FINAL Seminar Report Sustainable Business Event 2014theborneoinitiative.org/wp-content/uploads/2015/11/final_seminar... · indoor flooring, outdoor decking, truck flooring and garden

SEMINAR REPORT APHI - TBI Sustainable Business Event 2014

10 – 11 November 2014 Surabaya, Indonesia

Seminar report APHI – TBI Sustainable Business Event 2014 1

I. Introduction

The Borneo Initiative is a private initiative established in 2008 that intends to contribute to a reversal in the trend of deforestation and forest degradation. Specifically, The Borneo Initiative offers financial and technical support to forest concessions for enhancing their capacity for sustainable forest management according to both mandatory (SVLK/PHPL) as well as voluntary (FSC) standards of certification. While the integrity of Indonesia’s rain forests is our core concern, The Borneo Initiative supports forest concessions, wood industries and overseas buyers in their efforts towards adoption and promotion of sustainable forest management practices. As part of a broader promotion, The Borneo Initiative and the Indonesian Association of Forest Concessionaires (APHI) jointly hosted a Sustainable Business Event 2014 in Surabaya on November 10-11 that aimed to increase market awareness in export markets for the SVLK and FSC certified Indonesian wood producers. This event brought together 12 international timber companies from the USA, Europe and Asia, plus 24 Indonesian wood industries involved in the production of plywood, veneer, indoor flooring, outdoor decking, truck flooring and garden furniture. This event report presents highlights and proceedings of the Sustainable Business Event 2014, plus a set of recommendations based on feedback collected from the participants. The business event was generally considered a success, and we already are looking ahead to organizing repeat events in the coming years 2015 and 2016.

II. Table of contents

I. Introduction ............................................................................................................ 1 II. Table of contents ................................................................................................... 1 III. Program and participants ..................................................................................... 2

a. General program outline ................................................................................................. 2 b. Participants ..................................................................................................................... 2

IV. Summary of presentations ................................................................................... 2 V. Highlights of the working groups .......................................................................... 4 VI. Feedback and recommendations ........................................................................ 4 VII. Annexes .............................................................................................................. 5

a. List of participants (day 2) .............................................................................................. 5 b. Program .......................................................................................................................... 6 c. Press release .................................................................................................................. 8 d. Media coverage .............................................................................................................. 9


III. Program and participants a. General program outline

Seminar Date: 10 November 2014 Venue: Hotel Majapahit Surabaya Match making event Date: 11 November 2014 Venue: Hotel Majapahit Surabaya Visits to industries Date: 12-13 November 2014 Venue: PT. IFURA, PT. Integra, PT. Sumber Mas (Surabaya) Excursion to forest concession Date: 14-16 November 2014 Venue: PT. Dwimajaya Utama (Palangka Raya)

b. Participants Guests of honour in the seminar on day 1 included representatives of the International Wood Products Associations (IWPA) from the USA, from the UK Timber Trade Federation (TTF), from the Directorate General of Forest Business Development (BUK, Ministry of Environment and Forestry), and from the Directorate of Export of Agriculture and Forestry Product, Ministry of Trade. The audience consisted of representatives of several Indonesian wood producers associations, i.e. APHI, APKINDO and ASMINDO. Private sector was represented by 27 Indonesian wood industries, 12 overseas timber-trading companies and several forest concessions. The seminar on day 1 was also attended by representatives from FSC, certification coaches, donor agencies and forest concessions. In total there were approx.135 participants on day 1, 55 participants on day 2, 10 participants on day 3-4, and 3 participants on day 5-7.

IV. Summary of presentations Bambang Hendroyono, Director General of Forest Business Development (Ministry of Environment and Forestry) explained all the efforts undertaken by the ministry towards the improvement of legal and sustainable management of forests and forest product industries. All forest concessions and industries need to comply to this new Timber Legality Assessment system or SVLK as from January 2015 in order to get so-called V-legal export permits. From 1 January till 10 November 2014, 80 thousand V-legal documents have been issued. Government clearly sees a positive impact on trade since the implementation of SVLK certification scheme. As regards voluntary certification, the ministry sees that as complementary and helpful towards achievement of the ministry’s own targets for SVLK, and as helpful in the promotion of Indonesian forest products in overseas markets. Nurlaila Nur Muhammad, Director of Export of Agriculture and Forestry Product (Ministry of Trade) summarised the new government’s emphasis on export-led growth and the need for supporting infrastructural investments. Government set itself very ambitious growth targets of 10% annually for exports. The certification of agricultural and forestry products is seen as useful in gaining the confidence of international markets.


Cindy Squires, Executive Director, International Wood Products Association (IWPA), presented the major factors affecting tropical timber imports, e.g. a general anti-import sentiment, regulations against illegal logging, more awareness on sustainability, product quality regulations, and substitution by composites and plastics. IWPA takes a central role in promoting tropical timber, identification of new market opportunities, and education of its membership. The USA housing market is recovering and the import of forest products is picking up significantly again. Indonesian forest products exports, mostly plywood, are not following and are still much below previous export levels. Yet, new opportunities are presenting themselves, e.g. the revision of the generalized system of preferences, the call for reduction of trade tariffs on green goods, anti-dumping regulations, etc. Furthermore, the Lacey Act requires a sound understanding of the origin of a product, due diligence is gaining more attention. US industry is increasingly looking for brand partners, not commodity salesmen, and compliance includes all rules, not just legality. Serious adoption of effective chain of custody programs and certification schemes, improves the perception of imported forest products – and their sales. Anand Punja, Head of Sustainability of the Timber Trade Federation UK explained that 2014 has been a very strong year for sales of tropical timber in the UK, the best since 2007 and imports are expected to grow further in 2015, even though there are still many uncertainties, which can influence negatively (financial sector reform, weakness in EU economies and the impact of this on UK economy). UK importers not always buy directly from the country of origin, e.g. they also buy from other European tropical timber traders. However, in the top 7 of tropical hardwood producing countries exporting to the UK, Indonesia takes the 7the position only, way behind Cameroon and Malaysia. Still, the UK market uses a lot of tropical species that Indonesia also produces e.g. keruing and meranti spp. On the one hand, the EUTR has lead to some supply moving away from EU to other markets, especially as they tend to be less fussy in terms of species mix or quality. On the other hand, the UK nowadays has lots of interest in timber and will continue to be an important market in the future – if the timber sector gets the story right. Responsibly sourced products are the foundation for this. Rudy T. Luwia, Vice Chairman of Indonesia Furniture and Handicraft Industry Association (ASMINDO) showed how world furniture consumption is steadily growing. Yet, mostly Chinese producers benefit from this growth – they take 30% of the global market. In stark contrast, Indonesia has less than 0.5% market share only. ASMINDO therefore set itself a most ambitious target – to achieve 8% market share in 5 years time, and 20% in 10 years time. This is feasible, since Indonesian per capita income itself is improving, its index for competitive industrial performance is improving, and Indonesia has huge forest stock in natural forests, man-made forests and community forests. Indonesian species are highly appreciated, e.g. teak and rattan. Government has big investment plans to improve infrastructural conditions too. Indonesian producers must work hard now to comply with the legality regulations introduced or being introduced in big trading blocks as USA, EU, Japan and Australia. But Indonesian products are of high quality - Indonesians are excellent craftsmen, art is in their blood. Eko Pratomo, Executive Director of PT. Dwimajaya Utama, explained how their company strives towards managerial excellence. The company works together with various sustainable forest management support schemes, resulting in various recognitions e.g. PHPL ‘good’ rating, FSC certification, and APHI award for best social management. To achieve this, the company had to introduce many best practices in the fields of planning, production, forest development, community relationships, and worker conditions. It follows that all these measures add cost to operations, while forests are under consistent pressure from mining and agro-plantations. To survive, markets must recognise the intrinsic values of natural forest management and pay a reward for the extra effort invested in forest certification. Budi Hermawan, Indonesian Wood Panel Association (APKINDO) explained that plywood dominates the panel industry in Indonesia. Focus is quickly changing from Sumatra and Kalimantan, where natural forest species were exploited, to Java, than now have 43% of active mills. Since 2009, export value is growing again but is still only around half of


production in 1993. Asia is the main destination (about 55%), followed by Middle East (14%), USA (7%) and EU (6% only). In terms of production, unfair competition from illegal logging or land clearing is being addressed better than before thanks to the SVLK program. There is a huge and skilled workforce available, and Indonesia has the potential to develop raw materials from fast growing species due to a suitable climate and the availability of sufficient land. ON the other hand, costs are increasing, and with the global recession, consumers opt for the cheapest option, without consideration of the environmental concerns. Producers from other countries, with less law enforcement, also spoil the market. What is seen as a contradiction though, is that buyer countries demand legality documentation but are not willing to cover the extra costs for green wood products. If there is a premium, it is not balanced with the costs to meet the standards of sustainable forest management. Therefore, governments, NGOs, importers and retailers need to educate and socialize to end-users the importance of legal and green products – that hopefully will result in higher consumer willingness to pay.

V. Highlights of the working groups The audience was divided in three groups to discuss the opportunities and challenges in international timber trade. Main outcomes included the following:

• Overseas markets (USA, UK) have strict requirements as to quality and specifications of products. Indonesian industries should see this as an opportunity. More adequacies related to products for those markets are needed.

• Markets, in general, are not sufficiently aware of the intrinsic values of certified products, e.g. the conservation of natural forest, indigenous culture, and endangered wildlife species. The Indonesian wood sector is not doing enough promotion. Massive promotional materials would be helpful in approaching overseas traders/importers to local industries/exporters. Indonesian wood products must tell their story; how they are well managed from the concessions to the production line.

• In terms of promotion, Malaysian industries are more aggressive than Indonesian’s. Discussion in the working group for wood working industries:

• TBI should be more supportive including the mandatory certification (SVLK) in its program as it could provide improvements both in the supplying (by concessions) and manufacturing (industries) sides. Industries would feel more confortable/confident moving towards the FSC certification then.

• Concessioners within this group mentioned the lack of appreciation (specifically referring to premium prices), by markets in general; to their efforts in achieve certifications.

• Manufacturers disagree with the statement above as they’ve added more value to both SVLK and FSC log prices. However, they admitted that the additional value/premium price is below concessioners’ expectations, as they are also facing premium-pricing reluctance when selling the product abroad.

VI. Feedback and recommendations We circulated a concise survey to 12 overseas buyers and 24 wood industries asking for their opinion and feedback on the event program. All participants were satisfied with the program and indicated that they would participate in a next event. 73% indicated that this event generated new business contacts. 17% of participants succeeded making business deals immediately during the event, while 33% of buyers indicated that they are still under negotiating with their new business partners. Some recommendations that were made:

• Shorter program, 1 day is enough • Keep the event location in Surabaya, considering practicality visiting wood factories. • Give it larger scale, invite more importers (Asia, Australia, and New Zealand,

European) as well as more suppliers/producers/manufacturer/companies


• Organise this event regularly, even though not all the visiting buyers will attend every time

VII. Annexes a. List of participants (day 2)

Overseas timber trading companies: 1. Inter-Continental Hardwoods 2. Wood Brokerage International 3. Dekker Hout Den Haag BV 4. Felix Clercx 5. Fetim Group 6. Timber Trade Connection 7. Timbrian Europe 8. Timber Connection Ltd. 9. Laschwood International 10. Masterlinq 11. Wood United 12. Taraca Pacific Inc.

Indonesian wood industries:

1. PT. Karya Guna Ekatama 2. Perum Perhutani 3. PT. Seng Fong Moulding Perkasa 4. PT. Kayu Multiguna Indonesia 5. PT. Indo Furnitama Raya (IFURA) 6. PT. Agung Kharisma Jaya Abadi 7. CV. Jati Makmur 8. PT. Profilindah Kharisma 9. PT. Karunia Rejeki Abadi (KAREA) 10. PT. Bogowonto Primalaras 11. PT. Sumber Mas Indah Plywood 12. PT. Jatim Sentra Utama 13. PT. Inhutani I 14. Integra Group 15. PT. Sumalindo Lestari Jaya Global 16. PT. Diraja Surya Furniture 17. PT. Haswin Hijau Perkasa 18. CV. Foresindo Jaya Timber 19. PT. Prima Coating Cemerlang 20. PT. Indo Veneer Utama 21. PT. Antamas 22. CV. Almenta 23. PT. Sinar Wijaya Plywood Industries 24. PT. Aneka Rimba Indonusa


b. Program

TBI-APHI SUSTAINABLE BUSINESS EVENT “Boosting international trade in certified wood products from Indonesia”

Monday, 10 November 2014 Balai Adika, Hotel Majapahit Surabaya

Time Agenda 11:00 – 12:30 Lunch and registration 12:30 – 12:35 Opening Remarks

Mr. Jesse Kuijper, Executive Member of TBI Board 12:35 – 13:00 Key note address

Mr. Ir. Bambang Hendroyono, MM, Directorate General of Forest Business Development (BUK)

13:00 – 13:10 Key note address Mr. Irsyal Yasman, Indonesian Association of Forest Concessionaires (APHI)

13:10 – 13:20 Key note address Mr. Boen Purnama, TBI Advisory Board

13:20 – 13:35 Indonesia’s wood panel industry – status and outlook Mr. Budi Hermawan, Indonesian Wood Panel Association (APKINDO)

13:35 – 13:50 Indonesia’s furniture and craft industry – status and outlook Mr. Rudy T. Luwia, Indonesian Furniture and Craft Industry Association (ASMINDO)

13:50 – 14:05 USA tropical timber imports – status and outlook Mrs. Cindy Squires, International Wood Products Association (IWPA)

14:05 – 14:20 USA tropical timber imports – status and outlook Mr. Chris Connelly, Wood Brokerage

14:20 – 14:35 UK tropical timber imports – status and outlook Mr. Anand Punja, Timber Trade Federation UK

14:35 – 14:45 Coffee break 14:45 – 15:00 Certified forest management – experiences from the field

Mr. Eko Pratomo, PT. Dwimajaya Utama 15:00 – 16:00 Parallel round tables on:

• Growing the market share for Indonesian wood panel exports • Growing the market share for Indonesian wood working product

exports • Towards a competitive Indonesian forestry sector – issues and

challenges 16:00 – 17:00 Plenary presentation of working group outcomes 17:00 – 17:10 Closing 17:10 – 17:30 Press conference 18:00 – Finish Buffet with cultural program


Tuesday, 11 November 2014

Time Agenda

09:00 – 10:00 Registration and coffee

10:00 – 12:00 Business meeting session I

12:00 – 13:00 Lunch

13:00 – 15:00 Business meeting session II

15:00 – 15:10 Coffee break

15:10 – 17:00 Business meeting session III Wednesday, 12 November 2014

Time Agenda

07:30 Leave Hotel Majapahit (gather at the lobby)

09:30 – 12:00 PT. IFURA (moulding, flooring)

12:00 – 13:00 Lunch

14:00 – 16:00 PT. Integra (furniture, moulding, decking, flooring) Thursday, 13 November 2014

Time Agenda


09:00 – 11:00 PT. Sumber Mas Indah Plywood (plywood)

12:00 – 13:00 Lunch Friday, 14 November 2014

Time Agenda


10:30 Flight Surabaya – Palangka Raya

11:40 Arrive in Palangka Raya

12:00 – 12:30 Lunch

12:30 – 16:00 Palangka Raya airport to PT. Dwimajaya Utama basecamp

16:00 – 17:00 Electricity out

17:00 – 19:00 Free time

19:00 – 21:00 Dinner at guest house Saturday, 15 November 2014

Time Agenda

07:00 – 08:00 Breakfast

08:00 – 16:00 Go to production forest (lunch will be in the filed)

16:00 – 17:00 Electricity out

17:00 – 19:00 Free time

19:00 – 19:30 Dinner at guest house


19:30 – 21:00 Meet and greet with PT. Dwimajaya Utama’s management Sunday, 16 November 2014

Time Agenda

08:00 – 09:00 Breakfast

09:00 – 11:00 Meet and greet with PT. Dwimajaya Utama’s management

11:00 – 16:00 Basecamp – Palangka Raya

17:30 – 19:10 Flight Palangka Raya – Jakarta

c. Press release

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PRESS RELEASE Surabaya, 11 November 2014 Overseas markets see positive improvements in Indonesian forest management

Surabaya – International markets see new opportunities for trade with Indonesia given its progress in certified forest management, giving assurances about the legal and sustainable origin of timber products from natural forest. Today, 11 November 2014, the Indonesian Association of Forest Concessionaires (APHI) and The Borneo Initiative (TBI), a Dutch foundation that promotes sustainable forest management, brought together 12 international timber companies from the USA, Europe and Asia plus 27 Indonesian industries involved in the production of plywood, veneer, indoor flooring, outdoor decking, truck flooring and garden furniture. “The outcome of this event was most positive for our company”, states Mr. Henry Kumala of PT. Jatim Sentra Utama, a company that specializes in outdoor wood decking products. “We made many previous efforts towards entering the USA market, but this time we have been very successful. We signed up orders with at least two USA companies and one UK company, on the strength of our SVLK certification as well as FSC certification. As a company, we are very confident that we can meet international competition and expend trade volume much further.” This is a welcome statement in view of the government’s target to increase exports 3-fold, as explained by Mrs. Nurlaila Nur Muhammad of the Ministry of Trade. “Our company wants to distinguish itself by its quality of production”, states Mr. Ivan Hartono of PT. Sumber Mas Indah Plywood. “This event was very helpful in raising our company profile among buyers. We saw a lot of interest in our products from the overseas buyers, although pricing remains an issue. So it would help when Indonesian Government could help us to bring down the costs of production via improvement in infrastructure (ports and roads), while Indonesia is much behind other countries like New Zealand with the establishment of forest plantations which would help us in producing a more competitive product.” “I have been visiting Indonesia for 20 years now, and I am most impressed to see great improvements in forest management” says Mr. Chris Connelly of Wood Brokerage and President of IWPA. “I am very happy to see the progress made by Government in developing and implementing its new system of regulations to control legal harvesting (SVLK). In addition, sustainability is much ensured too by the great number of forest concessions and industries that have achieved, or are on the way to achieving voluntary forest management certificates (FSC). As USA buyers, we feel now so much more comfortable in conducting business with Indonesian forest industries.” Looking forward, Mr. Connelly says; “to grow its market share in the USA market, the Indonesian forestry sector must become better at promoting all the effort that is going into legal and sustainable production, and the intrinsic values of sustainable harvesting from natural forests that safeguard so many values – wildlife, indigenous cultures, and carbon stocks to mitigate climate change. USA markets must be sensitised to appreciate the special origin of Indonesian wood products.” “It is most encouraging to see Government and private sector to work together on the implementation of SVLK, really an outstanding achievement. The willingness of industries to accept this legality standard is very good to promote timber products offered. Not to punish but to support and to advice, is clearly the right path forward. The business event hosted by APHI and The Borneo Initiative was resulting in actual business transactions for our company. We feel very encouraged to move forward with APHI and The Borneo Initiative on promoting trade between Indonesian and USA companies” says Mr. Lenny Shibley of Inter-Continental Hardwoods. Adds Mrs. Cindy Squires, Executive Director if IWPA: “IWPA is pleased to work closely with The Borneo Initiative to connect responsible Indonesian suppliers to the North American market place. This partnership is an important part of IWPA’s mission to build acceptance and! demand! in! North! America! for! globally! sourced! wood!production!from!sustainable!managed!forests.“!

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d. Media coverage • Houtwereld Magazine

Vooruitgang Indonesië gewaardeerd (printed version)

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Editorial note: For enquiries and/or pictures please contact Indri ([email protected]) Indonesian Association of Forest Concessionaires (APHI) APHI is a trade association for forest concessionaires in Indonesia. http://www.rimbawan.com The Borneo Initiative The Borneo Initiative is a non-profit organisation that promotes sustainable forest management in Indonesia. In close coordination with the Indonesian Association of Forest Concessionaires (APHI), we extend financial support to forest enterprises in Indonesia and neighboring countries with the certification of their forest management. We operate a sustainable business program that promotes voluntary certification (FSC) additional to the mandatory certification (SVLK), in corporation with a wide platform of partners that include TFF, GFTN, TFT, TNC, and Wana Aksara. The Borneo Initiative receives funding from The Sustainable Trade Initiative (IDH) (see below), Dutch housing associations and several private charities. For more information: www.theborneoinitiative.org

International Wood Products Association (IWPA) Established in 1956, IWPA is the leading international trade association representing the North American imported wood products industry, with over 200 companies and trade organizations engaged in the import of hardwoods and softwoods from sustainably managed forests in more than 30 nations across the globe. Association members consist of three key groups involved in the import process: U.S. importers and consuming industries, offshore manufacturers and the service providers that facilitate trade. http://www.iwpawood.org


• Kabar Indo Pasar luar negri incar produk kayu legal dari Indonesia


• Berita Surabaya Pasar luar negri incar produk kayu legal dari Indonesia


Global respon positif manajemen kehutanan


• Tempo Bisnis Industri kecil diminta menggunakan kayu bersertifikat


• Pustaka Lewi The Borneo Initiative galakan perdagangan kayu bersertifikat

Documents

FINAL Seminar Report Sustainable Business Event 2014theborneoinitiative.org/wp-content/uploads/2015/11/final_seminar... · indoor flooring, outdoor decking, truck flooring and garden