In January 2024, the State Enterprise “Forests of Ukraine” liquidated wood processing plants throughout Ukraine, said the company’s CEO Yuriy Bolokhovets.
“Elimination of processing is a painful topic. It is much more pleasant to create than to close. But sometimes you have to make unpopular decisions,” he wrote on Facebook.
The company’s CEO said that forestry enterprises had started processing earlier because the sale of round wood did not cover costs. However, after the development of private wood processing, competition in the market increased. State-owned production facilities are formally profitable, but in fact they are subsidized.
As an example, Bolokhovets cited the work of a workshop of one of the branches of the Forest of Ukraine, which specializes in harvesting oak and produces oak parquet lamellae. Its profit for 10 months of 2023 amounted to UAH 8.3 million. However, the shop receives oak at cost, which is much less than the market price.
“If the same round wood were sold through open bidding, the branch could have earned UAH 24.1 million. Formally, the shop’s profitability is 58%, but in reality, the company lost UAH 16 million,” explained the company’s CEO and added that the situation is similar in almost all processing shops, of which there are more than a hundred at Forests of Ukraine.
According to Bolokhovets, in 2023, the workshops of the State Enterprise “Forests of Ukraine” processed 0.9 million cubic meters of wood, the market value of which is UAH 2.15 billion. The company sold 0.4 million cubic meters of lumber worth UAH 2.3 billion. The difference amounted to UAH 150 million, which is several times less than the cost of production (salaries, electricity, etc.), the head of the state-owned enterprise stated.
“In addition to the burden of subsidies to the workshops, we will also get rid of a significant share of corruption, which will also certainly contribute to an increase in the SOE’s revenues,” Bolokhovets stated and expressed confidence that the first positive results of this structural change will be visible in the first half of 2024.
As reported, Ukraine launched a forestry reform in 2016. As part of it, the sale of unprocessed timber at electronic auctions has already been introduced. Since 2021, an interactive map of wood processing facilities has been operating in a test mode in a number of regions.
The industry has implemented the Forest in a Smartphone project, which contains a list of logging tickets for timber harvesting and allows you to check the legality of logging on the agency’s online map.
On June 1, 2023, Ukraine launched a pilot for the electronic issuance of logging tickets and certificates of origin of timber. In addition, the State Enterprise “Forests of Ukraine” has launched a pilot project to procure timber harvesting services through the electronic platform Prozorro.
