The Prague Post
http://www.aaaradiotaxi.cz/index.php?xSET=lang&xLANG=2
September 7th, 2008
Endowment Fund     Business Listings ONLINE      Reservations      Classifieds    Subscriptions
Prague accommodation
Prague Art & Antiques Prague Art Prague Antiques

Home » Archives » Business

Lesy ČR announces reforms to ease tensions

Logging industry critics say state policies 'reek of bolshevism'

By Markéta Hulpachová
Staff Writer, The Prague Post
May 30th, 2007 issue

COURTESY PHOTO
Lesy ČR controls one-sixth of the Czech Republic's total territory.
State forests are sinking into a quagmire of commercial disputes between logging companies and the government. In response, the Agriculture Ministry is tightening its financial control over state-owned woods through regulations that some logging company owners say “reek of bolshevism.”
Faced with criticism from loggers and wood processors, the ministry announced plans last week to restructure the business strategies of Lesy ČR (LČR), the state-owned company that controls more than half of the country’s forests — one-sixth of the national total territory.
The company makes 89 percent of its income by selling trees to loggers, who, after harvesting the wood, sell it to processing plants at a markup 7 percent to 12 percent. To increase LČR’s profits, the ministry has proposed selling timber directly to processors, bypassing the logging companies who depend on these profits.
In an effort to appease logging companies, however, Agriculture Minister Petr Gandalovič said May 23 that the state will give logging companies selling rights to 50 percent of the wood they harvest. The remaining half will be sold directly by LČR.
While it is not ideal, the compromise is acceptable, said Roman Bajćan, spokesman for the Association of Forestry Businesses (SPLH), which represents 20 companies. “It’s the absolute minimum, but we can agree to it,” he said.
To avoid an industry-wide crisis, LČR recently held another competition for mid and long-term tenders, whose results were announced in mid-May.
These tenders may help bring closure to a dispute between LČR and the logging companies that has lasted for three years. The companies say LČR’s poor business decisions over that time have brought the forestry industry — and the forests themselves — to the verge of collapse.
“The government’s management of state-owned forests is reminiscent of the old regime,” Bajčan said. “It establishes a bureaucracy that enables corruption.”
The government says it models its principles after other EU countries.
“LČR is a national treasure,” Gandalovič said. “I respect the logging companies’ concerns, but my priority is to defend the interests of state-owned forests.”
Logging companies argue that LČR should limit its power to overseeing the operations of private loggers.
“The state is not a good businessman,” said Ivan Doubrava, chairman of CE Wood, the largest national logging and wood-processing company. “Lesy ČR’s entire operation is uncontrolled and completely unsystematic.”
By usurping the trading rights of regional logging companies, the state is placing the logging industry and forests’ ecological well-being in jeopardy, he said. Last December, CE Wood had to lay off more than 2,000 employees because of LČR’s poor tender management.
Industry professionals also say LČR’s current public tender system disrupts timber prices. The system encourages competing companies to offer unrealistically low prices, Doubrava said.
Sawed-off tenders
The saga of disputes began in 2004, when LČR announced its “mid length” tenders, which were to allot logging contracts for the following eight years. According to Bajčan, most of the participating companies were satisfied with the outcome of this process.
After securing work for the projected period, the companies began to allocate their resources in rural regions, where their investments have a profound economic impact.
In 2006, CE Wood, a company that did not participate in the 2004 process because of its alleged outstanding debts to the state, presented to the European Commission a complaint questioning the validity of the tenders. That prompted the Czech Anti-monopoly Office (ÚOHS) to reverse its former ruling that LČR did not have to follow public tender laws. The decision invalidated the previously approved 2004–05 contracts.
“The logging companies that had already invested in equipment and hired employees were told their contracts had been voided,” Bajčan said.
In their place, last December LČR announced new short-term tenders for 2007, which drew more than 90,000 complaints from CE Wood alone and a fresh investigation from the ÚOHS. Because of the dispute, logging on state lands halted as of Jan. 1, and was only renewed after Hurricane Kyrril struck later that month, when a state of emergency prompted urgent tenders to harvest the glut of damaged trees.
The short-term tenders that LČR has been issued are causing serious ecological problems, warned Bajčan. The truncated timeframes do not allow loggers enough time for forest rehabilitation.
“It takes 80 years for a tree to be ready for harvest. There are precise, age-old rules about what to plant in its place and how to plant it,” he said. “The topsoil is very fragile. If the replanting is done improperly, a few rain spells will make the land unusable.”

Markéta Hulpachová can be reached at mhulpachova@praguepost.com


Other articles in Business (30/05/2007):

Browse the Current Issue

If you enjoyed this article, why don't you subscribe to the print version!
We accept secure online transactions provided by PayPal and Moneybookers

Be the first to add a comment!


Full Name: *
City: *
E-mail: **
This comment can be published in the print version of The Prague Post
Enter the text on the right:
 visual captcha
Comment: *
* Required field. In order to be approved for display, comments must have a first and last name and a city.
** E-mails are required and will only be used for internal purposes.

Most visited in Business Listings

Hotel booking
The Prague Post Online contains a selection of articles that have been printed in
The Prague Post, a weekly newspaper published in the Czech Republic.
To subscribe to the print paper, click here.
Unauthorized reproduction is strictly prohibited.