ITTO Project PD 397/06 Rev. 3 (I) Sustainable Development of the Wood Based Industry in South Kalimantan

Transcription

1 ITTO Project PD 397/06 Rev. 3 (I) Sustainable Development of the Wood Based Industry in South Kalimantan Ministry of Forestry South Kalimantan Forestry Service Indonesia 2010 i

2 Project Identification 1. Title : Sustainable Development of the Wood Based Industries in South Kalimantan 2. Serial Number : PD 397/06 Rev 3 (I) 3. Host Government : Government of Indonesia 4. Executing Agency : Forestry Service of South Kalimantan Province Jl. A. Yani Timur No. 14 Banjarbaru Kalimantan Selatan Telp Fax Duration : 18 Months and 8 month extension 6. Project Starting Date : 26 May Project Cost : ITTO : 155,196 US$ GoI : 28,500 US$ Total : 183,696 US$ 8. Project Coordinator : Ahmad Jauhari i

3 PREFACE This Completion Report of ITTO Project PD PD 397/06 Rev 3 (I): Sustainable development of the Wood Based Industry in South Kalimantan was prepared with reference to the format provided in Annex E of the ITTO Manual for Project Monitoring, Review Reporting and Evaluation, third edition, ITTO November, The heading in the Contents, as well as the Content of the Completion Report, follow the heading and subject matter as stated in aforementioned Annex E. Project Executing Agency wish to thank ITTO, Ministry of Forestry of the Republic of Indonesia, and all partners and collaborators for their full support in the implementation of the project. To the members of the Project Steering Committee we weould like to express our sincere thanks and appreciation for their support, guidance and invaluable inputs and constructive criticism. Special thanks also go to colleagues at Forestry Service of South Kalimantan Province, BAPPEDA and Task Force for Forest Industry Revitalization in South Kalimantan Province, ISWA, APHI, National Consultants of ITTO PD 397 and other project stakeholders. Banjarbaru, July ii

4 EXECUTIVE SUMMARY This proposed small project is a follow up recommendation of the ITTO Technical mission 2001 in restructuring forest industry in Indonesia. It has been set up upon determination of the finding and recommendation derived from ITTO Project PD85/01Rev 2(I) ( ), entitled: Strategies for the Development of Sustainable Wood-based Industries in Indonesia. This small project will be focused more on how the strategies and actions recommended by the ITTO Project PD 85/01 are adopted at the provincial level through providing master plan as guide for policy direction in wood-based industry, particularly in the context of decentralization era. South Kalimantan province is featuring the largest scale of wood-based industry in Kalimantan. However, the industry is experiencing over capacity due to uncontrolled permits in the past causing shortage of raw material. The absence of an integrated master plan for sustainable wood based industry among others has made the industry worse. Thus, it is necessary for this Project to formulate the wood-based industry master plan for South Kalimantan province which could provide guidance and policy direction in developing sustainable wood-based industry in this area. Upon completion of the project, the figures on timber industry development in South Kalimantan has been updated, commitment of timber industry development course from the stakeholders in South Kalimantan Province has also been obtained, and it is expected that the next phase of the project could implement the phases stated in master documents as guidance in developing timber industry in South Kalimantan province. Overview of mapping on timber based industry in South Kalimantan is part of master plan development, which has advantage to identify current condition and efforts for future improvement in order to reattract investors to invest on timber processing industry. The overview on timber based industry could benefit (1) Government, to determine policy in order to develop timber sources to fulfill log supply for timber based industry towards sustainable timber based industry. (2) Community, to participate in small scale business and cooperative as their contribution share to local and national economy. (3) Business development (timber traders and other subsidiaries) may possibly develop timber business toward more competitive challenges and improving its market segment; and (4) Other stakeholders may possibly develop other business sector due to multiplier effects from timber based industry development. Additionally, there are indirect advantages such as: (1) a healthy business environment in placed; (2) sustainable forest management in placed; and (3) reducing deforestation and forest degradation; and (4) nationally will influence purchasing power of community toward timber processing products (primary and secondary) for housing and other purposes. Sustainable development of the wood-based industries could be achieved through a strong commitment of all stakeholders involved. A master plan has been formulated; some stages formulated in the documents should be implemented by all stakeholders to be able to achieve the objective of the project. iii

5 TABLE OF CONTENTS PREFACE Ii EXECUTIVE SUMMARY.. Iii TABLE OF CONTENTS Iv PROJECT IDENTIFICATION.. 1 PART 1: PROJECT IDENTIFICATION.. 1 Context.. 1 Origin and Problem.. 3 PART 2: PROJECT OBJECTIVE AND IMPLEMENTATION STRATEGY. 4 Project Rationale.. 4 The Implementation Strategy Adopted in Carrying Out the Project... 5 Assumptions and Risks.. 5 PART 3: PROJECT PERFORMANCE.. 6 Realized Performance and Planned Performance 6 Required Input.. 9 PART 4: PROJECT OUTCOME, TARGET BENEFICIARIES INVOLVEMENT 10 Project Specific Objective Achievement.. 10 Target Beneficiaries Involvement.. 11 Project Sustainability after Project Completion PART 5: ASSESSMENT AND ANALYSIS. 12 Adequacy of Project Identification Process 12 Adequacy of the Results of the Identification Process. 12 Most critical differences between planned and actual project implementation. 12 Adequacy of time and funding. 13 Appropriateness of the Assumptions and Risks Made Project beneficiaries 13 Project Sustainability after Project Completion. 14. PART 6: LESSONS LEARNED. 15 Development Lessons Operational Lesson PART 7: CONCLUSIONS AND RECOMMENDATIONS.. 16 APPENDICES 18 List of Acronym 18 Task Force Decree. 19 Project Steering Committee Minutes of Meetings. 25 Files of Supporting Documents (in a CD-ROM) 33 iv

6 PART 1: PROJECT IDENTIFICATION 1.1 Context (a) Project Location Most of large scale wood-based industries in Indonesia are located in South Kalimantan. Most of the wood processing facilities are sawmilling. The wood panel industry in Kalimantan is also concentrated in South Kalimantan province. Therefore South Kalimantan is the center of wood industries for South and Central Kalimantan. South Kalimantan is the smallest among four provinces in Kalimantan. In term of forest cover, South Kalimantan occupies an area of ha which is devided into five catagories, ie : 1) protection area 574,674 ha, 2) Park and reservation area 176,615 ha, 3) limited production forest 212,177 ha, 4) production forest 627,627 ha and 5) Conservation forest 67,902 ha. In South Kalimantan province the importance of wood for community livelihood also is very high. Declining of wood supply makes it imperative to use the remaining wood resource more carefully. As a figure, Banjarmasin municipality is the centre of wood based industries for South and Central Kalimantan. However, there are no wood resources that fulfill the raw material needed by wood based industries coming from Banjarmasin municipality. Thus, it is necessary for this ITTO Project to accommodate the proper formulation of this master plan specifically for south Kalimantan province which would be used as guidance and policy direction in developing sustainable wood industry in this area. The master plan will refer to the National and Regional master Plan in wood industry. This master plan was made to present a scenario and policy direction related to demand and supply of wood as raw material for South Kalimantan province. (b) Relevant National and Regional Policies In the decree of the Consultative Assembly (Majelis Permusyawaratan Rakyat) no. XVI/MPR/1998 regarding Economic Democracy, it is stated that Indonesia s forestry sector aims at achieving sustainable forest management. Furthermore it is pointed out this has to be undertaken in accordance with the principles of democracy and with due attention to provincial diversity. Moreover the management of local resources should be carried out in an efficient and effecticve manner, giving wide opportunities to small and medium enterprises and to cooperatives. In promoting the development of wood industries, the Goverment issued Regulation No. 17 of 1986, placing responsibility for licensing the wood processing industries under the authority of Ministry of Industry and Trade Indonesia (MITI). The recent reform situation in Indonesia has helped to improve forestry policy, by issueance of Basic Forestry Act No. 41 of 1999 which states that wood processing industries are licensed by the Ministry of Forestry and Estate Crops. And the latest Goverment regulation No. 25 states that the local goverment must regulate production forest managment.in the Government Regulation No. 25/2000 it is clarified that the administration and management of production forests are devoted to the the Local (District) Government or the Provincial Government. Other law underlines the importance of decentralization in forestry sector; Law No. 32 year 2004 concerning Regional Autonomy and Law No. 33 year 2004 concerning the fiscal balance between central and regional goverment, and law No 25 Year 2004 on Plannning System of national Development. These laws have reflected that most of the governing authority of forest land recources 1

7 has to be in the hand of the District goverment including the authority for its pannning and management. Indonesia has also confirmed its adherence to international objectives. This includes ITTO target 2000, the objectives and reccomedation of the United Nations Conference on the Environment and development held in Rio de Janeiro in 1992, The Convention on the International Trade in Wild Fauna and Flora Species Threatened with Extiction (CITES) and the world heritage. Since Indonesia is a member of ITTO it is a mandatory to support the ITTO objective towards sustainable forest management. Government policy related to timber industry is the Minister of Forestry decree No. P.35/Menhut-II/2008 on Permitting procedure, Re-engineering, and Utilization of logging wastes. The policy aims to revitalizing the forestry industry. Most of exist industries are not efficient any more. Therefore, it is necessary to undertake re-engineering through machineries/equipment modification with the purpose of processing small diameter logs. For that reason, it requires to re-collecting data of the entire timber processing industries, both with capacity of more than 6000 m3 per year and industries with capacity less than 6000 m3 per year (P.300/Menhut-II/2006). Industry timber supply plan (RPBI) for industries is stipulated on the Minister of Forestry decree No. P.16/Menhut-II/2007. Timber supply for industries in South Kalimantan is very inadequate. Logs supply scarcity inside the province has consequence on lack of competitiveness. Regulation related to timber administration in Indonesia is stipulated through Minister of Forestry decree No. P.55/Menhut-II/2007, which includes administration on processed timber. Through the issuance of the regulation, timber companies supposedly possessing a proper document. Additionally, on processed timber administration, an assessment on chain of custody is also applied. Furthermore, there is relevant policy related to investment, such as Presidential decree (Perpres) No.114 year 2007 that stipulates arrangement for close and open business, including forestry industry. (c) Programme and Activities The Government of Indonesia (GoI) as well as ITTO give priority to the sustainable forest management (SFM). The GoI has five priority programs in support of SFM, which are: (1) Combating Illegal Logging, (2) Rehabilitation and Conservation of the forest resources, (3) Revitalizing of forest industry (4) Enhancement of community forest development and (5) Forest Land use Planning. The implementation of the five-priority programs is to be carried out through 3 (three) strategies of social forestry program: utilization, rehabilitation and conservation. The new Minister of Forestry, appointed after the election of Indonesia c new President in October 2004 have determined four success target as his new policy in the managment of the forest resources of Indonesia. These area 1) The eradication of illegal logging, 2) Rehabilitation of forests 3) Revitalization of forest based industries and 4) the economic enhanchement of communities in the vicinities of forests. A fifth succes target was added 5) Forest land Use Stabilization. There are several programs and activities that should be undertaken in support of sustainable forest industry in Indonesia especially in relation to the imbalance of supply and demand. These are plantation development, rehabilitation of degraded forest, reduced impact logging experiments, forest industry restructuring and investment, efficient use of machinery by improvement of factory product flow engineering processes, and increasing waste utilization. 2

8 This small project is to support the improvement of processing efficiency that would be complementary to on-going ITTO projects in illegal logging, certification and reduced impact logging to develop a flourishing forest industry sector in Indonesia while meeting all the criteria for sustainable forest management. 1.2 Origin and Problem This project is a follow up action of the recommendation made by the ITTO Technical mission to Indonesia in 2001 related with restructuring of forest based-industries which remains relevant to present situation. It has been set up upon determination of the finding and recommendation derived from ITTO Project PD85/01 Rev 2 (I) entitled: Strategies for the Development of Sustainable Wood-based Industries in Indonesia focusing on three major areas (log supply assessment, wood based industry capacity and international trade market analysis). It also covers macro level policies involving various difference interests of stakeholders. This small project will be focused more on how the strategies and actions recommended by the ITTO Project PD 85/01 are adopted at the provincial level through providing master plan as guide for policy direction in wood-based industry. The development of wood based industry in South Kalimantan over the last many years has been driven primarily by the economic objective of provincial government i.e. (i) to increase the foreign exchange generation through exports (ii) to continue creating jobs and (iii) to increase the added value of production. The implication of the development of wood processing industry is the increasing wood processing capacities and the requirement of supply of raw material, wood. However wood processing facilities has developed without a comprehensive guide and critical review due to the absence of a master plan which is fit for the structure of wood industry in this province. It has been recognized by major stakeholders in South Kalimantan that the lack of any proper master planning for the wood industry has continued among others to the current industry difficulties. In addition, lack of coordination between the key agencies responsible for providing raw material (MoF) and authority responsible for developing the industrial facilities (MITI) in has contributed effect to the condition of over rampant licensees of which industry causing over capacity of the wood industry and exceeding the available raw material on a sustainable basis. At present the master plan for wood based industry for national level just developed last year. However, having evaluated by the MoF, the master plan need to reviewed. The implication of this situation, the wood industry is developed along an unclear and undefined plan. The Directorate General for Forest Utilization, Ministry of Forestry is undertaken the process of making regional (Sub-national) master plan (Sumatera Regional, Kalimantan regional Kalimantan, Sulawesi etc. (Master plan for Kalimantan regional has been done in the end of 2006). Kalimantan regional (sub-national) consist of 4 provinces: East, West, Central and South Kalimantan (South Kalimantan province is included as Kalimantan regional). The regional master plan should be referred to be a macro plan for the entire province in Kalimantan. But the situation and condition in term of wood resource and market potency in each province are different. Then the guidance needed to develop wood industry for each province will be different also. And in line with the decentralization spirit in forest sector as mention in Law No. 32 year 2004, each province has authority to develop wood industry by itself Thus, it is necessary to accommodate the proper formulation of this master plan specifically for south Kalimantan province which would be as guidance and policy direction in developing sustainable woodbased industry in this area. The master plan will refer to the National and Regional master Plan in wood industry. This master plan was made to present a scenario and policy direction related to demand and supply of wood as raw material for South Kalimantan province. 3

9 PART 2: PROJECT OBJECTIVE AND IMPLEMENTATION STRATEGY (a) Project Rationale Illegal logging and over exploitation of production forest have caused a log supply deficit. These problems also bring other impacts for example employment and business opportunities from wood based industries decreases and contribution of revenue from wood industries to national and provincial economy decreased. In short, the wood based industries in South Kalimantan are not sustainable. The underlying cause of this problem was identified as unavailability of a master plan of the wood based industries in South Kalimantan and its mechanism of implementation. There are a number of impediments that have prevented South Kalimantan to have sustainable wood based industries. They include: - Lack of reliable and consistent data and information in wood-based industries - Inconsistent policy on sustainable wood supply for wood-based industries in decentralization era - Framework for stakeholder consultation in developing master plan is not developed - A mechanism and strategy for implementation of the master plan is not established. These problem, their underlying causes, and proposed solutions, formed the basis for this project titled, Sustainable Development of the Wood-Based Industries in South Kalimantan. In order to effectively address the perceived problems and to achieve the intended outcomes, the project was structured around a broad development objective which stated: To contribute to the sustainable development of the wood-based industries in Indonesia The structure of the project was formulated around the specific objective below: To develop a comprehensive master plan for wood-based industries in South Kalimantan Province This specific objective was given substance by formulating a series of specific outputs, each of which had clearly stated activities designed to assure achievement of the desired output. Output 1.1. Output 1.2. Output 1.3. Output 1.4. Database related to wood based industries available Draft of the master plan analyzed and identified comply with national and regional (Kalimantan) master plan Public Consultations/dialogue are implemented as participative process on developing/adjusting the master plan A mechanism and strategies for implementation the master plan established. 4

10 (b) The Implementation Strategy Adopted in Carrying Out the Project The important strategies to achieve the project objectives as follows: a. Providing a reliable reported data on wood supply in South Kalimantan Province include identification flow of raw material from other provinces, also mapping of flow of raw material supply for wood industry in this province b. Developing of master plan for South Kalimantan Province c. Formulating mechanism and strategy to implement master plan d. Developing communication and dialogue to improve understanding of the master plan. The development of this Master Plan will be adopted a participatory, transparent and responsible approach. It refers to the guidelines for development of policy in priority industries issued by State Ministry of Industry, National Strategic Plan and National Master Plan for wood industry which issued by Ministry of Forestry of 2006 and Regional Master Plan for Primary Wood Industry (Regional Kalimantan) of In accordance with the principles and mandates in the above policy, this master plan will be developed through a communication and consultation process involving stakeholders in this province, as well as a series of process with Ministry of Forestry. (c) Assumptions and Risks Some assumptions have been formulated to be able to run the project smoothly. It is expected that the industrial company will have a commitment to cooperate and give access of information. Some government institutions and other related institutions are expected to be able to collaborate on giving the information and a there will be a good cooperation and coordination among stakeholders. Although the project is designed to complement the national program in restructuring sustainable wood industry in Indonesia which should receive full commitment from the related stakeholders from both national and provincial/district level, but still have some risk that have the potential to hamper to achieve the project goals. The risk in implementing the activities in this project are low commitment of key target group and poor political to implement the master plan as a guide and policy direction 5

11 PART 3: PROJECT PERFORMANCE (a) Realized Performance and Planned Performance The project Agreement between the Government of Indonesia and ITTO was signed on January 2008 in Indonesia by Secretary General Ministry of Forestry, Executive Director of ITTO and Head of Forestry Service of South Kalimantan Province. The project work plan was prepared and approved by the First Technical Committee in May 2008 in Jakarta. The first budget installment was received at the end of May The Workplan has been formulated to be implemented for the total period of 18 months as stated in the MoU. Schedules of project activities arranged in the proposed workplan were based on the assumption that the project could be started in March However, longer time was needed to prepare things. The project was officially commenced on May 26, 2008, which was two months later than the date planned in the first YPO. Table 1 shows the workplan review from May 2008 to October It can be seen that most activities are started three months later than the schedule. However, it is worth mentioning that all activities have been completed. Specific Objective: To develop a comprehensive master plan for the wood based industries in South Kalimantan Province. Ouput/Activities Output 1.1: Database on Wood Based Industries available Identification constraints and opportunities in sustainable sources of timber for the wood based Industry in South Kalimantan Identification the flow data of raw material from other district and other provinces Development Map of flow of raw material supplying the wood industry Output 1.2: Draft of the Master Plan analysed and identified comply with national and regional (Kalimantan) master plan Establishment of Task Force Schedule Q1 Q2 Q3 Q4 Q5 Q Activity started behind schedule yet it is completed Activity started behind schedule yet it is completed Activity started behind schedule yet it is completed Activity started behind schedule yet it is completed Formulation and analyzing Activity started 6

12 of master plan Output 1.3 Public consultations/dialogue implemented as participative process in developing/adjusting of the master plan Development of public dialogue Analyzing of public consultation result Output 1.4 Mechanism for implementation of master plan analysed and formulated Analyzing the mechanism for implementation Discussion regarding mechanism for implementation of master plan Development mechanism and strategy for implementation Note : = First Planned Schedule = Actual execution behind schedule yet it is completed Activity started behind schedule yet it is completed Activity started behind schedule yet it is completed Activity started behind schedule yet it is completed Activity started behind schedule yet it is completed Activity started behind schedule yet it is completed Overall project outputs have been achieved, although there were some alterations to the initial plan of the project. However, these alterations have not reduced the coverage of the project nor activities. In the following table, the main achievements have been described according to Output and the supporting Activities during the original 18 month period of the project. Table 2. Project Achievement by Output and Activity Output 1.1: Achievement: Database on Wood Based Industries available Activity Identification constraints and opportunities in sustainable sources of timber for the wood based Industry in South Kalimantan Field visit had been conducted for a week in 13 regencies. Questioner was designed and interview had been conducted in cooperation with the local governments and forestry institutions. Several constrain and opportunities have been identified. Some efforts have been done in order to promote small scale forest based operation. Distribution of CD containing effective and efficient small scale industry machine had been undertaken. Achievement: Activity Identification the flow data of raw material from other district and other 7

13 provinces Based on the result obtained from the questioner and the secondary data, the data of raw material has been identified. Achievement: Activity1.1.3 Development Map of flow of raw material supplying the wood industry The map of flow of raw material supplying the wood industry has been developed to be part of the master plan. Output 1.2: Achievement: Draft of the Master Plan analysed and identified comply with national and regional (Kalimantan) master plan Establishment of Task Force The establishment of Task Force to support the formulation of Master Plan of Wood-Based Industries in South Kalimantan was agreed by the Governor of South Kalimantan. The members are project stakeholders. (The Decree of the Task Force is attached). Achievement: Formulation and analyzing of master plan A preliminary workshop on the development of the master plan was conducted in July A series of discussions, workshops, expert team meetings have been undertaken with project stakeholders and expert teams. The strength, opportunities, constrains and challenges in term of raw material, industries and trade have been identified. The draft of the master plan has been formulated and analysed. Recommendations on the content of the master plan have been obtained. In overall, the results of those meetings are: to ensure that the formulated master plan would be in line with the purpose of the project to ensure that the formulated master plan would be in line with policy of wood-based industry development in South Kalimantan to ensure that the formulated master plan would be applicable to ensure that the formulated master plan would be able to be used as a guideline in wood-based industry development in South Kalimantan Output 1.3: Achievement: Public Consultations/dialogue implemented as participative process in developing/adjusting the master plan Development of public dialogue The end of the project meeting, organized by Project Management Unit and Forestry Service of South Kalimantan Province was held in July 2, Project stakeholders such as Forestry Offices in South Kalimantan, academics, police officers, members of Task Force, representative from Ministry of Forestry and other project stakeholders. The meeting included presentations of the main findings and recommendations of this project, as well as discussions on the latest issue on KPH. The public consultation was attended by approximately 70 participants. A detailed report has been prepared. Some conclusions and recommendations obtained are: to establish the stages of achieving wood-based industry development to realize the establishment of KHP Management Unit to determine KPH Management Unit as wood supply monitoring zone to develop cluster based wood-based industry by considering KPH zone to establish wood terminal 8

14 Achievement: Reviewing/analyzing of public consultation/dialogue result The public consultation has been carried out as participative process. Recommendations and input on the draft of the master plan have been obtained. There were three participants who give deep comments on the content of the master plan. Based on the result of the public consultation, the draft of the master plan has been reviewed. Output 1.4: Achievement: A mechanism for implementation of master plan analysed and formulated Analysing the mechanism for implementation After a series of discussions involving all project stakeholders, a draft of the mechanism for implementation of the master plan was formulated and analysed. This draft will be then discussed in a forum that involves policy makers. Achievement: Discussion regarding mechanism for implementation of master plan In June 9, 2009, a discussion on the draft of the master plan and its mechanism for implementation was conducted. The meeting was organized by Bappeda Regional Planning Board. The strategy of implementing the master plan was elaborated. The participants who are policy makers in South Kalimantan give comments and recommendations on the mechanism of the master plan including who does what in the implementation of the master plan and other aspects such as wood supply, market and policy. A detailed report has been prepared. Achievement: Development mechanism and strategy for implementation Based on the result of the discussion held in June 9, a mechanism and strategy for implementation was developed. (b) Required Input The project was started in May The project which lasted for 18 months plus 8 months extension with the total amount of 155,196 US$ could eventually achieved its objective because the project has received a high level of support from the Local Government which participated in providing budget. 9

15 PART 4: PROJECT OUTCOME, TARGET BENEFICIARIES INVOLVEMENT (a) Project Specific Objective Achievement Details of achievements under Outputs and Activities have been provided in Section 3. A brief synthesis of whether the indicated output have been realized or not is provided below. Table 3. Realization of Outputs Output Summary Status Output 1.1: Database on Wood Project Management Unit designed a Database Realized Based Industries available on Wood-Based Industries in South Kalimantan. Output 1.2: Draft of the Master Plan analysed and identified comply with national and regional (Kalimantan) master plan Output 1.3: Public Consultations/dialogue implemented as participative process in developing/adjusting the master plan Output 1.4: A mechanism for implementation of master plan analysed and formulated A draft of the Master Plan was formulated. A series of meeting have been conducted by involving all project stakeholders. Many recommendations on the draft of the Master Plan obtained so that the Master Plan could be applicable. The Project Management Unit, together with Forestry Service of South Kalimantan Province, organized a Public Consultation conducted in Banjarmasin, Indonesia, on July 2, Approximately 100 participants attended the consultation. A draft of mechanism of implementation of the master plan has been formulated. A discussion regarding mechanism for implementation of the Master Plan was carried out on June 9, 2009 by involving all policy makers in South Kalimantan. Realized Realized Realized The above outputs have been achieved. The objective of the project which is to formulate the woodbased industry master plan for South Kalimantan province which could provide guidance and policy direction in developing sustainable wood-based industry in this area has been realized. Additionally, Governor Regulation number 017 year 2010 regarding Long Term Plan of Sustainable Development of the Wood Based Industries in South Kalimantan for the year of has been stipulated. Before, wood based industries activities in South Kalimantan had been based on Strategic Plan formulated by Ministry of Forestry. The plan is not based on scientific and specific research which explains the future prospect of wood-based industries in South Kalimantan. The objective of this project to formulate the wood-based industry master plan for South Kalimantan province which could provide guidance and policy direction in developing sustainable wood-based industry in this area. The master plan elaborates some aspects such as wood supply (Implementation of Forest Management Unit), wood demand (The total number of industries is based on the wood supply in each Management Unit and cluster based industries), market (wood terminal) functioning as wood supplier for small scale wood based industries. Additionally, the master plan can used as a scientific reference for the formulation of Local Government Regulation particularly in wood-based industries activities. In a long term, it will also contribute to the sustainable forest management. 10

16 (b) Target Beneficiaries Involvement Task Force to support the formulation of Master Plan of Wood-Based Industries in South Kalimantan was established based on Governor Decree no Number /0437/KUM/2008. The members are project stakeholders such as exporters, private company owners, Forestry institutions in South Kalimantan, Bappeda (Local Planning Board), Trade and Industry Service of South Kalimantan Province, Regency Secretary Economy Bureau of South Kalimantan Province, ISWA (Indonesian Sawmill and Wood Working Association), APHI (Association of Indonesian Forest Concession) of South Kalimantan, NGO, Forestry Faculty of Lambung Mangkurat University, etc. A series of workshop, discussion and meetings by involving all project stakeholders have been conducted. Input and recommendations on the content of the master plan have been obtained. In the later stage of the project intensive contact with Legal Bureau South Kalimantan Local Government has been made on the issue of obtaining Governor Decree so that this master plan can be implemented by all project stakeholders in the future. Business development (timber traders and other subsidiaries) may possibly develop timber business toward more competitive challenges and improving its market segment; and Government benefited from this master plan, this master plan could be referred to determine policy in order to develop timber sources to fulfill log supply for timber based industry towards sustainable timber based industry. Additionally, the government possibly will be able to targeting revenue and taxes from timber based industry, which figure may closely to the actual quantity. Furthermore, government will be able to supervise industries that have provided sufficient contribution yet; Community could participate in small scale business and cooperative as their contribution share to local and national economy. Business related activities that can be undertaken by community/farmers are including Community Timber Estate (HTR), People Forest (HR), Community Forestry (HK), Land/Forest Rehabilitation Movement (Gerhan) or establishing small industry and cooperative at village and sub district levels; For other stakeholders, the overview on timber based industry could possibly develop other business sector due to multiplier effects from timber based industry development, therefore, may perhaps expanding business opportunity to improve community s income, local and national economy to reduce poverty and unemployment. (c) Project Sustainability after Project Completion Detailed stages and strategies to achieve the objective of this project have been elaborated. Forestry Office of South Kalimantan and Local Government are expected to have a greater role in the follow up of the project. Phase II of the project is needed with Forestry Service of South Kalimantan and Local Government to take a greater role in its implementation. Proposal of the next phase is planned to be submitted by the Government of Indonesia to ITTO for funding. The focus of the next phase is to implement the agenda and projection stated in Master Plan to the Development of Wood Based Industries in South Kalimantan. Local Government has indicated its willingness and commitment to assist by processing Governor Decree to provide legal basis of this Master Plan. Additionally, Forest Management Unit Decree (KPH) has been implemented in two regencies as proposed in the Master Plan. Besides, Bappeda (Local Planning Board) also plans to duplicate the formulation process of this master plan for other sectors. 11

17 PART 5: ASSESSMENT AND ANALYSIS (a) Adequacy of Project Identification Process The project document elucidated the underlying problem, which formed the basis for formulation of this project concept. Illegal logging and over exploitation of production forest have caused a log supply deficit. Therefore, the wood based industries in South Kalimantan is not sustainable. The underlying cause of this problem was identified as unavailability of a master plan of the wood based industries in South Kalimantan and its mechanism of implementation. This problem analysis led to a set of proposed actions which constituted this project. During the implementation of this project, it has remained very clear that the problem analysis at the formulation stage had been correct and that the actions implemented were very relevant and appropriate. (b) Adequacy of the Results of the Identification Process The underlying concept for the project implementation is the formulation of the master plan of wood based industries in South Kalimantan. It is expected that the master plan could provide guidance and policy direction in developing sustainable wood based industry in South Kalimantan. In order to achieve the above mentioned objective, some strategies have been set. The strategies are: Providing a reliable reported data on wood supply in South Kalimantan Province include identification flow raw material from other province, also mapping of flow raw material supply for wood industry in this province. Developing of master plan for South Kalimantan Province Formulating mechanism and strategy to implement master plan Developing communication and dialogue to improve understanding of the master plan During the implementation of this project, it has remained obvious that the definition of problems to be tackled, the project objective and the choice of the implementation strategies had been appropriate. (c) Most critical differences between planned and actual project implementation The Workplan has been formulated to be implemented for the total period of 18 months as stated in the MoU between the Government of Indonesia (Forestry Service of South Kalimantan Province and Ministry of Forestry) and International Timber Trade Organization (ITTO) signed in 28 January Schedules of project activities arranged in the proposed workplan were based on the assumption that the project could be started in March However, longer time was needed to prepare things. The project officially started in May

18 Some of the activities were started behind schedule since there was a delay in obtaining the approval of the National Consultants. However, the problem was finally settled and even though the activities were started behind schedule, all activities can be completed. Regarding the implementation of activity 1.1, some additional months needed to strengthen the project findings which are related with Identification the flow data of raw material from other district and other provinces and Development Map of flow of raw material supplying the wood industry. It has been also discussed during PTC 2 conducted in Banjarmasin. Extension period -9 months- was needed to be able to process the Governor Decree which is a legall basis of the Master Plan. (d) Adequacy of time and funding The implementation of the mechanism which has been designed to be able to have sustainable development of the wood based industries in South Kalimantan surely needs a longer process. The ITTO project provided a total amount of 155,196 US$ to operate this eighteen month project. With the support of the local government budget, the objective stated and output as identified in the ITTO Project Document have been fulfilled. However, there was budget line for GIS software. This software is actually needed in operating this project. (e) Appropriateness of the Assumptions and Risks Made For development objectives all assumptions and risks were correctly identified. Government and industrial companies were in support the idea of formulating the master plan of wood based industries in South Kalimantan in the framework of achieving sustainable development of wood based industries in South Kalimantan. It was assumed that there would be a good coordination between private companies and other project stakeholders. The project got this support in the implementation of project activities. It is expected that the policy implementation stage, they also would like to cooperate. (f) Project beneficiaries A series of workshop, discussion and meetings by involving all project stakeholders have been conducted. Input and recommendations on the content of the master plan have been obtained. The private company owners, other forestry institutions and other project stakeholders have actively participated in coordination meeting held in July They also participated in two workshops on master plan formulation carried out in November Some other key stakeholders also participated in expert team meeting conducted in Jakarta in February Project stakeholders including all POKJA members also participated in Public dialogue conducted in Banjarmasin in July However, some stakeholders do not try to understand the content of the master plan systematically since they thought that there would be a position change and that meant their responsibility would be different. 13

19 Project beneficiaries will be benefited from the project since future improvement can be identified based on overview on timber based industry in South Kalimantan. Advantages from the overview on timber based industry are as follows: (1) For government, to determine policy in order to develop timber sources to fulfill log supply for timber based industry towards sustainable timber based industry. Additionally, the government possibly will be able to targeting revenue and taxes from timber based industry, which figure may closely to the actual quantity. (2) For Management Unit, to determine type of timber based industry that has high competitiveness, additionally, will be able to make decision for asset improvement, both through machinery modification and mill relocation toward efficiency and high sustainable growth industry; (3) For community, to participate in small scale business and cooperative as their contribution share to local and national economy. Business related activities that can be undertaken by community/farmers are including Community Timber Estate (HTR), People Forest (HR), Community Forestry (HK), Land/Forest Rehabilitation Movement (Gerhan) or establishing small industry and cooperative at village and sub district levels; (4) For business development (timber traders and other subsidiaries) may possibly develop timber business toward more competitive challenges and improving its market segment; and (5) For other stakeholders, may possibly develop other business sector due to multiplier effects from timber based industry development, therefore, may perhaps expanding business opportunity to improve community s income, local and national economy to reduce poverty and unemployment. The mentioned advantages are direct benefits for all stakeholders, particularly the government, businessman, and community. Additionally, there are indirect advantages such as: (1) a healthy business environment in placed; (2) sustainable forest management in placed; and (3) reducing deforestation and forest degradation; and (4) nationally will influence purchasing power of community toward timber processing products (primary and secondary) for housing and other purposes. (g) Project Sustainability after Project Completion The Master plan could be directly implemented in two proposed regencies in South Kalimantan (KPH Unit 1 Kabupaten Banjar and KPH Unit VII Kabupaten Tanah Laut). Forestry Office of South Kalimantan and Local Government are expected to have a greater role in the follow up of the project. Phase II of the project is needed with Forestry Service of South Kalimantan and Local Government to take a greater role in its implementation. Proposal of the next phase is planned to be submitted by the Government of Indonesia to ITTO for funding. The focus of the next phase is to implement the agenda and projection stated in Master Plan to the Development of Wood Based Industries in South Kalimantan. (h) Appropriateness of the Roles and Responsibilities of the Institutions Involved Many forestry institutions involved in a series of workshop, discussion and meetings conducted by the project. Local Planning Board Bappeda hosted a meeting on the mechanism for implementation of the Master Plan. Some other institutions such as local university, police, Ministry of Forestry, Forest Concessionaire Association, NGOs have participated actively in the discussions and workshop conducted by the project. 14

20 PART 6: LESSONS LEARNED (a) Development Lessons The design of the project was already appropriate for the subject matter. More involvement of local government officials in project implementation in collaboration with the project will increase the sense of ownership of the project, especially in development activities. The involvement of Task Force members in formulating the Master Plan should be increased in order to be able to have a commitment to achieve the objective of the project. A spatial based design pattern for Master Plan should be developed. The spatial aspect should be clearly stated in the formulation of master plan so that the spatial quantity and quality can be measured. The supply side of sustainable development of the wood based industry is based on Forest Management Unit KPH and the demand side is based on the cluster system. A legal aspect of this Master Plan in the form of Governor Regulation has been stipulated so this Master Plan can be implemented. The GIS Geographical Information System should be utilized to assist the spatial data base processing and updating in the future. The project should use the internet facility to promote more on the project activities. (b) Operational Lessons The role of Project Technical Committee (PTC) has been very positive in directing the project. Project results have been disseminated through a series of meeting and public consultations by involving all project stakeholders. Project monitoring and evaluation was conducted every semester through project coordinator presentations at the PTC meeting. The Project Technical Committee (PTC) should monitor and evaluate not only progress report presented by project coordinator every 6 months, but also evaluate the publication produced by national consultants. 15

21 PART 7: CONCLUSIONS AND RECOMMENDATIONS 1.1 Identification South Kalimantan Province has been chosen since most of large scale wood-based industries in Indonesia are located here. However, there are no wood resources that fulfill the raw material needed by wood based industries. Thus, the design of the project has been appropriate since the project could accommodate the proper formulation of the master plan. The Master Plan would be used as guidance and policy direction in developing sustainable wood based industries in this area. The Government of Indonesia as well as ITTO give priority to the sustainable forest management (SFM). GoI has five priority programs to support SFM. This small project is to support the improvement of processing efficiency that would be complementary to on-going ITTO projects in illegal logging, certification and reduced impact logging to develop a flourishing forest industry sector in Indonesia while meeting all the criteria for sustainable forest management. The project should employ the results of the project and aim at preparation for the implementation of the Master Plan. The specific objective of the project should deal with sustainable wood sources which are based on Forest Management Unit KPH and its relationship with wood based industry. The willingness of all stakeholders to realize Sustainable Development of the Wood-Based Industries in South Kalimantan should be safeguarded for its long term vision, and should not be jeopardized by short-term economic interests. 1.2 Design The combination of field visit and discussions, workshops by involving all relevant stakeholders is considered to have been an effective approach to formulation of the Master Plan. The project is designed in a very short term 18 months plus 9 month extension. However, the implementation agenda of the Master Plan should be designed in a long term project. The project has designed CDs and brochures which contain information on the project. However, the promotion through the media internet or newspaper should be increased. The next phase of the project should be designed by referring to the stages stated in project document. 1.3 Implementation Involvement of local officials in implementing the project should be increased especially in implementation activities. Involvement of local officials in the project is limited only on training, seminar and workshop. More involvement of local government officials in project implementation in collaboration with the project will increase the sense ownership of the project, especially in development activities. 16

22 1.4 Organization The organization of the project was in harmony with the working arrangements of the ITTO and accommodated local political considerations. Local Government also supported the project through the stipulation of Governor Decree number /0437/KUM/2008 regarding the Establishment of Task Force for Forest Industry Revitalization in South Kalimantan Province and Governor Regulation Number 017 year 2010 regarding Long Term Plan of Sustainable Development of the Wood Based Industries in South Kalimantan. 1.5 Management The Project Technical Committee (PTC) should monitor and evaluate not only the progress report presented by the project coordinator every 6 months, but more importantly should be evaluating the publications produced by scientists. The publications need to be discussed and communicated with the PTC to ensure that the ideas and research results have been tested and thoroughly communicated with the authorities. (a) Potential for Replication There is clearly a potential for replicating this project into the next phase. The demand of all stakeholders to implements all the stages remains strong. This wood-based industries master plan can be replicated by many districts in Indonesia and elsewhere. The approach of the district to promote sustainable development of the wood based industries may be replicated in areas with similar situation, where many wood based industries exist. (b) Potential for Scaling up Clearly, there is significant potential for scaling up on the implementation of the wood based industries master plan concept. Some micro findings could be scaled up in chosen locations for implementation process. It could be carried out to find out some constraints in the future. There are two recommended locations for the implementation process Banjar Regency and Tanah Laut Regency. Responsible for the Report Ahmad Jauhari Project Coordinator 17

23 List of Appendices Acronyms APHI BAPPEDA CD ROM Gerhan GIS GoI HK HR HTR ISWA ITTO KPH MITI MPR MoF MoU NGO PD Perpres PTC RPBI SFM YPO Asosisasi Pengusaha Hutan Indonesia (Association of the Indonesian Forest Concessioners) Badan Perencanaan Pembangunan Daerah (Local Planning Board) Compact Disc Read Only Memory Gerakan Rehabilitasi Hutan dan Lahan (Land/Forest Rehabilitation Movement) Geographic Information System Government of Indonesia Hutan Kemasyarakatan (Community Forest) Hutan Rakyat (People Forest) Hutan Tanaman Rakyat (Community Timber Estate) Indonesian Sawmill and Woodworking Assosiation International Tropical Timber Organization Kesatuan Pengkuan Hutan (Forest Management Unit) Ministry of Industry and Trade Indonesia Majelis Permusyawaran Rakyat (Consultative Assembly) Ministry of Forestry Memorandum of Understanding Non Government Organization Project Document Peraturan Presiden (Presidential Decree) Project Technical Committee Rencana Pemenuhan Bahan Baku Industri (Industry Timber Supply Plan) Sustainable Forest Management Yearly Plan of Operation 18

24 Appendix 2. Task Force Decree THE GOVERNOR OF SOUTH KALIMANTAN THE DECREE OF THE GOVERNOR OF SOUTH KALIMANTAN NUMBER /0437/KUM/2008 REGARDING THE ESTABLISHMENT OF TASK FORCE FOR FOREST INDUSTRY REVITALIZATION IN SOUTH KALIMANTAN PROVINCE THE GOVERNOR OF SOUTH KALIMANTAN Considering: a. the Project Agreement of PD 397/06 Rev 3 (I) Sustainable Development of the wood-based Industries in South Kalimantan between the International Tropical Timber Organization (ITTO) and the Government of Indonesia Forestry Service of South Kalimantan Province; b. that forest is a gift given by God to Indonesia. The forest is actually owned by the government however it should be utilized to benefit all the people. Therefore, the forest should be preserved, utilized optimally for the sake of the people. One way to do so is by developing sustainable wood based industry; c. that the wood based industry is now in a critical condition. Some efforts need to be carried out to settle it. One thing that can be done is by arranging some plans to develop wood based industry; d. that to be able to carry out a sustainable management of wood-based industry as mentioned in point b and c, a Task Force of Forest Industry Revitalization in South Kalimantan need to be established ; e. that based on point a, b, c and d, a Governor Decree of South Kalimantan needs to be stipulated; Taking into account: 1. Law Number 25 of 1956 Jo. Law Number 21 of 1958 on the Stipulation of Emergency Law Number 10 of 1957 on the Establishment of Autonomy Area at Provincial Level in South Kalimantan (Government Gazette of 1956 Number 65, Addendum of Government Gazette Number 1106); 2. Law Number 41 of 1999 on Forestry (Government Gazette Number 167 of 1999, Addendum of Government Gazette Number 3888) which has been changed by Government Regulation of Law Substitute Number 1 of 2004 on Changes of Law Number 41 of 1999 on Forestry (Government Gazette of 2004 number 29, Addendum of Government Gazette Number 4374) and it has been established by Law Number 19 of 2004 (Government Gazette of 2004 Number 67, Addendum of Government Gazette number 4401) 3. Law Number 10 of 2004 on the Stipulation of Law Regulation (Government Gazette of 2004 Number 53, Addendum of Government Gazette number 4389); 4. Law Number 32 of 2004 on Local Government (Government Gazette of 2004 number 126, Addendum of Government Gazette number 4437) which has been changed for a few times and it was last changed by Law Number 12 of 2008 on 19