SVLK: Improving Forest Governance and Promoting Trade of Legal Timber Products from Indonesia

SVLK – Improving Forest Governance and Promoting Trade of Legal Timber Products from Indonesia

BACKGROUND Indonesian Timber Legality Assurance System, or known as SVLK (Sistem Verifikasi Legalitas Kayu) is a system to ensure the sustainability of forest management and/or timber legality and timber tracking through Sustainable Production Forest Management certification (S-PHPL), Timber Legality certification (S-LK), and Supplier Declaration of Conformity (SDoC).

Civil society are involved in the process to ensure the legality of timber and timber products that harvested, transported, processed, and exported from Indonesia. The assessment of performance and the verification of legality is carried out by independent auditor from Conformity Assessment Bodies accredited by National Accreditation Committee (KAN). The process applies standard of assessment/verification as developed by representatives of various forest stakeholders in Indonesia and stipulated by the Minister of Environment and Forestry.

SVLK was developed since 2003 and it always involves multistakeholder along the way, including academician, associations, related ministries, and non-governmental organizations (NGOs). The system was first regulated in 2009 by the Regulation of the Minister of Forestry P.38/Menhut-II/2009, stating that SVLK is mandatory for all forest-based business units from the upstream to the downstream, including the forest owners.

The regulation was strengthened several times, with the Regulation of Ministry of Environment and Forestry (PermenLHK) P.95/Menhut-II/2014 as the latest version. The amendment was aimed to improve the overall enforcement and execution of certification of Performance Assessment Standard and Guideline of Sustainable Production Forest Management and Timber Legality Verification for Permit Holders or Private Forests. In addition, the revised regulation currently accommodates the needs of small and medium enterprises (SMEs).

Some highlights of the change includes: a) Private Forest owner can publish SDoC; b) Small business owner can publish SDoC as long as the raw material comes from community forest; c) SME exporting furniture can use the Declaration of Export up to 31 December 2015; d) Government provides facilitation for SME on group-based mentoring, certification, and first surveillance.

Eradicating illegal logging and illegal timber trading

1 Promoting legal timber from sustainable sources Increasing dignity of the nation

5

2

4

3

Improving the governance of forest and forest-based industry Assuring timber legality

SVLK functions as “passport� to enter global legal timber market

ERADICATING ILLEGAL LOGGING AND ILLEGAL TRADING SVLK helps to reduce illegal logging because timber processing industry can only accept certified legal timber.

2000

Decreasing Trend of Illegal Logging Cases from 2005-2014

1750

1500 1000

720 478

500

220

151

0 2005

2006

2007

2008

2009

98

59

75

2010

2011

2012

70

29

2013 2014

(Source: Ditjen PHKA, 2015)

IMPROVING FOREST-BASED INDUSTRY GOVERNANCE The wood processing industries are obliged to comply with the regulations and the government’s service is more transparent.

Indonesian timber is deemed legal when its origin and production process as well as subsequent processing, transport and trade activities are verified as meeting all applicable Indonesian laws and regulations Progress on SVLK Certification Process (up to 28 April 2015): Management

Passed

Failed

In Process

Total

Unit

(unit/Ha)

(unit/Ha)

(unit/Ha)

(unit/Ha)

46

24

-

(4,301,165)

(797,283)

PHPL (HT) PHPL (HA)

70 (5,098,448)

110

37

3

150

(9,245,391)

(2,498,572)

(530,005)

(12,273,968)

57

-

-

VLK (KPH)

(2,449,254) VLK (HT)

42

-

-

(1,565,628) VLK (HA)

57 (2,449,254) 42 (1,565,628)

16

4

(1,036,196)

(260,395)

-

20 (1,296,591)

VLK Private

93

4

2

99

Forest

(42,672)

(1,500)

(4,493)

(48,665)

VLK

1,150

50

271

1,471

2

-

-

2

Industry VLK Timber Depot

(Source: SILK Online, 2015)

ASSURING TIMBER LEGALITY Indonesia’s legality definition draws on Indonesia’s laws and regulations on forestry, trade, environment, agriculture, land ownership, and international treaties signed and ratified by Indonesia. The definition is framed around a number of the following key principles covering essential aspects of forest production and processing, depending on the type of the forests: • For state-owned natural and plantation forests these principles cover:

(1) The legal status and area, and right to utilize the forest;

(2) Compliance with the legal requirements for harvesting; and

(3) Compliance with the environmental and social aspects related to harvesting.

• For privately-owned forest these principles cover the ownership of the timber as it relates to land area, the logs, and the trading of logs, and this can be cross checked for its traceability.

• Other timber harvesting permits regulate logging from non-forest zones that may or may not lead to forest conversion.

• In addition, there is a general legality standard covering the supply chain management of timber from the forest through processing units to the point of export.

• Compliance towards the Principles, Criteria, and Indicators for Sustainable Forest Management (SFM), as part of the requirements from the SFM Conformity Assessment Body or SFM Certification Body accredited by Indonesian Accreditation Body (KAN).

INCREASING DIGNITY OF THE NATION Indonesia used to be known as the hotspot for illegal logging, with total number of loss more than 30 trillion Rupiah per year. SVLK is developed to counter the image by bringing back the trust of the international world.

The target for this goal is expected to be achieved from two approaches: 1. Increasing number of export from forest-based industry in Indonesia Based on the Regulation of the Minister of Trade (Permendag) No. 64/2012 as amended by Permendag No. 97/2014, all exported forest industry products shall be from SVLK certified timber industry and the V-Legal documents shall be attached to complement the export license (PEB).

The number of issued export licenses by using V-legal documents from 1 January 2013 to 28 April 2015 are as follows: No

Remarks

Unit

Total

Doc.

232,843

1

Issued V-Legal Documents

2

Country of Export Destination

Country

192

3

EU Member States of Export Destination

Country

28

4

HS Codes (4 digits)

HS

44

5

Port of Loading in Indonesia

Ports

86

6

Port of Discharge

Ports

2,080

7

Net weight

million ton

22.06

8

Value

billion USD

16.29

(Source: SILK online, 2015)

Since its enactment, the use of V-legal documents has increased the export values of the following commodity: Export Values ( in million USD) No

Type

1

Panel

2

Woodworking

3

Pulp

4

Paper

5

Pre-fabricated buildings TOTAL

2012

2013

2014

2,357.29

2,640.26

2,793.48

650.02

649.67

807.25

1,545.40

1,848.77

1,721.89

611.54

602.41

633.62

7.43

4.59

5.00

5,171.70

5,745.71

5,961.25

11.10

3.75

Change (%) (Source: BPS, 2012 and SILK Online 2013-2014).

The following are comparison of export value of furniture products using V-legal documents for the past: Center of Industries 129.3

14,274,058

Jepara

32,736,453 99.7

Cirebon

3,112,182

2013

6,214,995

2014

20.5 8,123,065

Bali

Increased Export Value (%)

9,789,553 87.99

Yogyakarta

7,257,979 13,644,308

0

5

10

15

20

25

30

35

Million (USD)

(Source: SILK online, 2015) Five largest country export destination using DE

South Korea

USA USD 4.07 million

Netherlands

USD 1.45 million

Taiwan

UEA USD 146.21 million

USD 1 million

USD 1.06 million

2. International recognition on the SVLK negotiation process In order to expand the market access, the Government of Indonesia continuously promotes and negotiates the SVLK as a mechanism to ensure legal timber trading. The goal is for timber products from Indonesia to be accepted in the export destination countries without due diligence.

Some of the progress of this negotiation are: Main Market European Union

Progress The FLEGT VPA (Forest Law Enforcement Governance and Trade – Voluntary Partnership Agreement) was signed on 30 September 2013 and came into force on 1 May 2014.

Australia

The Country Specific Guideline (CSG) Indonesia was signed on 16 October 2014.

Japan, Korea, China, Canada

In the negotiation process

Hosting the 2nd Joint Implementation Committee (JIC) Meeting - Jakarta, February 2015

The Government of Indonesian and Australian Agree on the Country Specific Guideline for Legal Timber Trading Canberra, October 2014

PROMOTING LEGAL TIMBER FROM SUSTAINABLE SOURCES Start in 2015, series of activities take place to accelerate the timber legality certification for private forests, timber depot, supplier primary industries, and SMEs producing furniture. The facilitators for this process include Ministry of Environment and Forestry, Industry and Trade Office in District/City, Forestry Office in District/City, and NGOs. To improve the effectiveness of full implementation of SVLK, the Ministry of Environment and Forestry in coordination with Ministry of Trade, Ministry of Industry, and selected local governments initiated a programme to accelerate the certification of SME exporters, especially in the furniture industry.

The first phase, from January to June 2015, the acceleration process will target SME exporters in the furniture industry in Central Java, East Java, Yogyakarta, and Bali Provinces. The second phase, from June to December 2015, will cover primary industries holding Forest Timber Product Exploitation Permits (IUIPHHK).

The acceleration program will cover: (a) data collection; (b) technical assistance; (c) funding for group certification.

The target for this programme includes the certification for up to 464 exporting SMEs in the furniture industry and 1000 primary industries holding IUIPHHK permits

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