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
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
“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."
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.