The main concern for wood processing industries in Berau and East Kutai Districts (and in East Kalimantan as a whole) is uncertainty over supplies of legal timber. While most wood processing units struggle in meeting their raw material demand, this is not due to scarcity of timber. The problem lies in deficient legal framework to enable the utilisation of these resources by local industries. This presentation by CIFOR scientist Krystof Obidzinski gives an overview of the forestry sector in Indonesia and in Kaltim, and then outlines questions and points about revitalising the timber industry that need discussion. He gave this presentation at a district-level Focus Group Discussion (FGD) held on 12 April 2012 in Berau District, East Kalimantan, Indonesia, as part of research activities under the PROFORMAL Project (www.cifor.org/pro-formal).

1. 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.
THINKING beyond the canopy 12 April, 2012, Tanjung Redeb

2. Contents
1. About CIFOR
2. CIFOR Mission
3. Focus Group Discussion (FGD) objectives
4. Indonesian forestry sector
5. Forestry sector in Kaltim
6. Key points
7. Timber market opportunities
8. Global & regional trends in timber and trade
9. National Forestry Master Plan 2030
10.Market entry requirements
11.Main Questions
12.Discussion & collaboration
THINKING beyond the canopy

3. 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
THINKING beyond the canopy

4. 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)
THINKING beyond the canopy

5. 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
THINKING beyond the canopy

6. 4. Indonesian forestry sector
Production capacity of major timber products industry in
Indonesia
Item 2006 2007 2008 2009 2010
Individual (non integrated) mills, in millions m3/year
Plywood (KL) 2.35 2.58 2.61 2.84 2.65
Sawnwood (KG) 1.31 1.49 1.75 2.54 2.82
Veneer (VS) 0.23 0.65 0.94 1.00 1.01
Wood Chips (WC) 1.31 2.74 4.42 8.87 9.03
Integrated mills, in millions m3/year
KL + KG 6.44 7.24 7.42 8.08 8.52
KL + VS 0.60 0.27 0.27 0.18 0.27
KL + LVL 0.51 0.51 0.51 0.51 0.51
WC + Pellet (PK) 0.00 0.00 0.00 2.42 2.42
KL + KG + VS 0.96 0.74 1.17 2.02 2.36
KL + VS + LVL 0.23 0.23 0.28 0.40 0.42
KL + KG + WC 0.90 0.90 0.90 0.90 0.90 Sources: MOF
KG + VS 0.20 0.48 0.13 0.58 0.74
KG + WC 0.00 0.00 0.16 0.16 0.44
(2011), APKI
KG + LVL 0.00 0.00 0.00 0.01 0.01 (2007, 2011);
KL + KG + VS + LVL 0.00 0.00 0.00 0.00 0.28
KL + KG + WC + LVL 0.28 0.28 0.28 0.28 0.28
APKI (2007);
Total production capacity of KG, KL, VS
15.34 18.14 20.86 30.81 32.68
calculated by B.
,LVL, WC, and PK, in 1000 m3/year
Total production capacity of pulp, in
Simangungsong
6.45 6.48 6.48 7.19 7.90
million tonnes/year
Total production capacity of paper, in
10.51 11.03 11.03 11.96 12.90
million tonnes/year
THINKING beyond the canopy

7. 4. Indonesian forestry sector (cont)
Production of sawn timber 2000‐2010
Kayu gergajian (m3)
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000 Source: B.
Simangungsong
500,000
2012
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: CIFOR
analysis based MoF
data
THINKING beyond the canopy

8. 4. Indonesian forestry sector (cont)
Production of plywood 2000‐2010
Kayu lapis (m3)
7,000,000
6,000,000
5,000,000
4,000,000
Source: B.
3,000,000
Simangungsong
2012
2,000,000
1,000,000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: CIFOR
analysis based MoF
THINKING beyond the canopy
data

9. 4. Indonesian forestry sector (cont)
Production of veneer 2000‐2010
Veneer (m3)
5,000,000
4,500,000
4,000,000
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000 Source: B.
Simangungsong
500,000
2012
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: CIFOR
analysis based MoF
THINKING beyond the canopy
data

10. 4. Indonesian forestry sector (cont)
Production of wood chips 2000‐2010
Woodchip (m3)
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
Source: CIFOR 200,000
analysis based
0
MoF data 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
THINKING beyond the canopy

11. 4. Indonesian forestry sector (cont)
Production of pulp and paper 2000‐2010
Pulp (ton)
8,000,000
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0 Source: B.
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Simangungsong
Source: CIFOR 2012
analysis based MoF
data
THINKING beyond the canopy

12. 4. Indonesian forestry sector (cont)
Contribution of the forestry sector to national GDP (Trilliun Rupiah)
Gross Domestic Product
Year Forest sector contribution Forest industry contribution
Total
Amount % 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% Source: B.
2008 4,949 165 3.3% 125.1 2.5% Simangungsong
2009 5,604 186 3.3% 141.2 2.5% 2012
2010 6,423
THINKING beyond the canopy

13. 4. Indonesian forestry sector (cont)
Forestry sector employment
Employment in 1000 employees
300
250
200
150
100
50
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Sawnwood industry Plywood industry Pulp and paper industry
Source: B.
Simangungsong
2012 THINKING beyond the canopy

14. 5. Forestry sector in Kaltim
HPH
 Forest resources still large:
Kabupaten Jumlah Perusahaan Luas (ha) • 9.7 million ha HP
Paser 4 135,950
• 4.6 million ha HPT

Kutai Barat 23 1,498,988
Kutai Kartanegara 2 76,635
HPH concessions decline in number
Kutai Timur 15 1,184,615
and area, but still significant
Berau 14 855,631
 Log production: 1 million m3 (2010)
Malinau 9 909,461
Bulungan 6 598,825
Nunukan 4 237,940
Penajam Paser Utara 0 0
Tana Tidung 0 0
Source: Dinas
Balikpapan 0 0
Kehutanan
Samarinda 0 0 Provinsi
Tarakan 0 0 Kalimantan Timur
Bontang 0 0 (2010)
Jumlah 77 5,498,045
Tahun 2009 84 6,146,319
THINKING beyond the canopy

15. 5. Forestry sector in Kaltim (cont)
HTI in 2009
HTI  HTI plantations on the rise
Kabupaten Jumlah Perusahaan Luas (ha)
 HTI timber plantations permits: 28
Paser 3 97,259
in 2010
Kutai Barat 7 158,085 • Area: 1,344,000 ha
Kutai Kartanegara
Kutai Timur
6
6
478,545
146,376
• Production: 950,000 m3
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
Source: Dinas
Kehutanan
Samarinda 0 0
Provinsi
Tarakan 0 0
Kalimantan Timur
Bontang 0 0
(2010)
Jumlah 30 1,372,791
Tahun 2009 39 1,585,678 THINKING beyond the canopy

16. 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
THINKING beyond the canopy

17. 5. Forestry sector in Kaltim (cont)
 Produksi Kayu Olahan di Kaltim 2009
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 Source: Dinas
Balikpapan 16,712.62 0.00 304,860.02 0.00 0.00 72,463.01
Kehutanan
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
Provinsi
Bontang 0.00 0.00 0.00 0.00 0.00 0.00 Kalimantan Timur
Jumlah 117,605.83 6,971.79 369,010.02 10,840.83 0.00 76,896.51 (2010)
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
THINKING beyond the canopy

18. 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
THINKING beyond the canopy

19. 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
THINKING beyond the canopy

20. 8. Global & regional trends in timber
and trade
Source: FAO 2009
THINKING beyond the canopy

21. 8. Global & regional trends in timber
and trade (cont)
Source: FAO 2009
THINKING beyond the canopy

22. 8. Global & regional trends in timber
and trade (cont)
Source: FAO 2009
THINKING beyond the canopy

23. 8. Global & regional trends in timber
and trade (cont)
Wood Fibre
demand in the
Asia‐Pacific
Source: FAO 2009
THINKING beyond the canopy

24. 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
THINKING beyond the canopy

25. 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)
THINKING beyond the canopy

26. 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?
THINKING beyond the canopy

27. 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)
THINKING beyond the canopy

28. www.cifor.cgiar.org
THINKING beyond the canopy