The Russian timber industry: features of formation, condition, development and role

Komissarova Anna Vladimirovna Student; Faculty of Economics and Business; Financial University under the Government of the Russian Federation 125993, Russia, Moscow, Leningradsky ave., 49, office 314 mdb.science@yandex.ru

Introduction

According to various estimates, about 20-25% of the world's forest resources are located on the territory of the Russian Federation, which provides it with a leading position in this industry in terms of reserves. However, Russia ranks only 5th in terms of logging, and the share of the forest sector does not exceed 1.5% of the total GDP of our country.

The formation of the LPC market has certain specifics of development. In Soviet times, there was a state mechanism that controlled and interconnected the processes of timber processing and logging, ensuring a relatively uniform and efficient distribution of resources that were located on the territory of the RSFSR. However, as a result of the transition to a market model of the economy, certain problems have appeared that have slowed down the pace of development of this industry in the Russian Federation. This is primarily due to the institutional problems that initially appeared in the field of forestry, since, despite the privatization process, forest resources remained federal property and retained permanent state control. Currently, the state invests a large amount of financial resources for the development of the LPC market and takes various measures to increase its investment attractiveness and increase the number of entrepreneurs involved in this environment. However, a number of problems have formed in the timber industry market. Despite the large reserves of natural resources, the modernization of the LPC market is slow, which is why the national economy is not able to use the full potential of this sector.

The degree of knowledge of the problem. In general, the economics of the timber industry were considered in their works by many researchers: N. A. Moiseev, M. M. Orlov, who dealt with the problems of forest use back in Soviet times, as well as more modern T.N. Ivanova, N.E. Antonova, A. S. Sheingauz, A.A. Kiseleva. Currently, the specifics of research are related to the peculiarities of this market. So, today, most scientists studying the LPC market conduct their activities either in regions that have a significant reserve of forest resources, or rely on the request of large timber industry holdings. An analysis of the main sources showed that this topic is significant for Russian economics.

The purpose of this article is to identify the key features of the timber industry market of the Russian Federation and identify the prospects for its development. To achieve this goal, we will carry out the following work:

1. Studying the specifics of the processes of creation and development of the Russian timber industry.

2. Assessment of the current state of the LPC market in Russia.

3. Identification of key problems and limitations that currently hinder the development of the LPC market.

4. Determination of the effectiveness of the application of state support measures to solve these problems.

5. Consideration of the main prospects for this renewable resources market in the context of changing market conditions.

Based on the tasks set, it becomes clear that the object of this study is the Russian timber industry market. The subject of the study is the peculiarities of the formation and functioning of this market.

1. Fundamentals of the functioning of the timber industry market of the Russian Federation

1.1. The place of LPC in the Russian economy

In order to define the subject of the study more specifically, let's turn to the definition of the timber industry. It seems to be formulated most comprehensively in the work of T.N. Ivanova, where it is stated that the LPC is a system of enterprises of the forest industry, providing enterprises, as well as public authorities involved in the process of forest use ^[1]. Enterprises in this industry are interested in making profits and investments based on their own activities, while management bodies are interested in receiving tax revenues. Some researchers adhere to the cluster approach to determine the LPC market, since this industry requires the inclusion of a sufficiently large number of interconnected enterprises, some of which form the "core of the cluster" and are directly involved in the self-production process, and some, being partner enterprises, operate on the basis of contractual relations.

Regardless of the difference in approaches to the definition of LPC, this sector of the economy "has several common features" ^[2], which include:

1. The close relationship of the forest resources market with other subsystems of the national economy.

2. The complexity of describing a unified model of LPC functioning based on regional examples due to climatic, economic and managerial features.

3. The process of managing the forest complex implies the direct influence of management structures on the timber industry, which ensure the real achievement of the development goals of the forestry complex.

However, analytical modeling of the timber industry market, according to some authors, is "associated with certain difficulties" ^[3], due to the lack of a formally defined list of factors that can affect the entire system as a whole. To do this, they propose to turn to the method of "agent-oriented modeling", which is based on the behavior of individual subjects. This approach is based on the division of agents into forestry enterprises and logging companies, which in the course of their activities solve the problem of achieving optimal production activities. And management agents, such as the Federal Forest Service, as well as its regional divisions, which determine the external conditions for the functioning of the main agents ^[4].

Analyzing the structure of interaction of key agents in the LPC market, it can be concluded that it has a fairly extensive organization, including the roundwood market, the wood fuel market, the timber market, as well as the pulp and paper industry market. In addition, it is connected with the oil and gas market, the central heating market and the electricity market, which indicates its importance in terms of providing resources to the national economy.

However, this model is more effective in representing regional characteristics and cannot fully reflect the situation that is happening in the country. This is due to the fact that individual regional agents have a specific geographical location, have a certain set of resources and main suppliers and partners, however, "aggregating these markets by compiling a single algorithm for the actions of individual LPC agents" becomes problematic due to a lack of data and the impact of external factors.

If we talk about the modeling of LPC in the Russian Federation, it is important to take into account a number of features, which include:

1. Lack of production capacity for sufficiently deep processing of manufactured products.

2. Insufficient interest of wood producers in improving the harvesting process in order to comply with international standards.

3. The lack of significant results in the restoration of forests for their use as renewable resources.

4. Illegal use of forest resources and inefficiency of measures taken against unfair forest use.

The researchers note that the disadvantage of assessing forest resources is the use of quantitative indicators, which include "the area of land covered by forest, the area of forest lands (thousand), forest cover" ^[5]. It is relatively easy to track these indicators, and they remain an information base for analyzing the dynamics of forest use. However, the assessment of resources solely by this approach does not fully reflect the real situation.

In order to obtain objective information, countries use more advanced forest assessment methods in international practice. These include several methods:

1. Valuation of forests using NPV, where the cost of resources is estimated taking into account future profits.

2. ISEW evaluates forest resources in terms of the cost of their recovery.

3. ESNI implies the calculation of the cost at the maximum level of harvesting of forest resources, taking into account the preservation of certain environmental guarantees.

In the Russian Federation, the key indicator is the estimated cutting area, which shows the maximum amount of forest resources that can be used in the economy without causing environmental harm. However, this method has a number of disadvantages and is criticized in many works on the topic.

It can already be concluded that if the domestic assessment of the estimated cutting area reflects the use of resources at a specific time, then foreign practitioners evaluate forest resources in the long term and strive to adapt their methods for their effective use.

In order to optimize Russian approaches to the assessment of forest resources, it is often proposed to combine two key practices, namely "resource and technological" ^[5]. The resource assessment method relies heavily on environmental factors and generates the value of forest resources based on an analysis of the costs of their restoration. The key to the technological method is the cost of the final product, the value of which is formed by increasing the profitability of production and optimizing the processes of timber processing.

However, currently in the Russian Federation there is a real problem not only with the assessment of the future value of forest resources, but also with their depletion. This is primarily due to the uneven logging operations or the so-called "concentrated logging system". Due to the harvesting of forests mainly in the same territories that had transport accessibility and were located close to production facilities, their impoverishment occurred. As a result, the average shoulder for the removal of forest resources increased significantly, which was 50-100 km in 1940, and reached 300-350 km in 2015 ^[5]. In addition, due to the fact that not enough time passed between deforestation, the forest fund deteriorated, which is currently represented mainly by birch and aspen crops.

Thus, the rich potential of the Russian Federation's forest resources is currently not being used very effectively due to the high concentration of logging around timber processing centers. As a result, the most remote and inaccessible part of the forest remains unused, while the other part is gradually depleted and becomes unsuitable for production.

1.2. Features of the processes of LPC development in Russia

Having considered the main approaches to modeling the LPC market, let's pay attention to the analysis of the process of its creation and consistent development in Russia. According to statistics, the volume of harvesting of the RSFSR by 1990 reached 336.4 million cubic meters, but with the transition of the economy to a market type, this figure fell to a record low of 96.8 million cubic meters in 1996. Gradually, the volume of LPC production increased and from 2015 to 2021 it was steadily maintained at the level of 220 million cubic meters. meters. However, the same indicator for 6 years illustrates not too high values relative to the volume of forest that our country has.

If we turn to the data of the Federal State Statistics Service (Fig. 1), we can see that, despite the gradual increase in market volumes, the number of organizations involved in this industry has significantly decreased and reached 5,000, having tripled in 12 years. But, if this production in the early 2010s showed negative profitability indicators, then, starting in 2015, it showed steady growth, and by 2021 it reached record values of 16.6, which is comparable to the value of the indicator in most industries.

If we talk about the reasons for such trends, it can be assumed that a sharp decrease in the number of organizations is associated with high capital costs for organizing production in this industry, as well as with the increasing role of large holdings that are able to increase the profitability of their own production due to vertical organization and the opportunity to invest in technology upgrades. And a sharp increase in the profitability of production can be caused both by an increase in prices for lumber on the world market, and by a larger share of processed products in total sales.

Fig. 1. Dynamics of indicators by type of activity "Logging"

Source: Federal State Statistics Service.

The development of the LPC market is also largely related to the peculiarities of the allocation of forest resources in our country. If you look at the data on the volume of untreated forest production for 2018-2021 (Table 1), you can see that the main volumes of forest resources are concentrated in the Northern and Northwestern Federal Districts - their total share is about 65%, while in other districts there are much fewer forest reserves. A certain specificity of the development of the complex is associated with such a distribution of resources, since most often, due to high transport costs, forest processing takes place near the place of its extraction, therefore, the main products are manufactured in regions that have significant potential. Examples of such regions are Vologda, Kirov, Kostroma regions, Primorsky Krai, as well as the Republic of Karelia and Komi, etc., however, the largest concentration of woodworking enterprises is located in the Central part of Russia.

Table 1. Distribution of raw timber production by federal districts (2018-2021). A thousand dense cubic meters.

Source: Federal State Statistics Service.

1.3. The impact of the dynamics of exports of LPC products on the development of the complex

A controversial issue in the Russian economic literature is the problem of exporting forest products from Russia. The structure of the LPC market in Russia has changed over the past 20 years, in 1992-2008 the prevalence of roundwood was traced. The export of roundwood, as a fairly low-processed product, made a small contribution to national GDP due to the low added value, but led to an incomparably large amount of use of forest resources in comparison with the amount of money it brought to the national economy ^[13].

The researchers believe that the virtually unlimited export of roundwood abroad for 15 years has led to a "slowdown in the development of LPC and made quantitative expansion the main method." However, starting in 2009, the situation began to change dramatically. This was due both to a general decrease in the number of exported LPC products from the territory of Russia, and to the dynamics of prices for wood on world markets. If we rely on data on the structure of exports for 2019 (Table 2), we can see that the largest share is occupied by lumber, as well as paper and cardboard. Roundwood accounts for only a tenth of the total volume, which indicates a greater share of processed products in the overall export structure.

Table 2. Structure of exports of LPC products from Russia in 2019 (billion dollars)

Source: Federal State Statistics Service.

If we consider the key export directions of LPC products (Fig. 2), then more than half of all roundwood and pulp in 2019 were exported to China, while processed products were used by developed European and developing Asian countries.

In addition, the analysis of the structure shows that, if the main directions of supplies to China were pulp products, which occupied about 63.3%, then the share of wood products supplied to Finland and Japan was more than 6%. This structure proves the fact that if Russia supplied low-processed products to developed countries to a greater extent, then emerging markets were ready to purchase not only the raw material base for further production

A similar situation in the LPC market allows us to conclude that the export of products has played a significant role for many manufacturers over the past 30 years. However, at the beginning of 2022, the export of roundwood and other unprocessed wooden products from the territory of Russia was completely banned, and as a result of the imposition of sanctions, the situation has changed dramatically.

Fig. 2. Structure of Russian exports of forest products, 2019

Source: Federal Customs Service of Russia.

In order to ensure economic security, a temporary ban was imposed on the export of certain types of timber outside Russia to established foreign countries and territories ^[6]. This restriction applied only to certain types of LPC products, but limited the export opportunities of companies in the industry. However, the fifth, seventh and eighth packages of sanctions adopted by the European Union in the second quarter of 2022 also reduced the number of destinations for the export of timber abroad. And although friendly countries accounted for a significant share of exports (Fig. 2), it turned out to be quite problematic to reorient supply chains. This is largely due to the fact that transportation costs account for a large proportion of the costs of selling products. The main type of transportation is rail transport, the export of timber for which in 2022 amounted to 527.6 thousand tons, having decreased by 25.8% (Government Decree).

Thus, it is currently difficult to fully assess the state of the LPC market. Large forest holdings are forced to look for new markets and solve logistical problems in order to export products, since the needs of the Russian domestic market are too small. The State also provides certain support measures for the development of the forest industry. For example, it compensates for the cost of transporting industrial products ^[7]. However, despite the incentive measures, the decrease in production volumes of some enterprises exceeded 25%, the volume of exports of roundwood due to the restrictions imposed fell by more than 50% compared to 2021, however, some researchers claim that the drop in exports of LPC products can reach an average of 10-15%.

Summing up the study of the key features of the timber industry market of the Russian Federation, it can be concluded that they are associated with several significant factors that have formed the prerequisites for the development of the entire LPC market in Russia.

The first is the territorial allocation of forest resources. Despite the fact that Russia has large reserves of wood on its territory, these factors of production are unevenly distributed relative to the subjects of the federation. Therefore, the industry is affected by regional specifics, and its modeling becomes almost impossible due to the very different parameters of different territories of the country.

Also, an important factor influencing the development of the industry is the export of products, which accounts for a large share of profits for producers due to price differences in global and domestic timber markets. However, this area is subject to constant changes due to the influence of external factors, which makes the industry even more risky in the face of investors.

The final factor influencing the development of the industry is the concentration of core resources in the hands of large holdings that lease forest plots for a long period of time and increase competition by creating barriers to entry for smaller producers.

2. Analysis of the current state of the timber industry market and determination of its development prospects

2.1. Problems of development of the Russian timber industry and ways to overcome them

As mentioned above, in 2022, the development of the LPC market was significantly pressured by external restrictions, which seriously narrowed the export opportunities of the industry. However, before the introduction of these measures, the timber industry was experiencing a number of problems and difficulties, which also made its development much slower. Let's take a closer look at these negative factors.

Probably one of the most significant internal barriers to the development of the forest industry market is that the lands of the forest fund are federal property ^[8]. According to some researchers: "Russia remains the only one of the ten leading logging countries in the world that does not have private ownership of forest lands." It is noted that the growth of the Russian forest industry through extensive routes is largely related to the peculiarities of the disposal of these resources by private owners. Most countries with a significant amount of forest resources can use them effectively, thanks to the rational distribution of property rights and a high level of state control over their implementation.

So, if we rely on data from countries comparable to Russia in terms of logging volumes, for example, Canada, Finland, the United States, we can conclude that even a small share of ownership of private resources stimulates the development of the industry and makes it more attractive to investors. At the same time, the indicators of less developed countries – Mexico or Papua New Guinea – in which there is no private ownership of forests, prove that such a distribution of rights may not only not increase the degree of development of the forest complex, but also causes a reduction in the country's resource potential.

Currently, the tenant practically does not bear his own responsibility for the leased land after the end of the rent period. Such a measure reduces the effectiveness of reforestation measures, which pass into the hands of relevant local executive authorities. In this regard, the problem of insufficient restoration of forest resources also manifests itself, which leads to their gradual reduction, there is a decrease in the area of reforestation from 1453.7 thousand hectares in 1995 to 961.8 thousand hectares in 2017, that is, by almost 34% ^[9]. Despite the fact that the amount of rent for leased plots increases, according to a government decree, and the amount of rent is calculated as the discounted value of the forest, the auction procedure has a number of disadvantages related to the subjectivity of the results and the lack of official statistics.

However, the researchers also note that the instant transition to private ownership in Russia can further aggravate the situation on the Russian LPC market, transferring most of the logging to the shadow sector of the economy. As a solution to this problem, experts propose to reform the system of forest auctions. Thus, according to the work of A.I. Pyzhev, the budget revenues of the Russian Federation, with the correct implementation of the policy of rent payments in 2013, could increase 3-4 times from those that were actually collected. The main method of solving this problem is the calculation of forest rent "based on Pareto and Ricardo econometric models" based on open data from forest auctions.

Another important problem of the LPC market is the low attractiveness of this industry for investors due to the low profitability of production in this industry, as well as due to the high proportion of waste in the production of products. Based on international experience, it can be said that the main tools for increasing investments are subsidies, tax incentives and the creation of separate funds for the development of the industry ^[10]. These measures show their effectiveness in developed countries.

Russia is currently implementing a Strategy for the development of the forest complex until 2030, which involves the implementation of more than 157 projects with a total investment of more than 644.6 billion rubles. Government programs can be significant investments in the development of the industry, but private investors associate this industry with high capital costs and high risks, which is why the main development of the industry depends on the expansion of production of large construction holdings. This problem is currently also exacerbated by difficulties with the export of products and the relatively low volume of the domestic market, the needs of which are much less than the capabilities of existing industries ^[11]. New investments are also needed to increase investments in equipment, since if in 2019 this figure was 27 billion rubles, then by 2030 it is planned to double this value. In addition to the implementation of government support measures, it is necessary to guarantee manufacturers certain indicators of the cost of production, as well as maintaining interest rates on loans attracted for the development of the industry and the implementation of investment projects.

The final acute problem of the LPC of the Russian Federation, it seems, is the complexity of the institutional regulation of this industry. In particular, the availability of consolidated data reflecting the situation in the timber industry market, which is currently very limited. This is justified by a number of factors, which include the difficulty of accounting for the quantity of harvested products, as well as the inability to obtain fully reliable data from a significant proportion of enterprises operating in the shadow sector. To overcome this problem, it is necessary to systematize the data obtained when accounting for the activities of enterprises at all stages of production of LPC products, as well as to increase the effectiveness of measures taken to control the illegal manufacture and export of wooden products. When solving this problem, it is also worth paying attention to the structure of exported products. Since the increase in the share of highly processed products can also be regulated by measures taken by the state ^[12].

2.2. The possibilities of overcoming trade restrictions by Russian LPC companies

As mentioned above, exports have always played a significant role for the Russian forestry industry. That is why the restrictions imposed by the states can greatly affect the further development of the industry, which in modern Russia has developed at a slower pace than other areas of the resource economy.

Despite the fact that the total exports to the countries that imposed restrictions on the import of LPC products amounted to about 557 million dollars in value terms (which is 50% less than the total exports of wood to China), this still had a significant impact on the main forest holdings. Some companies managed to reorient themselves to other sales areas. For example, Segezha group's operating results (Table 3) show that despite a large increase in sales and production of lumber, other areas showed a decline. Despite an increase in production volumes and a 15% increase in revenue, the company reduced its net profit by 60%, which indicates quite significant financial losses in 2022.

Table 3. Segezha group's operating results,2022

Source: Segezha Group's official website.

According to the researchers, it is quite problematic to replace some of the products with similar options in a short period of time. In the case of high-value-added LPC products, some components from related industries may also be imported ^[16]. This fact indicates certain limitations faced by producers of wood products in case of reorientation of their activities to the domestic market and the search for alternative markets.

If we assess the real situation in the forest industry market, it still decreased, showing a drop of 10.3% and averaged 29 million cubic meters, as well as the export of all wood shipped abroad. According to the Federal Forestry Agency, the Middle East and China, as well as other developing countries, are expected to become key areas for the reorientation of Russian production. The overall growth of exports to these countries amounted to 18% ^[17]. However, the researchers argue that changing the supply chain of LPC products is not as easy as in the case of other industries. Several arguments are given in support of this opinion. The first of them is the cautious behavior of trading partners ^[14] in these areas, caused by geopolitical risks that can be applied to their countries. The second limitation is related to the capacity of transport routes, which are currently filled with various types of resources such as coal, steel and others. Thus, it becomes economically unprofitable to completely redirect exports to these regions, which is why companies have to look for alternative ways to adapt to the imposed trade restrictions.

Summing up, we can say that the Russian LPC market has opportunities to overcome market restrictions. They are primarily related to the desire of large exporting companies to adapt to changing conditions, constantly being in search of new markets and ways transportation of products. In addition, when solving a number of external factors, such as increasing the capacity of transport routes in the eastern direction and lifting trade restrictions on the export of certain types of products, this industry can have a positive impact. The Russian LPC market, which has been actively developing over the past few years due to high global prices for forest products, suffered quite a lot in 2022. However, despite the difficulties that have arisen, the timber industry has approached this crisis situation in a much more mature position than before. Government support measures are significant for the forest industry market, which allow reducing transportation costs for enterprises located in the North-West of the country, away from the markets of Asia and the Middle East. Supporting investment projects that involve stimulating wooden construction in Russia, as well as the possibility of introducing preferential transportation of wood products, can have a positive impact on large enterprises in the forestry industry.

Even from the perspective of mid-2024, it is quite difficult to assess the impact of sanctions on the LPC market, which has been largely export-oriented in recent years, due to the small amount of reliable data. However, we found out that this market has growth prospects, which, if properly implemented, can stimulate its further development, but which, apparently, are not being used to their full potential.

2.3. The impact of reforestation processes on the resource potential of the LPC market

When solving the current problems that the Russian forest complex is currently facing, it is necessary to take into account that its capabilities largely depend on the quality of the reforestation work carried out. But today, these activities do not always lead to the expected result. This is due to the fact that the assessment of the effectiveness of measures is based on data on the planting of forest plantations, while first of all it is necessary to track the result.

Fig. 3. Forest reproduction in the Russian Federation

Source: Federal State Statistics Service.

Based on statistical data, it can be concluded that the growth in the number of forest restoration activities carried out by humans is occurring at a fairly slow pace. Also, despite the annual increase in the amount of deforestation in Russia, that is, the estimated cutting area, the share of high-quality coniferous wood in the total volume of forest resources is gradually decreasing, giving way to younger tree species. Although a set of measures is currently being carried out aimed at clarifying the data for calculating the volume of the estimated cutting area, reforestation does not keep pace with the pace of timber harvesting.

Based on statistical data, it can be seen (Table 4) that if in 1990-2000 the forest on the territory of the Russian Federation not only did not recover naturally, but also the total amount of forest resources decreased, then by 2010 the situation had changed dramatically and the amount of restored forest reached 161 hectares per 1000 hectares per year, while while in the rest of Europe, the area of the restored forest fell from 257 in the previous period to -7. However, by 2020, the area of the restored territories has again almost halved relative to the record values of the 2010s.

Data on artificial forest planting have similar dynamics. If by 2010 the relative index per 1000 had almost doubled and reached 425, then by 2020 this figure had decreased, and the average annual loss of forest in the Russian Federation amounted to 73,300 hectares in 2010-2020 ^[15]. Such data indicate a reduction in the effectiveness of reforestation measures carried out by the Russian Federation in 2010-2020. In addition, the researchers say that the assessment is difficult due to the lack of accurate statistical data on Russian forest resources, which are currently being collected by three federal agencies as part of a forest inventory. However, on average, the reserves of the forest fund of the Russian Federation have not changed for 30 years and amounted to an average of 80,750 million cubic meters.

Table 4. Annual change in the area of naturally renewable forest in the Russian Federation ^[14]

The effectiveness of forest reproduction measures on the territory of the Russian Federation may be affected by changes in forest legislation, which will transfer responsibility for restoration to tenants of forest plots. Such a measure can make a more effective solution to the problem, since in this case the state will need to monitor the implementation of appropriate measures. In addition, it is necessary to "establish the dependence of the fee for the use of a forest plot on the quality of forestry" ^[16], which will limit the availability of higher-quality types of tree species and may lead to their systematic restoration.

Thus, the need to reform the reforestation system is also important for the LPC market. The gross income per unit area of operational forests at the same cost is 30-35 times lower than in Finland ^[16]. This fact indicates rather low profitability indicators in comparison with other countries, which makes Russian products less competitive in foreign markets. The depletion of resource potential due to the cutting down of the main part of high-quality rocks can lead to problems in the development of the entire industry, which, even with the availability of resources, is experiencing certain difficulties.

To overcome such trends, it is necessary to modernize the Russian LPC market, which will significantly increase the efficiency of realizing the resource potential (which, obviously, is very significant). However, it is impossible to do this solely due to the regulatory limitation of the number of logging operations and the introduction of clear parameters for reforestation. If we rely on the experience of countries that are also active suppliers of the forest resources market, then, for example, in Finland, commercial logging reaches about 40% of the total volume of logging ^[17]. Such a model reduces the depletion of territories planted with forest resources by removing low-quality resources. Despite the fact that from an economic point of view, such procedures are not very profitable for the harvester, they significantly increase the yield of wood and its quality from 1 hectare of forest ^[18]. The introduction of such technology in Finland is reflected in the current economic results of forest use, where, with relatively small forest reserves, exports of wood products account for about 5% of GDP. But, in addition, despite the annual increase in logging, timber stocks have increased by more than 10% over the past few years.

Despite the fact that in order to achieve such results, the Finnish government has been engaged in reforming the forest industry over the past 50 years, these indicators still confirm the possibility of growth of the Russian forest industry. However, in order to increase competitiveness in the global market of the Russian Federation, it is necessary to look for opportunities to update the logging system and increase the efficiency of reforestation in order to create prospects for the development of the timber industry market and the use of its potential in a shorter time.

2.4. The importance of the regulatory framework for the development of the LPC market – the international context

As mentioned earlier, the efficiency of the LPC in Soviet times was much higher than the indicators that the Russian economy currently has. Some experts believe that this is due to the peculiarities of formal state institutions that regulate economic activity. For example, Litvin D.A., Davydova G.V. and Yakovlev P.N. in their work note that due to the incorrect distribution of property rights, a contradiction arises, since "a formal institution prevents the establishment of an optimal market equilibrium that allows maximizing cash flow to the industry and optimizing the forestry (expenditure) part of the activity" ^[15]. This is also confirmed by the fact that the lessor, according to Russian law, can only dispose of resources, but the future financial benefits that can be obtained from a potential forest plot can only be obtained by the owner of the land, that is, the state. Thus, despite the large volume of exploitable forests, namely 598 million hectares, only half are leased. This indicates the unused potential of the industry and attracts attention, as it directly affects its development.

In addition to certain difficulties with the development of forest resources, problems arise at the level of introducing restrictions into the regulatory framework, which reduce the share of interested harvesters. In addition to the constant changes to the Forest Code of the Russian Federation (over the past 15 years, their number has exceeded 65), new Regulations are being introduced that increase the administrative burden on tenants (Government Decree), reducing the potential for profit. Also, these decisions lead to the division of the main market share between large companies that are able to withstand administrative pressure and can withstand competition in the face of sanctions and internal pressure.

It is also considered contradictory to calculate the cost of resources used, since the current minimum rates for wood at the root with annual increasing coefficients are the simplest form of direct tax that has nothing to do with the market value of a wood resource and does not guarantee even simple reproduction of forest resources ^[18]. This fact indicates the inefficiency of calculating forest rent in the Russian Federation, however, this problem cannot be fundamentally solved, since there is no single methodology for assessing forest resources that would most accurately reflect the cost of forest resources and could take into account all the costs of their restoration. In developed countries such as Canada and Finland, where the efficiency of the forest industry is much higher than in Russia, root prices are determined based on market prices for roundwood ^[5].

Currently, the key document laying down the basic principles of the modernization of the LPC market in the Russian Federation is the Strategy for the Development of the forest complex until 2030. Despite the identified directions for the rational allocation of forest resources, there are currently not enough regulatory legal acts that would ensure an increase in the role of commercial and private agents in the timber industry ^[19].

Thus, this industry in the Russian Federation is controlled by the state. Such an attitude reduces its development prospects and slows down its growth rate. The contradictions that arise in the market due to the peculiarities of legislation reduce the interest of market participants in increasing the value of their available resources. To overcome this problem, it is necessary to take and implement measures to decentralize forest management. And although most researchers admit that it will take time to implement such a solution, it must be done as soon as possible while the market is being formed anew, trying to adapt to changing external conditions.

Conclusion

Thus, in the course of the work, the key features of the timber industry market of the Russian Federation were identified. Based on the data presented above, this industry has certain specifics of development, which is associated with the difficulties of organizing a system of harvesting and processing forests in connection with the transition to a market model of the economy, as well as the peculiarities of the distribution of ownership rights to forest resources.

In addition, since the 1990s, the complex has experienced a number of internal problems. First of all, they were associated with a significant proportion of companies in the industry that operated in the shadow sector of the economy. This was due to the lack of an effective internal control system and even political will ^[20].

In addition, the rental relations that have developed between tenants and the state in the use of forest resources have played a significant role. Based on foreign experience, it can be concluded that fully state ownership of forest resources has a negative impact on the economic efficiency of their use. Nevertheless, it is recognized by many that the Russian LPC market in the short term requires not so much the transfer of ownership rights into private hands as the reform of the forest rent assessment system ^[21]. Such measures taken by the state will affect the investment attractiveness of the complex, as well as indirectly affect the effectiveness of reforestation. Actually, these same measures are considered in the world economic science to be the main ones for the development of the forest industry not only as a profit-making sphere, but also as an important branch of anthropogenic activity for the planet and climate (see the work of D. Jackson). However, in Western thought, it is also considered correct to develop the level of state control, with which Russian economic theory does not agree too much ^[22].

Having highlighted the internal problems of the complex, which have affected the development of this industry over the past 30 years, it is impossible to ignore the sanctions restrictions. The LPC market, which has always been export-oriented, is experiencing difficulties with the sale of products. If the share of exports in the revenue of large forest holdings in 2018-2021 remained at the level of 60-70%, then trade restrictions forced manufacturers to look for new markets for the sale of products. Despite the popular decision to reorient trade to the Middle East and Asia, it turned out to be not so easy for this market due to a number of restrictions that arose. They affected, first of all, the north-western regions of the country, whose transport costs could exceed the cost of the products themselves.

In general, it is worth noting that the LPC is a promising, but at the same time "blinded" in terms of information and having too high a level of regulatory and prescriptive acts (the Paris Agreement, Government Orders, Federal laws, etc.) vector of development of the domestic economy. We hope that the current crisis of the LPC will be able to pass by finding new ways to develop investment attractiveness.