EUROPEAN - INDONESIAN BUSINESS DIALOGUE (EIBD)
ON THE FORESTRY SECTOR
BETWEEN
INDONESIAN VERIFIED LEGAL TIMBER PRODUCT PRODUCERS AND EUROPEAN IMPORTERS
JW MARRIOTT HOTEL, JAKARTA – INDONESIA
March 21st, 2012
Organized by Permanent Committee on Forest Timber Products of the Indonesian Chamber of Commerce and Industries (KADIN)
in collaboration with the Indonesian Exporters Association (GPEI) and PT. Mutu Hijau Indonesia (PT. MHI)
A group of around 70 Indonesian and EU delegates came together to share the vision and mission of each party for mutual understanding and strengthen business networks for the future. They discussed topics from the markets and also the supply side.
Dr Suryo Bambang Sulisto, Chairman of the Indonesian Chamber of Commerce (KADIN) which organised the meeting in collaboration with Indonesian Exporterts Association and PT. Mutu Hijau Indonesia, welcomed the delegates. “The timber trade between Indonesia and EU amounted to $1.2 billion and it is vital therefore that we understand the regulatory world within which we must operate” he said. “The USA, EU, Japan and Australia are all establishing new schemes which present us with challenges that we have to overcome, so this meeting gives us the opportunity to understand,” he added. And he closed with the observation that “perception goes beyond certification.”
Dr. Suryo Bambang Sulisto, Chairman of the Indonesian Chamber of Commerce (KADIN)
Dr Boen Purnama, Senior advisor to the Minister of Forestry, presented a very comprehensive overview of forestry in Indonesia and stressed that the VPA, which has been signed, must not become a non-tariff barrier. He hoped that countries will swiftly reject illegal timber and said that TLAS (SVLK) is the instrument to restrict it. “The country is committed to address illegal logging, which will continue if the market allows it,” he concluded.
Ambassador Julian Wilson, EU Ambassador to Indonesia, welcomed the organisation of this business dialogue by KADIN as an opportunity to promote awareness on the EU’s market requirements and opportunities. He said, "The VPA has the potential to considerably improve the perception of Indonesian timber products on the EU market and, with the new EU Timber Regulation coming, Indonesian producers could have a competitive advantage against producers from non-VPA countries." He also said that this meeting was a deliberate attempt to start dialogue that would help the growth of Indonesian trade. Failure would mean Indonesia would not rise from supplying only 10% of its production to the EU and the risk is that, if there is not a credible SVLK, buyers will go elsewhere. He added that the ‘roll out’ of SVLK presented a challenge because so far only 15-20 companies were being verified/licence per month. “Let’s start grouping companies, identify real exporters, and fund further progress with the €10 million still available,” he suggested. EUTR is mandatory and VPA is a kind of mutual recognition, but SVLK can only go live (be signed) when we perceive it is up and ready, he added and urged that communication channels be created.
HE Ambassador Julian Wilson, EU Ambassador to Indonesia
The Morning Discussion addressed many issues in detail with formal inputs from:
Dr. Djisman Simanjuntak, Chairman of the Vision Group of CEPA called for a re-think on equal benefit-sharing between Indonesia and the EU and discussed the importance of capacity building followed by facilitating. He agreed with Ambassador Wilson that Indonesia can be first in complying with EUTR and take advantage thereof.
Mr Purwadi Soeprihanto from KADIN the length of time it had taken from the Bali Declaration in 2001 to the SVLK agreement in 2011. He referred to the certification schemes of FSC with 150 mill ha and PEFC with 241 mill ha of forest certified – as competition but suggested that engagement with them was needed to ensure market acceptance.
Mr Moeller of ETTF, discussing the readiness of EU importers for the EUTR, said that “we are all in the same boat” and hoped that the VPA would arrive early. He suggested that EUTR was the biggest challenge our industry has ever had and that many stakeholders were not well prepared. Certificates and verification are not passports to EUTR he asserted. But, while the EU commission simply want to eliminate illegal logging, the European private sector wants a wider discussion that rewards wood against concrete steel and plastic. He also explained that ETTF is collaborating with other producers countries and their representatives such as MTC and AHEC.
Gavin Rostron from United Wood, which operates globally, gave a detailed view of responsible buying wood and said that their main priority is with suppliers that have complete control of their chain. He also later said that customers in Australia and NZ were now asking for SVLK material.
Mr. Andy Roby, FLEGT VPA Facilitator in Indonesia, then chaired a panel discussion “under the Chatham House Rules” so that no comments could be attributed to any one person. Representatives from the Comprehensive Economic Partnership Agreement (CEPA), European Timber Trade Federation (ETTF), KADIN and international buyer Wood United presented their ideas:
Questions then related to the bottleneck in signing VPA, the differences between LEI and TLAS, the cost of certification and why LEI could not be merged with FSC or PEFC.
Responses were that the bottleneck is technical in nature, that PEFC is known to be talking to LEI/SVLK and that a phased approach to SVLK is the only safe way forward. One key point that dominated the discussion was the weakness of SMEs and that there are capacity limitations in the licensing of candidate companies which must be addressed. Finally it was pointed out that Due Diligence these days applies to everyone in the timber trade.
Michael Buckley, wood industry consultant and raporteur for the morning, was asked to summarise the dialogue. He referred to the complexity and the comprehensive nature of the issues under discussion. The commitment by the 70 members of the audience listening to the dialogue reminded him of the 50,000 – or perhaps 500,000 - of those who still know nothing of these issues - but need to know. The same themes as of the previous day were again threaded through the dialogue; that clarification is still needed and that fear of, and risk of, failure is an issue. But it was clear that all participants were committed to the progress of forest legality verification and improved confidence in timber trading. The president of the European TTF had said “Doing nothing is not an option,” which was perhaps, Mr Buckley pointed out, evidence of a thread of frustration running through the morning session that he had detected. He concluded that Indonesia has taken a lead but may be in danger of not being rewarded for its efforts.