Developing forest-related cooperation in the boreal zone
Esteemed Prime Minister Putin, Prime Minister Vanhanen
Distinguished Forest Summit Participants,
Ladies and Gentlemen,
The forest sectors of Russia and Finland both operate in the boreal zone. We have been cooperating extensively for several decades on many issues of significance to our business. During these years, Finnish forest products companies have invested nearly €1 billion in Russia, which has attracted Finnish sawn timber, panel and paperboard manufacturers in particular.
Russia is a very important cooperation partner for the forest sector of Finland. Your nation’s growing economy and abundant energy and forest resources provide diverse opportunities for the development of advanced products and business operations that have the potential to yield profits long into the future. It is of crucial importance to strengthen cooperation now, at a time when both countries are working to facilitate a return to growth in the global economy.
In recent years, during a period of rapid and global transition for the forest industry, investments have largely targeted Latin America and Southeast Asia. Neither Russia nor Finland has managed to break into the top three in this global race.
The role of the forest industry countries is to create a competitive operating environment, whilst the role of private corporations is to evaluate the commercial
prospects for substantial investments over several decades.
In addition to profitability, factors that are considered when making investment decisions include the existence of a stable legislative operating environment, safeguards for foreign investments, the availability of competitively-priced raw materials, functioning infrastructure and a growing market for end products. In many countries, these factors are the focus of systematic improvements which strengthen their ability to attract and create high-level competence and technology.
Russian timber exports
In addition to investments, the forest industry of Finland has been a source of timber export revenue for Russia. In the last 15 years, Russia’s timber export revenues from Finland have totalled to EUR 7 billion.
The raw material needs of the Russian and Finnish forest industries have complemented one another very well, as have our procurement practices for different timber grades. It is not technically or economically feasible to harvest saw logs and plywood material unless pulpwood is collected at the same time. The possibility to export pulpwood for utilisation by the industry in Finland has safeguarded the availability of logs for Russian sawmills. The supply of Russian birch has been of crucial importance to Finnish pulp, paper and plywood mills because sufficient quantities of this tree species are not available in Finland.
Russia’s gradual introduction of timber export duties has, however, made the importing of timber into Finland unprofitable. This has led to an almost complete cessation of trade. The position of South American raw materials has strengthened in the production operations of the global forest industry. This is not in the interest of the Russian or Finnish industries, both of which operate in the boreal forest zone.
Declined timber imports are partially to blame for recent shutdowns of Finnish forest industry capacity. These capacity cuts have reduced the industry’s annual raw material needs by about 10 million cubic metres.
The multiplier effects of shutdowns have reached Russia, too, and weakened the structures and infrastructure of the country’s forest sector. Thousands of jobs have been lost in regions, which have already been struggling with unemployment. At the same time, this has weakened the forest industry’s future prospects in Russia because deteriorating operating conditions make it more difficult to implement major investments. As soon as Russia introduces diverse incentives to promote investment conditions, the country has all opportunities to trive and become one of the leading players also in forest industry. Instead of implementing timber export duties it is in the interests of both our countries to promote the position of boreal raw materials on the global market.
Barriers to trade
The global economic crisis has led to an increase in protectionism and the establishment of trade barriers. However, this only serves to hold back economic recovery. It hampers cooperation within the forest industry and weakens the position of the raw materials, birch in particular, that the boreal forest industry zone provides relative to raw materials produced in other regions of the world.
Therefore, it is important to continue efforts to dismantle international trade barriers in order to create ever-better opportunities for cooperation and mutual success as well as to promote economic growth.
Position of boreal raw materials on the world market
The global success of forest sector operations, which are based on the utilisation of boreal raw materials, is a shared concern for Russia and Finland. We can utilise our northern raw material resources sustainably and successfully if the prerequisites for profitable forest industry operations are established in both countries.
Numerous opportunities for cooperation and development can be identified for the forest sectors of Russia and Finland with regard to this effort. The primary objective in Russia should be the dismantling of trade barriers, the promotion of the conditions required for major industrial investments and the strengthening of confidence in the availability of wood raw material over the long term. Furthermore, profitable operations in both countries presuppose a cost-effective and sustainable forest economy as well as more research, development and training aimed at the creation of new and improved customer solutions in addition to the industry’s existing products.
Our northern raw material provides a good foundation for success. Many of the opportunities are based on our ability to merge our interests and discover creative solutions that benefit the forest sectors of both countries.