International Conference   BUILDING INSIGHTS OF MANAGERIAL ECONOMICS AND ACCOUNTING TOWARDS SUSTAINABLE FOREST MANAGEMENT Ukrainian National Forestry University, Lviv, Ukraine May 17 � 19, 2007   IUFRO Unit 4.05.00 - Managerial Economics and Accounting IUFRO Unit 4.05.01 - Managerial, social and environmental accounting IUFRO Unit 4.05.02 - Managerial economics

Value Chain Analysis:

A Tool for Analyzing Options in Forest Products Investment

for Rural Development in a Transition Economy

Yurij Bihun

Forest Resources Analyst, Shelterwood Systems, Vermont, USA

shelterwoodsystems@comcast.net

 

Value Chain Analysis (VCA) is a relatively new tool for determining the viability of investing in sustainable forest management (SFM) and value-added forest product for rural development.  The VCA model requires financial accounting and decision-making at each link of the value chain to determine the feasibility of investment.  VCA has been used in North America and developing countries but its applicability to Ukraine's transition economy has not been studied.

The Ukrainian forest products industry was part of the large command economy system that functioned, albeit inefficiently, as part of the Soviet model. Many manufacturing and processing facilities were ruined or abandoned in the transition to a market-based economy. Enabling communities to make a definitive, transformational change to another economic system involves creating multiple streams of income and determining the financial viability of each of the dense linkages to commercial value chains.  To enable this to happen, options include a study of the financial credits associated with business strategies including marketing, product development and quality control. Improving efficiency, adding service components to the product, improving transportation and communication logistics, and reducing risks all improve linkages with the value chain downstream. Examples among processing facilities that have made this transition successfully can identify other categories of options.

The author presents the VCA process and evaluates its potential as practical tool in the forest sector. Case studies in the northeastern United States and South America are used to illustrate the possibilities and limitations of this model.

 
Keywords:  Value Chain Analysis (VCA), value-added, multiple streams of income, forest products, sustainable forestry.

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