St. Petersburg, Russia February 13, 2007 -
IFC, the private sector arm of the World Bank Group, and its partners recently celebrated the achievements of the Finnish-funded Northwest Russia Forest Investment Project. In five and a half years, the project has brought $400 million in actual or planned investments to northwest Russia. The event, held at the General Finnish Consulate in St. Petersburg, Russia, brought together representatives from IFC, Finland’s government, Finnish and local investors, and government and regional authorities from Russia.
Northwest Russia, a region with a forest area of 80 million hectares, has an abundant supply of raw wood and provides a natural source of material for neighboring Finland’s thriving forestry sector. But the region has been underutilized, with yearly harvests reaching only 60 percent of its annual allowable cut. Unfamiliar with the post-Soviet climate, the major Finnish forestry companies had been hesitant to invest in the region, and thus they sought out the help of IFC.
The project was launched in 2001 with funding from the Finnish Ministry of Foreign Affairs and the Finnish Ministry of Trade and Industry, with the aim of assisting Finnish companies in accessing emerging opportunities in northwest Russia’s forest sector. Original plans forecast investments of about $50 million over the planned five-year framework of cooperation. The project has been very successful in meeting and exceeding this objective. As of December 2006, $240 million in new investments have been commissioned in wood harvesting and added-value processing, and investments worth another $160 million are planned.
The project has helped clarify local investment conditions and has built trust and confidence between key players in the sector. “The investments have established a benchmark of operating standards in the forest sector, and they have resulted in a substantial transfer of skills and technology. These developments further enhance current national initiatives toward sustainable forest management,” said IFC’s Ian Luyt. The new investments have also created new demand for wood products, and this in turn has created opportunities for local harvesting companies and other small- and medium enterprises in the rural forest sector.
“All the project partners have been satisfied by the results of the project. It has created an effective network for partners and expanded opportunities for investment,” said Merja Aberg, who represented the Finnish Ministry of Trade and Industry. “I am also grateful to the project team, lead by Seppo Pulliainen, who worked for many years to make this project a success.”
The project was extended three times, with funding from private enterprise increasing with each extension. At its last phase, the project was funded entirely by its Finnish partner companies, UPM-Kymmene Oyj, Thomesto Oy/Metsäliitto Cooperative, Stora Enso Oyj, Koskitukki Oy, and Oy Metsa-Botnia Ab.
“The level of private sector support is unprecedented in this type of work, and the transition from public to private funding provides an excellent model for future public-private partnerships,” Mr. Luyt said.
Petri Salo, Director of the Unit for Neighboring Area Cooperation at the Finnish Ministry of Foreign Affairs, said, "As a state organization funding technical cooperation, we consider the project a success. It was in a sector where Finnish industry has a worldwide reputation for innovation and sustainability. And during the course of the project, the participants turned into major funders and investors. The project presented a unique combination of feasibility and start-up funding from the Finnish state, combined with the expertise of the companies from the sector itself and advisory expertise from IFC."
About IFC
IFC, the private sector arm of the World Bank Group, promotes open and competitive markets in developing countries. IFC supports sustainable private sector companies and other partners in generating productive jobs and delivering basic services, so that people have opportunities to escape poverty and improve their lives. Through FY06, IFC Financial Products has committed more than $56 billion in funding for private sector investments and mobilized an additional $25 billion in syndications for 3,531 companies in 140 developing countries. IFC Advisory Services and donor partners have provided more than $1 billion in program support to build small enterprises, to accelerate private participation in infrastructure, to improve the business enabling environment, to increase access to finance, and to strengthen environmental and social sustainability. For more information, please visit
www.ifc.org
.
The Ministry of Foreign Affairs of Finland
has since the early 1990s promoted economic and social development in Eastern Europe and northwest Russia through the Finnish Neighboring Area funding mechanism. This has been done in close cooperation with other Finnish government departments, nongovernmental organizations, private industry, and educational institutions. Key values pursued by Finland in this effort are respect for democracy, human rights and the rule of law. The purpose is to enhance relations between neighbors and to promote regional stability and balanced economic and social development. Special emphasis is placed on the environment, agriculture and forestry, social welfare and health, the judiciary, energy, transport, education, and nuclear safety.
The Ministry of Trade and Industry of Finland
bears overall responsibility for business environment policy, as well as promotion of exports and the internationalization of enterprises. In a country like Finland, rapid economic growth can only be achieved by using the global market, by exporting and going global. The Ministry works to enhance economic development in Finland, regardless of the ownership base of enterprises. Its main function is to improve the competitiveness of business life and the operating conditions of enterprises, as well as to promote employment in a sustainable manner. The Ministry supports research and product development, as well as productive use of new technology. It seeks to ensure the supply of energy and its efficient and safe use in an environmentally sustainable and responsible manner.
