untitled Development of forest sector in the Arkhangelsk oblast during the transition period of the 1990s ALBINA PASHKEVICH Pashkevich Albina (2003). Development of forest sector in the Arkhangelsk oblast during the transition period of the 1990s. Fennia 181: 1, pp. 13–24. Helsinki. ISSN 0015-0010. The Arkhangelsk oblast has long been one of Russia’s most important forest industrial regions. This paper analyses the changes in accessibility of forest resources and forest commodity production during the transition period in the 1990s. Special attention is given to firm restructuring, active roles of domestic capital and the different survival strategies that have been developed by in- dustries in the region. Further analysis deals with signs of economic recovery in the forest sector due to the processes of restructuring, modernisation and self-organisation. Albina Pashkevich, Spatial Modelling Centre (SMC), Department of Social and Economic Geography, Umeå University, Box 839, SE-98128 Kiruna, Sweden. E-mail: albina.pashkevich@smc.kiruna.se. MS received 12 August 2002. Introduction The shift from central planning to a market-based economy in Russia culminated with the dramatic economic and political reorientation that began in the 1990s. This transition towards a market-ori- ented and outward-looking economic system led by private sector has created new challenges and opportunities. Industries have been affected most- ly by changes connected to the process of ‘mar- ket economy building’. It has become clear that the transition from one type of economic system to another within forest sector has had a profound impact on its previously designed socio-econom- ic organisation, and has been especially hard on people who are dependent on it as their only means of livelihood. The forest sector may not be the biggest contributor to the economy of the Russian Federation overall, but it plays a signifi- cant role in the economy of many of its regions, particularly in the Arkhangelsk oblast1. It employs up to 40–45% of the oblast’s labour force and comprises up to 60% of the region’s industrial output. The analysis of Russia’s period of transition in the 1990s illustrates the fact that it has been pro- ceeding with a wide range of variations combin- ing features of the old communist system and the adoption of a new. Some suggest that this proc- ess has been deeply embedded in the nature of the socialist system (Dingsdale 1999; Hamilton 1999) and that the legacy of the communism has been only partly removed, and instead has mere- ly been reworked in a complex way (Smith 1997). Others say that reforms have actually ended the old ‘command economy’ but have instead suc- ceeded in the creation of only a very limited mar- ket-based economy, or have not been able to cre- ate anything at all (Brodin 2000). It is clear that the development of a specific political, institutional and societal system is deep- ly embedded in the country’s past and is shaped by its historical, cultural, political and economic experiences and legacies. Such a radical change as a transition to market economy and democra- cy cannot immediately alter people’s existing per- ceptions, structures and behaviour, derived under 74 years of Soviet regime. Yet, clearly one of the positive outcomes of the transition is the removal of the former domination of the centralised state over its regions and local communities, allowing regional actors to become more independent in establishing networks and connections across the space at all levels (including ‘global-local’ inter- dependence). The transition has resulted in a tre- mendous shift in the division of political and eco- 14 FENNIA 181: 1 (2003)Albina Pashkevich nomic power among the state, regional and local governments and other actors (Dingsdale 1999). Therefore, different types of strategies have been employed by local or regional actors while tak- ing into account the advantageous features of the regional economy and making greater use of es- tablished and re-established organisational struc- tures and networks (Hamilton 1999). After a decade of transition, the forest sector is still undergoing complex changes. Numerous scholars have pursued studies of the economic transition of the Russian forest industry. The Inter- national Institute of Applied Systems Analysis (IIA- SA) has made one of the most comprehensive Eu- ropean analyses of various aspects within the Sus- tainable Boreal Forest Resources project (Carlsson et al. 1999, 2000). The forest sector development of the European North has been reviewed recent- ly in several research attempts (Backman 1997; Piipponen 1999; Layton & Pashkevich 1999, 2000; Myllynen & Saastamoinen 2000; Nilsson 2000). Despite regional analyses of forest sector development in the European North since the So- viet period, very little information exists about the results of recent development in the Arkhangelsk oblast’s forest sector, which long served as one of Russia’s most important timber exporting regions. This paper analyses changes in the accessibility of forest resources and industrial output, includ- ing the spatial organisation of wood-processing industries and their current networks. Attention is also paid to the variety of interactions between different economic actors in the process of re- shaping the previous structural and spatial organ- isation of the forest industries. Forest industries before and during the Soviet period The 17th century can be considered a beginning of commercial logging activities in the region, the main centres being the cities of Arkhangelsk and Onega. However, the turn of the 19th century was the true starting point for the development of the wood-harvesting2 and sawmilling industries (Lay- ton & Pashkevich 1999: 34). During the 1930s and 1940s, Arkhangelsk oblast began its devel- opment as one of Russia’s major forest industry regions as its previous sawmilling capacities were complemented by pulp and paper production (Fig.1). Before the October Revolution of 1917, the main sawmills were located at the mouths of the main navigable rivers in four major clusters. There were no sawmilling activities in the timber harvesting areas and all of the logged timber was transported (floated) to the cities of Arkhangelsk and Onega for further manufacturing. During the Soviet period, new export sawmills were also set up at the ports of Mezen and Narjan-Mar at the mouths of the Mezen and Pechora rivers. Traditionally, logging has been practiced along main transport routes, such as rivers and railways, which is why logging activities became increasingly concentrated in the southern and western parts of the oblast. In the 1960s, more than 50% of the total harvested tim- ber was derived from the basin of the Northern Dvina and most of it was free-floated down the riv- er to the Arkhangelsk industrial centre3 (Layton & Pashkevich 1999: 35). Other river basins situated in the south of the oblast (Vychegda and Viled) sup- plied timber that was transported through Kotlas by rail to the Kirov and Vologda oblasts, and even to Moscow or St. Petersburg. This pattern is still evi- dent today, but there is clearly a shift in logging ac- tivity towards the northeastern and eastern parts of the region (Serebryannyy & Zamotayev 1997: 204). The output of the Arkhangelsk oblast timber in- dustry became very diversified with the introduc- tion in the early 1930s and again in the 1960s of the ‘upper echelons’ of the forestry sector – i.e., the main branches of the chemical wood-process- ing industry, such as pulp and paper milling and wood hydrolysis (Layton & Pashkevich 1999). During the Soviet period the main centre of the timber industry was Arkhangelsk itself, annually producing some 50–55% of the sawn goods, 55– 56% of the wooden packaging, and about 70– 75% of the oblast’s furniture production (Layton & Pashkevich 1999: 36). Other emerging indus- try centres in the oblast included the towns of Severodvinsk, Onega, Mezen, and Narjan-Mar. The expansion of sawmills and wood-processing plants were thus brought closer to the raw mate- rial bases during the 1960s. Post-Soviet changes and forest industries today Forest Resources For more than 90 years, industries operating in the region were heavily dependent on the forests FENNIA 181: 1 (2003) 15Development of forest sector in the Arkhangelsk oblast... Fig. 1. Administrative map of the Arkhangelsk oblast (BASIS 1999). along the main railroads and waterways. In the 1980s, some 23% of all exploitable coniferous forests had been exhausted, especially in those forest management units located along the Arkhangelsk–Konosha–Kotlas railway (Carlsson et al. 1999; Departament... 2000a). Although the extensive taiga forests in the central and south- ern parts cover 19 million hectares, potentially exploitable forests are distributed unevenly among the oblast’s districts in areas distant from the previously established road infrastructure (Serebryannyy & Zamotaev 1997: 204). How- ever, in 2000, the growing stock of the Arkhan- gelsk oblast’s forests was estimated at 2.4 billion cubic meters, which accounted for almost 2% of Russia’s growing stock (Chuiko 2000: 7). The ob- last, together with the Republic of Komi, contains one-third of the forest resources in the European part of Russia (Layton and Pashkevich 1999: 31). In recent years, the region has also accounted for a quarter of European Russia’s total wood har- vest. 16 FENNIA 181: 1 (2003)Albina Pashkevich One of the problems affecting the present de- velopment of forest management in the Arkhan- gelsk oblast (and the Russian Federation) is lack of stability in terms of its operational structure (Carlsson et al. 2000: 24; Gubnitsyn 2000: 2). The previous system of forest management has been undergoing reorganisation for several years and is still not complete. This process should theoret- ically finalise the adoption of the new laws, af- fecting the speed of transformation of forest man- agement practices, but a great deal of uncertain- ty still affects the system. Nowadays, regeneration of forestland that was previously clear-cut is dependent on the amount of money allocated to the state silvicultural agen- cies from various sources (federal and local ad- ministration budgets, forest management’s own assets, etc.). In the absence of funds for reforesta- tion and other silvicultural measures, the less de- sirable broad-leaved species will prevail in the oblast’s growing stock (Carlsson et al. 1999; 10). Forecasts predict that when young stands (with a total share of 4.6 million hectares, or 23% of the forest resources) come into maximum growth in the beginning of the twenty-first century, the to- tal annual forest regrowth in the oblast will in- crease from 20 million m3 to 25 million m3 (Trubin 2000b: 2). This will offer significant po- tential for industrial use of wood that would be- come even larger with the reinforcement of the silvicultural measures. Federal budget subsidies are, however, not the solution. The forest manage- ment units will continue to work towards the adoption of a longer-term sustainable forest poli- cy to secure revenues from their industrial activi- ties. Among other debated issues is the question of private forest ownership, which is still an un- easy one. Some argue that no forestland should be privatised (Carlsson et al. 1999: 8). Others sug- gest, however, that by the first half of the twenty- first century, loggers will be allowed to own the forests they operate, 15–20% of the total area (Trubin 2000b). In general, private ownership will lead to a higher responsibility for the forest use and over the performance of the silvicultural measures. Thus, along with the other measures already taken towards more sustainable forest uti- lization, it should ensure the quality of raw mate- rial supply in the near future. The period of development of the forest sector analysed here has been strongly affected by the following factors: 1) a continuous decrease in the availability of exploitable forests located in geo- graphical proximity to the main processing cen- tres, and 2) the impacts of the structural and dy- namic organisation of the secondary forests al- tered by long-term harvest operations in those for- ests. The physical and economic accessibility of the oblast’s forest resources has been challenged during the transition period also by the fact that they finally regained their market value absent during the Soviet period of development (Söder- holm 2001: 369). Clearly, much of the oblast’s potential forest resources are not yet realisable by the forest industry, because of the difficulties ex- perienced by the logging industry and forest man- agement practices. However, recent positive per- formance of the forest sector will likely lead to an improvement of forest regeneration practices (Backman 1999: 466; Nilsson & Kleinhof 2001: 177). Transport Networks Traditionally, the Soviet forest industries (saw, pulp and paper mills) have been built in locations with a relatively well-developed transport infra- structure optimal for sustaining a significant do- mestic timber supply (a pattern similar to Scandi- navian forest enterprises (Myllynen & Saastamoi- nen 2000). As timber stocks became depleted, logging activities moved from the existing trans- port routes and transportation costs became a constraint (Nilsson 2000). Thus, drastic econom- ic changes, resulting in rising costs of raw mate- rial production and lack of necessary infrastruc- ture investments to sustain productivity, can be seen as a major negative outcome of the transi- tion period. The prohibition in the 1990s of free flotation due to its negative environmental impact result- ed in roads becoming the sole means of transpor- tation for many wood-harvesting enterprises lo- cated in the upper parts of the Pinega, Onega and Vychegda rivers. Another negative outcome of the transition was the collapse of road building in 1993–1996 when a complete abolition of state funding, which has previously supported loggers, took place. Today, logging enterprises must bear the expenses alone, without any state investment (Backman 1999: 454). In the former Soviet Un- ion, some 25–45% of the money invested in log- ging enterprises was spent on the construction of log haulage roads and purchase of transport equipment. Thus, the logging enterprises’ lack of such financial resources led to major losses that FENNIA 181: 1 (2003) 17Development of forest sector in the Arkhangelsk oblast... have been estimated at 2.5–3 million cubic me- tres of timber annually (Orlov 2000). Future de- velopment in the forest industry is heavily de- pendent on the improvement of existing infra- structure and the creation of new roads. The re- gional government, the “Regional Department of Road Management” (Arkhangelskavtodor) and the Union of Forest Industrialists (Soyuz lesopromy- shlennikov) have together been the main initia- tors of a program of development in this direc- tion. During the 1990s, forest resources were ex- ploited along the existing road infrastructure, which today has further lengthened the overall mean distance of timber transportation by 60–80 kilometres (over 100 kilometres for some enter- prises). In early 1997, the annual programme “On construction, reconstruction and maintenance of the roads”4 was developed, partly financed by means of a regional road fund (Orlov 2000). The existing road network generally lacks hard sur- face, meaning that modern vehicles operating at maximum carrying capacity and potentially high speed cannot be used on the roads year round. Most of the roads have not been designed to with- stand this increased pressure, as they are often wooden-planked, narrow gauge railway, ice or dirt tracks, very few being of permanent charac- ter (Trubin 2000a). The most important role in the development of river transport is played by the Northern Dvina, which connects the administrative centre, Arkhan- gelsk, with settlements along the river. In terms of the volume of forestry goods transported by water, the Northern Dvina river system is in third position in the Russian Federation (Layton & Pashkevich 1999). Most of the logging companies that rely on rivers as the main means of transpor- tation have been investing considerable sums of money in deepening the riverbed. However, the complete collapse of the system that previously subsidised this practice has also resulted in the Northern Dvina becoming ever more shallow through sedimentation (Serebryannyy & Zamotaev 1997). This hampers the delivery of timber by riv- er ships, its rafting from up-river areas and its han- dling in the port (Brodin 2000). Since the beginning of the transition, logging enterprises relied on the existing road and river network due to the lack of funds for introducing new patterns of transportation. As the forest sec- tor recovers, pressure on the existing infrastruc- ture increases. Loggers have found themselves in a very difficult position since the economic situ- ation for most of them remains difficult, and only few enterprises are actually able to allocate enough funds for the further improvement of qual- ity and quantity of the infrastructure. Therefore, a vital cooperation among regional administration, road-construction firms and industrialists has been established in order to reduce the cost burden on the logging enterprises. Better accessibility of the forest resources due to an improved transport in- frastructure would lower production costs and thereby stimulate market performance of the for- est sector. Forest Industries Today Today, the oblast’s forest sector comprises of a to- tal of 1341 enterprises including 582 wood-har- vesting units, 728 woodworking enterprises (in- cluding sawmills, woodworking factories, furni- ture factories and a veneer factory), and 31 chem- ical wood-processing enterprises (3 pulp and pa- per mills, 2 hydrolysis factories, 1 pulp factory and 25 other plants belonging to the forest chem- ical industry) (Pashkevich 2001: 105). It should be noted that some 43% of the total wood-process- ing enterprises are located in the regional centre, Arkhangelsk. Lesser centres are at Novodvinsk, Onega and Kotlas. Fig. 2 locates principal logging enterprises, together with major manufacturing facilities, along the two main railways including (N–S) Permilovo, Plesetsk, Shalakysha, Konosha, and (W–E) Velsk, Shangaly, Kotlas, Koryazhma. Taking 1990 as the base year, a decline in the outputs of all major forest commodities is evident and often drastic (Table 1 and Fig. 3). The whole forest sector is undergoing a deep economic cri- sis and the financial position of many forest-based industries is unstable (Backman 1999). Decline in the production of main commodities can be part- ly explained as a result of the previously designed system, which has been neither economically ef- fective nor sustainable. The environment in which the forest sector operates has been altered by swift introduction of market reforms such as rapidly ris- ing energy prices and transport costs as a result of price liberalisation, and complete and abrupt abolition of state subsidises for logging activities and forest management practices. The type of market economy that has been developed today cannot generate the financial resources needed to compensate for those previously supplied by the State. 18 FENNIA 181: 1 (2003)Albina Pashkevich Fig. 2. Location of the principal forest-based activities in the Arkhangelsk oblast in 2000 (Departament... 2000a, 2000c; Pashkevich 2001). Since 1998, the Arkhangelsk oblast forest sec- tor has shown signs of recovery. During the peri- od 1997–2000, most of the wood-harvesting en- terprises benefited from privatisation and linkag- es to powerful wood-processing enterprises (Grevtsov 2000b; Kondratev 2000a, 2000b). Con- siderable amounts of capital have been invested in order to modernise logging machinery, provide firms with fuel and allocate funds for seasonal fell- ing activities. Therefore, the harvested volumes began to increase again in 1999. The dynamics of the total oblast timber harvest over the past 10 years reveals that the decline in production be- gan in 1990–1991, falling from 22.6 million cu- FENNIA 181: 1 (2003) 19Development of forest sector in the Arkhangelsk oblast... bic metres to less than one-third of the allowable cut in 1998 (Table 1). Since then, the harvests in 1999 and 2000 increased slightly. This trend is predicted to continue until the year 2005, with the total wood harvest reaching 14 million cubic metres annually, which still would constitute only about 62% of its 1990 level (Departament… 2000a: 5). Currently, the Arkhangelsk oblast is one of the largest suppliers of timber in Russia, with 11% of the total federal timber production and approxi- mately one-third of Russian forest exports to West- ern markets (Chuiko 2000: 7). The considerable decrease in forest use (from almost 26 million cu- bic metres in the mid-1980s down to 8-9 million cubic metres in the end of 1990s) did not over- throw the dominant role of the forest industry in the oblast’s economy in general. Fig. 3 shows a more considerable decrease in total harvest during the 1990s, compared to a de- cline in the manufactured goods production vol- umes. This phenomenon can be explained partly by the fact that major manufacturers have begun to supplement their raw material supply with im- ports from neighbouring regions, reaching a lev- el of some 3 million cubic metres in 1999 (De- partament 2000c: 5–6). The volume of wood har- vested in the oblast is still not able to fully meet the demands of manufacturers especially for pulp- wood and sawn timber. In early 2000, positive performances by most of the oblast’s logging companies led to a surplus of pulpwood as its share in total timber produc- tion reached 60–80%. Pulp and paper mills had managed to obtain their raw materials for lower prices and were acting as monopolistic buyers, resulting in a considerable fall in prices for the locally produced raw material (both pulpwood and wood chips). The evident overproduction of pulpwood in the oblast affected sawn wood man- ufacturers unable to meet their requirements for the timber supply. Thus, rising prices for the avail- able raw material lowered the profitability of the export of sawn timber, when the price of sawn timber fell under US$100 per cubic metre (Grevtsov 2000b: 7). Despite the falling export prices, the produc- tion of sawn goods increased at a slower pace in the year 2000. However, as most of the large and medium-sized sawmills in the region have already attained rather high volumes of production and Table 1. Volume of wood harvested and forest industry production in the Arkhangelsk oblast during 1990–2000 (Gos- komstat… 1991; Departament… 2000a, 2000b). Year Total Sawn Pulp Paper Card- Chip- Fibre- Ply- wood harvest goods 1000 1000 board board board wood million m3 1000 m3 tons tons 1000 tons 1000 m3 million m2 1000 m3 1990 22.6 5011.0 2154.3 396.5 628.1 149.4 22.4 50.4 1991 18.5 4096.9 1881.2 364.4 559.4 171.8 22.1 53.9 1992 18.0 3488.1 1657.0 299.1 460.1 140.8 20.5 44.2 1993 14.1 3200.6 1529.4 304.0 417.3 133.4 21.5 40.4 1994 9.9 2292.1 1211.6 177.1 367.6 40.6 15.1 24.0 1995 9.0 1737.4 1344.4 211.1 399.7 21.2 13.5 25.4 1996 8.1 1605.0 1021.3 208.4 333.0 5.5 13.0 17.0 1997 8.2 1542.3 1279.1 195.0 483.0 2.7 14.5 24.8 1998 7.8 1519.0 1200.0 215.7 459.7 – 12.6 32.5 1999 8.0 1700.0 1505.0 253.0 575.0 – 17.5 47.1 2000 9.5 1850.0 1600.0 270.0 585.0 – 18.8 50.0 Fig. 3. Forest sector production in the Arkhangelsk oblast in 1990–2000 (in percentage of the production volume in 1990) (cf. Table 1). 20 FENNIA 181: 1 (2003)Albina Pashkevich small-sized sawmills are orientated mostly to- wards domestic supply, there will be no potential for substantial increase in production of sawn goods (only to reach the volume of 2.5 million cubic metres) (Departament... 2000c: 5–6). In or- der to achieve higher prices for the sawn goods, producers must continue improving the quality of the final product and widen the range of goods produced. In 2000, regional pulp and paper mills had managed to produce some 1.6 million tonnes of pulp reaching still only 74% of the 1990 level. Plans exist to increase production to 1.9 million tonnes by the year 2005 (Departament... 2000c: 5–6). The graph also reveals that the oblast’s pulp and paper industries have focused mostly on the production of semi-processed commodities such as pulp, only half of which is subsequently refined further into finished commodities (Table 1). Thus, the outcome of the first ten years of tran- sition can be summarised into three distinct peri- ods (see Figure 3): 1) 1990–1993 – beginning of the transition pe- riod, with a disruption of the previous economic system causing a gradual decline in production since state subsidies were no longer available, al- though some still remained within the system; 2) 1993–1997 – period of initial restructuring of the economic units affected by the transition, resulting in a drastic decline in production due to the limited accessibility of forest resources, since state money was no longer available for pur- chasing new machinery or for road construction; 3) 1998–present – gradual increase in produc- tion (expected to continue) followed the devalu- ation of the rouble during the financial crisis of 1998, making profitability of forest exports high- er. However, the process of restructuring within the sector also increased in the rate of forest use and has supported it to start competing within a market economy. The export trade The Arkhangelsk oblast plays an important role in Russia’s export of forest commodities, comprising some 22% of total sawn timber and 27% of the total export of pulp and paper products (Chuiko 2000: 7). Several important conclusions can be derived from the latest available statistical data on exports (1993–2000). During the 1990s, the ex- port volumes were relatively stable compared to the industrial output of the sector. Although the export of all forest commodities experienced a decline at the beginning of the transition, the late 1990s, and 1997 in particular, can be regarded as the starting point of recovery for the region’s export trade. The volume of forest exports recov- ered faster than did the production (Nilsson 2000). Four forest commodities have traditionally ac- counted for the majority of forest exports from the oblast: pulp, paper, cardboard and sawn goods (Departament... 2000b) (Fig. 4). It is noticeable, however, that the export values of raw materials and semi-refined commodities such as round wood and sawn wood have fallen, whereas the refined products of the mechanical and chemical wood processing industries, pulp, paper and board, have gained importance. The production of high value-added goods has more capital be- hind it and has been in a stronger position during the process of economic restructuring, while the raw material suppliers have slipped into a weak- er and more dependent role (Layton & Pashkevich 1999: 63). One of the advantages of the transition to mar- ket economy is a widening of the possibilities for the forest producers to supply both domestic and international markets. Although Russia’s domes- tic demand decreased over the past decade, it is slowly beginning to recover (Tazhun, 2000). Re- gional firms operating in the European markets are experiencing heavy pressure to meet new require- ments of quality and environmental control brought about by European Union laws. One pos- sible option is a certification of forest goods, which would make it easier to find a niche on the European market and to assure buyers of the en- vironmental safety of the product. Some wood- Fig. 4. Changes in the composition of forest exports of the Arkhangelsk oblast in 1990 and 2000 (Departament… 2000a, 2000b, 2000c; Layton & Pashkevich 1999). FENNIA 181: 1 (2003) 21Development of forest sector in the Arkhangelsk oblast... processing companies have already initiated this process. Eventually, it would also enhance the competitiveness of Russian forest goods. During the past few years (1998–2001), the overall mar- ket behaviour of many Russian exporters has changed in order to facilitate secured delivery and better marketing of the firms’ performance. Firm Restructuring Several examples of company restructuring have been examined to illustrate the type of changes that occurred during the period of economic tran- sition in the 1990s. In brief, this restructuring has been achieved through the following activities: • Privatising state-owned companies, concen- trating shares among fewer owners and tight- ening controls on bankrupt enterprises (Grevts- ov 2000a); • Modernising all stages of the production chain (e.g., logging equipment, implementation of non-chlorine bleaching techniques in pulp and paper production) (Carlsson et al. 2000: 8; Severov 2001); • Horizontal and vertical integration amongst the forest commodity producers, which brought manufacturing businesses closer to each other and to their raw material bases (Pa- shkevich 2001); • Fulfilling the customer requirements better, and increasing productivity (Val’kov 2000); • Activating partnership amongst the biggest pro- ducers in the region to govern (administrate) price policy and lobby forest sector interests at federal level (Carlsson et al. 1999; Bulatov 2000); • Ensuring company credibility by co-operating with the banking system (Kalinin 2000; Parfen- ova 2000); • Utilising the capacity of the diverse regional educational systems (secondary and profes- sional) and designing a social policy of the en- terprise (summer camps for children, sea re- sort vacations for employees, bonus system for the most efficient workers) (Drachev 1999; Pa- shkevich 2001) and different kinds of sponsor- ship similar to those provided by Swedish for- estry firms (Carlsson et al. 2000), including support of local sport teams or cultural events. The emergence of the new organisational struc- ture within the sector is seen by some as ‘the old pattern of centralisation have been re-institution- alised’ (Carlsson et al. 1999: 74). The process of change we have witnessed since the mid 1990s is, however, a different type of structural organi- sation of the forest sector compared to the old structure. The basis for the formation of larger in- tegrated companies by which loggers are linked to the main processing industries has changed. Today, the process is based on competition, co- ordination and economic co-operation among the partners involved, instead of being imposed by the State. There is certainly a degree of centralisation taking place as well, as the manufacturing capac- ities located in the biggest cities are often ‘in charge’, not only of buying the shares of the log- ging enterprises, but also of facilitating the proc- ess of their economic restructuring. Another feature that many Western researchers considered to be strongly connected with the past is the relationship between the forest enterprises and the local population, which continues to be seen by some as a hindrance to companies’ bet- ter performance (Tykkyläinen & Jussila 1998; Hamilton 1999; Piipponen 1999; Pallot & Moran 2000). The fact is that most of the harvesting en- terprises deliberately choose to take the respon- sibility for the main social infrastructure – hospi- tals, schools, clubs, shops, and even power sta- tions – of the forest settlements. In this way, they re-assure employees that their basic needs will be satisfied. Eventually, the firm itself benefits from an increase in productivity, as workers are socially secure and have fewer worries about the future. Some of the ‘new’ traditions taken into account by most of the forest enterprises were in fact in- troduced during the Soviet times, such as ‘social- ist competition’, more widely known as piece- work contracts, the only difference being that dur- ing Soviet times workers were granted medals rather than money. Today, this has been accepted again and seems to have become a popular meas- ure of encouraging employees to be productive and concerned with the performance of their own firm. Conclusions By the beginning of restructuring, the output and consumption of the principal timber products dwindled to between a half and a third. The de- crease in production of main forest products in the region followed a pattern similar to the other Russian forest-producing regions, especially in the European part of the country (neighbouring Re- 22 FENNIA 181: 1 (2003)Albina Pashkevich public of Karelia) (Piipponen 1999), even if the forest product output of the Siberian regions has declined even more drastically (Backman 1999). However, signs of organisational stabilisation have appeared, followed by a higher degree of co- ordination among the actors within the forest sec- tor. The privatisation of forest industries and the limitation of the State’s role laid the foundation for the development in the oblast’s forest sector. The emerging free market policies helped many regional industrialists to expand even further to- wards the export markets. It is obvious that forest industrialists have become more active in promot- ing and lobbying their own interests at various levels of government. To ensure the future development of all branch- es of the forest sector, the industrialists must car- ry out the necessary technical and technological modernisation. In order to improve the competi- tiveness of their products (such as paper, card- board, plywood, fibre- and chipboard) the mod- ernisation of the chemical wood-processing in- dustries must continue with the aim to reduce the negative impacts on the environment. An in- creased level of wood harvest in the districts fur- ther inland (the Leshykonskoe, Verkhnaya Toima, Pinega and Onega districts) will require construct- ing new forest roads and improving the quality of the existing ones. The oblast has long served as one of the largest suppliers of forest products to international mar- kets and has most of its trading partners in Eu- rope. It is important to keep a high profile of the oblast’s forest products by fulfilling the require- ments of sustainable production and customer demands. The sustainable growth based on invest- ment, innovation, technical progress and structur- al change has already been initiated in the ob- last. The 1990s was an extreme decade, judging by the consequences on the overall performance of Russian economy. There have, however, been some considerable achievements made, which are reflected in the development of the Arkhan- gelsk oblast’s forest sector. ENDNOTES 1 The Arkhangelsk oblast is located in the north of the European part of the Russian Federation. It covers an area of 587 400 km2, comprising 3.4% of Russia’s territory, and is situated between the Repub- lic of Karelia to the west and the Komi Republic to the east. The northern boundary consists of the shores of the White, Barents and Kara Seas (Arctic Ocean). The Vologda and Kirov oblasts are in the south, the Tumen oblast in the northeast. The Arkhan- gelsk oblast also contains the archipelagos of Franz Josef Land and Novaya Zemlya, and the Nenets Au- tonomous okrug (NAO). NAO has an area of 176 700 km2, which is almost one-third of the ob- last (Fig.1). In terms of size, the oblast is the fourth largest in the Russian Federation, after Tyumen ob- last (1 435 400 km2) in West Siberia, Magadan ob- last (1 199 100 km2) in the Far East and Irkutsk ob- last (767 000 km2) in East Siberia. 2 ‘Wood harvesting’ and ‘logging activities’ are used in the paper as synonyms. 3 Arkhangelsk Industrial centre comprises the three largest cities – Arkhangelsk (administrative cen- tre of the oblast), Novodvinsk and Severodvinsk. 4 In Russian, “Programma stroitelstva, remonta i soderzhanija avtomobilnykh dorog.” ACKNOWLEDGEMENTS This paper is one among a number of studies con- ducted as a part of the EU-funded ‘Barents Sea Im- pact Study’ (BASIS). Working reports concerning the development of the forest sector within the Arkhan- gelsk oblast have been researched and written to- gether with Assistant Professor Ian Layton. 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