Schweizerische Eidgenossenschaft Confédération suisse Confederazione Svizzera Confederaziun svizra

Swiss Agency for Development and Cooperation SDC

Market analysis of the wood Industry in Pcinja and Jablanica District Contents  ,QWURGXFWLRQ  3URMHFW2YHUYLHZ  0DUNHW$SSURDFK  3URMHFWIRFXV  (QGPDUNHWVIRUWKHZRRGSURFHVVLQJLQGXVWU\WUHQGVDQGUHTXLUHPHQWV  0DLQSURGXFWVDQGGHVWLQDWLRQPDUNHWV  ([SRUWWUHQGV  &RPSHWLWLRQDQGFRPSDUDWLYHDGYDQWDJH  0DUNHWUHTXLUHPHQWVDQGGHPDQGFRQGLWLRQV  &RQFOXVLRQ.H\GHWHUPLQDQWVRIFRPSHWLWLYHQHVVIRUWKHLQGXVWU\  7KHZRRGLQGXVWU\LQ3FLQMDDQG-DEODQLFDGLVWULFWVWUXFWXUHSHUIRUPDQFHDQGNH\FKDOOHQJHV  %DVLFYDOXHFKDLQIXQFWLRQV±VWUXFWXUHRIZRRGLQGXVWU\  0DLQPDUNHWFKDQQHOV  3OD\HUVDQGUHODWLRQVKLSVDORQJWKHYDOXHFKDLQ  9DOXHFKDLQVXSSRUWHUVDQGWKHLUSHUIRUPDQFH  5XOHVDQGUHJXODWLRQV  .H\FKDOOHQJHVRIWKHZRRGLQGXVWU\ V\PSWRPVRIXQGHUSHUIRUPDQFH   8QGHUO\LQJFDXVHVIRUSRRUSHUIRUPDQFH  /RFDOGHVLJQFDSDFLWLHV±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ntroduction:

1.1 Project Overview 7KHSURMHFWDLPVDWLPSURYLQJHPSOR\PHQWDQGLQFRPH RSSRUWXQLWLHV LQ WKH 3FLQMD DQG -DEODQLFD UHJLRQ RI 3URMHFW "Private Sector Development in the South 6RXWK 6HUELD E\ VWLPXODWLQJ DQG IDFLOLWDWLQJ V\VWHPLF Serbia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

µ0DNLQJ0DUNHWV:RUNIRUWKH3RRU 03 DSSURDFK)RUIXUWKHUUHDGLQJSOHDVHUHIHUWRWKHNH\GRFXPHQWVSXEOLVKHGE\6'&DQG '),'D6\QWKHVLV2SHUDWLRQDO*XLGHDQG3HUVSHFWLYHV¶±DOODYDLODEOHIURPZZZVSULQJILHOGFHQWUHFRP´ 7KHLQFHSWLRQSKDVHVWDUWHGDQGHQG$IWHUWKLVWKHSURMHFWZLOOHQWHULQWRD\HDUVLPSOHPHQWDWLRQSKDVH

0DUNHWDQDO\VLVRIWKHZRRGLQGXVWU\LQ3FLQMDDQG-DEODQLFD'LVWULFW - 1 - 1.2 Market Approach 7KHPSD project uses a market development approach NQRZQDVWKH³0DNLQJ0DUNHWV:RUNIRUWKH3RRU 03 ´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a set of common principlesGHILQHGEHORZ  Inclusive growth (and access):&UHDWLQJDQHQYLURQPHQWLQZKLFKSHRSOH HVSHFLDOO\WKHSRRU60(V\RXWKDQG ZRPHQ DUHDEOHWRDFFHVVDQGWDNHDGYDQWDJHRIVRXUFHVRIJURZWKDQGRSSRUWXQLWLHVWRLPSURYHWKHLUHFRQRPLF DQGVRFLDO FLUFXPVWDQFHV

 Systemic action:8QGHUVWDQGLQJWKHGLVDGYDQWDJHGSRVLWLRQRIWKHWDUJHWJURXSVWREHWKHUHVXOWRIFULWLFDOIDLOLQJV LQKRZ PDUNHW V\VWHPVIXQFWLRQDQGDFWLQJWRFRUUHFWVXFKIDLOLQJV7KLVUHTXLUHVWKHSURMHFWWRGHYHORSDQXQGHU VWDQGLQJ RI IXQFWLRQV DQG SOD\HUV ZLWKLQ PDUNHW V\VWHPV DQGKRZ  WKHVH FDQ EHV WUHQJWKHQHG LQ RUGHU WR EHWWHU VHUYHWKHQHHGVRIWKHSRRU

 Sustainability:(QVXULQJWKDWWKHPDUNHWSOD\HUVQHHGHGWRVXSSO\UHOHYDQWJRRGVDQGVHUYLFHVRQDUHFXUUHQWED VLVKDYHWKHLQFHQWLYHVDQGFDSDFLWLHVWRGRVR7KHIRFXVRQV\VWHPLFFKDQJHDOVRPHDQVWKDWLQWHUYHQWLRQVDG GUHVVWKHXQGHUO\LQJFDXVHVRIXQGHUSHUIRUPDQFHUDWKHUWKDQPHUHO\WKHLUV\PSWRPV±KHQFHDFKLHYLQJJUHDWHU VXVWDLQDELOLW\

 Impact at scale:$LPLQJWRDIIHFWFKDQJHUHOHYDQWWRODUJHQXPEHUVRISHRSOHIRUH[DPSOHDFURVVDZKROHVHFWRU UDWKHUWKDQDFURVVMXVWRQHYLOODJHRUDIHZLQGLYLGXDOHQWHUSULVHV7KHSURMHFWWKHUHIRUHSXUVXHVDQDFWLYHVWUDWHJ\ RIFURZGLQJLQPDUNHWSOD\HUVHQVXULQJWKDWFKDQJHJRHVEH\RQGLPPHGLDWHLQWHUYHQWLRQSDUWQHUV

 Facilitation: 'HWHUPLQLQJ D WHPSRUDU\ FDWDO\WLF UROH IRU WKH 36' SURMHFW ZKLFK VWLPXODWHV PDUNHW SOD\HUV WKHP VHOYHVWRDGRSWDQGSHUIRUPIXQFWLRQVQHFHVVDU\IRUWKHFRQWLQXHGVXFFHVVIXORSHUDWLRQRIWKHLUPDUNHWV\VWHP UDWKHUWKDQEHFRPHDPDUNHWSOD\HURQHVHOI

- 2 - 0DUNHWDQDO\VLVRIWKHZRRGLQGXVWU\LQ3FLQMDDQG-DEODQLFD'LVWULFW 7KHFRPSOHWHLQWHUYHQWLRQSURFHVVRIWKH36'SURMHFWLQ 6XEVHTXHQWO\ WKH SURMHFW FRQGXFWHG DQ in-depth value WKH ZRRG SURFHVVLQJ LQGXVWU\ LV LOOXVWUDWHG LQ )LJXUH  chain analysis of the wood processing industry OHYHO EHORZ$FFRUGLQJWRWKLVWKHSURMHFWVWDUWHGZLWKD³FRQ LQWKHILJXUH WRXQGHUVWDQGWKHVWUXFWXUHDQGG\QDP WH[WDQDO\VLV´LQ$SULOZKLFKZDVDLPHGDWGHYHORS LFVRIWKHLQGXVWU\DVZHOODVWKHFRQVWUDLQWVWKDWXQGHU LQJ DEHW WHU XQGHUVWDQGLQJ RI WKH WDUJHW JURXS XQHP PLQHLWVRYHUDOOFRPSHWLWLYHQHVVDQGPRUHLQWHQVLYHDQG SOR\HGSRRU\RXWKZRPHQDQG60(V DQGWKHLUVRFLR LQFOXVLYHJURZWKLQLQFRPHDQGHPSOR\PHQW$VDUHVXOW HFRQRPLF FRQWH[W $V DU HVXOW RI WKLV the project se- WKHSURMHFWLGHQWLILHGsome key intervention areas VHH lected three markets for further intervention: wood &KDSWHU WKDWZLOOIRUPWKHSURMHFW¶VPDLQIRFXVRYHUWKH processing, forest plants and tourism FRPLQJWKUHH\HDUV

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  Level 1: Understand the profile of the target group and their wider context – including Symptoms The poor and their context overall economic opportunities and key drivers of change

Specific market system(s) Level 2: Map out the specific market sys- tem, its dynamics and the position of the target group – specifically how the market is failing to serve them currently

Level 3: Identify specific systemic con- Systemic straints – the underlying causes of underper- constraints formance and opportunities and obstacles for achieving change Caus-

Focus of inter- vention(s)

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0DUNHWDQDO\VLVRIWKHZRRGLQGXVWU\LQ3FLQMDDQG-DEODQLFD'LVWULFW - 3 - Market system focus: LWVIRFXVLVRQGHYHORSLQJPDUNHWV\VWHPVDVVHVVHGZLWKUHVSHFWWRGLIIHUHQWPDUNHWIXQFWLRQVDQG SOD\HUVSXEOLFDQGSULYDWHIRUPDODQGLQIRUPDO7KLVV\VWHPLFFKDUDFWHURI03GHILQHVPDQ\RILWVPRVWLPSRUWDQWIHD WXUHV,WVYLHZRIDPDUNHWV\VWHP )LJXUH HPSKDVL]HVWKHLUPXOWLIXQFWLRQPXOWLSOD\HUQDWXUH±LQSDUWLFXODUWKHWKUHH PDLQVHWVRIIXQFWLRQVWKDWPDNHXSWKHPDUNHWV\VWHP 7KHcore functionEHWZHHQSURYLGHUDQGFRQVXPHU RUWKHVHULHVRISOD\HUVLQWKHIORZRIYDOXHDGGHGLQDYDOXH FKDLQ  7KHIRUPDODQGLQIRUPDOrulesLPSLQJLQJVKDSLQJEHKDYLRUDQG 7KHLQIRUPDWLRQVHUYLFHVDQGRWKHU functionsVXSSRUWLQJH[FKDQJH )LJXUH6W\OL]HGYLHZRIWKHPDUNHWV\VWHP

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- 4 - 0DUNHWDQDO\VLVRIWKHZRRGLQGXVWU\LQ3FLQMDDQG-DEODQLFD'LVWULFW 1.3 Project focus The PSD project focuses on five municipalities: 3UHVHYR %MDQRYDF 7UJRYLVWH 9UDQMH DQG /HVNRYDF 9UDQMH DQG /HVNRYDFDUHUHFHQWO\FDWHJRULVHGDVFLWLHV DUHUHSUHVHQWDWLYHIRUWKHHFRQRPLFVWUXFWXUHRI6RXWK6HUELD7KHUHDVRQ IRU6'&WRVWDUWDQHZSURMHFWLQ6RXWK6HUELDLVUHODWHGWRWKHSRRUHFRQRPLFSHUIRUPDQFH WKHUHJLRQ¶V*'3DYHUDJHG RQO\RIWKHUHSXEOLFDQGJUHZRQO\E\SHU FHQWEHWZHHQDQG  ORZLQFRPHOHYHOV DYHUDJHVDODULHVLQ 3FLQMDGLVWULFWDQG-DEODQLFDGLVWULFWDUHDSSUR[LPDWHO\EHORZUHSXEOLF $QGKLJKXQHPSOR\PHQWUDWHV -DEODQLFDGLV WULFWDQG3FLQMDGLVWULFWLQ-XO\0RVWRIWKHXQHPSOR\HGLQWKHUHJLRQDUHZRPHQLQ-DEODQLFDGLVWULFW DQGLQ3FLQMDGLVWULFWDQG\RXQJSHRSOHLQ-DEODQLFDGLVWULFWDQGLQ3FLQMDGLVWULFW 

Although the PSD project focuses mainly on the above mentioned five municipalities, the market development approach that underlies the project rationale puts a strong emphasis on achieving impact beyond direct part- ners and beneficiaries – ie pursues an active strategy of crowding-in other players. Furthermore, intervention partners might include lead firms or other regional/national public and private players that are not only impor- tant change agents for the five municipalities, but whose influence goes beyond district boundaries. The project outreach is therefore expected to go beyond the five municipalities.

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- 6 - 0DUNHWDQDO\VLVRIWKHZRRGLQGXVWU\LQ3FLQMDDQG-DEODQLFD'LVWULFW Processing industry   HVSHFLDOO\WKHRQHEDVHGRQZRRGIRUHVWSODQWVDQGKHUEV agriculture  DQGservic- es  QRZKDVWKHELJJHVWFRQWULEXWLRQLQQDWLRQDOLQFRPH &KDUW5HJLVWHUHGDQGRSHUDWLRQDODFWLYLWLHVE\W\SH

The most important sectors in Pcinja and 20% Jablanica district include wood 49% processing ( number of employees ap- proximately 10000-12000), leather indus- try ( number of employees approximately 800), milk and meat production ( number of employees approximately 10000), tex- tile industry (number of employees ap- proximately 3500), and forest plants (number of employees approximately 5000). Tourism (number of employees Agriculture approximately 3000) is seen to be a ser- 31% Services vice sector with good growth potential: natural environment, hot water springs, Procesing industry  cultural and historic sites, as well as the 6RXUFH+(/3+LOIH]XU6HOEVWKLOIHH95HSXEOLFRI6HUELD0LVLRQ fact that the two districts are located along the main transit route to Macedonia and Southern Balkan countries provide good preconditions for tourism.

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0DUNHWDQDO\VLVRIWKHZRRGLQGXVWU\LQ3FLQMDDQG-DEODQLFD'LVWULFW - 7 - The wood processing industry has been chosen by the PSD project as the immediate focus for development in- terventions for the following reasons:

 large number of different wood processing enterprises - EHFDXVHLWKDYHVLJQLILFDQWDEVRUSWLRQDELOLW\IRURXU WDUJHWJURXSVDQGZLGHULQIOXHQFHRQLQWHUFRQQHFWHGPDUNHWV

 possibility to increased production and export – WKURXJKLQWHUYLHZVZLWKHQWUHSUHQHXUVWKH\VWURQJO\SRLQWXV WKDWWKHUHDUHDQXPEHURILQTXLULHVIURP:HVWHUQPDUNHWVWRZKLFKWKH\DUHXQDEOHWRUHVSRQGGXHWRORZSURGXF WLRQFDSDFLW\ODFNRIVWDQGDUGVDQGTXDOLW\

 good ground for raw material±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

 good geographic position – ,W VORFDWHGRQWKH6RXWKRI6HUELDFORVHWRERUGHUZLWK%XOJDULDDQG0DFHGRQLD 7KHUHDUHYHU\LPSRUWDQWLQWHUQDWLRQDOFRPPXQLFDWLRQURXWHVKLJKZD\(FRQQHFWLQJWKLVUHJLRQZLWK0DFHGRQLD DQGDOVRFHQWUDO(XURSHZLWK%DONDQUDLOZD\%XGDSHVW%HOJUDGH6NRSMH$WKHQV

- 8 - 0DUNHWDQDO\VLVRIWKHZRRGLQGXVWU\LQ3FLQMDDQG-DEODQLFD'LVWULFW 1) Relevance

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District Total 15-34 35-54 54+

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Pcinja         District

Jablanica         District

6RXUFH1DWLRQDO(PSOR\PHQW6HUYLFH  At the end of 2009 in Pcinja district was 239 companies registered in wood industry and 281 in Jabla- nica district. The number of registered companies increase from year to year, especially since 2005, ( Chart 3) thanks to state measures that stimulate the creation of new businesses and thus new jobs (over National Employment service grants, start up loans, the various programs of the National Agency for Regional Development...)

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300

250

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150 Pcinja district Jablanica 100

50

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2) Growth potential

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3) Intervention potential

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- 26 - 0DUNHWDQDO\VLVRIWKHZRRGLQGXVWU\LQ3FLQMDDQG-DEODQLFD'LVWULFW 3.6 Key challenges of the wood industry (symptoms of underperformance)

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0DUNHWDQDO\VLVRIWKHZRRGLQGXVWU\LQ3FLQMDDQG-DEODQLFD'LVWULFW - 27 - 4. Underlying causes for poor performance

7KHprevious chapterPDSSHGRXWWKHVWUXFWXUHDQGDQDO\VHGWKHSHUIRUPDQFHRIWKHZRRGLQGXVWU\7KHFKDSWHUFRQ FOXGHGZLWKNH\FKDOOHQJHVWKDWXQGHUPLQHWKHLQGXVWU\¶VORQJWHUPFRPSHWLWLYHQHVVDQGWKHFUHDWLRQRILQFRPHDQGHP SOR\PHQWRSSRUWXQLWLHVLQWKHUHJLRQ7KHVHFRQVWUDLQWVZHUHPDLQO\UHODWHGWRWKHLQGXVWU\¶VDELOLW\WRPHHWLQWHUQDWLRQDO PDUNHWUHTXLUHPHQWVDQGGHPDQGFRQGLWLRQV This chapterORRNVDWVRPHRIWKHVHFKDOOHQJHVPRUHFORVHO\DQGDWWHPSWVWRXQGHUVWDQGWKHUHDVRQVWKDWOHDGWRWKH SRRUSHUIRUPDQFHRIZRRGLQGXVWU\LQ3FLQMDDQG-DEODQLFDGLVWULFWV,WWKXVVHHNVWRGLVWLQJXLVKPHUHV\PSWRPVRIXQGHU SHUIRUPDQFHIURPWKHLUURRWFDXVHVLQWKHZLGHUPDUNHWV\VWHP 4.1 Local design capacities – in this section we meet with following weaknesses: x Lack of new designEX\HUVDUHWXUQLQJLQFUHDVLQJO\WRSURGXFHUVWKDWDUHDEOHWRSURYLGHPRGHUQFRQWHPSRUDU\ GHVLJQVLISURGXFHUVGRQRWLPSURYHGHVLJQWKHQPDUNHWDFFHVVWRKLJKHUYDOXHPDUNHWVZLOOEHGLIILFXOW'XHWRWKH ODFNRIDSSOLFDWLRQE\WKHPDQXIDFWXUHUDQGDQLQVXIILFLHQWQXPEHURIWUDLQHGGHVLJQHUVLQWKHILHOG7KHUHDUHD QXPEHURIDUFKLWHFWVZRUNLQJLQWKLVILHOGEXWGRQRWIROORZWUHQGVDQGPDUNHWLQIRUPDWLRQIURPWKHZRRGLQGXVWU\ 2QHRIWKHUHDVRQLVWKDWWKHUHLVQRSURWHFWLRQIRUQHZSURGXFWV x Lack of appropriate knowledge and skills WKHUHVXOWRILQDGHTXDWHHGXFDWLRQDOV\VWHPWKDWGRHVQRWIROORZWKH QHHGVDQGWUHQGVLQZRRGLQGXVWU\HVSHFLDOO\IRUWKHGHVLJQVHFWRUDOVRWKHODFNRIDGHTXDWHWUDLQLQJFHQWHUVHV SHFLDOO\IRUGHVLJQLQZRRGLQGXVWU\ x Lack of good research ±LWDSSHDUVIURPGLIIHUHQWFRQQHFWHGUHDVRQVWKHODFNRIMRLQWDFWLRQRIWKHSURGXFHUWKH ODFNRILQIRUPDWLRQWKHPRGHVWUROHRIFKDPEHUVRIFRPPHUFHDQGQRQH[LVWLQJRIWUDLQLQJFHQWHUVDQGVHUYLFHSUR YLGHUVODFNRIXQGHUVWDQGLQJRIWKHLQGXVWU\QHHGVWKHODFNRIDFRQVWUXFWLYHDSSURDFK x Comfortable safe zone0DQXIDFWXUHUVDUHJHQHUDOO\VDWLVILHGZLWKWKHLUFXUUHQWVLWXDWLRQDQGGRQWKDYHSODQVIRU IXUWKHUSURJUHVVDQGQHZLQYHVWPHQWV7KHUHDVRQLVWKDWWKHUHLVDUHDOSRVVLELOLW\WKDWVRPHRQHHOVHFRS\WKHLU SURGXFWV7KLVIHDULVMXVWLILHGEHFDXVHWKHUHLVQRODZWRSURWHFWQHZSURGXFWV 

- 28 - 0DUNHWDQDO\VLVRIWKHZRRGLQGXVWU\LQ3FLQMDDQG-DEODQLFD'LVWULFW 4.2 Specialisation and joint ventures to improve quantity and quality - in this section we meet with following weaknesses: x Old technology  WKH SURGXFWLRQ SURFHVVHV DUH UHSUHVHQWHG YHU\ RXWGDWHG PDFKLQHV ZKLFK KDYH OLPLWHG SURGXFWLYLW\DQGUHGXFHGDFFXUDF\RIZRUN,QWURGXFWLRQRIQHZPDFKLQHVLVOLPLWHGPRVWO\EHFDXVHRIKLJKFRVWVRI PDFKLQHVHVSHVVXDO\LIHYHU\SURGXFHUZDQWWRKDYHVHSDUDWHPDFKLQHDQGLQVXIILFLHQWWUDLQLQJWRZRUNRQQHZ PDFKLQHV x The organization of the production processSRRURUJDQL]DWLRQRIWKHSURGXFWLRQSURFHVVLVFORVHO\DVVRFLDWHG ZLWKVSHFLDOL]DWLRQRIWKHSURGXFWLRQSURFHVVUDWKHUWKDQSURGXFHUVGRMXVWZKDWWKH\DUHVSHFLDOL]HGDQGKD YH VXIILFLHQW H[SHULHQFH WKH\ DUH GRLQJ DOO NLQGV RI MREV LW RFFXUV GXHW R DO DFN RI FRQILGHQFH DQGSU HYHQWLQJ FRPSHWLWRUVWRWDNHPDUNHWDQGDOVRGXHWRODFNRIFRRSHUDWLRQEHWZHHQPDQXIDFWXUHULQWKHILHOGDQGOHDYLQJRQH SDUWRIDEXVLQHVVWRLWVFRPSHWLWRUVLQRUGHUWRDFKLHYHJUHDWHUSURILWV7KHUHLVDSUREOHPDURXQGWKHFRQGXFWRI EXVLQHVV DQG WKHUHIRUH WKH SURGXFWLRQ SURFHVV EHFDXVH LW PDLQO\ FRPHV GRZQ WR D PDQDJHU ZKR KDV OLPLWHG PDQDJHULDOFDSDFLW\EHFDXVHDRQHPDQLVXQDEOHWRKROGDOOWKHVWULQJVLQKLVKDQGVDQGDOVRLVQRWSRVVLEOHHYHQ LIKHLVHTXDO\JRRGLQDOODUHDVRIEXVLQHVV x Standardization of wood products±QRQVWDQGDUGL]HGSURGXFWLRQSURFHVVHVDQGILQDOSURGXFWVWKHPVHOYHV2XU PDQXIDFWXUHUVPXVWEHDZDUHRIDOOWKHVWDQGDUGVQHFHVVDU\IRUWKHLPSURYHPHQWRISURGXFWLRQVXFKDVVWDQGDUGV IRUZRRGTXDOLW\DQGWKHHQYLURQPHQWDOVRWKHUHLVDODFNRIJRRGSUDFWLFHDQGUHIRUHVWDWLRQRIQHZRUFKDUGVUHJX ODWLRQVWKHPVHOYHVIRUWKLVUHDVRQPDQXIDFWXUHUVIURPWKHVHUHJLRQRIWHQSURYLGHVXSSOLHUVZLWKQRUHTXLUHPHQWV IRUWKHVHVWDQGDUGVWKHUHLVDOVRDSUREOHPLQWKHDEVHQFHRIFRQVXOWDQWVZKRDUHLQWHUHVWHGLQWKLVDUHDRUKDVQR ULJKWVROXWLRQRUQRWLQWHUHVWHGLQ x Disconect between R+D and wood industry7KHUHLVDODFNRIFRRSHUDWLRQEHWZHHQWKHSURGXFHUVDQGDOVRD ODFNRILQWHUHVWLQWKHFRPPRQPDUNHWLQRUGHUWRDFKLHYHEHWWHUSHUIRUPDQFHDQGPRUHVHULRXVZLWKWKHSRVVLELOLW\ RIPHHWLQJWKHJURZLQJQHHGVRIDVSHFLILFPDUNHW

0DUNHWDQDO\VLVRIWKHZRRGLQGXVWU\LQ3FLQMDDQG-DEODQLFD'LVWULFW - 29 - 4.3 Skills - in this section we meet with following weaknesses: x Waste at workWKLVW\SHRIFRVWRFFXUVGXHWRLPSURSHUKDQGOLQJRIUDZPDWHULDOVLQVWRUDJH x Lack of certain skillsGXHWRWKHODFNRISUDFWLFDOZRUNDQGYRFDWLRQDOWUDLQLQJIRUVSHFLILFVNLOOVXQSURIHVVLRQDO KDQGOLQJRIUDZPDWHULDOV x Price of raw materials and the risk of supply  D SUREOHP ZLWK VXSSO\ LV OLQNHG WR OLPLWHG RSSRUWXQLWLHV IRU ZRRGFXWWHUVWRVXSSO\WKHPDUNHWZLWKVXIILFLHQWTXDQWLWLHVRIWLPEHU,QDGGLWLRQWKHUHDUHJRYHUQPHQWOLPLWDWLRQRI FXWVZKLFKFDQEHLQVXIILFLHQW7KHSUREOHPLVWKDWWKLVLVDVHDVRQDOEXVLQHVVDQGLQZLQWHUWKHUHLVWKHSRVVLELOLW\ RIUHGXFHGVXSSO\LQWKHPDUNHWDQGLQFUHDVHSULFHVRIZRRG 4.4 Forest management and certification - in this section we meet with following weaknesses: x Reforestation PXVWEHFRRUGLQDWHGEHWZHHQWKHZRRGLQGXVWU\DQG³6UELMDVXPH´ZLWKWKHKHOSRIWKH)DFXOW\RI )RUHVWU\)RUHVWU\,QVWLWXWHIRUGHWHUPLQLQJSODQWLQJRIFHUWDLQWUHHVSHFLHVDOVRDSSHDUVUHODWHGWRDODFNRIRUJDQ L]DWLRQLQUHIRUHVWDWLRQ 4.5 Waste management and recycling - in this section we meet with following weaknesses: x Costs –,QVXILFLHQWH[SORWDWLRQRIUDZPDWHULDOFUHDWHVDKLJKSURGXFWLRQFRVWV%HWWHUSURGXFWLRQPDQDJHPHQWFDQ FRQWULEXWHWRVDYLQJPDWHULDO 4.6 Administration - in this section we meet with following weaknesses: x Large administrative requirements$ODUJHQXPEHURIUHTXLUHGSHUPLVVLRQVZKLFKSURGXFHPRUHFRVWVIRUFDU U\LQJRXWDQ\ZRUNLVWKHEDVLFSUREOHPDOVRWKHSURFHGXUHWRJHWWKHSHUPLVVLRQVUHSUHVHQWVWKHRQHRIWKHSURE OHPZKLFKOHDGVWRODFNRIWUDQVSDUHQF\DQGDSSOLFDWLRQSUREOHPV7KHUHLVWRRPDQ\VXEFRQWUDFWVWRZRRGFXWWHUV ZKLFKWKH\FDQQRWPHHW

- 30 - 0DUNHWDQDO\VLVRIWKHZRRGLQGXVWU\LQ3FLQMDDQG-DEODQLFD'LVWULFW 5. Intervention areas and strategies

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- 34 - 0DUNHWDQDO\VLVRIWKHZRRGLQGXVWU\LQ3FLQMDDQG-DEODQLFD'LVWULFW 5.5 Improving the training system for better skills $UHZHDEOHWRIRUPDQRIIHU" :KHQZHGHILQHWKHPDUNHWTXDOLW\DQGTXDQWLW\WKHQH[WTXHVWLRQWKDWPXVWEHDQVZHUHGLVZKDWRXUFDSDFLWLHVLQWHUPV RILQSXWVDUH7KHUHLVDJRRGUDZPDWHULDOEDVHLVDOVRIXQGLQJWKHEDVLFIXQFWLRQVRIWKHPDUNHWDVSRVVLEOH:KDWDERXW KXPDQUHVRXUFHV" 7KHUHLVDQLQLWLDOPDVVRINQRZOHGJHWKDWLVPDLQO\GHULYHGIURPWKHSUHYLRXVV\VWHPRIEXVLQHVV,QWKHEHJLQQLQJLWZDV WKHIRUFHWKDWSXOOVWKHVHFWRUIRUZDUGEXWLIZHZDQW:RRGSURFHVVLQJLQGXVWU\LQYROYHGLQJOREDOFRPSHWLWLRQLWLVQHFHV VDU\WRLPSURYHDZLGHUDQJHRIKXPDQUHVRXUFHVDQGWUDLQLQJV\VWHP ,QWKLVUHJDUGLWLVQHFHVVDU\WRSURPRWHDEURDGUDQJHRINQRZOHGJHDQGVNLOOVUDQJLQJIURPPDQDJHULDOVNLOOVUHODWHGWR VWDQGDUGVUHVHDUFKDQGGHYHORSPHQWVSHFLDOL]DWLRQIRUFHUWDLQPDQXIDFWXULQJSURFHVVHVNQRZOHGJHFRPPXQLFDWLRQHWF $OVRLWLVQHFHVVDU\WRXSJUDGHWKHFDSDFLW\RILQVWLWXWLRQVVXFKDVWKH1(6LQWHUPVRIFRRSHUDWLRQZLWKWKHSULYDWHVHFWRU DQG WDUJHWJURXSV 1DPHO\ LW LV QHFHVVDU\ WR GHILQH WKH UHDOUHTXLUHPHQWV RIWKH HFRQRP\ FRPSDUHG ZLWK WKH H[LVWLQJ VXSSO\RISHUVRQQHO:HDOVRUHTXLUHDFORVHUFRRSHUDWLRQZLWKWDUJHWJURXSVDQGGHWHUPLQHWKHLULQWHQWLRQVDQGFDSDELOL WLHV)RUQRZZRUNLQJZLWKWDUJHWJURXSVPRVWO\ERLOHGGRZQWRILQGLQJDZD\WRJHWSHRSOHRIIWKHUHFRUGDQGPDNHUDQG WHPSRUDU\ZLWKQRUHDOFKDQFHVWRILQGDODVWLQJDQGVXVWDLQDEOHVROXWLRQIRUWKHP7KHUHIRUHZHUHFRPPHQGWKHIRUPD WLRQRILQWHUDFWLYHDQGLQFOXVLYHV\VWHPVWRLPSURYHVNLOOVLQDOOILHOGVRILQWHUYHQWLRQ

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- 36 - 0DUNHWDQDO\VLVRIWKHZRRGLQGXVWU\LQ3FLQMDDQG-DEODQLFD'LVWULFW 5.7 Gender equality and inclusion )DFLOLWDWLRQRQWKHUHJLRQDODQGQDWLRQDOOHYHOVVKRXOGSURYLGHDEHWWHUFOLPDWHIRUWKHLQYROYHPHQWRIPRVWH[FOXGHGWDUJHW JURXSVGHILQHGLQ36'SURMHFWwomen and youth

We must not forget the fact, that the main objective of the project is: “Increasing employment and income for target groups that are outside the system, but not by their own will.”

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0DUNHWDQDO\VLVRIWKHZRRGLQGXVWU\LQ3FLQMDDQG-DEODQLFD'LVWULFW - 37 - ,QGHILQLQJWKHWDUJHWJURXSVGXULQJWKHFRQWH[WDQDO\VLVFRQGXFWHGE\WKH36'WHDP ZHKDYHHPSKDVL]HGWKDWWKHGHYHORSPHQWRIWKHZRRGSURFHVVLQJLQGXVWU\PDUNHW Considering all demands V\VWHPLVXQVXVWDLQDEOHRQWKHORQJUXQZLWKRXWWKHFRPPLWPHQWRIQDWXUDODOOLHVDW for the wood processing DOOOHYHOV market improvement, in- terpreted in the interven- )LJXUH*URXSVXQFRYHUHGE\WKHV\VWHP FRQWH[WDQDO\VLV,36'WHDP  tion areas, we have 0XWXDOWDEOHRIZHOIDUH ,GHDOVLWXDWLRQ LQSUDFWLFH found that the inclusion  of women and youth is logically desirable and economically justified.

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We can freely say that the Gender issue is not a part of the problem, but rather a part of the solution. In order to support this process, the PSD team will moderate with all stakeholders. The intention is that the faci- litation and M4P methodology meet the decision-makers at national level. In particular, it is necessary to include people who write the statutes and decide on the amount and manner of the distribution of subsidies. Inclusion of vulnerable groups in the market system is possible through the diversification of activities, and the expan- sion of general requirements for the application and development of action plans and sub strategies that are "friendly" to these groups. All of this requires a permanent and interactive cooperation between the PSD and the project authority.

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