Trade survey year 2016 among Indonesian FSC certified forest concessions and wood processing industries

Transcription

1 Trade survey year 06 among Indonesian FSC certified forest concessions and wood processing industries May 07 The Borneo Initiative

2 Contents Introduction... Trade survey findings forest concessions... Feedback to The Borneo Initiative forest concessions... Conclusions and recommendations forest concessions Trade survey findings Wood processing industries Feedback to The Borneo Initiative wood processing industries Conclusions and recommendations wood processing industries... 8 Summary conclusions... Introduction The Borneo Initiative is a foundation that promotes sustainable forest management among forest concessions in Indonesia, in partnership with the Indonesian Association of Forest Concessionaires (APHI). The Borneo Initiative serves as a platform for cooperation between various partner organisations that act as certification coaches i.e. they advice forest concessions on the steps towards certified forest management. Forest concessions are supported with grant funding, expertise and market links - The Borneo Initiative organizes annual trade encounters to bring together the certified Indonesian forest industries and overseas buyers under the slogan: Indonesian hardwood products: Sustainable. Quality. Guaranteed. Via its market linking activities, The Borneo Initiative aimed for a trade flow in FSC certified wood products of 75,000 cu.m. annually between Indonesia and the Netherlands, or 0,000 cu.m. annually between Indonesia and wider Europe, as well as 0,000 cu.m. annually between Indonesia and North-America (USA). To assess trade volumes, previous surveys were conducted in 0 and 0. Preparations were made mid-06 for separate repeat surveys among overseas buyers, Indonesian wood processing industries and forest concessions. The aim of these surveys was to assess the level of FSC wood exports from Indonesia to European or American buyers for the calendar year 05, as well as to assess the underlying FSC log production from FSC certified forest concessions in Indonesia. Also, to collect feedback from Indonesian wood processing industries and from FSC certified forest concessions as regards the effectiveness of the market links activities by The Borneo Initiative. The survey among overseas buyers was documented in a separate report in December 06. The present report documents survey findings for the Indonesian wood processing industries and forest concessions combined, with 06 as the year of reference. The surveys among wood processing industries and FSC certified forest concessions were conducted in the form of pre-structured questionnaires with a limited set of questions, to minimize the time needed for answering the survey. Instead of asking for precise production data, size classes were used as answering categories. The surveys were sent out in the month of February 07 to all forest concessions that had achieved FSC certification with the support of The Borneo Initiative, and to those wood processing industries that were known to be trading partners of these forest concessions. Companies could respond to the survey via a hyperlink to the SurveyMonkey internet site. To improve the response rate, follow-up calls were made. We are thankful for the support we received in preparing and implementing these surveys from Mr. Herman Prayudi (APHI) and Mr. Hartono (FSC-Indonesia), plus Ms. Maresa Gracia, Rahmat Doang and Iwan Kurniawan from The Borneo Initiative. Coordination of the survey and report preparation were under the responsibility of Mrs. Stella Wisse and Mr. Wim Ellenbroek of The Borneo Initiative.

3 Trade survey findings forest concessions The questionnaire was sent to forest concessions in Indonesia that had achieved FSC certification in 06 with support from The Borneo Initiative. Complete sets of responses were received from companies, while three returned incomplete responses. This is a satisfactory response rate. Question : Meranti Merbau Mixed tropical hardwood Fancy wood spp Mangrove Other In 06, what were your company s main log categories? <0,000 0,000-0,000 0,000-50,000 50,000-70,000 70,000-90,000 Sum of averages cu.m. % 9 00,000 55% ,000 0% ,000 % ,000 % ,000 % ,000 % 75,000 The respondents included a variety of producers e.g. lowland forest concessions from Kalimantan, Papua or Moluccas, managing either lowland forests or mangroves. Therefore, the mix of wood species, from an estimated aggregate total of 75,000 cu.m., includes meranti spp. (55%), other mixed tropical hardwood species (%), merbau (0%) and mangrove (%). Question : Sinkers Floaters Comments For the year 06, what was the percentage of sinkers and floaters that you produced? 0-0% -0% -0% -0% -50% 5-60% >60% Average 7% 9 6% Among the respondents, log production in 06 consisted predominantly of lighter densities (6%), suitable for plywood production. About a third of production (7%) consists of high density logs, suitable for wood working industry (e.g. merbau logs) or for pulping (mangrove logs). Question : For the year 06, who were your main buyers? Own industry (same holding or sister company) Other If other, please specify 0-0% -0% -0% -0% -50% 5-60% >60% Rating Average 0 8% 0 7% Most respondents (0 out of ) sell to a wood processing industry under the same holding i.e. 8% of log output. Only two out of respondents sell most of their output to third parties.

4 Question : Meranti Merbau Mixed tropical hardwood Fancy wood Other If other, please specify What volume of your log harvest was sold with FSC logo? <0,000 0,000-0,000 0,000-50,000 50,000-70,000 70,000-90,000 Sum of averages FSC cu.m , , , , ,000 60,000 86% Based on responses, it is estimated that 60,000 cu.m. was sold with FSC logo, or 86% of production as estimated under question. Question 5: Did your buyers pay more for FSC materials as compared to non-fsc materials? Own industry (same holding or sister company) Other If other, please specify No <5% 6- Average if -5% >5% 0% premium % 8 0 % 6 As regards sales to a wood processing industry under the same holding, 6 out of 8 respondents indicate that no premium is paid for FSC logs. If a premium is paid, the average is 8%. When selling to third parties, out of 6 indicate that a premium is received for FSC logs, the average is %. Feedback to The Borneo Initiative forest concessions The second objective of the survey was to collect feedback from the wood buyers on The Borneo Initiative s market links activities. Question 6: In the period 05-06, have you been in contact with The Borneo initiative in any of the following ways? Newsletter updates Website 8% 0 7% 67% 8 50% 6 % 0 Personal meetings exchanges for contacting overseas buyers Participation in TBI trade encounters in Indonesia Other (please specify) Respondents indicated that most contact with The Borneo Initiative related to the newsletter or personal meetings. Market related activities were less frequent, e.g. mediation of contact with overseas buyers (50% of respondents) or participation in the TBI trade encounters (%).

5 Question 7: In the period 05-06, did you establish new trade contacts via The Borneo Initiative? Yes No Comment 8% 9% Respondents indicate that the mediation of trade contacts by The Borneo Initiative, or the trade encounters, mostly did not result in new trade contacts except in one case. This seems consistent with the above observation that most log production is sold to a wood processing industry under the same holding. Also, overseas buyers do trade with wood industries, not with forest concessions directly due to the log export ban. Question 8: Did these new trade contacts result in new sales contracts? Yes No Comment 0% 0 00% Respondents indicate that no new trade contacts were made via The Borneo Initiative, and that no new trade contracts could be established. Question 9: Do you see growth potential for Indonesian FSC hardwood products in your markets? Yes No Please specify 5% 7 6% 6 Just more than half of respondents say that they see growth potential for FSC hardwood products in their markets, while the other half does not. Question 0: Suggestions received include: Do you have suggestions how to enhance the promotion of Indonesian FSC hardwood products in your markets? - More market promotion - FSC and The Borneo Initiative consistently to promote to the broadest public that consumers must only use timber products derived from forests that are managed responsibly - FSC to emphasize the value added of FSC wood products as environmentally friendly - Mapping of the specific markets that appreciate Indonesian timber products high quality and high value - green price for FSC logs 5

6 - Government to help with assuring markets that wood from Indonesia is from sustainably managed forests; Government to cooperate in the promotion of programs of TBI - Mangrove wood is now only sold as wood chips to paper industry. However, it is among wood species with highest calorific value, so it can be promoted as renewable energy source. - Promotion via electronic media, website etc. - Participation in exhibitions - Increase the participation and understanding of local government Question : Suggestions received include: Do you have any other suggestions how the Borneo Initiative could improve its services? - Expansion of the certification program to Eastern Indonesia, for example The Papua Initiative - Organizing of more events to bring together buyers and producers of Indonesian FSC hardwood products - The Borneo Initiative to establish wider and more intensive partnerships with Forest Management Units and consultants, TNC, GIZ, WWF etc. - The Borneo Initiative still to provide services to forest concessions after they have achieved certification and not only reproduce new members to expand the scope of FSC certified forests; TBI to expand market reach - Facilitate more international exhibition of wood products - Continuation of financial support to FSC certification, capacity building, market links activities Conclusions and recommendations forest concessions. The response rate was good with responses out of companies approached. Yet, parties needed several reminders or lost the questionnaire s web link. For a repeat survey, given the relatively small number of forest concessions, instead of a web-based questionnaire, a personal interview approach is recommended.. Most respondents (0 out of ) sell to a wood processing industry under the same holding i.e. 8% of log output. Only two out of respondents sell most of their output to third parties. Most logs (86%) were sold with FSC logo indeed but did not fetch a premium price. Yet, if a premium price is paid, this can amount to 8- % on average.. None of the forest concessions made new market contacts via The Borneo Initiative. More support is solicited with market promotion and market links, also after FSC certification. Suggestions include the mapping of potential markets, promotion of the intrinsic (environmental) value of FSC timber products from Indonesia, promotion into new markets (renewable energy), more trade exhibitions, etc.. Forest concessions encourage The Borneo Initiative to expand its forest certification program. And, if possible, to start also a program for eastern Indonesia e.g. The Papua Initiative. 6

7 5 Trade survey findings Wood processing industries The questionnaire was sent to 0 wood processing industries in Indonesia that were FSC certified in 06 and were known to be trading partners of TBI supported forest concessions. Complete sets of responses were received from 0 industries. This is a much lower response rate than anticipated since we know most trade contacts personally. We also designed the survey such that we asked a minimal set of questions, and we followed up with personal calls. The survey was only intended to collect basic information on trade destinations and price premiums among an inner circle of trade contacts related to FSC certified concessions. No generalisations can be derived from this survey for the wider wood processing sector by lack of statistical sample universe, low sample number, product variability (high stratification), while data have not been converted to statistical standards (e.g. product classification, or cu.m. conversion factors). Question : In 06, what were your company's main export product categories? Lumber/rough sawn Panel products (plywood, etc.) Mouldings and joinery Furniture Interior flooring Garden, decking Veneer Wood chips Charcoal Other products and volumes (please specify) <0,000 0,000-0,000 0,000-50,000 50,000-70,000 70,000-90,000 Average sum , , , , , , , , ,000 55,000 Under question, multiple answers were possible. Answers reflect the considerable width of products that Indonesian wood processing industries can manufacture, ranging from sawn products (mouldings and joinery, garden products and decking, rough sawn lumber, flooring), to panel products and veneer, and wood chips and charcoal from natural forest including, as reported under other products, a very small trial volume wood vinegar (a by-product of charcoal production). Overall sales for the nine respondents sum up to 55,000 cu.m. on average. 9 Question : For the period 05-06, how did your overall exports develop in volume by region? Japan China Asia other Australia Europe North America Latin America Other (please specify) <-0% -0-5% -5-0% 0% 0-5% 5-0% >0% Rating Average 0 % % % % % % % 0 Eight respondents provided answers. On average, exports seem to have expanded, but individually, companies have variable experiences. E.g. changes in exports were both negative and positive for Japan, Australia and Europe; while exports to China and other Asian countries were stable or increased mostly. 8 7

8 Question : For each of the export categories (Question ), how much was the share of FSC in volume? Lumber/rough sawn Panel products (plywood, etc.) Mouldings and joinery Furniture Interior flooring Garden, decking Veneer Wood chips Charcoal Comment <0,000 0,000-0,000 0,000-50,000 50,000-70,000 70,000-90,000 Average sum , , , , ,000 5,000 Based on 7 respondents, FSC sales volume amounted to 5,000 cu.m. on average; compared to overall sales volume of 55,000 cu.m. this amounts to 8% only implying that the FSC logo does not matter for all clients in all markets. One company mentions a particular problem where its intended buyer of FSC certified material ceased buying and could not be replaced by another FSC buyer. 7 Question : Did your clients pay more for FSC materials as compared to non-fsc materials? Lumber/rough sawn Panel products (plywood Mouldings and joinery Furniture Interior flooring Garden, decking Veneer Wood chips Charcoal Other products and percentages (please specify) No <5% 6-0% -5% >5% Rating Average % % 0 0 % % % % % % % 0 Based on 8 respondents, it seems that FSC products do not always attract a price premium (5 out of 6 responses) albeit that more respondents ( out of 6 responses) indicated that price premiums are paid than not. If a premium is paid, it varies from to 5%, on average. 8 Question 5: Can you indicate the volume of FSC exports to North America in year 06? <0,000 Lumber/rough sawn Panel products (plywood, etc.) Mouldings and joinery Furniture Interior flooring Garden, decking Veneer Wood chips Charcoal Other products and volumes (please specify) 0,000-0,000 0,000-50,000 50,000-70,000 70,000-90,000 Average sum , , ,000 0,000 The Borneo Initiative expected that the USA market would be able to absorb in the range of 0,000 cu.m. annually of FSC products from Indonesian wood processing industries. Out of 0 respondents, only indicated a trading volume with USA of just 0,000 cu.m. in sum i.e. not an indication that trade with USA is on target for FSC certified wood processing industries

9 Question 6: Can you indicate the volume of FSC exports to Europe in year 06? Lumber/rough sawn Panel products (plywood, etc.) Mouldings and joinery Furniture Interior flooring Garden, decking Veneer Wood chips Charcoal Other products and volumes (please specify) <0,000 0,000-0,000 0,000-50,000 50,000-70,000 70,000-90,000 Average sum , , ,000 60,000 Same as for the USA market, The Borneo Initiative expected the European market to absorb in the range of 0,000 of FSC products from Indonesian wood processing industries. Out of 0 respondents, only 6 indicated a trading volume of 60,000 cu.m. with Europe but this estimate is most probably too high given the relatively high number of answers in the smallest category where the calculated average is 5,000 cu.m. 6 Question 7: Can you indicate the volume of FSC exports to the Netherlands in year 06? Lumber/rough sawn Panel products (plywood, etc.) Mouldings and joining Furniture Interior flooring Garden, decking Veneer Wood chips Charcoal Other products and volumes (please specify) <0,000 0,000-0,000 0,000-50,000 50,000-70,000 70,000-90,000 Average sum cu.m , , ,000 55,000 Specifically for the Netherlands, The Borneo Initiative aims for a FSC certified wood trade volume of 75,000 cu.m./yr. Based on just 6 respondents, data suggest an average trade volume of 55,000 cu.m., consisting of mouldings and joinery, garden and decking, and wood panels. But again, this estimate is most probably too high given the relatively high number of answers in the smallest category where the calculated average is 5,000 cu.m. Trading volume with the Netherlands for most respondents was the same as the one reported for Europe, so, not additional. 6 Question 8: Did you pay a higher price for FSC certified logs for your factory in the period 05-06? Logs No <5% 6-0% -5% >5% Rating Average 0 7% 6 Out of 6 respondents, 5 indicated that they pay a higher price for FSC certified logs as raw material for their wood processing industries. Premium can be as high as.5 % (class average) but is 7% on average. 6 9

10 6 Feedback to The Borneo Initiative wood processing industries The second objective of the survey was to collect feedback from the wood processing industries on The Borneo Initiative s market links activities. Question 9: In the period 05-06, have you been in contact with The Borneo Initiative in any of the following ways? Newsletter updates Website Personal meetings exchanges for contacting overseas buyers Participation in TBI trade encounters in Indonesia Other (please specify) 50% 5% 8% 8% 6% 5 0 Out of 8 respondents, 5 had participated in earlier TBI trade encounters, or had been assisted with personal meetings with overseas buyers () or exchanges (). 8 Question 0: In the period 05-06, did you establish new export contacts via The Borneo Initiative? Yes No Comment 5% 75% 6 0 Out of 8 respondents, only indicate that they established new export contacts via The Borneo Initiative. 8 Question : Did these new contacts result in new export contracts? Yes No Comment 7% 8% 5 0 Only industry indicates that it gained new contracts from a new trade contact that could be established via The Borneo Initiative. 6 0

11 Question : Do you see growth potential for Indonesian FSC hardwood products in your export markets? Out of 8 respondents, 5 indicate that they see a growth potential for Indonesian FSC hardwood products. In their explanations, they specify: - FSC Merbau Yes No Please specify 6% 5 8% - Japanese and Korean biomass markets where the governments require full FSC or controlled wood standard albeit that these markets still have a negative perception of natural wood products from Indonesia - FSC hardwood plywood and FSC hardwood decking for the Japanese building market in relation to the Tokyo Olympic Games 00 One critical observation mentioned that FSC is recognized mostly among the paper and packaging sectors. For hardwood markets, SVLK/FLEGT is often sufficient, with many customers reluctant to pay a premium for FSC materials. 8 Question : Do you have suggestions how to enhance the promotion of Indonesian FSC hardwood products in your export markets? s included the following: - To counter the negative basic perception among foreign buyers about Indonesia, a field trip or road show could be organized for international buyers and environmentalists to visit several FSC natural forest concessions. Have it well documented by well respected news media e.g. NatGeo channel. - Force the German market to buy FSC too. Ask Greenpeace to go to big importers to enforce FSC procurement Greenpeace enforced FSC but the German market does not care about FSC. And, after Germany, also USA. - More presentations or seminars with NGOs and government agencies so as to get construction companies to use more FSC certified materials. - Ask governments to lower the import tax or duty for FSC wood products or raise duties for non-fsc wood products. Question : Do you have any other suggestions how The Borneo Initiative could improve its services? s include the following: - Indonesian FSC wooden materials are facing unfair competition against commodity goods from Europe. Because European wood materials come from plantation forests regarded as sustainable as the plantation programs go back to some years ago. Meanwhile we in Indonesia are harvesting from the natural forests with trees again years. Indonesian industry is not able to create the noise to counter plantation species commodities that are now available in surplus in EU nations thus causing a cheaper raw material to work with. So the Indonesian wood sector has to explain better the advantages of using tropical hardwood species compared to plantation species over time, e.g. better durability, rot resistance, more stable, etc. Not only focus on being certified. - Organize another trade exhibition as in Surabaya 06 - Can we organise a small conference meeting to promote our FSC products in Europe, especially Germany. Now a specific concern with FLEGT that undermines market interest in FSC certification since FLEGT is proof of legality. Where FSC will stand now? Enforce the

12 FSC standard in the Netherlands, Germany and France. Also UK where they buy a lot of (non- FSC) sawn timber from Malaysia while in Indonesia, sawn timber export is considered as illegal. Now affecting Indonesia so badly as UK companies say it is cheaper to buy (non-fsc) sawn timber from Malaysia and to do the moulding in UK as compared to buy finished products from Indonesia. - TBI should be more active to promote FSC hardwood from Indonesia like FSC sawn timber, panel products and furniture in exhibitions and seminars in Holland and EU countries; and ask EU to lower import tax or duty for Indonesian FSC plywood or FSC timber products to motivate importers and end users to buy more FSC hardwood products from Indonesia. 7 Conclusions and recommendations wood processing industries. The questionnaire was sent to 0 wood processing industries in Indonesia that were FSC certified in 06 and known to be trading partners of TBI supported forest concessions. Complete sets of responses were received from 0 industries. This is a much lower response rate than anticipated since we know most trade contacts personally. We also designed the survey such that we asked a minimal set of questions, and we followed up with personal calls. The sample set in this survey is too small to make any observations on trade volumes towards USA, Europe or the Netherlands. We recommend that a repeat survey is done by FSC itself as the key stakeholder; and that it links the survey to other data collection exercises that are implicit in FSC certification (e.g. annual audits). This will raise the profile too of FSC as an interest group or service organisation.. Indonesian wood processing industries manufacture a wide range of products including mouldings and joinery, garden products and decking, rough sawn lumber, flooring, panel products and veneer, and wood chips and charcoal from natural forest.. Overall, FSC wood processing industries seem to have expanded their exports, but individually, companies have variable experiences.. FSC products do not always attract a price premium albeit that more respondents indicated that price premiums are paid than not. If a premium is paid, it varies from to 5%, on average. 5. Most respondents indicated that they pay a higher price for FSC certified logs as raw material for their wood processing industries. Premiums can be as high as.5 % but 7% is the average. 6. Most respondents see further growth potential for their FSC products; specifically for: - FSC merbau - FSC biomass (Japan, Korea) - FSC hardwood plywood and decking for the Tokyo Olympic Games Market constraints mentioned: - Persistent negative image of Indonesian forestry among overseas markets - FSC standard not sufficiently enforced in European markets. FLEGT SVLK seen as sufficient guarantee (legality) - Preference for cheaper plantation species, limited appreciation of intrinsic qualities of tropical hardwood (durability, stability etc.) even when FSC certified - Indonesian export restrictions a disadvantage when it is cheaper to buy lumber from tropical supplier and do the moulding in home market 8. Few industries made new trade contacts via The Borneo Initiative. Solutions offered to enhance trade in Indonesian FSC certified hardwood products: - The Indonesian wood sector has to explain better the advantages of using tropical hardwood species compared to plantation species over time, e.g. better durability, rot resistance, more stable, etc. Not only focus on being certified. - A field trip or road show for international buyers and environmentalists to visit several FSC natural forest concessions. Have it well documented by well respected news media e.g. NatGeo channel.

13 - Organize another trade exhibition as in Surabaya 06 - Cooperation with environmental NGOs to pressure more governments and companies to buy FSC. Focus on Germany, and USA. - TBI should be more active to promote FSC hardwood from Indonesia like FSC sawn timber, panel products and furniture in exhibitions and seminars in Holland and EU countries. More presentations or seminars with NGOs and government agencies so as to get construction companies to use more FSC certified materials. Instead of just FLEGT. Focus on the Netherlands, Germany, France, UK. - Ask governments to lower the import tax or duty for FSC wood products or raise duties for non-fsc wood products. 8 Summary conclusions. The low sample number and the variability of products, make it difficult to draw general conclusions. No reliable estimates could be derived about trade volumes between TBI supported forest concessions or related wood processing industries with the Netherlands, wider Europe or USA. We had a good response rate among forest concessions, but less so among wood processing industries. We recommend that any repeat surveys are done by FSC itself as the key stakeholder in trade enhancement of FSC certified wood products. To increase the response rate, perhaps FSC sees ways to link the survey to other data collection exercises that are implicit in FSC certification (e.g. annual audits).. Most forest concessions as supported by The Borneo Initiative sell to a wood processing industry under the same holding i.e. 8% of log output. When selling logs to a wood industries under the same holding, mostly no premium is paid to the forest concession. If a premium is paid, the average is 8%. Not paying a premium, implies that the forest concession has to bear the extra costs without receiving a compensation, which means underpricing of the costs and environmental services implicit in sustainable forest management.. When selling to third parties, out of 6 indicate that a premium is received for FSC logs, the average is %. Most wood processing industries also indicate that they pay extra for FSC certified logs (7% on average), which seems to be matching information when assuming that reference is made to logs bought from third parties.. Most FSC certified forest concessions indeed sell their logs with FSC logo (86% of production), while wood processing industries report that only 8% of sales carry the FSC logo - implying that the FSC logo does not matter for all clients in all markets. 5. A majority of wood processing industries sees growth potential for FSC certified wood products, against about half of the forest concessions. 6. Market constraints faced by forest concessions and wood processing industries include the persistent negative image overseas of Indonesian forestry; acceptance of FLEGT-SVLK as a sustainability standard rather than FSC; lack of market appreciation for high quality wood products; competition from producer countries with more lenient export regulations. 7. In the face of these constraints, suggestions include promotional activities in Indonesia, overseas promotional activities, media campaign (image improvement for Indonesian forestry sector), or lobby for tax benefits or preferential trade regulations. Market linking efforts by The Borneo Initiative thus far have not generated significant new contacts, but there is a general request to offer continued support with market promotion, also after achieving FSC certification. 8. Forest concessionaires encourage TBI to expand its certification program; if possible, also to eastern Indonesia (a Papua initiative.)