The ongoing threat to Indonesia’s legal timber trade

In March 2020, we reported how the Indonesian Government had issued Ministry of Trade Regulation 15/2020, a move which would have drastically undermined the credibility of its legal timber product supplies to international markets.

The new regulation was due to come into force on 27 May 2020.

However, following an international backlash – led by EIA and our Indonesian partner Kaoem Telapak – the Government made a sharp U-turn and revoked Regulation 15/2020.

Under the pretence of an economic stimulus in the face of the coronavirus pandemic, the proposed change had sought to substantially weaken the national Timber Legality Assurance System (TLAS) through large scale deregulation.

But this would have re-incentivised illegal logging and illicit trade, effectively sweeping away all progress made under Indonesia’s commitment to good forest governance and efforts to halt deforestation.

In pursuit of short-term gain, it would have caused the ruination of people’s livelihoods, increased biodiversity loss and further fuelled the global climate crisis.

Ultimately, the fallacy of quick economic gain through deregulation would have caused Indonesia to lose its unique position in the licensed timber market and tarnished the country’s reputation.

Although the Government has now abandoned its proposal and returned to the status quo, the impact of the pandemic on the country’s economy remains and is ongoing – raising the prospect of further attempts to dilute legislation protecting its precious forests.

We and Kaoem Telapak will be keeping a watching brief on the situation – and will vigorous opposing any future attempts to change the rules and allow stolen timber back into its exports.

  • 2016

    Forest lost (before licensing)

    928,660 Hectares
  • 2017

    Forest lost (after licensing)

    373,255 Hectares
  • 2000 >

    Estimated loss to Indonesia from forest crime

    $4,350,000,000

Beginnings - Unchecked crime with devastating consequences

The world’s forests have value far beyond any mercantile worth of the timber they contain – indeed, compared to their vital importance for livelihoods, culture and biodiversity, as well as helping in the fight against the climate crisis, their cash value should pale into insignificance. But, unfortunately, it does not.A long string of logs tied together on a wide river, guided by boats

At the height of the illegal logging era in the 2000s, Indonesia lost, on average, 2.8 million hectares of forests per year (an area nearly the size of Belgium). During that period, 80 per cent of the timber exported from the country was estimated to be illegal.

In simple economic terms, the country lost 40 trillion rupiah (approximately $4.35 billion) of revenue a year.

Beyond the economic concerns, forest crime also has massive environmental and social consequences. For far too long, forest destruction has been regarded as a victimless crime. This was reflected in the approaches of the governments of the period, firstly by not targeting the real criminals, including from within government ministries, and instead focussing on criminalising local people.

EIA has long been trying to turn the tide of illegal logging in Indonesia. Using investigations to highlight the destruction wrought by powerful companies and government officials, EIA and its partner Kaoem Telapak continued to investigate, expose and lobby in Indonesia as well as in consumer countries. Progress was, however, slow – unlike the rate of destruction of Indonesia’s forests.

Statistics on deforestation and tree cover loss from Global Forest Watch

This interactive map shows how forest cover in Indonesia has changed, click on Analysis to get detailed information.

Turning the screw on illegal logging

Finally, after years of campaigning, the European Union responded as a responsible consumer by taking the long-overdue step of acknowledging the serious issue of illegal logging.

In response, a governing framework built on a series of measures to prevent illegal timber from entering EU supply chains was established, known as the Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan.

Crucially, FLEGT seeks to combat illegal logging at its illicit core – rampant corruption, poor governance, lack of transparency and accountability from those managing and utilising forests in producer countries.

Central to the FLEGT Action Plan are Voluntary Partnership Agreements (VPAs) – bilateral trade deals negotiated between timber-producing countries and the EU – which are designed to prevent illegal timber products from entering supply chains and subsequently finding their way to European consumers.

VPA negotiations with Indonesia began in 2007 and concluded with the signing of the agreement in 2013.

A truck loaded with a timber container covered with a banner - First Trial Shipment Timber Export to Anwerp - 2012-10-23

The first FLEGT trial shipment timber export, to the Netherlands, on 23 October 2013

Safeguards of legality under such agreements are national timber legality assurance systems (TLAS) designed to have legality checkpoints along the chain of timber custody from harvest or import up to export of finished wood products from Indonesia. This system is called the Sistem Verifikasi Legalitas Kayu (SVLK) in Indonesia and mandates that every wooden product destined for export must have a certificate of legality, known as a V-legal Document.

Successful implementation of the SVLK was a crucial step to fulfil Indonesia’s good forest governance commitments, signed under the VPA, and was the final stepping-stone to become licensed under the FLEGT Action Plan.

A FLEGT licence attests to the legality of Indonesian timber in the same way as a V-Legal Document and guarantees privileged access to EU markets.

In 2016, Indonesia became the first country in the world to export timber products under FLEGT – effectively creating the world's first controlled green supply chain for timber.

Benefitting from legal timber supply

The cost of certification has been a point of contention from the beginning. Recently, Indonesia’s landmark SVLK has been under growing pressure from commercial interests and in 2019Indonesia’s Coordinating Minister for Economic Affairs, Darmin Nasution, argued that the Government’s plan to relax timber regulations would give the country a competitive advantage by cutting costs and thereby increase exports of wood products, stating that the SVLK should be applicable only to furniture products destined for Australia, Canada, the EU and UK.

Further, the Indonesian Furniture and Craft Association (HIMKI) has been instrumental in a push to abandon the legality assurance requirements, despite trade data showing there has been a substantial increase in market response to V-Legal documentation and the SVLK system.

Nevertheless, HIMKI Secretary General, Abdul Sobur, stated that under the present conditions, Indonesia cannot compete with Vietnam, for example, in attracting foreign investment.

However, since the implementation of the SVLK, FLEGT-licensed exports of wood products with a V-Legal document have rocketed:

(mouse-over highlighted points for more information)

Since 2013, the SVLK system has contributed exports of wood products amounting to a total of $68.37 billion giving testament to Indonesia’s reputation as a certified timber goods producer. In addition to the economic benefits, there have been significant environmental and social benefits from the VPA.

Deregulation – a return to the bad old days

Despite its economic success, the Indonesian SVLK needs further support to improve effectiveness as the system continues to be exploited.

In 2019 alone, the Directorate General of Law Enforcement of the Ministry of Environment and Forestry (DG Gakkum) seized 455 containers of illegal timber, for example.

DG Law Enforcement MoEF Seizure Container Merbau from Papua n West Papua in Tanjung Perak Port Jan 2019 (3)

Seizure of a container of merbau from Papua, Tanjung Perak Port, in January 2019

With the coronavirus pandemic-induced economic downturn in 2020, the existing SVLK faced yet another battlefront as legality safeguards are considered a hinderance to economic recovery. As part of a general economic stimulus drive, the Indonesian Ministry of Trade pushed for the new Regulation 15/2020 on the export of wood products.

Under the new, substantially flawed system set for implementation on 27 May 2020, companies would have no longer need to obtain special licences attesting legality – V-Legal Documents – at the point of export.

This regulation would have violated Indonesia’s VPA commitments to keep timber legality standards in place which are effectively locking stolen wood out of the country’s supply chains. The resulting deregulation of the majority of wood products, would have further introduced uncertainty and the scope for illicit activities to the extent that Indonesian wood products could not be guaranteed to be legally exported.

Relaxing legality requirements will likely re-incentivise the illegal logging sector further, thus exacerbating the still-present illicit timber trade and increase the risk of environmental destruction last seen 20 years ago.

Deregulating legality would be especially detrimental to Indonesia at a time when timber legality legislation is now in place with consuming countries such as Australia, the EU, Japan, South Korea, the USA and, most recently, China, which is revising its forest law to address illegally sourced timber.

Resisting deregulation

In the face of the Indonesia Ministry of Trade’s bid to drastically dilute timber export law, EIA and its partner Kaoem Telapak began to campaign against the move and to spread awareness of the threats it posed.

We used the first of our new podcasts – What on Earth? – to highlight the situation, with Faith Doherty, EIA Forests Campaign Leader, and Mardi Minangsari, from Indonesian partner Kaoem Telapak and also an EIA Forests Campaigner, discussing why this is happening, its likely impacts and the outlook for Indonesia’s rainforests if the Regulation were to go ahead.

Podcast - What on Earth?

Why is Indonesia abandoning its timber export regulations?

Twenty years ago, the chaos and violence in Indonesia’s forests spurred efforts to put an end to industrial-scale illegal logging and to keep stolen wood out of the country’s exports – but now the Government wants to significantly water down the rules, using the coronavirus pandemic as an excuse.

In this podcast, Faith Doherty, EIA Forests Campaign Leader, and Mardi Minangsari, from Indonesian partner Kaoem Telapak and also an EIA Forests Campaigner, talk with Press & Communications Officer Paul Newman about why this is happening, the likely impacts and the outlook for Indonesia's rainforests.

 

 

May 2020: Indonesia shelves its plan to undermine legal timber exports

On 15 May, we were able to announce that the Government of Indonesia had backed away from its reckless plan.

An international outcry of governments, the private sector and civil society – led by EIA and Kaoem Telapak – had spurred the Government to think again and revoke Regulation 15/2020.

Faith Doherty welcomed the shift, stating: “The Government has done the right thing and effectively restated its commitment to preserving the nation’s precious forests instead of greenlighting a regulation seeking to pursue short-term profits.

Instead, the new Regulation 45/2020 rendered Regulation 15/2020 invalid and re-instated previous legislation.