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“EC should do more to promote FLEGT-licensed timber”

In November 2016, Indonesia started issuing FLEGT licenses which are recognised proof of legality in the EU market and thereby became the first country to fully implement a Voluntary Partnership Agreement (VPA) with the EU. Dr Rufi’ie, Director of Forest Products Processing and Marketing with the Indonesian Ministry of Environment and Forestry, is responsible for daily implementation of the Indonesian Timber Legality Assurance System (Sistem Verifikasi Legalitas Kayu/SVLK) which the VPA is based on. In an interview with IMM, Dr Rufi’ie talks about Indonesia’s motivation for entering into a VPA, challenges met on the way and first experiences with FLEGT-licensed timber.

EU gets back to building

European construction is a key market for many European timber businesses so, as it  was among the sectors hit hardest and longest by the international economic downturn, they suffered accordingly.  Some companies reported seeing their sales to builders drop by 80% during the downturn which began a decade ago. In Spain, where the building industry suffered in the recession more than most, it shed 1.5 million out of 2.5 million workers. Elsewhere there was also dramatic slowdown and loss of capacity. But today, according to the European Construction Industry Federation (FIEC), the sector is slowly but surely getting back to growth.

Eurozone builds economic resilience…but Brexit causes UK caution

The EU timber sector is being buoyed by broadly resurgent economic conditions, with the UK the only major standout from an increasingly positive trading consensus due to growing concerns about the effect on business and consumer sentiment of Brexit negotiations.

The European Commission has developed an IT system named FLEGIT/TRACES to support the implementation of FLEGT Licensing Scheme in the EU. FLEGIT allows importers to electronically submit a FLEGT Licence to a Competent Authority and enables the electronic and fast validation of the FLEGT Licence by the Competent Authorities and subsequent clearance by the Customs.

Alongside regular surveys of market opinion to assess the market impact of FLEGT licensing, IMM is implementing near-real time monitoring of trade flow statistics. Early results of this monitoring indicate that there has been little immediate effect of the licensing system to either boost or impair timber trade between Indonesia and the EU. In fact, the value and volume of Indonesian trade with the EU has changed very little since the first licenses were issued in November 2016, while Indonesia’s share of the EU market has also remained stable.

The first round of IMM surveys in Indonesia, the only VPA partner country currently issuing FLEGT licenses, covered 47 timber industry players exporting a wide range of products – including furniture and furniture parts, decking, mouldings and plywood as well as paper, fibre- and particleboard, doors, gluelam and sawn timber – to the European Union and world-wide. Companies were surveyed about their main European export markets and the overall relevance of Europe as a sales market as well as their perception of the VPA process, FLEGT licensing and the EUTR.

The FLEGT Voluntary Partnership Agreement (VPA) initiative involves negotiations and programs in 15 tropical counties which together supply over 80% of the international tropical timber trade, by value. While the time taken by countries to reach the licensing stage has been a focus for criticism, a long lead time is inevitable for an initiative which aims to create robust and reliable systems, to engage with and secure the support of a wide range of stakeholders and to deal with complex political and technical issues. Progress varies between countries but there are many encouraging developments.

Ghana and the EC have started a cargo shipment test to evaluate export and import procedures in preparation for the transport of Ghanaian FLEGT licensed timber and wood products to various EU destinations. The main aim is to identify and recommend corrective actions for any shortcomings that might hinder efficient processing of export/import documents and thus the flow of FLEGT-licensed wood product exports.

The majority of respondents to a recent IMM survey of the Ghanaian timber industry fully or partially agree that the FLEGT VPA process is helping to improve forest management and governance in the country. They also agree thay it is helping to control illegal chainsaw milling and having a positive effect on implementation of laws concerning the payment of fees for the use of forest resources. However there is some variation in attitudes to the VPA process between larger and smaller companies.

New legislation on conversion of concessions has passed Parliament

Ghana has progressed farthest on the path to FLEGT-licensing among the five African countries implementing a Voluntary Partnership Agreement (VPA) with the EU. In early November, long-awaited new legislation dealing with the conversion of several timber harvesting concessions to Timber Utilisation Contracts (TUCs), among other things, has passed parliament. This means that a number of administrative and technical processes that were stalled due to the absence of this law can now be implemented. Ghana still has some technical and administrative hurdles to overcome before it can start FLEGT-licensing, but the goal is slowly coming within reach.

“FLEGT-licensed timber going from distant promise to physical reality restored faith”, one importer told IMM during the 2017 European survey. And that it is Indonesia doing the licensing also changed mind-sets. If such a large, complex country could do it, the view was that others could too.

The fact that the start of FLEGT-licensing in Indonesia has revived trade interest in FLEGT is an encouraging finding of the first round of comprehensive market surveys conducted by IMM in seven key EU consumer markets – Belgium, France, Germany, Italy, the Netherlands, Spain, and the UK – which together account for around 90% of EU imports from VPA partner countries. A previous IMM pilot survey in Germany, Spain and the UK in 2015 had found more widespread frustration and “FLEGT-fatigue”, as repeated forecasts about the start of licensing had come to nothing at that time.

A year on since Indonesia began FLEGT licensing timber exports to the EU, and one EU FLEGT national Competent Authority (CA) commented that introduction of the licensing system had been ‘remarkably smooth and uneventful’. This seems to be the consensus among most Indonesian exporters and EU importers and their respective authorities. At the same time, perhaps inevitably for any new administrative system, particularly one that involves an international spread of businesses and authorities and so many different products, both parties agree that there have been some initial issues with implementation and operational teething problems.