Five essays on forest raw materials use in an international perspective

Abstract: This dissertation consists of an introduction and five self-contained studies analyzing different aspects of roundwood markets. Geographically it is focused on Sweden (paper 1-3) and Russia (paper 4-5). Four of the papers (1-2, 4-5) are explicitly considering international trade and its effects and possibilities in the domestic markets. The other paper (3), only implicitly takes account of the international market (for pulpwood), in that we see a loss of competitiveness in Sweden to foreign competition. In Paper 1 we consider the possibility of market imperfections in the Swedish pulpwood market. Two methods to measure market power are used, but the results reject market imperfections. In Paper 2 we measure the substitution between imported and domestic pulpwood. Using a variable cost function for the wood raw material input, we find that the substitution possibilities between the wood raw materials input in most cases seemed high. Further, the own and cross price elasticities were generally high, strongly supporting the argument that it is the relative price that is the main factor behind the imported volumes. In paper 3, it is found that the responsiveness to economic stimuli such as prices and costs are very low, in both short and long run. There is evidence of a reduced responsiveness, lower in the in the period 1976-1996 than in the period 1958-1975. Paper 4-5 investigates the possibilities for exploiting the vast Russian forest resources. Paper 4 uses the Porter framework to analyze what has happened in the Russian forestry between 1990 and 1998. We describe demand and factor conditions, the conditions in related industries, the role of government and finally the role of ownership conditions for the future prospects of the Russian forest industry. The result is a conception of the Russian competitiveness in the forest sector as relying heavily on factor conditions. Our findings are that this makes the Russian competitive advantage frail and that this advantage may vanish with further changes in the other determinants of Porter's framework. Finally, in paper 5, we investigate the key factors determining Nordic foreign direct investments (FDI) decisions in the Russian forest industry. The responses indicate that the prime motivation for investments made has been to serve local and regional markets, and not to take advantage of low labor and raw material costs. Access to well-developed physical infrastructure and prior contacts with future Russian partners have been important factors determining the location of the investment. The companies emphasize different institutional factors, such as an ambiguous legal system, difficulties in negotiating with local authorities, and general political instability. In paper 5 it is thus concluded that FDI into the Russian forest sector is likely to remain low until there is a fundamental change in the legal and political systems.