Country: The Former Yugoslav Republic of Macedonia

Project Title: Institutional development and capacity building in forestry and forest industry subsectors

Project Number: TCP/MCD/3002 (A)

Starting Date: February 2005

Completion Date: August 2006

Government Ministry Responsible for Project Execution: Ministry for Agriculture, Forestry and Water Economy

FAO Contribution: US$296 000

I. BACKGROUND AND JUSTIFICATION

During the last decade Macedonia has begun to change from a centrally planned economy to a market oriented economy. This transition is taking place under extremely difficult economic and social conditions. These conditions are the combined legacy of three broad negative developments in the past decade: (a) very poor macroeconomic outcomes in the form of sharp drops in output and trade and initial high inflation; (b) severe deterioration in the state of the enterprise, financial and infrastructure sectors; and (c) worsened social indicators and increased poverty and inequality.

Upon the break up of the former Socialist Federal Republic of Yugoslavia (SFRY), the new government concentrated their efforts in three areas: (a) immediate stabilization of the economy, (b) meeting the most urgent needs of the most vulnerable people and (c) re-integration with the international community. Moving onto a path for achieving the strategic goals of full reintegration into the international community in the near and medium-term, achievement of a self-sustaining economy without dependence on aid in the medium-term, and accession to the European Union in the long-term, will require the government to adopt comprehensive transition reforms and undertake some priority investments and physical upgrading to meet three interdependent medium-term challenges:
• restoring macroeconomic stability and external balance;
• stimulating growth and creating the basis for a sustainable supply response;
• improving the social well being of the most vulnerable groups and building human capacity.

Organization of the Macedonian Forestry Sector

Forestry and forest industry plays an important role in the national economy and provides employments in rural areas. According to statistics about 6 000 people are directly employed by the forestry and forest industry sectors. Indirectly the sector provides job opportunities to additional 35 000 - 40 000 people through multiple effects. About 14 percent of the total work force is employed by forest sector. 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. 37 percent of the total land area (one million ha) is forestland, where 910 000 ha is production forest. 70 percent of production forest is low forest (90 percent oak and beech) and 30 percent is high forest out of which 90 percent is broadleaf forest and the rest pure coniferous stands or mixed broadleaf/coniferous stands.

Between 1950-1980, 200 000 ha of state forestlands were reforested, including the establishment of about 35 000 ha of pine plantations, mainly of pinus negra (see Table 1). In addition, barren lands covers 200 000 ha. Parts of these areas would certainly be suitable for establishment of plantations. Statistical figures from 1993 indicate a total standing volume of 73 million m3. During recent years, forests have been exposed to serious attacks by insects (pine procession moth) and forest fires. Official statistics report an annual average burned areas of 4 000 ha for the period 1997 – 2001.

Table 1. Macedonian production forest area (1993)

Natural forest			Plantations (monocultures)
Low forest	Oak, beech	600,000	Pinus nigra	30,000
	Other species	50,000	Other species	5,000
High forest	Broadleaf	200,000
	Mixed conifer/broadleaf	25,000
Total		875,000	Total	35,000

About 13 percent (see Table 2) of forestland in the FYRM belongs to private owners FYRM, with a species distribution rather similar to state owned forest. Forest holdings are located in close proximity to farm owners and the wood is mainly used for household purposes leaving very limited volumes of firewood to be sold on the open market. Because of the small size of holdings (average size in the order of 1 ha) and the fact that the owners consumes most of the wood, there has been no interest in establishing a forest owners associations. The intention of the government is, through the proposed sale of some state forestland, to allow a slight increase of private forest up to a level of 15 percent of total forestland.

Table 2. Forest area by main group of species and owner in 2000 (ha)

Main group of species	Public	Private	Total
Pure tree stands of broadleaf	480,000	100,000	580,000
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	860,000	135,000	995,000

Non-wood forest products including game meat, deer horn, pelts, forest seeds, fruits, berries, edible mushrooms, honey, cork, resin, moss for pharmaceutical industries and medicinal plants are an important economic resource, especially in rural areas. Utilization of non-wood forest products has declined in the past decade, and needs to be revitalized. Small-scale enterprises based on non-wood forest products could provide off-farm employment and income to rural households. In particular, mushrooms, herbs and wildlife resources of the FYRM offer considerable potential for commercial utilization. Macedonian forest resources possess considerable potential for expanding forest-based tourism.

Before the privatisation 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 privatised, or are in the final stages of being privatised. Makedonski Sumi is a public forest enterprise responsible for both planning and executing forest operations. It operates seven sawmills with an annual capacity of 20 000 m3. It is planned that a part of these mills will be sold via the stock market, though Makedonski Sumi, may decide to retain a portion of the shares. There are also 30 private sawmills producing about 30 000 m3 of sawn wood annually. In addition there is a great number of smaller sawmills that operates on and off when saw logs can be acquired at affordable prices (many of these are probably using illegally harvested logs). It is difficult to estimate the current production of the sawmilling industry. There are also as many as 1 000 small furniture factories, employing 2-5 persons. Since many factories are operating illegally, statistical figures are unreliable. State forestry is dependent on a healthy sawmilling industry with wood paying capability sufficient to cover necessary investments in forestry. A change of administrative structures for state forest management and the creation of a sawmilling association would result in a more balanced industry. Log prices are high and exceed those in high cost countries such as Austria, Germany and the Scandinavian countries.

The high demand for forest products is exacerbated by the need of wood for reconstruction, a high demand for firewood, rural poverty and the associated lack of employment opportunities. The public forest enterprise (Makedonski Sumi) in charge of forestry operations is in financial difficulties and lacks many of the necessary skills and tools that would enable the enterprise to supply the forest industry with cost efficient wood raw material. Low capacities to invest in the forestry resource base, together with the lack of efficient government policies and programs to control and direct forest development have caused further problems. About 25 percent of the total annual removal of wood is illegal, causing a loss of state income and is environmentally harmful. Illegal activities are concentrated in rural areas with few alternative income opportunities for the inhabitants, and undermine the long-term development prospects of these areas. Control of erosion through increase afforestation, secure future wood supply for the forest industry, protection of pine plantations and prevention of illegal logging are among the main priority areas.

Some of the institutional shortcomings in the forestry sector derive from the lack of a declared forestry policy. This is compounded by a legislative framework that mixes commercial and regulatory functions and forestry institutions that are not organized and equipped to deal with the challenges that have emerged in the sector as the country makes a sustained effort to achieve its major foreign policy goal of accession to the European Union.

The Ministry of Agriculture, Forestry and Water Economy (MAFWE) administer forestry sector in the FYRM. Responsibilities are split between three main bodies: the Forestry & Hunting Inspectorate and the Forestry Police, both under the MAFWE Forestry Department and the Public Forest Enterprise : Makedonski Sumi. The MAFWE Forestry & Hunting Inspectorate (18 employees) deals with legislative issues and the inspection of the operations of the Public Forest Enterprise. The Department of Forest Police employs 109 forest police officers at 19 stations. Presently there is no coordinating head of these two departments.

The Government of the Former Yugoslav Republic of Macedonia is experiencing a critical gap in addressing the above-mentioned problems and to formulate a new forestry sector policy, designing a national forestry strategy, reforming and strengthening its forestry institutions, harmonising its institutional instruments for forestry with those of the European Union and in preparing a long-term national forestry program in harmony with international resolutions, with the aim of increasing the sectors contribution to the national economy. MAFWE does not have sufficient technical expertise in forestry policy formulation, cross-sectoral policy coordination, involvement of all stakeholders, strategic planning and legislation revision and harmonization. The FYRM requests FAO technical assistance to support the MAFWE in preparing forest policy strategy and legislation.

A state budget of 25 000 euros per year has been planned for the sustainable implementation of the national forestry programme. Cumulatively the Government will allocate around 500 000 euros to ensure the sustainability and proper implementation of the activities envisaged in the strategy paper. This assistance will also make possible to concretize in the near future an interest expressed by the European Union to support a further implementation of a national forestry programme. This assistance will be complementary to the current bilateral assistance between the public enterprise “Macedonian Forest” and the Norwegian Forest Public Enterprise on forest management issues and the FAO assistance for the prevention of insect attacks against pine plantations.

II. OBJECTIVE OF THE ASSISTANCE

The project will to strengthen the policy environment and institutional capacity to sustainably conserve and manage forest resources in order to enhance their economic, environmental and social contribution to the well-being of the Macedonian society. The assistance will i) support the formulation of a new forestry policy and design a national forestry strategy in compliance with national development and environmental action plans and European Union standards; ii) review forestry legislation and harmonize it with new forestry policy and EU rules and regulations.

III. PROJECT OUTPUTS

The expected outputs of the project are:
1 A new national forestry policy: The forest law adopted in 1997 reviewed through a participatory process. All stakeholders will be invited to actively participate in the formulation of a new forestry policy in line with their goals and expectations with regard to forest resources conservation and management.
2 A national forestry strategy prepared in close consultation with all stakeholders and in line with the new forestry policy. Special attention will be given to integrating forest resources into national development planning and linking with other related sectoral development plans. The strategy will indicate scope of investment, training needs and timeline of proposed actions.
3 A harmonized forestry legislation with other sectors and European Union standards. This will allow for the concrete implementation of the new forestry policy and strategy.

IV. PROJECT ACTIVITY

A steering committee would be established to give direction to and monitor the work of the forestry policy and strategy working group in order to achieve the objectives of the project on schedule. A provisional time schedule of project activities is presented in Annex 1.

Output 1: Review of national forestry policy
The following activities will be coordinated by FONP and implemented by national consultants and the TCCT expert.
1. Definition and adoption of participatory forestry policy planning process.
2. Organisation of forestry policy and strategy working groups and the national steering committee for policy formulation to facilitate the participation in this process of different stakeholders acting in forestry.
3. Training of stakeholders participating in mentioned working groups in participatory process and techniques to improve their capacity to involve people in forestry.
4. Participatory formulation of and national seminar to discuss the draft national forestry policy.
5. Presentation of the national forestry policy validated by stakeholders to national authorities for approval.

Output 2: A national forestry strategy
The following activities will be coordinated by FONP and implemented by national consultants and the TCCT expert.
1. Organistiaon of a national seminar to discuss preparation and invite inputs from stakeholders.
2. Production of first draft for review/discussion by different public and private stakeholders.
3. Finalization of draft strategy for government approval.
4. Assessment of the current and potential contribution of the forest sector to the national and regional economy.
5. Review of the national institutional set up of the forestry sector and propose adjustments/modification to allow the appropriate implementation of the national forestry policy and strategy.
6. A human resource development needs assessments and preparation of training programmes for the implementation of the national forest policy and strategy.

Output 3: a revised and harmonized forestry legislation
The following activities will be coordinated by LEGN and implemented by national consultants and the TCCT expert.
1. Review of the current national forestry and related legislation in the context of the new proposed forestry policy and strategy as well as in relation to the EU standards
2. Drafting of forestry legislation in compliance with the international commitments, agreements and conventions concerning forestry adopted by the country
3. Discussion of different stakeholders on the drafted legislation
4. Production of a final draft revised forestry legislation for submission to the government consideration.

V. INSTITUTIONAL ARRANGEMENTS AND CAPACITY BUILDING

The overall responsibility for the project will be under the Ministry of Agriculture, Forests and Water Economy and its Forestry Department.
A national project coordinator will be responsible for the implementation of the work plan and will work under the guidance and supervision of a national steering committee and FAO Forestry Policy and Institutions Service. The steering committee will be composed of representatives of the government, NGOs, private sector and academic organizations.
The forestry policy and strategy working group will work under the direct supervision of the national project director and the steering committee. The working group will be responsible for the production of main outputs and it will be assisted by national consultants and TCCT experts. The exact composition of the working group will be determined at the beginning of the project.

VI. INPUTS TO BE PROVIDED BY FAO

The project will provide the following inputs and services:
Personnel
• A forestry policy and institutions international consultant (under TCCT or retiree partnership agreement), for eight month (TORs in Annex 2)
• A forestry legislation international consultant (under TCCT or retiree partnership agreement), for four months (TORs in Annex 3)
• A forestry policy and strategy national consultant for 11 person/month (TORs Annex 4)
• A forestry economy and planning national consultant for four p/m (TORs in Annex 5)
• A forestry legislation national consultant for five p/m (TORs in Annex 6)
• A forestry institutions national consultant for three p/m (TORs in Annex 7)

• 3 missions for advisory technical service (ATS) of forestry policy officer, FONP, for a total of three weeks (TORs in Annex 8)
• 2 ATS missions of forestry legislation officer, LEGN, for a total of three weeks (TORs in Annex 9)
• 2 ATS mission of a participatory forestry officer, FONP, for a total of two weeks (TORs in Annex 10).

Casual labour and temporary assistance
To cover the services of specialized staff for translation of essential documents and key texts from/into Macedonian/English and for providing interpretation services to the project team during meetings and field missions.
Materials and supplies
Limited number of selected scientific books, CD-ROM and other publications to be identified in detail during the initial stages of project implementation.

Equipment
Four computers and special software programmes for training, planning/programming and database development, two desk top printers and one multimedia and 1 overhead projector with mobile screen for training.
General and direct operating expenses
To cover expenses at FAO headquarters related to the implementation of the project and cost for communication and other support activities during project implementation.
Training
Study tours
Two persons will undertake a study tour of two weeks’ duration to european countries (e.g. Finland; Latvia), in national forest planning, institutional reform, forest information technology and participatory forestry.
In-country workshops/seminars

• Two national workshops on national forest policy and strategy preparation (each of up to three days’ duration and 30 participants from the forest administration and stakeholder representatives). Costs inclusive of US$50 allowance (for 20 external persons), refreshments, materials and facilities.
• Two training of trainers’ sessions on participatory forestry (each of up to five days’ duration and up to 25 participants from the forest administration and stakeholders’ groups). Cost inclusive of US$50 allowance (for 20 external participants), refreshments, materials and facilities.
• One national workshop on forestry legislation and forest law compliance (up to three days’ duration and 30 participants from the forest administration and stakeholders group’s representatives). Cost inclusive of US$50 allowance (for 20 external participants), refreshments, materials and facilities.
• One open meeting for all stakeholders’ participation in the debate and validation of project results, obtaining feedback for adjustments to outputs.
Simultaneous interpretation (English, Macedonian) for workshops/training sessions, including hiring of equipment.

VII. REPORTING

The national project coordinator will be the main responsible person for the preparation of progress quarterly reports. With the collaboration from the TCCT or retired senior and national consultant and the support of the officer responsible of the FAO lead technical unit. He will also be responsible for preparation of the project draft terminal report. This draft will be finalised by FONP and submitted according to established procedures.
At the beginning of the project, the national project coordinator also with support from the FAO lead technical unit will prepare a detailed work plan for the review and approval of the steering committee.
At the end of each mission, each international and national consultant as well as FAO technical officers will provide a detailed mission report on activities undertaken, conclusions and recommendations as well as any specific reports/documents mentioned in their TORs.

 

VIII. GOVERNMENT CONTRIBUTION AND SUPPORTING ARRANGEMENTS

The Government will support the project with the following arrangements:
• appoint a national project coordinator;
• appoint governmental members of forestry policy and strategy working groups;
• set up a project steering committee;
• designate English-speaking counterparts to work closely with the project consultants;
• provide office space for consultants and secretarial assistance as well as communications facilities;
• provide local transport;
• facilitate customs and tax clearance of equipment to be supplied by FAO, issue visas to international consultants requiring them.

After the completion of the project, the Government will ensure efficient and effective utilization of staff trained on the project and create the necessary conditions for the implementation of the project’s recommendations. In particular, it will pursue putting in practice the national forestry policy and strategy through participatory approaches and mechanisms, promoting its knowledge and dissemination. The Government will also adopt and introduce the recommended institutional reforms in the public and private sectors and enforce the new forestry legislation once approved by the Parliament.