Indonesia now faces an economic and environmental problem: a massive gap between timber supply and industrial processing capacity, which is generally being met by clear-cutting natural forest.
Forests cover almost half of Indonesia’s surface but, because growing new tree plantations and sustainably managing forests has historically not kept pace with the country’s extensive timber processing capacity, it now faces an economic and environmental problem. Indonesia is one of the only Asian countries not to have substantially increased the size of its timber plantation area in recent years. This has created a massive gap between timber supply and timber industrial processing capacity, which is generally met by clear-cutting natural forest.
In 2005, for example, up to 65% of the timber feeding pulp mills in Sumatra came from clear cut forests. This obviously poses a real challenge to efforts to launch an international scheme that will allow people, companies and countries to offset their carbon emissions by paying to plant trees and protect forests, called Reducing Emissions from Deforestation and Degradation (REDD+), beyond the obvious challenge of developing a sustainable timber industry.
Forest-owning families and communities, or those with secure rights to state-owned forests, referred to as locally-controlled forestry (LCF), could be key players in potentially tackling this issue in Indonesia. For example, in Java alone, between 1-1.5 million hectares of private woodlots managed by local farmers and communities already produce up to 8 million cubic metres of timber to industrial processing units – worth US$ 360 million a year in income to local farmers. Prospects for expanding this contribution are huge. But outside Java, where private tree-farm ownership is less prevalent, there is a need to make diverse forms of community-based forest management arrangements functional.
Ultimately, optimising the incentives for local families, communities and indigenous peoples to invest in commercial tree planting and management in Indonesia may require tenure reform in which ownership rights are actually delegated to communities by the state – a process discussed in the recent Lombok conference on Forest Tenure, Governance and Enterprise (11-15 July 2011) as a sustainable answer that bridges the gap between timber supply and demand.
But the political nature of tenure reform will take a long time to bring about – potentially decades. To bridge the industrial supply gap, shorter-term measures, working within existing policy arrangements, are essential. There are already four rather complicated state provisions covering different types of community rights:
- group or cooperative rights, under a regime known as Community Forestry (Hutan Kemasyaratan, HKm),
- cooperative and individual rights in timber production, under a regime known as People’s Timber Plantations (Hutan Tanaman Rakyat, HTR)
- the delegation of forest management rights to village administrations within the framework of Village Forests (Hutan Desa, HD) and
- company community partnerships in which communities may gain access to forest resources based on an agreement with holders of business licences or concessions (Kemitraan).
We need to work within these existing legal structures rather than starting for scratch.
The key will be to try and simplify the regulatory complexity of the four existing options described above while catalysing investment into viable business models that can then provide further evidence of what investing in locally-controlled forestry has to offer, both in terms of increasing local families’ income levels and for reducing emissions from forest deforestation and degradation.
Field visits during the Yogjakarta Forest dialogue on Investing in Locally Controlled Forestry (ILCF) in Java, the eighth of a series on this topic held from 6-9 February 2012, gave some insight into possible business models to build upon.
At the first site, a private company, Dipantara,aggregated teak from private farmers’ groups such as those in Gunung Kidul, located near Yogyakarta. It then sold the timber on to state-of-the-art furniture companies, such as PT. Jawa Furni Lestari, with international markets. Such companies buy wood that has been certified with the Ecolabel certificate and have stringent chain of custody controls for the wood.
At the second site, the Wana Lestari Menoreh Cooperative (KWLM), which is located in Kulon Progo near Yogyakarta and also has a strong focus on sustainability, assembled timber from farmer group membersand tried to develop their own teak sawmill processing capacity (with more modest results).
The experiences strongly improved both groups’ organisational and business capacity. For example farmers who were part of the KWLM cooperative benefited from the immediate credit provided by the farmer credit union (locally called CUKATA). The credit reduces their need to cut down trees for cash to meet short-term needs, and which threatens the long- term, sustainable management of their forests.
Indonesia will continue to explore how to invest in models of locally-controlled, climate-friendly forestry that delivers broad-based economic development and helps fill the critical current timber supply gap. To do so effectively, there is a need for ‘soft investment’ to create the space and logistics for farmers’ groups across Indonesia to share their experiences and enhance their capacity. This could, for example, take the form of a federation that would strengthen farmers’ market and political influence and help push for the required policy reforms and ‘hard investments’ needed to scale-up their activities.
It would be a fitting response to the huge challenges Indonesia faces to fill its industrial wood supply gap.