Russian Log Export Taxes to Hurt Employment
Oct. 14, 2008 - The Russian Federal Government is trying to assist development of its forest industry by adding export taxes on logs, thereby limiting competition by foreign companies for the Russian timber, according to the report Wood Resource Quarterly published by Wood Resources International (WRI).
These taxes are currently 25% of the log value (minimum €15/m3) for softwood logs and are scheduled to increase to a
minimum of €50/m3 (about US$78/m3) from January 2009, the report states.
With the assumption that Russian exports of softwood logs may come to a halt in January
next year due to prohibitively high log export taxes, there could be about 35 million m3
of softwood logs available to the domestic industry. The question is: Will the Russian
forest industry be able to expand the production capacity and process this wood
domestically? Unfortunately, the short answer to this question is NO, WRI said.
The Russian forest industry has increased softwood roundwood consumption on average
4 million m3 per year the past five years, but because of poor infrastructure, lack of
investment capital, corruption, burdensome bureaucracy, lack of respect for property
rights and political uncertainty, it is not likely that the industry will be able to expand
much more rapidly in the near future than it did the past five years. This is going to have
huge negative ramifications for thousands of Russian loggers, forest managers, and
workers involved in the transportation of wood, according to WRI.
The biggest changes in the Russian forest industry have come the past five years with
substantially higher production of wood-based panels in particular. The pulp industry has
not expanded as fast, although there are plans both for expansion of existing pulpmills
and for new greenfield mills in the coming years, WRI said.
The area with the slowest growth has been that of lumber, with softwood production up only about 20% the past ten years and
hardwood lumber production even declining 70% that seen in 1997, WRI added.
In summary, the only major expansion within the industry has occurred in sectors which account for only a
small share of the total log consumption in Russia, says WRI. The Russian government’s involvement in the domestic log market will have
unintentional consequences. Short-term, the effect of the Russian log export tax will be to
reduced employment in the forest sector rather than to increase it; exactly the opposite
effect hoped for by the Federal Government when it decided to restrict log exports.
SOURCE: Wood Resources International (WRI)