International concerns over illegal logging dominate Indonesian forest policy

Down to Earth No. 58, August 2003

Meanwhile, the need to bring about fundamental reform is not addressed.

The international environmental campaigning NGO Greenpeace believes that Indonesia has the world's highest rate of forest loss. Even Indonesian government ministers now admit publicly that deforestation in the country is out of control. "While we might still be having problems with environmental issues like flooding, forest fires and pollution, we nevertheless think we can find a way out. But as for illegal logging, we don't have a clue about how to combat it," environment minister Nabiel Makarim stated candidly in an interview on World Environment Day.

The forestry department says that annual deforestation rates reached 2.4 million hectares last year with estimated losses in government revenues from illegal logging and timber smuggling of more than Rp30 trillion (US$3.5 billion). This does not include the costs to local communities who suffer from landslips, floods and shortages of water for irrigation or the losses in biodiversity resulting from forest destruction. Satellite data shows that of the 1.2 million hectares of mature forest in West Kalimantan in 1999, less than half (560,000ha) was left by 2002.

In all his public speeches, forestry minister Prakosa stresses that Indonesian forestry policy must now focus on rehabilitation and conservation. His five priorities are:

• illegal logging;
• forest fires;
• reforestation;
• managing decentralisation;
• restructuring the forestry industry.

Social forestry is to play a key part in achieving these aims. (Jakarta Post 5/Jun/03; Suara Pembaruan 18,24/Jun/03)

Bilateral agreements on illegal logging

Senior Indonesian forestry officials are keen to point out that preventing illegal logging is not simply a domestic matter. Consumer nations also have responsibilities. At present, it is almost impossible under World Trade Organisation (WTO) rules for countries to ban imports of 'illegal timber'. But this does not prevent countries entering bilateral agreements voluntarily. Indonesia signed an agreement with Japan on illegal logging and the illegal trade in wood products on 24th June. This agreement is along similar lines to the Memorandum of Understanding (MoU) signed by Indonesia and the UK in April 2002 and builds an existing bilateral and multilateral framework such as the Asia Forest Partnership (AFP) and International Tropical Timber Organisation (ITTO). A Letter of Intent was signed by Indonesia and Norway in September 2002 and an MoU between Indonesia and China in December 2002. An MoU with the European Union is under discussion with Jakarta officials. The European Commission also published an action plan in May this year to tackle the illegal timber trade with Europe. Once a country or regional bloc has signed up to a Forest Law Enforcement, Governance, and Trade (FLEGT) agreement, the EU will refuse to accept imported timber from that state unless it can be shown that it comes from legal sources.*

Implementing action plans on illegal logging and the timber trade is proving more difficult than signing the initial agreements. The UK-Indonesia MoU is a case in point. Firstly, it can be argued that destructive rather than illegal logging is the crucial issue. There must also be a general consensus on what is meant by 'illegal logging'. This is highly problematic not least because of the complex and contradictory nature of Indonesian legislation. Moreover, 90% of logging concessions (HPH) in the system initially set up under the Suharto government are effectively illegal as they have never been formally gazetted (see DTE 56). Meanwhile, according to the indigenous peoples alliance AMAN, all forestry operations which do not have the indigenous community's free and prior consent are illegal under customary law. AMAN maintains that only traditional land holders can define what legal logging is in their customary forests.

The UK government's Department for International Development (DFID) is currently funding a study to examine the 'legality' issue in Indonesian forest policy. The first step was to identify a working definition of legal and illegal logging which all stakeholders can accept. Preliminary consultations were carried out in two districts of Riau and East Kalimantan. Multi-stakeholder workshops in these study areas ended with forestry officials walking out of one meeting in protest and indigenous participants leaving the other. Nevertheless, a national workshop to define 'legal timber' went ahead in Jakarta on 24-25 June and it was agreed that "to be legal, timber must have proof of origin: a logging permit; a system and procedure for logging; administration and documents for transporting, transfering, selling and changing ownership." There was also a national public consultation on combating illegal logging and the illegal timber trade in Jakarta on 17-18th June. This was specifically to provide inputs for the UK-Indonesia MoU Action Plan. The 120 participants included representatives of the forestry department and local forestry agencies, NGOs, academics, the timber producers, national police, environment ministry and forest communities. Working groups came up with recommendations on defining legality; capacity building to support verification and data collection on timber products and trade. Participants highlighted the need for the same understanding of legality to apply at national, provincial and district levels plus incentives for timber companies to avoid the illegal trade and illegal operations.

Measures to stop the trade in 'illegal' timber and wood products depend on reliable systems to verify that the timber has been legally produced in Indonesia and that its export to Europe is legal. These generally involve some form of licensing or certification plus systems for log tracking and product chain-of-custody. The Nature Conservancy (TNC), World Wildlife Fund (WWF), forest consultants SGS and Tropical Forest Foundation (TFF) are involved in pilot studies in Indonesia with funding from DFID to devise a verification scheme which is reliable but easy to use in the field, so that timber can be tracked from the logging sites right through the wood processing plants. Capacity building is also important as forestry and customs officials as well as independent observers will need training in these new systems and in monitoring and documenting illegal logging.

At the moment it is all too easy for companies to 'launder' timber from illegal sources by processing it through sawmills, plymills and particularly paper pulp mills. Overcapacity in Indonesia's wood processing industry is a key factor driving deforestation. Audits of some processing plants are being carried out by independent teams (in co-operation with the forestry department) to detect the use of illegal logs. So far only 8 of the 200 or so largest timber processing plants have been subjected to detailed inspection. All of these were found to be processing timber well in excess of legally available supplies, but the government only intends to take legal action against two of them. Pelalawan district council is going to sue PT Riau Andalan Pulp and Paper for the destruction of protected forests. "95 percent of the raw material supplied to the pulp and paper mills belonging to businessman Sukanto Tanoto are sourced from outside the company's industrial estates," said a legislative council member citing recent field research.

The forestry department has, in the past, been extremely reluctant to name and shame any Indonesian companies involved in illegal logging, usually claiming that more evidence is required. Efforts to break up networks of illegal logging and smuggling are further complicated by Indonesia's bureaucracy: at least eleven government institutions are needed to take concerted action. Forest Watch Indonesia director Togu Manurung believes that "the campaign [against illegal logging] must emerge as a social movement because we cannot rely on the government to take legal action against illegal loggers". (Reuter 21/May/03; Jakarta Post 17/Jul/03; Asia Pulse 13/Jun/03; Asia Times 10/Jun/03).

Civil society

Most Indonesian NGOs see illegal logging as just one of the symptoms of Indonesia's unsustainable forest policies, along with flooding and forest fires which now occur annually. They are prepared to go along with the international agenda on illegal logging, but only as a means of achieving fundamental policy reform on forests. There are few signs that Indonesian government will do this. Prakosa and his senior officials are maintaining a tough position at national and international meetings of no change to the 1999 Forestry Act. This is to be commended in some respects as the forestry minister has fought long and hard to prevent opencast mining in protected forest areas, despite intense pressure from mining companies and other government departments (see mining article). However, the forestry department is also refusing to countenance any recognition of indigenous peoples' sovereignty over their forests. Discussions about tenure have dropped off the political agenda. Government officials want to promote their new model of social forestry, but only within the framework of existing legislation.

Furthermore, Prakosa is determined to push through parliament the operating regulations (PP) which are fundamental to the implementation of the Forestry Act before next year's elections. Prakosa has made it clear that he does not see himself as forestry minister after August 2004. Civil society organisations and donors are dismayed by the way he is trying to rush these important pieces of legislation through with very little consultation or transparancy about the contents. The proposed regulation on customary forests (Hutan Masyarakat Adat) is a case in point.

Tensions between the forestry department, donors and civil society organisations have been running high in recent months for a variety of reasons. Prakosa and his staff are furious that NGOs have pressed for a judicial review of a regulation (PP34/2002) which contains a number of clauses recentralising authority over forests from local administration. The minister sees PP34/2002 as the central plank in efforts to control illegal logging and reduce deforestation. Many international donors support his position in the name of good governance. There is ample evidence that district heads (Bupatis) have been issuing hundreds of permits for so-called small logging operations in order to strengthen their political positions and repay election expenses. On the other hand, civil society organisations regard this regulation as Jakarta's attempt to thwart regional autonomy and restore central government control over natural resources. NGOs have had some success in using regional autonomy legislation enacted in 1999 to press for local regulations which safeguard communities' rights and promote sustainable resource use. One such example is in Sanggau, West Kalimantan (see interview, below).

Relations between the forestry department and civil society were further soured at a meeting to review the forestry programme funded by British government aid agency DFID (see DTE 57). Secretary General Wahjudi Wardojo, second in command in the ministry, was personally offended when indigenous groups led a walkout over statements he made. The meeting was not reconvened as promised at the time and, for a while, the whole future of the multi-stakeholder programme was in doubt. DFID's forestry programme has focussed funding to date on strengthening civil society groups and support for community-based forest management initiatives. (Jakarta Post 22/Nov/99).

Indonesia-Malaysia's illegal timber trade

Nevertheless, the forestry department depends heavily on NGOs to investigate and report a multitude of illegal logging cases. Telapak and the Environmental Investigation Agency (EIA) have exposed how Malaysia and Singapore are profiting by dealing in ramin stolen from Indonesia. The NGO team secretly filmed ramin logs from Kalimantan being unloaded at a port in Malaysia. The researchers also posed as smugglers to interview a Singaporean timber broker who explained how he imported ramin from Indonesia and re-exported it to China. Ramin is a tropical hardwood from swampy forest areas. Commercially valuable for furniture, picture frames and dowelling, its trade was banned under the Convention for International Trade and Endangered Species (CITES) in 2001. Indonesia, Malaysia and Singapore have all signed up to CITES and Malaysia officially banned imports of all Indonesian logs in June last year.

Log smugglers soon found new ways to get round the Malaysian ban: logs which had been squared off could still be imported from Indonesia. Primary Industries Minister Lim Keng Yaik quickly announced that, from June this year, his government would ban imports of squared logs of more than 60 sq ins from Indonesia. More cynical observers expect a rapid increase in the import of 'legal' smaller blocks of timber from Indonesia.

Much of Malaysia's annual US$2.5 billion timber exports and its US$1 billion-a-year furniture trade relies on illegal timber, mainly from Indonesia, according to Telapak/EIA. Malaysia has been conspicuous by its absence from international meetings on forest law enforcement, governance and trade. But in June, Malaysia announced it was willing to participate in a joint ASEAN EUmeeting on illegal logging to be held later this year. Its timber producers have made strenuous efforts to assure European buyers that timber and timber products exported from Malaysia are from legal and sustainable sources. Even so, most international NGOs remain highly critical of the Malaysian Timber Certification Council scheme (MTCC).

Timber smuggling continues across the Kalimantan-Sawarak border, despite both Indonesian and Malaysian government assurances of a crackdown on the illegal timber trade. Piles of timber seized from trucks crossing the border at Entikong now lie by the roadside marked with yellow police marker tape. But much of the illegal trade has simply been displaced to more remote border crossings by road and river. A thousand trucks may be operating weekly between Badau in Kapuas Hulu district and Lubok Antu in Sarawak. It is estimated that as much as half the timber used in the hundreds of sawmills in Sarawak was illegally exported from Indonesia (Asia Times 10/Jun/03).

Law enforcement

The government claims some successes in controlling illegal logging, but in reality these are insignificant compared with the scale of forest destruction. The Indonesian navy reported that this year it had detained more than 100 foreign vessels illegally transporting timber in the eastern waters of Indonesia. The boats, mainly from Thailand, the Philippines and Vietnam, are being held at naval bases in Surabaya, Sorong, Makassar and Bitung pending 'processing'.

Also over 100 suspected illegal loggers have been held and 100,000 cu metres of timber seized by police in Operation Wanalaga II in West Kalimantan during one month May-June this year. Most of those accused so far were 'small fry' - people caught red-handed with chainsaws or towing logs down river. Some local people from Sanggau even asked West Kalimantan's governor to ban the raids because they were preventing them from making a living. It seems that the timber traders, local business tycoons and corrupt officials can continue their activities with impunity. A statement by head of the team, Brigadier General Indarto, to his superiors from Jakarta is telling: "Nearly 80% of this timber had no documentation. Strangely some of the documents turned up later. This is odd and we are still investigating the possibility that local forestry officials are implicated. Even more worrying is that apart from trees which may be commercially logged, much of this timber was from protected species such as ramin and jelutung." 
(Jakarta Post 8,21/May/03; Dow Jones 13/May/03; SCMP 9/May/03; detik.com 12/Jun/03; Kompas 17/Jun/03; Suara Pembaruan25/Jun/03).

NGO targets

Little wonder that the Indonesian and Malaysian governments want to be seen to be taking action on the trade of 'illegal timber'. US giant International Paper together with Centex Homes and the Lanoga Corporation announced in May that they would no longer buy Indonesian pulp and wood. International Paper stated that a "complete break with Indonesian wood fibre is the only practical option" consistent with its commitment to help to protect endangered forests there. However, America's biggest home improvement chain Home Depot refused to follow suit, saying that it would continue to buy from limited suppliers through a policy of "constructive engagement." Home Depot, one of the world's largest retailers, set a deadline last August to stop buying wood products from "environmentally-sensitive areas" by the end of 2002.

The previous week, WALHI called for US timber giant Georgia Pacific to stop importing wood from Indonesia. Georgia Pacific is one of the main buyers of Indonesian timber in the USA. California-based NGO Rainforest Action Network, WALHI and AMAN are demanding that Georgia Pacific and Home Depot immediately halt all purchases of Indonesian wood and pulp until the rights of indigenous people to their traditional lands are recognised and the Indonesian government agrees to prevent destructive logging. The United States is the second largest market for Indonesian plywood after Japan, importing over 900,000m³ in 2000.

In the UK, Friends of the Earth forced the major supermarket chain Tesco to admit that one of its most popular ranges of garden furniture is made from illegally traded Indonesian timber. The hardwood called 'yellow balau' apparently came from trees felled and exported from Indonesia after the government in Jakarta banned the export of uncut hardwood logs in October 2001.Tesco belongs to WWF's 95+ Group - a scheme to promote interest in certified timber amongst timber producers and retailers.

The British government was embarrassed in June by Greenpeace's revelation that illegally-sourced Indonesian timber may have been used in construction of the new Home Office building. Britain's official procurement policy is that only timber from legal and sustainable sources can be used for government projects. Greenpeace campaigners occupied a crane on the construction site and declared the new offices a "forest crime scene". Their report Partners in crime, published on the same day as the direct action, looks at the links between Indonesian timber barons and the UK. It traces the trade in illegally logged timber from forests in Sumatra and Kalimantan to purchasers like UK builders merchants Jewson and Travis Perkins. Environment minister Makarim said that Indonesia would examine the evidence against two companies named in the report - PT Sumalindo Lestari Jaya and PT Raja Garuda Mas - and take action against them if proven guilty. Jewson and Travis Perkins have since said they will no longer buy timber as plywood from Indonesia. 

(Walhi News 16/May/03; Antara 9/May/03; Jakarta Post 22/Sept/00, 11/Jun/03; FoE 3/Jul/03).

(Greenpeace's report, Partners in Crime is at www.saveordelete.com.)

More certification problems

The Greenpeace report was not well received by some Indonesian NGOs because it - in common with most international approaches to the 'illegal logging' issue - recommends forest certification as the answer. Civil society groups are deeply concerned about the way that Forest Stewardship Council (FSC) certification has been used in Indonesia. All eight of the FSC certifications issued in Indonesia have been the focus of strong criticism from international and Indonesian NGOs.

The FSC certification of yet another Indonesian forestry operation was suspended on 23rd June 2003. PT Xylo Indah Pratama, in the Musi Rawas district of South Sumatra, was certified by Smartwood in 2000. Alstonia spp (pulai) is a common softwood which grows in secondary forests, local agroforestry systems and people's backyards. Local farmers sell it to a factory owned by XIP which turns the timber into pencil slats for export. Markets include the German company Faber Castell. XIP set up an agreement with over 1,000 local farmers to grow pulai on their own land. The company provided seedlings and technical advice and also agreed to buy the timber. Until these small plantations are mature, farmers are allowed to supply the factory with pulai from woodlands or local rubber plantations where it grows as a weed. Nearly 2,500 farmers with land covering over 18,000 ha entered into such agreements. The scheme was locally popular and provided a reasonable income for farmers. However, recently, NGOs have raised questions about whether all the timber PT XIP used was pulai and whether it was coming all from legal sources, especially in view of the amount of illegal logging in nearby Kerinci Seblat National Park.

The FSC is well aware that there are problems applying its principles and criteria to Indonesian forestry operations, given that Indonesian law does not recognise forest communities' land rights (see DTE 57). In December 2001, FSC Executive Director Heiko Liedeker strongly encouraged certifiers to "await the recommendations of the [ ] research currently being undertaken in Indonesia before issuing further certificates to forest management operations in Indonesia". (Smartwood press release 14/Jul/03)

Despite this voluntary moratorium on FSC certification, the US-based Smartwood/Rainforest Alliance did a certification assessment on the PT Erna Djuliawati concession in Central Kalimantan this June. The outcome was not known when DTE went to print. This concession had been assessed several years ago by SGS, but was not certified then.

FSC has been checking up on the work of forest certifiers SGS Qualifor who were responsible for the certification of PT Diamond Raya Timber in March 2001. This was the first natural forest concession in Indonesia to gain FSC certification. Last year, local communities called for the concession and its certification to be withdrawn. FSC's own inspectors went to the concession in Riau in June this year to monitor how SGS carried out its assessments. A number of international NGOs are preparing to issue a formal challenge to the original certification on the grounds that there have been disputes over tenure, unpaid compensation and illegal logging within the concession areas. It remains to be seen whether the FSC will suspend PTDRT's certification and what action it may take against Smartwood or SGS.

Forests for sale to highest bidders

While 'illegal logging' steals most of the headlines, destructive logging and the conversion of natural forests to plantations are still major problems in Indonesia. The government's proposed solution is to take permits from some companies and sell them off to others. Independent inspectors appointed by the forestry department have been reviewing forestry operations all over the country since late last year. So far, only 27 concessions have been inspected and 13 of these, covering an area of 1.1 million ha, "failed to meet the requirements for sustainable forestry". Prakosa announced in July that eight forest concessions in Kalimantan and Riau are to be auctioned off. The company names and dates of auctions have not yet been made public.

If the concessions have been badly managed, it is hard to see why other logging companies are to be given the chance to exploit them, instead of returning the forests to local people for rehabilitation and possible small-scale, community-based forestry operations. The forestry department says it will carefully vet all potential buyers, but there are several risks in selling off Indonesia's forests to the highest bidders. Few logging companies in Indonesia have good track records. And even responsible companies cannot always increase their holdings due to limits on the total concession area held by any one company within a province and nationally. In addition, how will the top bidders recoup their costs? Indonesian logging companies have been complaining bitterly about the high costs of production, including high forestry taxes, compared with timber prices. The risk is that successful bidders will fell more trees than their annual plans allow while cutting spending on replanting and community projects. Nor is it clear how the government will claw back unpaid taxes and levies, including reforestation fund contributions from companies which have been stripped of their licences.

Tree plantations are also up for sale by auction. Only 31 of a total of 91industrial timber concessions (HTI) which are joint-owned by state and private companies are being properly run, a forestry department spokesman announced in July. Some have already lost their licences, but most of the others are still "being verified". It is far from clear whether the 60 industrial timber plantations can legally be auctioned. In early July, a Jakarta court overturned the forestry minister's decision to withdraw some plantation licences.

Prakosa has said that concessions for industrial timber estates and forest management will be extended from 35 years to 100 years. This is an attempt to boost investment in the forestry sector. The development of HTIs is essential to guarantee supplies of raw material (logs) for the timber processing industry if natural forests are to be spared. 
(Gatra via FKKM 8/May/03; Asia Pulse 12/Jun/03; Antara 16/Jul/03; Kontan No 41 via WALHI news 14/Jul/03)

*News updates on international initiatives on illegal logging are on the website of the Royal institute of International Affairs - www.illegal-logging.info.