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Forest Industry Complex
Forest industry complex is traditionally the leading branch of the economy of the Republic. Its share is 40% of the total production, and over half of all employed in industry. Its products have a substantial share of the Russian market: 24% of production of paper, 35% of newsprint, 59% of paper sacks, 6% of timber, and 4% of lumber. The growth of the production of the major types of products, on the basis of quantities, is 1.5-2 times higher than similar data in electrical energy and black metallurgy (with the exception of production of lumber).
 The main work on leasing forest plots, on the basis of tenders, was finished in 2006. On January 1, 2008, the overall annual volume of all leased forests plots is 7.0 million cubic meters, including 6.6 million cubic meters as a result of tenders, which is about 75% of the planned harvest.During recent years, there has been positive growth of the volume of production of processed timber: the growth of production of lumber during five years was 13%, paper and cardboard – 27%, chipboard – 28%, pulp – 18%, paper sacks 1.5 times.
The process of consolidation of enterprises and creating holdings is continuing in the Republic. Merger of enterprises increases their possibilities of organizing effective work, providing the necessary raw materials, attracting additional financial resources in order to modernize and re-equip the facilities.
“Investlesprom” holding has been working in the Republic since 2007; it includes “Segezhsky pulp and paper mill” joint stock company, “Segezhsky timber processing factory” joint stock company, “Karelia DSP” joint stock company, “Medvezhyegorsky LPH” joint stock company, “Ilyinsky Lesozavod” joint stock company, and some others.
Now closed joint-stock company “Investlesprom” is the largest forest industry company in the European part of Russia, with annual volume of production of 450,000 tons of paper, more than 1.3 billion paper sacks, lumber – about 750,000 cubic meters and the amount of logging at 2.5 million cubic meters a year; the total area of its leased forests (on the territory of the Republic of Karelia, Archangelsk region, Vologda region, Ulyanovsk region) is 4.5 million hectares.
In October 2007, the Government of the Republic of Karelia and closed joint-stock company “Investlesprom” signed a general agreement, which defines the main stages of the development of the companies of the holding on the territory of the Republic up to 2012. The amount of investments will be about 21 billion rubles.
The process of consolidating enterprises, creating integrated entities and holdings will make it possible to concentrate timber resources produced by logging and use them as raw materials for wood processing companies, situated on the territory of the Republic.
 A number of perspective investment projects are being implemented in Karelia in the sphere of lumbering and wood processing.Reconstruction of “Segezhsky timber processing factory” joint stock company (which is part of “Investlesprom”) will increase the production up to 600,000 tons of pulp a year.
Russian-Swedish project “Svedwood Karelia”, together with “IKEA” corporation (Sweden), located in the border town of Kostomuksha, includes lumber production, production of furniture plywood, as well as construction of furniture factory. The building of the factory is in its final sage; it is planned to start work in 2009.
Implementation of the second part of the joint stock company “Setles” – a modern wood processing complex.
 The leadership of the company intends to create a modern wood processing complex, which will include the complete cycle of lumber processing (drying, surfaced timber, plywood, production of furniture, fuel pellets). The cost of the second stage is estimated at 12.7 million euros. In 2008, the shop of producing fuel pellets is planned to start working, with capacity of 20,000 tons per year, as well increasing the volume of lumber up to 140,000 cubic meters per year.“Kondopoga” joint-stock company reconstruction. The amount of investments for 2007 was 1.6 billion rubles, including 253.6 million in paper production, 10.8 million rubles – in cardboard production, and 419.0 million rubles – in other areas of production (reconstruction of electric power station – 322.5 million rubles), in developing of social sphere – 357.2 million rubles. The implemented actions allow the company to use waste paper for production of paper, which will decrease the deficit of raw lumber.
In the end of 2007, “Solomensky lesozavod” was opened – this is a modern facility, equipped with the state of the art machinery. The lumber which is produced here is of high quality and is sold for export (to Japan, the USA), as well as in the Russian domestic market. The amount of lumber is planned to reach 155,000 cubic meters per year. In 2009 the production of fuel pellets (out of raw waste lumber) will start using the remains of the lumber production, up to 50,000 tons per year, and in 2010 – production of wooden frame constructions for export, 35,000 cubic meters per year.
 The implementation of the investment project “Organization of Production of OSB Boards in Karelia” has started in the Republic. The project of “DOK Kalevala” joint stock company plans to build a plant to produce OSB boards from deciduous and low-quality lumber with capacity of 320,000 cubic meters of board per year. The overall cost of the project is 150 million euros. The project is implemented in partnership with Germany. When it reaches is full capacity in 2009, it will process up to 700,000 cubic meters of low-quality lumber.In February 2008 a new production line of rotary-cut veneer was launched at Lahdenpohya plywood factory “Bumeks”; this was the result of cooperation with the Finnish company “Raute”. This production line capacity is 2.5 times higher than the current production of the factory. The veneer will be exported to Finland.
The planned amount of logging of soft deciduous trees is not used to its full capacity in the Republic. The resources of deciduous timber comprise about 700,000 cubic meters; if the full capacity is achieved the amount will reach 1.2 million cubic meters. At present, “Segezhsky pulp and paper mill” joint stock company is preparing to produce bleached pulp, which will make it possible to use deciduous timber in industrial production.
A task force has been created to work on the problems of developing the infrastructure of forest industry, and the collection of application has been started to implement priority investment projects in developing forest land plots within the forest lands of the Republic of Karelia, by using federal financing and investment funds of RK.
To increase competitiveness of the timber products, the companies working in forest industry have continued the procedure of voluntary certification of the management of forest resources on the territory of the Republic.
At present, FSC certificates on forest management and production have been issued to four companies; the share of certified forest resources in 2007 was 17% of the total amount of annual forest use of leased plots, and in 2008 this number will increase up to 28%.
The certification procedure not only fosters the increase of markets for timber products but also helps to solve the problems of social responsibility of businesses.
In order to solve the current problems in the forest industry, there has been worked out the Plan of Actions of the Government of the Republic of Karelia on further Development of Management of Forest Complex up to 2010, which was approved by the decision of the Government of RK of 09.02.08, # 58p-Ï.
Analysis of the current situation in forest industry complex makes it possible to formulate four sets of goals, in order to increase the effectiveness of its work:
· Creation of balanced structure of management of forest industry and balanced structure of the budget of forest industry;
· Achieving a balanced structure of producing and consuming raw timber on the territory of the Republic, including measures to prevent illegal harvesting of timber and illegal transactions with timber;
· Preparing qualified personnel for forest industry;
· Using research results in forest industry.
For each of these goals, the Plan describes concrete tasks, measures, deadlines, persons responsible, and the expected results.
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