On April 8, 2021, a press conference was held on the topic: “For the development of Ukrainian woodworking, a balanced law” On the wood market “is needed. The online event was organized by the Rivne Agency for Attracting Investments and Investing Services InvestInRivne. The Ukrainian Association of Furniture Manufacturers took part in the conference.
The press conference was broadcast on the website and YouTube channel of Ukrinform: https://www.youtube.com/user/UkrinformTV
The lack of effective regulation of the wood market leads to a number of problems for woodworking and furniture companies. Experts attribute this to the imperfect regulation of timber sales. Neither the resolution of the Cabinet of Ministers of Ukraine №1178 nor the drafts of other resolutions and bills are perfect. All of them need significant refinement, say, industry representatives.
The coordinator of the committee of the woodworking and furniture industry of the European Business Association Yevhen Kuzmenko stressed that the biggest problem of the industry is the shortage of raw materials. This leads to a decrease in production rates, lower sales rates, staff reductions.
Key factors that lead to this market situation:
- lack of plans to hold auctions and hold auctions in violation of regulations;
- not the entire volume of materials is put up for quarterly auctions, but only a part, the rest – for additional auctions, which significantly complicates the planning of the production process and forecasting raw material prices;
- ugly pricing and overstating of starting prices at auctions;
- cases of non-fulfilment by individual forestries of obligations to supply raw materials in accordance with the concluded agreements based on the results of auctions, which leads to disruption of production programs of enterprises and deliveries of products to customers.
This state of affairs is due to imperfect regulation of the sale of raw wood and control over its sale. There are a number of issues that require specialized law to regulate the timber market. At the same time, the registered projects also need to be finalized taking into account the comments of the business community.
Vitaliy Ovsiyuk, Head of the Legal Department of ODEK Ukraine LLC, said that representatives of the furniture and woodworking industry are convinced that the regulation of the wood market should be based on the following principles:
- in order to provide real raw materials to real producers as a priority, to stimulate the deepening of wood processing and efficient use of forest resources, it is necessary to provide mechanisms for selling wood both at auctions and under long-term annual contracts;
- establish a transparent mechanism for forming the cost of raw wood, ie the starting price of the lot, which should take into account the market situation;
- own woodworking divisions of state forestry enterprises must participate in auctions on equal terms with all woodworking enterprises; in order to ensure a level playing field, it is proposed to restructure state forestry enterprises by separating woodworking enterprises.
- establish effective measures for violating the rules of bidding both for buyers who do not buy timber and for state forestry enterprises that do not fulfil contracts for the supply of timber purchased as a result of these auctions.
Oleksandr Kovalchuk, People’s Deputy of Ukraine and Deputy Chairman of the Verkhovna Rada Committee on Finance, Tax and Customs Policy, noted that he and his team had joined the process of improving the timber market.
– The market must be transparent, the rules must be the same for everyone, we must provide access to raw materials for those companies that deeply process and create the greatest added value of their products. But to apply the cascade method of selection of applicants for raw materials, – he emphasized.
Bohdan Tsupryk, Chairman of the Committee of the Woodworking and Furniture Industry of the European Business Association, believes that Bills 4197 and 4197-1 need to be significantly finalized together with representatives of the relevant associations of furniture and woodworking associations. After all, the current versions of the bills do not solve the problems of industries.
– The Association addressed a number of deputies with a justification of its position and proposals to improve regulations. It is time to finally establish the systemic rules of the timber market. But these rules should support the development of domestic woodworking. Representatives of relevant associations have already begun joint work on finalizing the bills. We summarized the best international experience, systematized information on the legislation of Poland, Bulgaria, Serbia. We sent this information to MPs, the Prime Minister, the Minister of Environmental Protection, – said Mr Tsupryk.
Natalia Pokinska, General Director of KRONOSPAN UA LLC, stressed that stability, transparency and rules of the game are important for the company, according to which it is possible to develop activities.
She presented the Concept of the market, which reflects the proposals for the sale of timber through electronic trading systems on the principle of cascading and the sale of timber on a public offer.
– We have analyzed the bills of other countries on trade, timber distribution, EU directives that support the sustainable development and management of forestry and the deepest possible use of wood, – said Ms. Pokinska.
Oksana Donska, a member of the Board of the Ukrainian Association of Furniture Manufacturers, said that the Ukrainian furniture industry has huge potential. Its sustainable development should be based on a stable and transparent timber market.
The furniture industry is more than 9,000 companies that produce products with high added value. For example, take serial furniture. Here 1 hryvnia cost of wood turns into 30-50 UAH cost of the finished product.
The industry employs more than 100,000 people. The industry is export-oriented. Exports grow annually by 13, 5%.
However, with a comparable amount of forest resources, the volume of exports in 2020 to Ukraine – $ 750 million, and in Poland – $ 14.8 billion. Poland ranks third in the world among furniture exporters, and Ukraine – 39.
The goal of the Ukrainian Association of Furniture Manufacturers is to bring Ukraine into the top 10 exporters. To do this, furniture makers unite in clusters, invest in the development of production, create private educational institutions for training.
With the support of the Government and the USAID Competitive Economy of Ukraine Program, the Furniture of Ukraine Business Expo will be held for the first time in Ukraine on June 15-27, 2021. Today 1769 participants from 53 countries of the world registered for the event.
However, furniture manufacturers are asking the Association to join in addressing the shortage of wood. After all, there is a risk of non-fulfilment of international contracts. Without an immediate solution to the problem of wood shortages and market stabilization, we will not be able to build a developed furniture industry in Ukraine and sell products with high added value to the whole world.
UAFM is ready to cooperate to bring the timber market out of stagnation.
The press conference was moderated by Yuriy Dyug, InvestInRivne Investment Manager and Investor Services Agency.