BRANCH-WISE AND REGIONAL ECONOMY UDC 332.05 © Prokopyev E.A. Modernization trends of forestry complex in the region (the Karelia Republic’s case) The article is devoted to the issue of the traditional branches’ enhancement. Karelia Republic’s forestry complex is considered as the example of the region’s traditional branch. The comparison of Karelia’s wood industry and Finland’s one is represented. The author chooses labor productivity (the factor of the intensive development) as the key parameter of enhancement. The dynamics of the wood complex’s development in Karelia from 1990 till 2009 is considered. The branch enhancement’s directions are offered according to the revealed tendencies. Modernization, forestry and forest industry, competitiveness, labor productivity Egor A. PROKOPYEV Graduated student of URAS Institute for Economics Karelian Research Center RAS [email protected] The course to the economy’s enhancement, Forestry complex is traditional in the chosen by the country’s administration, has the Karelia’s economy. About 9.7% of all employed overall objective that is to raise the Russian work in the complex’ organizations. Export of enterprises’ competitiveness. This problem the complex’ production prevails in the can be especially observed at the enterprises Republic’s foreign commerce. In 2009 export representing traditional branches. forestry production made 665 million US The urgency of the mentioned problem lies dollars (64% of all export deliveries of the in the contemporary economic conditions such Republic). In the commodity export structure branches’ enterprises loose competitive of timber and its products the greater share advantages such as cheap raw material, was made by raw wood products. In deliveries energy carriers, and qualified labor, therefore newsprint and craft paper prevailed in the the enhancement’s realization becomes the cellulose-and-paper production’s export [1]. necessary requirement for their survival and Forestry complex’ enhancement assumes development. movement to modern highly effective use of At the problems’ solution on the resources, production of qualitative competitive enhancement process’ management it is goods of deep processing. The best samples necessary to take into account a lot of factors of forestry can be found in such countries, influencing it. It is important to realize, that as Canada, the USA, Sweden and Finland. the enhancement’s driving forces can be Traditionally the Karelian forestry complex is represented by various groups of interests. compared to the Finnish one. 78 3 (15) 2011 Economical and social changes: facts, trends, forecast BRANCH-WISE AND REGIONAL ECONOMY E.A. Prokopyev The woods’ structure in Karelia and Finland The main objective of the forestry complex’ is practically similar; the wood reserves are also enhancement is the increase of the complex comparable. The Finnish forestry, as well as the enterprises’ efficiency and competitiveness. Karelian one, is focused on export of the The most simple and informative parameter of production of deep processing with the high an enterprise’s functioning is labor productivity. added cost. In the majority of branches from In labor productivity the Karelian enterprises 70 to 90% of production are exported [9]. lag behind the Finnish ones on processing wood In 2008 in Finland the cost of the exported products in 9.9 times (fig. 1), on producing forestry products 19.4 times exceeded the cellulose, wood-pulp, paper, cardboard and similar Karelian parameter ($16.4 billion and products made of them in 8.1 times (fig. 2). $849 million accordingly), in 2009 this ratio Before the market transformations in 1990s made 18.2 times ($12.1 billion and $665 million only 10 % of the round timber were delivered accordingly) [1, 8]. for export, the rest amount of it was processed Figure 1. Annual labor productivity of a woodworker, in dollars 400000 350000 331497 307144 300000 266182 250000 200000 150000 100000 33921 50000 25595 31068 0 2006 2007 2008 Finland Karelia Republic Figure 2. Annual labor productivity of a woodworker producing cellulose, wood- pulp, paper, cardboard and products made of them, in dollars 900000 777388 800000 718229 700000 588211 600000 500000 400000 300000 200000 95829 64033 80311 100000 0 2006 2007 2008 Finland Karelia Republic Economical and social changes: facts, trends, forecast 3 (15) 2011 79 Modernization trends of forestry complex in the region (the Karelia Republic’s case) at the woodworking and the pulp-and-paper At the period from 1990 till 1998 the mills in the Republic and the country. Republic’s wood processing enterprises At the end 1990s almost 70% of the provided experienced the significant recession caused wood in the Republic began to be delivered for by a number of reasons. At the majority of export as raw material, from its general volume enterprises the out-of-date equipment did (97%) to Finland, that resulted in dissociation not allow to release qualitative production of the complex – the “raw” enterprises were required by the market as it resulted in the reoriented to export, and the processing ones over-expenditure of raw material which cost – to cheaper raw material from the neighbor considerably increased in Karelia. In the regions. As a result the dynamics of the result the local enterprises faced the wood branches’ development of the Karelian forestry shortage as they could not pay for wood raw complex essentially differed. material as much as the Finnish ones did. The The requirements to the quality of the efficiency of investments into wood processing wood, provided by the Republic, from the part in comparison with raw materials’ export was of the Finnish enterprises, high speed of the much lower. capital turnover in logging have resulted The period of reforms revealed a low in its enhancement, the transition to the management level at the Karelian enterprises, sorting technology of wood production which inability to operate in the changing conditions means lumbering complex’ use (harvester and which were used by unconscientious partners. forwarder as one). One lumbering complex is In 1992, for instance, Ilyinsky timber enterprise capable to operate instead of some brigades lost its production for the sum of 600 000 dollars of woodcutters with a skidder. Nowadays because of the frauds of the foreign partner in Karelia, by experts’ estimations, to 90% from France. At the same time, a number of of wood are provided according to sorting enterprises becoming public corporations were technologies. As a result of transition to the redeemed from the workers by speculators, sorting wood providing the labor productivity specially bankrupted and resold. The decline of at logging in Karelia did not reduce in 1990s the work productivity during this period of time and has abruptly increased in 2000s, by 2009 it was also caused by the fact that the enterprises increased more than in 3 times in comparison did not reduce their staffs, hoping to return to with 1990s (fig. 3). the former political system. Figure 3. Dynamics of the labor productivity at Karelia Republic’s loggings, in % to 1990 400 357 316 350 301 300 243 250 219 218 200 162 139 123 131 127 150 113 110 111 117 107 107 105 97 100 50 1990 1993 1996 1999 2002 2005 2008 80 3 (15) 2011 Economical and social changes: facts, trends, forecast BRANCH-WISE AND REGIONAL ECONOMY E.A. Prokopyev Figure 4. Dynamics of the labor productivity at the wood processing enterprises in Karelia Republic, in % to 1990 110 97 100 91 90 86 85 87 90 80 79 74 77 80 70 59 62 62 60 51 48 46 50 40 40 40 33 30 20 1990 1993 1996 1999 2002 2005 2008 By virtue of these and other reasons the Since 2003 in Karelia in the sphere of Karelian enterprises could not find means for forestry complex the role of competition in enhancement, and by 1997 the labor development is growing. New wood processing productivity had fallen in 3 times (fig. 4). enterprises are created, that in the certain It is revealed, that the increase in the degree caused the enhancement of the old production volumes from 1998 till 2000 is ones. Due to the financial stability (2003 – connected to the ruble devaluation which made 2006) the enterprises used credits and leasing Karelia Republic’s woodworking profitable for circuits, the branch became more attractive some time, and from rather expensive Karelian for investments. raw material due to the modern technologies Till 2006 in Karelia a big Russian investor, it became possible to produce competitive holding “InvestLesProm” appeared. The production. It is also revealed, that the dynamics of the labor productivity was influenced by frontier position also assisted to the occurrence several factors. First, the increase in the labor of enterprises with foreign participation productivity basically took place due to loading “SvedWood-Karelia”, “SetLes”) with the unused capacities. Second, the growth of the high work efficiency. At the same period in labor productivity was connected to the new the Republic a new direction of activity – bio- equipment’s and technologies’ occurrence: energetics – appeared. Public Corporation highly-efficient lines on manufacturing “Karelia Profile” (Petrozavodsk) and Closed straughan-molded products; less power- Joint-Stock Company “North Inter House” intensive drying chambers; the processing (Lahdenpohya municipal area) set the centers on manufacturing windows and other equipment for manufacturing fuel granules equipment (at the enterprises in Petrozavodsk (pellets) from waste products of lumbering and Segezha); and the technologies on and fuel chips accordingly. Public Corporation manufacturing laminated panels. Thirdly, the “BioGran” bought a pellet factory in Finland role of the factor constraining the growth of and transferred it to Petrozavodsk. Despite the labor productivity is played by the artificial restriction of competition, as from 1998 to 2002 of the new enterprises’ occurrence and the republican authority did not let outside the enhancement of the old ones the labor investors into the wood branch.