Main page > Karelian forest info > Publications > Rodionov A.V., Rogov A.A. Formalization of choosing forest manager procedure
Rodionov A.V., Rogov A.A. Formalization of choosing forest manager procedure // Investigated in Russia - Electronic journal - ¹ 108, 2004. P. 1162-1171. - Access mode to article: http://zhurnal.ape.relarn.ru/articles/2004/108.pdf
FORMALIZATION OF CHOOSING FOREST MANAGER PROCEDURE
Rodionov A.V. (a_rodionov@km.ru), Rogov A.A.
Petrozavodsk State University
Strategy direction of timber industry complex development in the whole Russian Federation and in the Republic of Karelia particular is increasing not less than in three time (till 175 $ of USA) of final product income got from 1 cubic meter prepared wood.
One way for reaching of this goal could be the transition of forest fund areas (FFA) to long-term rent and it will allow to overcome the contradiction between state forest resources property and private ownership on its treatment and processing facilities.
In current conditions it should be recognized that experience of FFA transition to long-term rent is optimal on the basis of forest competition leaded by forestries dealing with local management administration accordingly with current Forest code RF decrees from 3.02.1997 and forest management federal service decrees ¹ 99 from 11.08.1997.
For example, in Karelia commission for forest management question examination formed accordingly with governmental regulation RK ¹ 692 from 12.10.1998 deals with realization of forest competition on FFA rent rights. The order of FFA transition to the rent and short-term use is ratified by governmental regulation RK ¹ 73-Ï from 12.08.1999. In 2002 average auction price of one cubic meter root wood exceeds stump price in 4.46 times.
Thus, forest auctions and competitions allow to approach into establishing of real FFA market price in transitional conditions to market economy.
However, results of leaded forest auctions and competitions in RF have discovered some shortcomings in the way of its leading:
- unjustified lobbing of local enterprise interests by regional administrations when they are allowed to participate in auctions;
- enterprises which have not own capacities for forest management organization (including cutting place cleaning and reforestation) are allowed to participate in auctions;
- as a result of auction FFA property rights are transmitted to enterprises which have not own capacities for forest management organization and it stimulates the practice of following illegal FFA transition to sublease;
- as a result of auction FFA property rights are transmitted to enterprises which are not occupied with road buildings on the area of forestry forest fund;
- as a result of auction FFA property rights are transmitted to enterprises which don't pay taxes and other payments into budget of all levels, and even to financially trouble enterprises;
- as a result of auction FFA property rights are transmitted to enterprises which have significant forest management rule violations.
Discovered shortcomings are caused by lack of simple methodology for preliminary auction and competition participant examination. In current time, making a decision about auction and competition participants is based on informal set of criteria. In the result, existing situation promotes price depreciation on forest auctions and transition FFA property rights to forest managers uninterested in sustainable forest management and deep wood proceeding development.
It should be pointed out, that formalization of preliminary choosing procedure between competition participants who will get rights for long-term natural objects exploitation is recognized as the most optimal strategy of sustainable forest management organization for countries with transitional economy.
Thus, formalization of preliminary choosing procedure between competition participants on FFA rent right is actual.
For example, in current time in the republic of Karelia common area transmitted FFA to rent is about 64 % of total republic forest fund area. Ratified forest management norm on rented areas is about 66 % of norm established in whole Karelia. In 2004 term of short-time FFA (for 5 years) lease of the most of leasers expires and in 2005 FFA RK will be transmitted to long-term rent (till 49 years) according to competition.
The task of potential competition participant estimation on FFA rent right is multi-purposed because a lot of different requirements which could contradict to each other should be taken into account. More than that making a solution additionally is complicated by information insufficiency about investigated objects (pretenders to rent right) and conditions in which objects develop.
Thus, preliminary competition participant estimation expediently should be leaded using a priori procedures for making optimal multi-purposed decisions. Among large diversity of a priori multi-purpose optimization methods Germeier method has the widest application for making corresponding task decisions.
In this method the complex criterion forms as weighted sum of partial criteria. The idea of the method is that alternative having maximum mean of this complex criterion is the best, i.e.:
Where λi is significance coefficient (weight) of i quality index; Wi - value of i quality index of n participant; i - quality index number.
At the same time certain values of meaning coefficients λi are determined by expert estimation leaded among representatives who makes decision about FFA transition to long-term rent.
Because of equation quality indexes Wi are not in the same units, these indexes are transferred to no dimensional view by using the following function:
where Vi is the value of i-quality index of n-participant measured in certain units; Vimax and Vimin are consequently maximum and minimum values of i-quality index measured in certain units among n compared participants.
FFA rent problem analysis conducted by authors with Karelian Scientific Center RAS Economical Institute (IE KarSC RAS) research assistants has allowed to form list of quality indexes on the basis of which in RK in 2003 questionnaire design of experts have been realized.
Questionnaire design was conducted among 3 groups of forest managers: representatives of Forest service of nature resource Administration Russian Federation nature resource Ministry in the republic of Karelia, representatives of local Administration and forest managers. There are 92 experts in total. Results of questionnaire design are presented in table 1.
After removal of expert answers sharply differing from the rest of ones, analysis of homogeneity by using χ2 criterion has shown that according to all indexes on the level of assurance factor equaled 0.9 hypothesis about homogeneity of all forest manager group answers should be excepted. Experts (about 4%) which opinions are sharply differing from the rest of ones were determined by "closed neighbor" method of hierarchical cluster analysis and by method of correlation analysis showing similar results.
Table 1.
Quality indexes and significance coefficients
| Quality indexes | Measuring unit | Significance coefficients |
| 1 | 2 | 3 |
| 1. Volume of wood raw material consumed on sawmill and woodworking enterprises of a pretender in the republic of Karelia | Thousand cubic meters | 0,1440 |
| 2. Volume of wood raw material consumed on sawmill and woodworking enterprises of a pretender in the Russian Federation | Thousand cubic meters | 0,0129 |
| 3. Volume of wood raw material consumed on sawmill and woodworking enterprises of a pretender outside of the Russian Federation | Thousand cubic meters | 0,0058 |
| 4. Volume of wood raw material consumed on pulp-and-paper mills of a pretender in the republic of Karelia | Thousand cubic meters | 0,0657 |
| 5. Volume of wood raw material consumed on pulp-and-paper mills of a pretender in the Russian Federation | Thousand cubic meters | 0,0127 |
| 6. Volume of wood raw material consumed on pulp-and-paper mills of a pretender outside of the Russian Federation | Thousand cubic meters | 0,0045 |
| 7. Volume of wood raw material consumed on logging enterprises of a pretender in the republic of Karelia | Thousand cubic meters | 0,1547 |
| 8. Volume of wood raw material consumed on logging enterprises of a pretender in the Russian Federation | Thousand cubic meters | 0,0190 |
| 9. Volume of wood raw material consumed on logging enterprises of a pretender outside of the Russian Federation | Thousand cubic meters | 0,0025 |
| 10. Registration duration of juridical organization or its detached Karelian subdivision in Karelian rating authority | years | 0,0828 |
| 11. Debt volume for payments in budgets of all levels | million roubles | - 0,0808 |
| 12. Sustainable paying ability to the moment of hand in an application for competition | - | 0,1057 |
| 13. Clear profit volume of a pretender | million roubles | 0,0737 |
| 14. Planned volume of sustainable wood using | Thousand cubic meters | 0,0770 |
| 15. Planned volume of investments for forest management | million roubles | 0,0943 |
| 16. Volume of timber supply by administrations of local governing in the republic of Karelia | Thousand cubic meters | 0,0475 |
| 17. Others | - | 0,0164 |
| Total | - | 1,0000 |
Commentary. Paying ability (point 12) is estimated according to methodology [13].
Thus, representatives of local governing administrations and forest managers have created unified conception about what kind of qualities should belong to FFA long-term leaser in the republic of Karelia.
The most important demands claimed by asked men to pretenders on FFA RK long-term rent are following: present of own logging facilities in RK - 15.5% of total weight; present of own sawmilling and woodworking facilities in RK - 14,4 %; sustainable paying ability to the moment of hand in an application for competition - 10,6 %; guaranteed for financing of all forest managing actions on rented FFA - 9,4 %; registration of juridical organization in Karelian rating authority - 8,3 %; lack of debts in all level budget payments - 8,1 %; present of forest using perspective plans passing state expertise - 7,7 %; profit activity to the moment of hand in an application for competition - 7,4 %; present own pulp and paper facilities in RK - 6,6 %.
It should be claimed that significant pretender qualities on FFA RK long-term rent for asked forest managers are following: present of raw wood material logging, treatment and processing facilities; forestry leading on the rented FFA by using own facilities; successful management and tax payments into Karelian budget.
On the next state of questionnaire design result treatment (table 1) some figures which weight was less than 5 % have been removed (¹ 2, 3, 5, 6, 8, 9, 17). Weights of rest quality indexes were correlated for creation of total sum equaled one (12). Results of it are presented in the table 2.
Table 2
Corrected meaning coefficients
| Quality indexes | Measuring unit | Significance coefficients |
| 1 | 2 | 3 |
| 1. Volume of wood raw material consumed on sawmill and woodworking enterprises of a pretender in the republic of Karelia | Thousand cubic meters | 0,1555 |
| 2. Volume of wood raw material consumed on pulp-and-paper mills of a pretender in the republic of Karelia | Thousand cubic meters | 0,0709 |
| 3. Volume of wood raw material consumed on logging enterprises of a pretender in the republic of Karelia | Thousand cubic meters | 0,1671 |
| 4. Registration duration of juridical organization or its detached Karelian subdivision in Karelian rating authority | years | 0,0894 |
| 5. Debt volume for payments in budgets of all levels | million roubles | - 0,0872 |
| 6. Sustainable paying ability to the moment of hand in an application for competition | - | 0,1142 |
| 7. Clear profit volume of a pretender | million roubles | 0,0796 |
| 8. Planned volume of sustainable wood using | Thousand cubic meters | 0,0831 |
| 9. Planned volume of investments for forest management | million roubles | 0,1018 |
| 10. Volume of timber supply by administrations of local governing in the republic of Karelia | Thousand cubic meters | 0,0513 |
| Total | - | 1,0000 |
It should be pointed out that removed quality indexes characterized pretender having facilities for raw wood material logging, treatment and processing in the Russian Federation and outside of RF (table 2).
Thus, the thesis has found one additional confirmation claiming that the most important qualities of a pretender on FFA RK long-term rent according to asked forest managers are following: present of raw wood material logging, treatment and processing facilities in RK; forestry leading on the rented FFA by using own facilities; successful management and tax payments into Karelian budget.
Minding the purpose to make automatic estimation according to formulas with using data from the table 2, in Petrozavodsk State University "Lesopolzovatel" program has been developed. Developed program allows making calculations according to offered formulas into interactive regime.
Developed program is intended for exploitation on personal computers of IBM PC type and compatible with it in Windows environment.
For working with the program user should open the file leaser.xls (picture 1).
Working sheets of the file leaser.xls and its functioning are presented in the table 3.
Picture 1. Working sheet "Complex criterion"
Table 3
Working sheets of the file leaser.xls and their purpose
| Name of sheet | Function |
| Complex criterion | Complex criterion calculation of pretender quality for participation in forest competition according to PetrSU method |
| Paying ability | Pretender paying ability calculation according to method of RF Governmental Decree from 20.05.1994 ¹498 "About some arrangements for enterprise failure (bankruptcy) legislation realization" |
Offered method and developed on it basis computer program have been used for complex criterion quality estimation of timber industry enterprises included into joint-stock holding company (AHK) "Karellesprom" using information about its activity results in 2002.
Estimation results are presented in the table 4.
Table 4
Complex criterion estimation results for JSHC "Karellesprom" timber industry enterprises.
| Timber industry enterprises | Value of criterion |
| 1. OAO "Lenderskiy LPH" | 0,2404 |
| 2. OAO "Muezerskiy LPH" | 0,4583 |
| 3. OAO "Pudozhpromles" | 0,3248 |
| 4. OAO "Pjalmskiy LPH" | 0,1376 |
| 5. OAO "Krivtsyles LPH" | 0,11 |
| 6. OAO "Lahdenpohskiy LPH"" | 0,1821 |
Thus, the best pretender on FFA long-term rent right in RK from all examined enterprises is OAS "Muezerskiy TIE".
It should be pointed out that only two enterprises - OAS "Lenderskiy TIE" and OAS "Muezerskiy TIE" - have passed paying ability examination according to methodology (13).
Offered method and developed on it basis compute program could be used by several means:
- Preliminary choosing on forest competition participation right could be organized no it basis (so double-stage competition should be conducted). On the stage of preliminary choosing pretenders on competition participation right who has value of complex criterion less than known threshold level are eliminated. On the second stage selected participants compete with each other to get the right on FFA long-term rent. Participant offering maximum size of payment to get rent right is recognized as winner.
- Use for reasonable solution accepting according to competition results: - if several participants offer the same or similar size bonus. Participant with maximum size of complex criterion is recognized as a winner (1); - if participant with not high criterion value (1) offers maximal bonus. It could be the basis for repeated competition realization because in this case probability of FFA rent right acquisition by strong pretenders for underestimated price is high.
- Use for direct selection the most effective FFA leaser from a lot of alternatives. A pretender with maximal complex criterion value should be recognized as the best one (1). Method introduction will help reasonably choose competition participants and it will promote establishing of FFA real market price and increasing State incomes from forest resource transition to private use.
Results from conducted investigations in RK could be recommended for using in forest auctions and competitions in Russian North-West Federal region. When it is necessary, meaning index values could be specified by using repeated expert estimations.
Offered method could be used for procedure formalization of preliminary competition participant selection on other natural resource long-term exploitation right in RF. For this forming of suitable quality index list and conducting of questionnaire design among experts are needed.
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