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Noticias GGSC
Workshop on Responsible Forest Products Trade between China and Indonesia was held on July 30, 2019

At more than 1.2 million km2, Indonesia hosts the third largest area of rainforest in the world, while also facing one of the highest deforestation rates globally in the past few decades. Substantial effort has been made by government, businesses and civil society groups to promote sustainable forest management and legal forest products trade in recent years. Indonesia developed a national sustainable forest management system (PHPL), and timber legality assurance system (SVLK) which has been issuing legality licenses FLEGT for EU and V-Legal to other markets.

Indonesia is an important forest products trade partner for China. Its forest product exports to China have been steadily increasing since 2009 dominated by wood pulp. Although Indonesia banned log and sawn-wood exports, based on China customs statistics, these products have been coming to China continually. In addition, not all forest products exports to China are accompanied with V-legal documents due to law enforcement challenges and Chinese buyers’ lack of awareness. China has taken steps to promote legal timber trade in recent years and is discussing policy options to strengthen imported timber legality with piloting countries.


In order to advance these developments, a workshop on responsible forest products trade between China and Indonesia was held on July 30th, 2019 in Guangzhou, co-organized by the Research Institute of Forestry Policy and Information of Chinese Academy of Forestry and The Nature Conservancy (TNC) Asia Pacific, and with support from Global Green Supply Chain (GGSC) Initiative Secretariat, WWF China, European Forest Institute (EFI) EU FLEGT Facility and Guangdong Timber Industry Association.


All these organizers agreed that it is important to enhance Chinese timber private sector’s awareness on legal timber imports from Indonesia via SVLK certification. At the same time, strengthening cooperation between China and Indonesia on legal timber products trade will provide positive incentives for Indonesian timber producers through V-legal licenses beyond EU market, and demonstrate China’s role in global responsible timber supply chain management.


Therefore, this workshop was designed to target Chinese Indonesian forest products importers and manufacturers and help participants have a more systematic and deeper understanding on the following three main topics:

  • How SVLK and PHPL systems work in Indonesia;

  • The status and trends in forest products trade between China and Indonesia;

  • How to strengthen cooperation between China and Indonesia in the future for promoting responsible forest products trade.


82 participants from governments, research institutes, forestry industry associations, companies and NGOs from China and Indonesia gathered at the Guangzhou Canton Hotel for the workshop . Experts shared updated policy and industry information and engaged in lively discussion related to the challenges, opportunities and pathways forward for responsible forest products trade between China and Indonesia.

Over the course of the workshop, the following main areas were discussed, and recommendations were provided:

1. Challenges for implementing PHPL and SVLK in Indonesia

  • High-cost of SVLK certifications is a major obstacle to implement SVLK in the private sector, especially for ‘small-to-medium’ sized enterprises (SMEs).

A thorough cost-benefit analysis should be undertaken to inform improvement of a cost-effective V-legal certification. It is important to provide financial incentives and technical support to SMEs for applying SVLK system, thus it will ensure responsible forest products production is not a burden for the private sector.

  • Limited resources (technical knowledge, capacity, and number of staffs) to enforce SVLK implementation.

Indonesian government should allocate more budget to back up activities for case investigation and maintenance of online SILK system. Also, it is important for law enforcement officers to enhance capacity building for technical knowledge such as determination of HS Code and identification timber species.


  • It is too time consuming to apply V-legal documents

Usually it will take about three weeks from applying SVLK to getting V-legal document, which is an especially long time for corporations. To address this issue, the existing online platform needs to be upgraded continuously.


2. China’s forest products imports from Indonesia

  • China is the largest forest product trade partner for Indonesia

China shared about 25% of Indonesia’s export value of forestry products, ranking it the number one trading partner for Indonesia. In 2017 & 2018, Indonesia significantly increased its exports of chemical wood pulp ($969M in 2016, $1.70B in 2017, $1.87B in 2018), paper ($163M in 2016, $405M in 2017, $607M in 2018). A smaller increase was observed in flooring exports ($168M in 2016, $203M in 2017, $239M in 2018).

  • Discrepancy on forest products statistics between China and Indonesia

When comparing Indonesian export data and Chinese import data, China consistently reports higher imports than Indonesia reports exports. A detailed analysis and bilateral customs data exchange will be helpful to address the data discrepancy, thus it will help to regulate illegal forest products trade.

  • Based on China customs statistics, China continually imports forest products banned for exports

Indonesia has issued policies on export ban for raw logs since 2001 and sawn-wood since 2004. However, based on 2018 customs statistics data China imported 330,000 m3 sawn-wood and 17,400 m3 logs. Also, Chinese importers who attended the workshop recognized that not all the forest products came from Indonesia have V-legal documents. Therefore, it is necessary to conduct a study to better understand why logs, sawn-wood and forest products without V-legal documents were exported from Indonesia in the first place. Also, forest products inspectors at Chinese ports need to better understand the policies issued by Indonesia.

3. Pathways forward for China-Indonesia cooperation on responsible forest products trade

  • Building trust and respecting each other’s regulations

Government should take the lead in developing bilateral cooperation mechanisms which should include periodically exchanging trade data, sharing updated forest products trade regulations and enforcement measures. Indonesia needs support from China to help enforce its forest product trade laws implementation to ensure the prevention of illegal forest products trade between the two countries.

  • China could reference other regulated markets that recognize Indonesia’s V-legal documents

Besides EU, a few other regulated markets such as Australia, South Korea and Japan recognized the legality of Indonesian forest products with V-legal documents (or FLEGT licenses). When China develops its management measures for strengthening legality of imported timber, China could reference these markets experiences and lessons learned on how to negotiate with Indonesian government and stakeholders for such a recognition.

  • Promote China’s responsible forestry investment in Indonesia

When comply with the local laws and regulations, Chinese investors are welcome by the Indonesian forest industry for developing forest resources and establishing manufacture businesses in Indonesia for mutual benefits such as: 1) to help local the economy and employment; 2) to help manufacture more customized processed products that meet Chinese market demand; and 3) provide an alternative to address Indonesia’s export ban of logs and sawn-wood.

July 30, 2019


Opening remarks

Opening Remarks #1

Prof. Wang Dengju, Director, Research Institute of Forestry Policy and Information, CAF

Prof. Wang expressed a warm welcome and introduced the background of the workshop, including:

  • China is facing increasingly serious environment problems and along with the liberalization and globalization trade, it is important to realize that the legal and sustainable utilization of forest products has become the key issue of forest industry domestically and internationally;

  • The development on timber legality and sustainability of different countries are unbalanced;

  • As the largest trading partner and the third largest investment country for Indonesia, China has developed strategic partnership in timber trade and forest management with Indonesia;

  • The GGSC Initiative was launched in Beijing with a consortium of 12 Chinese leading timber enterprises last year. Their goal is to meet sustainable forest products supply and demand along industry chain effectively, build responsible trade, apply a sustainable processing, circulation and consumption system for forest products. This effort is supported by international organizations and enterprises.

Opening Remarks #2

Dr. Zhang Xiaoquan, Chief Science Officer, TNC China

Dr. Zhang briefly introduced TNC, and shared important background and his expectations for the workshop, including:

  • TNC was established in 1951 and has been working on five major areas including Climate Change, Conservation Areas and Sustainable Cities in China since 1998;

  • The RAFT program, a partnership led by TNC, has been working with related government departments and communities in China, Indonesia, Myanmar and other Asian countries to provide support on capacity building, technical, and network on sustainable forest management and responsible forest products trade;

  • Chinese buyers’ awareness regarding the Indonesian SVLK mandatory legality and sustainability certification is relatively low and the Chinese market hasn’t fully recognized the low risk of the timber products from Indonesia;

  • It is essential to provide a platform for participants to have in-depth discussions on how to strengthen cooperation on responsible forest products trade between China and Indonesia.

Section 1: Forest Products Trade Overview between China and Indonesia

1. China timber imports from Indonesia and GGSC Initiative

Dr. Luo Xinjian, Associate Researcher, Research Institute of Forestry Policy and Information, CAF

Dr. Luo briefly analyzed the timber imports from Indonesia and provided estimates that almost 80% of China’s total imports from Indonesia are paper and pulp, mainly imported through Changshu Port of Jiangsu Province. For logs and sawn-wood, the main specie is Merbau which is widely used in traditional Chinese architecture and gardens as a natural preservative material, also in wooden door, furniture and wood floorings, almost all imported through Guangdong Province and Shanghai.

GGSC is a service platform voluntarily joined by wood enterprises, associations, research institutions and so on along global forest products supply chain. It was launched by 12 Chinese leading enterprises whose total turnover in 2017 had reached 80 billion RMB, with the support of ITTO, CINFT of NFGA, CGCF and CTWPDA[1] and others. As the secretary general of the secretariat of GGSC Initiative, Dr. Luo introduced the background, positioning and roadmap of the GGSC Initiative.

  • At the government level, China has been promoting sustainable forest management and fostering an image of “A Responsible Country” and has achieved mutual recognition by PEFC and CFCC. From the industry level, China is the biggest wood trade, processing and consumption country. Legal and sustainable wood trade and supply has become the key issue for Chinese enterprises. With respect to consumers, environmental awareness and demand for green products continues to increase.

  • GGSC Initiative is committed to the legal and sustainable development of global forest resources and forest industry, and aims to build a stable and orderly global forest products green supply chain platformadvocate and practice green processing and consumption, as well as promote communication and cooperation within the global forest products industry.

  • With the support of ITTO and other organizations, GGSC Initiative is mainly working on three aspects: the in-depth study of one timber sourcing country, building GGSC 300 information exchange and communication platform and awareness raising campaign. In the near future, GGSC Initiative will focus on the research and promotion of the positive contribution of forestry industry to climate change, stimulating legal timber trade from business through trainings and exhibitions to build capacity.

2. Share experience of purchasing and trading Indonesian timber products

Mr. Lin Guanfeng, Manger, Guangdong Sanxiong Wood Industry Ltd.

Mr. Lin’s company has been importing Indonesian timber for 20 years. His company is facing some challenges for importing timber products from Indonesia, including:

  • Transportation facilities and processing equipment in Indonesia needs to be improved. In addition, the process from harvesting, preliminary processing to shipping takes an enormous amount of time (about 45 days) and effort.

  • Because of the log export ban, all the logs have to be processed in Indonesia. The processing methods lead to dimension loss and specification limits, which sometimes can’t meet Chinese market requirement and causes unnecessary waste.

  • With the rising labor costs in Indonesia, the forest products price is facing competition pressure from Africa and South America.

3. Analysis and Forecast of China’s Trade of Forest Products with Indonesia

Dr. Chen Yong, Researcher, Research Institute of Forestry Policy and Information, CAF

Dr. Chen analyzed forest products trade between China and Indonesia and pointed out the following three characteristics:

  • The scale of forest products trade between China and Indonesia continues to expand;

  • Forest products trade between China and Indonesia effectively balances Indonesia's overall trade deficit with China;

  • Trade competition and complementarities of forest products between China and Indonesia coexist.

Regarding the future cooperation between China and Indonesia, Dr. Chen emphasized the following four aspects:

  • Trade of forest products would be further strengthened as the proportion of the trade value between China and Indonesia is less than 5% of China’s total forest products;

  • China has strong demand for Indonesian resource-based products, while Indonesia has a large demand for Chinese industrial products, which appear are the typical characteristics of inter-industry complementary trade;

  • New trade cooperation such as the construction of overseas economic and trade parks in Indonesia should be further explored;

  • Promoting mutual recognition on timber legality verification system between China and Indonesia would stimulate trade growth relatively.

4. Sustainable technology for China-Indonesia timber supply chain

Dr. Zhang Guohua, President, Galion Resource Limited

As an experienced wood trader, Dr. Zhang introduced his suggestion and research on how to reduce energy use and the cost for legal timber trade. He strengthened that China's timber industry consists of a large number of small-scale businesses, who are facing high cost and low capacity to conduct due diligence. Streamlining supply chain processes and reducing supply chain costs will help reduce illegal behavior and promote due diligence. Drying is the most energy consuming process for lumber production, which accounts for 40-70% the energy consuming of the whole supply chain. He developed a technology of drying wood when shipping with Shanghai Jiao Tong University, which will provide these benefits:

  • Improves wood traceability and due diligence by shortening the supply chain through cutting off unnecessary procedures for processing and drying

  • Reduce carbon emission in drying, loading and unloading;

  • Acidic substances contained in wet wood are extracted and discarded with traditional drying kilns. Also, new technology can collect acidic substances and sell them.

Section 2: Forest Resources and Forest Products in Indonesia

1. Indonesia forest resources, management and production

Mr. Ruslandi, Production Forestry Senior Manager, TNC Indonesia


Mr. Ruslandi introduced the different types of forest resources, management systems, and timber production in Indonesia over the past five years. Mr. Ruslandi also analyzed the challenges of sustainable production forest management in Indonesia, for example, the forest management units (KPHs) have not been functioning yet as expected, and the profitability is low to implement sustainable selective logging.

He also introduced the efforts TNC made to solve the above challenges, including:

  • Improve the profitability of natural forest management, including restoration;

  • Optimize logging practices in concessions and accurately measure impacts (Reduced impact logging Carbon/RIL-C);

  • Promote the implementation of best management practices (PHPL/SVLK);

  • Strengthen the role and capacity of forest management units (KPHs) to improve the forest governance and management.

2. Indonesia Forest Products Exports

Ms. Sun Xiufang, Senior Policy Analyst, Forest Trends

Ms. Sun provided an overview of forest products trade between China and Indonesia from the perspective of Indonesia and raised the following observations:

  • Globally Indonesia became the largest tropical forest products exporter with over 40% of Indonesian exports going to regulated markets in 2018, and with the top three products being paper & paperboard, wood pulp and plywood;

  • Over the past ten years, the growth of exports from Indonesia was relatively slow, but became strong and rapid since 2017, which matched the process of obtaining VPA license. However, the growth of exports was mainly to Japan, rather than EU;

  • When comparing Indonesian export data and Chinese import data, China consistently reports higher imports than Indonesia reports exports. Bilateral collaboration may be needed to address the data discrepancy.


3. Indonesian experience sharing in sawn-wood production and trade with China

Mr. Jimmy Chandra, Marketing Division, Indonesian Sawmill and Wood Working Association (ISWA)

Mr. Chandra introduced the association and provided an overview of Indonesian sawn-wood industry, as well as following suggestions:

  • Logs and sawn-wood exports should be totally prohibited according to the Indonesian laws;

  • Export and Import governance in timber and timber products between Indonesia-China must be immediately developed through a mutually-agreed mechanism;

  • SVLK has gained international recognition and increased exports of forest products, but still needs to be further promoted to help business access more international markets

  • Overseas forestry investment is welcome in Indonesia.

4. Indonesian experience sharing in pulp and paper production and trade with China

Ms. Liana Bratasida, Executive Director, Indonesian Pulp and Paper Association (APKI)


Ms. Bratasida analyzed the paper and pulp industry in Indonesia, and shared her perspectives on V-Legal certification.

With an advantage of abundant forest resources, excellent geographical location and population base, Indonesian pulp industry was the third largest producer country in Asia while the paper industry was the fourth in 2018. The paper and pulp industry has become one of the strategic industries according to national government plan and has great potential for further development. In 2018, 71% of Indonesia’s pulp exports and 11% of paper exports went to China. 41 out of 71 Indonesian pulp and paper processing mills have V-Legal certification. There are too many certification systems for pulp and paper products, which has created a big burden for producers. In many international markets, V-legal document is not enough, they need PEFC, ISO, IFCC, SNI and other certifications as well.

Section 3: Timber Legality Assurance System and Sustainable Forest Management in Indonesia

1. Sustainable forest management (PHPL) system in Indonesia

Mr. Yoga Prayoga, Head of Section of Business Planning of Plantation Forest, Ministry of Environment and Forestry Republic of Indonesia

Mr. Prayoga introduced background about why Indonesia developed PHPL: 1) Forest resource is the most important asset for sustainable national economy development; 2) Illegal logging eradication is priority policy; 3) Tropical forests play an important role to overcome climate change and as resource of livelihood; and 4) Increasing demand for environmental friendly timber and timber products to meet international market demand for sustainable forest management.

Mr. Yoga Prayoga also explained what natural and plantation forest concession holders should do for legal compliance. A main challenge for concession holders to comply with the regulations is the high cost, he gave the following suggestions:

  • Promoting product diversification through regulation of multi-business;

  • Promoting partnership between private sectors and forest communities;

  • Promoting legal wood globally in import countries.

2. Timber Legality Assurance System (SVLK) compliance in practice

Mr. Sigit Pramono, Directorate of Forest Products Processing and Marketing, Ministry of Environment and Forestry Republic of Indonesia

Mr. Pramono provided an overview of SVLK operation mechanism, components of ensuring legality, and the challenges linked to the implementation.

The main components to ensure legality are the following: 1) regulations, standards and guidelines to define legality with all the stakeholders involved in the processes; 2) NGO and CSO to independent monitor the whole mechanism; and 3) traceability, which is identification of control points from forest planning to export through online timber administration system.

There are a few challenges linked to the implementation of SVLK: 1) limited capacity for handling legality administration of both private sectors and licensing authorities, as well as licensing information units; 2) the current work mechanism couldn’t satisfy the requirements of business operations; 3) development of new regulations of related ministries lead to inconsistent management; 4) monitoring and law enforcement in huge and spread areas of Indonesia archipelago; and 5) the online platform needs to be upgraded continuously.

3. Indonesian experience sharing in implementing PHPL and SVLK

Mr.Sugijanto Soewadi, Head of Public Relation and Cooperation, Association of Indonesia Forest Concessionaries (APHI)

Mr. Sugijanto introduced five steps in implementing best practices in applying VLK and PHPL systems in natural forest management units, and shared his key experiences and challenges for implementing VLK and PHPL. His key experiences are:

  • There is a better synergy between forest legality and sustainability

  • The systems provide clearer indicators and standards, which help make forest legality and sustainability more measurable, systematic and achievable

  • They help simplify the bureaucracy and reduce the field supervision by officials greatly

  • The government provides incentives: RKT (annual planning) self-approval

  • Forest management is better, although it still takes a long time

The key challenge is that the goal of reinforcement of branding and increasing the selling value of Indonesian wood products hasn’t been achieved yet.

Section 4: Panel Discussion: Challenges, Opportunities and Pathways Forward for Responsible Timber Products Trade between China and Indonesia

Moderator: Dong Ke, Senior Advisor, TNC

Panelists:

  • Ms. Chen Jie, Senior Engineer, RIFPI

  • Ms. Liana Bratasida, Executive Director, APKI

  • Mr. Thomas Colonna, Forest Governance and Private Sector Expert, EFI EU FLEGT Facility

  • Mr. Zhou Libo, Manager of Overseas Business, Jiangsu Wanlin Modern Logistics

  • Ms. Zhang Junzuo, Team Leader, InFIT

Summary of key discussion points:

1. Question: What are the main challenges for Chinese enterprises to meet timber legality requirements?

Ms. Chen Jie:

  • Timber legality requirements are different from country to country, and they change constantly;

  • Finance and labor costs for timber legality verification, implementing due diligence and applying certification are still quite high;

  • There is a Lack of adequate capacity to collect information and trace timber sourcing.

2. Question: What instruments and tools have been developed that Chinese businesses can use to better implement due diligence?

Ms. Chen Jie:

  • China has been developing a China Timber Legality Verification System since 2009. A group standard has been developed by the China National Forest Products Industry Association;

  • A series of tools and guidelines have been developed, especially in timber risk assessment and mitigation for timber sourcing from high risk countries;

  • A Responsible Forest Products Trade and Investment Alliance has been launched which is an online system to help enterprises.


3. Question: How do you look at the policies in regulating the legality and promote sustainability of the forest sector in Indonesia?

Ms. Liana Bratasida: It is easy to say than do. The whole process has taken and will continue to take a large amount of investment in finance and labour to develop and implement them. Each pulp and paper enterprise has to get five certifications before exports their products. China and Indonesia could strengthen the cooperation on mutual-recognition of timber legality systems.


4. Question: What does your association offer to your members to comply with the legality requirements?

Ms. Liana Bratasida: We organize a series of capacity building trainings, keep updating domestic and international market information and data, and convince them of the importance and necessity to do the certifications. Also, we hope that the cost of certification could become relatively lower, procedures of custom clearance are more simplified, which will be a great motivation for business operations.


5. Question: what does the BCM do to support China-IND cooperation and the recognition of V-Legal certification?

Mr. Thomas Colonna: Since 2009, BCM has been organizing dialogues between China and EU, supporting timber legality in China, promoting information and experiences exchange among China and other countries. We have supported research to explore how to recognize V-Legal in China since 2016.


6. Question: Could you please share your experience regarding how other regulated markets recognize FLEGT licensed timber and what China could learn from them?

Mr. Thomas Colonna: South Korea, is a good example. It is the first country recognized FLEGT and carried out a mandatory timber legality regulation in 2017. The legality standard issued by the Korea Forest Service recognizes FLEGT-licensed timber as legally harvested. However, there is no regulation on timber legality in China currently, which leads to difficulties in verifying tractability and legality of China’s forest products.


7. Question: What is the current situation of China’s overseas investment and what is your strategy?

Mr. Zhou Libo: Prohibiting log export is a trend globally. We are investing timber manufacture mills in source countries including Indonesia which both promote local employment, and help us avoid risks such as constant changing tariffs (e.g. trade war between China and the US) and export limitation (e.g. log export ban).


8. Question: What are your opinions about responsible trade and investment?

Mr. Zhou Libo: From a private sector perspective, I think we need more opportunities to dialogue with both Chinese and timber producer country governments and let them know our concerns. We also need a channel to access more information in terms of trade and policies. From my personal viewpoint, it is necessary for China to have a timber legality verification system to level the playing field. We should neither act too hastily, nor over-analyse the difficulties in the process. That's why we joined GGSC Initiative.


9. Question: Based on your experience, what are the main progress and challenges for businesses for legal compliance?

Ms. Zhang Junzuo: In InFIT 1, we have done a lot regarding how to build and implement China’s timber legality verification system, such as guidelines, tools, standards, alliances and third-party tests and so on. The forest sector has made greater progress in responsible timber trade than palm oil and rubber sectors. We are still facing challenges in incorporating diligence into internal management system of enterprise, transferring theories developed by research institutions into practices, and developing regulatory frameworks, but they are also opportunities for all of us to continue our efforts.


10. Question: What is the plan for InFIT 2 to promote China’s responsible timber trade and overseas forestry investment?

Ms. Zhang Junzuo: 1) develop tools and guidelines to ensure the timber source legality in entire supply chains. 2) cooperate with industry associations to further promote due diligence and share experiences. Collaboration between source countries and processing countries, as well as different departments along the supply chains should be emphasized. 3) carry out overseas guidelines to support China’s overseas investment. and 4) strengthen sustainable, green and responsible trade and investment between China and Africa.


11. Question: What are your recommendations on strengthening China and Indonesia forestry cooperation for responsible timber trade?

Ms. Chen Jie: The engagement of governments is the most important, such as mutual-recognition of timber legality. Enterprises should pay attention to the changes of regulations and standards. Meanwhile, research institutions should cooperate with industry associations to provide policy and business information.

Ms. Liana Bratasida: Based on common understanding and respect, the two countries need to join efforts to head for the same goal through developing an information exchange platform and work together to protect our environment and regulate illegal logging.

Mr. Thomas Colonna: V-legal is a basic certification. Recognition of V-legal is very important for both governments and private sector.

Mr. Zhou Libo: Applying certification might be expensive for the production and impact profits at the beginning, but we will benefit from a sustainable forest resources in the long run.

Ms. Zhang Junzuo: The legal framework of timber legality in China and Indonesia are different. Better understanding and learning from each other is necessary. We could start from how to recognize V-legal forest products through pilot test from China side and better understand customs clearance process.

Further comments:

  • Mr. Jimmy Chandra: Indonesia will offer support as much as possible if needed and welcome China’s investment in Indonesia.

  • Mr. Ruff’ie: The process of building a legality system is really not easy for all the stakeholders. Even though the certification might increase the burden on enterprises, our government will offer financial support of 20 billion Rupees to middle and small enterprises this year. Mutual-recognition of timber legality verification between China and Indonesia is helpful for us to protect our natural forests and prohibit illegal logging.

  • Mr Sigit Pramono: Indonesia has been working with Japan, Korea, Australia and other countries and hope to work with China as well to reach mutual-recognition of timber legality verification system, which can also promote global responsible business cooperation.

Closing Remarks

Prof. Wang Dengju, Director, Research Institute of Forestry Policy and Information, CAF

On behalf of the organizers, Prof.Wang expressed thanks to the speakers and participants. It was a productive one-day workshop, as increased consensus was reached, experiences shared and participants gained a deeper understanding of responsible forest products trade between China and Indonesia.

Bilateral forest products industry is c


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