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Indonesia eyes Europe-like deal in timber trade with Australia
Publication Date : 15-07-2014
Indonesia is assessing the viability of creating a voluntary partnership agreement (VPA) on the timber trade with Australia to boost exports of forestry products.
Trade Minister Muhammad Lutfi said on Monday that the government aimed to propagate the benefits that Indonesia had received from a similar deal with the European Union (EU).
“Complying with sustainability principles is a trend to maintain trade in the future,” he said.
“I consider this as part of what we should do to meet the trend of responsible and sustainable global trade.”
Lutfi expected that the agreement would particularly boost exports of Indonesian furniture, as well as paper to Australia.
Under the EU-Indonesia Forest Law Enforcement, Governance and Trade (FLEGT) VPA, all timber and timber products from Indonesia that have been certified by the domestic timber legality verification system (SVLK) are considered legally harvested and in compliance with the EU’s timber regulation.
Such acknowledgment provides Indonesian exporters with a license that exempts their products from lengthy and costly due diligence procedures.
That resulting reduction in verification time and costs allow the quicker release of Indonesian timber at European import gateways.
Indonesia has anticipated its exports to the 28-member bloc would rise by up to 7 per cent this year as the arrangement took effect, and has eyed double-digit growth in the longer term.
One of the world’s major timber exporters, Indonesia secured around US$10 billion from delivering its timber and timber products overseas in the past year.
The EU as a whole has been the third-biggest export destination for Indonesian timber and timber products with sales totaling $1 billion last year.
Australia passed its Illegal Logging Prohibition Act in November 2012, which prevents the import of illegally produced wood products.
It is slated to apply a set of supporting regulations that specify the due diligence process, the detailed list of products covered by the act and the operational framework for importers and processors in November this year.
Deputy Trade Minister Bayu Krisnamurthi recently said the government was calculating the economic gains for exporters once the deal with Australia was inked.
“Viewed from the current position, the impact will not be directly related to financial issues, but rather time, as we can cut verification time,” he said.
“Compared to other countries, Indonesian products that are certified by the SVLK and thereby have traceability, get a competitive edge,” he added.
Indonesia’s main wood product exports to Australia are paper, furniture and plywood.
Exports of timber-based products to the country settled at $188.5 million last year, down 5.84 per cent from 2012, according to data from the Trade Ministry.
At present, all paper products shipped overseas have been certified by the SVLK, while other products, such as furniture, notably that manufactured by small and medium enterprises, are in the process of obtaining the sustainability certificates.