International Master's Program in Forest Policy and Economics 2007 -2008 FOREST FACULTY - SKOPJE

MASTER THESIS

Savić Nenad

ANALYSES OF THE COMPETITIVENESS OF FOREST INDUSTRY IN THE REPUBLIC OF MACEDONIA

 

MASTER THESIS

Author: Savić Nenad

ANALYSES OF THE COMPETITIVENESS OF FOREST INDUSTRY IN THE REPUBLIC OF MACEDONIA

 

.Belgrade 2009  

 

.

Acknowledgements

This study is focused on the forestry and forest industry in the Republic of Macedonia. By

deciding to describe such a specific component of the Macedonian forest complex, I was

confronted with a lot of difficulties including inconsistencies in data and lack of statistical

information. I hope that this work will provide a valuable input for the future policy makers who

will use it as guidelines for the development of forest policy in this sector. This is the reason,

why I want to thank all the people that helped me to accomplish the task that seemed to be very

difficult at the beginning.

First, I would like to express my deepest thanks and gratitude to my mentor, Mrs. Anne

Toppinen, who provided me with constructive and helpful suggestions regarding theoretical

framework, methods and scientific expressions. Special thanks to Mr. Stjepan Posavec, my

regional mentor, for all the time and energy he spent providing me with materials and valuable

suggestions, and Mrs. Makedonka Stojanoska, my local mentor and tutor, with whom I had an

excellent cooperation in the operative part of the project.

Finally, I want to thank all members of the coordination body of FOPER project, especially to

Mr. Tomi Toumasjukka, Ms Mari Pitkanen, Mr Mersudin Avdibegović, and Mr. Nenad Petrović

who had very important role in overcoming difficulties of administrative procedures regarding

studies and thesis.

ABSTRACT

This study gives a thorough picture of the competitiveness characteristics of the Macedonian

forest based industry for the period 1993 to 2006, from its independence to present times. The

core question is “Whether Macedonian forest industry is competitive or not”? The study is based

on theoretical tool of the “diamond” model of the national competitiveness introduced by Harvard

professor Michael Porter in his book “The Competitive Advantage of Nations”.

The forestry and forest industry in Macedonia has a long tradition but the transition to the market

economy and privatisation has left mark. The research showed that the basic strengths are due

the existence of favorable factor conditions, as a cheap labor and energy cost-compared with

region, good geographic location and relatively decent transport infrastructure, and weaknesses

come from the lack of infrastructural investments (lack of capital) inappropriate management

strategies, outdated machinery, low productivity and production consists mainly of products with

low value added.

The largest opportunities for developing forest industry in Macedonia lays in export orientation

of high value added final products, and penetration to the specific international niche markets.

For this purpose forest industry should be organised in better way and further investments in

modern technologies and in human resources are necessary.

KEY WORDS: forestry, forest industry, competitiveness, competitive advantage, Porter’s

diamond model

Table of contents 1. INTRODUCTION 1

2. PURPOSE AND OBJECTIVES OF RESEARCH 2

3. DATA SOURCES, METHODOLOGY AND THEORETICAL BACKGROUND 3 3.1. Methodology 4 3.1.1. Research design 4 3.1.2. Research object 5 3.1.3. Data collection 5 3.1.4. Data analyses 6

3.2. Theoretical background 7 4. RESULTS 4

4.1. Geographic location and socio-economic situation in Macedonia 11 4.2. Forest resources 13 4.3. Wood harvesting 16 4.4 Production and consumption of wood products 19 4.4.1. Sawn wood 20 4.4.2. wood based panels 21 4.4.3. wood pulp 22 4.4.4. paper and paperboard 23 4.5. Employment 23 4.6. Trade with forest products 26 4.7. Market and firm structure 30 4.8. Legal regulations, institutions and organization in forestry and forest industry 32

5. DISCUSSION (factors who affected competitiveness of forest industry) 34

5.1. factor conditions 34 5.2. demand conditions 38 5.3. firms strategy and structure 40 5.4. related and supporting industries 41 5.5. influence of Government 42

6. CONCLUSIONS 44

7. RECOMMENDATIONS 50

8. REFERENCES 53

Appendix I – production and consumption of forest wood (1993-2008) 55

Appendix II – trade with forest wood products (1993-2008) 57

Appendix III – trade with forest wood products in US dollars 58

Appendix IV: Classification and definitions of forest products           60

Appendix V. Organization of the Macedonian Forestry Sector 67

Appendix VI Questionnaire 68

• Figure 1: Porter’s “Diamond model” 8

• Figure 2: Population in Macedonia (1993-2007) 11

• Figure 3: Gross Domestic Products per capita in selected countries 11

• Figure 4: Production and consumption of round wood 17

• Figure 5: Roundwood removals by species and category 18

• Figure 6: Production and consumption of Industrial roundwood 18

• Figure 7: Production of wood products by sector in 1995 and 2006 20

• Figure 8: Production, consumption and trade with wood pulp 22

• Figure 9: Production, consumption and trade with paper and paperboard 23

• Figure 10: Annual average wages in forest industry in selected countries 25

• Figure 11: Net import of wood based panels by category 28

• Figure 12: Prices of electrical energy in Euro per kWh in 2006 36

• Figure 14: Average hourly labour costs in selected European countries in 2006 37 

• Figure 13: Structure of consumption of forest products in 2006 39 

 

• Table 1: Gross domestic products growth 11

• Table 2: Forest resources: area, growing stock annual growth in 2006 13

• Table 3: Assortment structure of planned production in 2005 14

• Table 4: Wooded land by main group of species and owners in 2004 15

• Table 5: Production of industrial roundwood by categories 19

• Table 6: Production and consumption of sawn wood by species 20

• Table 7: Production and consumption of wood based panels 22

• Table 8: Employment in forest sector in Macedonia 24

• Table 9: Gross salary in forest sector in € 24

• Table 10: Share of export and import of forest based industry 26

• Table 11: Trade with roundwood 26

• Table 12: Trade with sawnwood 27

• Table 13: Trade with paper and paperboard 29

• Table 14: Forest products net trade 29

• Table 15: Structure of enterprises in Republic of Macedonia in 2003 30

• Table 16: The largest companies in Macedonia 31

• Table 17: Consumption of forest products by country per 1000 persons in 2002 38

 

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1. INTRODUCTION

The competitiveness issue is a crucial element of interest for all governments, industries and

economies that work under the principles of market economy. To be competitive and to stay at

that position requires constant adjustments to market conditions, following the competitors and

trends, but first of all, there is a need for restructuring the main production characteristics as

quality, standard and prices according to the demand of the domestic and the international

market. This study is one of the first attempts in Macedonia to present accumulated statistical

material and analyze them with modern methods and approaches used in leading countries for

assessing economic and industrial development.

The competitiveness of the forest industry and forest sector in general originates from the period

when Republic of Macedonia was a part of the Yugoslavian Federation. The market size dropped

from 22 million to 2 million people. It caused big problems in the utilization of the production

capacities, organization of market toward new measures and establishes relations with the export

market had to be renewed.

Historically the forest industry in Macedonia has a long tradition. The long experience with

forests and wood oriented products has created a strong base for industry as well as skilled and

productive workforce. In the beginnings were several steam sawmills, but in 1950’s started

significant development of wood processing facilities. Big wood corporations (Kombinats) were

established during this period, with production oriented toward the big and protected Yugoslav’s

market. In the Republic of Macedonia according to the data from the Economic Chamber of

Macedonia, existed around 590 companies from the primary processing – sawmills, and 566

companies for final wood processing1.

Today forest industry in Macedonia faces lot of challenges as a transition from central planed

toward open market economy, globalization of markets and technologies, environmental

sensitivity, competition from other industries for raw materials (for energy sector), etc.

Intensified competition has been a major driving force behind technology innovation and

structural change in the wood industry. The gradual removal of trade barriers (CEFTA, bilateral                                                             1 Economic Chamber in Macedonia, 2006, http://www.mchamber.org.mk/default.asp

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agreements between ex-YU countries) has exposed the industry to further competition from

neighbors and EU manufacturers of wood and substitute products and materials. Many

companies ceased or decreased scale of operation and their annual turnover is rather small.

Demand and markets have changed, and require new strategies, operation and industrial policy.

In recent decades the state as an owner of the large wood processing enterprises have postponed

capital investments and maintenance that would have help raise productivity. There were

systematic extractions of wealth from these firms and the enterprises went down into bankruptcy.

The wood processing sector faces many other systemic challenges, such as outdated technology,

inadequate marketing, poor workforce development services (training and education for new

technologies), lack of credit facilities, etc. It is important to know what are the main

characteristics that can hold the sectors to be competitive, and what are the problematic areas that

have to be taken into consideration to keep the sectors’ competitive position. All of these

questions are included and observed by this analysis, through the application of specifically

chosen qualitative and quantitative methods, and application of Michael Porter’s “diamond”

method, explained in his book “The Competitive Advantage of Nations”, as a theoretical

background, which explains the competitiveness by different characteristics and investigate

effects of various competitive factors.

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2. PURPOSE AND OBJECTIVES OF RESEARCH

PURPOSE (aim): The main purpose of this study is to analyze competitiveness of Macedonian

forest industry and the factors that influences the creation and development of competitive

advantages using Porter’s Theory of Competitive Advantage of Nations. To meet this aim,

several objectives and research questions are answered:

Objectives:

• analyze forest product market and current status of forest industry in Macedonia,

• achieve a deeper understanding of competitive position and appraise level of

competitiveness of Macedonian forest industry,

• gather information’s and

• point recommendations to improve the present situation.

Research questions:

1) What factors affect the competitiveness of forest sector in Republic of Macedonia?

2) What are main competitive advantages and disadvantages of Macedonian forest industry?

3) What recommendations could be given to Macedonian policy makers or managers of

companies to enhance forest industry competitiveness?

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3. DATA SOURCES, METHODOLOGY AND THEORETICAL BACKGROUND

This research is basically holistic and descriptive and uses both a quantitative and qualitative

data in the process of determining the competitiveness of forest based industry in the Republic of

Macedonia. The descriptive character of the work is centered in the purpose to describe the

present situation and reality in forest sector in Macedonia.2 As sources of evidence in this case

study have been used secondary data sources: documents, interviews (open-ended and focused)

and observation. An attempt has been made to collect long time series, analyses starts with the

collapse of socialist economy and countries independence in 1993, with special emphasis of the

last few years.

Chapter 1 is giving some basic data about forest sector in Macedonia, in chapters 2 and 3 are

presented objectives, methodology and theoretical background, results and discussion related to

factors which affected competitiveness of forest industry are in chapters 4 and 5, chapter 6

contains conclusions and some recommendations are derived in chapter 7.

3.1. Methodology

3.1.1. Research design

The work relies on careful analyses of secondary data and triangulation of data from various

sources, according to the methodology explained in Robert K. Yin’s book: “Case study research:

Design and methods”.

The work is based on descriptive character because the quality and length of time series on

Macedonian forest sector in economic transition do not facilitate a more formal econometric

approach yet. The method used is case study, with purpose to analyze the case, not to apply the

case to testing some theories and hypotheses. A case study is a research on realistic situation,

which can be examined from many perspectives. The case studies can generate answers to the

questions “Why”, “What”, “How”. The collection of data can include interviews, observations                                                             2 There are two types of data: primary data and secondary data. Primary data is a kind of data that is collected for the first time, and secondary already exist. Secondary data includes: documentary, multiple sources and survey (W. Lawrence Neuman “Social research Methods - Qualitative and quantitative approach” university of Wisconsin at Whitewater, 1991)

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and documentary analysis. Case study research enables researcher to investigate important topics

not easily covered by other methods. Researcher Robert K. Yin defines the case study research

method as an “empirical inquiry that investigates a contemporary phenomenon within its real-life

context; when the boundaries between phenomenon and context are not clearly evident; and in

which multiple sources of evidence are used” (Yin, 1984, p. 23).

Thus, the study can be characterized as a qualitative case study analyses driven by discovery

motive and in that way techniques for analyzing the data is directed. The case study research

consist five steps that should be used3:

• Determine and define the research questions

• Select the cases and determine data gathering and analysis techniques

• Collect data

• Evaluate and analyze the data

• Prepare the report

3.1.2. Research object (sample)

Research object is forest industry in Macedonia, which is, according to “diamond” model,

connected to various factors for competitive advantages: factor conditions, demand conditions,

related supporting industries, structure and strategy of forest firms and the role of Government

(chance is not analyzed in this study).

3.1.3. Data collection

This study investigate research object using variety of data gathering and provides answers and

evidence that leads to understanding research questions. Data were gathered through

documentation, archival records, academic literature, publications, journals and websites.

Information’s for this study has been gathered from a wide range of sources: Macedonian State

Statistical Office, National statistical yearbooks and other national reports FAOSTAT and

UNECE/FAO Timber Section, Economic and Trade Chamber of Macedonia, EUROSTAT,

                                                            3Robert K. Yin :  “Case study methods” 2004

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Public Enterprise “Macedonian forests”, National Bank of Macedonia, Industrial database of

UNIDO and others.

Some key persons of the forest sector (owners, and persons involved in daily operations in forest

industry: sawmills, furniture producers, personal employed in Public Enterprise, National Park

“Galicica”, MAFW, etc.) is interviewed in order to help in determination the sector

competitiveness.

Work was focused on following categories: economic situations in the country, Gross Domestic

Product (GDP) growth, forest resources, production capacities, removals/roundwood production

(fuelwood and industrial roundwood), production and consumption for the main product groups

(sawnwood, wood-based panels, pulp wood, paper and paperboard), structure employment and

wages in forest based industry, trade (imports and exports of main product groups), and share of

export and import of forest sector to the total trade in country.

3.1.4. Data analysis

Analyses of collected data was carried out in the framework of the Michael Porters “diamond”

model of competitiveness, the five determinants was listed and collected data were categorized in

each determinant under positive and negative factors, in 5 categories of competitive factors, in

order to analyze the competitiveness of forest industry. At the end, recommendations about

improving situations in forest industry in Macedonia were derived.

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3.2. Theoretical background

In the study as a basic approach to the analysis is used “diamond” model of the national

competitiveness introduced by Harvard professor Michael Porter in his book “The Competitive

Advantage of Nations4”, published in 1990. In this book the author describe how companies find

sources of competitive advantages in the specific combinations of skills in their industries and

around it in specific regions and countries. He also studied the competitiveness of nations in

terms of their ability to offer companies an environment that provides unique advantages. The

study explored case studies of regions known for their ability to provide the world with

companies able to outperform others such as Silicon Valley, northwest and central Italy, Detroit,

etc.

National competitiveness has become one of the central preoccupations of governments and

industries in every nation. According Michael Porter opinion, national prosperity is created, not

inherited. It does not grow out of a country’s natural endowments, its labor pool, its interest

rates, or its currency’s value, as classical economics insists. Nations gains factor-based

comparative advantage in industries that make intensive use of the factors they possess in

abundance. According to prevailing thinking, labor costs, interest rates, exchange rates, and

economies of scale are the most potent determinants of competitiveness. Managers are pressing

for more government support for particular industries. Classical theory, however, has been

overshadowed in advanced industries and economies by the globalization of competition and the

power of technology.

A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade. In a

world of increasingly global competition, nations have become more, not less, important. As the

basis of competition has shifted more and more to the creation and assimilation of knowledge,

the role of the nation has grown. Differences in national values, culture, economic structures,

institutions, and histories all contribute to competitive success. They approach innovation in its

broadest sense, including both new technologies and new ways of doing things. Innovation can

be manifested in a new product design, a new production process, a new marketing approach, or

                                                            4 Michael Porter: “The Competitive advantages of Nations” Haundmills, London, 1990

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a new way of conducting training. It always involves investments in skill and knowledge, as well

as in physical assets and brand reputations. A nation’s standard of living depends on the capacity

of its companies to achieve high levels of productivity. Productivity depends on both the quality

and features of products (which determine the prices) and the efficiency with which they are

produced. International trade and foreign investment can both improve a nation’s productivity as

well as threaten it. The ideal is to deploy the limited pool of human and other resources into the

most productive uses. Competitiveness also does not mean jobs. It’s the type of jobs, not just the

ability to employ citizens at low wages.

According to Porter, as a rule, competitive advantage of nations is the outcome of 4 interlinked

advanced factors and activities in and between companies. These can be influenced in a pro-

active way by government. Namely, the “diamond” model is a mutually reinforcing system in

which the role of any determinant cannot be isolated and the effect of one determinant is closely

dependent with the others. Advantage in every determinant is not prerequisite for competitive

advantage, but the interplay of advantage in many determinants reinforces benefits that are

extremely hard for rivals to nullify or replicate.

Figure 1: The Porter’s Diamond system (Porter, 1998, pg 127)

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Factor conditions. This category includes production factors such as natural resources and

geographical location, as well as created factors inherited from preceding stages. The first group,

named basic physical factors, can include abundance of natural resources, demographic

conditions, human capital, geographical location, etc. The second group (advanced or specialized

factors) usually includes infrastructure, available capital, knowledge resources and R&D

potential. However, specialized factors involve heavy, sustained investment. They are more

difficult to duplicate. This creates a competitive advantage, because if other firms cannot easily

duplicate these factors, they are valuable.

Demand conditions. The demand is formed by two constituents: local (domestic) market, as a

starting source, and export to the international markets, and shows the nature of demand for the

industry’s product or service. It is the composition of home demand, (structure, the size and

pattern of growth of home demand, number of buyers) and the internationalization of domestic

demand in foreign markets. So, nations gain competitive advantage in industries or in industry

segments where the home demand gives local firms a clearer or earlier picture of buyer needs

than foreign rivals can have. If the customers in an economy are very demanding, the pressure

facing firms to constantly improve their competitiveness via innovative products, through high

quality, etc, will be greater.

The Strategy, structure and rivalry of firms. The industry structure is important determinant

for gaining competitive advantage. Direct competition impels firms to work for increases in

productivity and innovation, and motivate leading companies to invest in the product,

management and marketing. The competitive pressure also motivates higher organizational

efficiency and training. Firms have a variety of structures and strategies to use, and that some

will be more effective than others. As most important national differences in management

practices and approaches can be mentioned: the training, background and the orientation of

leaders, hierarchical style, decision making, the relationship between labour and management,

relationship with the consumers. These differences create advantage and disadvantages in

competing in different types of industries.

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Related and supporting industries. Spatial proximity of upstream or downstream industries

facilitates the exchange of information and promotes a continuous exchange of ideas and

innovations. A developed system of subcontractors and suppliers in a given region or country

can offer more complex products and service systems. The supplier industries gives potentials

for comparative advantage by producing inputs, offering new methodologies and opportunities to

apply new technology, transmission of information, innovations, etc.

M. Porter offer two additional areas from which companies can draw competitive advantages:

chance which reflect rapid changes on world financial markets, unexpected growth in local or

international growth, wars etc; and influence of Government through its policies as a catalyst

and challenger; it’s role is to encourage - or even push - companies to raise their aspirations and

move to higher levels of competitive performance. In the modern economy, government has

several roles: a) to achieve macroeconomic and political stability; b) to improve the quality of

general inputs and institutions, such as roads, schools and telecommunications; c) to incentives

and rules of the game that stimulate productivity innovation; d) to foster and reinforce the cluster

formation process; and e) to establish a positive, distinctive and challenging long-term economic

vision and action program which mobilizes government, business and citizens.

There are many policies that can influence each of the determinants in different ways, but on the

other hand, some policies implemented without consideration of their outcome and impact can

have opposite and undermining effects on the national advantage.

 

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4. RESULTS

The results are combination of the qualitative and the quantitative findings that contribute to

explaining the conditions prevailing in the forest sector in Macedonia.

4.1. Geographic location and socio-economic situation in Macedonia

The Republic of Macedonia is situated in the central part of the Balkan Peninsula5. It occupies an

area of 25 713 km2 and has a population of 2 050 000. The territory of the Republic of

Macedonia is hilly and mountainous, cut by river valleys. The climate is modified sub-

Mediterranean, continental, and mountainous.

Figure 2. Population in Macedonia (1993-2007)

Source of data: Macedonian State Statistical Office

Macedonia is independent country from 1991, and has experienced turmoil period with severe

politic and economic crises. The transition to the market economy and privatization has left mark

on the country’s economy and society affecting Gross Domestic Products in negative sense

(Table 1). In the 1990s, as a result of the transition to a market allocation of resources, an

associated decline in industrial production, wealth and purchasing power of the population, the

domestic market for forest products decreased.

                                                            5 See the map on the cover page

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Gross Domestic Products in the period 1993-1996 had negative trend, but from 1997 has small

increment (3, 5 - 4%). In 1996 it was 4 750 million US dollars.

Table 1. Gross domestic products growth for the period 1993-2006 year 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Gross Domestic Product in millions $

3450

3389

3351

3390

3458

3575

3730

3899

3723

3755

3825

4376

4566

4753

GDP Growth rate -7,5 -1,8 -1,1 1,2 1,4 3,4 4,3 4,5 -4,5 0,9 2,8 4,1 4,1 3,7 Source of data: Macedonian State Statistical Office

Compared with other countries in the region (figure 3), Macedonia has the lowest GDP per

capita (2393 $ US in 2006).

Figure 3. Gross Domestic Products per capita in selected countries in the Balkan region in US $

Source of data: Eurostat and National Central Banks

Forestry in Macedonia is an economy branch with minor participation in national Gross

Domestic Product with 0.3 - 0.5%, but if the multifunctional uses are valorized, the contribution

will be much bigger. The contribution of the forest industry (primary and secondary wood

processing, furniture, paper and celluloses...) in GDP is 2.5 - 3%,6 and the share in total labor is

0.8%7.

                                                            6 Ministry of agriculture, forestry and Water economy: “Strategy for sustainable Development of forestry in Republic of Macedonia” http://www.mzsv.gov.mk/strategija/ 7 World bank statistical review, 2006

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4.2. Forest resources

Forest area8: Macedonia has land area of 25 713 km2. Total wooded land is 988 000 ha or 39%;

forest area in Macedonia is 905 653 ha or 36% of total area and other wooded land is around 78

500 ha. According the forms of management: high forest are 262 790 ha or 29%, coppice 642

863 or 71%. The most abundant species are oak (Quercus spp.) and beech (Fagus spp.). Forest

distribution by purpose is: Economic forests are 834 347 ha (92%), Protective 17 617 ha (2%),

and National Parks 54 036 ha (6%). Growing stock is 74, 3 million m3 or 70 m3/ha (in 2006).

Table 2: Forest resources: area, growing stock and annual growth in 2006

Forest area

ha

Volume of growing stock

m3

Total annual growth

m3

Annual growth

m3/ha

Coppice 642 863 27 000 000 923 860 1.44

High forests 262 790 46 000 000 906 140 3.45

Total 905 653 74 000 000 1 830 000 2.02

Source: Statistical review, State Statistical Office of the Republic of Macedonia

Table 2 and Table 3 shows that the forestry reserves in the Republic of Macedonia are on an

unsatisfactory level and lag considerably behind other countries, especially those of Central and

Northern Europe. The high percent of low quality coppice forests (mainly beech and oak), many

of which are highly degraded, together with the small quantity of conifers, results in relatively

small timber reserves and low annual growth per unit of land.

                                                            8 Source: Statistical review: Agriculture, 5.4.5.03 504 Forestry, 1997-2004, State Statistical Office of the Republic of Macedonia   

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Table 3: Assortment structure of planned production in 2005 (m3) Sort of wood Assortment structure Total

Timber Fuel wood

Beech 96.419 308.537 404 956

Oak 180 253 218 253 398

Fir 12 229 0 12 229

White pine 17 908 0 17 908

Black pine 16 830 0 16 830

Other 341 4957 5 298

Waste 81 559

Total 143 907 566 712 792 178

Source: Public Enterprise “Macedonia forests”

Forest ownership

Forests in the Republic of Macedonia are either state or private property. The ownership is

regulated by the Constitution and other legislation acts which guarantees equal rights to each

owner and provides equal responsibilities, immunity of the rights of ownership and

independence of the economic activity. According to the official statistics, state owned forests

make a 88% and are mostly managed by Public Enterprise “Macedonian forests” and national

parks. “Macedonian forests” is public enterprise founded by the state to “manage state owned

forests, to develop silviculture, maintain and regenerate forests, manage plantations, reconstruct

and reclaim forests and brushland, produce forest seeds and nursery stock and establish new

forests and forest plantations, etc”9. The remaining 12% of forest area is owned and managed by

private owners. Privately owned forests are scattered, fragmented and small in size There are

approximate 220.000 plots of an average size of 0, 4 ha owned by approximate 65.000

households.10

                                                            9 Statute of PE “Macedonian forests” 10Ministry of agriculture, forestry and Water economy: “Strategy for sustainable Development of forestry in Republic of Macedonia” http://www.mzsv.gov.mk/strategija/ 

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Table 4: Wooded land11 by main group of species and owner in 2004 (ha) Main group of species Public Private Total

Pure tree stands of

broadleaf

473,000 100,000 573,000

Pure stands of conifers 70,000 10,000 80,000

Stands of mixed

broadleaf

250,000 25,000 275,000

Stands of mixed conifer 5,000 - 5,000

Stands of mixed

broadleaf and conifers

55,000 - 55,000

Total 853,000 135,000 988,000

Source: Ministry of agriculture, forestry and water economy: “National forestry strategy for sustainable development” 2006

All activities conducted in privately owned forests are done under the supervision of public

enterprise “Macedonia forests”.

Forest management

Traditionally forestry has primarily been seen as an economic activity and most forests have

been managed or established to supply wood and timber. Role of forestry as a provider of a wide

range of other goods and services has not yet become more pronounced. The limited land mass

and finite area of forest cover demand careful planning, reforestation and harvesting procedures.

There is great un-balances in age classes with either large excesses in inventory on some forests,

to large deficits in some age classes. Clear cutting is allowed, mainly in coppice forests.

The certification of the forests does not yet exist in Macedonia. Some forest have been over

utilized and some have been neglected which lead to inconsistent quality, inefficiencies, and

unacceptable price variation. The forest sector’s operations are inefficient and timber supply to

local industry is inconsistent and uncertain especially to the small and medium size sawmills

who are dependent of continuous supply with timber, and cannot afford delays in production12.

                                                            11 Cumulative forests area and other wooded land 12 According owners interviewed in this study, this is the most inhibited factor which hampers their production plans

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Illegal logging is big problem; the approximate 8630 m3 in 200613 or 10% of total harvesting in

the country is from illegal activities, but some sources (PE “Macedonian Forests”, Forest faculty)

states that this percentage reaches 20-25%. There has been a steady decline in legal cut and wood

processing and this has left the forests in less than optimal condition. According the opinion of

some forest experts in the PEMF and Forest faculty, if this trend of unsustainable management

practices continues, forests will be depleted over time, the revenues from timber will be

negatively affected and the wood industry will ultimately fail.

4.3. Wood harvesting (Production and consumption of round wood)

The basic forest product in Macedonia has been roundwood. It comprises all wood obtained from

removals, i.e. the quantities removed from forests and from trees outside the forest, including

wood recovered from natural, felling and logging losses during the period - calendar year or

forest year, and can be for industrial utilization and for heating (fuelwood). (Appendix I). The

use of determined volume is incomplete due to a number of reasons: inaccessibility of forests

owing to poor quality and few roads to the forests; insufficient mechanization of operations;

unfavorable orographic conditions; low interest in certain kinds of timber, etc. As a reason of

steep terrain harvesting practice basically is not changed since 1960s. Chainsaws are still widely

used and motor-manual wood harvesting is giving way only slowly to mechanize wood

harvesting. Mechanization appears in skidding, involving adapted agricultural tractors.

Nevertheless, it is unlikely that harvesting companies will introduce new technology in near

future.

Quality of timber suffers because of low-yielding species, poor forest stands, and poor harvesting

practices with limited access to the stands. Quality and quantity and sale are driven neither by

standardized specifications and volumes from the demand side, nor from planned and sustainable

yields from the supply side.

A major influence on demand relates to the non-industrial demands on forests, particularly for

fuelwood. It is common practice to use first class industrial logs as a fuelwood. Demand for

energy for both commercial and household purposes will undoubtedly increase with population

                                                            13 Source: Estimation by Forests police-Ministry of agriculture, forestry and water economy

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and economic development, and the limitations (high costs) on alternative energy sources will

continue to place heavy pressure on forests.

Production and consumption of roundwood during the period 1993-2006 are very balanced, and

are more and less same (Figure 4). Trade with this commodity is very low and insignificant.

Figure 4: Production and consumption of round wood in m3 (1993-2006)

Source of data: UNECE Trade and Timber Division: timber bulletins

Production is dominated by non-conifer species which exceeded conifers by large (conifer

removals are around 10% and non-conifer 90% respectfully). As a result of this condition of the

forests, non-conifer logs are used mainly as a fuel-wood (Figure 5).

Fuelwood accounts for approximately 82-85% of produced roundwood, and industrial

roundwood accounted for remaining 15-18% respectively (the biggest percentage has been sawn

and veneer logs with smaller quantities of pulpwood and for other industrial uses). In the country

there still is not exist developed market for another types of wood products (as a pellets, wood

chips and wood residues) to produce electrical and heating energy. There is a big demand for a

woodfuel in the country, because other energy sources are scarce and expensive (electricity,

natural gas, oil…) and majority of households rely on firewood for heating. Wood fuel

consumption is around 700 000-750 000 m3 annually, and mainly are covered by the domestic

production and very small quantities are imported.

18 

 

Figure 5: Roundwood removals by species and category in 1000m3 (1993-2008)

Source of data: Food and agriculture organization of the United nations-FAOSTAT and UNECE Trade and Timber

Division: timber bulletins

Consumption and production of industrial roundwood are balanced and generally, production

exceeded consumption by only small amounts, except in 1999 and 2004.

Figure 6: Production and consumption of Industrial roundwood by species in 1000 m3

(1993-2008)

Source of data: UNECE Trade and Timber Division: timber bulletins

19 

 

The biggest percentage of industrial roundwood is used for sawnwood and veneer logs (more

then 90%), and smaller quantities of pulpwood and for other industrial uses (table 5).

Table 5: Production of industrial roundwood by categories in 1000 m3 (1993-2008)

year 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 industrial roundwood 171 178 158 167 167 156 123 177 135 112 124 136 158 162 135

saw logs 155 154 144 149 149 145 113 164 125 104 118 126 144 140 121

pulp wood 8 12 7 9 9 2 5 5 - - - - - - - Other industrial roundwood 8 12 7 9 9 9 5 8 10 8 6 10 14 22 14

Source of data: Food and agriculture organization of the United nations-FAOSTAT and: UNECE Trade and Timber Division: timber bulletins

From this statistics is obvious that the country is relatively small in harvesting of forests. The use

of forests and wood for industrial purposes in Macedonia is at a fairly modest level. Most of the

industrial wood is used in sawmilling, and small amounts are used in wood-based panels

manufacturing and pulp and paper production. In accordance to the existing raw material base,

most sawmills produce sawn hardwood. Production and consumption of hardwood species

exceeded coniferous (approximately 60%-40% - Table 6). This is as a consequence of structure

and quality of forest resources in Macedonia, comprised mainly by broadleaves coppices and low

quality forests, and scarcity of coniferous forests with high technical value.

4.4. Production and consumption of wood products in Macedonia

The basis raw material – unprocessed round wood is supplied from domestic production i.e. from

PE “Macedonian forests”(PEMF). Non-conifer (mostly beech) sawn wood is the main category

produced; the conifer sawnwood is imported. The production of plywood and veneer is

symbolic, and production of chip-board and fibreboard does not exist at all, so that the furniture

industry imports them (Appendix I). Besides the furniture producers, the materials for

reproduction such as ironwork, furniture cloth, varnish and paints are imported. So the ironwork

is imported from Turkey, Italy and Greece and the varnish and paints mostly from Germany.

20 

 

Figure 7: Production of wood products by sector in 1995 and 2006 (1 000m3)

Source of data: Food and agriculture organization of the United nations-FAOSTAT

Production of sawnwood, wood based panels and paper and paperboard declined significantly

from 1995 to 2006, and only fuelwood increased to 740 000 m3. This situation is a consequence

of difficulties that wood industry faced in transition process in Macedonia. Structure of the

production according to individual sectors is discussed in more details next:

4.4.1. Sawnwood

Table 6: Production and consumption of sawn wood by species in 1000 m3 (1993-2008)

Year 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

production agg 63 57 42 40 33,5 26,7 36,8 36 23 20 20,8 27,8 18 17 16

conifer 15 11 10 8 6,5 6 10 8,5 5,5 5,6 5 7,5 5 4 3

non-conifer 48 46 32 32 27 21 26,5 27,6 17 14,6 15,6 20 12,6 12,9 13

Consumption agg - - - 31 55,8 67 93 171 95,8 153 143 134 115 284 284

conifer 30 51 60 78 152 86 143 132 114 102,6 277 276

non-conifer 1,2 4,8 8 15 19 9,4 9,6 10,5 20 12,5 7 8 Source of data: Food and agriculture organization of the United nations-FAOSTAT and UNECE Trade and Timber Division: timber bulletins

21 

 

Consumption of sawnwood has exceeded production by large. The gap between production and

consumption is balanced by a net trade. In accordance to existing raw materials base (softwood

species form a small component of the forest fund), most sawmills produce sawn hardwood

mostly beech. It is very interesting to recognize that production of non-conifer, exceeded conifer

sawnwood by two thirds, but in consumption conifer sawnwood exceeded non-conifer by very

large amount.

4.4.2. Wood - based panels

The wood based panels comprising the following commodities: veneer sheets, plywood, particle

board (including oriented standard board) and fibreboard. In category of fibreboard are included

compressed (medium density fibreboard - MDF, and hardboard) and non compressed fibreboard

(named also as insulating boards).14

One of the most important differences between the various wood panels is the types of wood raw

materials that can be used to manufacture each product. Fibreboard and particleboard are

reconstituted panels, and are manufactured from wood chips that can come from a variety of

sources. Plywood and veneer sheets are manufactured from industrial roundwood and are usually

made from larger sizes of roundwood (i.e. sawlogs and veneer logs).15

Macedonia is not internationally a significant producer of wood panels. The production is almost

stopped after collapse and bankrupt of only producer in Kavadarci in 2003, and consumption is

satisfying from import, mainly from Greece, Turkey, Czech Republic and Slovenia. In 2006 net

import reached amount of 85000 m3, mainly by increased imports of particleboard and

fibreboard.

Consumption of wood-based panels followed and slightly exceeded production, but after 2001, it

significantly decreased - 72 % to the level of around 50 000 m3. After 2003 the market has

recovered and in 2007 consumption raised to the 86 000 m3 (Table 7).

                                                            14 Product definition is taken from FAO site; figures are given in solid volume 15 European Forest Sector Outlook study: main report http://www.unece.org/timber/docs/sp/sp-20.pdf

22 

 

Table 7: Production and consumption of wood based panels by category in 1000 m3 (1993-2007)

Year 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Production of wood based panels agg 97 434 229 152 152 152 152 152 0,2 0,1 0,03 - - - - particleboard 0 181 152 152 152 152 152 152 - - - - - - - plywood 97 250 77 0,1 0,1 0,5 0,1 0,6 0,2 0,1 0,03 - - - - veneer sheets 0,6 0,4 0,2 0,2 0,1 - - - - - - - - - Consumption of wood based panels agg - - - 155 166 173 180 197 49 62,5 54 69,5 74 85,5 86 particleboards 157 161 166 171 174 34 43 40 46 50 58 58 plywood 0,3 0,5 1,7 2,4 6 1,7 2,5 2 1 0,7 2 2 veneer sheets 0 1 1 1,2 2 2 2 1 0,5 - - - fibreboards 1 3,1 3 5 15 11 15,8 10 22 23 26 26 hardboard 0,6 2 2 2,8 5 3 5,3 6 9 9,6 10,5 11 MDF 0 1,1 0 1,3 5 3 4 3,2 7,5 8 11,8 12 insulating board 0,2 0 1,3 0,7 5 5 6,5 1,2 5,4 6 3,5 4 Source of data: Food and agriculture organization of the United nations-FAOSTAT and: UNECE Trade and Timber

Division: timber bulletins

4.4.3. Wood pulp

This category includes wood pulp, fibre pulp from non-wood origin and recovered paper. Wood

pulp (a mixture of ground up and moistened wood cells or “fibers”) is the main source for paper

and many other fiber products. Production and consumption of wood pulp in Macedonia has

been on very modest level and domestic production is not sufficient to satisfy domestic needs for

paper, so consumption is entirely dependent on import.

Figure 8: Production, consumption and trade with wood pulp in metric tons (1993-2008)

Source of data: UNECE Trade and Timber Division: timber bulletins

23 

 

4.4.4. Paper and paperboard

Figure 9: Production, consumption and trade with paper and paperboard in metric tons (1993-2008)

Source of data: Food and agriculture organization of the United nations-FAOSTAT and: UNECE Trade and Timber

Division: timber bulletins

Figure above shows that production of paper and paperboard over this period (1993-2006) has

been relatively stable, with little oscillations Macedonia is producing mainly paper for

packaging. The production is used mostly on domestic markets and 90% of them are carried out

in small and medium sized private companies.

4.5. Employment

The main characteristic of the Macedonian labour market is high percentage of unemployment

and comparing to the European labour market relatively cheap labour force.

Forestry and forest industry plays an important role in the national economy and provides

employments in rural areas. According to statistics about 7 000 people are directly employed by

the forestry and forest industry sector (Table 8). Indirectly the sector provides job opportunities

(part-time jobs) to additional 35 000 - 40 000 people through multiplier effects (this is 4-6% of

total employed work force in Macedonia of 600 59316). Tens of thousands of people rely on the

                                                            16 Source: Statistical Office of Macedonia http://www.stat.gov.mk/statistiki.asp?ss=07.01&rbs=1

24 

 

forest industry for a living. As 40 percent of the population lives in rural areas and since a high

proportion of these people are unemployed, forestry is likely to be of particular importance in

raising living standards in rural areas.

The forest industry employs workers with a broad range of skills. Workers in the forest industry

include chemists, engineers, foresters, heavy equipment operators, loggers, mill operators, truck

drivers, and paper and wood scientists.

Table 8: Employment in forest sector in Macedonia (1992-2006)

number of workers 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

forestry 3690 3849 3592 3385 3767 3528 3401 3375 3000 2980 2830 2553 2940 2549 2517

Wood industry 1858 1392 1456 1463 1079 1232 1957 1633 1224 1348 1076 1348 2634 2861 3199

Pulp and paper industry 1767 1541 1694 1750 1208 1200 1265 1344 1337 1312 1235 1248 1766 1438 1734

Total 7315  6782  6742  6598  6054  5960  6623  6352  5561  5640  5141  5149  7340  6848  7450 

Source of data: Statistical Office of Macedonia

There is increase in employment in the recent 3 years, mainly in wood processing industry.

Although wood industry historically had a skilled and competitive workforce, the best and

brightest are leaving the industry and country to earn higher wages. Its managers, however, with

solid technical skills and from respected technical institutions, require more practical business

management training (e.g., marketing, accounting, information and communications technology,

manufacturing resource planning, design proficiency, finance).

Table 9: Gross salary in forest sector in € (2003-2007)

2003 2004 2005 2006 2007forestry 284,2 305 312,7 320,9 342,6wood industry 191,3 198,8 210 216,2 223,4pulp and paper 289,2 298,3 320,8 319,7 348,4

Source of data: Statistical Office of Macedonia

Wages have also slightly increased (above), during the past few years, but the level is still much

lower than EU countries and neighboring countries (figure 9). Especially gap in salaries in wood

industry is evident and large compared with west European and Scandinavian countries. This low

25 

 

cost of labor can be comparative advantage of Macedonian wood industry, and provides high

motivation for foreign investments in it.

Figure 10: Annual average wages in forest industry in selected European countries in 200517

(US dollars)

Source: UNIDO Industrial Database 2005

The responsibility for the educational and training activities for the people involved in the

Forestry sectors belong to the forest secondary school in Kavadarci, and forest faculty in Skopje.

Both of these institutions have a great impact for acquirement of appropriate knowledge and

generating high skill labour force. However, the expert’s opinion is that the sector lacks

specialists and managers that are able to deal with the prevailing production and market

conditions.

 

 

 

 

 

                                                            17 http://www.unido.org/index.php?id=4879

26 

 

4.6. Trade with forest products

According to statistics Macedonia is mainly import oriented with huge and growing trade deficit

and relies on import of high value added wood products. Export of wood products dramatically

dropped since 1997 to lowest amount of 4 600 000 $ US (2005), and share of export in total

export of Macedonian industry continuously have been decreased (to lowest 0, 23% of the total

export in 2005), and share of import increased (83, 8 million US dollars). The external trade

balance in the exchange of wood products is negative. The import value is several times bigger

than the value of realized export.

Table 10: Share of export and import of forest based industry) in total trade in Macedonia

year 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

EXPORT in US$1 000 000 Export

total 1.055 1.086 1.204 1.147 1.236 1.310 1.191 1.322 1.157 1.115 1.366 1.675 2.042 2.400 export

FBI 20 23 25 25 32 10 8 8 6 6 7 4 4.6 10

% 1,90 2,21 2,11 2,22 2,60 0,80 0,75 0,63 0,59 0,58 0,55 0,29 0,23 0,43

IMPORT in US$1 000 000 Import

total 1.199 1.484 1.718 1.626 1.778 1.914 1.776 2.093 1.693 1.995 2.306 2.931 3.232 3.762 import

FBI 21 31 37 37 64 53 72 54 44 55 64. 55 56 83

% 1,82 2,12 2,16 2,29 3,64 2,79 4,07 2,61 2,62 2,80 2,81 1,88 1,72 2,23 Source of data: Macedonian State Statistical Office

Trade with roundwood comprises small quantities and import exceeds export. Under the present

conditions, only a total of approximately 5 000 - 10 000 m3 industrial timber (logs) which is 5%

of the total production or 1, 02% of total timber production, were placed on the foreign markets

(mainly precious species as walnut which is exported in Greece and Italy).

Table 11: Trade with roundwood in 1000 m3 (1993-2006)

years 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

import 3,6 1,2 1 0,7 1 3,7 40 13 14 2,5 1 1 1,2

export 5 1,2 1,6 1,6 4,5 3 0,8 1,2 9 7,5 11 3 4,5 - Source of data: Food and agriculture organization of the United nations-FAOSTAT and UNECE Trade and Timber Division: timber bulletins

27 

 

Demand for the fuelwood is satisfied mainly from domestic sources. Industrial timber is mainly

absorbed by the domestic wood-processing industry. The annual consumption of the wood

industry and annual cutting volume of timber indicate that the industry’s need for non-conifer

trees can be completely satisfied from domestic production and that conifer are deficient.

For the reason that domestic production cannot satisfy demand quantities, Macedonia is forced to

import sawnwood, mainly of conifer species and this import have an increasing trend (see table

below).

Very small quantities are exported mainly in Greece, Italy and Serbia. The conifer sawnwood is

main import product; its worth in 2004 was $ 11,302,000 (Appendix III) or 30% from the entire

realized import of wood products. Main markets for import of conifer sawn wood are Serbia,

Bulgaria and Ukraine.18

Table 12: Trade with sawnwood in 1000m3 (1993-2007) years 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

import conifer 31,5 27,5 22 22 45 54 72 149 82 138 128 106,9 98 273 273 import non-conifer 2 2 4 4 6,8 3,8 2,5 6 4,5 4,5 3,4 1,2 1 2,5 3 export conifer 8,6 0,2 0,4 0,4 0,2 0,1 4 4,6 1,5 0,2 0,2 0,5 0,5 0,7 1 export non-conifer 50 67 63 63 24 16 14 14 12,5 9,6 8,6 1,5 1 8 8

Source of data: UNECE Trade and Timber Division: timber bulletins

Regarding wood based panels, Macedonia is small producer, and therefore domestic

consumption is satisfied with import. The figure 11 shows net trade with wood-based panels:

mainly is imported particleboards and fibreboard (hardboard and MDF) and import gradually has

been increased. In 2006 net trade has been 85 000 m3 or 25 million US dollars (Appendix III).

Import is mainly from Greece, Slovenia, Austria and Bulgaria. Small quantities are exported in

Serbia and Germany.19

                                                            18 EU questionnaire, industry http://www.sei.gov.mk/download/Questionnaire/3-15%20-%20Industrial%20policy.pdf

19 EU questionnaire, industry http://www.sei.gov.mk/download/Questionnaire/3-15%20-%20Industrial%20policy.pdf 

28 

 

Figure 11: Net import20 of wood based panels by category in m3 (1993-2006)

Source of data: UNECE Trade and Timber Division: timber bulletins

Paper and paperboards: Macedonia has been net importer of all categories of paper and

paperboard products, because there is no significant production of pulp and paper in the country.

Very limited quantities of packaging cardboard are exported mainly in Serbia and other ex

Yugoslav countries. Import gradually has been increased during the period 1993-2003, than in

next two years dropped to the level of around 27 000 m.t. (or 22,5 millions $US), and again start

to rise in 2006 (56800 m.t. or 46 million $US). Regarding category, larger share in the import

have packaging & wrapping paper and printing & writing paper (table below) mainly from

Slovenia, Germany, Serbia, Bulgaria, Sweden, Greece. The main markets for export are Serbia,

Bosnia and Herzegovina, Albania and Italy. Small quantities of pulp are imported from Bulgaria,

Slovenia and Serbia.21

                                                            20 Net import= import -export 21 EU questionnaire, industry http://www.sei.gov.mk/download/Questionnaire/3-15%20-%20Industrial%20policy.pdf 

29 

 

Table 13: Trade with paper and paperboard in 1000 m. t. (1993-2006)

years 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

import of paper &paperboard 15,7 23,5 36 33 28,6 33,5 39 37,5 39 43,8 45,9 28,4 27,3 56,8

newsprint 2 3 3,2 3,2 3,5 4,5 5,5 7 7,7 5,8 6 7,4 6,6 6,7

printing &writing paper 6 11,6 17 15,3 13,7 12 10,5 8,4 8,6 11,5 12,6 1 1,2 14,5

sanitary paper 0 0 1,8 0 0 0 0 0 3,2 3,9 4 4,2 3,8 3,7

Packaging & wrapping paper 7,5 7 13,7 12 11,4 12,6 18,4 16,5 17,5 21 21,6 14 14 30

other paper 0 0 0,1 0,2 0 1,3 1,5 2,1 2,1 2 1,6 1,5 2 1,1

export of paper &paperboard 0 0,2 13,5 10,5 7,8 7 7,5 6,9 7,2 9 7,5 6 7,1 8,3

newsprint 0 0 0 0 0 0 0 0,1 0 0,1 0 0 0 0,2

printing &writing paper - 0,2 3 2,4 1,8 1,3 0,7 1,8 1 0,4 0,4 0 0 0

Packaging & wrapping paper 0 0 10 8 6 4,2 2 4,3 5,8 8,2 7 6 6,8 8

other paper - - - - - 1,4 4,8 0,7 0,4 0 0 0,1 0,2 0 Source of data: Food and agriculture organization of the United nations-FAOSTAT and UNECE Trade and Timber Division: timber bulletins

If entire trade with all categories of wood products is being observed (see table 14), it is clear

that net trade deficit has an increasing trend. From -1, 6 million US dollars in 1993 in 2006

reached -72, 9 millions US dollars. The biggest trade deficit is from paper and paperboard,

sawnwood and wood based panels. Only exports of round wood as industrial raw material

exceed import. The reasons for this negative balance in trade are many (are low quality and lack

of standards for international markets, un-competitive prices, lack of business contacts, etc.).

Table 14: Forest products net trade (export - import) in Macedonia in 1000 US $(1993-2006)

years 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

in $ 1000 ROUNDWOOD Agg 127 -281 -24 -24 -24 299 37 -979 185 104 829 65 104 1222

fuelwood 3 -175 -21 -21 -21 -21 -21,5 -910 -234 -245 -25 90 137 171

Ind roundwood 124 -106 -3 -3 -3 319 58 -69 419 349 854 -25 -23 1051

SAWNWOOD 12597 15530 13673 13673 13673 -7772 -9275 -10860 -4814 -9416 -9957 -10868 -9952 -7755

PANELS -814 -1540 1285 1285 554 -8231 -10947 -10569 -9384 -12887 -14784 -19971 -21526 -24193

WOOD PULP -383 -2652 -2650 -2657 -190 -1437 -635 -1631 -1171 -415 -373 -204 -372 -960 PAPER AND PAPERBOARD -13345 -18560 -24031 -24300 -46462 -25926 -42678 -22434 -22430 -22428 -33135 -19850 -19925 -42400

TOTAL -1691 -7784 -11771 -12047 -32473 -42769 -63461 -47452 -37429 -44938 -56591 -50763 -51557 -72864 Source of data: Food and agriculture organization of the United nations-FAOSTAT and UNECE Trade and Timber Division: timber bulletins

30 

 

4.7. Market and firm structure

Forest industry is consists of two closely interdependent sectors: 1) the forestry, including state-

owned forest enterprise and small private logging companies, which grow trees and harvest

timber (logs) and 2) the wood products manufacturing industry, which converts timber into

value-added finished and semi-finished wood based goods. These manufacturers tend to be

located in rural areas near sources of timber. There are also secondary products that are derived

from the forests known as Non-Timber Forest Products (NTFP).

Before the privatization process started, there were ten wood processing kombinats. A typical

kombinat included a sawmill (band saw) producing some 1 500– 3 000 m3/annum of sawn wood,

kiln-drying facilities and downstream production in the form of furniture, kitchen cabinets, doors

and windows. All these units have been privatized, or are in the final stages of being privatized,

but have never achieved previous level of production, and many of them bankrupted. Subject

who dominated the forestry in the country is Public Enterprise “Macedonian forests” responsible

for planning and executing forest operations, and is the largest supplier of raw material to forest

industry. It also operates with own seven sawmills with an annual capacity of 20 000 m3. In

addition there is a great number of smaller sawmills that operates on and off when saw logs can

be acquired at affordable prices (Table 15).

Table 15: Structure of enterprises in Republic of Macedonia in 2003

Size of enterprise

gross output in

Euro number of enterprises sawmills

small 13556 549

medium 969 3

wood based panels

small 477 10

medium paper and

paperboard

small 15298 189 medium 3303 2

big 10171 1 Source: EU questionnaire, industry

31 

 

Their common characteristic is that they are in private property and functionate as a joint stock

companies or LTDs. They have positive financial results, but still lack modern technology,

marketing, modern design to be competitive on the international markets. The existence of great

numbers of sawmills is result of small starting capital needed and fast turnover of invested

capital compared to production of other wood products. These companies are privately owned

with mainly domestic capital.

Table 16: The largest companies in Macedonia

Gross Output in

euro Number of Employees Ownership

SAWMILLS LEDER 558000 22 private

MAK DRVO 47000 35 private PLACKOVICA 346000 57 private

ELA MAK 321000 17 private TRESKA STRASO PINDZUR 239000 152 public

MAKEDONSKI SUMI 24977000 2839 public ТОТАL 717000 125 private

BORDINGS 1027000 59 private JELAK STLARIJA 290000 86 private

JAVOR 193000 58 private BISTRA DRVO 1007000 37 private

WOOD BASED PANELS MIMAKO-VUD 149900 12 private

PAPER AND PAPERBOARD KOMUNA-AD 10171000 430 private

FUSTELARKO BOREC 2586000 321 private KOSTA ABRAS 724000 65 private

MISKOM 870000 34 private HIPS INDUSTRIJA ZA 604000 16 private

SUPERIOR 520000 14 private TEHA VLATKO I DRUGI 534000 18 private

BIOMENT 460000 18 private NATRONPAK 453000 13 private ILINDEN 2002 295000 23 private

FENIKS 158000 28 private LANTANА-2 114000 19 private

Source: EU questionnaire, industry

32 

 

In the interviews managers and owners of some of these companies, stated that the biggest

problem in their daily operations is disloyal competition of the unregistered small family firms,

which drastically ruin the market, do not fulfill their financial obligation from state and other

companies, especially when it comes to contracts with foreign partners, and sale of products at

foreign markets. Approximations are that more the 1000 firms existed in this illegal market, but

are impossible to establish the real number and assess their production results.

4.8. Legal regulations, institutions and organization in forestry and forest industry

The status of forests is basically defined by the Constitution of the Republic of Macedonia as a

natural resource of public interest placed under special protection regulated by a law. Institutions

and organizations play a pivotal role in the achievement of policy goals and implementation of

forestry strategy and programs.

The Government of the Republic of Macedonia administers the forests and forestlands of state

ownership through the following institutions (organization of forest sector is given in Appendix

V):

• Ministry of Agriculture, Forestry and Water Economy (leading role in forest sector);

• Ministry of Environment and Physical Planning;

• Ministry of Finance

• Ministry of Economy

• Economic Chamber of Macedonia

• Public Enterprise “Makedonski sumi” ("Macedonian Forests");

• National Parks “Galicica”, “Mavrovo”, “Pelister”;

• Public Enterprise "Jasen".

• The State Inspectorate of Forestry and Hunting functions as a body within the Ministry of

Agriculture, Forestry and Water Economy

• The Forestry Police as a sector within the Ministry of Agriculture, Forestry and Water

Economy

33 

 

Ministries carry out tasks of state direction, i.e. apply laws and general regulations and official

documents of Parliament and Government, as well as official documents of the President of the

Republic. Ministries also carry out administrative monitoring and other administrative tasks

defined by law. Ministries independence is determined by the Constitution and by competences

defined by law.

 

34 

 

5. DISCUSSION (Analyses with the diamond model)

Using Porter’s diamond model, the factors affecting competitiveness of forest sector can be

categorized as production factors, demand factors, firm strategy and industry structure, related

and supporting industries and government related factors. They will be discussed in more details

next.

5.1. Factors condition In this category of factors who affected competitiveness are included: a) basic factors- inherited

by the nation as a physical (geographic location, abundance, quality and accessibility of forest

resources, climate) and human resources (quantity, skills and costs of workforce) and b)

advanced factors – which are created and contribute to achieve higher level of competitive

advantage (knowledge resources, infrastructure, available capital). Competitive advantage from

the factors depends on how efficiently and effectively they are deployed.

Macedonia has geographic location on the Central part of Balkan Peninsula, relatively close to

the transport corridors (rail and roads) and access to big and lucrative markets in neighborhood

and Europe. (Italy, Greece, Austria, Germany, Serbia…). This good position which avail forest

companies themselves to the low transport costs.

State owns almost 90% of entire areas of economic forest, and remaining 10% of private forests

are with small and fragmented plots (average size 0, 4 ha). Public Enterprise “Macedonian

forests” manage with state and private forests. Privatization of state-owned public enterprise and

big wood processing companies is not complete, and that unregulated position in the market

generates problems in continuous supply with raw materials.

The country is relatively small in harvesting of forests. The use of forests and wood for industrial

processes in Macedonia is at a modest level. The removals does not reach annual growth which

in 2006 was around 1 800 000 m3, while harvesting quantities in the same year were 902 000 m3.

As a consequence there is shortage of industrial timber and producers bear high costs and have

low productivity. The high percent of low quality coppice forests, mainly beech and oak, (70%

35 

 

of total forest area), many of which are highly degraded, together with the small quantity of

conifers (around 10% of total growing stock), results in relatively low timber reserves, low

timber mass, and low annual growth per unit of land. Macedonia has only 160 000 m3 of annual

harvest of industrial round wood. Quality of timber suffers because of low-yielding species, poor

forest stands, and poor harvesting practices with limited access to the stands. The forest sector’s

operations are inefficient and the forests are generally harvested in a discriminatory manner

which leads to non-sustainable supply. Timber supply to local industry is inconsistent and

uncertain especially to the small and medium size sawmills who are dependent of continuous

supply and cannot afford delays in production. Illegal logging which according to official

sources is almost 1/5 of legal harvesting is huge problem who affect forestry, forest industry and

entire forest sector.

Most forest products are transported by roads and railway. The country have relatively decent

transport infrastructure, with 1821 km of roads, or 72,84 km/1000km2, and 530 km of railroads

(21,2 km/1000km2); two Trans European corridors (Corridor 10 and Corridor 8) passing through

country. The railway connect Macedonian capital city Skopje with harbor in Thessalonici,

Greece, which is main terminal for trade, because Macedonia is landlocked country and do not

has sea access (Thessalonici is 220 km from Skopje). There are two airports in Skopje and Ohrid,

but without significant role in the transport of forest products. This density of transport network

(despite low efficiency and out-of-date railway coaches) can deliver goods and products on the

large Europeans market inr relatively short time distances, and brings competitiveness for the

forest and entire industry in the country. But still, future development of the industry is closely

connected with major investments in present transport network.

Forest industry in Macedonia for the power mainly uses electrical energy. Total capacity of

working machinery, motors and devices in forest firms in 2005 was 19850 kW. Consumption in

the same year was 14260 MWh. This relatively high consumption per product is mainly because

of outdated equipment. According to the State Statistical Office in 2006, in the Republic of

Macedonia, in the gross national electricity consumption which is 8 800 700 MWh, the domestic

production share is 79.6% and the import share is 20.4%. 77% is from thermal sources (power

plants REK Bitola and Oslomej), and 23% from hydro sources. Regarding prices of electrical

36 

 

energy that industry is paying, compared from other countries in the region and EU (figure 12),

is obvious that price of 3 Eurocents per kWh is relatively low and still very competitive, but

concerning high import dependencies in the future for expensive electrical energy, this situation

cannot lasting very long.

Figure 12: Prices of electrical energy in Euro per kWh in 2006

Sources: EUROSTAT and Macedonian regulatory commission

Most of the equipment in use has been inhered from socialist era and dated from 90’s. Machinery

and equipment are outdated and inefficient (equipment in small sawmill companies is consist

mainly of 1 or two band or circular saws, debarker, board lumber is dried on open air, very rarely

in kiln), productivity is low, and there is lack of production process automation systems. Only a

few individual small and private (furniture and sawn mills) companies have introduce some

improvements in technology (as an automatic lathe’s and laser guided saw), which does little to

change the overall situation. As a consequences Forest industry is a faced with disadvantages as

a wasteful use of raw materials and energy, high production losses, high specific power and raw

material consumption, high specific labour intensity, high pollution. Low investments in aging

facilities leads toward low productivity and energy efficiency. All needed equipment and

machinery have to be imported, because there aren’t domestic producers in the country. The

import is burdened with high prices on the international markets and transportation costs.

Companies do not have substantial funds for modernization, and financial institutions are not

providing them with enough favorable credits and other sources of capital. Foreign direct

37 

 

investments in wood industry in 2006 was only 4 759 000 $US22. Without investment in new

technologies is impossible to met international standards and produced higher value added

products which would be competitive on international markets.

According to statistics about 7 000 people are directly employed by the forestry and forest

industry sector and indirectly the sector provides job opportunities to additional 35 000 - 40 000

people through multiple effects which is 14 % of the total employed work force in the country.

Regarding labor costs, wages in forest sector is well below average wages in EU countries and

this low cost of labor can bring comparative advantage and high motivation for investments in

the sector. If average hourly labour costs in various European countries are compared, in

Macedonia is 2, 63 Euro per hour, and only Bulgaria have lower (Figure 13).

Figure 13: Average hourly labour costs23 in selected European countries in 2006 (in € per hour)

Source: EUROSTAT and Macedonian State Statistical Office

Although Macedonian wood industry has had a skilled and competitive workforce, the best and

brightest are leaving the industry and the country to earn higher wages, due to the law salary

level in companies and low standard in all country. The quality of personnel currently employed

does not meet international standards especially in the field of management, marketing, IT

knowledge, discipline and work culture and mentality.

                                                            22 Central Bank of Macedonia www.crm.com.mk 23 Average hourly labour costs, defined as total labour costs divided by the corresponding number of hours worked

38 

 

5.2. Demand factors

Demand is formed by two constituents: domestic (local) and international (export) demand. It is

the composition of home demand, the size and growth of home demand, and the mechanisms by

which a nation’s domestic preferences are transmitted to the foreign markets. The demand

factors offer a high development potential, to be achieved specifically through the domestic

market development. So, nations gain competitive advantage in industries or in industry

segments where the home demand gives local firms a clearer or earlier picture of buyer needs

than foreign rivals can have. However, a major increase of the domestic market capacity would

be impossible in the absence of the general growth of national economy, accompanied by a

substantial increase of the per capita GDP. Local customers not only provide firms with a source

of income, but they educate firms about customer needs and perceptions, so the local customer

has much more influence over how products are designed, supported, and sold.

Macedonia with its relatively small population (figure 2), small economy (lowest GDP in South

East Europe (table 1 and figure 3) and small domestic market cannot offer possibilities to

develop economy of scale. In the 90s, as a result of the transition to a market-based allocation of

resources, an associated decline in industrial production, wealth and purchasing power of the

population, the domestic demand for forest products decreased.

Table 17: Consumption of forest products by country per 1000 persons in 2002

Sawnwood

(m3) Plywood

(m3)

Wood-based panels (m3)

Paper and paperboard

(tons)

USA 586 64,4 123 351 Canada 703 41,5 106 261 Finland 917 30,8 90,6 393 Sweden 493 20,9 99,1 205 Germany 244 14,9 131 214 Italy 156 11,8 65,9 178 Russia 85 4,2 24,7 26 Macedonia 76,5 1,3 31,25 28,5

Source: Research and Design Institute on Economics, Production management and information for forests

39 

 

The Gross Domestic Product per capita in 2006 was 2 393 $US and was well below the other

countries in EU and Balkan region (Figure 3). Domestic market with its size does not allow

achievements of the economy of scale and big demanding consumers, and purchasing power of

domestic population is on very modest level (table 17).

A major influence on demand relates to the non-industrial demands on forests, particularly for

fuelwood. Non‐industrial  uses  of  timber,  including  fuelwood  is  reached  2/3  of  entire 

consumption  in  the  country.  Vast majority of households rely on firewood for heating and

utilize first class hardwood timber for fuel (Figure 12). Demand for energy for both commercial

and household purposes will undoubtedly increase with population and economic development.

Figure 12: Structure of consumption of forest products in 2006

Source of data: Food and agriculture organization of the United nations-FAOSTAT and UNECE Trade and Timber

Division: timber bulletins

Regarding industrial wood, beech sawn wood is mostly been produced. Because of the little

production of conifer logs, the conifer sawnwood is being imported. The production of plywood

and veneer is only symbolic, and production of particle-board and fibre-board does not exist at

all, so the industry imports them. (Appendix I). The key customers and driving force for demand

for wooden boards and plywood are the furniture and construction industries. From tables 13 and

14 is obvious that Macedonia has been net importer of all categories of paper and paperboard

products. The portion of exports in the total country’s export has rather small (0, 23 %).

40 

 

5.3. Firm’s strategy, rivalry and structure As argued by Porter, domestic rivalry, like any rivalry, creates pressure on firms to improve and

innovate. Local rivals push each other to lower costs, improve quality and service, develop new

products and have role in innovation and the prospects for international success. Firms have a

variety of structures and strategies to use, and that some will be more effective than others.

Porter asserts that national culture plays a significant role, in which structures and strategies are

selected by management and relative success of these business models varies with each industry.

Regarding the structure, industry is dominated by the Public Enterprise “Macedonian forests”

who has monopolistic position on the market and is exclusive supplier of industrial logs to the

forest industry, and large number of small sized private owned companies, with mainly domestic

capital, although some of them have foreign capital, which main activity is sawnwood

production (table 15). The existence of great numbers of sawmills is result of small starting

capital needed and fast turnover of invested capital compared to production of other wood

products. The private-operated firm developed fast, but because most of them have old fashion

household management further development is limited. These companies are focused on the

domestic market, and fierce rivalry exists among them. There is lack of horizontal and vertical

integration process, the degree of integration between them is not strong, and concentration

process is needed in order to increase size of companies and their ability to invest in new,

modern facilities and development of competitive export oriented production.

In the forest market are present more than 1000 unregistered small family companies, which do

not fulfill their financial obligation toward state and other companies, have lower production

costs and have advantage on the market with lower prices.

The managers adopt flexible strategy oriented mainly on domestic market, where they can

change production lines according with external conditions in the market. This strategy enables

them to adopt new product, or to change design and produce small series in relatively rapid

response to the changed market demand.

41 

 

5.4. Related and supporting industries

Adequate related and supporting sector is able to provide the producers with extra competitive

advantages, and opportunities to use the products or services offered by the companies within the

related and supporting sectors. Existence of developed network of subcontractors and suppliers

in a given region or country, makes it possible to offer more complex products and after sale

service systems and turn out primary products with a higher value-added.

The main related and supporting sectors with forest industry are: Logistics; Energy; Processing

Equipment Manufacture; Chemicals; Auxiliaries Manufacture; IT; Banking and Finance;

Insurance; Business Consulting, and Environmental Services.

Machinery and processing equipment for the wood industry is mostly imported due to lack of

domestic production; the materials from chemical and auxiliaries needed for production such as

ironwork, furniture cloth, varnish and paints are also mainly from import.

Information technologies which are necessity in modern production are just getting a foothold in

the wood processing companies. One of the main reasons for slow IT implementation is lack of

educated and training personal and limited capital for purchasing new hardware and software..

Regarding bank and finance sector, very limited capital loans are allocated to the wood industry.

Companies faced difficulties to secure their working capital through bank loans, their assets are

often not accepted as a collateral, and interest are very high (according to commercial banks 3-3,

5% monthly). One must also note that a company's chances of securing a loan are hinged on the

private connections of its managers, rather than on the company's financial situation.

The current lack of an efficient environmental service has been affecting the competitiveness of

the forest companies and hampering their export in the conditions of the rapidly toughening

certification requirements and the various environmental activities going on in the international

market.

42 

 

5.5. Influence of Government

The role of government is above all to act as a catalyst and challenger; to encourage - or even

push - companies to raise their aspirations and move to higher levels of competitive

performance.

Porter asserts that the government can have a role in all determinants of national

competitiveness, but that the role can be negative as well as positive and that its role will always

be partial – not sufficient in itself to make a national industry competitive. The government can

help by raising educational levels or by purchasing local goods and by creating a regulatory

environment that supports business development. But it can also hurt by raising tariff barriers to

protect businesses, a process that also makes local products uncompetitive internationally. In

general we should recognize that there is a limit to what we can expect from government, and we

should be aware that governments can hurt business even when they try to help.

Until the independence Republic of Macedonia did not have its own policies which influence

forest sector and wood processing industry. The policy was in accordance to the state structure of

ex- Yugoslavia. The government of Macedonia has not yet established an attractive business

environment, very important for foreign direct investments. Government policies and activities

in Macedonia do not seem to be addressing these problems effective. In the past forest industry

(as other industries too) had the role of social service. This practice and mentality still existed in

some companies. Growth is restricted by lack of investment capital and high interest rates. Lack

of repayment discipline in economic system in the country also affected other industries, so

forest industry is not excluded. Huge problems are generated from unsolved and unclear

cadastral issues.

After the independence, Macedonia began a process of trade liberalization, which intensified

during the second half of the 1990’s. The process of the Macedonian trade integration can be

divided into regional, EU integration and global. Republic of Macedonia concluded a series of

Free Trade Agreements with the neighboring countries and other traditional partners: Turkey,

Serbia and Montenegro, Bulgaria, Croatia, Bosnia and Herzegovina, Ukraine, Albania, Moldova

and Romania.

43 

 

In 2007, Macedonia sign Central European Free Trade Agreement (CEFTA), for its further trade

liberalization. Another agreement that Macedonian has ratified is the Agreement for stabilization

and Association, signed in 2001. It regulates trade aspects focused on increased trade

liberalization between Macedonia and European Union. Under the Stabilization and Association

Agreement, Macedonia and EU agreed to abolish most of the tariff barriers and restrictions. The

Macedonian membership in WTO marked its global trade integration. Macedonia applied to join

the WTO in 1994. The Agreement itself was ratified in February 2003, when actually Macedonia

officially became a member of WTO. In the observed period (1993 – 2006) there were no other

significant supportive measures as well as foreign or domestic direct investments in forest sector.

It is opinion stated in interviews conducted with owners and managers of the companies for the

purpose of this survey, that the government role in the forest sector during the past period was

insignificant, and not supportive, bureaucratic obstacles in the State ministries and institutions

are still high. All the managers that were interviewed share the opinion that the industry should

receive some kind of support. Also they point that State institutions (Inspections) should be

deeply involved in activities toward solving the problem with illegal companies which does not

fulfill their financial obligation toward State, and have market advantage. General conclusion is

that the accession to the EU is many years away for Macedonia. The local economy is stagnant

while the currency continues to be stable, and local interest rates are still too high to allow local

credit borrowings, which could stimulate investments.

44 

 

6. CONCLUSIONS

Porter diamond model provide research framework to formulate an opinion on the

competitiveness of forest based industry in Macedonia and a view how industry can gain

competitive advantages through five determinants:

Factor conditions

Although basic factor conditions (forest resources abundance, geographical position, human

resources) are on the modest level compared with other countries in the region, they still offer

opportunities which should be further developed by improving the advanced factors (knowledge,

capital availability, and infrastructure). Under M. Porter’s theory the important factor behind

competitiveness of any industry is its human potential, skills and qualifications.

As a supporting factors (and opportunities) can be named good geographic location of

Macedonia close to European markets which avail forest companies themselves to the low

transport costs, relatively high density of transport infrastructure, low prices of labour cost and

electrical energy which is main sources for power in wood industry. Products from Macedonia

are cheaper than others and can be competitive with its price. Infrastructure can offer opportunity

for improving competitiveness but further investment is needed.

Impeding factors are: low quality of local raw materials sustain mostly of coppice stands with

very small quantities of conifer species, poor harvesting practice where planned annual cuts

never reach annual growth, low degree of mechanization which affect quality of timber and. As a

consequence there is shortage of industrial timber and necessity of import is arisen. Illegal

logging also contributes to this situation. State property of forest resources is also impeding

factor. PEMF has unregulated and monopolistic position in supplying forest industry with raw

materials, which supply is inconsistent and uncertain.

Forest industry is faced with shortage of modern equipment and automation systems which are

not produced in the country. Level of investments is very low, especially in foreign direct

investments (FDI) which brings not just capital but introduction of new technologies, business

culture, know-how and managerial techniques, thus contributing to the improvement of the

quality of products and the overall competitiveness of the economy, as well as providing local

firms with valuable foreign partners and enhances export potentials. Companies mainly finance

45 

 

themselves from their own and limited sources or from short term bank loans with high interest

rate, which is insufficient to reach competitiveness needed for international markets. Numbers of

innovations are very low, and collaborations with Forest faculty and other research institutions

are negligible.

With investments in innovations, training, education, research and development, and in

establishing the good relations with Forest faculty in Skopje (as a leading education institution in

forestry), the situation can be improved. Managers and engineers needed more practical

knowledge in modern technologies, communication technologies, international standards and

marketing as a precondition to overcome present situation of low motivation and bad work

mentality of local labour force, disrupted relationships and lack of cooperation between

companies and R&D institutions.

Demand

The most problematic bottlenecks are the domestic market capacity, which remains small and

inadequate to achieve economies of scale for many products. But still demand (especially for

final products mostly from import-furniture and paper and paperboard), gradually increased in

recent period. Also demand for sawn wood and wood based panels as raw materials for the

furniture producers and construction industry increased (the number of new constructions in

2006 was 1104, in 2005 -946, and 1060 in 2004)24.

On the whole, we can conclude that the volume of the domestic market remains insufficient for

sustainable development of forest industry and export are insignificant. Development of exports

is burdened by low quality and low values added products, the underdeveloped infrastructure and

bureaucracy, as well as the weak networks and almost non-existing cooperation between the

companies. The firms in the wood industry do not have the technological capabilities, design and

marketing skills, financial and business management, or related human resource capabilities,

required to compete in the global market.

But despite this gloomy situation, international market offers a lot of opportunities, and FBI in

Macedonia can benefit and improve its competitiveness through export, and exploited lower                                                             24 State statistical office http://www.stat.gov.mk/pdf/2007/6.1.7.26.pdf

46 

 

labour cost compared with other countries. The companies should pursue production of small

volume, high-margin applications with higher added value in niche markets (specialized

production of forest products as furniture, kitchens, stairs, cabinets, windows and doors with

unique designs, high quality and design). The industry can become more competitive by

participating in these markets, where higher product values generate higher selling prices and

yield higher profits, and do not require large capital.

Firm strategy, structure and rivalry: Industry is dominated by small sized private companies,

and PEMF as an exclusive supplier with raw materials (timber). They have positive financial

results, but still lack modern technology, marketing and modern design to be competitive on the

international markets. The presence of so many SME rise competition between prices and costs,

which forces enterprise to lower the costs, improve quality and marketing. There are also many

companies operating illegally in the environment of “grey economy”, which does not fulfill their

financial obligation. This structure does not contribute to the development of wood industry and

do not bring competitive advantage. There is absence of cluster organization, companies are too

weak, without vertical and horizontal integration, limited domestic competition, with production

which is not complaint with international standards, without export potential and orientation,

and, therefore, limited possibilities to integrate into global manufacturing and supply networks.

Still their flexible strategy and specialty enable them to make quick response to the changes of

the external environment.

According M. Porter’s “diamond” model for competitive advantages, existence of well

developed and competitive related and supporting industries is a key element needed to ensure

the competitiveness of the companies. Unfortunately Macedonian forest industry is not organized

in clusters, and cannot benefit from related and supporting sectors as a source of competitive

advantage, and explore possibility of early access to high quality and reliable supplies of

essential components and materials, and from the cost advantages gained from the competitive

local supplies. Development of competitiveness is prevented by the underdeveloped

infrastructure and bureaucracy, as well as the weak networks and almost non-existing

cooperation between the companies, low development and availability of IT services, weak bank

47 

 

and insurance sector which not supply forest industry with and cheap loans with favorable

interest rates and lack of cooperation between industry and R&D and education centers.

Government and public policy can be supportive or impeding factor, but in present situation

lack of long term strategy hampered progress of FBI. Experience of developed countries shows

that long-term and clearly stated policy helps to achieve impressive results on the world market.

Examples of developed countries (Finland, Ireland) are especially convincing: state measures

helped companies of Finish and Ireland cluster to increase their competitive advantages, and now

these countries occupied leading positions in the world.

Huge deficit in trade with wood products calls for change of country legislation in order to

promote export. Subsidies for the companies which are export oriented are necessity.

Liberalization of timber import from another country is one of the possible strategies to

overcome scarcity of domestic raw materials (mostly conifer saw logs) and to bust production of

wood products with higher added value worth. Also import of various materials required for

wood processing industry mechanical parts, paints, stains and other raw materials and semi-

finished goods, machines for wood industry, etc., should be free of tax and duty free.

The study reveals that the Macedonian forest industry is virtually lacking any obvious

competitive advantages to be developed without major investments in infrastructure, technology

upgrading, R&D, and professional training of personnel. To achieve competitive success, firms

from the industry must possess a competitive advantage in the form of either lower costs or

differentiated products that command premium prices. To sustain advantage, firms must achieve

more sophisticated competitive advantages over time, through providing higher-quality products

and services or producing more efficiently.

It is important and necessary for the State to abandon its sporadic interference, concentrating on

creating a favorable investment environment and on introducing regulations promoting

conscientious and rational use of natural resources (especially since forests are one of the few

renewable resources).

48 

 

A summary of the Porter’s Diamond model analyzed above are presented in the next table:

Factor conditions

Geographic position

– Good geographic location close to the main transport corridors

– Short distance to main export markets (EU, Balkan countries)

– Regional instability

Human resources (labour force)

– Tradition and experience – Cheap labour cost which lead toward lowest producer

prices in the region – High social importance, employment and existence of

large part of rural population

– Mentality and absent of willingness to accept changes and modern way of production

– senior managers and owners are not familiar with modern ways of doing business

Natural resources – Low quality of forest resources (high percents of hardwood coppice stands)

– State property of forest resources (90%) – Shortage of industrial timber – Inconsistent and uncertain supply with raw materials – Poor harvesting practice – Illegal logging

Innovations – Low investments in innovation – Small firms have week ability to develop innovations

Infrastructure – Good transport infrastructure of road network

– low efficiency and out-of-date railway coaches – country do not have sea access, the closest port is

Thessalonici in Greece

Equipment – Outdated and inefficient machinery leads toward high production losses

– High consumption of energy per product – Pollution

Energy supply – Low price of energy (compare with the region)

– Absence of long-term contracts with energy suppliers

Demand conditions

Domestic demands – Flourishing furniture and construction industry as driving force increase demand of forest products

– Small size of domestic market – GDP per capita is among the lowest in the region, so it is

difficult to have demanding and sophisticated home demand

– Bad relations between producers and buyers International demands

– Trade liberalization agreements (CEFTA, Free Trade Agreements), opportunity for further market expansion and export

49 

 

– Low quality of products and absence of certification of forest stands limits export potentials

– High value-added products are little – Production is not standardized – At the same time trade liberalization -threat for domestic

market from new developing countries (China, India…) Firm strategy, structure and Rivalry

Structure – Monopolistic position of Public Enterprise as a largest supplier of raw material to forest industry

– Large number of private SME focused on domestic market

– Absence of cluster organization and lack of horizontal and vertical integration

Strategy – SME adopt flexible strategy regarding production of small series of new products

– Fragmented and loosely connected companies with modest attempts to cooperation in order to reach economy of scale

– lack of modern business strategies, marketing and products design

Rivalry – Fierce domestic competition creates pressure on firms to improve and innovate.

– Disloyal competition of the unregistered firms (more then 1000)

– The focus on the domestic market harm the competitiveness forest industry on international markets

Related and supporting industries

Machinery supply – All machinery and equipment have to be import Chemicals and Auxiliaries supply

– Products such as ironwork, furniture cloth, varnish and paints are also mainly from import.

Relations with educational and R&D centers

– Connections with forest faculty and other research institutions with industry is week

Information technologies

– Very low implementation of IT technologies partly for the reason of lack of capital, educated and training personal

Bank and financial sector

– Rigid and unstable bank credits (SME cannot obtain loans due to high risk and high interest rates

– Lack of investments (particularly foreign direct investments)

Associations – Lack of business association concerning forest industry Government – Privatization of big state plants is still not accomplish

– Lack of state policy which influence domestic forest sector

– Lack of subsidies and appropriate tax policy. – Government is reluctant to provide financial assistance to

export-oriented companies – State institutions does not penalize illegal companies – Bureaucracy

 

50 

 

7. RECOMMENDATIONS

In order to improve competitiveness of Macedonian forest industry some measures and efforts

should be undertaken:

Macedonia has limited resources of timber. Raw material resources for wood industry are

unstable and unpredictable at the moment. Porter argues that a lack of resources often actually

helps countries to become competitive. Abundance generates waste and scarcity generates an

innovative mindset. Such countries are forced to innovate to overcome their problem of scarce

resources, so effort should be made for fully utilizations of existed domestic resources.

PEMF should improve harvest practices, quality certifications, regulations, methodologies and

procedures, enforce standards, specifications and certifications for timber in order to stabilize

quality, consistency, and price of raw materials. Wood processing companies should pursue

long-term commercial contracts with the main producer of domestic roundwood and must be

able to process logs of low quality and smaller diameters by introduction of specialized

production lines and efficiency practices. These enhanced work conditions will require more

higly educated workers and therefore specific work force development through education and

training must be pursued. Equity of treatment between imported and domestic wood in terms or

regulatory, technical and other requirements should be established.

One opportunity would be in the establishment of certification of forest stands. The National

Forest Policy could include a plan to upgrade existing stands to meet the criteria of the main

certification schemes in the World (FSC or PEFC), which should be adopted as the industry

norm. Participation in such a scheme implies short-term productivity losses and excess volumes

of low quality timber, in order to reconfigure the profile of all forests.

Statistics related to the forest products industry in Macedonia suggest that economies of scale

simply do not and will not exist for the foreseeable future. Therefore, it is appropriate to consider

the option of cooperation and collaboration. Organizing forest cluster can help to achieve higher

results. The cluster-based approach recognizes the reality of what determines productivity — that

51 

 

is, the interdependence and the joint activity among related fields. State should foster and

reinforce the cluster formation process.

One opportunity is in the increase of export of final products. The industry should change

strategy and should be export oriented and contribute to reducing the big trade deficit of

Macedonian forest product market. Exports of value-added products drive industry growth and

sustain profits. Value-added niche products require better technology, superior human resources,

and improved management skills, which in turn require investments.

Much effort should be devoted to marketing and design improvements. Traditional production

designs are obsolete and not in demand in world markets where existed various standards and

codes of performance which must be met, as are: environmental impact regulations, labor codes,

and other trade, market and product issues. Promoting and producing new wood based products

will require technology development and innovation. Developing a positive reputation and

Macedonian brand name for finished wood products (engagement of world famous experts in

design and management), promoting competitive advantages and organization of special

institutions for following the compliance of producers to the international standards, would be an

ultimate aim in the future.

Current trend in business is outsourcing the business operations. Companies in the European

Union are increasingly interested in relocating certain production capacities due to high

production costs. High labor costs and environmental pressures make it costly for those

manufacturers to relocate or expand within their own countries. Many companies are planning to

relocate their capacities and process lines in to Eastern Europe countries, where labor costs and

other conditions favor more cost-effective manufacturing. Macedonia should grab this

opportunity and create favorable climate for foreign companies to invest in the country. Those

companies through FDI bring cheap capital, new technologies, managerial techniques, research

and development, marketing and design skills and access to international markets.

52 

 

The Government with strategy formulation, regulations and policies (privatization of State

enterprises, import and export disincentives, labor laws, land use and land title, solving cadastral

issues, improving the judiciary system, sustainable management of forest resources,

implementation of business oriented procurement policies, trade and tax policies, research, and

testing and certification standards) should improve macroeconomic conditions in the country.

Traditional business-government dialogue must be transformed; state should improve quality of

infrastructure and work of its institutions, and stimulate innovations and human resource

development (through creation of think-tank institutions or educational centers).

Improving statistics and data bases for future analysis of forest product market and forest based

industry in Macedonia will be also needed in the future to facilitate a more formal and

quantitative econometric analyses on the determinants of competitiveness of Macedonian forest

sector.

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8. REFERENCES:

1. “Case study methods “ Robert K. Yin COSMOS Corporation January 20, 2004

2. “Current problems in the wood industry development of the republic of Macedonia”

Mira Stankevik, Violeta Efremovska, Zivka Meloska; Forest faculty Skopje, 2007

3. Central Register of Macedonia year book from www.crm.com.mk

4. Economic Chamber of Macedonia bulletins; http://www.mchamber.org.mk/default.asp

5. EU questionnaire, industry 2005; http://www.sei.gov.mk/download/Questionnaire/3-

15%20-%20Industrial%20policy.pdf

6. EUROSTAT: Forestry statistics pocketbook;

http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-76-06-322/EN/KS-76-06-322-

EN.PDF

7. Food and agriculture organization of the United Nations-FAOSTAT - www.fao.org

8. Forest products annual market review 2006-2007 (Geneva timber and forest study paper

22) from http://www.unece.org/timber/docs/fpama/2007/fpamr2007.htm

9. Forests police - Ministry of agriculture, forestry and water economy

http://www.mzsv.gov.mk/index.php?lang=mk

10. Geneva timber and forest study paper 20 “European forest sector outlook study Main

report” Geneva 2005 from http://www.unece.org/timber/docs/sp/sp-20.pdf

11. Global forest resources Assessment 2005: Republic of Macedonia - Country report from

http://www.erti.hu/dl.php?id=1&kn=dok&fn=FRA_2005.pdf

12. Grigory Dudarev, Sergey Boltramovich, Dmitry Efremov “From Russian forests to

world market; Competitive Analysis of the Northwest Russian Forest Cluster” ETLA,

The Research Institute of the Finnish Economy; Taloustieto Oy, Helsinki, 2002

13. Lawrence W. Neuman “Social research Methods - Qualitative and quantitative

approach” university of Wisconsin at Whitewater, 1991

14. Michael Porter: “The Competitive advantage of nations” Houndmills, London, 1990

15. Ministry of agriculture, forestry and water economy: “Strategy for sustainable

development of forestry in Republic of Macedonia” from

http://www.mzsv.gov.mk/strategija/

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16. National bank of the Republic of Macedonia: financial reviews from

http://www.nbrm.gov.mk/default-en.asp?ItemID

17. Public Enterprise “Makedonski šumi” - http://mkdsumi.com.mk/en/ekz.asp

18. Robert K. Yin “ Case study research: Design and methods” (1984) Newbury Park, CA:

Sage

19. State Statistical office of Macedonia from

http://www.stat.gov.mk/statistiki.asp?ss=10.03&rbs

20. Statistical review: agriculture, 5.4.5.03 504 forestry, 1997-2004, state statistical office of

the Republic of Macedonia from http://www.stat.gov.mk/statistiki

21. TCP/MCD/3002 (A) “Institutional development and capacity building in forestry and

forest industry subsectors”, 2006, project conducted by FAO and Ministry for

Agriculture, Forestry and Water Economy

22. The state of the competitiveness of The EU forest-based and related industries: “Draft

communication to the council, the European parliament”, The economic and social

committee and The committee of the regions from

http://ec.europa.eu/enterprise/forest_based/comm_en.pdf

23. The Vienna Institute for International Economic Studies Industrial database;

www.wiiw.ac.at

24. UNECE trade and timber division: timber bulletins - http://www.unece.org/timber/tc-

publ.htm

25. UNECE/FAO timber section Balkan training workshop – forest products Marketing 3 –

6 April 2006, Novi Sad; Expert market statement of Macedonia from

http://www.unece.org/timber/workshops/2006/MktStatement_theFormerYugoslavRepOf

Macedonia.pdf

26. UNIDO (United Nations Industrial development organization) Industrial Database

http://www.esds.ac.uk/international/access/access.asp

27. United Nations economic commission for Europe and food and agriculture organization,

2007 from http://www.unece.org/timber/WorkArea1.html

55 

 

APPENDIX I – Production and consumption of forest wood products in Republic of Macedonia (1993-2008)

Year 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 200825 1000 m3

ROUNDWOOD - production roundwood total 768 789 768 783 783 699 822 1052 740 715 812 841 822 902 828 785

conifer 119 123 105 107 107 115 47 71 46 44 48 61 81 80 62 56 non-conifer 649 666 663 676 676 584 775 981 694 671 764 780 741 822 761 727

consumption 782 779 697 820 1071 744 722 804 839 818 869 0 0 FUELWOOD in (charcoal is included)

production 697 611 610 616 616 542 699 875 605 603 688 705 664 740 688 657 consumption 616 617 543 695 892 616 616 689 702 659 711 0 0

INDUSTRIAL ROUNDWOD -production Ind Roundwood agg 171 178 158 167 167 156 123 177 135 112 124 136 158 162 135 126

coniferous 52 56 54 61 61 42 45 68 42 42 47 52 69 69 54 51 non coniferous 119 122 104 106 106 114 78 109 93 70 77 84 89 93 61 77

INDUSTRIAL ROUNDWOD -consumption Ind Roundwood agg 126 162 154 120 176 128 106 114 137 158 158 127 123

coniferous 22 61 42 40 65 42 43 48 53 69 69 48 47 non coniferous 104 101 112 80 111 86 63 66 84 89 89 79 76

SAWLOGS AND VENEER LOGS production total 155 154 144 149 149 145 113 164 125 104 118 126 144 140 121 116

conifer 40 40 44 47 47 33 40 63 34 35 43 50 58 55 45 43 non-conifer 115 114 100 102 102 112 73 101 91 69 75 76 86 85 76 73

PULPWOOD - production Removals 8 12 7 9 9 2,5 5 5 0 0 0 0 0 3 3 3

OTHER INDUSTRIAL ROUNDWOOD production total 8 12 7 9 9 9 5 8 10 8 6 10 14 22 14 10

conifer 6 8 5 7 7 7 1 1 8 7 4 2 11 14 9 6 non-conifer 2 4 2 2 2 2 4 7 2 1 2 8 3 8 5 4

WOOD RESIDUES production 4 4 4 5 5 5 4 4 3 3 3

consumption 0 5 5 5 5 4 3 1 SAWNWOOD production

total 63 57 42 40 33,5 26,7 36,8 36 23 20 20,8 27,8 18 17 16 18 production conifer 15 11 10 8 6,5 6 10 8,5 5,5 5,6 5 7,5 5 4 3 4 production non-conifer 48 46 32 32 27 21 26,5 27,6 17 14,6 15,6 20 12,6 12,9 13 14

SAWNWOOD consumption total 31 55,8 67 93 171 95,8 153 143 134 115 284 284 286

consumption conifer 30 51 60 78 152 86 143 132 114 102,6 277 276 277 conumption non-conifer 1,2 4,8 8 15 19 9,4 9,6 10,5 20 12,5 7 8 9

WOOD-BASED PANELS production wood based panels 97 433,6 229 152 152 152 152 152 0,2 0,1 0,03 0 0 0

particleboard 0 181 152 152 152 152 152 152 0 0 0 0 0 0 0 0 plywood 97 250 77 0,1 0,1 0,5 0,1 0,6 0,2 0,1 0,03 0 0 0 0 0 veneer sheets 0,6 0,4 0,2 0,2 0,1 0 0 0 0 0 0 0 0 0 0

WOOD-BASED PANELS consumption Wood based panels 155 165,7 172,5 180 196,8 49 62,5 54 69,5 74 85,5 86 86

particleboards 157 161,2 166 171,4 173,8 34 43 40 46 50 58 58 58 plywood 0,3 0,5 1,7 2,4 6 1,7 2,5 2 1 0,7 2 2 2 veneer sheetss 0 1 1 1,2 2 2 2 1 0,5 0 0 0 0 fibreboards 1 3,1 3 5 15 11 15,8 10 22 23 26 26 26

                                                            25 Estimation

56 

 

hardboard 0,6 2 2 2,8 5 3 5,3 6 9 9,6 10,5 11 11 MDF 0 1,1 0 1,3 5 3 4 3,2 7,5 8 11,8 12 12 insulating board 0,2 0 1,3 0,7 5 5 6,5 1,2 5,4 6 3,5 4 4

WOOD PULP 1000 m.t

Production 0 0 4 1 1 1,2 0,7 0 0 0 0 0 0 0 0 0 Consumption 0 0 0 2,6 0,3 3 1,8 3 2,5 0,8 0,5 0,2 0,5 1 1 1

OTHER WOOD PULP (non-wood origin) production 0 0 0 0 0 0 0 3 0,7 1,2 0,8 0,4 1 1 consumption 0 0 0 0 0 0 0 3 0,7 1 0,9 0,4 1 1

RECOVERED PAPER Production 0 0 0 0 0 2,5 2,5 2,4 2,1 2,3 2 9 9 9 consumption 3 0,7 1,2 0,8 0,4 0,8 0,9

PAPER & PAPERBOARD production paper &paperboard 24 24 29 23 23 14,7 13,6 16,5 15,5 19 18 16 20 20 57 57 newsprint 0 0 0 0 0 0 0 0 0 0 0 0 0 0 printing &writing paper 6 2 5,7 4,5 3,3 2 1 3,2 0 0 0 0 0 0 sanitary paper 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Packaging & wrapping paper 11 14 10 10,6 11,5 12 12,6 13 15,5 19 18 16 20 20,6 other paper 7 8 13 8 8 0,3 0 0 0 0 0 0 0

PAPER & PAPERBOARD consumption paper &paperboard 45,5 43,5 41 45 47 47 54 57 38 40,6 69 71 72 newsprint 0 0 0 5,5 7 8 5,6 6 7,5 6,6 6,7 printing &writing paper 0 0 0 22,7 18,6 20,5 10,8 10 7,3 11 13,2 1 1,2 15 sanitary paper 0 0 0 3 3 3 4 4 4 3,8 3,7 Packaging & wrapping paper 14,6 17 20,6 29 25,5 27 31,5 33 24 27 42,5 other paper 8 8 0,2 -3,3 1,1 1,8 1,6 1,4 1,4 1,7 1

Sources: Food and agriculture organization of the united nations-FAOSTAT and UNECE Trade and Timber Division: timber bulletins

57 

 

APPENDIX II – Trade with forest wood products in Republic of Macedonia (1993-2008)

years 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 200826

ROUNDWOOD 1000 m3

import 3,6 1,2 1 0,7 1 3,7 40 13 14 2,5 1 1 1,2 export 5 1,2 1,6 1,6 4,5 3 0,8 1,2 9 7,5 11 3 4,5 34

FUELWOOD import 0,2 3,6 0,5 0,5 0,5 0,5 0,5 37,3 11 12,5 1 0,1 0 0 export 0 0 0 0 0 0 0 0 0 0,1 0,1 3 4,4 5

CHARCOAL import 5 9 5 5 5,2 100 0 0 0 0,1 0 0 0,2 0,6 export 0 0 0 0 2,5 2,5 0 0 0 0 0 0,1 0,2 2,5

INDUSTRIAL ROUNDWOOD Import conifer 0,2 0,2 0,1 0,5 0,3 9 1,2 1 0,7 1 Imports non-conifer 0,2 0,8 0,6 0,5 0,3 0,3 0,2 0,6 0,3 0 0 0,3 export conifer 300 0 0 0 100 0 50 50 0 300 export non conifer 5,2 1 1,6 1,5 4,2 3 0,8 1 9 7 10,5 0 0 0,5

SAWNWOOD import conifer 31,5 27,5 22 22 45 54 72 149 82 138 128 106,9 98 273 273 270 import non-conifer 2 2 4 4 6,8 3,8 2,5 6 4,5 4,5 3,4 1,2 1 2,5 3 3 export conifer 8,6 0,2 0,4 0,4 0,2 0,1 4 4,6 1,5 0,2 0,2 0,5 0,5 0,7 1 1 export non-conifer 50 67 63 63 24 16 14 14 12,5 9,6 8,6 1,5 1 8 8 8

WOOD BASED PANELS import Woodbased panels agg 9 14,3 8,5 9 13,6 20 29 58 49 63 54 71 76.7 88 87 87

veneer shits 0,3 0,3 0,4 0,4 0,3 1,2 1,3 2,7 2 1 0,9 0,5 0,8 0,4 plywood 0,3 0,6 0,5 0,5 1 1,2 2,6 1,8 1,5 2,5 2 1,3 0,8 2 2 2 particleboard 7 11,5 6,4 6,4 9 14,3 19,8 38 34,3 43,5 41 47 50,8 59,5 59 59 fibreboards agg 2 2 1,5 1,5 3 3,5 5 15 10 16 10,3 22 23 26 27 27 hardboard 0,1 1,2 0,6 0,6 2 2 2,8 5 3,6 5,3 5,8 9 9,5 10,1 12 11 MDF 0 0 0,5 0,5 1 0,7 1,3 5 2,6 4 3,2 7,5 8 12 12 12 insulating board 1 0,6 0,4 0,4 0 0,6 0,7 5 4,7 6,6 1 5,5 5,8 3,5 4 4

WOOD BASED PANELS export Woodbased panels agg 5 6 6 6 0,2 0,1 0,9 0,6 0,2 0,6 0,6 1,5 1,7 3 2 2

veneer shits 3,7 4,3 5,1 5,1 0,2 0,1 0,1 0,2 0 0 0 0 0,7 0,4 plywood 0 0 0 0 0 0 0,4 0 0 o 0,1 0,1 0,1 0,4 0 0 particleboard 1 0,2 0,7 0,7 0 0 0,4 0,2 0,1 0,3 0,6 1,2 0,7 2 2 2 fibreboards 0,2 0,2 0,2 0 0 0 0,1 0,1 0,2 0,1 0,1 0,1 0,2 insulating board 0,2 0,2 0,2 0,2 0 0 0 0,1 0,1 0,2 0,1 0,1 0,1 0,2

WOOD PULP

1000 m. t. Imports 0,8 6,8 2,6 2,6 0,3 2,7 1 3 2,5 0,8 0,5 0,2 0,5 1 1 1

RECOVERED PAPER

import 0,4 0,1 0,1 0,1 0,1 0,2 0,1 0,2 0 0,1 0,2 1 0,5 0,3 export 0 0 0 0 0 2,5 0,9 2 1 0,5 0,6 6,5 7,7 6

PAPER & PAERBOARD import

paper &paperboard 15,7 23,5 36 33 28,6 33,5 39 37,5 39 43,8 45,9 28,4 27,3 56,8 57 57 newsprint 2 3 3,2 3,2 3,5 4,5 5,5 7 7,7 5,8 6 7,4 6,6 6,7

printing &writing paper 6 11,6 17 15,3 13,7 12 10,5 8,4 8,6 11,5 12,6 1 1,2 14,5 sanitary paper 0 0 1,8 0 0 0 0 0 3,2 3,9 4 4,2 3,8 3,7

packaging&wraping 7,5 7 13,7 12 11,4 12,6 18,4 16,5 17,5 21 21,6 14 14 30

                                                            26 estimation

58 

 

paper other paper 0 0 0,1 0,2 0 1,3 1,5 2,1 2,1 2 1,6 1,5 2 1,1

PAPER & PAERBOARD export

paper &paperboard 0 0,2 13,5 10,5 7,8 7 7,5 6,9 7,2 9 7,5 6 7,1 8,3 8 8 newsprint 0 0 0 0 0 0 0 0,1 0 0,1 0 0 0 0,2

printing &writing paper 0,2 3 2,4 1,8 1,3 0,7 1,8 1 0,4 0,4 0 0 0 sanitary paper 0

Packaging & wrapping paper 0 0 10 8 6 4,2 2 4,3 5,8 8,2 7 6 6,8 8

other paper 1,4 4,8 0,7 0,4 0 0 0,1 0,2 0 Sources: Food and agriculture organization of the united nations-FAOSTAT and UNECE Trade and Timber Division: timber bulletins

 

 

APPENDIX III – Trade with forest wood products in US dollars Republic of Macedonia (1993-2008)

years 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 $1000

ROUNDWOOD import 36 281 87 87 87 96 165 1123 417 367 134 34 33 91 export 163 0 63 63 63 395 202 194 602 471 963 99 137 1313

FUELWOOD import 3 175 21 21 21 21 21,5 910 234 249 31 3 0,44 0 export 6 0 0 0 0 0 0 0 4 6 93 137,1 145

CHARCOAL import 5,2 9,1 5 5 5,2 5 2 7 24 6 0,04 0,28 219 export 0 0 0 0 108 2,14 4 3 2 9 11,87 58,18 134

INDUSTRIAL ROUNDWOOD trade Import conifer 2 6 0 0 0 34 9 42 25 32 57 31 33 51 Imports non-conifer 31 100 66 66 66 42 135 171 158 86 46 0 0 40 export conifer 157 0 63 63 63 4 0 7 0 4 6 0 42 export non conifer 0 0 0 0 0 391 202 194 595 467 953 0 0 1100

SAWNWOOD trade Imports conifer 3701 4990 4728 4728 4730 12547 14586 14149 7083 10903 11881 11055 10208 10000 import non-conifer 895 597 1499 1499 1500 1062 699 1033 748 804 792 248 202 770 Exports conifer 1620 99 805 805 805 23 994 613 191 30 42 74 64 150 export non-conifer 15573 21018 19095 19095 19095 5814 5016 3709 2826 2261 2674 361 394 3065

WOOD BASED PANELS import Wood based panels agg 3156 4030 3547 3547 4204 8353 11506 10760 9478 13215 15195 20826 22402 25906

veneer shits 292 229 541 541 541 437 414 419 333 253 236 163 281 575 plywood 155 371 303 303 303 847 1898 630 553 799 850 686 418 1120 particleboard 2182 3073 2310 2310 2310 5616 7334 7549 6672 8944 9807 12750 13551 13973 fibreboards agg 527 357 393 393 1050 1453 1859 2162 1920 3219 4302 7227 8153 10200 hardboard 161 310 181 181 750 843 898 721 946 1538 2465 4575 5161 6460 MDF 0 0 117 117 300 371 522 721 511 798 1214 1814 2046 3050 insulating board 366 47 95 95 0 239 439 721 463 883 623 838 946 725

WOOD BASED PANELS export Wood based panels agg 2342 2490 4832 4832 4758 122 559 191 94 328 411 855 876 1713

veneer shits 1543 1773 3237 3237 3240 46 46 40 30 17 0 23 345 912 plywood 416 604 716 716 716 8 345 37 10 24 10 80 81 244 particleboard 333 103 797 797 797 52 166 85 33 206 323 671 401 426

59 

 

fibreboards 50 10 82 82 5 16 2 29 21 81 78 81 50 130 insulating board 50 10 82 82 5 16 2 29 21 81 78 81 50 130

WOOD PULP Imports 383 2652 2655 2655 190 1437 635 1631 1171 415 373 204 372 960

RECOVERED PAPER Imports 44 32 26 6 26 68 97 43 26 Exports 146 55 171 73 38 61 643 586 424

PAPER & PAERBOARD import paper & paperboard 13680 18916 24692 24692 53939 29944 44734 25874 25472 30204 36479 22630 22472 46000

newsprint 916 1497 2835 2835 2840 2800 2927 3277 4182 3066 3488 4406 4103 4 printing &writing paper 8583 12761 14187 14187 14200 12554 11022 8032 7539 10085 12127 1596 1717 sanitary paper 0 880 1366 1366 0 1872 17315 1816 1650 2318 3010 3200 2900 2900 packaging&wraping paper 4181 3472 5689 5689 36899 9508 10410 9799 9264 11514 14543 9900 9800 21300 other paper 0 0 306 615 0 3200 3000 3100 2800 3200 3200 3400 3900 2800

PAPER & PAERBOARD export paper & paperboard 335 356 661 661 7477 4018 2056 3440 3044 3290 3344 2781 2547 3600

newsprint 0 0 13 10 8 7 8 7 7 9 7 6 7 0 printing &writing paper 335 356 661 661 661 1425 671 1482 694 279 262 17 27 sanitary paper packaging&wraping paper 0 0 0 0 6816 1543 1013 1584 2042 2884 3011 2676 2203 3000 other paper 0 0 0 0 0 1046 372 334 276 77 53 79 311 0

Sources: Food and agriculture organization of the united nations-FAOSTAT and UNECE Trade and Timber Division: timber bulletins

 

 

 

 

 

 

 

 

 

 

 

 

 

 

60 

 

APPENDIX IV: CLASIFICATION AND DEFINITIONS OF FOREST PRODUCTS

1. Roundwood:

Wood in its natural state as felled or otherwise harvested, with or without bark, round, split,

roughly squared or other forms (e.g. roots, stumps, burls, etc.). Roundwood products are

manufactured by first removing the bark and then milling the resulting log to the desired shape

and diameter27. Commodities included are Industrial roundwood, fuelwood and wood residues.

1.1. Fuelwood 28

The commodities included are fuelwood (coniferous and non-coniferous) and the roundwood

equivalent of charcoal (using a factor of 6.0 to convert from weight (MT) to solid volume units

(CUM).

a) Fuel wood: wood in the rough (from trunks, and branches of trees) to be used as fuel for

purposes such as cooking, heating or power production.

b) Charcoal: wood carbonized by partial combustion or application of heat from an external

source. It is used as a fuel or for other uses. Figures are given in weight (MT).

1.2. Industrial roundwood

In this category are included a) sawlogs or veneer logs, b) pulpwood with chips and

particles, and c) other industrial roundwood.

1.2.1. Sawlogs and veneer logs29:

Logs whether or not roughly squared, to be sawn (or chipped) lengthwise for the manufacture of

sawnwood or railway sleepers (ties). Logs for production of veneer, mainly by peeling or

slicing. Match billets are included, as are special growth (burls, roots, etc.) used for veneers.

1.2.2. Pulpwood

Production of pulpwood is combined with production of chips and particles.                                                             27 Microsoft® Encarta® Encyclopedia 2003. © 1993-2002 Microsoft Corporation. All rights reserved. 28 FAO methodology for estimating production and consumption of fuelwood. Due to the illegal logging not all quantities can be recorded 29 From FAO web-site: www.fao.org.

61 

 

Wood in the rough other than logs - for pulp, particle board or fibreboard. Pulpwood may

be barked or unbarked and may be in the form of roundwood or splitwood

1.2.3. Other industrial roundwood agg

Roundwood used for tanning, distillation, match blocks, gazogenes, poles, piling, posts, pitprops,

etc. 30

1.3. Wood residues

Wood residues which has not been reduced to small pieces. They consist principally of

industrial residues, e.g. sawmill rejects, slabs, edgings and trimmings, veneer log cores, veneer

rejects, sawdust, bark (excluding briquettes), residues from carpentry and joinery production,

etc.

2. Sawnwood

Wood that has been produced either by sawing lengthways or by a profile-chipping process. It

includes planks, beams, joists, boards, rafters, scantlings, laths, boxboards, sleepers and

“lumber”, etc31;

3. Wood-based panels (FAO/UNECE classification 2007)

                                                            30 From FAO web-site, www.fao.org 31 Eurostat pocket book: Forest statistics, http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-76-06-322/EN/KS-76-06-

322-EN.PDF

62 

 

3.1. Veneer sheets

Definition: Thin sheets of wood of uniform thickness, rotary cut, sliced or sawn, for use in

plywood, laminated construction, furniture, veneer containers, etc.

3.2. Plywood

Plywood is manufactured by stacking veneer sheets and then gluing these layers together. Once

arranged, the sheets are glued together into a strong construction material. Plywood is used

widely as a construction material because it is light, strong, durable, and inexpensive (the cost of

producing plywood is often reduced by using less-costly wood for the inner layers). Plywood

resists warping and cracking, and is moderately flexible because the grain direction of each layer

is alternated. Plywood is used to underlay floors, roofs, and walls in homes and buildings. It is

used for making boats, truck campers, trailers, highway signs, pallets, bins, and other crating.

Plywood is used to make concrete forms for basements, bridges, and other foundations. Plywood

is also used for decorative applications inside the home, including furniture, cabinets, and

interior wall panels.32

3.3. Particle board33

Particle-board is a engineered wood product manufactured from small pieces of wood or

other ligno-cellulosic materials (e.g. chips, flakes, splinters, strands, shreds, schives, etc.)

agglomerated by use of an organic binder together with one or more of the following agents:

heat, pressure, humidity, a catalyst, etc.34 These logs or wood scraps are milled to a specific

particle size, and the particles are blended with an adhesive. This blend is then bonded in a hot

press to form a panel. Particleboard is commonly used for making inexpensive furniture,

cabinets, and shelving. It is also used to underlay floors, roofs, stairs, and countertops.

                                                            32 Microsoft Encarta® Encyclopedia 2003. © 1993-2002 Microsoft Corporation. All rights reserved. 33 In this category is included oriented strand board (OSB).  

34 Definition from FAO site, www.fao.org

63 

 

Particles are generally laid down randomly in the boards, but oriented-strand boards have

particles aligned perpendicularly to each other, resulting in a more durable panel similar to

plywood.

3.4. Fibreboard

A panel manufactured from fibres of wood or other ligno-cellulosic materials with the

primary bond deriving from the felting of the fibers and their inherent adhesive properties.

Bonding materials and/or additives may be added. It is usually flat pressed but may also be

moulded. This category included fibreboard compressed (MDF-medium Density Fibreboard and

Hardboard), and fibreboard non-compressed (or insulating board).

3.4.1. Fibreboard (compressed)

In this category are included MDF and Hardboard

3.4.1.1. Hardboard

Hardboard refers to panel products manufactured from fibers that are pressed between hot

plates to densities exceeding 517 kg/cu m (31 lb/cu ft). Hardboard is fabricated either by a dry

process similar to that used to make medium density fiberboard or by a wet process similar to

that used to make insulation board. Dry-process hardboard is molded into door panels and other

products. Wet-process hardboard is commonly used for siding, trim, and roofing tiles.

3.4.1.2. Medium density fiberboard (MDF)

Medium density fiberboard is manufactured from mechanically pulped wood fibers that are

blended with an adhesive and pressed into dense (517-834 kg/cu m; 31-50 lb/cu ft) panels.

Medium density fiberboard is inexpensive because it is made from wood fibers generated from

pulp chips, shavings, sawdust, and low-quality logs. Medium density fiberboard is replacing

lumber and particleboard for use as door panels and other items because it possesses excellent

surface qualities and is strong and durable.35

                                                            35 Microsoft® Encarta® Encyclopedia 2003. © 1993-2002 Microsoft Corporation.

64 

 

3.4.2. Insulating board (non-compressed fibreboard)

Insulation board is made by passing wet wood fibers over a screen to drain, and then

pressing the remaining thick mat of fibers into a low-density (167-517 kg/cu m; 10-31 lb/cu ft)

panel. This panel gets its strength from bonding between the fibers rather than from adhesives.

Insulation board is used for acoustic tiles or combined with urethane foams, foils, and fiberglass

for use as insulating panels.

4. Wood pulp (FAO/UNECE classification 2007)

The total production of wood pulp encompasses the production of a number of different types of

wood pulp with different properties and characteristics. At the broadest level, wood pulp can be

divided into four main types: dissolving wood pulp; mechanical wood pulp; semi-chemical wood

pulp; and chemical wood pulp.36 In the mechanical processes, logs from which the bark has been

removed are ground into pulp against a large revolving grindstone. Pulp is also made from wood

chips by forcing the chips between revolving metal disks, which tear the chips into fibers. In the

chemical processes, wood chips are treated with chemicals such as sodium sulfate or magnesium

sulfate that dissolve lignin and other wood-binding materials, breaking the fibers into pulp. There

                                                            36 European Outlook study, main report; http://www.fao.org/docrep/008/ae428e/ae428e00.htm

65 

 

are many variations of mechanical and chemical pulping methods, and some wood pulping plants

combine both approaches.37

Other fibre pulp (non-wood origin)

On this category are included pulp of fibrous vegetable materials other than wood made from

non-wood fibres such as grasses, agricultural waste and cotton). This non-wood fibre pulp are

Used for the manufacture of some types of paper, paperboard and fibreboard.

Recovered paper

In this category is included waste and scrap of paper or paperboard. This commodity includes

paper and paperboard which has been used for its original purpose and residues from paper

conversion. This includes waste and scrap collected for re-use as a raw material for the

manufacture of paper and related products.

5. Paper and paperboard (FAO/UNECE classification 2007)

The paper and paperboard sector covers a wide variety of types and grades of paper. This

category is divided into the following three main categories: a) newsprint; b) printing and writing                                                             37 Microsoft® Encarta® Encyclopedia 2003. © 1993-2002 Microsoft Corporation.

66 

 

paper; and c) other paper and paperboard. The first two categories are self explanatory, while the

last covers a mixture of different products such as: household and sanitary paper, tissue paper;

paper used in the manufacturing of other industrial and consumer goods; and paper used to make

boxes and sacks (packaging and wrapping paper)38.

5.1. Newsprint

This category is used mainly for the printing of newspapers

5.2. Household and sanitary paper

Category of household and sanitary paper includes special thin paper

absorbent paper, creped or uncreped, sometimes embossed, made from bleached or unbleached

chemical wood pulp, sometimes with a mixture of pulp from waste paper and mechanical pulp.

Included are: toweling, napkin, facial tissue, toilet tissue, wadding disposable tissues39.

5.3. Wrapping and packaging paper

In this category are included papers made from pure chemical wood pulp or from mixture of

chemical wood pulp, cotton fibre pulp, treated (e.g. highly hydrated or hard beaten) to render the

resulting paper resistant to oil, grease and water40. There is a lot of variety of utilization and

types of this category paper. They are used primarily for packaging frozen, moist or greasy

materials such as butter, margarine, meat or fish, linerboard; paper or paperboard used as facing

material on corrugated or solid paper or paperboard boxes and containers, paper or paperboard

used as medium when combining paper and paperboard for conversion into a corrugated board,

paper used as a folding boxes, etc.

5.4. Paper and paperboard not elsewhere specified

In this category are included impregnating, spinning or twisting, gumming, etc., paper

manufactured principally from furnishes rope and jute paper, folder stock, blotting paper, filter

paper, photographic sensitizing paper, shoe board, gasket board, transformer board, press textile

                                                            38 European forest sector outlook study: main report http://www.fao.org/docrep/008/ae428e/ae428e00.htm 39 FAO web site www.fao.org 40 Taken from FAO web-site www.fao.org

67 

 

board index pressboard, panel board (automotive) trunk and suitcase board, matrix board,

construction paper and paperboard used in construction industry and special thin paper as:

papers made for special purposes, their common characteristics being their relative thinness.

Examples: carbonizing tissue, condenser and capacitate or paper, cigarette paper, lens tissue,

pattern tissue, tea bag paper, etc41.

APPENDIX V Organization of the Macedonian Forestry Sector

 

                                                            41 FAO web site www.fao.org

Government

Ministry of Agriculture, Forestry and Water Economy 

Agriculture Vet. Service Forestry Water Economy

State adviser for forestry and Hunting

Directorate of forest police

Public Enterprise Makedonski Sumi

Contractors

Forestry and hunting

Forest management

Breeding and afforestation

Hunting

Development and international contacts

Forest police (16 stations)

68 

 

APPENDIX VI Questionnaire In the study the questionnaire is used as supplement to the other information. The interviews

were unstructured with managers and owners of small and medium size companies.

1. How do you provide raw materials for processing (do you use contract for purchasing)?

2. Are you satisfy with your supplier of timber (quality and consistency of timber supply)

3. Do you think that in your company are competent technical and expert staff and managers?

4. How you evaluate level of modernization of your equipment and machinery?

5. Are you satisfied with cooperation between your company and forest faculty and other R&D

institutions?

6. What is your primary target market (domestic or international)?

7. How can you evaluate relationships with your suppliers and subcontractors?

8. Do you think that in Macedonia exist acceptable conditions for getting credits for your business?

9. Do you thing that the rivalry in the industry exists, and how are you affected by illegal

companies?

10. Is there any clear and purposeful industrial policy offer by the Government (subsides, tax

reduction, attraction of investments)?

11. How big is the influence of the State institutions that affect the activities of the producers’

production improvement.

12. In your opinion what should be done for improving Macedonia’s forest industry

competitiveness?

13. What is the biggest barrier you face to growing this part of your business? Technology?

National policy? Human Resources?