A forest is a complex ecosystem that supports a myriad of life forms and is an important part of the national wealth and living space of any nation. Despite a low proportional percentage of total forestry cover, Ukrainian forests are a recognised and valuable natural resource for their ecological and social functions, and as a source of wood and non-wood forest products.Ukrainian forest area is estimated at 9.6 million hectares which is similar proportion of forest cover to Poland - 9 million hectares and Germany -11 million hectares. However, in Poland the annual volume of timber is 34 million m³, Germany -76.7, that figure changes dramatically in Ukraine and is measured as only 17 million m³ per year. Moreover, the quality of harvested wood in these countries is higher than quality of Ukrainian timber. Similarly Ukraine is significantly behind most European countries in terms of the intensity of forest management. The Czech Republic harvests 6.5 m³ of timber from one hectare of forest-covered area, Austria 4.6- 5.1, Germany-6.9 m³ of timber per year. In Ukraine, this figure reached a peak in the last two years, and is 1.5-1.7 m³ of harvested timber annually. Based on the standards of forest management and international experience, Ukrainian logging could be increased by at least 1.5-2 times without significant environmental degradation.This thesis attempts to explain the reasons why the Ukrainian forestry sector is underdeveloped on a comparative basis to European peers. I will also identify and comment on several changes the forestry sector experienced during the process of establishing new economic relationships, following the collapse of the Soviet Union.This paper will focus on the current situation in the forestry sector, achievements and failures in forestry sector development, and the forestry sectors state ownership structure alongside the forestry policy and institutional mechanisms used to develop a sustainable forestry management policy.The study will employ the Fisher and Faustmann rotation model, and a cost-benefit analysis. This thesis will also compare the rotation age from the literature with the theoretical ideas as well as practice from other countries. Special attention in the study has been given to development of the Ukrainian forestry view oriented towards sustainability.The current situation of the forest sector in Ukraine is the result of objective and subjective factors. The main objective factors are related to the economic crisis, a lack of investment, old and obsolete technology. Subjective factors that centre around the culture and a lack of awareness and understanding on the basic principles of reforming of forestry management and forestry production.The third part of this thesis will primarily describe the reasons which are hindering the development of the forestry sector. There is relatively little access to and investment in modern and competitive capability forestry husbandry technology that the Ukrainian forest industry can utilise, and the majority of the technology used today shares the same heritage and engineering base as that used during the Soviet period. Resolution of the lack of investment resources would potentially allow for acceleration of the processes of modernization and the possible upgrade of state and private enterprises within the forestry sector.The current Forest Code of Ukraine does not entitle the regional administrations to manage forest resources, while the executive branch, which has the rights, does not have working arrangements for its implementation. All this complicates the attraction of investments to support the industry in the current economic conditions and forest enterprises are characterized by low attractiveness for foreign investors.Certification is also a pressing issue and a task for the state. There is a very real need for the state to provide a timely solution to the problems of certification and improvement of the certification process of Ukrainian forests.The incentive for the development of certification at the international level comes from an ongoing prohibition on timber exports and production from countries where forest management does not meet the economic, environmental and social standards. This is linked to the sustainability and global climate control and ecological agendas.The forest industry in Ukraine is characterized by lower wages compared with the average for the whole economy. The wage in the forest industry is 73.8% of the average in the economy. Comparing the wages of workers, the mean wage in industry is 1.5 times higher than in forestry. This does not provide an incentive for workers in the forestry sector to work more productive and effective.