Quo Vadis

1. «Опыт малого лесопиления в странах Центральной Европы и Северной Америки применительно к условиям Дальневосточного региона» ВЛАДО БУТОРА Президент компании «Salix» (Швейцария) «Experience of low-scale milling in Central Europe and North America relative to the Far Eastern region» VLADO BUTORA President Salix Company (Switzerland)

2. Quo Vadis Future of Forest & Lumber Industry Dr. Forst Ing. ETH Vlado A. Butora Salix Inc. Switzerland / Canada Khabarovsk, Salix Presentation, Sept. 2005

3. The Russian Forest and Lumber Industry is facing similar problems like in the other countries, but the impacts to the Russian Industry is more serious. Khabarovsk, Salix Presentation, Sept. 2005

4. World present situation: The last two decades of global free trade politics, the world political changes and the world economical development as well, is putting the Forest and Lumber Industry under enormous pressure: • Securing the timber areas (ownership, timber licences etc) • Over cutting the timber areas, low reforestation • Increasing the energy costs • Increasing the transport distances (timber areas – manufacturing facilities) • Environmental protection of forest areas (National parks etc) • Over supply of lumber in industrial countries Khabarovsk, Salix Presentation, Sept. 2005

5. Present Situation of Forest and Lumber IndustryinFar East Russia(Summary of the statements of several organisation) • Poor log export policy / loosing major profits to the import countries • Large dependence from export • Forest companies have problem to secure the raw material • Increasing the transport distances of raw material to the mill and markets • Increasing the energy costs • Decreasing of working capital • Low interest to invest into Forest Industry (high capital costs, small margins and low RI • Fast changes in woodworking and building technology • Dullness to sales low grade timber, lumber Khabarovsk, Salix Presentation, Sept. 2005

6. Present Situation, cont. • Low infrastructure – technical, human resources, • Not efficient government regulation of timber resources • Forest Policies not up to day • To many government organisations • No or very low support from government and financial institutions for development of “small Industry program” in Forest, Lumber Industry • Past, poor management and bad privatisation concept of forest and lumber companies • Dependence from Moscow • No fair businesses practices Khabarovsk, Salix Presentation, Sept. 2005

7. What to do? There is a way for the future? Yes Russian Forest Industry has the great opportunity Khabarovsk, Salix Presentation, Sept. 2005

8. Implementation of new Forest Policy (Canadian Licence System) • Like in Russia close 100 % of Forest Land is owned by Government • Advantage: • Government has steady revenue (Stumpage fees) • Industry has steady timber supply • Forest companies (licence holder) have responsibility to manage forest areas • Easier government control of Forest policy / licence holder could loose the timber licence • Forest company have security for new long term investments • Equal business opportunities for all companies • Development of new work places • Healthy cooperation between Government and Forest, Lumber and Building Industry Khabarovsk, Salix Presentation, Sept. 2005

9. Development of “small business Industry “ • British Columbia , Canada “Woodland Tree Farmer Licence” • Licence holder are holding up to 2 - 5000 ha of forest land • 100 % sustainable Forest Management System • 100% selective logging only • Back to the timber sources • Secure the local working places • Low investment costs of operating equipment • Better usage of wood fibres • Support an development of the local lumber und building Industry • Secure the social infrastructures of small cities and villages (no ghost cities) • Lower transport cost to the market (finish products only) Khabarovsk, Salix Presentation, Sept. 2005

10. 3.Large Facilities ? There is, will be and must be a place for large facilities (like Plastum, Igirma Tairiku) . But this mill, similar to the Canadians mills will always facing following problems : • Log supply • High investment of logging equipment • New sawmill technology • Shareholders dependence • Increasing transport costs for raw material • Large distance to local, domestic and international markets • Large dependence from export and lumber brokers • Labour problems • Low infrastructures for high technology equipment • Low or no interest of foreign investors to develop the social and economical infrastructure of the regions! ! Khabarovsk, Salix Presentation, Sept. 2005

11. “Small business” the spine of the Industry • To the opponents of this concept - example from Switzerland • Switzerland annual log production - 6 Mill m3 / year • Public sector owns 70% of forest are and private sector 30% • 450 saw mills • 250l saw mills with capacity of 2 – 8000 m3 / year • 80% of the owners are also home builder and diff. woodworking manufacturers • Only two mills cutting more that 100,000 m3 / year • High integration of local sawmill industry and building industry • Log supply – 100% from selective logging • Intensive Forest Management System • 50% of logging take place in the mountains (Cable logging) • Forestry, Agriculture and Tourism are building a common utilization system Khabarovsk, Salix Presentation, Sept. 2005

12. Small Business Program and Far East Region of Russia • Ten years ago, with forest experts from Khabarovsk and Vladivostok we started to develop • this program. • Due to several circumstances this project was put on hold. • Today, the need to continue and to develop further this program is probably more important • than 10 years ago. Khabarovsk, Salix Presentation, Sept. 2005

13. To support this program we developed two small mills • Canada 2000 • Canada 2005 • This mill are very suitable for the Russian conditions and could excellent support the • development of “Small Forest Business Program” in the Far East of Russia • The major characteristic of this mill: • Low investment costs • Good productivity • Energy efficient • Easy technology and low maintenance equipment • Prove operating records in Russia. Khabarovsk, Salix Presentation, Sept. 2005

14. Operating Facilities in Russian Far East • Canada 2000 Marinskoje / 1996 • Closed due to disagreement between Owner and Government organisation, • Sold to Primorskij kraj and still profitable operating inDalnoriechensk • Canada 2000 Komsomolsk na Amure (1999) • still operating with profit • New Canada 2005 • Sold and will be delivered end of September to Kukan, Khabarovsk kraj Khabarovsk, Salix Presentation, Sept. 2005

15. Canada 2000 • Production: up to 20,000 m3 • Including: • Scragg Mill (max . 40 cm) • Board Edger • Horizontal Band - Saw • Transfer tables • Computer Control • Sorting table 3. Price: from 575 US$ Khabarovsk, Salix Presentation, Sept. 2005

16. Canada 2005 • Production: up to 8000 m3 • Including: • Band Saw Mill • Board Edger • Power Generator • Sharpening equipment • Laser lines • Log loader 3. Price: from 91,000 US$ Khabarovsk, Salix Presentation, Sept. 2005

17. Conclusion • The past good cooperation and connection between the Governments of Khabarovsk, Primorskij kraj and Britisch Columbia • should be re-open and • the positive results should be put in the reality. • It is not only my opinion, but the the Canadian Forest Policy System, Licence System and Woodland Licence could be the best suitable systems to apply for the Russian Far East Region, since also the climate and forest are similar as well. • New re-organisation of the Forest Sector will results, that the Far East Russian Forest and Lumber Industry will be again the world leading timber and lumber producer. • Thank you for attention Khabarovsk, Salix Presentation, Sept. 2005