Issue 1, 2005

This paper summarizes the main results and messages gained from the 35 scientific reports and presentations of an international seminar and workshop "Challenges for enterprise development in forestry, wood processing and non-wood products and services", organized by the Institute of Economics at the Bulgarian Academy of Sciences in cooperation with the COST Action E30 of the European Science Foundation, in Yundola, Bulgaria, October 2004. The objective of the scientific reports and discussions was to gain a better understanding of the problems of economic integration of consumers' demand and forestry production and possible solutions of forest-based entrepreneurship in small-scale forestry, wood processing and non-wood forest products and services.
The defined suggestions are directed to further development of the theory and to practical solutions for planning and implementation of rural development activities such as structural funds in many sparsely populated regions in Europe. The results contribute to a better understanding of similarities and differences in challenges for enterprise development in forestry, wood processing and non-wood products and services in EU member states, Associate candidate states and other countries from Central and South-Eastern Europe.
JEL: O18, Q12, E20, R10

This article reviews the development of interest in the relationship between forestry and rural development in developed countries and, using evidence from recent research in Europe, suggests a need for a widening of the methods by which economic impacts are investigated. This need for a widening of the approaches to economic appraisal of impacts stems from the profound halo effects evident in the UK case studies, which circumstantial evidence suggests are likely to be replicated in the more developed and densely populated parts of Europe.
JEL: O18; Q23

Non-timber forest products and services receive growing attention as they are expected to contribute to income in rural areas and to the solution of conflicts over forest use. This article studies the role of the forestry sector innovation systems of Central European countries in the development and diffusion of non-timber forest products and services on the basis of extensive research done in course of the project centre Innoforce of the European Forest Institute. For this purpose the sector innovation systems are characterised by survey data and case studies. The situation in non-timber forest products and services is presented for the Central European region in general and for the cases of environmental and recreational services in particular. It is concluded that the forestry sector innovation systems in Central Europe are typically made up of "traditional coalitions" of forestry actors. The development of non-timber forest products and services is hardly supported by the innovation systems. For strenthening innovations in non-timber forest products and services, forestry agencies would have to provide more information on new market opportunities and would have to promote cross-sectoral relations to service sectors.
JEL: O32; O33; Q23

The article presents the state of the art and perspectives of the Finnish builders' carpentry Industry and the role of the small firms. It is identified that firms producing prefabricated components to BtoC markets do not supply their products to BtoB markets and vice versa. Domestic markets of single dwelling house construction have been growing during the recent years. There is a large demand potential opening up by the replacment of concrete by wood in the frame construction for multi storey dwelling buildings. The competitive structure of the industry as one determinant of business performance is evaluated with respect to suppliers (supply chain), entrants (entry barriers), buyers, rivals and substitutes. Despite of high cost, differentiation is used by firms in the industry as the major competitive strategy. Lack of knowledge and skills in strategic management, low innovativeness and low marketing competencies are common. Exports do not show any positive impact on business performance. Human capital rather than technology is a strategic but scarce resource. Subcontracting is common but partnerships in production and procurement are rare. There is large variation in the degree of process integration. Differentiation strategy, i.e. broadening competitive scope, implies flexible manufacturing systems with sufficient manufacturing capacity and a sufficient number of product variants. Small firms encounter restrictions with respect to the endowment of human and financial capital. At the end the article presents some factors of success for small firms in the Finnish builders' carpentry industry. Differentiation strategy hardly does provide a competitive advantage for small firms without extended networking. Business networking can allow small firms to compensate scale disadvantages when focusing into narrow demand segments. The preconditions for small firms to enter a BtoB partnership with a construction company are process automation and exploitation of IT-technologies, integrated information management and the implementation of an open construction system.
JEL: Q12, Q23, O33

The paper proposes an empirical analysis of the demand and supply as they appear trough the auctions for standing timber organised by the Forest Directorate Suceava, a regional branch of the National Forest Administration located in the Northern part of Romania.
The results confirm that there is a trend of territorial concentration of large firms, which are able to influence the decisions of the small-size agents. On the other hand, the capacities for harvesting activities are over-sized compared with the annual resource available at the level of the Forest Directorates. Second, the evolution of demand and supply before, during and after the storm event which occurred in 2002 shows how the entrepreneurs reacted to different supply context. It appears that after the storm period the demand is much more fragmented and small-sized, and the competition is very strong. Compared with the situation before the storm, the number of firms is 25% higher, while the supply is reduced by 50%. We advance some hypotheses to explain whey the number of firms did not decrease with the decreasing of the timber supply and why the sector is facing apparently irrational economic choice, e.g. harvesting economic inefficient tracks.
Finally, the paper helps to identify some key fields for the further development of the research.
JEL: Q3, Q21, Q28

This paper provides some basic information about expertise and research projects at the Finnish Forest Research Institute (Metla), collected, firstly, with the help of information published at the institute's website by participating researchers, and, secondly, using research reports, summaries and research plans compiled or collected by the author.
The studies concern the Finnish innovative system and innovation performance of the Finnish woodworking industry, co-operation activities of Finnish SME's in the sawmilling and wood construction industries, process and wood product innovations, horizontal cooperation in forestry and organizational innovations in timber procurement and forestry services, innovative techniques that support horizontal cooperation of NIPF-owners in forest management planning. The paper provides some suggestions for developing future research projects.
JEL: O32, L23, Q23

The paper presents data on the forest resource development in Bulgaria during the 20th century, as well as contemporary challenges.
It is summarized that during the last 14 years, forestry in Bulgaria has passed through numeral structural and economic changes, directed to its adaptation to market economy. The forest industry in the transition to market economy after 1989 overcame the state monopolism but went to the opposite extreme. The weak sides of the forest industry in this period are summarized as: decreasing of the production; insufficiency of quantity and quality raw material for the existing processing capacities; lost markets for the production of the wood processing industry; problematic credit allowance. The strong sides of the Bulgarian forest industry are the high qualified specialists and the low labor price. The main challenge for sustainable development of economically viable forest sector is implementation of multifunctional forest management. Among the identified new priorities are: restoration of the economic activities in the state-owned forests; comasation of the small forest plots of land; interruption of experiments in the management of the forestry sector.
The quantitative criteria for meeting the new challenges by the Bulgarian forest industry is achievement of annual growth of production and export by 10%.
JEL: O13, Q23

On the base of analysis of the existing management system of the forestry sector symptoms of deepening crisis in forestry management, forests and forest industry in the years after 1997 are identified. They are systemized and directions of their removal are suggested. The main conclusion, which is drawn, is that change in the management system in forest sector is necessary. Otherwise, it is expected the resources in the territory of the forest fund constantly to decrease their potential (economic, social and ecological). The negative consequences will concern the carbon and water balances, agriculture and forestry, forest industry, tourism, etc.
JEL: O13, Q23

The transition to market economy and the restructuring of the production and ownership in Bulgaria, as a whole and specifically for the enterprises from forest industry, raised the questions for their adapting to the new conditions and their forthcoming integration to the European market space. In this connection the article discusses the role and significance of the branch territorial formations (clusters), of the base production capacities, of the entrepreneurship incubators, of the R&D centers, as main factors influencing on the increase of the competitiveness of the wood processing and furniture enterprises.
JEL: L13, O13

The paper presents results of a survey in the wood processing and furniture sector. It is identified that there is no system for obtaining professional qualifications; inadequate qualifications of middle and upper management; the strong protection of the employees by labour legislation hinders management; difficulties in employing specialists with good qualifications; lack of motivation in employees; limited opportunities for efficient improvement of qualifications.
It is summarized that to deal with the problems facing the Bulgarian woodworking and furniture production companies, solutions should be pursued in the following directions: establishing a strategic basis for company management; improving the efficiency of investment process management; developing a well-functioning system for collecting and maintaining market information for the sector; activating the international marketing; improving the qualifications of managers and entrepreneurs in the area of management and marketing.
JEL: L10, O13, J31

The paper presents results of analysis of the framework of traditional and Web channels which affect achievement of transformation of marketing business strategie. We study the fulfillment of business strategies for promotion and attracting consumers to support solving the traditional public problems in the area of urban consumption - market for end-use efficiency of forestry and non-wood products on traditional and Web channels (an example: parquet and raspberry productions, Sofia area). Our empirical results show slow infiltration of the new ways of virtual promotion for end-use forestry products and services on the local market.
JEL: R22, L19

The aim of the paper is to identify factors, affecting innovation activities of enterprises in Bulgarian wood processing.
The database used and the methodology applied are developed by R. Chobanova on the base of OECD Oslo manual requirements.
The results presented concern:
a) internal and external sources for innovation ideas in enterprises in Bulgarian wood processing, divided into domestic and foreign;
b) factors, supporting innovation activities;
c) factors, hampering innovation activities.
The conclusions and policy making considerations, drawn at the end, concern modernization of the wood processing technology in the context of EU requirements for environmental protection and sustainable development.
JEL: O33, O31, Q23

The objective of the paper is to contribute to a better understanding of the problems of economic integration of urban consumers' demand and rural forestry production and possible solutions of forest-based entrepreneurship in small-scale forestry, wood processing and non-wood forest products and services in Bulgaria.
The paper presents some results of the work undertaken in the frame of the first phase of the European project COST Action E30 "Economic integration of urban consumers' demand and rural forestry production". The presented five topics concern consumption of forest related products and services, small-scale forestry practices as a factor affecting consumption and living standards in the country, wood-processing industries, non-wood forest products and services, as well as forests resources and their ownership structure as factors, affecting forestry production.
It has been assumed the economic integration of urban internal and external consumers' demand and forestry production in Bulgaria has to be developed. It is concluded that Bulgaria has significant resources and potential for further forestry production, which are not used effectively. The identified main barriers to entrepreneurship in the forestry, wood processing and non-wood products and services in Bulgaria are the low level of production and demand for forest - wood product services, and respective national policy. The lack of consensus for enterprise development in the forestry in Bulgaria defines a broad area of questions to be answered. Among them are which model for innovation system in forestry to be chosen? Which is the effective strategy for further integration to EU forestry structures, what kind of effective marketing strategies for Bulgarian products to develop in order to increase foreign consumers'demand? What kind of instruments to be introduced in order to increase sources for purchasing modern forest machinery, building forest roads and forestation? What kind of incentives to be implemented to improve the quality of local production and to protect industrial property rights? How to speed processes of standardization and certification?
JEL: O13, L13, E20

Summaries
The paper summarizes demand and supply aspects of Turkish forestry and its link with the other sectors of the national economy. Stressing out the importance of industrial forestry in Turkey, we suggest that the forestry is a sector of not high backward linkages, but the forward linkages of which are significant as it gives inputs to a lot of other sectors. Although it does not have high share in the overall production in national economy, the importance of environmental and ecological services of the forestry sector increases significantly. Forestry sector supplies products used as inputs and final consumption both for the domestic demand and to a very limited degree for foreign demand. Nevertheless the external factors play important role of the development of this sector. The paper also suggests policies followed by identification of some factors that affect the competitiveness of forest wood and non-wood products chain indicating their links with the international cooperation and in particular with the on-going process of accession to the EU.
JEL: E20, 013