Preface

Reports of the type presented here tend to demand a high level of rigorous analysis and statistical credibility. This sometimes effectively obscures realities that may not otherwise enter into discussions because of their anecdotal nature.

It can not escape the knowledgeable observer that the potential for the Latvian forest sector is significant. This is even demonstrated by several of the statistics presented below. The potential for the forest sector has been clearly identified by, for instance, the Latvian Ministry of Economy and the OECD, in separate reports.

The MOE report, Economic Development of Latvia, June 1998, refers to, "… a big potential in terms of enlargement of production …". It suggests that incomes are being lost because exports consist mainly of roundwood and sawnwood and that "deep" processing constitutes a very small portion of exports. In addition, the first page of the introductory "Overview" section of the OECD, Investment Guide for Latvia, 1998, report refers to, "…lucrative opportunities for foreign investors …", in the country’s wood processing sector.

Early rationalisation and restructuring of Latvia’s forest sector included a period of radical land and fixed capital redistribution that has thus far served the initial phases of transition admirably. In many cases, productivity, incomes and profits now exceed all earlier levels. Subsequent phases of transition reforms will further reconfigure the flow of raw material, capital and economic rents amongst the participants in this sector. It is assumed that the ultimate goal includes that of creating an internationally competitive forest sector in Latvia capable of reasonably effectively defending itself within the international markets and broader commercial unions – and meeting Latvia’s economic and social welfare development expectations.

In all countries in transition, reform faces the prospect of resistance from entrenched interests – public sector and private sector – having specific objectives that diverge from broader social objectives held by society. The consequence of this is very dramatically evident in former centrally planned economies.

The final outcome of attempts to optimise forest sector institutions and structures will be determined by historical precedents, by rigorous and demonstrable economic, management and legal concepts, and by the extent to which a transparent, responsible and accountable process of participation is forthcoming from participants and stakeholders. Where any of these are compromised, results will be sub-optimal and must necessarily be re-visited in future processes.