I

ndonesia, which until several years ago was perceived as a notorious center of illegal logging, has finally become the first country in the world to gain certification for its wood-based products under the European Union Forest Law Enforcement, Governance and Trade (FLEGT) licensing scheme on legally produced tropical timber.

This is indeed a great achievement and came almost 15 years after Indonesia launched its own timber legality assurance system (SVLK) and after three years of negotiations with and verifications by EU regulators. The SVLK system audits the entire supply chain from the source of timber to the point of exports. This means buyers of Indonesian-made wooden furniture or paper in Europe can trace the source of the timber and verify whether the wood was sourced from sustainably managed forests.

Both SVLK and FLEGT are a response to mounting global market demands for “green” products, especially wood-based products harvested from sustainably managed forests, especially in Europe, North America and Australia. With this license Indonesia will have a great advantage in entering the 28-country EU market and most other developed countries, though the final sales will still depend on the ability of the wood-based industry to meet the preferences of consumers.

Both schemes also provide a strong signal to the market that it is possible to promote sustainable forest management by increasing transparency, accountability and stakeholder participation in decisions about forests. The certification system has boosted legal trade, modernized and formalized Indonesia’s forest sector, and improved business practices, enabling many thousands of businesses to meet market demand for legal timber-based products.

The FLEGT licensing scheme ensures that wood-based products exported from Indonesia are sourced from independently audited factories and forests. These audits have so far covered more than 20 million hectares of forests and more than 1,700 forest industries, an unprecedented level of scrutiny. FLEGT-licensed products automatically meet the requirements of the EU Timber Regulation (EUTR), which prohibits EU operators from placing illegally harvested timber and timber products on the EU market.

The EU imports about one third, by value, of its timber product needs from Indonesia and EU imports account for 11 percent of Indonesia’s total exports of timber products.

However, Indonesia needs to strengthen the certification scheme and maintain its credibility. The credibility of the SVLK to assure timber legality will still depend primarily on how the system achieves its own accountability. In this context, the government’s role is vital, notably in ensuring monitoring and effective law enforcement in cases of non-compliance or violations of the regulations and in responding to reports of violations submitted by independent monitors.

Poor accountability and law enforcement will erode the credibility of the system and turn the certification scheme into a false incentive for developing rent-seeking behavior in the certified timber market.

Hopefully, the Indonesia-EU model of cooperation in assuring consumers of the legality and environmental sustainability of wood-based products can be replicated in the palm oil industry, which contributes about US$20 billion of exports to the Indonesian economy annually.