Prerequisites for the Evolution of Markets: An Institutional Analysis of Russian Forestry: A Project Proposal and its Funding Needs

Abstract

"Contemporary research indicates that the wood supply from the USA, Canada, and the tropical areas will decline. The Russian forests are underexploited, and have the potential to fill this gap. This is, however, primarily depending on whether adequate institutional arrangements will be developed in order to smoothen the entrance and the entrenchment in this new market. In this context it is important to emphasize that institutional arrangements are not to be understood as formal organizations and formally written laws and regulations. Institutions are 'the rules of the game,' i.e., those formal or informal rules that are de facto used by a set of actors. Such institutional arrangement, well functioning, is a basic prerequisite for the development of Russian forestry. Logically, a Russian forestry sector poorly governed will be a severe obstacle for the transition to a market economy.

"It is important to realize that forests are no resources per se. Only within a framework of institutional arrangements can a forest resource be regarded as an asset in an economic sense. Socio-economic development requires new institutions to facilitate the processes. The forestry sector can be expected to play a significant role in this development. Trade, transport, management, marketing, etc., and, in the end, the sustainable utilization of the entire Russian forest resource, are dependent on the establishment of an adequate institutional framework. When referring to institutional arrangements relevant for forestry, we mean, among other things, the existence of market information systems, rules, technology, and so forth. We also refer to the clarity and simplicity of rules of trade, financing, contracting, etc. Finally, we refer to a whole cluster of variables related to property rights, ownership, usufruct rights, monitoring and sanctioning of infringements, etc."