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EU timber license could help Indonesian small-scale furniture exporters access global markets

JAKARTA (RambuEnergy.com) – The Forest, Law Enforcement, Governance and Trade (FLEGT) licenses issued by the Indonesian government in November 2016 would allow timber exporters to enter the European Union market without the need for importers to conduct further due diligence checks. Entering the EU market could serve Indonesian exporters as a reference to access other markets that enforce timber legality, such as Australia, Japan and the USA, according to the Center for International Forestry Research.

The SVLK, or Timber Legality Assurance System in English, is required by Indonesian law for all wood product exports. All Indonesian exporters who qualify for SVLK can automatically obtain the FLEGT license and export to the EU.

President Joko Widodo expects furniture product exports to triple from US$ 1.5 billion to US$ 5 billion from 2016 to 2021. Maximizing the use of FLEGT licenses could improve not only Indonesia’s timber exports, but also the livelihoods of millions of people dependent on small and medium-sized enterprises (SMEs), which dominate the furniture sector.

In a policy dialogue held by the Center for International Forestry Research (CIFOR) in collaboration with the Ministry of Environment and Forestry, speakers analyzed how small-scale furniture producers in Indonesia can benefit from FLEGT licensing to tap into global markets.

The Director General for Sustainable Forest Management from the Ministry of Environment and Forestry, Putera Parthama, expressed that the FLEGT license will serve to “increase our market share, improve the competitiveness of our products, increase revenue for the communities and improve the livelihoods of those involved.”

He added that illegal logging is one of the biggest challenges faced by Indonesia and that “contrary to some predictions that this licensing system would hamper exports, the figure is quite encouraging.”

Similarly, the Deputy Head of the European Union Delegation in Indonesia, Charles-Michel Geurts, showed the latest figures of Indonesia’s timber exports to the EU, which seem to have tripled compared to the previous period. He praised the “incredible success by Indonesia in rolling out SVLK”, which led the way for the signature of the FLEGT agreement.

The Deputy Head of the UK Climate Change Unit in Indonesia, Su-Lin Garbett-Shiels, congratulated Indonesia on being the first country in the world to sign the FLEGT agreement and highlighted that legal timber is “crucial to protect livelihoods as well as to promote trade.”

CIFOR scientist Herry Purnomo pointed out that “the need for legal wood is not only because of global demand, but because it is mandated in the Indonesian constitution; that resources must be managed sustainably and in an environmentally friendly way.” Purnomo noted it is essential to encourage demand of legal wood in the domestic market as well. “The market is huge and the government can take the lead in public procurement, which has been initiated but is not widespread yet.”

Small-scale exporters face challenges

More work is needed to make it easier for SMEs to comply with the verification requirements of SVLK and FLEGT.

Governments at the national and local levels should make it easier for SMEs to comply with license requirements. “Local governments should facilitate finance regulations to make it accessible for SMEs,” said Herry Purnomo. “For example, furniture business owners cannot use their own house as a workshop, because it is residential property, but they cannot afford industrial property either.” According to him, “local governments should be adaptive to this sort of situations.”

Margono, from the Jepara Smallholders’ Furniture Association (APKJ), requested the government “to continue its support to small businesses to ensure they benefit from SVLK.” He reminded that legal timber licenses “should not burden the communities, but bring benefits.”

Jajag Suryo Putro, a representative of smallholder businesses, remarked that “dissemination about the value of legal wood should not only happen here in Indonesia, but also in the European markets.”

Further improvements to FLEGT licensing are foreseen, to help SMEs with compliance and to remove excessive requirements that make it harder for them to compete with lager exporters. The EU will also assess the similarities between the FLEGT license and the USA’s Lacey Act Amendment of 2008 and Australia’s Illegal Logging Prohibition Act of 2012. (*)

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