T

he European Union (EU) and Indonesia announced on Wednesday that they had signed the Voluntary Partnership Agreement on Forest Law Enforcement Governance and Trade (FLEGT–VPA), to reduce illegal logging, log laundering and related international activities.

The FLEGT-VPA will implement the new Indonesian timber legality assurance system (TLAS) and the EU forest law enforcement governance and trade policy on timber and timber products, which until recently represented around 50 percent of timber exported from Indonesia and 20 percent of timber products imported to the EU.

“Indonesia is not only the first Asian country to conclude VPA negotiations with the EU, but also by far the largest timber exporter to enter into such an agreement,” EU trade commissioner Karel de Gucht said at the signing ceremony in Jakarta.

He said that negotiations between Indonesia and the EU will facilitate the export of wood and paper products from Indonesia to European companies.

Forestry Minister Zulkifli Hasan called the agreement a significant breakthrough, the culmination of four years of negotiations.

Indonesia presented initial proposals to the EU in July 2009, but Indonesian industry came out in support of the agreement only in March of this year.

“We are expecting to ratify the agreement in September, and the full implementation of the VPA will be in 2013,” Zulkifli said.

Aside from the forestry agreement, the EU is preparing a capacity building program to strengthen Indonesia’s trade climate and investment. The EU is planning to add around ¤30 million (US$44.5 million) of its investment, from ¤66 million in 2009, to support Indonesian businesses.

“[The ¤30 million support] includes a program to support Indonesian businesses (ACTIVE), the Trade Support Program (TSP) II to support the Indonesian government in the field of export quality infrastructure and the Trade Cooperation Facility (TCF), a flexible mechanism to support attracting investments to Indonesia,” said an official statement following De Gucht’s visit to Indonesia.

Indonesia is EU’s largest investment destination and second largest market. The 27-member bloc invested a total of $2.78 billion in Indonesia — excluding oil and gas, banking and financial institutions — with a total of 521 projects, Investment Coordinating Board (BKPM) data shows.

Over 700 European companies have invested over ¤50 billion in Indonesia, providing more than 500,000 jobs in value-adding industries such as pharmaceuticals, banking and manufacturing.

De Gucht also met with Trade Minister Mari Elka Pangestu to discuss bilateral trade and investment issues and several issues with market access.

The high-level gathering digested the EU-Indonesia Vision Group’s recommendations to boost commercial relations between the countries. Established in 2009, the vision group was formed to invigorate the relationship between Indonesia and the EU by strengthening economic growth, employment and poverty alleviation through investment and trade in key sectors.

“One important step recommended by the Vision Group after the completion of its report is to have early consultation with stakeholders to generate widely shared interests and support from businesspeople, government officials and civil society in both countries on the idea of the Indonesia-EU comprehensive economic partnership agreement,” the joint statement said. (drs)