Indonesia'€™s rising forestry product exports, with figures surpassing last year'€™s total annual exports, have yet to benefit the upstream industry, producers say.

Association of Indonesian Forest Concessionaires (APHI) executive producer Purwadi says the upstream industry is dying, seeing a dwindling number of active players in the past few years, with only less than 5 percent of existing forest concessions estimated to survive by 2017.

There were 69 percent out of 308 natural-forest concession (IUPHHK-HA) holders active in 2008, while there are currently only 39 percent active players out of 294 permit holders, the association'€™s data shows.

The data also shows that only 106 industrial-forest permit holders (IUPHHK-HTI), out of the total 235, are currently active.

Purwadi explained the current low price of logs and limited markets available were behind the defunct upstream industry, saying that the upstream industry was able to survive only by reopening log exports.

He said fewer players were interested in developing natural forests due to high costs and uncompetitive prices.

For example, he said, Merbau logs from natural forests were now priced at US$300 per cubic meter, lower than the $880 per cubic meter set for imported Merbau logs in the Chinese market, underlining the chance that the Indonesian upstream industry might lose on the ban on log exports.

The number of industrial forest concessionaires, according to him, is shrinking as the market is limited to harvested products, with only the pulp and paper industries absorbing the timber, which may further lead to monopsony practices and price distortion.

'€œThe government pushes the growth of the downstream industry, but allows the upstream industry, which supplies the raw material, to die. In no time, we will see our processing sector forced to import material to produce,'€ said Purwadi.

According to Forestry Ministry data, exports of forest products soared to $3.48 billion in the first half of this year, from $835.18 million during the same period last year.

Exports of forest products have reached $4 billion year-to-date. The figure more than doubled the total number of annual forestry exports last year, which stood at $1.52 billion, thanks to the mandatory Timber Legality Verification System (SVLK), which helped meet demand in the world timber market.

'€œThe only solution to help forest concessionaires is to lift the nearly 30-year ban on log exports so that we can grab a more competitive market out there,'€ Purwadi said.

Indonesia prohibited log exports in 1985 before lifting the prohibition in 1998 under a letter of intent signed with the International Monetary Fund (IMF) to give the government some space to change forestry policies.

The policy led to looser monitoring and in turn illegal logging and the trade of illegally logged products, which then resulted in 3.5 million hectares of forest denuded every year. The government introduced a number of regulations in 2001 to restrict log exports and further curb deforestation.

Environmentalists argue that restarting log exports '€” especially those from natural forests '€” will reopen the door to illegal logging that was rampant from 1998 until 2001.

Purwadi argued the country had SVLK and schemes that were able to calculate quotas given to concessionaires and trace all harvested wood, to prevent rampant illegal logging from reoccurring.

Forestry Ministry secretary-general Hadi Daryanto said reopening the export of logs was possible under a provision in a 2006 governmental regulation on forestry produce management and utilization, with recommendations from related ministries.

'€œThis is a good time to start reopening log exports with rising exports and with SVLK. We basically must go from the Trade Ministry, but we have to discuss the matter first with the industry minister to ensure the log trade involves industrial efforts, such as planting and cultivating,'€ Hadi explained.

'€œHowever, for now, we may only allow exports for industrial forest products and not those from natural forests.'€

He added that reopening natural forest log exports was '€œtoo sensitive and challenging'€ as there were certain groups that had to be convinced it was now safe to open exports and was too '€œprimitive and morally hazardous'€ as it involved less planting and industrial efforts.

Even if it was made possible, Hadi said only logged-over timbers '€” not first cut timbers '€” would be allowed for export. '€œIndustrial restructuring is the answer to maintaining supply for the downstream industry,'€ he said.

'€œWe have encouraged processing plants to upgrade their machines so they can outsource wood from community plantation forests that are smaller-sized, rather than from natural forests that will burden them with more costs.'€

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