Implementation of Indonesian Timber Legality Assurance System (Sistem Verifikasi Legalitas Kayu): Progress and Challenges

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1 Implementation of Indonesian Timber Legality Assurance System (Sistem Verifikasi Legalitas Kayu): Progress and Challenges Dr. Rufi ie Director, Forest Products Processing and Marketing Directorate General of Sustainable Management of Production Forests Ministry of Environment and Forestry INDONESIA Regional Forest Governance Forum Brazzaville, Republic of Congo, October 2018 MINISTRY OF ENVIRONMENT AND FORESTRY REPUBLIC OF INDONESIA

2 Toward Sustainable Forest Resources SFM GOOD GOVERNANCE SVLK DEVELOPMENT LAW ENFORCEMENT

3 Uniqueness of SVLK SVLK is developed Implemented By forestry-based stakeholders Mandatory Strong commitment to sustain forest resources Based on Indonesian law and regulation Through multi-stakeholders consultation process

4 SVLK Scheme Government (Regulator & Facilitator) National Accreditation Body (KAN) * COMPLAINT ACCREDITATION APPEAL Certificate of Accreditation Independent Verification Bodies (CAB) COMPLAINT PUBLISH Independent Monitor AUDIT APPEAL PUBLISH V-Legal - Document (FLEGT License) Auditee - Management Units Certificates of SFM/TL SILK.DEPHUT.GO.ID

5 LEGAL TIMBER Due diligenceö Import Ö Due diligence Timber depot State-owned Forest Privately-owned Forest Primary industry Secondary industry Point of export Ö Legal in harvest Ö Legal in transportation Ö Legal in Production Process Ö Legal in Marketing Timber administration Legal Business Unit CoC/timber tracking/verification

6 FOREST PRODUCT EXPORT MECHANISM 5 V-LEGAL DOC IS PRINTED BY CBs 4 LV-LK 40 HS Code 6 SILK online LIU-MoEF Competent Authority V-LEGAL DOCUMENT ISSUANCE PROCESS EXPORTER 7 Customs Destination Country 2 3 IMPORTER

7 SILK - Information Center on SVLK

8 Online SILK On-line Electronic system to connect respective Ministries (MoEF, MoTrade, MoFinance) and Competent Authorities As platform for Licensing Authorities to issue V-Legal Documents/FLEGT Licenses easy, fast, more credible and accountable), Reliable - Operate 24 hours/7 days Development of SILK (Information System for Timber legality) since 2012: - Issuance of V-Legal Documents since 2013, - Issuance of FLEGT Licensie since November Communication of Licensing Information Units/LIU with Competent Authorities, Real-time information on timber exports On line verification on requirements for issuance of import recommendation (no longer by regulation), Open for public and holders of access rights (Governments, Accreditation Bodies, Licensing Authorities, SVLK Certificate Holders, CAs, Exporters/importers, Independent Monitors),

9 SVLK Development & FLEGT-VPA Progress SVLK Development 2009 Forestry Regulation on SVLK 2012 Trade Regulation on SVLK FLEGT-VPA Joint Declaration 2013 Ratification on SVLK Acceleration SILK online 23 March 2015 Import Regulation 2001 Bali FLEG Declaration 2007 RI-EU FLEGT-VPA initiated 2011 Negotiation Concluded 2013 Signing RI-EU FLEGT-VPA EUTR Take into Force 2014 EU Ratification 15 Nov 2016 FLEGT Licensing

10 INDONESIA EU FLEGT VOLUNTARY PARTNERSHIP AGREEMENT DEFINITIONS RELEASE OF SHIPMENT FLEGT LICENSING SCHEME (Product Coverage) STAKEHOLDER INVOLVEMENT LICENSING INFORMATION UNIT AND LICENSING AUTHORITIES COMPETENT AUTHORITIES SOCIAL SAFEGUARDS (Impact Monitoring) JOINT IMPLEMENTATION COMMITTEE (JIC Sec, JWG, JEM) FLEGT LICENSE (Annex IV, V) MONITORING AND EVALUATION (Periodic Evaluation, IMM) VERIFICATION OF LEGALLY-PRODUCED TIMBER (SVLK) REPORTING AND PUBLIC DISCLOSURE INFORMATION (Yearly Report)

11 Working Structure JPC JPC JIC JEM JEM JEM TWG JWG TWG NEGOTIATION PREPARATION IMPLEMENTATION 2016

12 25 CABs Have been accredited by the National Accreditation Committee CSO-consortium (as an independent monitoring body) is actively monitoring It does work! Majority of companies/auditees (on and off forests) are becoming more acceptive/ cooperative/ supportive GoI responds to problems raised/reported accordingly >25 Million hectares of forest and 3172 Wood manufacturers have been CERTIFIED (since 2010) Regulations are improved MINISTRY OF ENVIRONMENT AND FORESTRY REPUBLIC OF INDONESIA

13 Export Values of Wood Products KEMENTERIAN LINGKUNGAN HIDUP DAN KEHUTANAN Value (US $) 12, Year Total EU Non EU ,168, ,468,897, ,055,066, , , , , , , ,973, ,944,438, ,586,411, ,300, ,971,405, ,843,705, , , , ,850, ,396,357, ,265,207, , ,709, ,940,936, ,935,676, , Jan sept ,085, ,443,220, ,277,305, Jan sept 2018 Non EU EU Source: silk.dephut.go.id, downloaded on 2 Oct 2018

14 Export of Wood Products by Product Types KEMENTERIAN LINGKUNGAN HIDUP DAN KEHUTANAN No Product Value (US $) Millions 4,000 3,500 3,000 1 Panel 14,988,772,476 2,500 2 Paper 14,789,880,150 2,000 3 Pulp 11,574,133,875 1,500 4 Woodworking 5,400,144,260 5 Furniture 4,962,022,379 6 Chipwood 591,736,785 7 Handycraft 345,840,532 8 Veneer 323,451,017 1, Prefabrication Building Chipwood Furniture Kerajinan Panel Paper Pulp Veneer Woodworking 9 Prefabrication Building 26,110, Jan s.d sept 2018 TOTAL 53,002,092,295

15 Reality against Expectations MINISTRY OF ENVIRONMENT AND FORESTRY REPUBLIC OF INDONESIA Expectations Improved forest governance Reduced IL and ITT YES Significantly ü ü Realized? YES Starting NOT YET Notes Market acceptance ü Buyer still request other certifications Improved market access (vis a vis voluntary certification) ü Waiting for the result of Independent market Monitoring. It also depends on the implementation of due diligence in EU. Increased export ü Based on early data from LIU Reduced cost (of exporting)?? ü For some Products Increased price?? ü

16 To Dos Ahead Indonesia and EU to progress on the joint action plan. Indonesia: Periodic Evaluation (1 st PE was reported to the JIC), Impact Monitoring (design endorsed, baseline was reported to the JIC), Follow-up on non-compliance (on schedule). EU: Independent Market Monitoring (on progress). MINISTRY OF ENVIRONMENT AND FORESTRY REPUBLIC OF INDONESIA In addition Indonesia must maintain the credibility of the INA-TLAS by certifying all segments of the timber chain including SMEs, including for domestic market. EU/UK: to consistently close the entrance of unknown/uncertified and illegal timber, precondition for a better access and price appreciation for legally certified timber.

17 MINISTRY OF ENVIRONMENT AND FORESTRY REPUBLIC OF INDONESIA Periodic Evaluation Progress of Periodic Evaluation (PE) and Impact Monitoring (IM) PE methodology was endorsed by JIC Meeting (Sept 2015) The first PE was reported on JIC Meeting 2017 Impact Monitoring IM design was reported to JIC Meeting (Sept 2015) IM baseline was reported on JIC Meeting 2017

18 Challenges MINISTRY OF ENVIRONMENT AND FORESTRY REPUBLIC OF INDONESIA Cost of certification issue New small producers to be certified Facilitation by government: Free certification and surveillance for SME and Technical assistance for SME Demand of real impacts, e.g. better price, no need of other certifications Further evidence on the implementation of due diligence (that it is not easier than using FLEGT-licence in entering EU market) Technical issues: - different interpretation of HS codes, - carelessness in filling form, taking for granted on the weight tolerance, - information inconsistency (accross the various documents, e.g. bill of lading, invoice, etc.)

19 Concluding Note MINISTRY OF ENVIRONMENT AND FORESTRY REPUBLIC OF INDONESIA It works The job has not yet done, several issues remain to be addressed More effort at the demand sides is determining the future path: promotion, total closing to illegal wood

20 KEMENTERIAN LINGKUNGAN HIDUP DAN KEHUTANAN