Once among the world's leaders in round wood and plywood production, today the country's logging and woodworking sectors are in steep decline. CIFOR's Krystof Obidzinski - Principal Scientist with the Forests and Governance program - looks at the causes of illegal logging in Indonesia, the progress made towards combatting it, and the next steps required.
Indonesia's forestry sector is in deepening crisis. During the last three years, the export of plywood decreased by nearly 75% while the export of sawn timber products fell by nearly 50%. Production and export reductions of such magnitude have had significant economic and social impacts in terms of shrinking foreign earnings and employment loss.
The reasons for this situation are many, but they start with the uncontrolled expansion of timber processing industries in Indonesia in the 1980s and the subsidized promotion of pulp and paper mills in the 1990s - all without ensuring a sustainable supply of timber. The resultant supply-demand imbalance has continuously been dogging Indonesia's forestry sector and is the key underlying structural problem that drives illegal logging and the movement of illegal timber within and out of Indonesia.
Over the years, the excessive demand has taken its toll on Indonesia's forest resources, resulting in increasing deforestation that has hovered around 2-3 million hectares annually for the last seven years. The increasing timber scarcity, rising production costs, log smuggling, stiffening competition from other countries producing tropical timber, intensifying international scrutiny of forestry practices in Indonesia and the subsequent forest law enforcement (FLE) actions by the Indonesian government (e.g. Wanalaga I-III, OHL I-III) have all placed the forestry sector under pressure. In the early 1990s, there were nearly 600 forest logging concessions in Indonesia. Today, there are less than 300. In the province of East Kalimantan, the leading log and plywood producing province in Indonesia, the number of HPH forest concessions dropped from the all time high of 200 in 1993 to 56 in 2006.
Tackling Timber Smuggling - Is It Enough?
Timber smuggling, seen as one of the main factors undermining Indonesia's competitiveness on the international market by supplying the competitors with under-priced logs, has been one of the main targets of FLE operations in Indonesia. For instance, the Ministry of Forestry estimates that in 2006 alone about 10 million m3 of timber left Indonesia without any documentation. As a result, since 2001 government security agencies have undertaken regular FLE operations in key timber producing parts of the country.
By all accounts, these operations have had a significant impact. According to CIFOR research, in 2006 cross-border timber trade in Kalimantan decreased by as much as 70%.
Despite this decline, the Ministry of Forestry reported that in the same year the illegal logging caused by the supply-demand gap, driven mostly by the pulp and paper industry, stood at 52 million m3.
What Next?
This demonstrates that real progress against illegal logging in Indonesia is possible. In addition to continued FLE operations to keep timber smuggling in check, a number of parallel steps are necessary.
One important first step is to implement existing bilateral agreements aimed at reducing timber trade discrepancies associated with illegal logging. Indonesia has signed a number of such agreements, including with China, Japan, Malaysia and South Korea. But their actual implementation has been limited. The recent establishment of a China-Indonesia government working group on illegal logging is an encouraging sign.
Ratifying and implementing the recently negotiated FLEGT-VPA agreement with the EU for timber trade would also be a positive measure. VPA is expected to provide the access for Indonesian producers to premium timber markets in Europe and will also provide extensive capacity building opportunities for the producer countries.
Coordination between FLE enforcement agencies on the common understanding of the recently revised timber legality standard - in line with the VPA process - should also be a priority. But the standard must be applied consistently in evaluating the activities of timber concession holders. This will help prevent the kinds of misunderstanding seen in the Adelin Lis illegal logging case in Sumatra.
Indonesia's anti money laundering laws with their inclusion of forest-related crimes are unparalleled anywhere else in the world. But, along with anti-corruption legislation, greater use needs to be made of the anti-money laundering legislation in prosecuting illegal logging cases and increasing the probability of convictions.
Enforcing a greater degree of public transparency and accountability for new investment in the forestry sector would also help by curbing excessive and potentially unsound development of timber production and processing capacity.
Of course, all of these measures need a solid foundation from which to operate. It's therefore important that a feasible and sustainable timber plantation development policy be developed. In late 2006, the Indonesia government announced a target of nine million hectares of new timber plantation to be developed by 2016. Timber plantations are crucial to solving the illegal logging problem in Indonesia, but the challenge is to do it in an economically feasible and environmentally sustainable manner.
Finally, over the coming years it will be important to explore, through policy framework analyses and pilot projects, how REDD schemes can become a catalyst for sustainable forest management in Indonesia and how they can provide a viable incentive to reduce illegal logging.
"The supply-demand imbalance has continuously been dogging Indonesia's forestry sector and is the key underlying structural problem that drives illegal logging."
- Krystof Obidzinski, CIFOR