Prospects for the Northwestern Russian Forest Raw Material Harvesting during the Transition to a Market Economy

Abstract

This paper analyzes the long-term prospects of profitably harvesting the forests in northwestern Russia in a sustainable manner, indicating the potential short-to medium-term competitiveness of the Russian forestry in both domestic and international markets. We have chosen a systemic approach (a modification of Porter's Diamond) to investigate the threats to and possibilities of the Russian forestry. This means that we consider not only factor conditions, but also demand conditions, the presence and status of related and supporting industries, firm strategy, structure, and rivalry, and the role of government in creating a competitive Russian forestry. Our analysis of the factor conditions prevailing in the mid to late 1990s indicates that the prospects for the Russian forestry could be very good. However, this potential will be realized only if substantial problems can be solved with regard to revising government policy, clarifying property rights, developing and maintaining the infrastructure, and achieving a stable and not too rapid increase in costs. Furthermore, we think that domestic demand is a weak link and that a revitalization of this demand is necessary.