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Jakarta Post

Timber trade deregulation: Barking up the wrong tree

  • Smita Notosusanto

    The Jakarta Post

Jakarta   /   Fri, October 30, 2015   /  02:56 pm

The Trade Ministry'€™s decision to deregulate sustainability certification for exports of wooden furniture has sparked concerns not only among NGOs working to prevent deforestation, but also in the furniture industry, which the government wishes to help. At a time when fire razes vast areas of forest, the government should think twice before introducing policies that contribute to even greater deforestation.

Indonesia initiated the development of its own timber legality assurance system, called the Sistem Verifikasi Legalitas Kayu (SVLK), in 2001 to complement the tough law enforcement against illegal logging. Back then law enforcement was deemed as insufficient to stop the massive logging of the forests, especially in a decentralized country like Indonesia where the management of natural resources falls, albeit partly, in the hands of local governments. The SVLK therefore complements law enforcement measures by utilizing market forces and providing incentives to timber-based industry players to trade their products in a sustainable manner.

The sustainability of Indonesia'€™s forests, the primary source of the timber-based industry, is the key objective of the SVLK. The system provides incentives for legality by promoting market access for verified legal products and blocking market access for illegal products. The SVLK promotes broader governance reforms, such as improved information, transparency, capacity and community rights.

The system was developed through multi-stakeholder consultations involving government agencies, the private sector and civic organizations. Indonesia should be proud to be the first with such an extensive system of timber legality assurance in Asia.

The SVLK also responds to increasing global market demands for '€œgreen'€ products, especially timber-based products harvested from sustainably managed forests. Demand for such green products in importing countries in Europe and North America and in Australia are on the rise, signaling greater awareness among consumers to promote environmental causes.

Indonesia is well-placed to lead in these markets because of the SVLK. Indonesia became the first country in Asia to negotiate and ratify a FLEGT Voluntary Partnership Agreement (VPA) on Forest Law Enforcement, Governance and Trade with the EU, toward the issuance of a FLEGT license for all timber-based exports to EU countries.

With this license Indonesia will dominate the EU market as the first country in the world to obtain such a license that provides fast-track access to all EU 28 member countries. Aside from the EU, Australia also recognizes the SVLK as a timber legality assurance system for all timber-based imports from Indonesia.

The current economic crises faced by Indonesia prompted the government to deregulate the policy for investments and exports. However, within this deregulation package, the SVLK is seen as a barrier to export, instead of a tool to promote Indonesia'€™s sustainable timber-based exports.

Therefore, a mandatory SVLK for all timber-based exports is to be lifted for the furniture industry, owing to their relative sizes compared to other big timber-based industries such as decking, pulp and paper.

Nothing is further from the truth. Export data from the first half of 2015 shows that since the SVLK was implemented, the furniture industry has enjoyed a 20 percent growth in exports with a total value of US$120 million to various importing countries, including European countries. This indicates that instead of limiting exports, the SVLK is actually boosting markets for Indonesia'€™s timber-based exports.

Let'€™s look at the experiences of small and medium-sized furniture enterprises in Central Java that increased their export value after they obtained the SVLK. The SVLK not only expanded their markets beyond their traditional market, but also opened a lot of other opportunities, such as participation in international exhibitions, export credits and capacity building training in design, production and marketing.

These small and medium-sized enterprises (SMEs) consistently confirm that international buyers flock to place orders once they see the SVLK logo. With the SVLK, they can have direct relations with buyers, without the often disadvantageous deals with middlemen or brokers. In general, most SMEs experience an increase of 40 to 60 percent in exports after they obtain the SVLK.

By June 2015, Indonesia has used the SVLK to audit more than 12 million hectares of natural forests and more than 1,400 timber industries. It has issued more than 230,000 '€˜V-legal'€™ certificates, accounting for exports worth $16.4 billion.

If the government wants to deregulate export requirements, then it needs to closely look at the multitude of permits and licenses required just to start a business in Indonesia. Indonesia consistently ranks low on the '€˜Ease of doing business'€™ index just based on this issue alone.

The SVLK is not an additional requirements on top of these requirements. Instead, it only checks on the legality of exporting companies based on industrial and trade laws, as the first requirement before checking on the sustainable management of forest resources (for forest concession holders and other forest permits) and the sustainable sources of raw materials (for downstream industries).

With the SVLK, not only the legality of business entities is checked, to prevent smuggling or illegal trade of timber, but also the sustainability of raw materials is assured.

So really, the Trade Ministry is barking up the wrong tree if it accuses the SVLK of creating barriers to exports, not only because the SVLK contributes to an expansion of markets for the export of sustainable timber products, but it also reduces illegal businesses.

We all want to be free of this annual forest and smoky haze period and this is not the fault of El Nino alone. Sustainable forest management is a key ingredient to prevent mass destruction of forests by fires. The SVLK can help by creating incentives for all market actors to foster sustainability in trade.

The writer is program director of the Multi-Stakeholders Forestry Program.

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