Last updated: 07 March 2020

Profile

Profile

Forestry and legality

Source
Region South-eastern Asia (2019) UNSD
FLEGT status FLEGT licensing (2019) FLEGT Facility
Forest area 91 million ha (2015) FAO
Deforestation rate 0.68 million ha/year (2010-2015) FAO
Planted area 4.946 million ha (2015) FAO
Tree cover loss 25.6 million ha (2001-2018) Global Forest Watch
Tree cover loss (%) 16 % (2001-2018) Global Forest Watch
Tree cover gain 6.96 million ha (2001-2012) Global Forest Watch
FSC certified area 2,955,291 ha (December 2019) FSC
PEFC certified area 3,912,747 ha (December 2019) PEFC
Double certified area (FSC & PEFC) 0 ha (Mid-2019) FSC & PEFC


VPA status of Indonesia

  • In November 2016, Indonesia became the first country to issue FLEGT licences, having signed a VPA with the EU in 2011.

  • Full VPA implementation means that Indonesia has structures in place to issue FLEGT licences as well as manage, monitor and evaluate the legality assurance system.

  • To satisfy the terms of the FLEGT VPA, Indonesia’s legality assurance and licensing system had to:

    • include a timber legality definition stating aspects of national laws with which the system requires compliance;
    • meet strict chain of custody requirements, as set out in the VPA’s Appendix V, ensuring unverified products do not enter supply chains;
    • be subject to ‘Periodic Evaluation’, a minimum annual assessment to ensure the timber legality assurance system is functioning properly and effectively (VPA Annex VI);
    • be backed by market monitoring, assessing the impact of FLEGT licensing on Indonesia’s trade in the EU market (VPA Appendix VII);
    • be subject to civil society monitoring;
    • include procedures for issuing FLEGT licensing documents, licensing document formats and for information exchange procedures between EU authorities and licensing authorities in Indonesia (VPA Attachments III and IV).
  • From November 2016, Indonesia’s established SVLK framework became the VPA timber legality assurance system for exports to the EU.

  • The SVLK ‘V-Legal’ documentation and label is maintained as the legality assurance validation for exports to non-EU countries.

  • JPIK, the Indonesian civil society organisation network, is officially recognised as independent monitor as required for FLEGT licensing.

  • Under scrutiny by JPIK and EU and Indonesian authorities, the Indonesian licensing and assurance system has continued to evolve.

  • In November 2018, the EU FLEGT and REDD facilities produced a working paper looking into the feasibility of amending the SVLK to apply to customary forests to support livelihoods and forest protection. To date only a limited area has been recognised as customary forest but it could extend up to 2 million hectares.

  • Feedback in IMM surveys from importers and EU Competent Authorities, and during IMM trade consultations, indicates that generally the FLEGT licensing system has worked effectively and efficiently.

  • One issue has been mismatches in HS customs codes between those applied on licences and those used by EU customs. However, this seems to have been largely resolved in 2018 through dialogue between EU and Indonesian authorities. The number of licences issued after consolidation of shipments, which tended to lead to errors, has also been reduced.

  • To further streamline licence administration, the EU and Indonesia are looking at the feasibility of implementing e-licensing.

Forest resources in Indonesia

  • According to Indonesian Ministry of Environment and Forestry data, after declining by 3% to 48.4 million m3 in 2016, log supply in Indonesia increased by 12% to 54.3 million m3 in 2017 and by a further 7% to 57.9 million m3 in 2018.

  • Much of the increase in log supply in 2017 and 2018 was due to a continuing rise in production from industrial plantations and, to a lesser extent, community forests.

  • In 2018, 70% of Indonesia’s log supply came from industrial plantations, up from 61% in 2014, while 15% came from community forests, the same proportion as in 2014. Between 2014 and 2018, the share of log supply from land clearing declined from 7% to 1%, and the share from natural forest concessions fell from 11% to 9%.

Industry

Industry

Economic and industrial status

Source
GDP 1042.2 billion USD (2018) World Bank
Population 267.7 million (2018) World Bank
Income group Lower middle income (2019) World Bank
Ease of Doing Business (EDB) Rank 73 / 190 (2019) World Bank
Global Competitiveness Index Rank 50 / 141 (2019) World Economic Forum
Liner Shipping Connectivity Index 44.4 (maximum value in 2004 = 100) (2019) World Bank


Timber industry competitiveness of Indonesia

  • Indonesia is one of the world’s leading producers and exporters of tropical timber, competitiveness having been built, historically, on a large natural resource and a strong local tradition of wood knowledge and craftsmanship.

  • Indonesia was ranked 45th on the Global Competitiveness Index in 2018, with slightly higher scores than in 2017. It retained third place among the VPA partner countries, behind Malaysia (25th) and Thailand (38th). Of two main Asian non-VPA competitor countries, China (28th) ranked higher and India (58th) lower.

  • On the Ease of Doing Business Index, Indonesia ranked 73rd in 2018, hardly changed from 72nd in 2017. Malaysia (15th), Viet Nam (69th) and China (46th) all ranked higher than Indonesia, with India (77th) coming out lower.

  • Indonesia’s ranking in the Connectivity Index has improved in recent years but remains a challenge for export industry competitiveness. Indonesia was ranked 36th on the index in 2018, considerably lower than key competitors including China (1st), Malaysia (5th), and Viet Nam (19th), but marginally better than Thailand (36th) and significantly better than tropical supplying countries in Africa and South America.

  • EU timber importers surveyed by IMM in 2018 highlighted that Indonesian suppliers tend to offer higher quality and reliability relative to other non-EU suppliers of competing products.

  • The risk of intellectual property theft was also regarded as lower in Indonesia than in some other countries, notably China.

  • There was almost unanimous agreement at all IMM Consultations in 2018 and early 2019 that FLEGT licensing has made importing from Indonesia into the EU easier compared to exercising due diligence.

  • However, trade data indicates that FLEGT licensing has had little impact on the market share of Indonesian products in the EU and has not overridden the on-going effects or direction of larger economic trends. Equally, licensing does not seem to have had any detrimental effect on import share.

  • Several agencies stepped up their communication and marketing of FLEGT-licences in the EU during 2018, but FLEGT’s profile is still low compared to forest certification initiatives such as FSC and PEFC.

Trade Overview

Trade Overview

Highlights

  • Most wood supplied to Indonesia’s wood processing sector is from domestic forest sources, with a growing dependence on plantations. Imports of primary wood are limited.

  • Indonesia does not allow log exports and limits sawnwood exports to S4S (products surfaced on four sides). As a result, exports include a wide variety of further-processed timber products, ranging from S4S, veneer, plywood, pulp and paper to doors, furniture and handicrafts.

  • Indonesia’s timber exports were rising in 2017 and 2018 with particularly strong growth in China, but gains were also made in the EU for plywood, doors, charcoal and S4S.

  • However, exports of Indonesian wood furniture and decking/moulding to the EU declined during this period, due both to supply side issues and intense competition from other wood suppliers and non-wood materials.




STIX) Hover over the chart to see the value.

Imports (3,441.46 Million USD) Exports (12,452.58 Million USD)
Region Country Product Product Country Region




Indonesia’s production, imports, exports and domestic consumption of primary wood products in 2018

(data source: ITTO) Hover over the chart to see the value.




Trend in production, imports, exports and domestic consumption of primary wood products (logs, sawnwood, plywood, and veneer) in Indonesia

(data source: ITTO)