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December 7, 2018 www.intellinews.com I Page 6
company, was appointed the new director of the state-owned Czech Forests. Founded in 1992 by the Czech Ministry of Agriculture, the company’s primary responsibility is to manage more than 1.2mn hectares of forestland owned by the state, around 50% of all forestland in the country.
Prior to Sykora’s appointment, the company wasn’t particularly preoccupied with profitability; its primary business was to ensure that forests remained a sustainable resource for future gener- ations. Since the founding of the company in 1992 until 2009, the average yearly gross profit was a mere $28.2mn.
Within a couple of months of Sykora’s leadership, this number shot up beyond any reasonable expec- tations. After just a year in office, the former Babis’ employee brought more than $137mn in profits to the company, adding another $92mn in 2011.
According the renowned Czech agricultural expert Petr Havel, that extra money was needed to fill some holes in the state budget.
“Czech Forests used to keep their profits on their own accounts. But, under Sykora, part of it went to the state budget. That’s why the need to increase the profits of the company; it went straight to the state coffers,” Havel told bne in an interview.
How to quadruple profits in one year?
Since its foundation until 2010, Czech Forests was the principal manager of the forests it owned. It did most of the forestry work with its own limited manpower. The work beyond its capacities was subcontracted. The contracts were awarded to private companies for two basic types of work: tree harvesting and tree planting. The subcon- tracted companies were chosen on the basis of
a multi-criteria tendering process and received
remuneration upon delivery of the trees they har- vested. It was then left to Czech Forest to inspect, store, and sell the wood on its own terms.
This system, widely applied to state-owned forests across Europe, began to change in 2010. According to the new rules, there was no longer a separation between harvesting, planting, and selling of the trees. Instead, private forestry companies compete for the so called “complex forestry tenders.” These are giant, five-year-long contracts worth millions of dollars that let private companies do all the work: harvesting, planting, and selling.
The change in rules was made permanent by the adoption of the so-called “Wooden Book” order by the government of the Czech Republic in early 2011. Although officially implemented in 2012, the new “long-term strategy for the management of state-owned forests” has been tested since 2010.
Arguably the most important change concerns the selection criteria for awarding the forestry contracts to private companies. In essence, all the criteria were dumbed down, except for one — price. According to the new rules, contracts are awarded to companies that offer forestry work for the lowest price and sell the wood for the high- est price. The growing difference between these two prices is what made possible the exponential increase in profits for the state forest owner.
“Unfortunately, the new tendering system was designed in a way that there really is only one cri- teria — price. Who ended up paying for it were the forests themselves, as the quality of the care for them went down significantly,” Havel told bne.
The new rules have also effectively excluded the vast majority of Czech forestry companies from the competition. Only the largest companies, with