Russia is of the fastest growing economies in the world. The demand for paper products is stimulated by the high domestic consumption. The boosting construction sector (development and repair) sustains the high demand for timber products. Russia has the world richest undeveloped forest resources. Thus, reliable basic factors are available. The remaining world, however, believes that the most noticeable event in the forest and paper industries is the Russian plan to impose strict duties on raw timber exports at the moment when the country is turning into the global leader in timber export. Before 1 July 2007, the duty was 6.5% (minimum of €4 per cu m). For softwood, the duties increased to 20% and 25 % since 1 July 2007 and 1 April 2008 respectively.
The early 2009 will see a further increase up to 80% (minimum of €50 per cu m). As for birch, the introduction of the new duty is postponed until 2011, when it will jump up from zero to 80%. The already introduced and the forthcoming tariff escalation worry both Russia’s neighbors who placed stake on cheap deliveries and more remote markets. The impetus for such a plan is Russia’s desire to develop its own manufacture of forest products with added value to be delivered to the domestic and export markets. If such a program is implemented in full, timber harvesting will become economically unviable unless the timber is processed on site. The effectiveness of this tariff policy in terms of achieving the set targets is questionable. Some processing investment attempts have already been made; however, despite the abundant offer, large-scale pulp project still wait for their time to come. So, the level of harvest in Russia, at least, in the short-term perspective, may go down jeopardizing the international timber market in the future.
Potential foreign investors are very cautious about investing heavily into Russia ignoring the fast growing domestic demand and high export capacity and focusing on the absence of developed infrastructure, illegal cuttings and risks related to the governmental policy in the forest sector.
However, Russia possesses the biggest underdeveloped and underused natural resources stock and borders the vastest international market – China. Considering the sharp increase of Russian export duties, investments into timber processing in Russia seem quite justified economic-wise.
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