Institutional Changes in Forest Management in Countries with Transition Economies: Problems and Solutions Moscow, Russia 25 February 2003 Workshop Proceedings ACKNOWLEDGEMENTS The Workshop and proceedings were possible thanks to the contributions of the Ministry of Natural Resources of the Russian Federation, the World Bank, the Government of Austria, and the Program on Forests (PROFOR) and the efforts of the joint team of the All-Russian Institute of Continued Forestry Education (Zhanna Gerasimova, Anatoly Petrov, Elena Samoletova) and the World Bank (Laurent Debroux, Gerhard Dieterle, Jim Douglas, Andrey Kushlin, Tatyana Shadrunova, and Marina Smetanina). A special acknowledgement to Laura Ivers of PROFOR for editing and managing the production of the proceedings in English and to Professor Petrov for editing the proceedings in Russian. iii TABLE OF CONTENTS Acknowledgements.....................................................................................iii Introduction...............................................................................................vii Chapter 1: Topical Goals in Reforming the Russian Forest Administration and Management System............................................................................. 1 Chapter 2: Forest Sector Reforms in Eastern European Countries - Overview and Lessons Learnt......................................................................................5 Chapter 3: Forestry in Ukraine: Old and New Forest Management ............ 13 Chapter 4: The New Forestry Policy of the Republic of Kyrgyzstan............ 17 Chapter 5: The Latvian Forest Sector Reform Process................................ 19 Chapter 6: Forest Reforms in Estonia, 1990 - 2002...................................... 23 Chapter 7: Commercialization of the State Forest Management in Finland and Possible Options for Development in Russia....................................... 25 Chapter 8: The Swedish Case..................................................................... 31 Chapter 9: Managing Change: The Austrian Federal Forests Example....... 33 Chapter 10: Forest Tenures and Concession Experience in Canada and Selected Other Countries ........................................................................... 37 Chapter 11: Implementing Forest Concessions Policies and Revenue Systems: Experience and Lessons from Countries around the World......... 51 Chapter 12: Certification Requirements for Concession-Based Forest Management: International Experience..................................................... 69 Chapter 13: How to Build Public Support and Create Value for Forests – the Swedish Forest Industries Federation’s Perspective................................... 79 Chapter 14: “Forest Institutions in Transition Countries” – Overview of an Ongoing World Bank Regional Analysis .................................................... 81 Chapter 15: Workshop Conclusions and Recommendations....................... 89 Annex 1: Workshop Agenda ....................................................................... 95 Annex 2: List of Participants...................................................................... 97 Annex 3: World Bank Europe and Central Asia Forest Portfolio Note.......103 Annex 4: Issues in Forest Policy Reform in the Russian Federation ..........109 v INTRODUCTION The International Workshop on Institutional Changes in Forest Management in Countries with Transition Economies took place on February 25, 2003, in Moscow, Russia. Approximately 100 participants representing eight ministries of the Russian Government and 16 regions of Russia, 18 countries with transition economies, the World Bank, the private sector, research institutes, academia, and environmental non-governmental organizations attended the one-day event organized jointly by the Russian Ministry of Natural Resources and the World Bank with support from the Program on Forests (PROFOR). The workshop was held in parallel to the All- Russia Foresters Congress, a gathering of some 5,000 foresters from across Russia to discuss forest management through 2010. The workshop provided an opportunity for decision-makers within the Russian forest sector and transition countries to benefit from the experience of other transition countries. Discussions focused on key issues for the development of the Russian forest sector, including benefits and risks associated with concession management, opportunities associated with forest certification, approaches to forest institution reform, public-private partnerships, and balancing the economic, ecological and social roles of forests. The workshop resulted in a number of conclusions and recommendations to inform the process of forest institution and policy reform. This book is a collection of papers presented and speeches delivered at the workshop, the outcomes of the workshop, and a number of background papers relating to the World Bank’s Forest Strategy and operations in the region. vii CHAPTER 1: TOPICAL GOALS IN REFORMING THE RUSSIAN FOREST ADMINISTRATION AND MANAGEMENT SYSTEM Dr. Anatoly P. Petrov All-Russian Institute of Continued Forestry Education, Pushkino, Russia Throughout the last decade of economic and structural reforms in the Russian Federation, the forest sector has remained on the sidelines, retaining several attributes of the old economic system, including: · A monopoly of public ownership in forests; · Forest administration through leskhozes, local-level forest administration structures which combine both public administration and forest management functions; · A forest resource allocation system without any real competition; and · A non-transparent financial system characterized by low returns from forest use and government funding for forest management operations. These aspects of the forest administration system should be addressed as priorities in reforming forest administration and management in the Russian Federation. Forest Stock Ownership and Authority for Forest Use, Protection, and Renewal While the Russian forest stock is federal property, the Forest Code of the Russian Federation delegates a number of important forest management functions to the subjects1 of the Federation. However, these management functions and associated authority are not accompanied by respective obligations. For example, government authorities of the subjects are able to make decisions on the allocation of forest plots for lease and free use, decisions which ultimately determine the level of 1 The Russian Federation is comprised of 89 administrative subjects, including 21 republics, 6 krays, 49 oblasts, 2 Federal cities (Moscow and Saint-Petersburg), 1 autonomous oblast and 10 autonomous okrugs. 1 INSTITUTIONAL CHANGES IN FOREST MANAGEMENT IN COUNTRIES WITH TRANSITION ECONOMIES income from forestry. However, the federal government is responsible for financing the protection, renewal and organization of forest use.2 This unequal distribution of rights and obligations leads to conflicts in forest administration and forest use. Further conflict stems from the fact that in some subjects, authority for forest administration has been delegated to local governments, which do not belong to the official system of government authorities and thus do not perform state property management functions. 3 Given that the forest stock is federal property, the basic normative, regulatory and administration functions should be carried out by federal authorities, and rights to forest stock use should be distributed with respective obligations. The federal government should be given authority to undertake institutional reform in forest management and develop a forest administration structure in line with the economic context of the forest sector, recognizing local differences evolving in the use and cultivation of forests. Institutional Reform in Forest Administration In the 1930s forests were nationalized, and leskhozes were established as state enterprises responsible for forest administration, harvesting, wood processing, and forest renewal. With the adoption of the Fundamentals of Forest Legislation in 1993, leskhozes began operating as state institutions, with their financial activities regulated by the Budget Code of the Russian Federation. The leskhoz forest management system is in need of reform due to the following: · Lack of interest in earning money by performing the public administration functions; · Lack of interest in performing management functions because salaries are paid to workers in accordance with the tariff system; · Lack of legal sources of investment in economic development; and · Lack of competition in allocating budget resources for economic activities. The leskhoz system should be reformed through separation of public administration and economic functions so that functions of the forest public administration are performed by the state forest service responsible for compliance with the forest legislation; and forest management functions (use, protection, and renewal) are performed by state-owned commercial organizations regulated by business norms and criteria. Any institutional reforms in forest administration should be in line with the government policy in the area of forest use management. 2 These rights and responsibilities are set out in Articles 18 and 47 of the Forest Code of the Russian Federation. 3 As set out under the Federal Law “On General Principles of Organization of Local Self-Government in the Russian Federation”. 2 TOPICAL GOALS IN REFORMING THE RUSSIAN FOREST ADMINISTRATION