THINKING beyond the canopy

Revitalisasi Industri Kehutanan dan Peran Pasar Kayu Domestik di Kalimantan Timur (Berau dan Kutai Timur)

Timber industry revitalisation and the role of the domestic timber market in East Kalimantan (Berau and East Kutai)

Obidzinski K., Komarudin H., Andrianto A. Dermawan A.12 April, 2012, Tanjung Redeb

THINKING beyond the canopy

Contents

1. About CIFOR2. CIFOR Mission3. Focus Group Discussion (FGD) objectives4. Indonesian forestry sector5. Forestry sector in Kaltim6. Key points7. Timber market opportunities8. Global & regional trends in timber and trade9. National Forestry Master Plan 203010.Market entry requirements11.Main Questions12.Discussion & collaboration

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1. About CIFOR

International Research Organisation – focusing on tropical forest resources

One of 15 CGIAR research centers

Headquartered in Bogor, West Java, Indonesia

Hosted in Indonesia by Ministry of Forestry (MoF)

Regional offices in Africa and Latin America

More than 50 research staff and 250 partner collaborators in tropical forest countries

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2. CIFOR Mission

Provide scientific input for sustainable and equitable use of tropical forest resources at the global, national and local level:• Governance (kebijakan, trade & investment)• Environmental services (Jasa Lingkungan)• Livelihoods (Penghidupan Lokal)

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3. FGD objectives

Get a better understanding of the conditions in the forestry sector in Kaltim – forest management & wood processing Discuss challenges and opportunities facing the

forestry sector in Kaltim (Berau/Kutim) How to take advantage of the emerging timber

market opportunities? (especially domestic) SVLK (Sistem verifikasi legalitas kayu - timber

legality verification system) – is it a help or barrier? Identify areas/topics for EC-supported research on

enabling conditions for SVLK, especially in small and medium enterprises

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4. Indonesian forestry sector

Item 2006 2007 2008 2009 2010Individual (non integrated) mills, in millions m3/year

Plywood (KL) 2.35 2.58 2.61 2.84 2.65Sawnwood (KG) 1.31 1.49 1.75 2.54 2.82Veneer (VS) 0.23 0.65 0.94 1.00 1.01Wood Chips (WC) 1.31 2.74 4.42 8.87 9.03

Integrated mills, in millions m3/yearKL + KG 6.44 7.24 7.42 8.08 8.52KL + VS 0.60 0.27 0.27 0.18 0.27KL + LVL 0.51 0.51 0.51 0.51 0.51WC + Pellet (PK) 0.00 0.00 0.00 2.42 2.42KL + KG + VS 0.96 0.74 1.17 2.02 2.36KL + VS + LVL 0.23 0.23 0.28 0.40 0.42KL + KG + WC 0.90 0.90 0.90 0.90 0.90KG + VS 0.20 0.48 0.13 0.58 0.74KG + WC 0.00 0.00 0.16 0.16 0.44KG + LVL 0.00 0.00 0.00 0.01 0.01KL + KG + VS + LVL 0.00 0.00 0.00 0.00 0.28KL + KG + WC + LVL 0.28 0.28 0.28 0.28 0.28

6.48 6.48 7.19 7.90

Total production capacity of paper, in million tonnes/year

10.51 11.03 11.03 11.96 12.90

32.68

Total production capacity of pulp, in million tonnes/year 6.45

Total production capacity of KG, KL, VS ,LVL, WC, and PK, in 1000 m3/year 15.34 18.14 20.86 30.81

Production capacity of major timber products industry in Indonesia

Sources:  MOF (2011), APKI (2007, 2011); APKI (2007); calculated by B. Simangungsong  

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4. Indonesian forestry sector (cont)Production of sawn timber 2000‐2010

Source:  CIFOR analysis  based MoF data

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Kayu gergajian (m3)

Source: B. Simangungsong 2012

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4. Indonesian forestry sector (cont)

Production of plywood 2000‐2010

Source:  CIFOR analysis  based MoF data

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Kayu lapis (m3)

Source: B. Simangungsong 2012

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4. Indonesian forestry sector (cont)Production of veneer 2000‐2010

Source:  CIFOR analysis  based MoF data

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Veneer (m3)

Source: B. Simangungsong 2012

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4. Indonesian forestry sector (cont)Production of wood chips 2000‐2010

Source:  CIFOR analysis  based MoF data 0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Woodchip (m3)

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4. Indonesian forestry sector (cont)Production of pulp and paper 2000‐2010

Source:  CIFOR analysis  based MoF data

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Pulp (ton)

Source: B. Simangungsong 2012

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4. Indonesian forestry sector (cont)

Contribution of the forestry sector to national GDP (Trilliun Rupiah)

Source: B. Simangungsong 2012

YearGross Domestic Product

TotalForest sector contribution Forest industry contributionAmount % Amount %

1994 382 16 4.2% 9.1 2.4%1995 455 18 3.9% 10.5 2.3%1996 533 21 3.9% 12.6 2.4%1997 628 25 3.9% 14.7 2.3%1998 956 31 3.2% 19.1 2.0%1999 1,100 32 3.0% 18.7 1.7%2000 1,390 57 4.1% 40.3 2.9%2001 1,646 68 4.1% 50.8 3.1%2002 1,822 71 3.9% 53.7 2.9%2003 2,014 76 3.8% 57.7 2.9%2004 2,296 83 3.6% 62.3 2.7%2005 2,774 92 3.3% 69.1 2.5%2006 3,339 114 3.4% 84.2 2.5%2007 3,951 136 3.5% 100.3 2.5%2008 4,949 165 3.3% 125.1 2.5%2009 5,604 186 3.3% 141.2 2.5%2010 6,423

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4. Indonesian forestry sector (cont)

Forestry sector employment

Source: B. Simangungsong 2012

0

50

100

150

200

250

300

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Employment in 1000 employees

Sawnwood industry Plywood industry Pulp and paper industry

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5. Forestry sector in Kaltim Forest resources still large:

• 9.7 million ha HP • 4.6 million ha HPT

HPH concessions decline in number and area, but still significant

Log production: 1 million m3 (2010)

HPH

Kabupaten Jumlah Perusahaan Luas (ha)

Paser 4 135,950

Kutai Barat 23 1,498,988

Kutai Kartanegara 2 76,635

Kutai Timur 15 1,184,615

Berau 14 855,631

Malinau 9 909,461

Bulungan 6 598,825

Nunukan 4 237,940

Penajam Paser Utara 0 0

Tana Tidung 0 0

Balikpapan 0 0

Samarinda 0 0

Tarakan 0 0

Bontang 0 0

Jumlah 77 5,498,045

Tahun 2009 84 6,146,319

Source:  Dinas Kehutanan Provinsi Kalimantan Timur (2010)

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5. Forestry sector in Kaltim (cont)

HTI plantations on the rise HTI timber plantations permits: 28

in 2010• Area: 1,344,000 ha• Production: 950,000 m3

Source:  Dinas Kehutanan Provinsi Kalimantan Timur (2010)

HTI

Kabupaten Jumlah Perusahaan Luas (ha)

Paser 3 97,259

Kutai Barat 7 158,085

Kutai Kartanegara 6 478,545

Kutai Timur 6 146,376

Berau 3 208,016

Malinau 0 0

Bulungan 3 251,514

Nunukan 0 0

Penajam Paser Utara 1 16,475

Tana Tidung 0 0

Balikpapan 1 16,521

Samarinda 0 0

Tarakan 0 0

Bontang 0 0

Jumlah 30 1,372,791

Tahun 2009 39 1,585,678

HTI in 2009

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5. Forestry sector in Kaltim (cont)

IPK timber utilization permits (2010): 57• Area: 105,000 ha• Production: 633,000 m3• Due to oil palm plantation development• As well as mining concessions

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5. Forestry sector in Kaltim (cont) Produksi Kayu Olahan di Kaltim 2009

Source:  Dinas Kehutanan Provinsi Kalimantan Timur (2010)

Sawn Timber (m3) Block Board (m3) Chip Wood (ton) Moulding (m3) MDF (m3) Lain‐lain

Kabupaten 0.00 0.00 0.00 0.00 0.00 0.00

Paser 19,938.67 0.00 0.00 0.00 0.00 0.00

Kutai Barat 0.00 0.00 0.00 0.00 0.00 0.00

Kutai Kartanegara 0.00 0.00 0.00 0.00 0.00 82.22

Kutai Timur 7,409.46 0.00 0.00 0.00 0.00 0.00

Berau 660.78 0.00 0.00 0.00 0.00 0.00

Malinau 0.00 0.00 0.00 0.00 0.00 0.00

Bulungan 0.00 0.00 0.00 0.00 0.00 0.00

Nunukan 0.00 0.00 0.00 0.00 0.00 0.00

Penajam Paser Utara 0.00 0.00 0.00 0.00 0.00 0.00

Tana Tidung 0.00 0.00 0.00 0.00 0.00 0.00

Balikpapan 16,712.62 0.00 304,860.02 0.00 0.00 72,463.01

Samarinda 27,130.96 0.00 0.00 9,564.71 0.00 4,351.28

Tarakan 45,753.34 6,971.79 64,150.00 1,276.12 0.00 0.00

Bontang 0.00 0.00 0.00 0.00 0.00 0.00

Jumlah 117,605.83 6,971.79 369,010.02 10,840.83 0.00 76,896.51

Tahun 2008 148,901.94 8,808.67 49,343.62 135,507.00

Tahun 2007 286,117.04 11,523.63 404,924.96 33,258.07 15,464.61 15,345.86

Tahun 2006 402,777.48 46,637.75 525,662.04 23,956.86 119,206.50 238,964.21

Tahun 2005 276,667.99 76,194.90

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6. Key points

HPH logging is down Timber supply is down Wood processing is down Employment down Pulp and furniture production up BUT there is potential for a turnaround:

• EU market• Asian market (India, China, Middle East)• Indonesia’s domestic market

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7. Timber market opportunities EU: strong demand for high end hardwoods, furniture,

plywood, pulp Asia:

• 2020 India will overtake China as the largest construction site – USD 800-900 billion

• Saudi Arabia and UAE USD 1 trillion construction through 2030

Indonesia’s domestic market: US$70 Billion construction investment boom over the next

5 years Demand for office and residential construction doubled

over the last 3 yrs Construction sector expected to grow by over 10%/yr

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8. Global & regional trends in timber and trade

Source: FAO 2009

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8. Global & regional trends in timber and trade (cont)

Source: FAO 2009

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8. Global & regional trends in timber and trade (cont)

Source: FAO 2009

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8. Global & regional trends in timber and trade (cont)

Source: FAO 2009

Wood Fibre demand in the Asia‐Pacific

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9. National Forestry Master Plan 2030

Rencana Pembangunan Jangka Panjang Kehutanan, 2006-2025• PDB sektor kehutanan naik 3 kali lebih besar dari PDB

sektor kehutanan tahun 2005 (1,3%). Rencana Kehutanan Tingkat Nasional (RKTN) 2011-2030

• By 2030, HTI dan HR mencapai 14,5 juta ha dan mampu memproduksi 362,5 juta m3 kayu per tahun

• By 2030 plywood production menjadi 37,2 juta m3, sawn timber 41,25 juta m3, woodworking dan furniture masing-masing 21,8 juta m3 dan 3,4 juta m3.

Can these targets be achieved? Given the history of HTI and HTR, it is doubtful

Therefore, the role of the natural forest (HPH, industry) still important

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10. Market entry requirements All markets will require TLAS (timber legality

assurance system) In Indonesia this means SVLK SVLK sufficient to meet EU Timber Legality

Regulation Also sufficient to meet Lacey Act requirements in

the US SVLK to come into effect for trade to EU in

January 2013 For other markets by January 2015 (tentative)

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11. Main Questions

How to take advantage of emerging market opportunities? What are the implications of SVLK for forest

management and industry?• Economic (costs?)• Operational (additional systems?)• Social (employment?)• Environmental (additional practices?)

How can small/medium timber enterprises (in particular) manage these requirements? How to overcome the implementation problems?

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12. Discussion & collaboration Seek input from government officials and private

sector on burning issues Comments on & collaboration in research Research scope:

1. Current state of forest management and timber industry sectors (WP1)

2. Forest management practice requirements under SVLK (WP3)

3. Economic (cost) and social (employment) implications of SVLK (WP4)

4. Institutional and legal requirements of SVLK (WP5)

5. Closing the gap? Enabling conditions (WP5)

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