of forests negatively affects the environmental situation, and high environmental requirements can threaten the social and economic stability of society. It is social sustainability that can serve as the indicator of the balance among the three dimensions of sustainability. Based on the analysis of the industry, we proposed the Program of innovative and institutional transformations (PIIT) of the Forest industry, which includes four consecutive stages, which are supposed to be implemented sequentially in time for the 5 years, and which has been partially realized (please, see Fig. 3.7). Now, let’s describe the main stages of the PIIT.

3.4.1 Stage 1: 2021–2023 The first stage (stage 1) is implemented in years 2021–2023 starting with bankruptcies and administrative policy improvements. At this stage, the State forest policy is developed, which should be given a special place in the program of support for the Forest industry. Drastic changes in forest policy may lead to changes in forest legislation or the adoption of new laws. State forest policy is defined here as the

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PIIT 2021–2026 2021– 2023

1 stage

Bankruptcies issues

Administrative policy

Educationa l programs

Implementati on of IT technologies

Deep processing and other innovative programs

Financial and credit policy

Certificati on and marketing

Assistance to management personnel

Informatio n and analytical support

Improvement of organization al structure of the industry

Organizati on of protecting services

2022– 2024

2

Taxation and tariffs

Creation of associations

stage

Formation of exchanges and auctions

2024– 2025

3 stage

Optimization of production placement

Optimization of production placement

Development of methods to stimulate innovation activities

2025– 2026

4 stage

Private property issues

Improvement of the legal framework

Creation of publicprivate partnerships

Fig. 3.7 Program of innovative and institutional transformations of the Forest industry

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activity of government authorities and State forest management within the country and at the international level, reflecting the social system and economic structure of the country. The issues of bankruptcy of unprofitable and environmentally dangerous enterprises, search of effective owners for enterprises in the Forest industry have taken for many years an important place in decision making at all levels of the government. The most prospective solutions are restructuring, re-profiling and development of deep processing. The main elements of forest policy are legislative (regulatory framework), institutional (institutional mechanisms), financial and economic (material incentives), scientific and technical, human resources, and social (information tools). The main issue in the formation of forest policy is the setting of goals. This should be a political decision, since such a decision can only be made by assessing its consequences at the macro-economic level in the long term. The principe moments for the formation of forest policy goals can be: the share of protective forests in the forest fund; the ratio of funds allocated to increase forest productivity (with a huge underutilization of the estimated forest area), and resources used to preserve forests (from fires and pests), and others. The forest policy is closely linked to forest management, and it is sometimes very difficult to draw a line between or separate them. Forest policy defines the goal and main directions of development of the Forest industry or the forest sector of the economy, and forest management is one of the tools for achieving this goal. Forest management is the system of actions or programs aimed at achieving the goals set up for the forest policy within the framework of the current legislation.

3.4.2 Stage 2: 2022–2024 An important aspect of the activities of enterprises in the Forest inustry at the level of the State is to determine the optimal rate of payment for the use of forest resources, which can range from the minimum in times of crisis to support enterprises in the forest sector to higher, which should ensure the desired revenues to the regional treasury and to the Federal budget. Tax and credit policies should be adaptive and encourage interaction between economic agents and environmentalists to achieve sustainable development goals. In addition to the rent charged to forest users, the following tax options can be applied and implemented: The billet tax or “deferred fee” per tree harvested. It is assumed that only regular payments are made for each cube and/or each prepared tree. The base rate is applied with a coefficient that takes into account the level of world prices and changes in the exchange rate. The differentiated tax. Different types of differentiated tax can be applied. For example, depending on the quality and assortment of the harvested forest, its remoteness and accessibility. As it has been mentioned earlier, according to existing and potential producers, both general and industrial tax policies are a serious impediments

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for the development of the regional economy. According to a survey of entrepreneurs, 95% consider current taxes excessive if compared to what they receive from the State [55]. Currently, many business people are not satisfied with the the tax system. Its main disadvantages are the multiplicity of taxes, high rates, the complexity of calculations, and the difficulties in control. In addition, it is important to note the need for preferential financing on the competitive basis for companies that carry out innovative activities. So, in year 2013, there were submitted 22 projects for regional subsidies, three of which related to the Forest industry. Only projects for the production of construction materials were selected. Such projects as, for example, the development of technology for processing lignocellulose wastes by the company “Bionika” or for clearing glades and routes of overhead transmission lines using a machine for chopping the felling residues by “Bratskvodstroy” LTD, or an innovative technology for manufacturing logs for the construction of by “Author’s log houses” LTD, have not been approved yet due to a negative expert opinion [56]. As it has been noted in the first Chapter, an important factor in the formation of the modern model of sustainable forest management is the tightening of the requirements of world markets for forest products in relation to export-oriented forest companies. The main mechanism for this is forest certification, which should be based on the social responsibility of business institutions. It is the forest business that should take on the role of the main guarantor of the sustainable forest use and management. Today, the work to introduce the system of voluntary forest certification is actively underway in the forest management area. The forest certification is aimed to solve two main tasks: (1) to improve forest usage and forest management; (2) to ensure the entry of certified forest products into the market. Forest certification usually includes the following: (1) forest audit: verification of local forest management for compliance with certain standards; (2) certification of products, i.e. tracking the chain from harvesting of labeled products to delivery to the final consumer. The forest certification system includes certification of forest resources, forest management, and wood processing. Thus, the following are distinguished, among the objects of forest certification at the stage of forest usage: logging technologies, technical means of technology, organization of the production process of the forest usage, interaction of forest users with authorities and local populations. The most urgent task of forest management today is to create a national system of forest certification required for effective supply and management of forests. The border for non-certified forest is almost closed today. Russian lumber producers have limited access to the world markets. In international practice, such recognized certification systems are used as, for example, responsible forest management under the FSC and pan-European PEFC. Russia needs too to develop its own national certification system, for approval within the country and for recognition by the international Council. Currently, forest certification is widely used in the Russian Federation. It is represented by two systems: the Forest stewardship Council (FSC) and the scheme of the Russian National Council for forest certification (RNCFC), which was accredited in the international program for approval of forest certification schemes (PEFC). The

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most widely scheme in Russia had been the FSC. The first FSC certificates for forest management and supply chain were issued in Russia back in 2000. By the end of 2011, the total area of forests where forest management is certified under the FSC scheme was almost 30 million hectares. According to this indicator, Russia ranks second in the world after Canada. The total number of certificates (for forest management and supply chain) was almost 300. Of these, about 70 are forest management certificates (along with 115 controlled wood certificates), and the rest are supply chain certificates. Currently, about 177 thousand hectares have been certified under the PEFC system and five certificates have been issued, including one for forest management. All five companies have FSC certificates too. Certified forests are located in 17 regions of the Russian Federation. Their area is 26% of all Russian forests rented out for logging. Unfortunately, there is no data on logging in certified forests. The forest users harvested 123 million m3 of wood of 174 million m3 of all types of logging only in year 2010. The first steps have been already taken in this direction: work is underway to improve the system of voluntary forest certification. The certification is the procedure whereby a third independent party issues a written assurance that the process or service meets certain requirements. It is aimed at solving two main tasks: (1) improving forest use and management, and (2) ensuring the entry to the certified forest products market. Forest certification includes: (1) forest audit, which is the verification of local forest management for compliance with certain standards; (2) product certification, i.e. tracking the chain from the procurement of labeled products to their delivery to the consumer. The forest certification system includes certification of forest resources, forest management, and wood processing. Among the objects of forest certification at the stage of forest usage the following are distinguished: logging technologies, technical means of technology, organization of the production process of forest usage, interaction of forest users with authorities and local populations. The most urgent task of forest management today is to create a national system of forest certification, which is required for effective supply and management of forests. The border for non-certified forest is almost closed today. Russian lumber producers have limited access to the world markets. There are such recognized certification systems used in international practice, as responsible forest management under the Forest stewardship Council (FSC) and European Programme for the Endorsement of Forest Certification (PEFC). The terms of certification by the Forest stewardship Council and the list of FSC product groups of “UI LDZ”, JSC are presented further and in Table 3.4. The result of the “UI LDZ”, JSC risk assessment includes in its own verification program all non-certified suppliers and is based on inspections conducted for the five specified categories of wood that are not allowed for lumber controlled by FSC. Russia also needs to have its own national certification system, for approval within the country and for recognition by the international council. Declaration of compliance with the FSC values of UI LDZ, JSC (Ust-Ilimsky Sawmill and Wood Processing Plant) has ties with the FSC via contractual relations for certification of the supply chain of wood products. By signing this Declaration,

3.4 Development of the Forest Industry Innovative Transformations Program Table 3.4 List of FSC product groups of UI LDZ, JSC

FSC product code

151

FSC product group name

FSC product material category

W5.2

Solid wood boards/pine

FSC Mix Credit; FSC Controlled Wood

W5.2

Solid wood boards/larch

FSC Mix Credit; FSC Controlled Wood

W5.2

Solid wood boards/spruce

FSC Mix Credit; FSC Controlled Wood

W5.2

Solid wood boards/cedar

FSC Mix Credit; FSC Controlled Wood

W3.2

Sawdust/coniferous

FSC Mix Credit; FSC Controlled Wood

Sawmill products

the company’s management openly declares that they have read and understand the “Policy on association of organizations with FSC” published on their website www.fsc.org. This policy highlights the position of the FSC regarding unacceptable activities of organizations and individuals that are or may be associated with the FSC, as well as the mechanism for exclusion from such association. In view of the above the company’s management publicly undertakes at present and in the future, during the term of relationship with FSC not to participate directly or indirectly in the following unacceptable activities: • • • • • •

illegal logging or trade of illegal wood or forest products; violation of traditional or human rights in forest operations; destruction of high environmental values in forestry operations; significant conversion of forests to plantations or non-forest use; introduction of genetically modified organisms in forestry operations; violation of any of the fundamental conventions of the International labour organization (ILO) as defined in the ILO Declaration on fundamental principles and rights at work.

Now, it is required to modernize the industry and coordinate the actions of Federal executive bodies and of local authorities, to overcome the technological, innovative and socio-economic lags in the forest sector. It is necessary to improve the procedure and the system of State control and supervision in forests. It is necessary to develop a national system of voluntary forest certification. All the lumber produced in Russia and products made from it must have certificates confirming the quality and legality of origins.

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The forecast of certification development in the Russian Federation till year 2030 is considered in three variants. There are three scenarios possible when forecasting the development of the Forest industry, namely: inertial, innovative and moderate [57]. The inertial scenario is based on maintaining the trends in the development of the Russian forest sector over the past 20 years (1990–2010). It does not make provisions for additional targeted measures of the State support for the development of the Forest industry by increasing investment in the modernization and reconstruction of production facilities. The inertial scenario is based on the assumption that the global financial crisis can continue. The possibility of further increase in tariffs of natural monopolies for gas, electricity and railway transportation of forest goods is taken into account. There are no plans to increase prices for wood and timber, or to build new pulp and paper mills. The inertia scenario considers the development of the Forest industry through the modernization and reconstruction of existing lumber enterprises and the implementation of a small number of priority investment projects for the construction of sawmills, plywood and slab plants. International trade will be dominated by exports of roundwood and lumber, as well as imports of paper and cardboard. The inertial scenario is based on low growth rates of the main macroeconomic indicators of the Russian Federation for 2010–2030. The development of the use, protection, preservation, and restoration of forests is envisaged in accordance with the current forest legislation. The moderate scenario provides a transition from the inertial to the innovative scenario. The moderate scenario assumes that the Russian economy will fully recover from the crisis in 2012–2015. In the future, the GDP growth rate will be 4–4.5% per year, and in the second decade the growth rate will accelerate. The inertial scenario assumes the modernization of the main wood processing enterprises. The structure of wood boards will be dominated by medium-density fibreboards (MDF) and oriented strand boards (OSB). It is planned to increase the number of priority investment projects in the Volga, Ural, Siberian and far Eastern Federal districts. Capacities will be built and put into operation at specific new pulp and paper mills in the European part of Russia and in Siberia. They will focus on integrated processing of low-grade larch hardwood and production of importsubstituting products, which will reduce the import of paper and cardboard and will help to achieve positive balance in trade in pulp and paper products. New federal laws on industrial policy and new forest legislation are required for the realization of the moderate scenario. The scenario requires the use of the State support measures in the form of tax and investment incentives. The innovation scenario is based on the following assumptions: • industrial production, investment and wages are growing at a rate of at least 4% per year; • new pulp and paper mills are built in the North-Western, Ural and Siberian Federal districts and some of them are being put into operation no later than 2021; • large-scale technological modernization of existing lumber enterprises is carried out on the basis of breakthrough technologies, including innovative structural wooden materials;

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• wooden housing construction is developed in accordance with the national project “Affordable and comfortable housing for citizens of the Russian Federation”, and with the introduction of housing in the country in the amount of 140 million m2 per year, i.e. 1 m2 per inhabitant of the Russian Federation. In pulp and paper production, the use of nanocellulose is organized. The development of bioenergy at lumber processing enterprises will allow them to meet their own needs for electricity and heat supply. The innovative scenario assumes targeted measures of the State support for the development of forest infrastructure and the implementation of priority investment projects. The scenario provides for improving the structure of foreign trade, reducing imports and increasing exports of high-value-added products. It is assumed that the growth of problems of sustainable development and global warming will contribute to the promotion of the Russian forest sector among the priority industries that benefit from the State support in the form of tax and investment incentives, preferences and other tools. The production of new bio-products with high added value will significantly change the structure of the pulp and paper industry and its economic parameters. For the first decade, the priority will be to generate knowledge and stimulate breakthrough technologies for the creation of liquid and solid biofuels, pharmacological products, carbon plastics, composite materials and polymers. In the second decade, there will be a qualitative shift that will lead to changes in the structure of production and consumption of pulp and paper products in the domestic and foreign markets. The inertial scenario is based on the trends of the past years. The moderate scenario assumes moderate economic development and by its nature is a transition from inertial to innovative development. The innovative scenario represents the most favorable alternative. It assumes relatively high and stable economic growth, measures of the State support, promotion of consumption of forest products, improvement of the structure of foreign trade, and increase in the share of deep processing of wood. The lag of the previous two decades is propi9osed to be overcome by innovations and breakthrough technologies. One of the” findings “of the project is the concept of the “envelope curve”: a consistent transition from an inertial scenario to a moderate and innovative scenario over 20 years until year 2030. The practical application of this approach is recommended when drawing up State plans and programs in the field of the Russian forest sector. The inertial scenario assumes reduction in illegal logging by 5–10% by 2030, moderate by 20–30%, and innovative by 70–80%. It is assumed that the law on the turnover of round timber and other Russian initiatives on the legalization of wood will be as effective as possible by year 2030. Under any scenario it is realistic to expect a reduction in illegal forest use of more than 80%, i.e. less than 4% of all the logging in the country. It is necessary to address macroeconomic challenges that go beyond the forest sector, primarily unemployment and low rural income, to effectively and sustainably address the problem. The goal of the forest policy for the forecasted period in the next 10 years (until year 2030) should include a transition from an inertial scenario to a moderate one,

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and then from a moderate one to the innovative one. The policy should be comprehensive and include measures to support forestry, the Forest industry, investments, science, education, international trade and cooperation. What should be achieved by implementing the innovative scenario based on innovations and breakthrough technologies, the latest generations of technology, advanced knowledge and scientific achievements accumulated by the world experience over the previous two decades, while the country’s forest sector was struggling for survival. This approach applies not only to techniques and technology, but to politics, government institutions, science, and education too. Russia has all the conditions required and sufficient for such an approach. In fact, this is the only way to survive for many branches of the domestic forest sector, under the conditions of growing competition and free trade in the world. The entire material base of the forest sector is subject to reconstruction, since it has been designed and built in the middle of the last century on the basis of design solutions, technologies, knowledge and ideas of that time. These are the main funds, institutions, policies, science, and education in the Forest industry. By now, this base is mostly physically worn out, outdated, is in decline and requires radical reconstruction. This makes it possible to use fundamentally new solutions in the reconstruction of the XXI century and pass the intermediate stages that developed countrires have passed over the past decades. In other words, the Russian forest sector has a chance to step over the development stage and enter the new reality as an updated, modern and competitive segment of the domestic and global economy. The realization of this advantage will require extremely urgent and serious research, investment in science and education, qualified personnel, foresight and forecasting of technologies and world markets for decades to come. The innovative scenario assumes spatial and structural restructuring of the Forest industries. It is necessary to restore the positions lost by the forest sector in low-forest and medium-forest regions of Russia. It is home to one third of the country’s forest resources and two-thirds of the country’s population (consumers). The underutilized annual growth in this region of 255 million m3 should be used first. To do that, it is recommended to double the existing volume of wood harvesting by year 2025, and then triple it by 2030. At the same time, only half of the underutilized growth will be used. The expansion of deep processing and production of wood energy will open up opportunities for expanding the sale of wood from logging and replacing low-quality stands with high-quality ones. The share of forest crops in the country will increase up to 50%. So, the inertia scenario is based on maintaining current trends in certification development in the Russian Federation. The moderate scenario is associated with an increase in demand for certified products by environmentally sensitive markets. The innovative scenario provides for the formation and growth of domestic demand for certified lumber products. The experience of implementing the Forest Code shows that there is a need to consider the question of transferring the authority to the Federal level to ensure state forest control, supervision and surveillance in forests, which in turn should strengthen the State management of forests that are the Federal property, i.e. belong to the State.

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3.4.3 Stage 3: 2024–2025 Experts suggest that companies review their strategies, make more use of secondary raw materials, create forest plantations, invest in emerging markets, and expand their product lines. The restoration of the Russian Forest industry should be started with wood processing. However, there is a risk that the difficult situation in harvesting, complicated by the financial crisis and increased export duties on roundwood, may lead to the shortage of raw materials and higher prices for it. Thus, it is believed that the harvesting sector may slow down the recovery of the industry, because harvesting companies will have to face a lot of difficulties, including legal and structural reform of the forestry sector. In order to be the most effective, companies in the Forest industry will first need to adapt their market, production, and raw materials policies to post-crisis realities. In particular, it is necessary to determine which markets are the target for the company, what strategy for supplying raw materials is the most profitable considering the difficult situation in harvesting. One of the key success factors for Russian companies is to use new market opportunities in the Western, Chinese and other Asian markets. It is important to focus on improving production efficiency. The current low prices for lumber raw materials, electricity, and low labor costs will increase in the future, and local companies will need to improve production efficiency to keep the costs competitive. The wood processing companies have to improve the distribution system of their products in the Russian market, cooperate more actively with the authorities, and strive to develop projects of wooden housing construction. Loggers need a nonstandard strategy and promotion of wood products in both domestic and foreign markets. Modern forest management involves determining not only the size of logging operations, but the correct definition of the sorting structure of wood harvested for production too. Meanwhile, the transition to sustainable development sets new requirements that strongly affect the economy of the Forest industry. For example, you need to clarify the distribution of stands into groups and categories for the intended target purpose, which will affect the mode of the forest use and logging. It will be necessary to allocate the areas of protected territories where industrial logging should be banned. At the same time, it is necessary to determine the full resource base on the basis of sustainable usage in economically accessible areas where industrial wood harvesting is possible. Since, today operation in economically accessible forests is implemented on the basis of self-financing, and the rentee is able to invest significant resources, it is necessary to establish environmental requirements for forest exploitation and reforestation activities at the expense of the forest user. It is required to introduce control over reforestation and conservation of non-wood vegetation. The development of various options for forest usage with different levels of intensity, as well as determination of not only the degree of sustainable forest management, but also of all the costs, including both current and investment, are required. An important issue is the estimation of the residual value of forest resources, which

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is determined by subtracting the costs of their operation from the gross income and the normative profit of forest users. It is necessary to compare all types of costs for all types of producers. An important criterion to from the balance in forest relations to create an effective model of the Forest industry are: the minimization of costs at different levels in the system “suppliers-consumers”, the optimal placement of forest sub-sectors, production specialization, the establishment of new business relationships among consumers and producers, the formation of regional markets. Besides that, when forming interrelated Federal and regional programs, it is important to take into account the measures necessary for the sustainable development of all forest sub-sectors, including forestry. The whole set of proposed criteria will facilitate decision-making locally when developing operational plans, medium-and long-term programs. This approach is an effective means of managing the long-term process of expanded reproduction of forest resources too. Scientists from different research institutes, together with design institutes, develop methods to predict the size of forest used, based on programs for forest resources reproduction in different variants. Such program calculations were performed on the example of the Arkhangelsk, Vologda, Kostroma regions and the Komi Republic [58]. In the process of planning, each rentee, as the forest user, must develop a business plan for entrepreneurial activities. Since the project of main logging and forest management and the business plan in our case are directly interrelated, the planned project costs for methods of logging and reforestation will be reflected in the cost of output, and therefore on efficiency. The choice of solutions for both types of plans will require their close relationship. To ensure the profit maximization for entrepreneurs and net income for forest owners, i.e. to solve the problem of ensuring the balance of economic interests in the market environment we have to define the following: (1) the nomenclature of production; (2) methods of production; (3) options for distributing the results among all partners associated with the forest. Now, it is necessary to justify the production goals that meet the effective demand, in order to determine commodity and non-commodity forest products. In this case, the demand assessment should be conducted based on the definition of the existing demand for final goods and short and medium term demand forecasts. Such as, for example, for the pulp and paper industry, paper, cardboard, and other consumer products. Another feature of forestry is the long-term cultivation of forests, which demands the regulation of supply and demand too. The planning and financing is one of the main components of the innovation and institutional transformation program. To ensure the effectiveness of sustainable forest management, the careful planning related to the seasonality of logging activities is required. To ensure the productivity and efficiency of the entire industry, it is necessary to combine production in the forest and related industries. It is the seasonality of work that dictates the requirements for ordering and organizing production. The key factor in integrated forest management planning is the timely delivery of the wood to pulp and paper mills and all the forest products to the end users. With increasing

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demand for forest products, the production expansion and additional investment will be required too. The forest management programs must include items of potential damage, which has to be included in the costs that reduce revenues. The multi-sided assessment of the economic activity requires to take into account all the factors: economic, environmental, social, aesthetic, spiritual, and other, which are necessary for production and reproduction of the forest. The analysis of income and costs will demand to expand the database to facilitate the decision-making, including the formation of various alternatives and the selection of the most effective ones that meet the above requirements. There is also an obvious need to transfer the function of planning of ongoing expenditures and of their financing to the level of local Federal forest management bodies. Measures should be provided for when the forest users are obliged under the contract to perform and finance activities related to the reproduction of used resources at the expense of the cost of forest products sold by them. These costs should be compensated by payments for the reproduction of the resources used as part of the market price of the standing wood. Therefore, it is suggested to keep this part of the fee, rather than transfer it to the Federal and regional budgets, and wait for it to be transferred back. The reproduction fee should not be a part of the either tax or the budget payments. The federal payments and funds must include rent, which is the difference between the market price and payments for the reproduction of the resource used, i.e., as a superprofit, which the state receives. The latter is a source of investment and a means of financing for federal and regional programs, strictly differentiating their status and content from local level funding. The long-term investments should include all the costs of a set of measures for the extended reproduction of forest resources (Complex of Measures for Extended Reproduction [CMER]), while current investments should include the costs of the Regional system of forest management measures (RSFMM). The object of budget planning can only be investments that really should be the subject to the requirements of estimated financing for special projects that require proper economic justification and comprehensive expertise, including the environmental one. The current costs should be the subject of planning for local programs of financing at the expense of the forest users and to be compensated by the part of the market price of the resource used, which relates to payments for reproduction. There are the following measures which are the priority: 1.

2.

There is the need to streamline the sources of financing, with special attention to payments for forest resources, which are the main item of the forest income, determining it with the rent-based approach and taking into account demand and supply in the market. These should include: (1) payments for the reproduction of used resources; (2) net or differentiated rent as the superprofit due to the quality of the resource and its location relative to sales markets. Financial flows must have a specific destination. The proposed scheme is given in Fig. 3.8.

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RF’s Ministry of Natural resources State Forest Service

Federal budget

Budget of the RF entity Forest Service General Office of Natural Resources of RF’s Entity Local budget Forest Service of the disctrict (forestry, forestry department)

Forest Fund

Forest users

financial flows from rents as net income financial flows resulting from payments for reproduction of the resource used

Fig. 3.8 Financial flows in forestry

Payments for reproduction must be sent to local federal forest management authorities. In particular, the part of the payments is sent back to the forest users or is left in their accounts, when they conduct RSFMM themselves. The net income or the rent can be distributed between budgets of different levels for priority programs. Federal budget revenues should be used to finance the maintenance of federal forest management, scientific, project and survey work, training of personnel, as well as forest improvement and monitoring, construction of forest roads and other objects of infrastructure related to forest protection and conservation. Planning of income and expenses for activities should be carried out already during forest management, which requires improvement of forest management design. The budget financing at the level of federal and regional programs requires methodological justification too, taking into account the ongoing structural reforms in the forest management. Another important aspect is the development of accounting reports, which should be consistent with measures to improve planning and financing of the Forest industry. Planning and reporting documents should accurately reflect the income and costs of forest management. The basis of any financing is a legally approved system that should guarantee the reproduction of used resources in the exploited forests and ensure the protection

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and conservation of both preserved and reserve forests. The compliance with this condition will allow you to organize sustainable use and management of forests. The improved funding system requires permanent, sufficient and well-founded sources of funding. It is necessary to rationalize their distribution among financial flows, which in turn should ensure the balance of interests of all the forestrelated participants, provide a transparent and understandable procedure for forming financing plans, and present them to the local forest management bodies and to the entities involved into the realization of tasks. The plans must meet the management goals and must be monitored to achieve them in a timely manner.

3.4.4 Stage 4: 2025–2026 The practical implementation of innovations is carried out through innovative activities. The innovative activity, aimed at creating, distributing and implementing innovations in the form of innovative projects, creates the basis for the emergence of positive effects in the economy. Today, there is a question at the level of the government and society why Russia is unable to use the huge natural potential of forests to ensure sustainable eco-friendly economic growth and improve the well-being of the population. Why the forest sector, being the key one in the socio-economic development of half of the country’s regions, has not become one of the main drivers of the transition period in the Russian economy. The results of many studies of the Russian economy and its problems show that forest resources have economic value only if there is a functioning institutional structure that includes social rules and agreements along with formal laws [49]. This also applies to innovation and technology issues. Any technological investment may be doomed to failure without appropriate institutional arrangements in the forest sector. The institutional order in the forest sector implies that the structure of the ownership rights is set and clearly defined; the rules set are legitimate and apply equally to all active agents; decision-making is decentralized; private investors have the opportunity to return their investment; rules are established to protect natural resources from depletion; official organizations take action against violators of the rules [49]. These statements are highlighted by the previous analysis. In many cases, it is appropriate to manage the costs of certain activities or make agents pay for the use of natural resources owned by the society. This will improve the formation of systems that focus on taxes, payments, fines, and royalties. In other cases, it is more appropriate to reduce the costs of certain types of activities for individual economic entities, which implies the formation of systems related to subsidies, transfers of certain resources or tax holidays. The use of incentive systems is not always effective, since the payment of taxes and payments by some agents may be ignored, and subsidies misused.

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The implementation of more stringent institutional terms implies increased transaction costs too on behalf of the State. The realization of more complex and flexible activities in the field of control of monitoring of the forest management processes, despite increased costs associated with it, will allow account the interests of the State to the greater extent, and to protect it from possible opportunistic behavior of the forest using companies (for example, in the case of the use of schemes to “optimize” taxes). When modeling forest management processes, it is assumed that strict institutional terms and conditions in the field of forest usage will facilitate the implementation of such obligations as, for example, the correct development of the site in accordance with the approved plan (based on the principle of “best practice”); compliance with the rules and regulations of logging operations; compliance with the actual and reported costs; compliance with environmental measures. In case of implementation of the soft institutional conditions, forest-using companies will be more focused on their own, mainly commercial priorities and will be less restricted by rules and regulations in the field of forest management, as well as will have a greater degree of freedom in determining (“optimizing”) the tax burden. In such a situation, the behavior of companies is characterized by the fact that they will carry out logging with the use of intensification methods from the very beginning of the development of sites, which may entail the risk of subsequent degradation, erosion and dewatering of these sites and adjacent territories; they will engage only in extensive logging in order to extract maximum economic benefits, thus achieving high levels of profitability, reducing the payback period and investment risks; they minimize the costs of environmental protection measures, which is especially important from the point of view of environmental safety at the regional, federal and planetary levels. The features of different institutional conditions of forest management are summarized in Table 3.5. As noted in the first Chapter, forests are the State property according to the Russian law. Companies can get the right to use (rent) forest lots for a certain period of time under certain conditions. Therefore, from the point of view of the State’s interests, it is obvious that there is a need to update and supplement the legal framework, which should ultimately regulate the processes of search, access, preparation, logging, restoration, and reclamation. Today, it is especially important in the Forest industry to organize all the reproduction processes and aimed at minimizing the costs associated with a spatial gap between consumers and suppliers of the lumber; at the balanced development among the forest related industries considering a given species and assortment structure of lumber resources potential, which is required for further development of the Forest industry and for sustainable forest management. This approach should be a general and long-term strategy for the development of the forest sector of the Russian economy, the basis of which are federal and regional programs developed on the basis of the state forest policy. This approach will help to solve the tasks of spatial placement of the Forest industry in the country and its regions, and of its structural adjustment. Such the restructuring is possible only with the application of

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Table 3.5 Characteristics of the degree of rigidity of institutional terms and conditions Characteristics

Institutional terms and conditions Soft

Hard

Forest usage and harvesting

Possible deviation from the rules and regulations, freedom of interpretation and application

Compliance with the rules and regulations, if they are not available focus on cases of “best practice”

Implementation of environmental provisions

Significant deviations from the Compliance with the requirements in the field of requirements in the field of environmental protection environmental protection; introduction of new stricter standards and practices in this area

Investment in modern greener Relatively low technologies

Increased

Environmental costs

Low

High

The level of specific transaction costs of the State

At a low level

At increased level

The level of specific transaction costs of the forest usage

At a relatively low level

At an increased level

targeted programs at the federal and regional levels, which will simultaneously be relevant programs of reproduction in the forest sector, directing their development to the adjustment of the balance of total supply and demand for all types of forest products and services and the necessary market infrastructure. The programs themselves should consider and solve the entire range of issues that provide a way out of the crisis, stabilization, and further economic development of forest sub-sectors and their interaction. The goal setting of the reproduction process aimed at achieving a balance of aggregate demand and supply is considered in statics and dynamics. In statics, balanced supply and demand assumes reaching a certain level, for example, per capita or a certain assortment of products. If this condition is met, retention implies the implementation of sustainable reproduction or at a given scale. At the same time, it should be considered that the general trend in the development of industrial countries is a continuous increase in per capita consumption, taking into account the need to raise the level of the poor. The implementation of such plans is possible due to economic growth, which in practice means the organization of expanded reproduction. According to the provisions of the Concept on transition of the Russian Federation to sustainable development, adopted in back in 1996, economic growth is to be taking into account the sustainable use of natural resources in the interests of the future generations: in the Forest industry expanded reproduction should be based on sustainable forest management and multipurpose values of forests of Russian Federation.

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Federal and regional programs should link the interests of all participants in forest relations: loggers, producers, and the population. Reforestation and sustainable forest management programs should be funded out of the federal budget, which is sent directly to local forest management bodies to special accounts linked to the reproduction fund, to pay and/or prepay the expenses of rentees and other users who are required to perform reforestation. This will ensure that local forest management authorities are interested in fully utilizing the resource potential and maximizing forest revenue, while establishing close business contacts between forest management authorities and forest users. The income as the difference between the market price of the forest and minimum rates, which are net rent payments, should go to the State as to the forest owner, i.e. to the federal budget with the subsequent transfer of a part to the regional budget for “implementation of the rights of ownership, forest fund use and management in the territories of appropriate entities of the Russian Federation” [59]. These are the rent payments, which have to be the source of funding for all the federal and regional programs activities, including the ensuring the balance of supply and demand within the borders of the regions and the Federation. The problems and drawbacks discussed in the first Chapter should be a priority for further improvement of forest legislation, taking into account the requirements of the Concept of transition to sustainable development. Let’s highlight the following important requirements: • the transition to sustainable development is possible only with the formation of the effective spatial and structural model of the economy that ensures a balance of strategically important main directions of the Forest industry development while preserving the vital parameters of the natural environment and its potential. It is important to emphasize the normalization of the process of reproduction and timely renewal of the fixed capital of existing production; • unsatisfactory state of fixed capital, physical and moral depreciation of fixed assets, low technological level and low profitability, all these require State support and attraction of capital, including foreign capital; • to encourage producers, a significant reduction in tax burden will be required, which should be reflected in the Tax code. An increase in the amount of rent payments for forest resources, taking into account their economic role for consumers and ecological value, can only happen through a gradual reduction of the tax loads; • payments for commodity and non-commodity forest products of the rent-based nature play a special role. They are the most significant source of the forestry financing, and at the same time are necessarily sufficient for the level of simple reproduction, which is the lower limit of sustainable forest management. Financial flows associated with the accumulation of forest income over the minimum rates should be determined at the level of the budgets of the Russian Federation and its entities with the normative distribution that requires special justification, taking into account the interested parties and directions of the use of the

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net income generated from the forest usage. These funds can and should be used to finance federal and regional forest improvement programs. A specific topic of economic relations should be the use and reproduction of nonmarket forest resources and services represented by public goods. Currently, the as the sources of financing for reproduction in regions and in the country as a whole can only be budget allocations at the expense of taxpayers, i.e. at the expense of the population. At the international level, international funds can be attracted for the rational distribution and reproduction of commodity and non-commodity forest products of the global significance (for example, sequestration of carbon dioxide). Such funds may be associated with environmental organizations that determine quotas of environmental benefits to compensate for the corresponding excess hydrocarbon emissions. This direction requires additional research and legal support. For this purpose, it is necessary to improve forest law at the international and national levels, which is necessary for the normalization of the natural environment on a global scale. The improvement of forest legislation is possible through normalization of the process of forest reproduction and integrated interaction of all sub-sectors of the Forest industry. It is necessary to develop and improve educational programs. Today, the issue of providing the industry with personnel is the most relevant and most important. The Forest industry is experiencing a great shortage of specialists, and will soon be forced to turn to the West or the East for personnel. About 70% of all the world’s specialists are trained in Finland. In Russia, the prestige of the profession has fallen. People come to the industry either out of desperation, or from family dynasties. There is practically no new inflow. The most sad fact is the lack of qualified personnel, which is felt at the highest levels, even among officials responsible for the forest sector, there are very few specialists with specialized education. The problems of forest management efficiency and prospects for deep processing are of a particular importance. The experience of developed countries shows that the most promising solution to the problem of forest management efficiency is the development of deep wood processing facilities. The problem of roundwood export, which has existed for many decades, is very relevant for all forest regions. The second priority direction of solving the problem of efficiency of the domestic lumber industry is to improve its structure with a reorientation to processing, rather than exporting raw materials in the form of the roundwood. The orientation on deep processing of wood will allow Russian Forest industry to receive more than $ 100 billion annually from the export of forest products, with existing reserves of the ripe wood. To improve the efficiency of forest management, the established rent terms can be set for 25–49 years with the right to extend every five years for the next five years, provided that all contractual obligations are fulfilled. The rent agreements should define not only the types and norms of non-destructive forest use, but quarterly adjustments to payments for forest usage are also proposed, based on the rent approach and taking into account the entire range of changing economic conditions, including the ruble exchange rate and the level of inflation. The projected volume of harvesting from long-term rent agreements in a multi-forest region may reach the highest total volume of the world logging.

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The long-term concession of foreign partners of the States bordering Russia will become a promising direction for the forests of multi-forest areas, especially in Siberia, but provided that the export of sawn wood and plywood ridge is restricted and then stopped, with the right to build enterprises for the wood processing. This form of cooperation will help to expand the scale of use of reserve forests, to raise the living standards of the local population, and overcome economic crisis in the forest regions. Therefore, at the first place in terms of cooperation is China, which demand for Russian forest products is very high and totals many tens of millions of cubic meters. To reralize this direction, we need broad intergovernmental bilateral agreements and mutual development of long-term programs with justification for the placement of specific investment projects. We should not forget the problems of domestic consumption too, especially in the South and in the European part of Russia. It is necessary to organize industrial processing of wood, including cardboard and paper, the demand for which always exceeds the supply. By the order of the government of the Russian Federation, new enterprises are created and existing ones are modernized in the country, including Pulp and Paper Plants (P&PPs) Lumber Industry Complex (LIC). The creation of such enterprises requires long range, according to experts, at least 10 years, and large investments. In the future, we propose to use auctions widely, based on the experience of the United States and primarily in areas where there are many potential contractors, i.e., for example, in densely populated areas with a high demand for wood. At the same time, in low-forest and medium-forest areas with a predominance of purely protective forests, the use of which requires the application of technology of combined methods of logging, including not continuous ones, it is possible to preserve all economic activities in existing forestry enterprises, which, as a rule, should be stateowned enterprises. Monitoring and control over the activities of such forestry should be entrusted to a regional body of the State forest service of Ministry of Natural Resources (MNR) of the Russian Federation and the corresponding preparation of a substantiated program of use and reproduction of forest resources on behalf of forest management service for every five years. The estimated budget system of such forestry enterprises must include deductions of the profit to the budget. To improve the entire system of forest management, it is necessary to develop and adopt the following interrelated institutional norms, which are recorded in the fundamental State documents: • the National forest policy of the Russian Federation; • new version of the Forest code of the Russian Federation; • Federal and regional programs of forest use and reproduction of forest resources. In recent years, a special attention has been paid to research and forecasts, and, consequently, to international programs of development of the entire Forest industry. According to the Food and Agriculture Organization (FAO UN) forest division, such studies were conducted, for example, in the beginning in Western Europe, in former CIS countries, and then in Russia. For example, in 2007–2008, we participated in

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the German project “Irkutsk regional information system for environmental protection” [60]. In recent years, along with research on tropical forests, boreal forests have been studied. These studies are related not only to the prospects of production and international trade, but to environmental problems and global climate changes throughout the planet. Such international studies and based reviews are ultimately aimed at developing a strategic concept for the development and regulation of relations between States and their forest industries in relation to the use and reproduction of forest resources. Since forest management is regulated not only by the forest law but by land, water, civil, tax, financial, administrative, and criminal codes too, the bodies of forest management should monitor the consistency of the forest and preceding legislation in order to avoid contradictions. The need to ensure consistency between all types of legislation at the federal and regional levels, relations among which are currently under development and improvement. Forest legislation of the Russian Federation must comply with generally recognized principles and norms of international law and international agreements in the field of use, protection and reproduction of forests. Changes in the State forest policy, which is an integral part of the national policy, are too reflected in the forest legislation, which is undergoing corresponding changes. Therefore, it should either be adjusted or changed in specific paragraphs, or in general, depending on the nature of the changes that occurred. Another important issue is improvement of organizational structure of the industry. The institutional theory, when considering the dynamics of institutional systems, pays special attention to such factors as uncertainty, the specifics of assets, and the frequency of transactions. These factors influence the formation of various variants of the institutional system and, ultimately, the formation of the organizational structure of the considered branch of the economy and the corresponding regulatory schemes. The problem of economic development is considered in works of D. North as an interaction between institutions and organizations. This development does not necessarily contribute to higher efficiency, but rather aims to maximize the opportunities provided by the institutional and organizational structures at each specific time interval. This means that different organizational forms can co-exist, and, consequently, the organizational structure of innovations. However, the existence of institutional competition is possible where existing agents can maximize their benefits via various institutional innovations. The preference is given to the institutional innovation that generates a higher return compared to another innovation. The desire to minimize transaction costs affects organizational and institutional terms and conditions and is the main element of institutional competition and choice. In the process of functioning, such organizational structures arise, which lead to the reduction in costs due to limited rationality and opportunism. This fact is particularly important in cases where transactions are idiosyncratic (i.e. unique), and assets are specific, which is often characteristic of the forest industry as well). Under such circumstances, the vertical integration is an essential cost-saving tool. This suggests that vertically integrated holdings will be effective for a number of industries, which is true for the Forest industry too, where such a vertically integrated company as the already mentioned Ilim holding has proven its effectiveness. Vertical

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integration, as an example of unified management, is used for highly specialized assets. This reduces the impact of uncertainty, and most transactions are carried out within the company, rather than in the market. Ilim holding is one of the best examples of the successful forest business in the whole Russian Federation. One of the advantages of the Ilim Group is the successful location of the company’s enterprises in relation to the sales markets. At the same time, the company’s product supply geography extends from Europe to Southeast Asia. In addition to the Irkutsk province, the company’s plants are located in the Leningrad and Arkhangelsk regions. Ilim Group’s enterprises are located in the Komi Republic and the Krasnoyarsk krai. Its companies in the North-West are focused on the markets of Russia, and Western and Eastern Europe. The company’s Siberian assets, located at a distance of 1000 km from the Chinese border, supply products to China and other Southeast Asian countries. International Paper JSC, the world’s largest pulp and paper company, is the strategic partner and the owner of over 50% of the Ilim holding’s shares. Main enterprises of Ilim Group and their description are summarized in Table 3.6. Other examples of successful companies operating in the Forest industry are UstIlimsky Sawmill and Wood Processing Plant, JSC (UI SWPP) and Ust-Ilimsky Wood Processing Plant (UI WPP), JSC. Ust-Ilimsky Sawmill and Wood Processing Plant, JSC (UI SWPP) is designed as an enterprise for complex processing of wood raw materials for lumber and technological chips. It has been commissioned back in 1983. All workshops of the plant are put together in a block under a single roof with an area of 13 hectares. The plant structure includes: bucking and screening plant, consisting of site for acceptance, storage and bucking of logs, ands site for sorting saw logs by diameter; warehouse of raw sawn timber; sawmill; lumber drying and refining shop; low-grade lumber refining shop; shop of finished products, consisting of a warehouse of lumber and a section for loading railway carriage; household, utility and production purposes structures; objects of engineering and transport support. It is located in Ust-Ilimsk, Irkutsk province, 700 km away to the north from Irkutsk. The design capacity is 650 thousand m3 of lumber and 500 thousand m3 of technological chips per year. The produts are exported to Europe: Belgium, Great Britain, Denmark, Germany, Greece, Hungary, Italy, Luxembourg, Netherlands, Portugal, Spain; to Middle East: Jordan, Iraq, Lebanon, Syria, Saudi Arabia, Turkey; to North Africa: Egypt, Libya, Tunisia; to Asia: China, Japan; to America: USA, Canada. The current goals of UI SWPP, JSC are: complex processing of wood raw materials for lumber and technological chips; meeting the needs of individuals and legal entities in goods and services; making a profit. The main tasks of UI SWPP, JSC include: production and sale of products and consumer goods based on processing of wood raw materials; harvesting and processing of wood; development of the rational use of natural resources mechanism; capital construction of industrial facilities and social facilities; provision of raw materials and material and technical resources; sales of finished products and services; carrying out work on reforestation and the environment; implementation of a unified policy in the field of labor protection, development and implementation of comprehensive measures to ensure healthy and safe working

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Table 3.6 Main enterprises of Ilim group Division

Description

Central office in The Central office of the Ilim Group is located in Saint-Petersburg Saint-Petersburg The head office of the centralized service company “Fintrans” is also located in Saint Petersburg. This enterprise of the Ilim Group provides logistics and transport services, and makes purchases for all the company’s enterprises. Fintrans has regional branches and provides services for Ilim Group companies in the Leningrad, Arkhangelsk and Irkutsk regions, as well as for third-party companies Bratsk Pulp and The launch of the bleached coniferous and cardboard streams of Bratsk PCM Cardboard Mill took place in 1965, and further construction of workshops and factories (PCM) continued in the 1970s Products produced: sulfate bleached softwood and deciduous cellulose; sulfate unbleached cellulose; packaging cardboard for flat layers of corrugated cardboard (kraftliner); forest chemical processing products Production capacity: the company is capable to process up to 7 million cubic meters of wood per year. The total annual output of pulp and paper products is 724 thousand tons Market shares: the Branch produces more than 22% of all Russian commercial pulp. The main markets are China (up to 80% of total exports) and Southeast Asia Certificates: the quality, environmental and industrial safety management systems of the Bratsk branch meet the international standards ISO 9001, ISO 14001 and OHSAS 18,001. The company’s products are certified to comply with the international requirements of the Forest Stewardship Council (FSC) The raw material sourcing: the branch of Ilim Group in Bratsk area was established in 2010, on the basis of “Logging and Timber Rafting Management” that deals with raw material sourcing of the Bratsk branch of the company. The forest management and supply chain system is certified in accordance with FSC requirements. The total annual volume of its own production is about 2.7 million cubic meters Ust-Ilimsky LIC Construction of Ust-Ilimsky LIC has began in 1973, since the 1980s, all the enterprises of the plant are operating Products: sulfate bleached coniferous cellulose; • a sheet of unbleached cellulose; • unbleached pressed cellulose; • products of forest chemical and biochemical processing Production capacity The capacity of the enterprise was significantly increased after the modernization in 2006 up to 756 thousand tons of commercial pulp per year (continued)

conditions, prevent injuries and occupational diseases; social and household support for the company’s employees and their family members; professional development and training; investment activities. Ust-Ilimsky Wood Processing plant (UI WPP), JSC is one of the largest producers of chipboard in Russia and the largest producer in Siberia. It was founded on March 4, 1989. The plant is one of the largest producers of laminated and non-laminated

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Table 3.6 (continued) Division

Description The branch accounts for about 30% of commercial pulp produced in Russia. The company exports up to 90% of the total volume of bleached pulp produced to European and Asian countries Certificates: the quality, environmental and industrial safety management systems of the Ust-Ilimsk branch of the enterprise comply with international standards ISO 9001, ISO 14001 and OHSAS 18,001. The company’s products are certified for compliance with FSC requirements Forest supply: the branch of the Ilim Group in Ust-Ilim district was established back in 2010 on the basis of the IlimSibLes logging enterprise. The branch is engaged in forest supply of the Ust-Ilimsky branch of the company The forest management and supply chain system is certified in accordance with FSC requirements The total annual volume of its own production is 2.3 million cubic meters The logging branch of the Ilim Group in Ust-Ilim district was established in 2010 on the basis of the IlimSibLes logging enterprise. The branch is engaged in forest supply of the Ust-Ilimsky branch of the company

LIC in Koryazhma

The first line of the plant was introduced back in 1961. The second line of power was launched in 1964–1965. The project of the third stage of construction, a paper factory for the production of high-quality printing paper was developed on the basis of domestic equipment, commissioned in 1972 Products: • sulphate bleached leaf pulp; • cardboard for flat layers of corrugated cardboard (kraftliner); • paper for corrugating (fluting); • offset printing paper; • products of forest chemical and biochemical processing Production capacity: The Koryazhma branch produces over 1 million tons of pulp annually The branch’s share in the production of all Russian commercial pulp is about 14%. Over 35% of the company’s products are exported to the domestic market, the rest is exported to Europe, the middle East and North America Certificates: the quality, environmental and industrial safety management systems of the Ilim group branch in Koryazhma comply with the international standards ISO 9001, ISO 14001 and OHSAS 18,001. The company produces products certified for compliance with the requirements of the Forest stewardship Council (FSC) The forest supply of the production branch is provided by the Forest branch of the Ilim Group in Koryazhma, logging is carried out on the territory of the Arkhangelsk region and the Komi Republic. The branch’s forest management and supply chain is FSC certified too (continued)

chipboard (LPB and PB) in Russia, occupying about 20% of the market of the Siberian Federal district. UI WPP, JSC produces more than 200 thousand m3 of LPB and LB a year: according to GOST 10,632–2007 of polished board with emission class E-1, E-2 and laminated according to GOST R 52,078–2003. More than 60% of products are first-class chipboard. The plant has two chipboard production lines with the capacity of 80,000 conventional cubic meters each. Due to regular upgrade and modernization

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Table 3.6 (continued) Division

Description

NSSC plant

NSPC plant In 2009, Ilim group opened a modern plant for the production of neutral-sulfite semi-cellulose in Koryazhma. This is the largest production facility in the world that produces this type of products The company has installed the latest generation of equipment. The use of advanced technologies means for Ilim group solid prospects for the company’s development, reducing the environmental burden, improving working conditions and increasing the professionalism of employees. The construction of the new plant is a priority investment project, with over 1.7 billion rubles invested in its implementation. The new production capacity is 900 tons of semi-cellulose per day or 310 thousand tons per year The implementation of this project is an important element of the development of both the main production and infrastructure of Ilim group branch in Koryazhma. Commissioning of the plant increases the availability of high-quality semi-cellulose, which is used in the production of packaging cardboard, while reducing the consumption of wood raw materials compared to traditional methods of pulp production. The construction of this plant resulted in reduction of costs of production of the high-quality cardboard, and also increases its production by more than 40 thousand tons per year. The plant is built on the basis of the best existing technologies, thus reducing the discharge of pollutants by 15–20%

Ilim Gofra, JSC Is a subsidiary of the Ilim group, which develops corrugated packaging production business. Ilim Gofra is the most modern plant in Leningrad region, equipped with the best equipment of the world known manufacturers Company products: • three-and five-layer corrugated cardboard of various brands with a wide range of corrugated profiles used with brown and white upper layers; • packaging of complex shape and design (trays, pallets); • four-valve corrugators; accessories for corrugators; • packaging for large-sized products It is the first modern plant with a capacity of 140 million m2 of corrugated packaging per year which has been built and put into operation back in 2008 in Leningrad region. This new plant is equipped with the most modern high-tech equipment from leading manufacturers. The company has a corrugating unit by BHS, the world leader (Germany), four processing lines with the capability of full-color flexographic printing and rotary die-cutting produced by Martin (France), which allow to produce boxes and pallets of almost any size and design, as well as a flat die-cutting and printing line produced by Bobst (Switzerland) Strategy: the company intends to become the leading supplier of corrugated packaging in Russia Advantages: one of the major strategic advantages of the Ilim group’s gofrobusiness is the availability of its own raw material base, which ensures guaranteed uninterrupted supply of raw materials for processing, and allows to control the quality of products at all stages of production too. This provides serious advantages to consumers of Ilim group’s corrugated products, ensuring regular deliveries, as well as a high level of quality and service Experience in the Russian market of corrugated packaging, human and financial resources of Ilim group, combined with International experience of International Paper, create a solid foundation for the further growth (continued)

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Table 3.6 (continued) Division

Description

Ilim-Garant

The Ilim-Garant charitable foundation was established in April 2005. Today, the foundation is a partner of the Ilim Group in the implementation of social and charitable programs Ilim-Garant has two branches: Eastern (Irkutsk province, Krasnoyarsk krai) and Western (Arkhangelsk region, Komi Republic, Kirov and Vologda regions). All the main activities related to the implementation and management of the company’s external social programs are carried out in regions where the Group’s enterprises are represented. This is determined by one of the fund’s goals: to create favorable and socially stable external conditions for the company’s enterprises via effective management of external social programs Ilim-Garant has three categories of social programs. The first are charity programs in the sphere of social partnership and cooperation with regions. The second category is corporate social program of assistance to the employees, retired and veterans of war and labor. The third direction is charity, which includes assistance to orphanages, kindergartens, sports, etc The decision to support certain programs is made by the Foundation’s advisory and expert councils in each branch, which includes representatives of regional authorities, public, youth, religious, and sports organizations, and representatives of the Ilim Group

of the technological base, UI WPP is constantly increasing the production of highquality chipboards. The plant is equipped with automated equipment from RAUTE (Finland), with a designed total capacity of two production lines 160 thousand conventional cubic meters of high-quality chipboard per year, and with Sufoma (China) production lines, with a design total capacity of two lines of 55.4 thousand conventional cubic meters of high-quality laminated chipboard. The main use area of chipboard and of laminated chipboard is construction and furniture production. The UI WPP organized the production of new products with added value, the laminated chipboard, while implementing the program of innovative development. More than 90% of the products produced is high-quality laminated board of grades 1–1. The volume of production of which is not less than 40,000 m3 per year. Thanks to this new product, the geography of deliveries has expanded and continues to expand. So, the company is profitable and financially stable. Its main goal is to increase the annual level of production of chipboard and laminated chipboard, via the highest productivity and safety of production, improving the risk management system. The leading positions of UI WPP, JSC are provided by operational excellence, efficient logistics and high quality of products. Priority areas are: diagnostics and activation of hidden reserves that can provide the greatest financial return through non-capital-intensive measures; increasing the utilization of installed capacity of lamination lines; modernization of the automatic control system of the drying department and mixing department; start-up of the chip machine; purchase and commissioning of new power equipment; development and implementation of technical and commercial solutions for the modernization of production equipment.

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Now, the issue of establishment of public private partnerships (PPPs) in the Forest industry. The public–private partnership can serve as the full-fledged program, that allows to realize the potential of private and business initiatives and preserve the control functions of the State in the field of sustainable forest management. Public–private partnership (PPP) involves the mobilization of private capital, knowledge and experience to solve the problems of partnership, society and the State. PPP as an economic partnership between the State and the private sector, is an institutional and organizational alliance between the State and business to receive investment and implement significant investment projects for the community in a wide range of areas of activity. The most important function is to attract private sector investment in properties that are state-owned [62]. There are four main characteristics that distinguish PPP from other methods of State regulation in the forest sector: • the PPP is created to work in the Forest industry, where forests and many services are provided by State authorities and budget organizations (rent, monitoring, conservation and restoration of forests); • partnership between the State and private sector participants is formalized legally by a special agreement (agreement, contract); • co-financing of PPP projects in certain shares by the State and private companies or 100% financing by the private sector; • risk sharing among project participants. A public private partnership may correspond in some cases to a pool model for an organizational structure or to an exchange model for a specific innovation project. In the pool model, partners provide their resources for sharing and effectively solving tasks. The necessity to set a goal, determine the method of resource management, as well as the need to distribute results among partners determines the need for cooperation. The need for cooperation in the exchange model is caused by the complexity of the structure of contractual relations, as well as the unreliability of terms [61]. World practice demonstrates a variety of different models and forms used, types and specific options for implementing relations between the State and business as partners. The key issues here are always interaction with the State and financing. At the same time, it is the institution of ownership (ownership and use) that serves as criteria for attribution to a particular structural group, as well as the degree of interaction with the state and the amount of rights transferred to private companies [62]. We can distinguish the following established forms of PPP: 1.

Contracts and agreements concluded between the State (usually a local government body) and a private enterprise for carrying out certain necessary and useful activities for the community. Contracts for the supply of products for public needs, for the performance of various works, for the provision of public services, for management and technical assistance are considered the most common for the PPP practice. In such contractual relationships, ownership rights are not transferred to the PPP. Costs and risks are fully borne by the State, which is very profitable for private investors. Under the agreement, a private investor is entitled

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to a negotiated share of income, profit, or collected payments. Such contracts with the State executive body are very attractive for private investors, because in addition to their status and prestige, they provide them with guaranteed income and demand, as well as possible benefits and preferences. Rent or lease agreement, leasing. This agreement defines the conditions for the transfer of State or municipal property to a private investor-partner for a certain fee and for temporary use. There are some features of the rent relationship between private business and the government, which are the following: (1) the classic rent agreement assumes the return of the property rented, while the power to dispose of the property is retained by the State and is not transferred to a private partner; (2) in special cases, the terms of the lrent are stipulated, which may result in the purchase of the leased property; (3) in the leasing agreement, the lessee automatically receives the right to purchase municipal or State property. The most common form of relationship between the State and a private partner is a concession or concession agreement. A feature of concession is that in partnership the government, as the rightful owner of the property, which is for the concession agreement, authorizes the private partner to perform stipulated in the agreement functions within a certain period of time and gives it rights for this purpose necessary to ensure the normal functioning of the object of concession. The concessionaire on their side pays for the use of the State property on the terms stipulated in the concession agreement.

Now, we will highlight a number of significant feature characteristics of concession relations: • in our case, State property is a subject of concession, as well as monopoly activities of the State or its entities; • the main subject of the concession agreement is the State or its executive authority; • meeting the needs and requirements of the community is the main goal of the concession; • the concession is always made on a contractual basis (in the form of a concession agreement); • the main postulate of the concession is the return of the subject of the agreement; • the private partner receives the subject of the concession for a fee, which is determined by the agreement of the parties. The concession, as a form of partnership between private business and the State, has become widespread in developing industries where private capital flows and professional management are particularly needed. There are the following types of concessions: (1) concession for existing facilities and activities; (2) concession for facilities under construction or being modernized and/or logging operations and other activities; (3) transfer of the State property to private management companies. Moreover, options for concession agreements may be based on a different combination of ownership rights between private investors and the State, as well as on different types and scales of business activities requiring investment (procurement, operation, management, restoration.).

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5. 6.

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Important is the agreement on production section. This form of partnership between private business and the State is similar to a traditional concession. However, there are differences, for example, in the different configuration of property relations between a private investor and the State. In production sharing agreements, the State’s partner owns only a part of the output produced under the agreement, and not all of it as in concessions. The agreement sets out the conditions for the division of production between the State and the partner. Such production sharing agreements can be applied in the field of prospecting, exploration, and harvesting, or other activities. The creation of mutual enterprises of private businesses and the State is possible. Trust management. The meaning of the institution of trust management is to use commercial management instead of administrative management. Where entrepreneurs and commercial organizations can act as a trustee.

Despite the variety of specific forms, the fundamental principle of PPP is that public assets are transferred to the disposal of private business for temporary use. Private businesses benefit from the provision of public services and accept the investment risk associated with this activity. At the same time, the State retains control over the volume and quality of services provided on the basis of PPP. The principles of such a control are defined between a private firm and a government representative in contractual obligations. When implementing PPP projects, a variety of cooperation between the state structures and private enterprises is expected. The enterprises themselves differ depending on the ownership rights transferred to private partners, their composition and volume, the parties’ investment obligations, risk management principles, and responsibility for various works and activities, such as harvesting, operation, management, and so on. The creation of security services. An important requirement for forest management, which determines the prospects for forest use and the economy of forestry, is to ensure reliable protection of forests from fires, theft and other forest damage. The elimination of criminal phenomena requires changes to improve forest management, new economic and administrative sanctions, financing, modernization, and professional development of forest protection units.

3.5 Development of Methods for Stimulating Innovation Activity in the Management of Enterprises in the Forest Industry The methods of stimulating innovation activity in the Forest industry can be divided into: (1) methods of the State support through direct subsidies; (2) stimulating tariff and customs policy; (3) infrastructure creation (roads, education system, etc.); (4) State stimulating standards of the forest management.

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It is necessary to improve the mechanisms of the State support for innovative development of the industry. This includes subsidizing of interest rates on loans for technical re-equipment, export supplies, as well as for the creation of inter-seasonal reserves of wood, raw materials and fuel. The following measures should also serve as the incentive for the modernization of production and output of high-value products in the Forest industry: • cancellation of import duties on a number of high-tech equipment that is not produced in Russia and is necessary for the modernization of LIC; • the abolition of export customs duties on more than 300 types of high-value-added wood products (boards, plywood, mass-produced paper and cardboard) and the simultaneous increase in duties on the export of unprocessed wood would allow for a significant increase in capacity for the production of products of deeper forest conversion: wood boards, lumber, cardboard and plywood; • cancellation of export duties on all types of timber processing products; • introduction of measures to protect the domestic market of wood products; • support for small and medium-sized businesses to develop deep wood processing capacities via preferential loans and interest rate subsidies; • development of the State target program for the construction of logging roads with shared federal funding. Another basis for innovation development is the industry’s focus on the concept of sustainable development, which was mentioned earlier. We will highlight important areas of State and industry policy that will contribute to the implementation of the concept of sustainable development of the Russian Forest industry and of its forest regions in particular. It is required the following: • to develop a set of measures to create conditions for using the natural regenerative capacity of forests and promote their self-renewal; • specify methods for determination of the allowable volume of wood extraction, taking into account the commodity structure of plantations and the forecast of the breed and age structure of forests; • to clarify the parameters of logging according to ecological significance and biological diversity of forests classification of territories; • to perform mandatory reforestation in the areas where logging is conducted; • to develop a program of the forest seed production, which should consider the formation of a network of specialized farms, which have the necessary human, technological, technical and financial resources for the sustainable development of the forest seed production; to increase the level of technical equipment for all types of work for the creation and maintenance of forest seed facilities, harvesting of forest seed raw materials and processing of seeds, analysis of their quality, and long-term storage; • to take measures to restore the human potential of the Forest industry; to create professional training centers equipped with modern training equipment, machine tools, and training and laboratory equipment;

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• to ensure timely monitoring and improvement of regulatory and legislative support at the federal and regional levels, identifying inconsistencies in regional regulations with the federal legislation; • to create an official structure in Russia and in its regions to monitor, forecast and stimulate not only supply, but demand for forest products; • to ensure that reforestation procedures are followed. In this regard, it is necessary to accelerate the vertical integration of the industry and improve the relevant regulatory and legislative support. It is necessary to continue run the events at the federal and regional levels in the format of meetings, where interested parties can discuss current problems of Forest industry. Such as, for example, issues of forest reproduction, creation of enterprises for deep forest processing, protection from forest fires, construction of forest settlements and technoparks based on enterprises in the forest sector, etc. It is possible to create permanent working groups to develop specific legislative initiatives that create conditions for stimulating the development of the industry. Experts also note the need for timely development of consolidated plans for extinguishing forest fires and their use during peak burn conditions; introduction of responsibility of officials for late performance of duties; licensing of forest fire extinguishing activities in accordance with legislation and within the established period [63]. The advanced technologies are the only way for the Forest industry to enter the innovative development path in many regions. The observed twenty-year delay in the development of the Russian forest complex opens up a unique opportunity for innovative development via the comprehensive reconstruction of existing enterprises based on the scientific achievements attained during previous decades, the latest generations of equipment and technology. The most appropriate way to reconstruct existing enterprises is to switch the production to the high-tech products. For many regional industries, this is the only way to survive in the market economy with the free trade. Implementation of the industry innovation system model for technological and intellectual improvement requires good scientific and human resources, foresight of markets and development trends for several decades to come. The implied advanced technologies in the Forest industry include IT, nano, and biotechnology. The IT technologies are used in the management, monitoring, creation of geographic information systems (GIS) and logging models. The GIS are created to identify and refine the existing wood stocks. They provide operational accounting of the forest harvesting and transportation, fire control, supply chain control, and monitoring of reservoir flooding during the construction of new hydroelectric power plants. Foreign information models such as, for example, HARVEST [64] and LANDIS [65] are used to model forest succession and optimize logging taking into account ecological and biological factors of reforestation. In Russia, for example, in ISC SB RAS, the work on an automated control system for wood harvesting and processing using GLONASS/GPS navigation systems and geoinformation systems is underway. The uniqueness of this complex solution is in the organization of effective control

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of wood harvesting and processing using modern navigation and geoinformation systems, which have no analogues. Today, the relevance of becoming “green economy”, or bioeconomics, is obvious and is an evolutionary path for the further development of modern technologies for the entire forest complex. The Russian “green economy” should be based on the use of renewable resources and energy sources for sustainable industrial production. Recommendations on promising innovations for the development of the Forest industry should be continued by analyzing the development of the global forest sector in the past two decades. This analysis will help to identify areas that are promising for the forest sector in the period up to year 2030, and possibly beyond. The development of a comprehensive program for sustainable development of the forest industry for the period up to 2030 should be based on the best international experience and domestic developments to create high-tech production. The development of sustainable Forest industry is based on a number of these advanced innovations, including institutional changes that are justified in this work. Let’s focus on such an institutional form of innovative development as technology platforms. Technology platforms are the most effective means for implementing advanced technologies and innovative scenarios based on public–private cooperation. Currently, the European Community (European technology platform, European biofuel technology platform) and North America (Agenda 2020 Technology Alliance) [66] are following this path. The Russian forest technology platform is an integral part of the Russian technology platform “Bio-industry and bio-resources: Biotech2030” [67]. The platform consists of 19 areas, of which eight relate directly to the Pulp and paper production (P&PP). The national research program of the Russian platform was developed in collaboration with the European forest technology platform. It examines a number of cutting-edge innovations, covering both, technologies and materials, as well as the principles of their shared use. At the same time, the program pays great attention to the transition to “best existing technologies”, the concept of which was introduced in the environmental legislations of the United States, the European Union and the Russian Federation. The problems of preventing global climate change, assessing and minimizing the “carbon” and “water footprint”, of energy saving and improving energy efficiency are fundamental at all stages of the life cycle of products, materials and technologies. All these issues should be considered as stages of transition to the ecological “green economy”. The purpose of the section “Pulp and paper products” of the Russian forest technology platform is to create and implement an innovative model for the development of the P&PP of the Russian Federation, primarily on the basis of a phased environmental and technological reconstruction of existing enterprises. However, the implementation of this path leads to a number of new questions and problems. They are related to sustainable forest supply, increased energy efficiency, and the need to solve a number of environmental problems. In Russian Federation, which is the birthplace of oxygen bleaching, the transition to chlorine-free bleaching has been unreasonably delayed. Currently, the Russian Federation remains almost the only country that continues to use molecular chlorine for bleaching. The transition to

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chlorine-free bleaching during the reconstruction of existing enterprises solves the issue only partially, since there is still a problem of disposal of sludge accumulated over several decades and reconstruction of sludge accumulators containing millions of tons of dangerous slime, including organochlorine compounds. The use of biotechnologies in this case is the main solution. In parallel with the growth of paper and cardboard consumption, there will also be an innovative change in the structure of fiber semi-finished products used for their production. To do this, the scientific base to optimize the structure of fiber semi-finished P&PP products has been developed, expanding the use of secondary fibers (waste paper) and mineral fillers. Innovative development of pulp and paper production is supported by the following main directions: (1) development of resource-and energy-saving technological processes for the production of pulp, chemical and thermomechanical mass, paper, cardboard and waste paper processing; (2) creation of the new assortment of competitive types of paper, cardboard and composite materials in accordance with the best existing technologies to solve problems of import substitution and to ensure the integration of Russia into the world market for pulp and paper products, including: (a) development of technologies for the production of paper, including coated, for digital printing with coatings for various purposes on the basis of chemical thermo mechanical pulp and chlorine free pulp; (b) the creation of new biodegradable packaging materials of the general technical and special purpose; (c) development of production of new types of paper and cardboard with environmentally friendly barrier coatings; (d) creation of promising technologies for the production of technical, sanitary and hygienic papers and composite materials; (e) production of new types of paper and cardboard using nanotechnologies and innovative chemicals. At the same time, it is necessary to develop scientific bases for reducing the environmental load of pulp and paper enterprises on the environment: (1) transition to chlorine-free bleaching; (2) optimization of water use systems in pulp and paper enterprises; (3) transition to energy-saving technologies and increasing the use of wood wastes processing for the production and use of biofuels; (4) reducing the amount and toxicity of liquid, gaseous emissions and solid wastes via switching to the best existing technologies; (5) implementation of advanced technological processes, new equipment and materials; (6) development of criteria for assessing damage from chemical pollutions; (7) making Russian rules and regulations of industrial safety to comply with international standards; (8) use of wood processing wastes for the reclamation of man-made landscapes, etc. Thus, the development of the Forest industry on an innovative basis, on the one hand, is an urgent and necessary way to solve a number of the most important and urgent problems of sustainable development. On the other hand, they are closely related to and conditioned by institutional transformations, changes in industrial safety standards, rules and regulations, the state of environmental consciousness, and institutional mechanisms for implementing innovations. Staffing and training of personnel to work with innovative technologies is of particular importance for the successful implementation of investment programs for pulp and paper enterprises. Personnel support for the production of high-tech products is primarily related to the most important aspect of this problem: engineering

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personnel, the creation of the innovative network of training and retraining of engineering and scientific personnel. Due to the transition to new technologies, specialists with extensive knowledge in the field of innovative technologies of high-tech types of pulp, paper and cardboard, packaging and packing, resource saving, optimization of water use by pulp and paper enterprises, creation of new materials and technologies, are highly required. The innovative methods of organizing research and development (R&D) involve the use of a mechanism of public–private partnership, combining fundamental, applied and experimental technological work in time, purposeful development of the experimental base, scaling when in the transition from research in the laboratory to pilot testing, system analysis of the state and trends in the development of world markets for forest products. The innovative approach provides the integration of the scientific potential of Russian universities and academic institutions, the systematic involvement of leading foreign scientists and specialists, the use of modern research equipment of domestic and world scientific centers, and the broad involvement of students, postgraduates and young scientists to participate in projects.

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Conclusion

After profoundly studying the issue of the Forest industry development in Russia we made the following conclusions: 1.

2.

The problems of the forest industry are intersectoral, and theoretically interdisciplinary. The main requirement for the management of forests and the Forest industry is the organization of sustainable use of forest resources and utilities, which can only be achieved if the forest reproduction is at the level of constant scale. The transition to sustainable forest management involves the organization of multi-resource planning and forest management. The task is to develop an integrated system of measures, in which all individual forest resources that meet individual goals must be coordinated with each other to ensure the use of all resources in each individual section of the forest. This implies an integrated approach to forest management that ensures optimal and efficient use of forest resources. At the same time, it should be taken into account that the forest is not only an economic resource, but also an object of cultural heritage of the country. The organization and planning of multi-resource forest management is a priority for the implementation of the sustainable forest management program and will be included in the forestry economy. The sustainable and innovative use of forests is a promising direction for the development of the forest sector in Russia and its regions. The following types of problems in the Forest industry are identified: (1) (2) (3) (4)

3.

production and technological; natural and environmental; institutional and organizational; problems of forest protection and reproduction.

The problems specified in the forest sector, including the lack of technologies and capacities for deep processing of harvested wood, are primarily related to the quality of institutions and the lack of effective institutional relations in the industry. This study confirms the conclusions of various studies that prove

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 S. V. Zykov and D. V. Dayneko, Forest Industry of Russia, Advances in Sustainability Science and Technology, https://doi.org/10.1007/978-981-16-9861-3

183

184

4.

5.

6.

Conclusion

the existence of a causal relationship between the qualitative characteristics of institutions and institutional relations and the broad economic results. In this case, it was done for the first time using the example of the Forest industry. Institutional relations represent a special sphere of interaction and resolution of contradictions arising in relation to the distribution of responsibilities and the assignment of benefits from economic activities. Institutional innovations, i.e. changes in institutions (rules, norms, and mechanisms for ensuring them) are the main type of innovation in the Forest industry, the basis for optimal and efficient use of forest resources. Institutional changes should ensure innovative development of the Forest industry based on the principles of multi-resource forest management. Inefficient use of forests is primarily due to inefficient institutional relations in the industry. To improve the efficiency of the forest sector, a whole system of institutional changes is required, which should be presented as a system of measures in national, regional and sectoral forest policies. First of all, it is necessary to introduce a system of effective forest ownership rights. Institutional transformations of the environment are a prerequisite for the development of the most promising type of innovations: eco-innovations that minimize the negative impact of various technologies on the environment. The relation between the concepts of “institutional change” and “institutional transformation” has been determined. We define institutional innovations in this paper as the emergence of new forms in the system of interaction of agents or recombination of elements of existing forms that cause significant changes in the status and functions of an institution or institutional structure as a whole, which generate a certain private, collective or public benefit. However, obtaining such a benefit by economic agents does not necessarily imply obtaining a public benefit.

Institutional transformations are institutional innovations which benefit both economic agents and society as a whole. In order to characterize institutional innovations as institutional transformations, innovations must meet the following conditions: (1)

(2)

(3) 7.

the subjectivity and regularity of institutional changes, which is the basis for transformations (who, in whose interests, and how has implemented innovations); the fixing the significant results of institutional changes (in terms of private, collective, and public benefits from institutional innovations and their correlation); the possibility of competition of institutional innovations. The classification of institutional transformations is completed according to different characteristics: (1) (2)

based on the functional attributes: (a) increasing the efficiency of resources use, (b) having a purely redistributive nature; by the nature of the impact on the economy: (a) constructive, (b) destructive;

Conclusion

(3) (4) (5) (6) (7) (8) 8.

9.

185

in terms of the source of changes: (a) endogenous, (b) exogenous; according to the method of occurrence: (a) incremental, (b) evolutionary, (c) revolutionary; by the presence of an element of purposeful activity in changes: (a) spontaneous, (b) purposeful, (c) mixed type; according to the source of performed by: (a) federal authorities, (b) regional administrations, (c) municipalities; by direction of implementation: industrial, corporate, and at the level of individual teams; by instruments of influence on economic agents in institutional innovation: (a) based on instructions, (b) based on incentives.

Effective innovations in the forest industry require the formation of an innovation system for the whole Forest industry. It is a set of interrelated subjects, which productivity is determined both by individual activities of each subject and by their interaction with each other. It includes resource carriers (knowledge, personnel, capital, etc.), administrations, interest groups, clients, the research and development sector, the consulting sector, markets, and innovative enterprises. The most important role in the innovation system of the Forest industry is played by innovative entrepreneurship. The goal of the innovation system is to ensure the sustainability of the forest industry. To develop the model of sustainable forestry, a special methodology is proposed for research of the forest sector, based on the interdisciplinary approach, which includes: • research of economic and social subsystems of forest socio-economic systems with consideration of environmental factors of development; • research of innovative transformations of the Forest industry enterprises; • research of the institutional structure of the forest management system; • use of special methods for analyzing and evaluating data about each subsystem.

The main scientific approach of the research is institutional analysis with specific analysis tools. 10.

Institutional transformations are a complex process that requires significant financial and intellectual resources, as well as significant time spending. Evaluating the effectiveness of innovations and of institutional changes is a necessary element of transformations itself. Although many innovations and institutional changes can be formally implemented in a short period of time through the implementation of innovative projects and political and legal decisions, in practice, the implementation of innovations and/or the realization of institutional formal rules does not occur immediately, especially in the Russian reality. As for the transformation of informal institutions associated with customs, traditions, and codes of conduct, these cultural restrictions are even less susceptible to the conscious efforts of reformers. This leads to the problem of quantitative assessments of institutional changes, especially in the short and medium term.

186

11.

12.

13.

Conclusion

Institutional changes are primarily of a qualitative nature, hence, they require the use of qualitative analysis methods to evaluate them. To evaluate the effectiveness of institutional transformations, such tools as the Q-method, Institutional Analysis Development Framework (IADF), Political Risk Services evaluation criteria (PRS measures), Polity IV (constraints on the executive), as well as evaluation criteria presented by the World Bank for Development in the project Doing Business; regression analysis, and other are proposed. The choice of regression analysis, which classifies not just influencing features, but explains subjective behavior, allows us to solve the task of measuring factors and analyzing the effectiveness of innovations in the Forest industry most correctly. To assess the effectiveness of innovation activities and institutional changes, the evaluation model was developed, which had been tested in the Forest industry in one of Russian regions, in Irkutsk province. This model shows in particular the importance of institutional innovations. According to experts, the innovative and sustainable development of the Forest industry is more dependent on informal institutions, which include both contractual obligations and traditions of the local forest business. Decisions of the Federal government play the great role, while little depends on the regional authorities in matters of conducting forest business according to the model, especially under the terms and conditions of predetermined distribution of rented land. The model showed that all informal institutions related to the contracting method, and such as contracts, obligations, social norms and the ability to cooperate, are effective. All formal institutions (political, regulatory and legislative support, etc.) are of great importance in the processes of innovative development, but the issue of their effectiveness remains unsolved. In this regard, it is important to note the need for the transition of informal institutions to formal ones and their mutual significance. The model also showed a weak dependence of the sustainable development of the Forest industry on eco-innovations in the short run, and even, perhaps, their negative impact on the economic development of the industry as a whole. Since, according to the classical definition of eco-innovations, efforts should be directed, if not to eliminate the negative impact of man on the environment, then at least to minimize it. If we talk about the long-term development of the Forest industry and take into account many other factors that affect the sustainability of development (according to expert estimates), we should pay special attention to environmental innovations. The negative assessment obtained also shows the load on the forest business and the need to invest in environmental projects. It is necessary to increase expenditures in high-tech eco-oriented projects aimed at both restoring forest resources and increasing them. The results of the evaluation confirmed the imperfection of normative-legal support at the Federal level. At the same time, according to experts, local orders and regulations have a clear and consistent implementation. The reliability of financial institutions is required to ensure the sustainable operation of the industry. It is important to note the need to implement educational

Conclusion

14.

15.

16.

17.

187

programs and information support for the industry too, as well as to improve the organizational structure of the industry. The State should set goals and create conditions for their implementation in the development of the Forest industry with help of legislative and executive authorities. In order to achieve the goals set under the existing terms and conditions, it is necessary to have a unified national forest management policy. It is particularly important to note the role of State regulation aimed to realize highly effective innovative projects via guarantees on loans borrowed, tax and customs preferences for scientific organizations, to finance priority scientific innovation projects and small innovative enterprises. The effective institutional form is public–private partnership, in which enterprises are supported by funds (subsidies) from the federal budget, the Investment fund, the Bank of development and regional budgets through various financial schemes. The Russian forest complex is still undergoing a process of adaptation to new economic conditions, but not all the entities are adapting equally. The analysis of innovative enterprises that are most successful in the market revealed that: (a) large enterprises with the full processing cycle are the most successful; (b) small enterprises with good equipment and investments that specialize in the production and sale of high-quality goods, including deep processing products, survive too; (c) new enterprises and entrepreneurs who respond flexibly to changes in demand with employment and changes in labor productivity are the most successful. Many factors that affect Forest industry sustainability should be taken into account for its further development. We are talking about the need to implement a set of measures that include institutional, technological, product, and ecological innovations aimed at sustainable development of the Forest industry. Therefore, the program of innovative and institutional transformations is proposed that promotes the creation of the environment, which is favorable to the implementation of new innovations. It is recommended to apply the principle of the envelope curve to the implementation of three scenarios: a gradual transition from inertia to moderate and innovative development. It is recommended to use this guideline in the development of all State programs for the development of the forest sector. Recommended institutional changes in the Forest industry are: improvement of the regulatory framework, legal regulation of forest fires; transfer of authority for forest management to the entities of the Russian Federation; implementation of State forest control and supervision, State fire supervision in forests; improvement of forest rent relations; strengthening of responsibility for violations of forest legislation. We need effective and transparent institutional relations that regulate intersectoral and interregional flows of capital from budgetary and extra-budgetary sources, invested in wood processing and maintenance of logging infrastructure, and that form the effective customs policy.

188

Conclusion

18.

A number of incentive measures for the development of innovations in the Forest industry are proposed. It is especially important to encourage projects for deep wood processing and production of products with higher added value, as well as projects for the production of completely new products, such as biofuel. It is necessary to financially encourage private businesses to develop the wood processing using the latest technologies and production of new materials. State support is needed to create research centers that develop, search for and adapt innovations in the Forest industry. The funds allocated should be directed to solve strategic problems of innovative development of the Forest industry. The measures to attract investors to the Forest industry are highlighted: (1) creation of infrastructure-secured platforms for interaction with LIC entities; (2) simplification of approving procedures by control and supervisory authorities to build new production; (3) development of transport infrastructure in the forests for rent to implement priority investment projects in the field of forest development on the principles of public–private partnership. The authors’ advise to provide in the forest legislation the possibility of reserving forest lots by potential investors for a period of up to ten years or more has been partially realized. Now it is necessary to further specify the terms and conditions for the return of the rented forest lots. The development of transport infrastructure, the implementation of investment projects, the construction of linear facilities, and much more are inextricably linked to forest management, which must be carried out systematically and continuously. In addition to the organization of protection of the forest fund from illegal actions, it is necessary to interest entrepreneurs in legalizing logging with preferential rights for those enterprises that previously performed it, did not violate the law and passed voluntary forest certification.

19.

20.

Appendix A

Institutional Changes in the Organizational Structure

See the Fig. A.1 and Table A.1. RUSSIAN FEDERATION GOVERNMENT Ministry of natural resources and ecology of Russian Federation

Federal forestry Agency

Department of scientific research and interaction with scientific organizations

Forest Management

Research and design, survey institutions

Forest fund Management

Forest management institutions

Management of protection, conservation, and reproduction of the forest fund

FBA Avialesohrana

Main departments of natural resources in the entities of the Russian Federation

Management of specially protected natural territories and objects

Department of personnel, professional development and social policy

National parks and reserves

Eductional institutions

Forest services

(Aviation forestry)

FBA Rosleszashita

Forestries

(Forest protection)

FBA Centrlessem

Forestry plots Forest bypasses

FGA: Federal Government Agency

Fig. A.1 Organizational structure of the forestry

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 S. V. Zykov and D. V. Dayneko, Forest Industry of Russia, Advances in Sustainability Science and Technology, https://doi.org/10.1007/978-981-16-9861-3

189

The ability to use external sources of information and scientific and technical expertise, modern communication channels

Contradictions of formal and informal institutions, multi-level communications

Exposure to bureaucracy, fear of risk, human factor

Lack of developed sales, weak Developed network of sales Manifistations of monopoly market position, unidirectional and services, preferential specialization market position

Timely response to changing demand

Direct communications, rapid solution of internal problems

Internal communications

Experience of professional management

Opportunities to attract Focus primarily on borrowed funds, “portfolio” maximizing profits risk distribution, the ability of large self-financing

Excessive specialization careerism, lack of initiative

Certification and marketing services

Personal example, low level of bureaucracy, ability to take risks, entrepreneurship

Leadership

Increased investment risk due to the uncertainty of innovations and difficulties in obtaining loans

Large and diverse human resources

Limited communication channels, difficulties in outsourcing

Low capital intensity

Finance

Often lack of necessary specialists

Disadvantages

External communications

Enthusiasm, cohesion, initiative

Large firms Advantages

Advantages

Disadvantages

Small firms

Staff

Areas of activity and enterprises

Table A.1 Characteristics of large and small firms in applying innovations

190 Appendix A: Institutional Changes in the Organizational Structure

Appendix B

Wood Products Production in Irkutsk Province

See the Tables B.1, B.2, B.3, B.4, B.5, B.6, B.7 and B.8.

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 S. V. Zykov and D. V. Dayneko, Forest Industry of Russia, Advances in Sustainability Science and Technology, https://doi.org/10.1007/978-981-16-9861-3

191

2003

2004

2005

2006

2007

2008

2009

2011

2012

2013

1789,84

4706,36

1755,49

4642,49

1789,62

4728,38

1,300,265 1,348,314 1,356,374 1,301,993

1,660,938 1,715,430 1,715,742 1,592,224

2010

1825,63

2002

Round timber hardwood for the production of pulp and wood pulp (from 2010 till 2017), thousand dense cubic meters

2001

4484,85

2000

Round timber of coniferous breeds for the production of pulp and wood pulp (from 2010 till 2017), thousand dense cubic meters

Cellulose products (till 2016), t

Wood pulp and pulps of other fibrous materials (from 2010 till 2017), t

Year indicator

Table B.1 Wood pulp and cellulose from fibrous materials and their volumes production in Irkutsk province

1983,31

5241,43

2014

2334,86

5378,49

2015

5224,92

2016

2017

(continued)

2018

192 Appendix B: Wood Products Production in Irkutsk Province

2005

2006

2007

2008

2009

2010

Woodpulp unbleached softwood soda or sulphate (except dissolving grades) (from 2010 till 2017), t

Woodpulp soda or sulphate, except for the soluble variety (2010–2017), t 545,254

1,624,304

36,634

2004

Cellulose viscose (from 2010 till 2017), t

2003

36,634

2002

Chemical wood pulp, soluble grade (from 2010 till 2017), t

2001 826,64

2000

Technological chips for the production of cellulose and wood pulp (from 2010 till 2017), thousand dense cubic meters

Year indicator

Table B.1 (continued)

933,64

2011 975,57

2012 964,38

2013 1009,35

2014 1185,74

2015 1530,19

2016

2017

(continued)

2018

Appendix B: Wood Products Production in Irkutsk Province 193

2005

2006

2007

2008

2009

2010

345

2004

Tablecloths and table napkins made of paper pulp, paper, cellulose wool and cellulose fiber (since 2010 till 2017), thousand pcs

2003

313,156

2002

Woodpulp unbleached of hardwood, soda or sulphate (except dissolving grades) (2010 till 2017), t

2001 765,894

2000

Woodpulp semibleached or bleached of coniferous varieties soda or sulphate type (except dissolving grades) (since 2010 till 2017), t

Year indicator

Table B.1 (continued)

295

2011

230

2012

414

2013

1490

2014

1050

2015

1614

2016

2017

(continued)

2018

194 Appendix B: Wood Products Production in Irkutsk Province

2003

2004

2005

2006

2007

2008

2009

2010

2011

Round lumber of coniferous types for the production of pulp and wood pulp (balance) (2017), thousand dense cubic meters

1,2

2002

Artificial shells made of hardened proteins or cellulose materials, pipes, tubes, hoses, hoses, rigids, polymeric (2010–2017), t

2001 287

2000

Sanitary and hygienic towels, tampons and similar products made of paper pulp, paper, cellulose wool and cellulose fibers (bundles) (2010–2017), thousand pcs

Year indicator

Table B.1 (continued)

31,2

3765

2012

31,2

2585

2013 1552

2014 2320

2015 3272

2016

4808,61

2017

(continued)

4244,83

2018

Appendix B: Wood Products Production in Irkutsk Province 195

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Toilet paper made of paper pulp, paper, cellulose wool and cellulose fibers fibers (since 2017), thousand rolls

(continued)

14,146,47 19,344,03

245

212

2005

Cellulose of other fibrous materials, except wood (2017), t

2004

245

2003

212

2002

Wood pulp obtained by a mechanical method; polycellulose wood; pulp of other fibrous materials, except wood (2017), t

2001

2654,16

2000

Round lumber hardwood for the production of pulp and wood pulp (balance) (2017), thousand dense cubic meters

Year indicator

Table B.1 (continued)

196 Appendix B: Wood Products Production in Irkutsk Province

Towels sanitary and tampons, diapers and baby diapers and similar products for sanitary purposes and items and clothing accessories of paper pulp, paper, cellulose wadding and webs of cellulose fibers (from 2017), thousand roubles

Tablecloths and napkins for the table of paper pulp, paper, cellulose wadding and webs of cellulose fibers (since 2017), thousand pieces

Year indicator

2000

2001

Table B.1 (continued)

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2248,97

2018

(continued)

17,826,53 13,264,49

2717,1

2017

Appendix B: Wood Products Production in Irkutsk Province 197

700

724

524

365

365

343

343

384

349

825

524

2006

Methylcellulose (until 2010), t

724

2005

35

700

2004

Ethyl cellulose (until 2010), t

Esters of cellulose and plastics based on them (until 2010), t

825

2003

132

132

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

975,9

2002

Artificial membranes of hardened protein or of cellulosic materials, tubes, pipes, hoses, hoses, rigid, of plastics (2017), t

2001 1927,02

2000

Sanitary towels and wads of paper pulp, paper, cellulose wadding and webs of cellulose fibers (since 2017), thousand pieces

Year indicator

Table B.1 (continued)

(continued)

1045,9

1743,05

2018

198 Appendix B: Wood Products Production in Irkutsk Province

129

3514,3

2783,4

Lumber for the production of pulp and wood pulp (till 2010), thousand dense cubic meters

Softwood lumber varieties for the production of pulp and wood pulp (until 2010), thousand dense cubic meters

2000

Solvents and washes for paints, enamels, primers and coatings for cellulose ethers (till 2010), t

Varnishes, enamels, primers and sealers of cellulose ester (until 2010), t

Year indicator

3209,3

4545,5

13

2001

Table B.1 (continued)

2969,7

4350,7

9

2002

2995,5

4849,4

1

2003

587,3

862,7

2004

2671,9

3110,2

439

2005

2607,3

3213

2401

2006

3189,5

3864,2

2929

2007

3045

3668

2020

2008

2379,5

2898,7

1776

2009

2010

2011

2012

2013

2014

2015

2016

2017

(continued)

2018

Appendix B: Wood Products Production in Irkutsk Province 199

2000

589,4

407,6

402,5

Year indicator

Birch lumber for the production of pulp and wood pulp (until 2010), thousand dense cubic meters

Technological chips for the production of pulp and wood pulp waste from the sawmill (until 2010), thousand dense cubic meters

Coniferous technological chips for the production of cellulose and wood pulp from the sawmill wastes (till 2010), thousand dense cubic meters

327,4

330,9

1288,5

2001

Table B.1 (continued)

471,9

491,6

1285,3

2002

531

559,1

1758,5

2003

609,1

632,6

206,7

2004

956,3

995,8

405

2005

920,2

943,9

523,9

2006

822

842

559,2

2007

703,7

711,8

552,5

2008

747

752,5

112,1

2009

2010

2011

2012

2013

2014

2015

2016

2017

(continued)

2018

200 Appendix B: Wood Products Production in Irkutsk Province

34,1

Coniferous technological chips for the production of pulp and wood pulp from logging wastes (till 2010), thousand dense cubic meters

86,4

86,4

2001

231,1

252,1

2002

356

379,1

2003

456,7

504,5

2004

58,4

177,5

2005

132

134,2

2006

83

83

2007

87,6

87,6

2008

79,9

79,9

2009

1,313,393 1,411,304 1,521,502 1,593,023 1,622,139 1,629,010 1,695,367 1,789,365 1,676,913 1,576,710

35,4

Technological chips for the production of cellulose and wood pulp from logging wastes (till 2010), thousand dense cubic meters

Cellulose (for cooking), including polycellulose and chemical wood mass (until 2010), t

2000

Year indicator

Table B.1 (continued) 2010

2011

2012

2013

2014

2015

2016

2017

(continued)

2018

Appendix B: Wood Products Production in Irkutsk Province 201

993,704

2001

2003

2004

2005

2006

2007

2008

2009

1,254,652 1,311,783 1,066,033 1,140,395 1,182,777 1,244,663 1,375,719 1,274,804

2002

20,406

20,406

841,132

Cellulose sulfate viscose (until 2010), t

Bleached sulfate cellulose (until 2010), t

882,485

55,117

55,117

913,708

33,773

33,773

82,563

82,563

64,321

64,321

73,370

73,370

91,013

91,013

59,043

59,043

36

36

1,015,920 1,101,812 1,194,740 1,212,212 1,292,667 1,247,910 1,313,012

53,161

53,161

1,254,745 1,349,586 1,508,409 1,579,971 1,606,943 1,617,546 1,679,477 1,772,018 1,664,509 1,576,710

1,254,745 1,349,586 1,508,409 1,579,971 1,606,943 1,617,546 1,679,477 1,772,018 1,664,509 1,576,710

1,313,393 1,411,304 1,521,502 1,593,023 1,622,139 1,629,010 1,695,367 1,789,365 1,676,913 1,576,710

1,130,893

2000

Cellulose acetate and viscose (until 2010), t

Cellulose sulfate liquid (till 2010), t

Cellulose (for cooking) liquid, including polycellulose (until 2010), t

Cellulose (for cooking) sulphate (up to 2010), t

Cellulose (for cooking), including polycellulose and chemical wood mass of coniferous types (till 2010), t

Year indicator

Table B.1 (continued) 2010

2011

2012

2013

2014

2015

2016

2017

(continued)

2018

202 Appendix B: Wood Products Production in Irkutsk Province

2000

393,207

851,545

179,492

841,132

20,406

Year indicator

Cellulose sulfate unbleached (until 2010), t

Softwood commercial cellulose (till 2010), t

Unbleached sulfate commercial cellulose (util 2010), t

Bleached sulfate commercial cellulose (until 2010), t

Viscose and acetate commercial cellulose (until 2010), t

55,117

882,485

166,302

903,826

411,984

2001

Table B.1 (continued)

33,773

870,443

317,168

974,605

560,928

2002

53,161

970,104

237,538

1,008,313

510,890

2003 393,895

2006 388,338

2007 357,556

2008

161,413

183,242

185,903

134,297

1,019,142 1,067,208 1,124,893 1,013,827

358,485

2005

50,799

942,165

263,662

2009

82,563

64,321

73,370

91,013

59,043

36

1,038,912 1,069,727 1,090,537 1,153,574 1,107,867 1,169,869

164,813

941,679

422,568

2004

2010

2011

2012

2013

2014

2015

2016

2017

2018

Appendix B: Wood Products Production in Irkutsk Province 203

Construction logs and coniferous lumber 3,7 toolboxes and packaging (2010–2017), thousand dense cubic meters

0,9

1,9

2,65

7,8

8,21

219,11

0,3

5,65

Logs of coniferous lumber for posts (for communication and power lines) (2010 till 2017), thousand cubic meters

11,99

5,97

4

5378,49

Round coniferous lumber for other purposes (2010 till 2017), thousand dense cubic meters

5241,43

5224,92

4728,38

4706,36

Round coniferous lumber for the production of 4484,85 cellylose and wood pulp (2010–2017), thousand dense cubic meters

4642,49

29,55

10,304,98 11,989,51 15,163,76

Round coniferous lumber for veneer and plywood production (2010–2017), thousand dense cubic meters

9401,63

21,020,66

82,8

8304,48

2016

Round coniferous lumber for peeling and slicing (2010–2017), thousand dense cubic meters

7496,41

7357,5

2015

Round coniferous lumber for sawing (since 2010–2017), thousand dense cubic meters

2014 21,215,29 22,207,45 27,684,06

11,846,35 12,373,54 13,350,75 14,599,42 15,730,92 17,508,1

2013

Softwood logs (2010–2017), thousand dense cubic meters

2012

17,525,36 18,733,62 18,892,63 19,892,7

Raw wood (2010–2017), thousand dense cubic meters

2011

2010

Year indicator

Table B.2 Logs production 2017

(continued)

2018

204 Appendix B: Wood Products Production in Irkutsk Province

14,67

Wood fuel in the form of logs, faggots (split wood) (2010–2017), thousand dense cubic meters

17,6

176,16

Fuel wood in logs (the long lumber) (since 2010 177,19 till 2017), thousand dense cubic meters 10,87

131,49

9,98

71,8

241,8

1789,62

1,53

57,95

252,94

1983,31

48,39

218,17

2334,86

9,19

8,97

3254,54

2016

63,38

214,58

536,9

519,91

454,77

1755,49

6,32

2511,49

2015

Fuel wood (2010–2017), thousand dense cubic meters

1789,84

7,5

2121,1

2014

11,87

1825,63

43,47

91,94

1949,56

463,76

2013

Hardwood logs, not included in other groups, other (2010–2017), thousand dense cubic meters

Round lumber hardwood for the production of cellylose wood pulp (2010–2017), thousand dense cubic meters

Aspen logs for sawing (2010–2017), thousand dense cubic meters

49,6

Birch logs for sawing (2010–2017), thousand dense cubic meters

121,17

341,25

215,19

Round hardwood lumber for sawing (2010–2017), thousand dense cubic meters

241,95

2112,28

2218,7

2012

Hardwood logs of deciduous trees (2010–2017), 2040,82 thousand dense cubic meters

2011 391,79

2010

Coniferous species logs not included in other groupings (2010 till 2017), thousand dense cubic meters

Year indicator

Table B.2 (continued) 2017

(continued)

2018

Appendix B: Wood Products Production in Irkutsk Province 205

325,12 3118,28

Wood fuel, other (since 2010 till 2017), thousand dense cubic meters

Raw wood (including poles and stakes), other (2010–2017), thousand dense cubic meters

Cedar logs for sawing and planing (since 2017), thousand dense cubic meters

2248,86

Larch logs for sawing and planing (since 2017), thousand dense cubic meters

(continued)

22,64

833,36

130,39

509,09

Spruce logs for sawing and planing (since 2017), thousand dense cubic meters

2018

11,883,49 9327,36

3194,28

2017

Pine logs for sawing and planing (since 2017), thousand dense cubic meters

1969,69

3194,28

149

2016

14,684,53 10,382,48

3110,33

1969,69

168,6

2015

Round lumber of coniferous breeds for sawing and planing (since 2017), thousand dense cubic meters

3101,91

3110,33

193,46

2014

23,070,06 18,157,22

2974,83

3101,91

160,02

2013

Lumber of coniferous trees (since 2017), thousand dense cubic meters

3604,48

2974,83

312,41

2012

26,712,48 21,863,22

3117,38

3604,48

346,07

2011

Raw wood (since 2017), thousand dense cubic meters

Raw wood, not included in other groups, other (2010–2017), thousand dense cubic meters

Wood container and riveted (timber for shotarou 0,9 and filler packaging) (2010–2017), thousand dense cubic meters

2010

Year indicator

Table B.2 (continued)

206 Appendix B: Wood Products Production in Irkutsk Province

0,72

3006,84

3383,05 1772,31

Construction logs and for packaging of coniferous timber (since 2017), thousand dense cubic meters

Softwood whips (since 2017), thousand dense cubic meters

Pine whips (since 2017), thousand dense cubic meters

(continued)

1615,18

4

0,07

Logs of coniferous lumber for piles of hydraulic structures and elements of bridges (since 2017), thousand dense cubic meters

12,62

2462,28

4244,83

2018

Coniferous lumber for cutting mine pillars (since 2017), thousand dense cubic meters

2,93

Spruce balances (since 2017), thousand dense cubic meters

2017

1935,2

2016

Pine balances (since 2017), thousand dense cubic meters

2015

4808,61

2014

Round lumber of coniferous breeds for the production of cellylose and wood pulp (balance) (since 2017), thousand dense cubic meters

2013

29,26

2012

Pine logs for peeling (since 2017), thousand dense cubic meters

2011 29,26

2010

Round lumber of coniferous breeds for peeling (since 2017), thousand dense cubic meters

Year indicator

Table B.2 (continued)

Appendix B: Wood Products Production in Irkutsk Province 207

14,31

Hardwood timber for use in the round shape, other (since 2017), thousand dense cubic meters

(continued)

61,16

246,88

52,49

232,3

30,03

Aspen logs for sawing and planing (since 2017), thousand dense cubic meters

361,35

Hardwood whips (since 2017), thousand dense cubic meters

228,04

Birch logs for sawing and planing (since 2017), thousand dense cubic meters

413,84

2654,16

258,07

Round hardwood lumber for sawing and planing (since 2017), thousand dense cubic meters

3405,08

50,67

8,39

134,89

55,86

2018

Round hardwood lumber for the production of cellylose and wood pulp (balances) (since 2017), thousand dense cubic meters

3427,24

Hardwood timber, except for tropical species (since 2017), thousand dense cubic meters

2017

20,57

2016

Fir whips (since 2017), thousand dense cubic meters

2015

5,83

2014

Cedar whips (since 2017), thousand dense cubic meters

2013

61,71

2012

Larch whips (since 2017), thousand dense cubic meters

2011 38,12

2010

Spruce whips (since 2017), thousand dense cubic meters

Year indicator

Table B.2 (continued)

208 Appendix B: Wood Products Production in Irkutsk Province

2013

2014

2015

2016

2017

107,93

Fuel wood, other (since 2017), thousand dense cubic meters

92,63

0,7

192,29

300,92

2018

Firewood split in the form of logs of all species (since 2017), thousand dense cubic meters

122,55

2012

Firewood (since 2017), thousand dense cubic meters

2011 215,18

2010

Fuel wood (since 2017), thousand dense cubic meters

Year indicator

Table B.2 (continued)

Appendix B: Wood Products Production in Irkutsk Province 209

0,6 0,7

Wooden houses and log houses (until 2010), thousand sq. m. of total area

0,8

0,6 0,6

0,6 0,2

0,6 0,3

0,4

0,6

0,1

0,3

0,32

0,26

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2014 2016

Sets of parts for standard houses with walls made of local 0,6 construction materials (until 2010), thousand sq. m. of total area

Log houses and baths (since 2010–2017), thousand sq. m. of total area

Year indicator

Table B.3 Volumes of production of wooden houses, log cabins, banya houses and sets of parts for standard houses

210 Appendix B: Wood Products Production in Irkutsk Province

2009

2010

2011

4275,8

1769

3351,6

2008

Boxes made of corrugated cardboard (transport containers) (2010–2017), thousand sq m

2007

1722,5

2006

Cardboard containerboard (Kraft-liner), uncoated (2010–2017), million square meters

2005

230,333

2004

Cardboard: total (since 2010–2017), tons

2003

233,151

2002

Paper and cardboard (since 2010–2017), tons

2001 230,333 235,148

2000

Cardboard containerboard (Kraft-liner), uncoated (2010–2017), tons

Year indicator

Table B.4 Volumes of cardboard and products made from it production in Irkutsk province 2013

2014

3352,5 1412,3 1692,5

2012

2015 2016

2017

(continued)

2018

Appendix B: Wood Products Production in Irkutsk Province 211

2005

2006

2007

2008

2009

2010

Labels of paper or paperboard, with printed text or images (except adhesive ones) (printouts) (2010–2017), mln. pcs

123,9

2004

Labels of paper or paperboard (2010–2017), mln pcs

2003

713,3

2002

Boxes (consumer packaging) made of corrugated cardboard (2010–2017), thousand sq m

2001 91

2000

Boxes (consumer packaging) of corrugated cardboard (2010–2017), tons

Year indicator

Table B.4 (continued)

8,51

2011

13

2012

21,63

2013

36

2014

32,7

1,33

12,58

2015 2016

2017

(continued)

2018

212 Appendix B: Wood Products Production in Irkutsk Province

2003

2004

2005

2006

2007

2008

2009

2010 8,51

2011 13

2012 6,5

2013 19

2014 7,06

2015 2016

500

2002

Diaries, address and phone books made of paper or paperboard (2010–2017), thousand pieces

2001

0,16

2000

Notebooks and pads of paper or cardboard (2010 up to 2017), mln. pcs

Labels of paper or paperboard, with printed text or pattetn (except self-adhesive) (printouts) (2010–2017), mln. pcs

Year indicator

Table B.4 (continued) 2017

(continued)

2018

Appendix B: Wood Products Production in Irkutsk Province 213

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015 2016

432,7

224,7

Boxes and cases of corrugated paper or paperboard (since 2017), tons

2017

Boxes and cases of corrugated paper or paperboard (since 2017), thousand sq m

158

2002

Pulp derived from recovered paper or cardboard (waste paper) (2010–2017), tons

2001 798

2000

Notebooks, binders, folders and file covers of paper or paperboard (except book covers) (since 2010–2017), thousand pieces

Year indicator

Table B.4 (continued)

(continued)

2018

214 Appendix B: Wood Products Production in Irkutsk Province

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015 2016

2017

2018

(continued)

58,901,01 67,620,61

2004

Registration Magazines, accounting books, folders (directories), letterheads and other stationery made of paper or paperboard (since 2017), thousand roubles

2003

80,1

2002

Boxes and cases, folding, from non-corrugated paper or paperboard (since 2017), tons

2001 229,3

2000

Boxes and cases, folding, from non-corrugated paper or paperboard (since 2017), thousand sq m

Year indicator

Table B.4 (continued)

Appendix B: Wood Products Production in Irkutsk Province 215

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015 2016

2017

162,334 183,307 194,554 203,685 220,778 220,293 232,099 220,055 238,644 230,480

160,711 182,960 194,554 203,685 220,778 220,293 232,099 220,055 238,644 230,480

Cardboard (including fluting paper), tons

Cardboard for containers (including fluting paper) (until 2010), tons

Tags and labels made of cardboard paper (since 2017), mln. pcs

83,91

2004

Labels made of paper or paperboard (printouts) (2017), mln. pcs

2003

39,22

2002

Forms made of paper or cardboard (since 2017), million pcs

2001 28,9

2000

Registration journals made of paper or cardboard (since 2017), thousand pcs

Year indicator

Table B.4 (continued)

(continued)

0,05

176,36

32,47

2018

216 Appendix B: Wood Products Production in Irkutsk Province

1430,4

2003 1656,7

2004 1577,3

2005 1706

2006

1,9

4,1

347

1316,2

2002

Boxes made of cardboard (before 2010), thousand sq m

1623

Cardboard for roofing (until 2010), tons

1222,8

2001

1,9

1096,3

Cardboard for containers (including fluting), (until 2010), million square meters

Transport containers from cardboard (to 2010), thousand sq m

2000

Year indicator

Table B.4 (continued)

8,7

8,7

1624

2007

8,7

8,7

1798,5

2008

8,6

8,6

1752,2

2009

2010

2011

2012

2013

2014

2015 2016

2017

2018

Appendix B: Wood Products Production in Irkutsk Province 217

233,151

2818

6665

Plain wrapping paper (except sulfite) (2010–2017), tons

Toilet paper (since 2010–2017), thousand rolls

2818

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Paper and cardboard (since 2010–2017), tons

Toilet paper (since 2010–2017), thousand rolls

Paper (until 2016), tons

Year indicator

Table B.5 Paper production in Irkutsk province 2012

17,643 18,033

2011

2014

19,663 17,449

2013

2016

16,071 16,405

2015

2017

(continued)

2018

218 Appendix B: Wood Products Production in Irkutsk Province

Household and toilet paper and paper products (2010–2017), thousand roubles

Business self-copying forms (including sheet-lined copying sets), non-copying paper (2010–2017), million pcs

Year indicator 39,84

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Table B.5 (continued)

157,8

2011 37,52

2012 30,84

2014 24,6

2015 42,15

2016

85,376 105,305 89,214 117,425

34,62

2013

2017

(continued)

2018

Appendix B: Wood Products Production in Irkutsk Province 219

Wrapping and packaging paper of all types (till 2010), tons

4174 3283 2625 3481 2469 2374 2011 1729 2497 1

2013

2014

2015

2016

2017

2018

(continued)

19,344,03

14,146,47

2012

Toilet paper made of paper pulp, paper, cellulose wool and cellulose cloths made of cellulose fibers (since 2017), thousand rolls

2011

110,078,81 140,980,46

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Household and toilet paper and sanitary products (since 2017), thousand roubles

Year indicator

Table B.5 (continued)

220 Appendix B: Wood Products Production in Irkutsk Province

25,9

32,9

24,5

23,5

19,8

17,2

25,3

30,4

25,9

32,9

24,5

23,5

19,8

17,2

25,3

4174 3283 2625 3481 2469 2374 2011 1729 2497 1

Plain 40,2 wrapping paper (till 2010), area in million sq. m

Plain wrapping paper (till 2010), tons

30,4

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Wrapping 40,2 and packaging paper of all types (till 2010), million sq. m

Year indicator

Table B.5 (continued) 2011

2012

2013

2014

2015

2016

2017

2018

Appendix B: Wood Products Production in Irkutsk Province 221

2010

2011

2012

2013

2014

2015

2016

50,47

80,22

132,56

151,4

250,27

2018

187,76

Technological chips (since 2017), thousand dense cubic meters

Fuel chips (since 2017), thousand dense cubic meters

146

1649,54 1937,54 1452,78 1791,54

Wood chips (2017), thousand dense cubic meters

1649,77 1939,14

88,8

2017

Chips or wood shavings (2017), thousand dense cubic meters

Fuel chips (2010–2017), thousand dense cubic meters

Technological chips for other industries (2010–2017), thousand dense cubic meters

Technological wood chips for production of pulp and wood pulp (since 826,64 933,64 975,57 964,38 1009,35 1185,74 1530,19 2010–2017), thousand dense cubic meters

Year indicator

Table B.6 Wood chips production in Irkutsk province

222 Appendix B: Wood Products Production in Irkutsk Province

2012

2013

2014

2015

2016

11

Furniture for seating with wooden frame (upholstered), other appliances (since 2010–2017), pcs

93,601

141,528

18

165,874

238,939

81,737

Sets of wooden kitchen sectional (universally assembled) furniture (since 2010–2017), sets

82,660

Kitchen furniture (since 2010–2017), thousand rubles

62,445

51,629

41,192

Wooden furniture for offices, administrative premises, educational institutions, cultural institutions, etc. (without seating furniture) (since 2010–2017), thousand rubles

7873

2719

8699

11,604

620

1160

Metal furniture for offices, administrative offices, educational institutions, cultural institutions, etc. (without seating) (since 2010–2017), thousand roubles

2

915

1370

84

10

1059

294

Seating furniture with wooden frames rigid (not upholstered) for offices, schools, administrative offices (since 2010–2017), pcs

55,184

4

Furniture for sitting with a metal frame soft (upholstered) special for offices, educational institutions, administrative premises (since 2010–2017), pcs

Seating furniture with wooden frame rigid (not upholstered), other appliances (since 2010–2017), pcs

660

Furniture for sitting with a metal frame rigid (not upholstered) household other (since 2010–2017), pcs

427

344,053

22,755

129

20

60

Furniture (since 2010–2017), thousand rubles

2011

2010 574,231 719,985 751,895 881,623 1,092,274 1,048,012 1,006,046

Year indicator

Table B.7 Furniture production in Irkutsk province 2017

(continued)

2018

Appendix B: Wood Products Production in Irkutsk Province 223

337 854

Wooden kitchen furniture sets (since 2010–2017), sets

Other wooden kitchen furniture not included in other groupings (since 2010–2017), pcs

Kitchen furniture made of other materials (since 2010–2017), pcs

885

742

2011

798

3424

2012

1080

2697

2450

2013

2014

3165

2099

237

4450

Furniture made of other materials not included in other groupings (since 2010–2017), thousand roubles

40

1681

Wooden furniture not included in other groupings (since 2010–2017), thousand roubles

18

4233

3

Wooden furniture for dining and living rooms, other (since 2010–2017), pcs

Sets of wooden sectional (universally assembled) furniture for dining and living rooms (since 2010–2017), sets

Sets and sets of complete wooden furniture for dining and living rooms (since 2010–2017), sets

263

2718

41

34

23

7

321,902

1746

Wooden furniture for bedrooms, other not included in groupings (since 2010–2017), pcs

14

632,945

2059

2016 1668

156

15

2015 206

Other wooden bedroom furniture (since 2010–2017), pcs

Other wooden bedroom furniture (since 2010–2017), pcs

Wooden furniture for the bedroom, dining room, and living 417,965 502,145 543,329 627,904 790,012 room (since 2010–2017), thousand roubles

Metal furniture, not included in other groupings (since 2010–2017), thousand rubles

2010 205

Year indicator

Table B.7 (continued) 2017

(continued)

2018

224 Appendix B: Wood Products Production in Irkutsk Province

4466

193,912 227,509 364 2822 1161

Wooden furniture for trade enterprises (since 2017), thousand roubles

Kitchen furniture (since 2017), thousand roubles

Sets of kitchen furniture (since 2017), sets

Services for production of kitchen furniture (since 2017), thousand roubles

Metal furniture, not included in other groupings (since 2017), thousand roubles

Other household metal furniture, not included in other groupings (since 2017), pcs

3138

Other wooden office furniture (since 2017), pcs

(continued)

2

1099

1166

7090

3197

4110

29,889

2496

2018

153,978 120,895

2017

Seating furniture, mainly with wooden frame (since 2017), pcs

269

8300

2016

Wooden furniture for offices (since 2017), thousand roubles

92

2015

3830

266

2014

Seating furniture, mainly with a metal frame (since 2017), pcs

4935

2013

677,481 775,119

134

2012

29,310

2011

Metal furniture for offices (since 2017), thousand roubles

2010

Furniture (since 2017), thousand roubles

Parts of furniture (except seat furniture) made of wood and wood materials for offices, administrative premises, educational institutions, trade enterprises, catering, household furniture (since 2010–2017), thousand roubles

Parts of furniture (except seat furniture) made of metal for offices, administrative premises, educational institutions, trade enterprises, catering, household furniture (since 2010–2017), thousand roubles

Year indicator

Table B.7 (continued)

Appendix B: Wood Products Production in Irkutsk Province 225

2017

2018

10,546

5308

Services for finishing new furniture; services for upholstery of chairs and seating furniture, other furniture production (since 2017), thousand roubles

588 6093

159

Other children’s furniture products not included in other groupings (since 2017), pcs

2658 8

Other wooden furniture, not included in other groupings (since 2017), pcs

1409 42

1569

1282

Wooden furniture for hallways (since 2017), pcs

Sets of children’s wooden furniture (since 2017), sets

37,825

Wooden furniture, not included in other groupings (since 2017), thousand roubles

Children’s wooden furniture (since 2017), pcs

1176

Wooden furniture for dining and living rooms, other (since 2017), thousand roubles

513

Furniture sets and sets of complete wooden furniture for dining and living rooms (since 2017), sets

439

96,233

Wooden furniture for dining and living rooms (since 2017), thousand roubles

84

12

8527

21

2016

Wooden furniture for bedrooms, other (since 2017), pcs

2015

126

2014

Wooden furniture sets, sets of complete bedroom furniture (since 2017), sets

2013

6613

2012

Wooden bedroom furniture (since 2017), pcs

2011

258,640 337,401

2010

Wooden furniture for the bedroom, dining and living rooms (since 2017), thousand roubles

Year indicator

Table B.7 (continued)

226 Appendix B: Wood Products Production in Irkutsk Province

258,07

Round hardwood lumber for sawing and planing (since 2017), thousand dense cubic meters

2654,16 61,16

Round hardwoods for cellylose and wood pulp production (balances) (since 2017), thousand dense cubic meters

Hardwoods for use in round form, other (since 2017), thousand dense cubic meters

14,31

3405,08

3427,24

Hardwood lumber, except for tropical species (since 2017), thousand dense cubic meters

413,84

4 0,72

4244,83

Construction logs and commercial lumber of coniferous breeds (since 2017), thousand dense cubic meters

0,07

Logs of coniferous timber for piles of hydraulic structures and elements of bridges (since 2017), thousand dense cubic meters

10,382,48

18,157,22

21,863,22

2018

Coniferous lumber for cutting to mine pillars (since 2017), thousand dense cubic meters

29,26 4808,61

Round wood lumber of coniferous breeds for sawing and planing (since 2017), thousand dense cubic meters

Round coniferous lumber for the production of cellylose and wood pulp (balances) (since 2017), thousand dense cubic meters

14,684,53

Lumber of coniferous breeds (since 2017), thousand dense cubic meters

Round lumber of coniferous breeds for peeling (since 2017), thousand dense cubic meters

26,712,48 23,070,06

Raw wood (since 2017), thousand dense cubic meters

2017

Year indicator

Table B.8 Lumber consumption in Irkutsk province in years 2017–2018

Appendix B: Wood Products Production in Irkutsk Province 227

Bibliography

1. Dayneko, A., Dayneko, D., Peshkov, V., Matveeva, M.: Development of the regional innovation system in the Forest industry of Irkutsk province based on institutional changes. IOP Conference Series: Earth and Environmental Science 2. McGinnis, M.D.: An Introduction to IAD and the Language of the Ostrom Workshop: A Simple Guide to a Complex Framework for the Analysis of Institutions and their Development. Version 1f. Revised November 1, 2010. http://php.indiana.edu/~mcginnis/iad_guide.pdf. Access 10 November 2021

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 S. V. Zykov and D. V. Dayneko, Forest Industry of Russia, Advances in Sustainability Science and Technology, https://doi.org/10.1007/978-981-16-9861-3

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