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Moratorium on exports of unprocessed timber is a temporary measure to solve profound problems of the system – experts, MPs

Kyiv, January 16, 2017.

Every year Ukraine harvets 18 million cubic meters of wood. However,  the real figure might be up to 40 million cubic meters, up to 50 per cent of this market is shadow market.

Moratorium on exports of unprocessed timber is a temporary measure to solve profound systematic problems of Ukrainian economy, said experts and MPs at a press briefing at Ukraine Crisis Media Center. “The main problem is corruption in all key segments: logging, sale & processing and export,” noted Viktor Mazyarchuk, head of the Parliamentary Office of Financial and Economic Analysis. According to the official figures, every year Ukraine harvets 18 million cubic meters of wood. However, the experts say, the real figure might be up to 40 million cubic meters. In other words, up to 50 per cent of this market is shadow market.

The acting moratorium on exports of unprocessed timber is often bypassed through illegal registration of the roundwood under other product range. In collaboration with customs officers, it is often registered as “firewood”. To counter this practice, Ukraine should adopt an electronic registration system for exported timber and to install video surveillance on the customs checkpoints, says Viktor Mazyarchuk. The only thing needed to put this mechanism in practice is the political will of the officials.

According to MP Ostap Yednak, the root of the problem is inefficient and obscure forestry management. “We still have soviet-type system that tries to imitate market economy. […] State forestry enterprises should be taken out of direct control of the State Forestry Agency of Ukraine. The latter should be responsible for forestry policy, while the enterprises should be merged into one centralized structure for forestry management […]. This should be a holding functioning according to international management standards, with transparently appointed Supervision Council, with transparent accountancy and clear investment and price policy,” he said. According to Igor Guzhva, international trade expert at the NGO “Center for Market Economy Development” (CMD-Ukraine), in the future these state enterprises should be responsible only for harvesting wood, while wood processing will be reserved for businesses.

Electronic record of wood and trade through online-platforms with anonymous customers would help to overcome the grey market, corruption and artificial deficit of timber, said Ostap Yedmak. These tools would ensure transparency and real responsibility of timber suppliers. According to him, public e-procurement system “ProZorro” would be the best platform for this purpose, preliminary negotiations have already started. In addition, it is important to strengthen responsibility for illegal logging and errors in the documents.

According to Igor Guzhva, Ukraine should launch wood market. This would ensure accountability for wood harvesting and transmission, as well as transparent wood record. The income could be used for reforestation. “It is very important to impose restrictions on domestic consumption of timber. […] It is necessary in order to approximate our legislation to international law,” he added.

Cancellation of duties on innovative equipment would boost timber industry in Ukraine, said Igor Guzhva. According to Ostap Yednak, many Ukrainian enterprises modernize their equipment and improve products quality. “According to my estimations, there will be nearly EU 100 million of investments in this sector. It would create thousands of jobs,” he noted. It is very important that the Government take a clear stand on this issue.

“The moratorium as a single measure turned out unable to solve the crucial problems in this area. In practice, it did not help to prevent uncontrolled clearance, deforestation, illegal wood harvesting and trafficking (as firewood, etc.). It did not solve the problem of opaque pricing as well as absence of transparent mechanisms in forestry market, that paves the way for corrupt schemes,” said Ivanna Klympush-Tsyntsadze, Vice-Prime Minister of Ukraine on European and Euro-Atlantic Integration, in her comment on the results of the discussion. “In order to solve all the problems in forestry, we need to reform the state policy in this field through a complex and balanced approach that would ensure civilized use of forests and compliance with our international commitments. We consider that cancellation of moratorium on export of unprocessed timber is possible only after the launch of complex measures that would bring solution to systematic problems in this field that were the reason for imposing the moratorium,” said Vice-Prime Minister of Ukraine on European and Euro-Atlantic Integration.

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