REVISED TNA IN ARKHANGELSK REGION - Part of component 2: "Improved educational structure and training delivery system in the forest sector at ...

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REVISED TNA IN ARKHANGELSK REGION

Part of component 2: “Improved educational structure and training delivery
system in the forest sector at Arkhangelsk region”.

                                             JANUARY 2004
                                             SILVECO LTD

                                                                             1
Content

Introduction
1. Previous TNA (Training Need Assessment)
1.1. TNA 1 of 2000-2001 yr. in Arkhangelsk area
1.1.1. The basic purposes and investigation phases 2000-2001 years
1.1.2. The basic results of research 2000-2001 years
1.1.3. The basic offers and recommendations based on results of research 2000-2001yr
1.2. TNA 2 (Training Need Assessment) in Leningrad area 2002-2003 yr.
2. Training Need Assessment in Arkhangelsk region 2004
2.1. Scheme of project realization
2.2. Technique of researches and processing of the information
3. Timber industry complex of the Arkhangelsk area
3.1. Developing trends in forest harvesting and forest management
3.2. Forest harvesting companies of the Arkhangelsk area
3.2.Forest Management Units ( FMU) of the Arkhangelsk area
3.4. General problems of the forest sector enterprises.

4. Description of the “model” enterprises
5.1. Small and average forest harvesting companies
5.2. Large forest harvesting companies
5.3. Forest management units (FMU)

5. Situation analysis
6.1. SWOT-analysis
6.2. Analyses of cause and effect relationships
6.3. Analysis of head problem (Ishikawa diagram)

6. Conclusions and recommendations

Annex
Glossary (terms and definitions from report)

                                                                                       2
Introduction

The North-West covers 9 % of the area of Russia and 10 % of its population lives here. The
region is favorably located concerning the internal and external markets. The affinity of export
deliveries creates favorable conditions for development of forest industry enterprises. The
volumes of forest harvesting in North-West makes about half of all – Russian. Last years the
forest complex develops dynamically. At the same time in regions the tendency of deterioration
of qualitative structure of forests, and decrease of their economic availability remains.

The territory of the Arkhangelsk region covers 589.9 thousand sq. km. Forests cover 39 % of this
area, agricultural land – 1.3 %, reindeer pastures – 24.2 %, islands – 19 %, the rest – rivers,
swamps, lakes. Total growing stock is 2454 mln. m3. Mature and over-mature forests makes
56,7%. The allowable cutting is 22462 thous. m3.(including 2383 thous. m3 in agricultural
forests). Factual use of allowable cutting is (for nowadays) about 44%. Forest using in territory
of area goes non-uniformly. It is connected to presence of the transport communications. On 90
% of the area, covered by forests possible for operation, intensity of forest using is below
normal.

The administrative – territorial scheme of the region is composed of the Nenetsk national area,
20 districts, 13 towns, 38 settlements of urban type, about 4 thousand rural settlements, Novaya
Zemlya (New Land) islands make part of the region.

Population of the region is 1 million. 493 thousand inhabitants, density of the population – 2.5
inhabitants per sq. km. Major part of the population lives along railroads and in the basins of big
rivers – Severnaya (North) Dvina, Vaga, Pinega, Onega, Mezen.

Severe climate is conditioned by close location of the region to arctic seas and the Arctic Ocean.
Winter is cold with temperature as low as 26 degrees C. Weather is unsettled. Summer is cool.
The average temperature of July is 14 – 16 degrees C. The length of the day ranges from 3 hours
30 minutes (December 22) to 21 hours 40 minutes (June 22). In the economic system of Russia
the Arkhangelsk region stands out as an area of timber, woodworking and pulp-and-paper
industries, timber export, fish industry and a number of others, which are described below.

The population of the region is about 1500 thousand people. Urban population accounted for 74
%, rural population – 26 %. Density of population was 2.5 inhabitants per sq. km. Active
population are 900 thousand people (62 %), including 578 thousand people (84 %) employed in
regional economy. The number of pensioners is 260 thousand people.

The forests have the largest value for the economy of the Arkhangelsk area. All prospects of
development of almost all life spheres in Northern Europe connect to forests. Despite of
intensive forest cutting in the past, the Arkhangelsk area remains rich in forest resources. The
forests of the Arkhangelsk area are rather old, with complex age structure, low increment and
stock. Because of their complex structure the forests have a high natural stability and
biodiversity. The long-term forecasts of forest using for Arkhangelsk area show possible
increasing of harvesting volume till 30 million m3/yr. The forestry of the Arkhangelsk area is a
determinant branch of the economy. The well being of the local population, economic- and
social status of the region are depending on performances of the forest industry. Nevertheless
forest fund is used inefficiently by number of the reasons:
    - non-uniformly use of allowable cutting;
    - reduction of forest inventory volumes;
    - weak development of a transport infrastructure;
    - prevalence of low-effective mechanisms of forest fund use;

                                                                                                 3
-   illegal wood turnover;
   -   raw orientation of “forest” areas with weak development of own processing;
   -   growth of expenses of the enterprises;
   -   problems with attraction of the investments;
   -   growth of work productivity lags behind growth of wages;
   -   weak enterprise activity on creation of additional manufactures;
   -   reduction of working number in branch, growth of unemployment.

The prognosis of program “Ecology and natural recourses of Russia for 2002-2010” assumes the
stabilization of volumes of forestry measures at essential improving of their quality and
effectiveness. It is supposed to increase the volume of main usage up to 30-40 %. Together with
intermediate and main cuttings it is planned to achieve 200 million m3/ yr. The main growth is
expected from intermediate felling. Basis of forest using strategy in Russia should be a principle
of involving in operation of all sites of forest fund with presence of profitable wood resources for
industrial preparation. The increase of harvesting volume is also provided by involving in
operation new not mastered territories, and increase of intensity of using in the mastered forests.
Thus the features of harvesting in untouched forests should be taken into account. Pernicious
consequences of cuttings in old-age forests shows, that the harvesting culture and knowledge
should be lifted on a new level. The accessibility of forests must be increased by road building
all over the Russian Federation. With the purposes of maintenance of forestry development in
2003-2010 years it is necessary to make active the decision of tasks on financing, including the
foreign investments, means of public and international funds, to use leasing more widely.
According to the recently made studies (Silveco ltd 2003) the basic problems of the forest sector
enterprises can be divided into following groups:

   1. Bad working conditions in the enterprises
   2. Long distances for workers and wood transportation
   3. Problems in the wood market, monopoly
   4. Criminality in the forest business
   5. Problems in engineering and equipment
   6. Problems in infrastructure maintenance and development
   7. Problems related to the young specialists and qualified workers
   8. Social problems
   9. Lack of conformity of the educational levels, professional competence
   10. Problems in work with local authorities
   11. Legislative base, forest legislation
   12. Tax policy
   13. Problems with re-structuring of export production
   14. Lack of long-term strategy in companies’ development

Part of these problems (probably 3, 7, 9, 10, 13, and 14) can be resolved by realization of
appropriate educational services. The majority of problems are indirectly connected to an
educational level and competence of the personnel education.

The maintenance of the further successful training for the enterprises of forest sector of all
Northwest regions requires development of the appropriate system of continuous education
distribution. For this purpose the precise distribution of roles and areas of the responsibility of
educational establishments is necessary by definition of target groups and subjects of training. At
first it is necessary to study opportunities of continuous training on an example of the
Arkhangelsk area and, being based on researches, to create acceptable model for other regions of
Northwest of Russia. In this direction also works Pilot Project of World Bank on sustainable

                                                                                                  4
forest management, developing model of granting of educational services for forest management
enterprises of Russia.

At development of the strategic concept of system of granting of educational services in forest
sector it is necessary to take into account opportunities as All-Russia Institute of Improvement of
professional skill of forestry personnel and its regional centres, educational institutions
(universities, colleges, professional schools), and also branch research institutes, at which the
educational centres can be created.

In connection with prospective high requirement for training the personnel of harvesting and
forestry enterprises, educational institutions and the centres should supply themselves with the
prepared teaching staff.

All this activity will require the authentic information on the present and perspective needs for
educational services of the various enterprises of forest sector in view of a variety of used
technologies, arrangement of the enterprise, social conditions etc.

As the base information for the given work the research of necessity of educational services for
the managers, experts and workers, carried out in 2000-2003 years at the enterprises of forest
sector of the Arkhangelsk and Leningrad areas has served.

1. Previous TNA (Training Need Assessment)
1.1. TNA 1 of 2000-2001 yr. in Arkhangelsk area

The research was carried out by group:
Silveco LTD, Finland –
Markku Iso Markku – Management of practical work of the project, planning cycle, report
prepare
Arkhangelsk State Engineering University –
Sergey Koptev., Elena Dybtsyna. – material collection, interviewing, report writing
All Russia Institute of Qualificatoin Improvement in Forestry (ARICEF)-
Petrov A.P. - development of manual of evaluation; the preliminary analysis of the assembled
results
Danish Forestry College, Danmark-
Annet Munk Sorenses – methodology on information collection development, training to results
analyses

1.1.1. The basic purposes and investigation phases 2000-2001 years (circuit):

The purpose of the project consist in the analysis of the new tendencies in the qualitative and
quantitative requirements to the personnel of harvesting and forestry enterprises. First phase of
project represented the analysis of forest education in Russia as a whole and in the Arkhangelsk
area in particular. The purpose of the second stage consists in the analysis of need in educational
services for the enterprises of forest sector. Within the framework of the second stage of the
project the qualitative and quantitative requirements to a qualifying level of those or other chiefs,
experts and workers, and also tendency of demand were analyzed (see annex 1, table. 1.1). At the
third stage the results of the analysis of needs were compared to existing opportunities of forest
education in the Arkhangelsk area, the recommendations for practical planning of the future
programs of cooperation were developed.

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1.1.2. The basic results of research 2000-2001 years:

The general theoretical requirement for training the personnel of the enterprises of forest sector
(timber industry enterprises) is submitted in a fig. 1.1. On this circuit the personnel working now
at enterprises is submitted. The number of the personnel of forest harvesting companies
(especially of the workers) tends to reduction in connection with introduction of modern
technologies. But this figures can’t decrease lower than are practically determined by
possibilities of new technologies introduction. According to the experts estimations in a near
future the share of modern technologies in total amount of forest harvesting can not exceed 50
%. This figure is determined by many factors. For forest industry sector of the Arkhangelsk area
is approximately of 7-8 thousand workers. The number of the chiefs and managers can remain
former in absolute expression and increase in relative.

General subjects of training for forest sector companies are determined in dependence of
management level to which belong the peoples. For top managers it is necessary to carry out
continuous training in planning and management. Specialists and average link managers need to
have training in legislation, ecology, new harvesting or forestry technologies. For workers it is
necessary to renew of skill and knowledge in silviculture and ecology, make development of
professional skill. It will take different courses at different training institutions.

                                 Forest sector
                       Total personnel about 65 thousand

      Forest harvesting and              Wood working                  Pulp and paper
          management                   Total - 19 thousand.              production
       Total- 26 thousand.                                           Total - 20 thousand.

  Top managers                       Continuous training in planning and management
  1.5 thousand.

 Specialists and average
 link managers                        Extra training in legislation, ecology, new technologies
 4 thousand.

 Workers, operators                   Renewing of skill and knowledge in silviculture and
 About 18- 20 thousand                ecology, development of professional skill

Fig. 1.1. General requirement in training of personnel of forest sector in Arkhangelsk area.

In connection with a natural loss and shift of population the enterprises of forest sector will need
injection of new forces. The requirement of enterprises for the new experts (on the basic
integrated categories) on the nearest prospect is estimated in the large enough figures (tab. 1.1).
Despite of personnel reductions, the enterprises feel growing need for the qualified workers

                                                                                                  6
capable to carry out difficult kinds of jobs on preparation, operation of forest harvesting fund
and reforestation.

Table.1.1. Possible perspective requirement of forest sector enterprises of Arkhangelsk area in
new specialists and workers (additionally to now working)

                                                                     Requirement in
                      Specialty, occupation                          specialists in nearest 5
                                                                     years
Forestry engineer                                                               100
Forest harvesting specialist                                                    125
Tecnician specialist                                                             80
Forester                                                                        150
Qualified workers                                                               750
Specialist on information technologies                                           60

The basic changes of the requirements to education are expected in the field of application of
computer technologies and modern harvesting methods in work of the forest sector enterprises.
For the future specialists this is a problem that has to be recognized and solved by educational
institutions in conformity with the new educational programs. The educational institutions of
forest sector also should give attention to own problems of internal and external character
connected mostly to a bad material situation, separation from industrial activity and large
enough reserves of educational process perfection for conformity of an educational level to the
modern requirements.

The organization of a retraining system is necessary for the nowadays-operating experts and
workers. The requirement for retraining of already working personnel at the enterprises will
represent figures of other order, taking into account, that in forest sector of the Arkhangelsk
area is engaged about 65 000-70 000 men. From general number of forest harvesting personnel
about 1,5 thousand are leaders and directors, for which the professional standard of the top-
manager is required. Approximately 4 thousand the non-production workers and chiefs of an
average link have average technical (college) and higher education and need improvement of
professional skill or retraining in connection with changes in legal questions new ecological
requirements, technical and technological progress. Other personnel (about 18-20 thousand) are
submitted by working trades, from which 8-10 thousand are tree fellers and operators of trailing
machines (skidders), which job requires the certain skills and knowledge in area of silviculture
and ecology.

The offered educational services should as far as possible follow an existing system of staff
retraining and have to correspond to the programs of educational institutions of forestry. So, a
perspective enough direction is the development of distance training system. But the workers of
forest sector enterprises concern to these innovations cautiously enough (less quarter of
interrogated considers to possible application of distance training in an existing situation),
preferring traditional methods.

1.1.3. The basic offers and recommendations based on results of research 2000-2001yr.:

Training institutions of forest profile:
- To coordinate the educational programs with needs of the enterprises of forest sector
- To develop continuous system of teachers training
- To develop modern system of qualification improvement courses on the basis of joint efforts of
regional educational institutions and ARICEF

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- To spend the advertising company of given educational services (through the Internet - sites,
TV, direct job with the customers)

Forest sector companies:
- To participate in development of educational establishments
- To encourage positive aspirations of the workers of the enterprise in increase of the
educational level

State bodies:
- To develop the long-term regional program of development of a professional level of the
experts of a forest structure
- To improve an investment climate in wood sector

Within the framework of the international projects:
- To develop the special educational programs for distance training
- To spend seminars and other open measures for administration and experts for study of
positive experience

1.2. TNA 2 (Training Need Assessment) in Leningrad area 2002-2003 yr.

In general, the purpose of performing TNA was to provide possibilities for determining the
training areas with the most urgent need, where training will provide the greatest effect, and
where companies in question have agreed with the needs and therefore are interested in
investing into training courses, either in terms of time or/and funding.

The purpose of this specific TNA was to analyze tendencies of requirements for workers and
managers (and specialists) at forest enterprises and Forest Management Units (leskhoz) in the
whole Leningrad region. It was aimed at revealing the possibilities for increasing the overall
performance of the forest management and forest industry enterprises through personnel
training, development of a long-term policy for technology optimization, and creation of a basis
for further improvements.

The study was carried out by an international group under the guidance and financing of the
Ministry of Agriculture and Forestry in Finland.

The basic tools applied for information collection were interviews of personnel of the companies
(which were previously selected as “models” and represent the branches in average) and a
written questionnaire filled in by various departments of the companies according to their area
of responsibility. The methods used for data processing were swot-analysis, flow-chart
diagrams, and cause-effect –analysis. The results have been presented in the form of a Training
Plan for the “model” companies and Forest Management Units and further generalized to an
estimation of quantitative training needs in the Leningrad region.

Main results of TNA

Forest harvesting companies

To simplify the results, one could say that the needs for training are rising from the point of view
of companies from the need to an overall improvement of activities and attempt to higher
productivity. Training is rated as one of the most important tools to find development, but the
companies are not ready to invest into it. The training needs for the management occur in the
subjects of general management and planning, economy and business and forest certification.

                                                                                                  8
The medium level management and specialists need training in wood markets and marketing,
development of forest harvesting and to adopt computer based methods in their work. The needs
for training among the forest workers are upgrading of skills in forest harvesting.

Forest Management Units (leskhozes)

As expected, the need for training in the Forest Management Units is huge comprising
practically all the forestry activities aiming both to upgrade professional skills and to meet the
requirements of new tasks and duties. The training is regarded rather high among the forest
specialists; among methods to increase an overall enterprise performance the most effective is
considered the change of payment methods (probability that it will influence is appreciated in 50
%). On the second place is the personnel training (30 %) and on third auditing of working
methods (20 %).

The needs for training in the Forest Management Units are for the top management level in the
subjects of legislation and administration, general management, economy and public relations.
The medium level management and specialists need training to upgrade their skills especially in
forest regeneration and silviculture and to adopt new tools and working methods in forest
planning and planning and implementing of forest harvesting. The needs for training among the
forest workers are corresponding with the ones of specialists but on practical level.

Conclusions

The key issue before one can provide competitive services for clients is to upgrade the skills and
knowledge of personnel, upgrade the facilities and improve the management practices of the
educational institutions. Without these functions it is hard to manage well in increasing
competition, and meet the requirements of various clients. One way for that is to network with
relevant foreign and domestic educational institutions and if found appropriate, become a model
or pilot educational entity for the forest sector. Except development of teaching, also the
organizational development has to be taken care of. The aiming of significant results will
require the establishment of departments for continuous training.

It is also essential that the management of these institutions will have close and operational
relationships with the regional and local administrations, as the case usually is, in order to be
able to promote particularly regional and local funding for upgrading the facilities and basic
infrastructure.

It is sensible to build up closer partnerships with the locally operating forest industrial
companies and other actors in the forest sector, and follow closely the working life development.
Without close contacts with them it is difficult to foresee the future development needs in various
labour markets and thus to be in the front of the development processes. Educational institutions
should graduate professionals for future, not to sustain and stick to the old traditions too much.

In future professionals educating the full chain of production processes should be covered as
they need to know more and more about their own position and importance for the final products
or services produced.

The next phase is training of trainees, after which various evaluations, either self- or externally
implemented ones should follow. These types of activities could and should be carried out
together with the clients, and the educational entity should try to be active and collaborative in
such activities. Also external educational consultants are being recommended to be used in this

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context, as it claims for deep understanding and special knowledge about educational
development and learning processes.

In addition it is of utmost importance to develop the content of curricula and other educational
services.

2. Training Need Assessment. Arkhangelsk area 2004 yr.

It was carried out by group of researchers:
Markku Iso Markku – leading, managing of research
Sergey Koptev – planning and preparing of research, material collection, report writing,
recommendations prepare
Olga Smirnova – material collection, preparing of recommendations.

2.1. Scheme of project realization

 Researches of 2000-2003 yr.         Base of research of 2004 yr

 Deepening of research in            Additional statistical materials.
 2004 г.                             The profound qualitative analysis on base of
                                     “model” companies.

                                     Educational centres:
 Potential suppliers of
 educational services –
                                     Professional schools
 possibilities, requirements         College
                                     University (Institute of Continuous Training)

 Strategic plan of realization
 and spreading of educational        Forming of target groups
 services                            Studying of training centres possibilities (ASEU, College,
                                     NRIF)
                                     Recommendations on teachers training

                                     Practical recommendations on realization
 General model for North-
                                     of continuous training courses for forest sector companies
 West region
                                     for other regions of North –West Russia.

Fig. 2.1. Stages of TNA on North-West Russia.

2.2. Technique of researches and processing of the information

The researches of 2004 were based on extensive statistical research 2000-2001 years which have
been carried out at the enterprises of forest sector of the Arkhangelsk area with the purpose of
revealing of development prospects and necessity of educational services. Experience of study of
needs in training the enterprises of forest sector of the Leningrad area (2002-2003) on a basis of
the "model" enterprises also was taken into account. The research of 2004 had by the purpose to
deep the previous researches in a part of educational services. As the basic methodology at

                                                                                               10
working meeting of research group (October 2004) was chosen a type of “monographic”
research with detailed description of "models," chosen from the enterprises of timber industry
branch and forest management units. To represent by “models” the enterprises all forest sector,
it is necessary to research the distribution on annual volumes of wood harvesting and used
technologies. Forest management enterprises (FMU) have approximately identical structure,
therefore number of "models" in this case can be minimal. The number of the “model”
harvesting companies is limited by means, time and opportunities of research group. The number
of the companies, necessary for research, is determined by a variety of technologies, used by
them, and volume of manufacture. It is also taken into account as well the amount of personnel
at the enterprises.

For work ordering the special questionnaire and forms were developed. The basic way of
reception of the information is realization of interview with the representatives of various
organizational structures and levels of the company:
- The chiefs and top managers (director, vice-director, chief- engineer, head-specialists)
- Average – link managers (masters, mechanics, foresters, and heads of sub-units)
- Specialists of different departments and sub-divisions
- Workers and operators, forest guarders.

The methods, standard in socio economic researches, and tools were applied to processing the
received information of qualitative character:
- Ishikawa diagram (the analysis of a head problem)
- SWOT-analysis
- The analysis of cause and effect relationships
The statistical methods were applied to processing statistical figures: account of statistical
parameters of distribution, dispersion, correlation analysis, and multi - dimensional methods.

3. Timber industry complex of the Arkhangelsk area

In the Arkhangelsk area 11 % of business wood from all-Russian volume, 12 % of saw-timbers,
third of cellulose and cardboard is developed. On 01.01.2003 more than thousand forest users are
registered in area. From them 250 enterprises have a long-term basis in rent sites of forest fund.
Other enterprises and individual businessmen work under the turnkey contracts or by way of
short-term (about one year) usage. Small harvesting companies often break rules of cuttings, do
not carry out silvicultural and ecological requirements, and do not participate in construction of
roads. Almost all harvested wood is processed in Arkhangelsk area. There are 26 wood
processing factories, 4 cellulose and paper enterprises and number of infrastructural
organizations. Today at the processing enterprises of forest industry the sharp shortage of raw
material is felt. The missing raw material is delivered from other areas (in 2002 it was about 2,3
mln. m3). Some decrease of personnel number working in a timber industry complex is marked
(in 2002 it was 12% decreasing). It is called by introduction of new harvesting technologies and
increase of work productivity. The rate of growth of work productivity have made for the same
period 15,6 %.

The condition of harvesting enterprises is a determinative for preservation of ability to live of
forest settlements. Many of large companies have the responsibility on settlements infrastructure
maintenance and up to half of local population is engaged in harvesting activities.

For today the majority of the companies of area is included into structure of this or that group of
the enterprises. On the one hand large processing companies have an opportunity to spend
modernization in harvesting companies, to build the roads, to support live ability of settlements.

                                                                                                11
On the other hand harvesting companies are considered as the suppliers of round wood. The
prices for production often do not reflect real cost of manufacture.

3.1. Developing trends in forest harvesting and forest management

Forest harvesting in Russia now is in front of dual situation. On the one hand from the former
large harvesting companies there were capacities for old technologies. Especially it is so called
“low landing” capacities and some initial wood processing. These technologies allowed to carry
out qualitative sorting of round forest products, but borrowed significant amount of the people
labor. Also many human resources were engaged directly in harvesting works. The large
companies supported all infrastructures of forest settlements (school, children's gardens, system
of heating etc.). On the other hand it became ever less wishing to leave the health and forces on
cutting area using traditional technologies. The reduction of capacities occurs at the expense of
aging and leaving of equipment. For last years cost of a “fixed” capital has decreased on about
30 %.

Now modern technologies came in a forest. At the moment in the Arkhangelsk area are working
about 100 machines "Timberjack", "Valmet" and “Caterpillar” (fig. 3.1.). The good package of
services from the party “Ponshe” is offered. One complex Harvester/Forwarder replaces on
productivity of work 5-6 brigades with traditional technology. However, under the forecasts of
the experts for nearest 10 years the share of modern technologies in harvesting manufacture will
not exceed 50 %. One of the main limiting factors is high cost of modern machines. Their
purchase even in the leasing form is possible now only for the large harvesting or woodworking
companies. Small private companies while are oriented to traditional technologies: felling of
trees by chainsaw, trailing by skidder to “upper landing”, loading to tracks. “Low landing” can
be absent in case of assortment scaling in cutting area. More often began to be applied variants
of assortment technologies: chainsaw-forwarder.

             120

             100

              80
    Number

              60
                                                                       Fig. 3.1. Dynamics of
              40                                                       modern harvesting
                                                                       complexes
              20                                                       introduction in
                                                                       Arkhangelsk area.
               0
                   2000      2001          2002        2003

                                    Year

The very important factor in change of the technological approach to forest harvesting is the
increase of the requirements to environment preservation. Modern technologies are more
flexible and allow to be used in all possible kinds of intermediate or final cutting. Traditional
engineering (especially steel-track skidders) puts significant damage, especially on wet soils and
so can not be used in summer time on selective and intermediate cutting. In connection with the
listed factors and specified tendencies there is a significant requirement for the operators and
qualified workers.

                                                                                               12
In connection with decrease of demand and absence of the state order (as earlier) the
      manufacturers of domestic harvesting engineering have sharply lowered the volumes of its
      release. The niche in the market remains free.

      Nevertheless transitive period to new technologies is characterized by some decrease of an index
      of physical volume of manufacture in forest harvesting industry (fig. 3.2.).

           120

           115

           110

           105
Index, %

                                                                             Fig. 3.2. Index of
           100                                                               physical volume of
                                                                             manufacture in
           95
                                                                             harvesting industry, %
           90
                                                                             to 1996.

           85
                 1996   1997   1998     1999      2000     2001     2002

                                        Years

      The reasons constraining development of a timber industry complex alongside with general
      (inherent all branches) are:
      - Seasonal prevalence of manufacture caused by lack of roads;
      - Low efficiency of activity of the harvesting enterprises on goods promotion in the external
      market; unsufficient professional standard of marketing services; outstripping rise in prices on
      fuel- power resources;
      - Discrepancy of structure and allocation of a timber industry complex to the requirements of
      market economy;

      The preservation of the nowadays tendencies in development of forest sector of Russia will
      result to gradual degradation of available capacities and forests in a zone of their action.
      Character and scale of problems of the enterprises are those, that their sanction is possible only
      with the help of state regulation including active industrial politics. In connection with
      importance of forest harvesting branch in a national economy the project of Strategy of
      development of a timber industry complex on long-term prospect was developed. The major
      directions of increase of competitiveness of the Russian timber industry complex were
      determined in it. For this purpose the development of next systems will be provided:
      - systems of machines for full-tree wood harvesting;
      - systems of machines for assortment technologies;
      - systems of machines and equipment for “low landing” storages;
      - technologies and equipment for fire-wood processing for its using in energetic purposes.
      One of without alternative ways of development is also organization of the forest relations on
      principles steady forest using. Thus rent payments for forest resources can make up to 70 % of
      the state budget. It will allow to develop an infrastructure of manufacture, to update engineering
      and technologies.

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3.2. Forest harvesting companies of the Arkhangelsk area

On the data of the rent base analysis for 2003 the distribution of harvesting enterprises in the
Arkhangelsk area was the following:

Groups of the enterprises on harvesting volume,                           Share of the enterprises, %
thous. m3/yr
To 5                                                                                     25
From 6 to 25                                                                             33
From 26 to 50                                                                            14
From 51 to 100                                                                           12
From 101 to 200                                                                          11
201 and more                                                                              5

Distribution of forest harvesting companies on groups of the sizes:
Groups of the enterprises on      Annual volume of        Share of the                        Provisional number
harvesting volume *               wood harvesting,        enterprises, %                      of the personnel,
                                  thous.m3/yr                                                 men.
small                                     To 15                  25                                    2000
average                               From 15 to 50              47                                    6000
large                                    More 50                 28                                   12000

*As the basis for such classification the materials of forest inventory projecting have served, at which for harvesting
companies of the average size (volume of harvesting is more than 35 thousand m3/ year - the middle of average
class) is spent multialternative account and forecast of forest using.

The greatest contribution to total amount of harvesting in region is carried out by the large
companies (till 70-75 of % from total amount). The share of the small companies in total amount
of preparations makes up to 5 %. Other part of wood is prepared on the by the average-size
enterprises. Taking into account this distribution, the “model” companies for representation of all
harvesting enterprises can be picked up according to their contribution to total amount (1-2 small
companies, 1- average and 4- large). The small and average company will present traditional
technologies, large – modern assortment and traditional full-tree technologies or mixed. Small
companies can also use the assortment technologies but with manual cross cutting of trees at
upper landing places (as often transportation of the whole trees on roads of general usage is
forbidden).

Harvesting companies work according to the plan of cuttings, which are obliged to carry out. At
default of the plan of cuttings other companies can be employed.

3.3. Forest Management Units ( FMU)

List of FMU of Arkhangelsk area see in Annex 3, table 3.1.
The creation of effective market economy in forest sector represents long and difficult process.
The achievement of this purpose will require creating new institutional structures and economic
mechanisms, to transform system of management, planning and financing of forestry. The
important meaning thus is got by organization of economic experiments. The experiment on
perfection of a management system of forests and forestry now is begun by division of functions
of state management of forests and forest business. In our work we used the materials of
experiment in Leningrad area (one of experimental Forest Management Units).

                                                                                                                   14
The variants to evolutionary transition from the combined performance of state management
functions of forest fund and economic functions on conducting forestry to their separate
realization are considered.

The process of search of out-of-budget means has resulted to overlapping by forest management
units of functions of state management of forest fund and commercial activity. Such overlapping
conducts to low-effective both state management of forest fund, and commercial activity on
forestry conducting. On the other hand such overlapping allows forest management units, at the
lowest budget financing of state functions on forestry conducting, to compensate lack of budget
means on these purposes and to provide actual forestry conducting.

    Observing functions              The right applying functions               The right establishing
                                                                                      functions
Protection    Controlling       Organizational            Disposing
                                 (executive)

                            FUNCTIONS OF STATE MANAGEMENT

State forest service as             State forest service in                 State forest service – sub-
Federal body                        subject of Federation                   regional (between-
                                                                            regional) level

Fig. 3. 2. State forest service of sub-regional (between-regional) level.

Functions of an economic management by forest fund are the next:
   - Sale of wood on a root through auctions;
   - Harvesting and sale of wood from intermediate usage;
   - Preparation and sale of resources of collateral usage by forests
   - Preparation and sale of seeds
   - Preparation and sale of a planting material
   - Rendering of recreational and other services
   - Performance of forestry works
   - Construction and maintenance of forest roads
These functions can be directed on:
   - Private commercial structures on the rights of long-term rent and concessions of forest
       fund
   - Contractors on agreements with territorial bodies of forest management
   - State commercial organizations

On base of state commercial organizations there can be various forms of organization of an
economic board:

                                                                                                     15
State commercial
                              organizations carrying out
                               functions of an economic
                              management by wood fund

  The federal unitary              The unitary enterprise            Joint-stock company
enterprise based on the             based on the right of           with 100 % participation
  right of economic                operative management                   of the state
      conducting                     - the federal state
                                         enterprise

Fig. 3.3. The forms of organization of an economic management by forest fund on the basis of
state commercial organizations.

Different Forest Management Units have different circumstances:
   - large variety of socio economic conditions;
   - different degree of forest using intensity and forestry on regions and separate forest
       management units
   - norms of the working forest legislation
   - a level, saved for 2005, and order of forestry financing

So it is more rational to spend reforming of a control system of forestry at a level forest
management units, by their evolution from an existing situation to separate realization of
functions on state management of forest fund and economic functions on forestry conducting.
Such evolution is offered to be carried out in three stages:
1-st stage:
Since 01.01.2005 year in Forest Management Units it is necessary to create forestry branches
(filial) with the large autonomy, but without creation of the legal unit, for realization of all kinds
of forestry and other works connected to conducting of forestry and forest using. The functions
of state management of forest fund in FMU will carry out sub-units and part of the FMU staff
not concerning to forestry branches, and forestry branches of FMU will carry out performance of
economic functions on forestry conducting, and in case of absence of other executors of forestry
works to carry out by their own forces.
2-d stage:
At the end of 2005 on the basis of the analysis of sub-units work and forestry of branches of
FMU, it is necessary to carry out reorganization FMU by division them on state sub-units and
state forestry enterprise, taking into account silvicultural, socio economic and other objective
features of FMU and regions. State forestry enterprise will be at same level with private
enterprises in carrying out both organization, and direct performance of works on forestry
conducting
3-d stage:
On results of the analysis of an overall performance of state forestry enterprises and other
organizations on performance of forestry works in 2006, it is necessary to accept the further
decisions on perfection of organization of performance of economic functions on forestry
conducting, taking into account the requirements of the legislation, which will work in 2007 and
appropriate features of each region.

                                                                                                   16
For the beginning realizations of the first stage the federal agency of forestry issues the order. In
the order the organizing in FMU of forestry branches for realization of all kinds forestry and
other works connected to conducting of forestry and forest using should be stipulated. On the
basis of the above-stated order the territorial agencies of forestry issue the similar orders with a
concrete definition of FMU, where are formed forestry branches, their number, territorial
allocation and so on.

As a result of realization of offered reforms total number of the employees involved in different
kinds of works can appear at the same level. The division of responsibility areas of the various
leaders, managers and specialists also remains in the same parities. The structural scheme of a
“vertical” on realization of functions of state management of forest fund and forestry conducting
see in Annex 1, fig. 1.6.

The structure of forest management in Russia now undergoes revolutionary changes. The Forest
Code, in conformity with which the enterprises of forest management work, till now has not
accepted as a final kind. The basic direction of structural changes is connected to division of
functions of management and manufacture. That was obvious enough, has appeared an uneasy
task. The structure of forest management of on the present time has a final kind up to a level of
agency (former level of Regional Management of Forests). Structural Scheme of Agency, Forest
Management Unit and general correlation in stuff representation between 1-st and 2-d groups of
forest management units after reorganization see in Annex, fig.1.7.). The FMU structure of
managing units of a level of timber enterprise is not determined yet. Under the forecasts of the
chiefs of a regional level the work of FMU in former structure will proceed also the next 2005.
There are probable also the associations of FMU in borders of administrative areas (in cases, if
there are more then one within the limits of administrative area). The addition of agricultural
forests (about 1,8 million. ha.) to general structure of management is predicted also. Now in
Arkhangelsk area are allocated 29 FMU of federal structure, 18 FMU of agricultural structure, 2
national parks. Probable number of structural forest management units in the future can be 23-25
after association within the limits of administrative borders of sub-regions.

Staff of new structural units on sub-region level (FMU)

The experts of FMU will stay on the same kind of workplaces but in different structures. That is
for a level of top and average link the list and volume of educational services can be designed in
the same sizes, as for current structures (see. structural scheme of FMU, Annex, fig. 1.4.). For
the workers training the subjects of courses can be extended by way of study of questions
concerning harvesting, modern reforestation technologies, thinning. The basic part forestry
workers can remain in economic structures, or will pass in the timber industry companies. In a
result planning of educational services volume in account on existing now requirements will not
give significant mistakes.
General correlation in stuff representation between 1-st and 2-d groups of forest management
units can be the next:

                                                                                                  17
1-rst group (FMU)                                   2-d group FMU (“forestry branch”)

≈10% of FMU staff                                   ≈90% of FMU staff

                      Forest management unit level

Director                                            Vice-director
Chief-forester                                      Chief-accountant
       Forestry department                                  Accountant department
       Reforestation department                             Economist
       Forest protection department                 Staff department
Information technology specialist                   Chief-mechanic
                                                            Repair department
                                                            Dispatchers
                                                    Safety specialist
                                                    Fire-chemical station
                                                    Information technology specialist
                                                    Lawyer

                      Forest management sub-unit level

Forester                                            Vice-forester
                                                    Master of forest
                                                    Forest guards

3.4. General problems of the forest sector enterprises.

The greatest problems of harvesting enterprises are connected with their management (example –
“Ilim-Palp” factory). Its successes explained, basically, with competent management at all not
looking that the forest fund of southern region of the Arkhangelsk area is rather limited and
mosaic. The automation of management at the enterprises of a timber industry complex is at the
lowest level, the low level of documents registration is marked (it is required the computer nets,
automated systems of management, automation of accounting works, personal computer
working). The main limitation in this is possibilities of connection (by telephone lines), age
limitations (there is no desire at the personnel something to change, if it is not connected to the
material part).

The financiers and economists are required (despite of filling of management staffs, there are
observed virtual vacancies). In existing structures of management the specialization of the
personnel is too narrow. It is one of female employment attempts and ways in countryside
villages. There is shortage of workers even in conditions of unemployment in forest settlements.
Average age of workers is 40-50 years (it basically so-called "hired" of times 70-th years). All of
them still hope to return themselves to home (Byelorussia, Ukraine). Many of them after useless
attempts come back. Part of structure of workers in forest settlements represent former prisoners,
stayed here after serving long terms of the deprivations of freedom. For this category of the
workers any training does not represent the special interest, as well as job in a forest, after the
opportunity has appeared to earn on life by the berries and mushrooms collection, using various
crafts. The greatest interest for training can be represented by a category of workers in the age of
till 40 years and conducting a healthy image of life.

Other problem is construction of roads. Last years (more than 10 years) roads practically are not
constructed. Annual requirement for road construction is more than 10 km on one forest

                                                                                                 18
harvesting company. Cost of construction of 1 km of a road with a hard covering makes 1200-
1400 thousand rubles, and ground forest road - 600-700 thousand rubles. The construction is
limited mostly by financial opportunities. Construction of private roads with the limited moving
of vehicles, which are not belonging to the enterprise, takes root.

The difficult social situation in forest settlements also is a sharp problem. In connection with
introduction new harvesting technologies has taken place occurrence of superfluous working
hands (as one Harvester\Forwarder complex has replaced 6-7 brigades working on traditional
technology, also became unnecessary capacities of the bottom and top wood storages, cross-
cutting lines, cranes and other divisions of an infrastructure of traditional technologies). Culture
of manufacture on the one hand has grown, and on the other hand there was a stratification of
working environment on solvent and beggars. The management of the forest companies does not
plan anything to undertake for radical change of a socio economic situation. The basic rate is
made on that all will be placed by time (settlements simply die out). The investment of money
(including in education) can appear useless. The trained workers can here be intercepted by
smaller and dynamical structures (for the higher salary).

The infrastructure of forest settlements now maintains at the expense of municipal means (which
critically does not suffice). Therefore forest settlements represent a gloomy picture (half-
destroyed houses and frozen heating systems). The life in these settlements does not represent
any interest for youth, therefore, having received secondary education, here a little who lingers
over. Especially sharp there is a problem of female work maintenance. Without the decision of
this problem it is impossible to speak about stability and constancy of forest settlements. As one
of exits it is considered the development expedition-shift harvesting methods (as development of
sphere of services and manufactures are not obviously possible).

The problem of staff recently also has displaced accents a little. For the enterprises located close
to town (to the sub-regional or regional centre) a large outflow of the people became
problematic. In connection with development of service sector in cities many workplaces and
opportunities of work application, which is not requiring high qualification (for example repair
work in apartment) have appeared. The workers do not keep for the places. At dismissal it is
possible easily enough to find job in city. The lack of the workers and experts, in turn, is
compensated by the staff from cities (expedition-shift method). Moreover, the most effective
management is the job of the external manager living in city and receiving for the job worthy
compensation. On this ways many companies are following. In case of an arrangement of the
company far from the centre, the outflow of working hands is smaller. The dismissed workers
can not find other job in settlements, and, therefore keep for job.

In connection with development of forest certification process it is obviously necessary on each
enterprise to have the expert of the appropriate structure, and answering (responsible) for the
decision of all questions connected to realization of certification and performance of all
requirements for the certificate maintenance.

To organize the precise document circulation at the enterprise is also very important. At many
enterprises the documentation is conducted by old (as speak, explaining a situation good tested)
method. On a low level there is knowledge of silvicultural requirements to cuttings and
reforestation.

At moving of harvesting capacities logistics and optimization of manufacture remains on a low
level. The basic reason of large moving of engineering and equipment is the division of forest
fund on degree of accessibility.

                                                                                                 19
For large holdings (as “Titan”) the problems with realization of harvested wood do not exist.
Harvesting enterprises which are included in holding, conduct delivery of wood raw material to
the consumers which are taking place also inside it.

The basic nowadays problem of forest management enterprises (FMU) is to finish (or even
clearly to begin) structural reorganization of forest management. Most likely it will result in
reduction of stuff number (probably on 1/3). Covering of expenses on forestry works will occur
basically at the expense of intermediate usage. Already now many of FMU spend of intermediate
usage in volumes of the average harvesting company. Thus the successful and unsuccessful
enterprises will initially be allocated according presence in their fund of premature stands for
thinning. The successful enterprises can save staff of the employees in former structure. The
problems of FMU connected to industrial activities are similar to harvesting enterprises.

4. Description of the “model” enterprises
4.1. Small and average forest harvesting companies

Company-Model A. Small forest harvesting company.
It is located in northern part of the Arkhangelsk area (Seaside area). The office settles down in
Arkhangelsk. There are roads with hard covering of general purpose. The network of forest roads
is advanced poorly. The preparation of wood is made only in autumn - winter-spring time, when
there is an opportunity to use winter roads. Structure of the personnel includes 2 constant
employees and 12-18 temporary (seasonal). The work is conducted by expedition-shift method.
Shift duration depends on site arrangement. The work is conducted with application of
traditional technologies and equipment, but with cross cutting on assortments in the upper
landing (as the transportation of wood in whole trees in city on roads of general usage is
forbidden). The amount of brigades depends on opportunities of forest fund sites rent. Structure
of a brigade is standard (6 men). The annual (seasonal) productivity of one brigade makes no
more than 2500 м3 (as in suburban forests the not continuous cuttings are permitted only, at
which realization the productivity of wood harvesting is much lower). At use of an expedition-
shift method of wood harvesting for one shift (about 20 days) are prepared on the average 800 м3
of wood. General annual volume of harvesting changes from 3 up to 6 thousand м3/year. The
close arrangement of harvesting fund to city also stimulates observance of the silvicultural
requirements, as the availability of cutting places to various checks and commissions is high
enough.
The block diagram of company management is most simple (fig.4.1). The functions of a
management, finance, marketing, maintenance by spare parts, organization of jobs, preparation
of harvesting fund etc. often are combined in one or two persons. The chief, as a rule, is the
proprietor of the company and does not resort to services of the extraneous persons. Chainsaw
tree feller of a harvesting brigade, being as a rule simultaneously also a foreman, often defines
technology of cutting area development.

                             Head of company

                Accountant              Brigade 1

                                        Brigade 2

                                                                                              20
Fig. 4.1. Structural scheme of management of small harvesting company.

Small harvesting companies often use of the seasonal workers. In this case it is difficult to ensure
a sufficient level of technological and silvicultural knowledge of the personnel. The presence of
necessary skill and knowledge’s is the entrance requirement. For courses of qualification
improvement focused on traditional technologies, this category of the enterprises could make a
sufficient reserve of the potential customers. The subjects of courses coincides with subjects
focused on the personnel of the average size harvesting companies.

The problems small harvesting companies are similar to average. The basic difference is
dispersion of cutting fund, necessity of significant removing of the equipment and infrastructure
from a place to another place, dependence on larger harvesting (or others) companies in
maintenance of a road network. Often (or, as a rule) small harvesters have some sowing
manufacture for working on the local market. In sub-regions of the Arkhangelsk area it is a lot of
small harvesters, representing any municipal, agricultural and building organizations. The
purpose of cutting in this case is maintenance by building materials and fire wood for heating
houses. Woodcutting thus is spent not by the experts, frequently with infringements. At increase
of silvicultural and technological requirements to cuttings, and also the strengthening of the
practical control can bring these enterprises also in the category of the potential clients of
qualification improvement courses.

Company-model B. Is located in middle part of the Arkhangelsk area (Plesetsky sub-region).
The road network is advanced poorly. Distance from a settlement, where the company is located
makes about 150 km up to the railway. The highways with a hard covering practically are absent.
Forest road net is advanced poorly. The company represents the most widespread type of small
harvesting enterprises, which are bringing in the appreciable contribution to total cutting amount.
The number of the similar enterprises in territory of the Arkhangelsk area exceeds 100.

The company is engaged only in wood harvesting. Any forestry works, reforestation is not spent.
Annual harvesting volume is 15-20 thousand м3/year (depending on presence of forest fund,
accessible in the transport relation. The forest fund annually turns out from tenders. Main kinds
of spent cuttings are cuttings of the main and intermediate usage (mostly in premature stands).

The wood harvesting is made on traditional technology (tree falling and cross cutting by
chainsaw, debranching, trees trailing to loading–cross cutting platform, cross cutting to
assortments, loading on automobiles by hydraulic manipulators). Wood transporting is made in
assortments by automobiles. The control of harvesting technology observance is conducted by
workers. Harvested wood is realized in Arkhangelsk (80 %) in a round kind. Other part of wood
(20 %) is sawn on boards with use tape sawing machine. The realization of boards is made in
Moscow. The transportation of boards to the consumer is made by a railway.

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