WORLD BANK SUPPORT TO FOREST DEVELOPMENT IN EASTERN EUROPE

by

Louis Carbonnier

World Bank

1. INTRODUCTION

One of the overriding problems with forestry in Eastern Europe is the lack of economic consciousness when planning and executing forest operations, which of course is an inheritance from the many years of planned economy. However, if this situation is not dealt with there is a risk that Eastern Europe will lose the competitive edge that most of the countries have when compared to other European countries.

The advantage of good raw material and low salaries will be eaten away by low productivity and lack of operational planning, which leads to waste of resources and the use of environmentally damaging harvesting equipment.

More economic awareness does not mean ignoring environmental issues that foresters, long before the environmental lobby became active, had been used to dealing with as a natural component of their work. What is important is that there be a reasonable balance between environmental, social and economic considerations, which are the three important cornerstones to sustainable development.

2. ECONOMIC CONSCIOUSNESS

Table 1

Examples of what is meant by lack of economic consciousness

Lack of Economic Consciousness in Forestry Operations Planting; afforestation and reafforestation Dense planting, high costs for protection, too little natural regeneration Silviculture; cleanings, early thinnings, pruning Leave more broadleaves, more intensive thinnings, lack of funding Harvesting Energy consuming and damaging equipment Planning; strategic and operational Determination of allowable cut, poor utilization of information in management plans

The following two examples demonstrate lack of economic consciousness and what happens with very dense planting.

2.1 Dense planting

Figure 1 shows how the relative land value, i.e., the net present value of all net cash flows during one rotation of a plantation, changes with different planting densities. Relative values have been used in order to facilitate the comparison. A pine plantation under Polish conditions and a discount rate of four percent are given as an example, but the shape of the curve is basically the same as for other examples.

The value of the wood production (Figure 1) when planting at a density of 5 000 seedlings per ha is about 20 times higher than the value when planting at 15 000 seedlings per ha.

There are of course other factors that influence the decision on how dense plantations should be done, but most of the other factors, with the exception of wood quality (which to a certain extent has been included in this calculation), give higher benefits at less dense planting. Such examples are the harvest of non-wood products such as berries and mushrooms (very important products in most Eastern European countries), biodiversity of the ground flora, etc. Regarding the protection function of soils and water, which is important for many forests, there would not be any significant difference between the range of densities shown in Figure 1.

Planting density in 1000 seedlings per ha Land value=Net present value of all net cash flows during one rotation

Figure 1. Relative land value at different planting densities

2.2 Logging costs and average tree size

Figure 2 demonstrates the relationship between logging costs, including all operations from stump to road side, and average tree size. Relative costs are shown and the average tree size of a middle-sized thinning (0.15 m³/tree) is used as the base. There are many conclusions one can draw from this figure, but the most important one is how expensive it becomes to cut small trees. The graph stops at the size of 0.05 m³ ob/tree¹, but many of the early thinnings in plantations, which have been established with 10 000 and more seedlings per ha, have trees that are considerably smaller. Concentration on fewer trees leads to better harvesting economy and higher financial returns.

It is of course important to keep the amount of the spacing within reasonable limits so that the soil can be fully utilized by the roots of the trees and consequently the height and form of the stems are not negatively influenced. The above conclusions are specifically valid for pine and some other conifers. When it comes to broadleaves, especially oak, the spacing has to be adapted to the development phase of the stand. At the early stages a large amount of seedlings should be maintained in order to force stems to grow straight and promote natural pruning, while at the later stages it is the size of the crown which determines the spacing.

Figure 2. Relative logging costs at different tree sizes

3. HOW TO IMPROVE OPERATIONS

Some of the options for improving operations and overcoming previously mentioned drawbacks are shown in Table 2.

Table 2

Options for improving operations

How to Improve Operations

Decentralization

Increased economic responsibility for local managers

Training

Increased productivity, better understanding, increased work safety

Management tools

Operational planning (based on forest management plans)

Guidelines and routines for deciding on optimal methods

Privatization of operations

Especially silviculture and harvesting

Incentives for long term investment

Intensive silviculture

Table 3 shows a list of areas where the Bank can assist countries in Eastern Europe to solve some of the problems mentioned earlier.

4. ASSISTANCE FROM THE WORLD BANK

Table 3

Possible World Bank assistance

How the World Bank Can Assist

Carry out sector reviews and studies

Options for policy and institutional reform

Finance information systems

Management information systems, strategic forest resource planning, operational planning

Finance operations and equipment

Silviculture, environmentally sound logging equipment, genetic improvement, restitution of forest-land

Function as catalyst in obtaining grants

Training, research and development; national parks management

5. WORLD BANK SUPPORT TO FORESTRY IN EASTERN EUROPEAN COUNTRIES

The countries where the Bank has already been involved in the forestry sector are shown in Table 4. It also indicates at what stage the involvement is as of mid-June 1994 and estimated amounts of financing.

The differences between total budget and "World Bank contribution" consist of extraordinary budget allocations from the Government of the respective country, grants from bilateral donors and parallel financing from other institutions, which have been agreed upon under the umbrella of the project. Such contributions amount to about half of the total budgeted costs.

The total of World Bank commitments for forestry projects in Eastern Europe at this stage is about US$ 300 million, which is a considerable investment.

Table 4

World Bank support to the forestry sector in Eastern European Countries

6. THE GLOBAL ENVIRONMENT FACILITY (GEF)

Another group of projects that are of interest from the forestry point of view are the ones being developed under the Global Environmental Facility (GEF) shown in Table 5. All of these projects have a strong forestry component but are mostly oriented towards the conservation of biodiversity. As opposed to the regular lending program this category of projects is financed by grants.

Table 5

Projects financed by grants from the Global Environmental Facility (GEF) and administrated by The World Bank

As mentioned earlier, there is a risk that the Eastern European countries can become less competitive unless more emphasis is placed on economic principles where forest management is concerned. From the World Bank point of view there are many areas where this assistance can be given to countries in this process and can be continued and expanded.

1 m³ ob = solid cubic meter over bark (including bark).