Logs scarcity may cut into RI's wood exports

Logs scarcity may cut into RI's wood exports

By Sylvia Gratia M. Nirang

JAKARTA (JP): Dwindling timber supplies, demands for greater
environmental responsibility, and sluggish demand are likely to
hamper any growth in the country's timber and forest-related
exports this year.

The government has predicted that foreign exchange earnings
from the export of timber and other forest products will decline
this year due to a poor supply of timber.

Director-general of the Utilization of Production Forests
Waskito Soerjodibroto said the drop in timber production and the
sluggish sales of Indonesian wood products in several main
destinations, such as Japan and South Korea, led to the lower
export earnings from wood and other forest products in 1998.

He estimated that earnings from wood and wood related product
exports would fall below US$7.5 billion for 1998/1999, lower than
the government's initial target of $8 billion for the fiscal
year.

"We predict that foreign exchange earnings from wood and
forest products will continue to drop next fiscal year because
timber production is expected to drop by a further 50 percent
from a normal supply of over 24 million cubic meters (as in
1997), " he told The Jakarta Post.

In 1997, Indonesia's exports of wood and wood products brought
in $7.55 million in foreign exchange revenue.

Waskito said the country's timber production dropped by 32
percent, to 12 million cubic meters, during the period from
January 1998 to October 1998, compared to 17.6 million cubic
meters in the same period of 1997.

Log supply

The Indonesian Forestry Society (MPI) initially estimated that
Indonesia's timber supply might decline again by as much as 25
percent in 1999, due to a drop in logging activity and the heavy
wet season.

MPI chairman Sudradjat DP said the low timber production would
likely continue until the middle of 1999.

"The sharp drop in timber supply has been primarily caused by
the heavy rains, which are expected to continue until March. This
has disrupted logging activities and the transportation of timber
to the mills," he said.

Sudradjat added that logging activities would also be affected
by political events in the country, especially during the run-up
to the general election planned for June.

"Many timber companies will stop their activities during this
period," he said.

That would force wood processing industries to continue to
work well below capacity.

Wood processing industries are currently operating at 30
percent to 40 percent of total production capacity due to the
scarcity of timber, he said.

"Because of this timber scarcity, wood-related industries are
also rejecting big orders from overseas," he said.

Domestic wood processing industries have a total capacity of
about 36 million cubic meters of timber a year. Of this, 12.6
million cubic meters is used by the sawmill and woodworking
industry, 18.5 million cubic meters by plywood manufacturers,
4.64 million cubic meters by pulp and paper manufacturers, and
430,000 cubic meters by the furniture industry.

Minister of Forestry and Plantations Muslimin Nasution said he
expected the country's wood processing industries would have to
face a timber shortage for the next five years. He predicted that
by that time the supply of timber would reach about 31 million
cubic meters per year.

Muslimin blamed the Ministry of Industry and Trade and the
Investment Coordinating Board (BKPM) for the current scarcity of
timber and the idleness of most wood processing firms.

"BKPM and the Ministry of Industry and Trade issued permits
for new wood processing plants without referring to us about the
timber supply," Muslimin said.

"That policy has resulted in timber shortages. And this
situation encourages theft and illegal trade."

The timber industry has been under the supervision by the
Ministry of Industry and Trade since 1986.

To address the shortage, Muslimin said the government would
cut its timber export quota for the next fiscal year.

The government set a timber export quota of 5 million cubic
meters for 1998/1999, as part of the International Monetary
Fund's economic reform program.

The freeing up of timber exports was mandated by an agreement
with the IMF, despite the fact that most of the country's wood
processing industries are currently operating below capacity.

As part of the agreement, the government has also cut the
export tax on timber to 30 percent, from the previous 200
percent.

Despite the drastic cut to the timber export tax, most
companies are still reluctant to export their timber, as local
sales are now more profitable due to domestic timber scarcity.

The government has issued timber export licenses to 20 of the
43 companies which applied for them. The 20 companies were each
licensed to export 460,000 cubic meters of timber.

"But so far less than 20,000 cubic meters of timber has been
exported. How can we export if there is not enough supply?"
Sudradjat said.

To increase the country's timber production, Waskito said the
government would cut the existing protracted bureaucracy
procedures.

He said the government would also increase or even abolish
logging quotas for timber companies.

The quota was imposed as a penalty on errant timber companies.
Its other aim is to reduce the destruction of forests and the
environment.

Ecolabeling

Aside from the dwindling timber supplies, local forest-related
companies are also facing pressure from major buyer countries to
increase their environmental responsibility.

They demand that the wood they buy has an ecolabel, that is,
certification to show that the timber is felled and the wood
products are processed in an environmentally sustainable manner.

The United States and some companies in Europe require wood
they import to have ecolabel certification.

Waskito also said that other timber producing countries,
including Malaysia, have issued their own ecolabel certificates,
adding pressure on Indonesia's industry to do the same.

Malaysia has issued forest certificates similar to ecolabel
certificates, called 'Sustainable Forests of Malaysia', although
much of the timber processed in the country is reportedly
smuggled from Indonesia.

"International buyers choose to buy Malaysian plywood because
it has been certificated, although they admitted that Indonesian
plywood is the best in terms of quality, and also cheaper,"
Waskito said.

The International Tropical Timber Organization (ITTO), which
includes timber consuming and producing countries, says
ecolabeling will become a prerequisite for tropical timber
producers to gain access to international markets after 2000.

At least 19 countries now have ecolabel requirements,
including some members of the European Union, Canada, Japan, the
Scandinavian countries, the United States, New Zealand,
Australia, India, South Korea, Singapore, Croatia, Taiwan and
Israel.

The Indonesian Ecolabeling Agency (LEI), an independent body
established in 1996 to promote sustainable forest management by
assessing Indonesian timber companies' operations, said last year
that it would audit the operations of at least 16 timber
companies to see if they could be certified.

The ecolabeling audits would take place on a voluntary basis.

If companies meet the criteria of the Sustainable Forest
Management Certification System they are awarded the local
ecolabel certificate known as SNI 5000.

"Although ecolabeling is not compulsory for forest
concessionaires, they may not be able to access some foreign
markets without this certification," Waskito said.

Waskito added that only 26 of the 70 forest concessionaires
assessed by LEI in 1996 were considered "adequately prepared" to
meet ecolabeling requirements while none were considered "fully
prepared".

But the current economic conditions have discouraged timber
companies from applying for the ecolabel certification.