Evaluating Financing of Forestry in Europe country-level report

Transcription

1 Evaluating Financing of Forestry in Europe country-level report Czech Republic Faculty of Forestry Czech University of Agriculture Prague Research staff: Ludek Sisak research leader Karel Pulkrab Martin Chytry Zdenek Bludovsky Miroslav Zeman Tomas Broukal Jan Bukacek Libuse Dvorakova Martina Paduchova Prague, November 30, 2002

2 Table of Contents Summary 4 Introduction 9 1. Policy context 9 2. Institutional context 11 State forest administration 11 Private forest owners 12 Communal forests 12 State forest lands 12 Private forest companies 13 Associations in forestry Socio-economic context 14 Previously implemented programmes 17 1.Materials and methods Data collection Data analysis Limits of the study Programmes in Tax system and tax concessions in relation to forestry 20 Forestry tax concessions summary Social values - total economic value Presentation and preliminary analysis of the information collected Private forestry sector Programme: Support of minor forest owners up to 250 ha ( ) Programme: Support of innovation in information system in forestry ( ) Programme: Reforestation by soil improving and stand stabilising tree species ( ) Programme: Soil reclamation and torrent control ( ) Programme: Regeneration of forests damaged by air pollution in threat zones A, B ( ) Programme: Reforestation, establishment of stands and their tending ( ) Programme: Grouping of the small-size forest owners ( ) Programme: Environment and nature-friendly technologies ( ) Programme: Support of endangered species of wild animals ( ) Programme: Afforestation of agricultural lands including their protection ( ) Programme: Investments support by the Supporting Guarantee Farmer s and Forestry Fund ( ) Programme: Forest management guidelines (FMG) ( ) Programme: Licensed forest professionals (LFP) ( ) Programme: Providing forest services aimed at forest management support ( ) Public forestry sector Programme: Support of forest running in the military forests ( ) Joint programmes for public and private owners Programme: Public beneficial activities (for non-market services) ( ) 41 2

3 2.3.2 Programme: Support of forestry in air-polluted areas ( ) Programme: Land-tax concessions ( ) Programme: Non-market forest services ( ) Programme: Torrent control ( ) Programme: Other subsidies for forest running ( ) Programme: Other support ( ) Programme: Providing forest services aimed at forest management support ( ) Results Findings Conclusions Recommendations 58 Annexes 1. Data collection framework 2. Structure of qualitative questionnaires 3. Complete data sets (Word tables) 4. References and sources 5.Conception of the forest policy for the period before accession of the Czech Republic to the European Union 3

4 Summary Introduction The area of the Czech Republic is 78,863 km 2 (7.886 mil. ha) populated by 10.3 mil. inhabitants. Forests cover mil. ha, 33.4% of the total land area of the Czech Republic (CR). The area of forests in the CR increased gradually from mil. ha in 1990 to mil. ha in The increase of forest area between 1990 and 1999 was 5 thousand ha. But due to great problems in agriculture where large areas of agricultural lands were abandoned in the period estimated to about 1 mil. ha of 4.5 mil. ha the afforestation is negligible. There is considerable lack of finance for the afforestation of agricultural lands in the public budgets. The Czech Forestry Sector experienced many substantial changes basically influencing the process of forestry financing in the period A completely new state forest administration was formed, private sector originated in forestry, new structure of forest owners came into being, new structure of state forest establishments administering state forest lands occurred, quite a new system of forestry financing was gradually formed. By the end of 1999, the proportion of commercial forests was 77.7%, forests of special purpose 18.7% and protective forests 3.6%. Financial support in different forms goes mainly to protective forests, forests of special purpose and forests affected by air pollution. The main tree species are Norway spruce (Picea abies L.), which covers 54% of the total forest area, and Scots pine (Pinus silvestris L.), covering 18%. These figures are considered relatively high. Great effort is made to come nearer to natural composition (to enhance ecological stability) in the process of reforestation, which is politically supported and significantly subsidised. As well as the forest area, the growing stock has also increased gradually. The total growing stock volume in 1990 reached 546 mil. m 3 and in mil. m 3 under bark. Total increment in forests permanently exceeds removals that reached about mil. m 3 of timber per year in the second half of the 90. Conservative planning of harvesting influences the extension of rotation age. For example, the average rotation age was years in 1990 and years in The average age of forests reached 60 years in 1990, while 62 in These aspects negatively affect economic effectiveness of forestry and cause other problems like the higher danger of diseases and disasters, and an increased susceptibility to air pollution, which is a significant problem in the forests of the CR. The position of forestry sector is stable in the national economy. Forestry produces 0.6 % 0.7% of the Gross Domestic Product (GDP) on the level of 11.3 thousand mil. Czech Crowns in 1999, shares in 0.7% 0.8 % of the total number of employees, while investments in forestry sector reached only 0.3 % of their total volume in the CR. Forest policy and legislation The principles of sustainability, environmentally friendly management and enhancement of the biodiversity in forests have been included in the new Forest Act (No. 289/1995) passed by the Parliament of the Czech Republic in The Forest Act respects the contemporary trends in forestry and supports them in both legislative and economic ways. According to the Forest Act, forests are a national heritage that forms an irreplaceable element of the environment and the Act for the Protection of Nature and Landscape states that forests are a significant factor in landscape use. 4

5 Legislative tools are applied to all forest owners, without exception, to restrict their activities for reasons of public interest. Apart from the Forest Act, there are two other Acts substantially influencing forestry: Nature Conservation Act (No. 114/1992) and the Water Act (1996). Forestry policy is aimed at the permanent maintenance of forests for future generations. Forest provides not only sustainable timber production but also meets public beneficial functions. The State is interested in permanent and balanced use of this renewable resource and utilisation of its benefits for the public interest. The policy in forestry financing is related above all to the securing and enhancement of providing the population with non-market forest goods and services. Partially it supports the competitiveness of timber production and employment (consumption) because timber is considered as very important environmentally friendly, sustainable and renewable raw material for the life of society opposite to the other non-renewable and non-environmentally friendly raw materials. Forestry financing is not aimed at support of market services including timber production as itself. The economic instruments are also derived from valid legal regulations, but they directly influence financial management of the forest owners. The economic instruments are divided by their functions into: a) taxes (fiscal), b) subsidies (motivating), c) compensations. Institutional framework The institutional framework is created by the state forest administration, private forest owners, communal forest owners, state forestland managers, private forest companies, and by their associations. State forest administration consists of two levels. The Forestry Division of the Ministry of Agriculture methodically supervises district and regional authorities. These authorities exercise the state administration duties imposed by the state forest administration bodies by the Forest Act on the land they look after. Especially regional offices are responsible for introducing financial contribution programmes by the Ministry of Agriculture into practice. Great change occurred in area and number of private forest owners. In 1990, almost no private forest owners existed in the CR but by the end of 1999, there were about 150 thousand private forest owners in the CR with 23.0% of forestland. The group of private forest owners is quite different. At present, the vast majority of private forest owners have holdings smaller than 2 ha, which are frequently further divided. Small private owners generally have little professional knowledge of forestry. They also generally have a weak claim to the ownership of the land, a lack of financial means, and often live very far from their forestland and work in other sectors of industry. Therefore, the forest policy, and the state administration and authorities try to support the enhancement of their knowledge, elaboration and use of forest management guidelines, consultancy by professional foresters and creation of forest co-operatives by using mainly economic tools. Communal forest ownership has a long tradition in the CR. At present, communities cities, towns and villages have almost 340,000 ha of forestland, which is 12.8% of the total forest area. The majority own small areas of forestland (56.4% own less than 10 ha). Systems of forestland management are quite different, from those only administering their forests and all forest operations do on contractual basis to those performing almost all forest operations by 5

6 themselves. As for economic tools of forest policy, communal forests are treated as private forests. State forestland (64%) is administered by several different establishments. The largest of them is the State Enterprise Forests of the Czech Republic, headquartered in Hradec Kralove, administering mil. ha which is 56% of the total forest area. Other managers are Military Forests and Farms (5% of the total forest area) and 4 national parks (5% of forests) belonging to the Ministry of Environment. Apart of them certain area of forests was managed by 2 Agricultural Universities (faculties of forestry) and by the Office of the President of the CR. Private forest companies belong to he forestry sector, too, but usually, they do not own any forestland. They offer and perform forest services and operations. The can obtain only one kind of subsidy supporting investments from the Promoting and Guarantee Farmers and Forestry Fund. Financial support of forestry Information and data on respective programmes in were gathered from different sources. Data on programmes by the Ministry of Agriculture, the most important programmes for forest owners and managers, were collected in close collaboration with experts of the Ministry of Agriculture, Forestry Branch. Archives and statistics of the Ministry and of the state forest administration of lower levels (regional departments of the Ministry) were used. The data on respective programmes, financed by the Ministry, were collected from summaries of contracts and resolutions of granting subsidies by individual years and programmes. Data on Programme: Investments support by the Supporting Guarantee Farmer s and Forestry Fund ( ) were collected from the Fund (limited company with 100% shares owned by the state). Data on financial support in military forests were collected from the respective authorities and from the statistical surveys at the Ministry of Agriculture. Analysis of the forestry financing system in the CR in the period resulted in findings that the so-called process of transition to market economy substantially influenced the possibility to collect data on forestry financing. Up to the year 1991, almost all forests were in the state possession or were managed as a state ownership (directly connected with the state budget), and there existed quite a different system of financial support (both positive and negative). Basically, financial losses (planned) were covered from the state budget, financial gains went to the state budget. In the period , the newly and gradually created system of the financing of forestry was heavily influenced and distorted by restitution processes. Also the system of forestry financing was different in the respective years. As for the period , the mentioned processes resulted in: - great lack of statistical data on forestry financing, no data on physical outputs; - considerable unreliability of some data that could be identified; - incompatibility of the data between years. Since 1996, after the new Forest Act came into being, a relatively modern system of forestry financing has been created and sufficiently stabilised. Simultaneously, the system of state forest administration was substantially rebuilt. The proper and stable financing programmes started mostly in Available and reliable data on forestry financing could have been collected systematically only since the year 1996 (incl.). The tax system is relatively complex and complicated in the CR. Tax concessions in forestry can be related theoretically to land tax, road tax (not paid from forest tractors), to certain 6

7 extent to income tax and to value added tax (lower taxation of the fuel wood). Acceptable data were found in relation to the most important land tax concession. Land tax is not paid from forests categorised as protective forests (3.6 % of total forest land in the CR) and forests of special purposes (18.7% of total forest land). Land tax is substantially reduced or abolished in forests affected by emissions. Data on other tax concessions in the forestry sector are not available. Social value of programmes outputs (value to the society) were not identified as there is no information about such value under present state of knowledge in the CR. Valuation of externalities based on consumer surplus approach (use-values, non-use values, option, bequest, existence values) has not been performed in the frame of the CR. So-called expert valuation systems of non-market forest goods and services have been constructed for different purposes (especially fees for deforestation and damage calculations), nevertheless, they cannot be used for the study purposes. There were identified 30 programmes (see the following table) and 46 measures (programmes and subprogrammes) in in the CR. Programmes were unstable. They occurred in different years with different level of finance. Sets of programmes in periods 1991, and are quite different. Intended outputs were not statistically observed on national level up to 1996, which stems from history. In spite of the fact the support was approved by proper and checked projects with physical outputs in individual cases, physical outputs started to be surveyed since 1996 but in some programmes only since Considering the financial support including tax concession of the whole set of programmes by individual years, the highest support occurred in But 2/3 of the support came from the former financing of air-polluted areas. On average, the level of finance varied at about 10% of the GDP created by the forestry sector. Qualitative analysis on implementation gaps and non-market failures was performed in two most important programmes Reforestation, establishment of stands and their tending and Non-market forest services. The analysis was carried on by virtue of interviews with representatives of key actors: - Ministry of Agriculture Forestry Branch, responsible for general implementation of the programme, - Regional Offices Departments of Environment, responsible for practical administrative realisation of the programme, - Association of Municipal and Private Forest Owners, the most important organisation representing beneficiaries, - Forests of the CR, state enterprise, representing important user of the programme. Administrative procedures are more problematic for small-size forest owners than for the larger ones. Financial support is performed prevailingly in connection with the securing and the quality enhancing of non-market public forest services and sustainable forest management. Market relations are not affected. Efficiency of majority of the programmes could be calculated only as a share of the private value of physical outputs to the value of financial and administrative inputs. No social values could be identified and used. Using social values, the efficiency of majority of programmes would be even much higher. The extreme level of the efficiency in the programme Reforestation by soil improving and stand stabilising tree species was caused by only 5% financial support of the total costs, but without the support the desirable share of such tree species would not be planted. The problems mentioned above should be solved. 7

8 Financing of forestry in the Czech Republic in mil. CZK prices 1999 Programmes Years Efficien cy Support of air-polluted areas 1,719.2 Subsidies calamity funds Other subsidies 2.1 Silvicultural operations for non-market services Intensification of non-market forest services 90.3 Other public beneficial activities 90.3 Forest reclamation and torrent control Support of minor forest owners (250 ha) Support of innovation in information system in forestry Reforestation by soil improving and stand stabil. tree species Soil reclamation and torrent control Regeneration of forests damaged by air pollution Reforestation, establishment of stands and their tending Grouping of the small-size forest owners ? Environment and nature friendly technologies Support of endangered species of wild animals Afforestation of agricultural lands including their protection Investments support Forest management guidelines (FMG) Licensed forest professionals (LFP) Providing forest services aimed at forest management Support of forest running in the military forests Public beneficial activities (for non-market services) Support of forestry in air-polluted areas Land tax concessions Non-market forest services Torrent control Other subsidies for forest running Other support Providing forest services large scale measures Total 2, , , , , , , ,

9 Introduction 1. Policy context In the period , the Czech Forestry Sector experienced many substantial changes basically influencing the process of forestry financing. Completely new state forest administration was formed, private sector originated in forestry, new structure of forest owners came into being, new structure of state forest establishments administering state forest lands occurred, quite new system of forestry financing was gradually formed. Concern and care for forests in the CR have a long tradition that dates back as far as the 14th century. The principle of sustainable forest management, which has been applied for more than 200 years, is based on forest management planning. This has been used for over 100 years in the majority of the country and for 40 years throughout. Systems of education and training in forestry also have a long history. At present, Czech forestry experiences great and rapid changes in the process of transition to a market economy. The CR is a signatory state of the Resolutions of the Strasbourg and Helsinki Conferences. The State forest policy, adopted by the government of the CR in 1994, was based on these resolutions. The principles of sustainability, environmentally friendly management and enhancement of the biodiversity in forests have been included in the new Forest Act, which was passed by the Parliament of the Czech Republic in The Forest Act respects the contemporary trends in forestry and supports them in both legislative and economic ways. According to the Forest Act, forests are a national heritage which form an irreplaceable element of the environment and the Act for the Protection of Nature and Landscape states that forests are a significant factor in landscape use. Forestry policy is aimed at the permanent maintenance of forests for the future generations. Forest provides not only sustainable timber production but also meets public beneficial functions. The State is interested in permanent and balanced use of this renewable resource and utilisation of its benefits for the public interest (Ministry of Agriculture, 1994). Long-term principals of the Czech forestry policy are: to restore and preserve stable forest ecosystems, to increase diversity of the forest tree species and to come nearer to a natural composition, to reach a significant decrease in air-pollution load on forest stands, to safeguard and revitalise forest stands in regions damaged by air-pollution, to maintain and develop the gene pool of forest tree species. Short-term principals of the Czech forestry policy include: to complete restoration of property rights to forests, including the settlement of indemnities, to achieve a stable organisational structure of the State forests, to preserve a high level of forest management planning, to reduce significantly damage caused by hoofed game, to assist in the improvement of forest management (especially for small owners, through establishing and supporting groups/associations of owners), by increasing the professional level of the staff, consultations and public awareness. 9

10 Forests represent an important object of public interest as they provide the public with many benefits and this forms a major part of the State management. In particular these benefits include water management, soil protection, climate regulation, recreation, landscape formation and the conservation of the unique character and biodiversity of wildlife. The State tries to safeguard the public interests in all types of forest ownership by using economic tools, direct State orders and legislative tools. Economic tools are optional and can be applied in the forms of motivation and compensation. The State can impose direct orders for certain activities such as pest control, subsidies and indemnities for injuries (on account of restriction of the owner). Legislative tools are applied to all forest owners, without exception, to restrict their activities for reasons of public interest. These restrictions are usually applied under the Forest Act (No. 289/1995), Nature Conservation Act (No. 114/1992), and the Water Act (1996). The Present Forest Act, No. 289/1995, was passed by the Parliament of the Czech Republic on 3 rd November 1995 and is a fundamental rule of new legislation in forestry. It respects the elementary rights of forest landowners and the concerns of the State for the fulfilment of all forest functions and preservation of forests for future generations and the sustainability of all forest benefits is the leading principle. The new Forest Act create a legislative framework for the fulfilment of the major characteristics of the processes that are underway in Europe that respects the principles of environmentally friendly forest management, sustainability and biodiversity. The Forest Act represented a milestone in financial support of forestry in the Czech Republic. Financial support system was completely changed in At present, the forestry policy principles were adjusted by the material Conception of the forest policy for the period before accession of the Czech Republic to the European Union, prepared by the Ministry of Agriculture in Apart from completion of restitution, improvement of the condition of forest ecosystems, conservation and enhancement of biodiversity in forests, development of non-market forest goods and services, the support of the extending of timber utilisation and of forestry institutions is mentioned, especially: State forests administration, Management of state-owned forests, Forest management planning, Forestry research, System of forestry schools and professional education, Consultancy, extension services, Grouping of small forest owners, Inter-sectoral and international co-operation. Also the National Forest Programme started to be elaborated as a system of implementing projects of state forest policy. The policy in forestry financing is related above all to the securing and enhancement of providing the population with non-market forest goods and services. Partially it supports the competitiveness of timber production and employment (consumption) because timber is considered as very important environmentally friendly and sustainably renewable raw material for the life of society opposite to the other non-renewable and non-environmentally friendly raw materials. Forestry financing is not aimed at support of market services including timber production as itself. 10

11 Forestry policy focuses on preservation of forests for future generations. Forests are not only a permanent source of products for the forest owner, but they also fulfil beneficial functions for the public. It is in the interest of the state to maintain permanent and well-balanced exploitation of this renewable natural resource as well as exploit the beneficial functions. Public interest is secured by the state in all forests regardless of ownership. The instruments for securing public interest can be divided into two groups: a) legislative, b) economic. Legislative instruments are legal regulations that define the rules for forest management, or, if it is in public interest, set its limits. The key legal regulation is the Forest Law No. 289/1995 of the Code of Law. The economic instruments are also derived from valid legal regulations, but they directly influence financial management of the forest owners. The economic instruments are divided by their functions: d) taxes (fiscal), e) subsidies (motivating), f) compensations. The economic instruments development was directly influenced by the fall of communist regime. The Czech Republic (or rather Czechoslovakia) returned to democracy after November This initiated a number of important democratic changes. The state committed to return properties confiscated in the socialist period, i.e. from Feb 25,1948 to Jan 1, The return of properties to their legitimate owners was called the process of restitution. Now, 63% of forestland in the Czech Republic is owned by the state. More than 22% was returned to the private owners and 15% of forests is owned by municipalities or other public subjects. Changes in ownership called for altered legislative and economic instruments. 2. Institutional context State forest administration State forest administration consists of two levels: the Forestry Division of the Ministry of Agriculture supervises methodically district and regional authorities. Their main duties and responsibilities are stipulated in the Forest Act (1995). The Forestry Division of the Ministry of Agriculture directly manages the forestry sector and implements the duties of the central body of State administration in forestry and game management. It also suggests appointments and withdrawals of the directors of the State forest enterprise. Regional and District offices exercise the State administration duties as imposed by the State forest administration bodies by the Forest Act on the land they look after. District offices make decisions related to landscape changes and planning, to the activities of people in forests. They also approve forest management plans for forests under 1,000 ha, exercise 11

12 supervision of compliance with the Forest Act and grant exemptions from the Act, impose measures to eliminate revealed deficiencies, appoints and recalls forest wardens, issues and withdraws licences of forest specialists and collect and store forest management records etc. Especially regional offices are responsible for introducing financial contribution programmes by the Ministry of Agriculture into practice. Private forest owners Great change occurred in area and number of private forest owners. In 1990, almost no private forest owners existed in the CR but at the end of 1999, there were about 150 thousand private forest owners in the CR. At present, the vast majority of private forest owners have holdings smaller than 2 ha, which are frequently further divided. The majority of private owners possess very small pieces of forestland (69% own less than 1 ha, 14.3% own from 1.1 ha to 2 ha, 11.7% own from 2.1 to 5 ha, 3.3% own from 5.1 ha to 10 ha and only 1.3 % own from 10.1 ha to 50 ha, and 0.4% own over 50.1 ha of forest land). This presents many problems for the surveying of the boundaries and woodlands and places great demands on the professional and state administration and the government s financial situation. Further problems arise with the quality of forest management, as the private owners with small pieces of forestland generally have little understanding of forestry. They also generally have a weak claim to the ownership of the land, a lack of financial means, and often live very far from their forestland and work in other sectors of industry. Therefore, the forest policy, and the State administration and authorities are trying to support the creation of forest co-operatives by using mainly economic tools. Further proposals include obliging each forest owner to undertake a forest management plan in co-operation with a professional forest manager (specialist), who can either be chosen by the owner or by the district State administration. The forest specialist provides the forest owner with specific skills required in forest management and is paid for by the State. The specialist can either be an individual or a legal entity, holding a licence for such activities issued by the relevant State forest administration body. Communal forests Communal forest ownership has a long tradition in the CR. At present, communities - cities, towns and villages - have almost 340,000 ha of forest land, which is 12,8% of the total forest area. By the end of 1999, there were about 4,500 communal forest owners in the CR. The majority own small areas of forestland (56.4% own less than 10 ha, 26% own from 11 ha to 50 ha, 8.7% own from 51 to 100 ha, 7.3% own from 101 ha to 500 and only 0.7% own from 501 ha to 1,000 ha, and 0.9% own over 1,000 ha of forest land). The largest communal forest belongs to the city Brno that owns 7,514 ha of forestland. Systems of forest land management are quite different, from those only administering their forests and all forest operations do on contractual basis to those performing almost all forest operations by themselves. State forest lands System of management of state forest land was basically changed. Up to 1992 state forests (almost all forests 96% - in the CR) were managed by seven state forest enterprises headed by the Ministry of Forestry and Water Management as the general manager. The enterprises administered forests and performed all forest operations having workers and respective equipment for all economic activities. 12

13 At present, state forests (64%) are administered by several different establishments. The largest of them is the State Enterprise Forests of the Czech Republic, headquartered in Hradec Kralove, administering mil. ha which is 56% of the total forest area.. Military Forests and Farms is another state enterprise, which manages 133,000 ha of forests (5% of the total forest area) performing to a great extent most forest operations. There are also 4 national parks, three of them originated between (Sumava - 56,000 ha of forest land, Podyji - 6,000 ha and Ceskosaske Svycarsko 9,500 ha). Only Krkonose National Park (30,000 ha of forest land) existed already before. Two Agricultural Universities (faculties of forestry) manage 20,000 ha of forests, and the Office of the President of the CR manages 5,000 ha. (Source: Ministry of Agriculture, 1997). The Forests of the Czech Republic - State Enterprise, was founded during the transformation of seven directorates of the former State Forests. The founder of the enterprise was the Ministry of Agriculture and the main role is the management of the State owned forests. The application of the principle of environmentally friendly forest management and a permanent fulfilment of all forest functions are the most important economic priorities with balanced financial management being the economic aim. In general, the State Enterprise does not have its own machinery or labour force for undertaking forest operations and so contracts the work to different private forest companies who deliver their services in competitive conditions. Conversely to the State Enterprise Forests of the CR, the other enterprises - like Military Forests and Farms and Universities School Enterprises not only administer their forests but also perform major part of forest operations with their own workers and equipment. National Parks mostly only administer forests in their areas, and forest operations are done on contracts. Private forest companies Private forest companies belong to he forestry sector, too but usually, they do not own any forest land. They offer and perform forest services and operation. The can obtain only one kind of subsidy supporting investments from the Promoting and Guarantee Farmers and Forestry Fund. Private forest companies were created in the process of transformation of the former Forest Directorates of State Forests. All property of the State forest enterprises, under the auspices of the Ministry of Agriculture (excluding forest land and forest stands), was divided by the privatisation projects into either a privatised section (50.6%) or was assigned to restitution and to the administration of the State forests (49.4%). In the process of privatisation of the State forest enterprises, 3 auctions, 4 public tenders and 17 direct sales were carried out and Ninety four established joint stock companies were included in the second wave of voucher privatisation. The total value of this privatised property amounted to 8,200 millions Czech crowns (CZK). The remaining property (worth of millions CZK), which was assigned for administration and for restitution, was transferred to the State enterprise Forests of the Czech Republic. The forest operations are carried out by more than 8,000 private individuals and by around 100 forest companies operating on a competitive (contract) basis. However, it is only these companies, (those which are stock holding or limited), that have any great importance and that have the labour force and the equipment needed for different operations in forests. They undertake around 90% of forest operations. However, problems do exist, mainly in the stock 13

14 holding companies, resulting from unclear ownership relations, from frequent and unexpected changes in share holding and from unqualified share holders. The quantity of the main forest operations, performed in the CR, is shown in the following table. Associations in forestry Many new associations in forestry originated gradually in the period At present there are several associations of forest owners, businessmen, enterprises and foresters in the CR. The respective associations support and defend the interests of their own members, care for professional growth of members, participate in the formation and realization of the State forestry policy and take part in preparing different legislations. Associations of Woodland Owners and Entrepreneurs in Forestry include mostly forest owners who manage small areas of forest land or businessmen who work in forestry. The Czech Association of Entrepreneurs in Forestry comprises mainly of large forest companies, some timber processing companies and paper mills, and some larger forest owners. The Association of Communal and Private Forest Owners was founded in 1992 by 93 communities and cities. There are three forestry professional associations in the Czech Republic at present Czech Forestry Professional Association, Czech Forestry Union and National Forest Committee (Source: Ministry of Agriculture, 1997, 2000). Apart from them there originated a set of other minor associations of undertakers in forestry representing different branches of production and economic activities. All are independent, non-profitable, and nongovernmental organisations. Membership and quality of association is still under rapid development. 3. Socio-economic context Area of the Czech Republic is 78,863 km 2 (7.886 mil. ha) populated by 10.3 mil. inhabitants. Forests cover mil. ha, 33.4% of the total land area of the Czech Republic (CR). The area of forests in the CR has gradually increased (for example, from million ha in 1875 and mil. ha in 1950 to mil. ha in 1990 and to mil. ha in 1999). The increase of forest area between 1990 and 1999 was 5 thousand ha. But due to great problems in agriculture where large areas of agricultural lands were abandoned in the period estimated to about 1 mil. ha of 4.5 mil. ha the afforestation is negligible. There is considerable lack of finance for the purpose of afforestation of agricultural lands in the public budgets. Forest stands cover 98.2% of the total forestland area. By the end of 1999, the proportion of commercial forests was 77.7%, forests of special purpose 18.7% and protection forests 3.6%. Financial support in different forms goes mainly to protective forests, forests of special purpose and forests affected by air pollution. The main tree species (as shown in the following table) are Norway spruce (Picea abies L.) which covers 54% of the total forest area and Scots pine (Pinus silvestris L.), covering 18% These figures may be considered relatively high as the tree species composition changes very slowly. Great effort is made to come nearer to natural composition (for enhancing ecological stability) in the process of reforestation, which is politically supported and significantly subsidised. 14

15 Natural, current and recommended composition of forests in the CR ( %) Composition Spruce Fir Pine Larch Other Total Oak Beech Hornbeam Conif. conif. Natural Current Recommended Ash Maple Elm Birch Linden Alder Other Total broadlvs. Broadlvs. Natural Current Recommended Source: Ministry of Agriculture, 2000 As well as the forest area the growing stock has also increased gradually. This is due to many reasons, including the steady prevalence of annual increment over removals, permanent enlargement of the forest area, prolongation of rotation age, decrease in unstocked areas, an improvement of the gene pool of forest species, higher average crop density, conservative planning of harvesting, and (probably) climate changes. The total growing stock volume in 1950 was about 322 mil. m 3, while in 1990 it reached 546 mil. m 3 and in mil. m 3 under bark. It means that the growing stock increased by 79 mil. m 3 between 1990 and Total increment in forests permanently exceeds removals. Conservative planning of harvesting influences the extension of rotation age. For example, the average rotation age was 92.5 years in 1930, years in 1950, while years in 1990 and years in Between 1990 and 1999 the average rotation age increased by further 3.5 years, which negatively affects economic effectiveness of forestry. This long-term trend results in an increase in the average age of forests, which was 53 years in 1950, 60 in 1990 and 62 in This prolonging of the rotation and average age does cause problems, such as the higher danger of diseases and disasters, and an increased susceptibility to air pollution, which adversely affects older forest stands. Atmospheric pollution is significant problem in the forests of the CR. The CR managed to reduce sulphur dioxide emission by more than 37%, compared with the level of 1980, and the health status of forests started to improve. However, there was a marked increase in large scale damage in forests (mainly in so called emission areas) caused by the combination of emissions and unfavourable climate conditions in 1996 and For example, in the winter of the high concentration of harmful agents in the atmosphere significantly impaired the health conditions of 20,000 ha of forests in the Ore Mountains and dieback in 2,590 ha was reported. This significantly reversed the efforts of foresters over the last twenty years. The damage to the forests cost almost 1 billion CZK. Indigenous tree species were heavily afflicted (mostly Norway spruce), while introduced species (e.g. Blue spruce) remained intact. To try to deal with this problem of pollution, Czech forests are classified according to the effect of emissions into four so called Threat Zones with six grades of damage. The differentiation of the threat zones is based on life expectancy of mature Norway spruce from when pollution starts to damage the tree. Stands in Zone A have a life expectancy of less than 20 years, zone B a life expectancy years, C a life expectancy years and those in D have a life expectancy of years (see the following Table). 15

16 Areas of threat zones in the CR in 1996 Threat zones A B C D Out of zones Life expectancy (years) up to % of the total forest area Source: Ministry of Environment, 1996 The threat zones were defined according to the direct effect of sulphur dioxide. However, this criterion has been loosing its usefulness as the environmental influence of sulphur dioxide has been decreasing and other causes of declining forest health now have to be taken into account. These factors include soil changes, unfavourable climatic conditions, influence of increasing nitrogen oxides, ozone and other gaseous emission concentrations, direct influence of acid deposition, influence of risk elements, etc. Therefore, the relevance of this zoning system is limited. The position of forestry sector is stable in the national economy. Forestry produces 0.6 % - 0.7% of the Gross Domestic Product (GDP), shares in 0.7% % of the total number of employees, while investments in forestry sector reached only 0.3 % of their total volume in the CR (the following table). Average wages vary about 80 % of the national level. Role of forestry in the national economy (1999) Indicators Unit CR Of which forestry sector GDP Bill. CZK 1, % Investments Bill. CZK % Number of employees 1,000 4, % Source: Ministry of Agriculture, 2000 Nevertheless, considering the supplying sectors (suppliers of production materials, services and investments) the forestry creates 2.75% of working places in the CR, and shares similar percentage in GDP. Taking into account the timber-processing sector, then the respective shares will be increased by more than 2%. Apart from this, non-timber forest goods and services are of great importance. The former structure of forest ownership has been gradually renewed by restitution. Substantial changes in the ownership structure, in the history, and the official figures are presented in the following table (see especially the differences between 1990 and 1999). Forest ownership changes on the territory of the CR Years Forests % of forest area State Communal Church Co-operatives Foundations Private Source: (Ministry of Agriculture, 2000) 16

17 As a whole, the economic situation of forest owners can be characterised as favourable. But there are great differences amongst individual localities. On the poorest ones, forest estates are unprofitable. Forestry as a total is still profitable sector of national economy. The profitability in forestry varies about some hundreds of CZK/ha. E.g. in 1999, the gain before taxes and without state subsidies reached in private forests 488 CZK/ha, in state forests 466 CZK/ha and in communal forest 288 CZK/ha. Nevertheless, the figures are comparable only with great difficulties due to different factors (including the financial ones) influencing the gain (e.g. transfer of part of gain in communal forests to municipalities by virtue of rent). Profitability, according to the particular types of the ownership, was significantly influenced by the different internal structure and size of the forest estates, and especially by creation of reserve funds. Locally, the profitability is influenced to a great extent by natural conditions and by limits due to social needs for non-market goods and services of forests (protective forests, forests of the special purpose - watershead areas, biodiversity, forest preserves, recreation, etc., and forests damaged by air pollution). Under unfavourable conditions, forest estates have losses. Forest operations performed in the CR in 1990, 1993 and 1999 Forest operations Artificial regeneration (ha) 33,615 27,698 23,165 Natural regeneration (ha) ,605 Cleanings (ha) 51,000 34,200 49,300 Thinnings (ha) 68,800 53, ,100 Fellings (mil. m 3 ) Source: Ministry of Agriculture, 1995, 2000 The year 1993 was the worst year in the period as for the amount of forest operations (only in the fellings the year 1992 was even worse with 9.9 mil. m 3 timber cut). This was caused by the transition to market environment. The economic activities dropped dramatically those years ( ) due to great problems in restitution processes (returning the forest lands to families of previous owners) and in radical transformation of management system of state forestland. Previously implemented programmes Until 1991, the economy in the Czech Republic had been centrally planned. All enterprising subjects followed a set plan and delivered free financial means to the state - a major part of not only the profit but also of the writes-off. After redistribution, the state enterprises were given financial means for their investments and development. The Czech economy was governed by the state. In forestry there existed seven state enterprises at regional levels. The redistribution process of that period is shown in the following table (in mil. CZK, current prices). 17

18 Subsidies of previously implemented programmes (mil. CZK current prices) Object of support Support of airpolluted areas Investment subsidy Subsidies - calamity funds Other Total Source: Ministry of Agriculture - Report on the State of Forests and Forestry 1995 State support of non-market forest services was first claimed in the 2nd half of XX century. First instructions for reimbursement of the costs related to non-market services were issued by the Ministry of Agriculture in The regulations for state support of the non-market forest services changed in the course of time. The last pre-revolution Instruction of the Ministry of Forestry and Water Supply and Distribution concerning management and financing of nonmarket services of the state forest enterprises was issued in In terms of this instruction the following non-investment activities were to be financially supported: a) silvicultural operations supporting non-market forest services, b) operations and activities intensifying (enhancing) non-market forest services, c) other public beneficial activities. d) repairs and maintenance of forest reclamation and torrent control establishments. This instruction was valid until The costs supported from the national budget are shown in the following table. No data outputs in technical units were presented, therefore no outputs have been found. Costs of operations intensifying non-market forest services covered by the state budget (mil. CZK current prices) Total costs in mil. CZK Silvicultural operations for non-market services Intensification of non-market forest services Other public beneficial activities Forest reclamation and torrent control Total Subsidies in 1991 in 1999 prices (mil. CZK) Object of support (mil. CZK) Support of air-polluted areas 1,719.2 Subsidies - calamity funds Other 2.1 Silvicultural operations for non-market services Intensification of non-market forest services 90.3 Other public beneficial activities 90.3 Forest reclamation and torrent control Total