Although the State Forest Management Centre (RMK) earns millions, it cannot be found in the Estonian business register. This institution has its own law and its annual report can be viewed only in its website. Aigar Kallas explains the impact of the bark beetle and coronavirus crises and which member of the RMK board received the most profitable contract from the enterprise last year.
The RMK is a special institution as it has its own law. It is not a company but neither is it a state institution. What is it then?
It was discussed every which way but the argument against declaring it an enterprise was – it may sound emotional – the sacred status of the forest, which is so important for the Estonian people and politicians that it could not be named a business enterprise of the state forests. In case of state-owned enterprises there is always the question of whether it was formed for business interests only or is it performing some public mission as well. There is no such question regarding the RMK, since the Forest Act stipulates – yes, there are economic activities which earn profit, but there is also a public mission.
But how does the RMK earn money? One imagines that you cut the trees and sell the timber – but is it all that simple?
I have to admit that 99 percent of the RMK income does come from the sale of timber. But as for the principle “cut them down and sell them”, the state actually possesses one million hectares of forests, which is sacred and its privatization is never discussed. One third of it is protected and the remaining two thirds can be used for economic purpose. We operate according to the principle that we cut down the mature forest and replace it by new trees.
Do you have your own forest?
No. I never wanted it because it might lead to a conflict of interests.
The price of timber has been favorable for the RMK. Has there been a change recently and how will it impact your operations?
The price of timber has been growing indeed for a long time. The reason is primarily that if the world economy is doing well, it will eventually impact forestry as well. Secondly, the timber industry, the processing industry in Estonia is so advanced that they can pay a high price for raw material. And that has allowed all forest owners make profit.
I have to admit that the prices of timber have been relatively low for the past 1.5 years, although not in all classes of timber. But the price of pulp wood has dropped by one third since 1.5 years and this has naturally affected our performance. But thanks to high efficiency, forestry can be profitable even in case of drastic price fluctuations.
The European timber industry has been affected by the bark beetle epidemic for quite some time and it reached Estonia this spring. How does than affect your performance?
One reason for the decline of timber prices last year was the increased supply in Europe and that was indeed caused by the bark beetle damage. It began to impact forestry in Austria and Germany and brought more timber to the market than had been planned. We noticed last year that the same bark beetle wave had reached Estonia. We addressed it this year, which meant that we had larger supply of fir timber than that of pine or other types of wood and this in turn made it more difficult to find local buyers. But I must again commend the Estonian timber industry, which found use for that wood. They were able to pay the price and sell the product abroad.
How did the bark beetle influence the logging volume?
The planned logging volume remained unchanged; we just changed the logging plots.
Is there much illegal logging in Estonia?
No, fortunately not. It is interesting that you ask it, since I was offered just yesterday a proposal for an application registering the sound of power saws in the forest. If the sound is not lawful, one could suspect illegal activity and rush up. It is a fine idea in itself and it could have been quite useful some 20 years ago when illegal tree cutting was a hot issue, but I can see no need for it at present. Strictly speaking, there is nothing to do with the illegally logged timber.
How has the coronavirus influenced the demand for timber?
I think that the impact of the virus is quite low for the time being. There is nothing to do, we are a part of the global timber market and the virus has not influenced it much. The central European bark beetle damage, which began in 2015, reached here only last year; the delay was thus four years. I believe that the impact of the coronavirus will become apparent in the autumn in the earliest or even later, with the exception of short-term influence concerning logistics and other similar issues.
But it is difficult to predict the wishes of people. As for the trend of people wanting to live in the forest, build their houses and develop gardening plots there, our houses are fortunately built of wood still and that could increase the local demand. But as for wood-based energy, renewable energy is an opportunity for us as well. There is an abundance of timber we cannot use for any other purpose and we could cut it and convert to electricity.
About the planned cellulose plant near Tartu a few years ago, did we win or lose by failing to build it?
I would say that the Estonian forest owners, including the state, lost from it. And the Estonian state, regarding the potential tax income and employment, lost as well. But when looking at what is going on in the world’s cellulose industry, maybe the biggest winners were these women and men, who agreed to invest in it but did not have to.
But how do logging and nature protection fit together? They say that there is too much logging, that birds must be protected during nesting time, that you are ignoring your own rules. What about that?
Rules are always reviewed during a crisis. We have had the rule of springtime logging ban for 20 years and we have been observing it punctually. But just like the society was hit by the corona crisis, the forests faced the bark beetle crisis and we had to adjust to the situation.
The work we are doing is open and accessible to everybody. One can look up that here is my home and here is the forest and the RMK is planning to do something there. We are trying to inform the people and if there is some interest, then we explain why we are doing something. But once the forest has reached some certain age, there is nothing else to do, we cannot keep it like that and have to cut it down the way we have been taught at school.