Lloyd C. Irland – Chornobyl Update – Governance, Market Reform and Private Forest Landownership in Developing a Sustainable Forest Policy in Ukraine

Lloyd C. Irland, The Irland Group, Wayne, Maine, USA

1. Adapted from a talk presented at Pennsylvania State University at a conference Diverse Landscapes of Ukraine, a Celebration of twenty years of independence, sponsored by the Woskob Foundation. A version with full footnotes is available from the author.
2. lcirland@gmail.com; author is also Faculty Associate, School of Forest Resources, University of Maine.

Ukraine has fallen heir to a significant forest resource and an important economic development opportunity, but also to a series of governance weaknesses that do not repair quickly and certainly not automatically. Tragically, the fresh air of freedom is inhaled by the just and the unjust. Anders Aslund (2009) has argued that Ukraine is now a market economy and a democracy. I would not lightly argue with such an expert, but would demur that it seems to me that the penetration of market and democracy into the forest sector of Ukraine has a ways to go. I support the general desirability of a substantial independent sector of private forest owners – of the right lands and under the right rules – but have concluded that this cannot be achieved in Ukraine under present conditions. This essay reviews why.

Ukraine’s forest covers about 16% of its land area, or 10.8 million hectares (27 million acres). Ukraine’s forests vary according to climate and soils (Strochinksii, Pozyvailo and Jungst, 2001). The Carpathians are similar to other central European forests with Norway spruce, fir, beech, and oaks. The Polyssia is the forest ecotone between grain belt of Ukraine and the sub boreal forests that stretch to the North, dominated by scots pine and birch on sandy wet soils. The forest steppe, the Podylia, includes the northerly grain areas where rainfall will support forests of oak and other hardwoods. In this paper, the focus will be on these three regions and not the steppe proper or the subtropical areas of the Crimea.

Ukraine’s wood economy, partly due to its small forest area, is less well developed than other peer nations. It must rely more heavily on masonry construction. Nearby Poland has higher forest cover than Ukraine. But its per capita wood consumption appears to be increasing (Fig. 2)

Figure 1. Source: State Forest Committee

Figure 2. Source: Forest Europe, 2011, Table A 6.8.

Source: World Bank

Assuming these governance indicators roughly indicate the true situation, it would mean that designing a transparent, trustworthy privatization process for forests will be a major challenge. The experience of the program for privatizing farmland has been widely criticized and may hold some lessons. Especially since in most of Ukraine, farmers will likely be strongly interested in adding forest management to their enterprises. Creating a reliable and well ground-truthed land cadaster would be costly, time consuming, and difficult, especially with vested rights in the form of leases informally granted to well-placed individuals and groups over the years.

As is true in many transition economies, Ukraine faces the apparent contradiction of a low level of government strength and competence with an extensive web of perverse and wasteful regulations that are holdovers from the Stalinist period. This is a deadly combination. As an example, a project designed to plant trees to store carbon was abandoned, after running afoul of a regulation that requires that a permit be obtained before anyone can plant a tree. This, despite the fact several million hectares of former farmland lie idle, growing anthills and weeds, for lack of someone to cultivate it. Further, potentially significant, if subtle, changes in climate appear to be challenging traditional cropping patterns, especially for winter wheat.

The contradiction between low government competence and extensive and unnecessary regulations has an additional perverse effect: it drives activity into informal or black areas of the economy. Ukraine has an extremely large informal sector compared to other transition economies. This perpetuates many social problems and starves the system for revenues. It does not constrain the lawbreakers, only the law-abiding. It further embeds corruption and an atmosphere of impunity on the part of lawbreakers.

Rural unemployment and poverty are serious issues in the Ukraine countryside. Poverty is a significant cause of timber theft, in two ways. It compels people to steal wood in order to heat homes and survive, and supplies a large “reserve army of unemployed” for the timber mafias.

Every regulation offers the opportunity to extract a bribe. And this is occurring with a vengeance. According to the Transparency International ratings, Ukraine ranks 134th in the world, with a rating of 2.4 in 2010. In the past, ratings below 3 have been described as “rampant corruption”. In contrast, Poland ranks 41st, with an index of 5.4. The US, with its rogues gallery of public officials and Mafiosi in its jails, ranks 22 in the world at an index of 7.1 out of ten.

The difficulty of obtaining outright private title to forest land has produced ingenious subterfuges. These generally small individual transactions to favored parties, in a complete absence of transparency, are slowly eroding public values and public access to the State lands, as well as compromising management flexibility. These often include water frontage, which is prime real estate in any country. In some instances clubs or larger groups obtain use rights over larger tracts, which are then managed as “reserves.” I asked a leader of an Ukrainian environmental group, what was his biggest concern about the forests. He replied that it was the shadowy, ongoing process of granting small leases to favored people.

General Ideas for a path forward

If a private sector of forest owner/managers could be created in Ukraine, it would bring forward a number of important social goals:

– Near term, improve supplies of wood and nontimber forest products for local needs;
– Long term, improve supplies of wood for industry
– Improve local incomes;
– Help meet national goals for forest cover;
– Improve opportunities for recreation and wildlife habitat;
– Contribute to carbon sequestration;
– Improve water supplies;
– Create an independent force in forest ownership and policy.

This is not the place for an exhaustive analysis of alternative policy mixes. Plainly, progress is needed on a number of fronts, the trick is to plan pilot programs, to adapt to local situations, and learn by doing. Further, a re-orientation of research will be necessary. Much of the management practice on Ukrainian State forests in the past has been highly labor intensive and seems to an outsider to take little account of costs.

Behind the obvious appeal of “privatization,” trolls are lurking. Privatization can be popular. Politicians love it – for them it seems to offer a substitute for action, a chance to appear decisive, and to placate powerful groups. It is a fine thing that no such groups are clamoring to privatize the forests. Perhaps they have reviewed the accounts and see better opportunities elsewhere.

The first task now is simply to protect existing property rights. If the state, with its resources for policing and coercion, its prosecutors and its courts, cannot protect its own forest, how could newly minted private owners do so? If forest assets cannot be protected, why would an private owner want to own them – expect to slash them down to convert to immediate cash? And why would anyone invest private cash to grow trees, on rotations short or long? At present, loudly publicized “bans” on harvesting here or there are simply bans on legal harvesting by law abiding citizens. Such “bans” enable politicians to pretend they are doing something. The means and will to end illegal harvesting do not seem to be available. Control over illegal logging cannot be done by decrees from the Center. It will require many steps, including things that need doing anyway in law enforcement. It will require real cultural changes in rural communities. It may require locking up some powerful bad guys, and it will require rural economic development to give local people an alternative to the grey economy. There needs to be much more independent watch-dogging. How can this be provided for?

There is more than a little bit in common between forest and agricultural sector; we need to examine lessons being learned from privatization and market development in the farm and food sector and see how they might apply to forest planting and management in rural Ukraine.

Ukraine has many assets and a chance to do it right. It needs patience, a focused, experiment-driven effort that acknowledges regional differences, and time. Memories of injustice, especially when ethnically based, do not fade quickly in Europe. Forest and land ownership are rife with injustices, from the nationalizations in the new lands after 1945, to the collectivizations, liquidations of the kulaks, and exile of minorities under Soviet rule. Passage of time may take the edge off of these remembered injustices. When the other pieces are coming into place, perhaps in 10 or 20 years, then would be the time for privatization on any scale.

References: Available from author on request

Policy Ideas for Path Toward Private Forest Land Sector in Ukraine

  • Develop a credible and accurate land cadaster;
  • Recognize that the process may need to vary regionally;
  • Address Corruption and unnecessary regulation;
  • Halt creeping privatization by small leases;
  • Develop stumpage markets & contractors where possible;
  • Work with farm and landowner cooperatives and industry associations;
  • Develop or expand demonstration forest farms in each region;
  • Outgrower schemes by major wood buyers;
  • Pilot test cost-share grant programs & extension services;
  • Develop short rotation management regimes suited to each region;
  • Focus on production to immediate household & community needs – fuel and local fencing & building materials;
  • Control illegal logging and (mystery: how to do while reducing regulations?);
  • Learn lessons from Agriculture’s experience of decollectivization and privatization;
  • Recognize need to develop full supply chain;
  • Privatise all mills as soon as possible.