Industrial policy for wood-processing industry: countries experience analysis

1
Industrial policy for wood-processing industry
countries experience analysis

• key findings
• Moscow, June 2008

2
Main goals

• To reveal the government policies and instruments
  applied by the leading wood-products exporting
  countries to stimulate their forest sector.
• To find new instruments to facilitate forest
  sector development in Russia.

3
Limitations

• The research covered nine countries with the
  world-wide competitive wood-processing
  industries Finland, Canada, the USA, Japan,
  China, Brazil, Chile, New Zealand. So we analyze
  a state policy in these countries as the policy
  promoting industrys growth and, at least, not
  interfering it.
• Time periods for the research are chosen as the
  periods with the highest growth rates of
  production and export and relatively stable
  policy.
• Many countries with weak forest sector together
  with countries benefiting from strong forest
  sector (as Austria) were not covered.
• Therefore we cannot reveal the policies which are
  generally ineffective. And also we cannot
  conclude about the full list of the historical
  effective instruments /policies applied.
• The research was rather far from the pure science
  with more emphasis on policy issues and
  recommendations.

4
Countries and periods

• Canada 1949-1986
• Finland 1948-1975
• USA best practices
• New Zealand 1984-2002
• Brazil 1965-1988
• Chile 1974-1994
• Uruguay 1987-2008
• China 1985-2002
• Japan best practices

5
Main conclusions

• There was no common policy model for developing
  wood-processing sector
• Interventionist measures are not necessary for
  establishing competitive wood-products sector
• The factors other than the industrial policy can
  be more important for the forest sector
  development
• Measures aimed to ease access to capital for
  forest sector producers are among the most
  effective for boosting the industry growth
• Effective technology transfer may be more
  important for industry development than
  wood-products research
• The degree of state intervention generally
  decreases with the development of the industry

6
There was no common policy model for developing
wood-processing sector

• Each country used very different set of measures
  to stimulate wood processing

7
There was no common policy model for developing
wood-processing sector

• and the state interference decreased with the
  growth of competitiveness and efficiency of the
  industry
• Countries with initially weak wood sectors (China
  and Brazil) applied the combination of domestic
  markets protection with the state financing of
  forest sector industries.
• In developed countries direct state interference
  was limited to forest policy in its narrow
  definition, information support, financing of
  science and ecology policy (USA, Japan, Finland).

8
Interventionist measures are not necessary for
establishing competitive wood-products sector

• We labeled as interventionist instruments the
  measures significantly distorting market
  incentives subsidized loans, export/import
  restrictions (gt15 import/export duty), direct
  subsidies, tax preferences for the forest
  industry enterprises. Only three countries
  applied instruments which were indicated as
  market-distorting for the wood-sector development
  (Brazil, Uruguay and China).
• Six from nine countries did not relied on
  interventionist measures to promote the industry
  growth. However some of them applied distorting
  instruments (timber export restrictions, loans
  for the small business) but the scope of this
  interference was very limited. These measures
  significantly differed between countries from
  timber export restrictions (US, Canada) to tax
  preferences and subsidized loans to small
  wood-processing companies (Chile).

9
Measures aimed to ease access to capital for
forest sector producers are among the most
effective for boosting the industry growth

• In Finland in 1950s cheap bank loans were the
  main source of financing wood-processing
  industries. Low interest rates resulted from high
  saving rate and international loans.
• In Chile in late 1980s and in New Zealand in
  1990s privatization opened the industry to
  foreign investors and lead to sectors
  internationalization.
• In Brazil in late 1980s and in China in mid 2000s
  forest sector producers received privilege loans
  for wood-processing investments.

10

• Effective technology transfer may be more
  important for industry development than
  wood-products research

• US and Canada industries had significant
  advantage over the Finnish industry in RD
  expense. However Finland leave North American
  producers far behind in terms of labor
  productivity and Total Factor Productivity. The
  roots of this difference may lie in intensive
  information policy applied by Finland including
  knowledge centers and state-supported networking
  events.
• Other small countries with limited RD budgets
  also succeeded in creating effective forest
  sector (Chile and New Zealand).

11

• The degree of state intervention generally
  decreases with the development of the industry

Number of applied policy instruments

• The most clear cases provided by Brazil, Chile
  and New Zealand with the policy evolving from the
  interventionist toward liberal one in line with
  the growth of the wood sector competitiveness.

Interventionist model
China
Brazil
Uruguay
Protectionist model
Chile
Canada
Finland
Japan
USA
Liberal model
New Zealand
Competitiveness
12

• Thank you!