Multistakeholder Forestry Programme Phase 3 Technical Reports
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1 Multistakeholder Forestry Programme Phase 3 Technical Reports Building the Road Map for Strengthening SVLK Policy and Implementation in Indonesia
2 Progress Report: Building the Road Map for Strengthening SVLK Policy and Implementation in Indonesia MFP3 Jakarta, December 2015
3 Table of Contents List of Figures and Tables List of Abbreviations 1 Executive Summary 2 1 Preliminary 4 2 Scope of Activity and Expected Results 5 3 Flow of Research Process 7 4 Provisional Result Overview on the Journey of SVLK Policy Implementation SVLK and Forest Governance Improvement SVLK and Source of Legal Timber Supply for Industry SVLK and Small and Medium-scale Enterprises 13 5 Conclusion 15 Bibliography 16 iii ii
4 List of Figures and Tables Figure 2-1 Scope of SVLK Study... 6 Table 4-1 Progress of Production - Natural Forest Exploitation of Table 4-2 Trend of Production - Natural Forest Exploitation Table 4-3 Progress of Industrial Plantation Forest of Table 4-4 Utilization and Use of Forest (million Ha) Table 4-5 Production and Productivity of State Forest and Community Forest in Java iii
5 List of Abbreviations DKN FLEGT-VPA HD HTR IPHHK IUPHHK-HA IUPHHK-HT IUPHHK-HKm MFP PUHH SVLK Dewan Kehutanan Nasional (National Forestry Council) Forest Law Enforcement, Governance and Trade and Voluntary Partnership Agreement Hutan Desa (Village Forest) Hutan Tanaman Rakyat (Community Plantation Forest) Industri Primer Hasil Hutan Kayu (Wood Processing Industries) Izin Usaha Pemanfaatan Hutan Hasil Kayu Hutan Alam (Business Permit for Timber Forest Products Utilization Natural Forest) Izin Usaha Pemanfaatan Hutan dan Hasil Kayu Hutan Tanaman (Business Permit for Timber Forest Products Utilization Plantation Forest) Izin Usaha Pemanfaatan Hutan dan Hasil Kayu Hutan Kemasyarakatan (Business Permit for Timber Forest Products Utilization Community Forestry) Multistakeholder Forestry Programme (MFP) Penatausahaan Hasil Hutan (Timber Administration) Sistem Verifikasi Legalitas Kayu (Timber Legality Assurance System) 1
6 Executive Summary MFP3 and its partner KARSA, an NGO based in Jogja (Central Java), conduct a study to develop a road map to strengthen the policy on SVLK (Indonesia s Timber Legality Assurance System) and sustainable forest management for the National Council of Forestry (DKN). The process takes place from September 2015 to April There are five research questions that the study attempt to address: a. What is the rationale behind the development of SVLK policies, including the narrative used to justify its creation? b. What are the benefits of SVLK on the national economy, particularly for the business holders, including the benefit in terms of social and environmental context? c. What are the underlying challenged related to SVLK policy and implementation from the perspectives of forestry business holders or from the certifiers/auditor, including from the perspectives of women using gender analysis perspective? d. What are the option that might be incorporated to SVLK regulation such as conflict prevention, corruption prevention, issues related to forest governance and other indirect issues related to SVLK implementation? Scope of the Study The scope was developed based on the research questions and consists of four aspects (see Figure 1): a. Rationale of the existence of SVLK and its regulations and institutions, including its criteria and indicators selection as well as its appraisal system. b. The key subjects of SVLK s impacts, i.e. all holders of IUPHHK-HA and IUPHHK-HT, privateowned/community forest, as well as all timber industry license holders. The latter consists of SMEs as well as plywood, pulp and paper industries. The business players could be differentiated into the following categories: a. License Holders included in a holding company (IUPHHK-HA and IUPHHK-HT) b. License Holders not included in a holding company (IUPHHK-HA and IUPHHK-HT) c. Community / Private-Owned Forests d. Small Medium Enterprises Those four types of business holders have different risks from SVLK implementation, resulted from different reasons: a. Differences of the transaction costs raised from different forestry business licensing systems and/or the timber trade systems. b. The pressure from the timber market price as a result of the weak bargaining capability to influence the timber price. 2
7 c. The Licensing systems, including the Provision Regarding the Indonesia Wood Administration (Penatausahaan Hasil Hutan or PUHH). It focuses on the amount of the transaction cost related to the licencing system such as the cost to obtain the permit, to develop the industry, including implementing the trade management system. d. Trade Policy and International Issues. This policy is important to overcome the problem in forest governance system and its related industries. The initial findings resulted from this study indicate a number of issues as follows: The need to emphasise the implementation of SVLK policy as an export instrument. The future challenges is to strengthen the policy as an instrument to improve the forest governance for sustainable use and social justice A road map to address options for strengthening SVLK legality basis which gives mandates for Ministry of Environment and Forestry and its sub ordinaries to implement SVLK rules. The future SVLK policy should address the actual challenges for sustainable forest governance practices and its related social justice issues in Indonesia The future challenge of SVLK implementation is also addressing the tendency of timber companies to avoid the production of sustainable timber. A comprehensive policy is needed to address the challenges in SVLK policy implementation in the medium and small scales timber industries. Options to design a future SVLK policy that could also address problems of high transaction costs, corruption practices, and conflicts is also a major challenges for SVLK Implementation. 3
8 1 Preliminary The MFP is currently established process to provide inputs to National Forestry Council (DKN) on possible elements to be included in the road map of SVLK Policy in the future. In this context, MFP is behaving as a forestry observer forum as stipulated in Article 70 paragraph 3 of Law Number 41 Year 1999 on Forestry that stated: Dalam rangka meningkatkan peran serta masyarakat Pemerintah dan Pemerintah Daerah dapat dibantu oleh forum pemerhati kehutanan. ( In order to increase the community participation, Government and Local Government may be assisted by forestry observer forum ) The forestry law does not contain detail explanation on the relationship between DKN and the Ministry of Forestry. However, as the only institutionalized multi-stakeholder forum, DKN s role in developing the SVLK road map is critical. This constituent-based institution divided its members into five (5) chambers that respectively represent the government, indigenous and local communities, business, NGO/observer, academic/researcher. The division has shown that there is an inherent mechanism in DKN to run multi-stakeholder consultation process. MFP underlined the need for all parties concerned to contribute on the development of the SVLK policy road map. Inputs from various parties will make SVLK increasingly relevant to the achievement of more sustainable and equitable forest management. This process is also providing broad legitimacy to the SVLK process. It is expected to raise SVLK s credibility in public. Such legitimacy also contributes to the strengthening of public support in blocking attempts to debilitate SVLK policies by certain parties. The most important elements in strengthening SVLK policy are internalisation of strategy, mainstreaming scheme into national policy, and rapid response to on-going forest governance issues. The role and credibility of SVLK are critical for both exporters and producers of timber and other forest products to access premium price. The expected results of this activity are: 1. Recommendation from multi-stakeholders for elements included in the road map for SVLK improvement and primary sector of forest management. 2. Series of Policy Brief for decision maker. The next chapter discussed the scope of this study and its provisional results. Conclusion and the process to develop proposal of the road map will be included in the final report. 4
9 2 Scope of Activity and Expected Results The implementation is facilitated by KARSA, an NGO based in Yogyakarta. A study has been conducted to draw up policy recommendations for strengthening the certification and primary sector of forest management, based on the five major questions below: a. What is the rationale of SVLK and its basic policy narration? b. What are the SVLK s benefits for the country and for certified enterprises, either economically, socially and environmentally? c. What are the major problems of SLVK implementation based on perception of primary forestry enterprises and certification/auditor bodies, including from gender s perspective? d. What is the most possible option to be carried out: interpolation of new SVLK indicators such as conflict prevention and anti-bribery, or pull out the governance issues from the certification process as agenda of central/local government? e. Are revisions or new regulations related to SVLK implementation still relevant? In other words, what is the most appropriate legal base for underlying the SVLK in interministries/agencies agenda, including the Ministry of Trade, the Ministry of Industry, the Ministry of Finance, and the National Police? Six team members will be selected to carry out the desk study. The selected persons should have experiences in conducting study on certification issues (including SVLK). The findings of the desk study will be complemented with results of discussion with industrial players (primary sectors: IUPHHK-HA and IUPHHK-HT, and community forest) and certification/auditor bodies. The six team members that involved in writing the study and the scope of the study are as follows: 1. Prof. Dr. Ir. Hariadi Kartodihardjo, MS, as an expert on forest management and institutional 2. Dr. Myrna Safitri as a jurist 3. Dr. Mubariq Ahmad as an economist 4. Drs. R. Yando Zakaria as an sociologist 5. Dr. Rahmanta Hadi as an expert on social forestry and forest product industry policy 6. Paramita Iswari, ST, MA as a gender specialist and team facilitator In order to focus and limit the study, the scope of the study is set out by the following stipulations: a. The establishment of SVLK system is still based on historical sentiment with various regulations and institutions, including the stipulation of the criteria, indicators and system of assessment (such as LPI and KAN). b. The permit holders of forest utilization in production forest (IUPHHK-HA and IUPHHK-HT) and right/community forest, and all permit holders of timber utilization industries, those are plywood, pulp, paper and small and medium industries are the most affected players. The business players are classified into: 5
10 1. Permit holders (IUPHHK-HA and IUPHHK-HT) that are incorporated in a holding company. 2. Permit holders (IUPHHK-HA and IUPHHK-HT) that are not incorporated in a holding company. 3. Advanced industrial business permit 4. Primary industrial business permit 5. Private/Community forest business player 6. Small and medium enterprise player Each of the business groups has different risks to the SVLK implementation, mainly due to: 1. Transaction costs caused by permit system, including the timber administration system. 2. Timber selling price pressure due to the weak bargaining in uncompetitive price fixing in market. c. Permit system, including timber administration (PUHH) and its implementation. In this matter, especially viewed from the high cost of permit system, either for utilization permit, industry establishment, and implementation of timber administration. d. Trade policy and international issues. This policy is considered essential when intended for resolving the poor governance of forest utilization and industry. The flowchart of the four aspects of SVLK study can be seen in Figure 1 below: Figure 2-1 Scope of SVLK Study 1 SEJARAH PEMIKIRAN & REGULASI SVLK 2 IUPHHK-HA IUPHHK-HA holding company PLYWOOD HUTAN NEGARA DAN HUTAN HAK tidak terintegrasi IUPHHK-HT tidak terintegrasi terintegrasi IUPHHK-HT terintegrasi holding company PULP & KERTAS 4 EKSPOR & KEBIJAKAN INTERNASIONAL HUTAN RAKYAT INDUSTRI KECIL- MENENGAH/IKM tidak terintegrasi USAHA KEHUTANAN PRIMER KEBIJAKAN & BIAYA TRANSAKSI PERIZINAN & TATA USAHA KAYU 3 6
11 3 Flow of Research Process The pathways of development process of SVLK road map from September 2015 to April 2016 are as follows: 1. Team Building Team building has been executed by programme management at the beginning of the programme. The team building is intended to take care of various administrative needs of research team and to agree on schedule of team consolidation meeting. 2. Team Consolidation Meeting Team consolidation is intended to reach a common understanding on the purpose of research and to agree on report outline and task sharing. The consolidation team meeting had been held on September 11, 2015, at Grand Zuri Hotel, Yogyakarta. The meeting discussed the measures of research and time frame until mid Preparation of study by each researcher Desk study and draft of its results will be submitted by each researcher by the end of Workshop of Writer consolidation to generate Draft 1 In early January 2016, six researchers will meet in a workshop to discuss the findings of their respective studies and consolidate them into one draft report. The consolidated report will be named as Draft FGD with primary sector entrepreneurs and certification/auditor bodies The purposes of Focus Group Discussion (FGD) activity are to clarify the findings of the study and to explore inputs from FGD participants. Twenty persons from certification/auditor bodies and twenty from primary sector entrepreneurs will be invited to the workshop that will be held at the end of January 2016 or the beginning of February 2016 in Jakarta. 6. Multi-Stakeholder Workshop A one-day workshop to present the results of the study will be held. The Presidium of DKN is invited to represent the five chambers in commenting and complementing the results of the study. Critical opinions will be elaborated for formulating recommendation related to the SVLK policy and primary sector of forest management to improve forest governance in Indonesia. The workshop will produce additional recommendation to the study. The workshop will be held in Jakarta and attended by 15 participants from outside Java and 30 participants from Jakarta. 7. Development of a Policy Brief The final draft will be presented in a form of a policy brief and submitted to the relevant parties, such as the MoEF, the MoTrade, and other. Activities undertaken in this stage are as follows: - Team consolidation meeting to agree on the targets, scope, and outline of the policy brief. - Development of a Policy brief. The team consolidation meeting is to agree on the targets, scope, and outline of the policy brief and the multi-stakeholder workshop will run concurrently, and then followed by writing them independently. 7
12 4 Provisional Result This subchapter explained important findings of the study, as follows: 4.1 Overview on the Journey of SVLK Policy Implementation Ministry of Forestry (now the Ministry of Environment and Forestry) initiated SVLK (Timber Legality Assurance System) as a policy in early 2000s with supports from various stakeholders, including the key buyer countries that concerned on illegal logging practices in many of the Asia and Africa s timber producer countries. As a follow-up of a consultation with key partners in 2003, the SVLK policy was established in 2009 under the Minister of Forestry Regulation Number P.38/Menhut- II/2009 on Standards and Guidelines of Performance Evaluation of Sustainable Forest Management and Timber Legality Verification for Permit Holders or Private Forests. The endorsement of SVLK policy increased in 2007 as Government of Indonesia (GoI) started the negotiation with the European Union on the inclusion of the SVLK into Forest Law Enforcement, Governance and Trade and Voluntary Partnership Agreement (FLEGT-VPA). In addition, the application of Due Diligence principles in some European Union countries and Lacey Act mechanism in USA pressured the timber producers who wanted to export their products. In this context, DFID/UKCCU provides support to GoI in preparing the timber industry to entry into FLEGT-VPA scheme through the Multi-stakeholder Forestry Programme phase 2 (MFP 2) which took place for two years (2008 to 2013). At the end of the MFP 2, both GoI and UK Government signed agreement on preparing FLEGT-VPA in December The Multi-stakeholder Forestry Programme phase 3 (MFP 3) was established in 2014 to continue the efforts of both countries in preparing Indonesian Timber Industry to enter the FLEGT-VPA scheme. Indonesia conducted both domestic preparation and international negotiation of FLEGT-VPA, including continuously improves the SVLK policy and implementation. During two years of preparation stage ( ), Ministry of Forestry applied SVLK as a mandatory provision for all forestry sector industries. Number of revision to SVLK policy were made from 2009 to 2014, including the guidance for its implementation. The following are some of the important amendments: Regulation Number P.38/Menhut-II/2009 was amended twice by the Regulation Number P.68/Menhut-II/2011 jo. P.45/Menhut-II/2012 jo. P.42/Menhut-II/2013 and by P.43/Menhut- II/2014. Director General Regulation Number P.6/VI-Set/2009 on Standards and Guidelines of Performance Evaluation of Sustainable Forest Management and Timber Legality Verification was also amended twice by P.02/VI-BPPHH/2010, P.8/VI-BPPHH/2011, P.8/VI-BPPHH/2012 and by P.5/VI-BPPHH/2014 in The change of government administrative in 2014 has brought out the importance of building longterm commitment related to the SVLK implementation that was built under the leadership of President Susilo Bambang Yudhoyono. New political direction and new challenges occurred for SVLK implementation, implied a growing concern of the future of SVLK. 8
13 One of the most challenges development is the issuance of new Ministry of Trade regulation which opted out SVLK as one of the requirements for wooden furniture industry and handicraft to get export license. This new regulation is also impacted GoI s commitment to the FLEGT-VPA cooperation agreement. There is a concern that the long negotiation process will to be stagnated, or even cancelled. On the other hand, this situation resulted in a recognition of fundamental weakness of SVLK regulations. At the time this report is written, the SVLK is only based on the Ministry of Environment and Forestry s regulation, and as a result, is limiting the implementation beyond the scope of authority of the Ministry. The elephant in the room is: what are the options that SVLK has to take in order to effectively implement in both short and long term? The study is also conducted to answer the concern of sustainability of the SVLK, not only in the context of ensuring the legality of timber export from Indonesia but also in the context of improving forest governance nationally. The next subchapter will discuss number of issues on the relationship between SVLK and forest governance. 4.2 SVLK and Forest Governance Improvement The SVLK has gained recognition as an instrument for the international trade of legal timber export. However, it is unclear how SVLK will take a role in improvement of public policy, increasing forest sustainability, and economic fairness in utilization of natural resource. In the last 20 years, the SVLK policy does not have significant contribution to the improvement of primary sector of forest products 1, both timber and non-timber. The primary forestry businesses (IUPHHK-HA and IUPHHK-HT) outside Java are still relatively undeveloped (see Table 1, 2, and 3). Only the community forest businesses in Java have good infrastructure and proper location. The weakening of forestry businesses is due to several causes, including coal mining exploitation in production forest areas, labour competition, fuel use competition, expansion of oil palm plantation, and tenure conflict with community. In addition, the economic fairness for community around forest area is also questioned by many stakeholders. Majority of forest tenure outside Java are dominated by large companies (Table 4), leaving a small allocation for community. Government s policy needs to be reviewed as it does not include the growth of community-based forestry business outside Java as one of the targets. If the condition continues, it will cause the following matters: a. SVLK will gradually lose its credibility to the primary sector of forest economy. There are many businesses with identity of sustainable-legal, but with tenure conflict, high transaction costs, and lack of indigenous/local community s access to forest economic benefit still dominate the problems in the field, the pressure to convert forest into other uses will increase. The consequence will be a decreasing relevancy and legitimacy of the SVLK policy into the process. b. The national and regional forest management policies do not align with real problems on the ground. There is an impression that the measurement against the policy makers performances are only based on recognition of SVLK from international community. It is critical to ensure the alignment of the SVLK implementation with the problems in the field to gain support for SVLK policy. 1 Primary sector of forest products is the whole timber and non-timber processing that produce raw material 9
14 c. The negligence on the paradoxical situation between the identity of sustainable-legal on the one hand, and the poor forest governance with various dimensions on the other hand, can increase the gap between certified industries and the supporter for fairness in utilization of forest resources. If it is not immediately addressed, the counter-productive movement to SVLK will emerge. d. There is a concern that SVLK implementation is unable to improve the permit policy and timber trade system which cause high transaction cost, which only enterprises belong to a holding company could cover. Meanwhile, the cost will create additional production cost for the rest of the enterprises. Table 4-1 Progress of Production - Natural Forest Exploitation of Note: Active IUPHHK-HA = 115 management units of 294 management units (=39%). PHPL Certification: a/. Voluntary= 11 management units (3.7%), b/ Mandatory: 37 management units (12.6%) Translation of texts in the above table: Tahun = Year, Jumlah HPH = Total HPH, Luas Areal = Area, Produksi x Juta Ha = x million ha, Production, SK = Decree, Efektif = Effective, Kuota = Quota, Realisasli = Realization, Produktifitas Hutan Alam = Natural Forest Productivity, m 3 /ha/th = m 3 /ha/y, Keterangan Remarks, Transisi Orba Reformasi = The New Order Reformation Transition, HPH aktif = Active HPH TREN HPH AKTIV = TREND OF ACTIVE HPH Jumlah HPH aktive = Total Active HPH 10
15 Table 4-2 Trend of Production - Natural Forest Exploitation Table 4-3 Progress of Industrial Plantation Forest of Years Total (Unit) Total Area (Ha) Total Plantation (Ha) Accumulative Total Plantation (Ha) ,626, ,691 3,121, ,802, ,914 3,253, ,734, ,125 3,416, ,187, ,953 3,648, ,883, ,838 4,005, ,923, ,463 4,310, ,673, ,311 4,522, ,726, ,758 4,980, ,633, ,205 5,381, ,854, ,744 5,781,412 Note: Total plantation area +/- 3 million HA. From 245 HTI units, only 106 units (45 %) obtain Annual Work Plan. Realization of plantation decreases in the last 3 years. Table 4-4 Utilization and Use of Forest (million Ha) No. Description Total (Unit) Area (Ha) Allocation (%) 1. IUPHHK-HA IUPHHK-HTI IUPHHK-RE Large-Scale Enterprises ,82 4. IUPHHK-HTR 85 Cooperatives Persons IUPH-Sylvo Pastura IUPHHBK IUPHHK-HD and HKm Small-Scale Enterprises ,18 TOTAL Source : The Ministry of Forestry,
16 4.3 SVLK and Source of Legal Timber Supply for Industry A case study analysis on the trend of timber supply in Java, which is dominated by communitybased timber industry is essential for SVLK Implementation. The Forestry Law Number 41/1999 inquired 30% of Java area should be covered in forest land. Currently, total forest area in Java is only 2,881,949 hectares or about 23.1%, with production forest as the largest (62% from total forest cover). If the community-based forest land is added to the equation, the total area will reach 38.8%. This shows the important role community-based forest management (CBFM) plays in keeping the balance of ecosystem in Java Island. Community forest, in general, carry a much larger production capacity and productivity than production/industry forest, managed by the State-Owned Forest Company (Perhutani). With the total area of 5.7 million hectares, its productivity could reach 2.72 m3/ha/year with almost 26.2 years of plantation circle (calculated with Von Mantel formula). This indicates that community forest have a stable sustainability level in providing the raw material supply for forestry industry. In 2012, raw material supplies for primary and advanced industries in East Java were 57.7% from community forests, 12.1% from Perhutani, and 30.2% were imported from outside Java (East Java Forestry Office, 2012). In the same year, raw material supplies in Central Java were 46.8% from community forests, 6.4% from Perhutani and 46.8% were imported from outside Java (Central Java Forestry Office, 2012). The data shows that community forest will play strategic role as the main sources of raw materials for industry sector. The industries dependence on community forest land is shown in Table 4-5 below: Table 4-5 Production and Productivity of State Forest and Community Forest in Java DI Yogyakarta East Java Central Java Area Production (m3) Productivity (m3/ha/y) Production (m3) Productivity (m3/ha/y) Production (m3) Productivity (m3/ha/y) State Forest 67, , , Community 95, ,192, , Forest TOTAL 162, ,633, , West Java and Banten TOTAL Area Production (m3) Productivity (m3/ha/y) Production (m3) Productivity (m3/ha/y) State Forest 177, ,026, Community 1,720, ,708, Forest TOTAL 1,898, ,734, Sources: Dishutbun of DIY (2009), Dishut of West Java (2010), BPKH XI (2009, 2010), Dishut of Central Java (2012), Dishut of East Java (2012). Two important things to underline are as follow: It is unlikely that a significant increment of timber production will come from large-scale enterprises. It is likely that the biggest opportunity will come from small and medium-scale enterprises owned by private forest or through other community-based forest management models in state forest. Although this phenomenon occurs mostly in Java, but it is not impossible that the pattern will also occur outside Java, if the local governments take serious efforts to develop it. However, the tenure conflicts is still dominating forest governance outside Java. It needs to be addressed, together with commodity market competition, labour competition, cost structure, market access, etc. It is also critical to measure how the SVLK policy contributes to the development of community timber, especially in forest areas. 12
17 The demand for raw materials for Java s timber industry can be considered large, with 30.2% in East Java and 46.8% in Central Java comes from outside Jakarta. This information indicates that the guarantee of legal timber should be applied to imported timber; and timber legality verification policy should also be applied not only to the upstream but also to the downstream industries. 4.4 SVLK and Small and Medium-scale Enterprises The study shows that there are many challenges in SVLK implementation, especially for small and medium enterprises (IKM). Since SVLK policy entry into force in mid-2009, only 137 IKMs that have been certified or less than 1 % of total IKMs (furniture association and the Ministry of Trade data). Since the 1 st of January 2015, S-LK is mandatory for the license holders of IUI, TDI, ETPIK nonproducer, IUPHHK-HKm/HTR/HD/HTHR, and exporters of forestry industry products (9 HS) as part of their export documents. However, as recorded by MFP 3, only 12 community-based forest enterprises, 86 IKMs and craftsmen, and 39 ETPIK non-producers have been certified. The main challenges in certification/verification process are financing, lack of knowledge on permit procedure, source of raw material, and the process from production until export. Inability to finance the first surveillance audit causes the certificates of a number of community forest enterprise units that have obtained timber legality certification frozen by certification body. According to the Minister of Forestry Regulation Number 43/Menhut-II/2014 and Director General of Development of Forestry Enterprise Regulation Number P.5/VI-BPPHH/2014, if the S-LK holder remains unable or unwilling to be subject to surveillance within 3 (three) months after freezing stipulation, the S-LK will be revoked. The implementation of timber legality verification in Indonesia also faces difficulty in initial verification and surveillance audit. The lack of capability of community forest enterprise units to independently finance the audit is the main challenge. Therefore, when the audit is take place, the enterprises is not ready to present their market competitiveness that is needed to obtain the certificates. In addition, difficulties in fulfilling the Guidance and Standard of SVLK also come in the form of regional regulation or policy that are not related to SVLK. The lack of verifiers that could fill the requirement as stipulated in Standard 2.5 P.8/VI- BPPHH/2011 jo Standard 2.6 P.14/VI-BPPHH/2014 could also increase the transaction cost. According to the Standard the verifiers are entitled to the following: a) Deed of establishment and the latest change, b) SIUP (Trading Business Permit), or Trading Permit listed in IUI (Industrial Business Permit) or IUT (Permanent Business Permit), or TDI (Industrial Registration Number), c) HO permit (Environmental disturbance permit), d) Company Registration Number (TDP), e) Taxpayer Identification Number (NPWP), f) Environmental Impact Analysis (AMDAL)/Environmental Management Effort (UKL) Environmental Monitoring Effort (UPL)/Environmental Management Statement 13
18 (SPPL)/Environment Management Document (DPLH)/Environmental Permit (SIL)/Environment Evaluation Document (DELH), g) Industrial Business Permit (IUI) or Permanent Business Permit (IUT) or Industrial Registration Number (TDI), and h) Industrial Raw Material Fulfilment Planning (RPBBI) for Primary Industry of Forest Products (IPHH). A survey on in 2012 showed that there was only 28.6% of the industries that had the complete set of permit documents. More than the half admitted to not have any permits and 19% had only part of the required permits. In general what had been missing from the set was AMDAL/UKL- UPL/SPPL/DPLH/SIL/DELH and IUI/IUT/TDI. Many enterprises only have Deed of Establishment, SIUP, HO and NPWP (Setiahadi, et al, 2012) The survey also showed that the high-cost permit procedures had hindered the certification process. As an example, the Jepara-based enterprise needs to complete their Building Constructing Permit (IMB) as a prerequisite for their HO application. This created additional cost for the enterprise. It is critical that the SVLK policy shall include a clear road map of how small and medium enterprises could overcome the abovementioned challenges. One of the solutions that is being tested is to apply SVLK in a group, thus it will save the transaction cost. However, other challenges such as different local government policy need to be accommodate in the road map. 14
19 5 Conclusion The study is aimed to elaborate current SVLK policy as an input to road map design. At the time this report is written, the first draft of the report had been produced. Findings presented in this report do not illustrate overall findings of the study. However, it provides inputs in designing the road map, as follow: It is critical to address on how the SVLK policy can significantly contribute to forest governance improvement and not merely be considered as an important export instrument. It is important to propose future options in relation to legality aspect of the SVLK as a way to strengthen the implementation outside the Ministry of Environment and Forestry jurisdiction. There is an urgency to address real problem on the ground and align it with the current SVLK development. SVLK policies shall improve the way the legal timber industry meet the demands of raw materials, including how to manage community-based forest s products. A more comprehensive road map is needed for small and medium enterprises to overcome the barriers of SVLK implementation. 15
20 Bibliography Kartodihardjo, H. 2015, Cakupan Kajian SVLK. Supporting document for SVLK Road Map study. Kartodihardjo, H. 2015, Aspek Kebijakan dan Managemen: Terbatas Usaha Besar, Draft of Report. Term of Reference (TOR), SVLK Sebagai Jalan Perbaikan Sektor Primer Kehutanan. Setiahadi, R Dikotomi Perspektif Hulu Hilir dalam Dimensi SLK, (Case: Supply Chain of Wood Raw Material form Community Forest for Industry in Java), Draft of Report. 16
21 For more info: Manggala Wanabhakti Building, Block 7, 6th Floor Jl. Jend. Gatot Subroto, Jakarta 10270, Indonesia P Dipo Tower Unit B, 9th Floor Jl. Jend. Gatot Subroto Kav , Jakarta 10260, Indonesia P F
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