Introductory Remarksat Meeting with Forestry and Wood Processing Workers at Vilga Forest Nursery,Petrozavodsk Leskhoz

President VladimirPUTIN:

Petrozavodsk, 21 July2003

Good day, dear colleagues,

Using this opportunity of a visit to Karelia, I want to congratulate all the residents of Karelia and primarily the residents of Petrozavodsk on the recent anniversary. I am confident that all the residents love their capital, and I think that all the colleagues who have met here will join in my congratulations.

Now let’s turn to the subject matter of our meeting. I would like to begin by thanking the head of the enterprise and the ministry head for their interesting presentation of the sector’s operations. If everything I have been told about here is introduced in practice, that would mean tangible progress, I believe.

People here, in Karelia, know very well the positive things that have been done in the sector over the recent years. They are also aware of the sector’s problems because Karelia is our country’s traditional forestry region. The head of the government and I have just been discussing in sufficient detail the conditions in the republic and the state of affairs in the industry.

We in the Russian Federation have almost one-fourth of the world’s forest reserves. In this sense it would not be an exaggeration to say that the Russian forests are the environmental shield for the entire planet, and I have been very pleased to hear from specialists now what is being done, and how, to reproduce, clean up and protect our forests. Unfortunately, we still have very many problems here, but I would now quote Russian scientists and forest wardens of the 19th century. They introduced the concept of “sustainable and non-exhaustive forest use,” and I think that this principle is 100 percent relevant today.

In the context of what has been said I would like to address the important matter of financing the expenditures on forest reproduction and protection. Today this burden is shouldered mostly by leskhozes, but unfortunately, as we know, far from all of them have sufficient financial and other resources to fully accomplish this mission. And you also know what is being said and planned with regard to this. There are differing views of ways of improving this situation. One suggestion is to have the forest reproduction expenditures covered by forest users, in which case rent payments and forest fees could be fixed through auctions and tenders. This suggestion could be given consideration, and I would like you, too, to speak up on the matter today.

One more problem is protection of the forests against fire, disease and unauthorized cutting. How many forest fires are raging today? There are 436 of them across Russia? What is the area under fire? About 12,000 hectares. These negative trends, unfortunately, have been growing over the past few years, and I mean not just fires, but also diseases and unauthorized cutting. Efforts need to be stepped up in countering these trends, primarily through arrangements for interagency coordination. I am aware of the traditional proposals for improving management and establishing additional integrated structures. We can discuss this matter today if you think this necessary.

Customs and tariff regulation is one of the ways to boost forest use efficiency. We have also discussed this subject in detail today. Debates keep going unabated on this matter. One suggestion is to think about reducing export duties on highly processed wood products, while raising such duties on unprocessed wood. I agree with those who argue that there should be some differentiation between grades of unprocessed wood. In this matter, too, perhaps, there should be no indiscriminate approach, but, in any case, this is what the principle should be like, I think. The Government has discussed this on many an occasion. I hope the deputy economic development and trade minister who is in this audience will tell us what the situation is like today. Everyone believes that this is right, but unfortunately, nothing or almost nothing – very little has been done.

One more very important problem is raising investment in the development of the forestry sector. Today very little, if at all, is invested in the fixed assets of leskhozes and wood processing enterprises. Experts believe that the well-known principles of concession and long-term forest lease could be used to encourage the investment process. Of course, much depends on the legislation. The Government has been considering it for a long time. In particular, a new version of the Forest code is being worked out. The draft is virtually ready, and you are certainly aware of its key provisions. Let us discuss this matter today as well. 

There are very many questions for discussion, but I would not like one more matter to be missed. We talked about investment, and when I discussed the customs policy – of course, we have had more than one debate on the question of lowering customs barriers to the import of equipment that is not produced in our country. Here we always have a fight between the Government’s fiscal interests and the interests of economic development. I believe that our situation today makes it undoubtedly imperative to give priority to the economic development principle. There are certain plans, too, to this effect, and I think that our colleagues from the Government will unveil them in more detail today. This is what I wanted to say by way of introductory remarks. Let us now give the floor to the deputy economic development minister, and then to the first deputy natural resources minister, after which we could just exchange information and opinions on those problems for the discussion of which we have met today.


Concluding Remarks at Meeting with Forestry and Wood Processing Workers at Vilga Forest Nursery, Petrozavodsk Leskhoz

 Vladimir PUTIN: We have heard differing views and even had elements of a dispute at our meeting today. I think this a good thing – anyway, we have heard different viewpoints. I hope the Economic Development Ministry and the Government as a whole reckon with them as they finalize those most important documents for the sector that we have talked about and discussed in principle because, to one extent or another, everything we have talked about relates to the Forest Code, practical operations and another package of documents functioning in that sphere.

What I mean is not just those documents that are immediately related to the forests. For example, the problem of return of VAT has been raised here. The deputy minister has already said that appropriate proposals are being worked out. I simply didn’t want to mention this. I hope that, indeed, they will become reality by the end for the year, and next year, perhaps, more important, bolder things will materialize, making it possible to reduce the taxes across the board and drastically improve administration, including the return of VAT. I will just refrain from announcing in advance these plans of the Government that we discussed recently.

As for the profit tax, that problem has been quite rightly raised here. The revocation of privileges has complicated many investment-related problems. I hope that there will be appropriate response to these maters as well.

I would think that a tougher stand on the taxation of imported production equipment is correct. I agree that this approach should be selective. Clearly, this should by no means do harm to our domestic producers of such equipment. In individual cases, in line with an example cited here, when nothing at all is produced in the world, why should we make things difficult for our own producer? This is the kind of privilege that could certainly be extended. This is under discussion today as well, and such selective solutions are being drafted.

As for the bank financing rates, this situation is more complex, of course. As regards banks, we could talk about changes in the situation in the context of the overall improvement of the macroeconomic situation in the country, in the context of the national economy, because the state cannot either take on guarantees of this thing or subsidize the rates. It is only in individual cases, say, in agriculture that we do such things during the sowing campaign or preparations for another crop-farming season. But introducing this practice across the economy is hardly possible.

A very important matter of the infrastructure has been touched upon here. Of course, we must develop the infrastructure and bring it closer to the needs of the economy, the national economy, and the sector. But it is very important that, excuse my saying so, business should not use this free and very important state infrastructure like that. Indeed, we should make no secret of this, and you yourselves have now cited some facts showing that forest is cut where there are approaches, roads, etc. But, generally speaking, who has counted the people’s money spent on this infrastructure? Yes, we must support business. And yes, we must create the conditions for efficient business operations. But do they pay for this infrastructure? No.

So, if we talk about developing this infrastructure, then, first and foremost, we should think about a situation in which the operations of the sector as a whole would be transparent and efficient. It should be understood what the state is going to get eventually if it pays for this thing.

I have taken note of what you said about Valaam, too. I think this concerns not just Valaam. The had of government and I have had a lot of discussions on such matters, including Valaam. We will by all means think about ways of keeping such problems in focus. 

I want to thank you all. Just like my colleagues from the Government, I have taken appropriate notes. As we continue to work on the documents, in particular, to finalize the Forest Code, we will take this into account, of course. 

Thank you very much. I wish you success.


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