28 september 2010

Prime Minister Vladimir Putin chairs a meeting to discuss progress made on investment projects in the timber industry

Vladimir Putin

At a meeting to discuss progress made on investment projects in the timber industry

"Many companies are showing more interest in the timber industry. Therefore, I would like to emphasise that it is the government’s responsibility to give all interested businesses an opportunity to invest in timber projects. If a project meets the requirements, the company should have no problems with leasing forest plots or anything else."

Prime Minister Vladimir Putin's introductory remarks:

Good afternoon, gentlemen,

Today we will review progress made on investment projects in the timber industry. We have visited two companies today to look at operations on-site, and I should admit that what I saw there made quite an impression on me. We considered plans for several of these projects about two or three years ago, and I was pleased to see today that they are underway. Moreover, they survived the recession. The investor opted not to terminate these projects and saw them through to the end. And it sees more development opportunities today and it has plans for future investment projects.

The government pays the timber industry the attention it deserves, and it's clear why. First, Russia is a land of forests, figuratively speaking. A large part of its territory is covered by forests - and this factor gives us an edge. We have a wealth of forest resources; no other country is probably as rich in forests as Russia. Forests can be renewable resources if handled properly.

Deep timber processing projects create new and well-paid jobs for qualified personnel - today we have seen how this works in practice. These companies pay decent salaries to their employees and increase tax revenues for budgets at each level. Sometimes such production is the only chance for a town or village in the forest zone to revive and develop. If there is no modern timber processing plant in such towns or villages, there will be nothing at all there and people will just abandon them.

Ultimately, we need such projects to preserve our natural riches. As I said, it's important to handle these resources properly. Those who invest massively in timber processing certainly plan to stay in this industry for a long time to come. Such companies are eager to invest in the protection and restoration of forests; they observe all fire-protection and environmental requirements and will never treat nature as temporary property.

I'd like to remind you that in 2006 the government put into effect new progressive legislation regarding the use of forest resources. We tried to make the industry more stable, create transparent rules for long-term investors and eliminate barriers that impede the industry's development.

First of all, we increased the maximum term of leasing forest land to 49 years, giving responsible and scrupulous leaseholders a preferential right to extend the lease.

Second, those willing to invest over 300 million roubles in the industry can receive forest land on a no-bid contract. In addition, their rent can be reduced by half for the whole recoupment period.

Third, the government increased export duties on raw timber, sending businesses a clear message: the companies wishing to operate in Russian forests must develop timber processing capacities.

These initiatives helped to increase investment in the industry. A total of 12 large-scale projects worth 34 billion roubles have been carried out here, creating over 4,000 new jobs, and nine more projects will be implemented in different regions in 2010. We'll raise this issue with local officials today to discuss how these projects are going. The investment in these projects stands at some 35 billion roubles; they will employ 3,500 people. This is quite impressive for new projects. The government sees that businesses are becoming increasingly interested in the forest industry. I'd like to stress that the main mission of the government is to create every opportunity for investors to operate in this industry. If the plan for a project meets all requirements, a business should have no problems leasing forest land or doing anything else it needs.

Today we'll hear from those who have fulfilled their plans. Other companies should try to benefit from their best practices, and federal and local government bodies should analyse the problems these businesses have encountered to improve their work. Incidentally, the investors I met with today said they see that Komi authorities do their best to attract investment in the region and support investors.

We'll review new projects in the industry very thoroughly. Although it is impossible to develop unified rules and requirements because the situation in each particular region is unique, every business must meet general requirements for the rational use of forest resources, forest protection and restoration, no matter the region in which it operates.

I suggest we first listen to reports on the situation in particular regions, and then Mr Zubkov will make his report.

* * *

Vladimir Putin: Ladies and gentlemen, I'd like to tell you that we have just inspected several construction sites, several projects, which are to be commissioned this year, nearly all of them. Overall, there are 91 projects in the timber processing sector at various stages of completion. This is a serious and large-scale effort embracing the whole country. Generally, I believe things are going well here. Please Mr Zubkov (to First Deputy Prime Minister Viktor Zubkov), go ahead.

Viktor Zubkov: Thank you. Mr Putin, colleagues. Timber industry issues are addressed regularly by the Government Council on Timber Industry Development as part of its activity.

Russia's new Timber Code, adopted in 2006, required a consolidation of efforts of federal and regional bodies of authority, research institutions, businesses and industry groups to help reach the objectives in the timber sector, primarily providing for the rational use of the resource. Representatives of all of the above entities have been included in the Council established three years ago at the Russian Federation Government; that helped us improve the process of drafting government policies with regard to the forest sector and to develop effective schemes to implement these policies.

We have determined the key goals for industry: to increase the timber industry's potential and economic efficiency in timber harvesting, to increase the sector's attractiveness to investors, including foreign investors as you mentioned Mr Prime Minister, to develop forest infrastructure and to establish a system for the rational use of forest resources.

The Council regularly discusses important timber industry issues so as to address them comprehensively. Recently, we not only discussed them but proposed solutions. We decided to draft a development strategy for Russia's timber sector until 2020 (already done), and we proposed solutions to improve customs and tariff regulation processes and to optimise exports of raw low-grade timber.

The Council generated the idea of a more comprehensive approach to priority investment projects in the sector at one of its first meetings. As a result, the government passed a resolution to streamline the conditions and requirements for investors and make it applicable to all investors seeking the status as a priority investment project in timber processing.

This approach has helped create an equal starting point for competing for Russian and foreign investors. Mr Putin, you have already mentioned the results of specific priority investment projects.

Let me add that, as you said, 91 investment projects envisaging a total investment of 408 billion roubles have been selected and approved, primarily due to the Council's intensive work; the facilities, to be commissioned before 2017, will consume 69 million cu m of raw timber.

The new processing facilities will create over 42,000 jobs; this is absolutely realistic. All these projects are feasible; we know the regions where they are located and we know the projects.

Importantly, the capacity of both Russian and foreign markets for timber products has been taken into account during planning.

Russia's Industry and Trade Ministry is currently looking at more applications from investors; part of the projects will involve foreign capital.

The Council has discussed various policies to ensure more effective operation in the timber sector, both at the federal and regional levels, over the three years since it was established. We have discussed how the constituent regions of the Russian Federation should exercise the functions to regulate the sector delegated to them; a state record system for the harvested timber to be put in place; as well as legal and customs regulation policies. The Council passed decisions on such issues as illegal logging, reforestation, forest cultivation, and the effective fighting of forest fires. Unfortunately, we could not complete everything this year.

Decisions have been made to expand the Federal Forestry Agency's authority and make it directly accountable to the Russian government. This marked a qualitative change in the attitude toward the country's forest resources.
Timber is the country's only renewable strategic resource. Therefore, we should focus in our work on such priorities as reforestation, clearing the aftermath of forest fires and windfall timber, creating an effective system of forest seed and seedling technology, forest cultivation, along with the timber processing issues we have just discussed.

We are going to revise the Council's plan to address current issues and to add clauses to the timber industry development strategy, primarily pertaining to the rational use of forest resources.

Thank you.

* * *

Closing remarks by Vladimir Putin:

Ladies and gentlemen,

We have addressed issues today that are extremely important for our country. I am referring to the fact that the bulk of the world's forest resources are concentrated in Russia, as I said in my opening remarks. This is no exaggeration.

The main problem, of course, is the poor accessibility of these resources due to underdeveloped transport and infrastructure, but that'll come with time, as the Russian people say. We'll go slowly and develop the required infrastructure gradually, as the sector grows.
Our goal now is to work out jointly an investor friendly environment in the sector, so that the projects in this sector remain profitable irrespective of fluctuations on international markets caused by decreasing demand for paper or other products. Timber products will be in demand anyway, both in Russia and abroad.

Speakers at this meeting have mentioned housing construction, alternative fuels and chemicals. Timber can be used for a variety of products, and what's most important, it is a renewable resource, given wisely managed forests.

The policies adopted in recent years have helped get the industry's modernisation moving. Today 91 investment projects are being implemented, with only four of the initial bids declined, and a system of state support for investment projects has been created. These achievements give us reason to believe that we are on the right track.

However, unresolved problems remain. That is why we have met here today to discuss them - to identify the problems and find solutions. I will not repeat all that has been said here. A prime ministerial instruction has been drafted. We will expand it with the results of today's discussion and incorporate your proposals, including those from the audience. A roundtable on the issue will be held in Moscow tomorrow. This discussion will be carried on, and we will add tomorrow's proposals to the draft as well. I hope we will take another step toward productive cooperation.

I wish you all success. Thank you for participating in today's work.


More Information