Roadmap For Revitalization of Indonesia S Forest Industry Nov 2007 Engl

A Road Map for the
Revitalization of
Indonesia's Forest
Industry
The Forest Industry Revitalization

In-house Experts Working Group
MINISTRY OF FORESTRY 2007
Authors:
E.G. Togu Manurung
Ch. Bintang Simangunsong
Doddy S. Sukadri
Bambang Widyantoro
Agus Justianto
Syaiful Ramadhan
Lisman Sumardjani
Dede Rochadi
Pipin Permadi
Bambang Mardi Priyono
Bambang Supriyanto
Editors:
Ch. Bintang Simangunsong
E.G. Togu Manurung
Doddy S. Sukadri
Cover design:
Hasbi Akhir
Published by:
Ministry of Forestry of Indonesia.
Address:
Gd. Manggala Wanabhakti Blok VII Lantai 6
Jl. Jenderal Gatot Subroto, Senayan, Jakarta (10270)
Telp: (021) 5720206, fax: (021) 5738732.
We, the Government of Indonesia, would like to thank the World Bank Office in Jakarta, especially Mr. Josef
Leitmann, Environment Coordinator, and Dr. Timothy Brown, Senior Consultant, who have taken care and made
this publication possible.
A Road Map for the
Revitalization of
Indonesia’s Forest
Industry
Prepared by
The Forest Industry Revitalization

In-house Experts Working Group
MINISTRY OF FORESTRY
2007
Table of Contents
Table of Contents
List of Tables
List of Figures
Foreword
I. Introduction 2
II. The Current State of Indonesia’s Timber industry 5
III. Current Availability of Timber Supplies from Various Sources 13
IV. Problems Facing the Timber industry 19
V. Expected Conditions 21
VI. Strategy Recommendations 25
VII. Enabling Conditions 51
VIII. Closing 55
References 57
List of Tables
Table 1. Round wood production by production source (m3) 9

Table 2. Pulp industry developments in Indonesia in the 2000 – 2005 period 11
Table 3. Problems facing Indonesia’s timber industries 20
Table 4. Percentages of timber raw materials allocated to wood-based industries 28
Table 5. Estimated timber raw material supplies from various sources and their allocation to
wood-based industries 28
Table 6. Selected strategies for each of the industries 32
Table 7. Problems, targets and strategies in the restructuring period (2007-2014) 33
Table 8. Problems, targets and strategies in the revitalization period (2015-2025) 34
Table 9. Strategies, policies and action plans necessary in the restructuring period (2007-2014) 37
Table 10. Strategies, policies and action plans necessary in the revitalization period (2015-2025) 40
Table 11. Action plans, success indicators and verification methods for M&E and implementing
agencies in the restructuring period (2007-2014) 42
Table 12. Action plans, success indicators and verification methods for M&E and implementing
agencies in the revitalization period (2015-2025) 48
List of Figures
Figure 1. Indonesian wood products production 1980-2005 6

Figure 2. Timber industry wood consumption 1980-2005 7
Figure 3. Installed capacity utilisation rates 8
Figure 4. Share of timber supplies from various sources 8
Figure 5.Wood consumption vs. supply 10
Figure 6. Road Map to Forestry Industry Revitalization. 22
Annex
Annex 1. Supply Capacity of Raw Material in 2005 and prediction for 2006 59
ii The Forest Industry Revitalisation In-house Experts Working Group A Road Map For The Revitalization Of Indonesia’s Forest Industry
Foreword by the Minister of Forestry, Republic of Indonesia
We extend our gratitude to God the Almighty who has bestowed the Indonesian people with abundant
forest resource that we can utilize for our prosperity. God has tasked us to properly manage and maintain the
resources so that the forest benefit could flow sustainably, not only for present generation, but also for our children
and grand children in the future.
Forest Industry Restructuring, particularly timber industry, is one of five key programs I launched in the
Ministry of Forestry for the period of 2004 – 2009. It is certainly a short period of time, but we have to strive for the
best. Human is in loss, if today is the same or not be better than yesterday; and human is even lost when today is
worst than yesterday.
With my short appointment period, it is difficult to experience the result of forest industry restructuring
efforts. But most importantly, we have a genuine, good intention and the sense of togetherness of all stakeholders
on common vision, mission, target and objectives to be achieved in the forest industry restructuring process. This
is a building block to reach efficient forest industry, supported by sustainable supply of raw material, produce the
most value added products, and can compete in the global market. For this purpose, I asked the Forest Industry
Revitalization Working Group to prepare this document so that it would be of the main reference to achieve the
forest industry goal in the near future.
I invite our colleagues, forestry practitioners, business actors, academics, policy makers at all level of the
governments and communities to review, analyze and implement this document in accordance to their specific
condition. With our strong intention and good will, we hope that we can reap the benefits in not a very distance
future. As with people with illness, the forest industry needs a remedy to be recovered and keeps healthy. I hope
the recommended strategy and the follow up actions laid out in this document can be of the medicine to cure such
illness.
Finally, I would like to thank the Forest Industry Revitalization Working Group who works very hard
in finalizing and completing this document. I sincerely hope that this document can bring improvements for the
betterment of Indonesia’s forest industry in the future.
Minister of Forestry, Republic of Indonesia
H.M.S. KABAN
The Forest Industry Revitalisation In-house Experts Working Group A Road Map For The Revitalization Of Indonesia’s Forest Industry iii
Foreword
We give our thanks and praise to God the Almighty for the completion of this paper. After a year of hard
work involving weekly meetings with key practitioners, field trips, two workshops and involvement in forestry
associations’ road map preparations for the development of four forestry industries (plywood, wood working, pulp
& paper and furniture), the Forestry Industry Revitalization In-house Expert Working Group has finally succeeded in
compiling this paper from the outcomes of all these activities.
This paper would not have been possible without the moral and material support of everyone involved.
Therefore, we wish to extend our deepest thanks to the Secretary General of the Ministry of Forestry. We would also
like to express our gratitude and appreciation to the Director General of Forestry Production Development for all his
support. We also extend our thanks to donor organizations, particularly the European Union, The World Bank and
MFP-DfID, for providing facilities for the working group. We would also like to thank the forestry associations APHI,
APKINDO, ISWA, BRIK, ASMINDO and APKI for all their efforts, from routine discussions to their preparations of road
maps. Finally, we wish to express our utmost appreciation to all members of the working group for their undying
dedication. Hopefully all of our devotion will secure the blessing of almighty God.
As the proverb says, there is no such thing as uncracked ivory. We feel what is presented here remains
insufficient, so on behalf of the working group we apologise for all shortcomings, and will gratefully accept any
input, comments, suggestions, responses and constructive criticism for creating competitive and sustainable wood
processing industries in Indonesia in the future.
Finally, we hope this writing will be of benefit to us all.
Jakarta. August 15, 2007

On behalf of the
Forest Industry Revitalization Working Group,
E. G. Togu Manurung, Ph.D.

Senior advisor for the Forestry Minister
iv The Forest Industry Revitalisation In-house Experts Working Group A Road Map For The Revitalization Of Indonesia’s Forest Industry
I
Introduction
I. Introduction
Rapid developments in the timber industry, with its vital role in securing foreign exchange and economic
development, have led to complex issues for the government and the people of Indonesia. Diminishing supplies
of raw materials from natural forests, the low development realization rate of pulpwood and lumber industrial forest
plantations (HTI), and production inefficiencies have all caused a decline in forest product production leaving many
wood processing companies with financial losses and debts. Some of these companies are suspected of consuming
illegal timber from natural forests in their production processes. Consequently, not only are future supplies of round
wood for the timber industry under threat, but environmental destruction from deforestation and forest degradation
is becoming increasingly severe.
This shows Indonesia’s weaknesses in failing to utilise its comparative advantages as a tropical country,
particularly in making the most of forest plantation productivity, which should be far higher than in non tropical
countries. Furthermore, environmental problems and conflicts have increased as a result of scarce forest resources,
and declines in forest environmental services and biodiversity. Meanwhile, illegal loggers and consumers of illegal
timber continue to enjoy alluring profits, while the public have to bear the brunt of the extensive negative impacts
resulting from environmental degradation.
The Ministry of Forestry and other stakeholders realise that timber industry raw material requirement
discrepancies and continuous illegal logging are major obstacles to forestry industry revitalization. The future of
Indonesia’s timber industry will depend on the successful development of forest plantations. In some regions
there is ample potential for involving poor communities in forest plantation development, either in state forests or
on private land. However, forest plantation development will undoubtedly face numerous challenges, including
landuse conflicts and issues relating to land utilisation permitting processes to ensure the legality of Indonesian
forest products sold in the international marketplace.
The Ministry of Forestry is aware of these highly serious and complex issues and has established five policy
priorities for the forestry sector1. In connection with the second priority - revitalization of the forestry sector - forestry
industries in particular, and the fourth priority - empowering community economies in and around state forest areas
- the government plans to accelerate the development of industrial forest plantations and has set a target of 5
million hectares by 2009. The Ministry of Forestry has also set an additional target of developing 5.4 million hectares
of community forest plantations between 2007 and 2016.
In 2005, the Ministry of Forestry formed a working group tasked with synthesising the latest studies
on forestry industry restructuring. The group subsequently recommended strategies covering three stages: the
restructuring stage, the re-engineering stage and the revitalization stage. In the first stage – restructuring – attention
is focused on forest plantation intensification and extensification, eradicating illegal logging and illegal trading,
resolving the question of the debt-ridden timber industry, developing alternative sources of timber raw materials,
and temporarily limiting timber industry production to levels that can be supported by sustainable timber supplies.
In the second stage, attention will focus on the adaptation of wood processing technology and investment in
1 The five forestry sector policy priorities: (1) Eradicating forest timber theft and the illegal timber trade, (2) Revitalising the
forestry sector, particularly the forest industry, (3) Rehabilitating and conserving forest resources, (4) Empowering community
economies in and around the state forests, and (5) Consolidation of state forests.
2 The Forest Industry Revitalisation In-house Experts Working Group A Road Map For The Revitalization Of Indonesia’s Forest Industry
wood processing machines in order to utilize an increased supply of sustainable timber and meet the demand for
new, high-quality products. The adaptation of processing technology will focus on machines with the capacity to
process small-diameter wood from fast-growing species, while producing more varied and higher value added
products, and not merely wood-based commodities like sawnwood and plywood. In the third stage – revitalization
– attention will be paid to maintaining or improving the timber industry’s competitiveness and efficiency. During
this period, Indonesia’s forest product industries will very probably develop and create many new jobs due to an
abundance of forest plantations with fast-growing species. This three-stage strategy offers a vision of Indonesia’s
forestry industry in the future, which can certainly be achieved through policy intervention and management and
should begin right away.
In an effort to realise these targets, the Ministry of Forestry established the Forest Industry Revitalization
In-house Experts Working Group in June 2006, tasking it with discussing a policy framework for forestry sector
revitalization and consulting with stakeholders to prepare forestry sector revitalization policies. The In-house Experts
Working Group subsequently carried out a number of activities, including: (1) Holding discussions with stakeholders;
government agencies, timber company businessmen, forestry associations, non-governmental organizations and
academics, (2) Conducting field trips to several HPHTI and IUPHHK forest plantations, some community forest
locations, as well as a number of timber companies, and (3) Presenting two workshops in Jakarta; one entitled
“Timber Raw Material Supplies for Indonesia’s Timber Industry” was organized in the Twin Plaza Hotel on the 12 and
13 October 2006, and the other “Indonesian Timber industry” was held in Hotel Santika on the 19 and 20 December
2006. In addition, the In-house Experts Working Group was actively involved in preparing wood processing industry
road maps with the working groups (WG) for Woodworking, Furniture, Panel Wood, and Pulp and Paper established
by the Directorate General of Forestry Production Development (BPK).
The Road Map for the Revitalization of Indonesia’s Forest Industry was prepared based on the activities of
the In-house Experts Working Group outlined above. This paper presents an illustration of the current state of the
timber industry and availability of timber supplies from various sources, problems confronting the timber industry in
the provision of log supplies now and in the future, objectives, targets, strategies, policies, and necessary action plans
for bringing about a healthy and competitive wood-based industry, which produces high added value products,
creates job opportunities and relies on legal and sustainable supplies of logs from a number of sources.
The Forest Industry Revitalisation In-house Experts Working Group A Road Map For The Revitalization Of Indonesia’s Forest Industry 3
II
The Current State of
Indonesia’s Timber
Industry
II. The Current State of Indonesia’s Timber industry
The past Government forestry industry policies2 have resulted in rapid growth (Figure 1) and structural
changes (Figure 2) in Indonesia’s timber industry between 1980 and 2005. Sawnwood production rose sharply
from 4.8 million m3 in 1980 to 7.1 million m3 in 1985, peaking at 10.4 million m3 in 1989, and then falling sharply to
4.3 million m3 in 2005 (FAO, 2006). Plywood and veneer production showed a similar sharp rise from 1 million m3 in
1980 to 8.3 million m3 in 1990, peaking at 9.7 million m3 in 1997, and subsequently falling to 4.7 million m3 in 2005
(FAO, 2006). Pulp production increased rapidly from 0.5 million tons in 1989 to 3.1 million tons in 1997, and reached
5.4 million tons in 2005 (APKI, 2005). In addition to these major forest products, total production estimates for other
forest products such as woodworking timber, blockboard, particle board and wood chips ranged from 0.1 million
m3 to 2.3 million m3 in the 1983 to 2005 period (MoF, 2006 and FAO, 2006).
Figure 1. Indonesian wood products production 1980-2005

25.0
20.0
15.0
Million M3
10.0
5.0
0.0
1980 1985 1990 1995 2000 2005
Year
Sawnwood Plywood Veneer Block Board Wood Working Particle Board Chipwood Pulp
The installed capacity utilization rate for the sawnwood industry rose from 86% in 1980 to 97% in 1989,
and then fell sharply to 41% in 2005. The installed capacity utilization rate for the plywood industry increased from
51% in 1980 to 99% in 1997, before falling sharply to 42% in 2005. These trends show a very real increased round
wood deficit for the sawnwood and plywood and veneer industries as of 1997. This meant assets invested in these
two industries could not be utilized properly. Meanwhile, the installed capacity utilization rate for the pulp industry
continued to rise from 65% in 1989 to 85% in 2005. Installed capacity utilization rates for the timber industry in the
1987 to 2005 period are shown in Figure 3.
2 An incremental ban on round wood exports began in 1980 and was completed by 1985; high export tax on sawnwood was
applied from November 1989; revocation of the round wood export ban and its replacement with a prohibitive export tax
on round wood began in June 1992; and export tax on round wood was reduced to a maximum of 10% before the end of
December 2000 and 0% in 2003 (Manurung, 2002).
During the 1980 to 2005 period, the timber industry contributed significantly to foreign exchange earnings,
gross domestic product, state revenue, and employment. The export value of forest timber products3 fluctuated
during the 1980 to 2005 period and reached its peak of US$ 6.24 billion (17.8% of export value for industry goods
or 11.7% of the total value of exports) in 1997 when the export value of plywood reached its peak as well, and there
were significant contributions from pulp and paper and wooden furniture. The export value of forest products
subsequently fell as a result of the economic crisis, and by 2005 the value had dropped to US$ 5.41 billion (9.7% of
export value for industry goods or 6.3% of the total value of exports) (Central Statistics Agency, 2006). Simangunsong
(2004) showed that although the export value of forest products continued to rise during the 1980 to 1997 period,
their contribution to the export value of industry goods continued to decline at the same time, thus indicating
slower growth in the timber industry compared to overall industrial growth. Further, by 2002, the export value of
pulp and paper had exceeded that of plywood signifying a considerable change in the composition of Indonesia’s
timber industry exports.
Forestry sector contributions to gross domestic product ranged from 1.7% to 3.1% during the 1993 to 2005
period. These figures are higher than the Asian average of 1.1% (FAO, 2005). State revenue in the form of non-tax
earnings such as HPH Concession License Fees (IHPH), Reforestation Funds (DR) or Reforestation Guarantee Funds
(DJR), and Forest Product Royalties (IHH) or the Performance Bond (PSDH) in the 1993 to 2004 period ranged from
Indonesian Rupiahs (IDR) 1.16 trillion to IDR 3.37 trillion (or between 0.76% and 1.73% of total state revenue). The
number of people currently employed directly in the forestry industry sector is estimated at between 500 and 600
thousand. This figure would be far higher if all those employed in the woodworking, small-scale sawnwood, particle
board, fibreboard and wooden handicrafts industries were taken into account.
Figure 2. Timber industry wood consumption 1980-2005

100%
80%
RWE Consumption (%)
60%
40%
20%
0%
1980 1985 1990 1995 2000 2005
Year
Sawnwood Plywood+Veneer Woodworking+Block+Particleboard+Chipwood Pulp
Note: RWE = Round wood equivalent
3 Sawnwood, plywood, wooden furniture, pulp and paper.
Figure 3 . Installed capacity utilization rates
120%
100%
80%
Utilization Rate (%)
60%
40%
20%
0%
1987 1990 1993 1996 1999 2002 2005
Year
Sawnwood Plywood+Veneer Pulp
Figure 4. Share of timber supplies from various sources

(Ministry of Forest)
100%
80%
60%
Share (%)
40%
20%
0%
1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000*) 2001 2002 2003 2004 2005
Year
Natural Production Forest (RKT) Conversion Production Forest (IPK)
Other Legal Permits (ISL) Plantation (Perum Perhutani)
Industrial Plantation Forest (HTI)
Based on the above timber product realization figures, total logs consumption for timber industry rose
sharply from 11.7 million m3 in 1980 to 24.1 million m3 in 1985, and reach the peak at 52.7 million m3 in 2003. This
figure was then felt drastically to 44.5 million m3 in 2005. Meanwhile, the timber industry also faced changes in
sources of raw materials which affected their quality (Figure 4). At present, round wood produced in Indonesia
originates from a number of sources; natural forests, industrial forest plantation, other legal permits, and conversion
areas. Total timber production for 20054 was 24.22 million m3, 5.72 million m3 of which originated from natural
forests5, 12.82 million m3 from industrial forest plantation, 0.76 million m3 from state-owned forest enterprise Perum
Perhutani, 3.61 million m3 from conversion areas (IPK) and 1.31 million m3 from other legal permits (ISL). Round wood
production figures for the last 12 years are presented in Table 1.
4 Ministry of Forestry (2006). Executive, Strategic Forestry Data 2006.

5 Annual Allowable Cuts agreed by the Ministry of Forestry for 2002 to 2007 were as follows: 12 million m3 (2002), 6.3 million
m3 (2003), 5.7 million m3 (2004), 5.1 million m3 (2005), 8.2 million m3 (2006) and 9.1 million m3 (2007).
The total number of log production in 2005 published in Eksekutif Data Strategis Kehutanan 2006 (2006
Executive Strategic Forestry Data) is much lower than the total log production recorded by Directorate General for
Forestry Production in 2007, i.e. 42.36 million cubic meters (the complete data is presented in Annex 1).
Table 1. Round wood production by production source (m³)

Plantation Industrial
Year Natural Conversion Other Legal Total
Forests (Perum Plantation
Forests (RKT) Areas (IPK) Permits (ISL) Production
Perhutani) Forests (HTI)
1994/95 17,308,737 4,708,696 138,106 1,871,737 0 24,027,277

1995/96 16,943,933 5,398,196 124,883 1,868,356 514,692 24,850,061
1996/97 15,268,134 8,021,328 682,006 1,623,545 474,268 26,069,282
1997/98 15,597,546 10,038,228 1,266,455 1,821,297 425,893 29,149,419
1998/99 10,179,406 6,056,174 628,818 1,682,336 480,210 19,026,943
1999/00 10,373,932 7,271,907 895,371 1,890,901 187,831 20,619,942
2000 3,450,430 4,564,592 488,911 1,511,001 3,783,604 13,798,537
2001 1,809,100 2,323,614 - 1,455,403 5,567,282 11,155,399
2002 3,019,839 182,708 - 1,559,026 4,242,532 9,004,105
2003 4,104,914 956,472 59,538 976,806 5,325,772 11,423,502
2004 3,510,752 1,631,885 153,640 923,632 7,329,028 13,548,937
2005 5,720,515 3,614,347 1,311,584 757,993 12,818,199 24,222,638
Total 107,287,240 54,768,147 5,749,312 17,942,033 41,149,310 226,896,042

Source : Ministry of Forest (2006). Executive, Strategic Forest Data (2006)
Note : (-) no data available
If we assume the shortfall between official round wood production and processed wood industry round
wood consumption is sourced from illegal round wood, it is quite clear that processed wood industries consume
huge quantities of illegal timber in their production processes (Figure 5). In 2002 the amount of illegal round wood
consumed by the timber industry was estimated at 42.2 million m3, later falling to 20.3 million m3 in 2005. This
means the timber industry plays a large part in severe environmental degradation currently taking place through
deforestation and forest degradation. Further, the timber industry’s declining consumption of illegal round wood
also indicates increasing difficulties in securing raw materials. In other words, forest resources are critically degraded,
not only in the state production forests, but also in other forest areas as well. The MoF’s unremitting illegal logging
eradication operations are reported to have succeeded in reducing forestry crime in Indonesian forests over the last
two years.
Specific conditions in each of the timber industries will be explained below.
Figure 5. Wood consumption vs. supply

60.0
50.0 RWE wood consumption

Volume (Million m³)
40.0
30.0
20.0
Wood supply
10.0
0.0
1980 1985 1990 1995 2000 2005
Year
Note: RWE = Round wood equivalent
2.1. Sawnwood and Woodworking Industries

Almost 90 % of Indonesian Sawmill and Woodworking Association (ISWA) members constitute small and
medium enterprises (UKM) with no HPH concessions. The current number of export-orientated companies registered
in the Forest Industry Revitalization Board (BRIK) stands at around 1600. However, the number of companies with
active operations has fallen from over the years, and in 2006 was down to 602 (BRIK, 2006). Total exports for 2006
amounted to 2.3 million m3 valued at US$ 1.29 billion. This figure is almost identical to 2005 with total exports of 2.4
million m3 worth US$ 1.27 billion. The main destination for woodworking exports is Japan followed by China, while
the best average prices come from exports to European countries, though volumes are small. For now, accurate
information regarding domestic supply and demand remains unavailable.
2.2. Plywood and Other Panel Wood Industries

The Indonesian Panel Wood Producers Association (APKINDO) had a recorded membership of 130
companies on 6 October 2006. Only 68, however, were active with a production capacity of 6.1 million m3 annually,
while only 19 units were producing at normal capacity (1.54 million m3 annually). Total exports for 2006 amounted
to 2.91 million m3 with a value of US$ 1.30 billion. This figure is significantly lower than the 3.47 million m3 valued
at US$ 1.25 billion for 2005. The main destinations for plywood exports are Japan, the United States and the United
Kingdom.
2.3. Pulp and Paper Industries
The Indonesia’s Pulp and Paper Association (APKI) reports for 2005 showed 10 integrated pulp and paper
mills and 3 non-integrated pulp mills operating in Indonesia with a total installed capacity of 6.45 million Adt (air-
dried tons), 86% of which came from Sumatra. At the same time, 53% of pulp and paper mills constituted foreign
private company investments. Total pulp production in 2005 was 5.47 million Adt with 2.56 million Adt being
exported, while pulp imports for the same year were 0.89 million Adt. In that year, Indonesia was the world’s ninth
largest pulp producer and the twelfth largest producer of paper. The main players in the pulp and paper industry in
Indonesia are Asia Pulp and Paper (APP) from the Sinar Mas Group (SMG), which controls 40% of pulp capacity and
31.8% of paper capacity, and APRIL from the Raja Garuda Mas group controlling 33.3% and 7.8% of pulp and paper
capacity, respectively.
During the 2000 to 2005 period, installed capacity for the pulp industry rose from 5.23 million Adt in
2000 to 6.45 million Adt in 2005, an increase of 23.3% (Table 2). This installed capacity increase accompanied by an
installed capacity utilization rate increase of 6.6% causing a sharp rise of 33.8% in pulp production during this period.
Further, despite pulp consumption rising at a low rate (7.7%), due to a 15.8% rise in imports, exports for 2005 were
almost twice as high as for the year 2000. Based on an FAO international trade data report (2005), in 2003, the main
importers of pulp from Indonesia were China (44%) followed by the Republic of Korea (24%), France (7%), Italy (6%)
and Japan (6%).
During the 1996 to 2003 period, 73% of world pulp industry capacity growth was down to the contributions
of just three countries: Brazil, Indonesia and China. Nevertheless, the combined pulp industry capacity of these three
nations was only 10% of total world capacity. Meanwhile, despite the combined population of the world’s three
major pulp producing countries - the United States, Canada and Japan – being only around 18.6 percent of the
world’s population, they consumed 73% of the world’s pulp and paper produced in 2003. Further, Spek (2006)6
stated that world pulp industry capacity is estimated to grow to 201.3 million tons Adt by 2010.
Table 2. Pulp industry developments in Indonesia in the 2000 – 2005 Period

Year
Item
2000 2001 2002 2003 2004 2005
Installed capacity (Adt) 5,228,100 5,587,100 6,087,100 6,287,100 6,287,100 6,447,100
Production (mT) 4,089,550 4,665,920 4,969,000 5,194,310 5,208,680 5,470,000
Imports (mT) 768,590 564,130 825,700 735,560 899,050 890,000
Exports (mT) 1,329,460 1,698,580 2,245,200 2,375,250 2,476,960 2,560,000
Consumption (mT) 3,528,680 3,531,470 3,549,500 3,554,620 3,630,770 3,800,000
Pulp capacity utilization rate 78% 83.5% 81.6% 82.6% 82.8% 84.8%
Source: Indonesian Pulp and Paper Association (2005)
2.4. Furniture and Handicrafts Industries

Furniture and handicrafts enterprises have been around for a long time in Indonesia and been passed down
from generation to generation. Furniture and handicrafts industry centres have developed rapidly, particularly in
Java with wood centres in Semarang, Jepara, Solo, Yogyakarta and Surabaya, and rattan centres in Cirebon, Sukoharjo
and Surabaya. The furniture and handicrafts industries are dominated by small and medium enterprises (UKM) with
6 Machted Spek. 2006. Financing Pulp Mills: An Appraisal of Risk Assessment and Safeguard Procedures. CIFOR.
home industries working together with larger businesses. Of all the industries in the forestry sector, the furniture
and handicrafts industries generate the highest number of employment per US$ 100 investment.
The timber requirement of the furniture and handicrafts industries is approximately 7 to 7.5 million m3
annually; commonly using species such as teak, mahogany, pine, acacia, gmelina, durian, mango, mbacang, kuweni,
bungur, sonokeling, mindi, waru, rubberwood and to a lesser degree woods originating from natural forests, like
meranti, nyatoh, bangkirai and kempas. Recently, Indonesia has begun importing wood from overseas, and the trend
is rising.
ASMINDO reported a total value of approximately US$ 1.79 billion in furniture exports for 2005 with the
main destinations for exported Indonesian furniture being the United States (37%), Japan (12%), the United Kingdom
(8%) the Netherlands (8%), Germany (7%) and France (7%). Some exports were also destined for Italy, Belgium, Spain
and Australia. Meanwhile, the world furniture trade increased in size from US$ 51 billion in 2000 to US$ 80 billion
in 2005.
III
Current Availability of
Timber Supplies from
Various Sources
III. Current Availability of Timber Supplies from Various
Sources
At present, round wood produced in Indonesia originates from a number of sources, including natural
forests, industrial forest plantations, other legal permit areas, and conversion areas. Total wood production for 20057
was 24.19 million m3; with 5.69 million m3 originating from natural forests8, 12.82 million m3 from industrial forest
plantations, 0.76 million m3 from state-owned enterprise Perum Perhutani production forests, 3.61 million m3 from
land conversion permits (IPK) and 1.31 million m3 from other legal permits (ISL). Round wood production for the last
12 years is presented in Table 1 above. Some wood processing companies have reported using rubberwood (Hevea
brasiliensis), palm oil wood (Elaeis guineensis) and coconut wood (Cocos nucifera) usually sourced from crop estates
or smallholder estates.
3.1. Natural Production Forests

The Ministry of Forestry (2005)9 reported that based on results of its latest recalculations on Indonesia’s
forest cover status for 2003, forest cover was estimated at 133.6 million ha or around 71% of Indonesia’s total land
area. Out of the 133.6 million hectares, 60.9 million ha has been designated for natural production forests, either
Limited Production Forest or Permanent Production Forest. This recalculation shows too that production forests
comprised 14.8 million ha of primary natural forest (24.3%), 21.6 million ha of secondary natural forest (35.5%), 2.4
million ha of forest plantations (3.9%) and 18.4 million ha of non-forested areas (30.2%), while no data was available
for the remaining 3.7 million ha (6.1%). Further, 88% of total remaining primary forest and 72% of total remaining
secondary forest is located in Papua and Kalimantan. The extensive area of non-forested zones indicates the current
highly degraded state of natural forests. This is apparent from the extremely sharp decline in round wood production
during the 1994 to 2005 period, which fell from 17.3 million m3 in 1994 to 5.7 million m3 in 2005.
By June 2005, there were 281 HPH/IUPHHK concessions in active operations covering an area of 27.11
million ha. These comprised 185 purely private operations on 19.63 million ha, 5 purely state-owned enterprises
on 0.34 million ha, 86 participatory HPHs on 6.50 million ha, and 5 joint ventures over an area of 0.63 million ha.
These HPH/IUPHHKs were located mainly in the provinces of East Kalimantan (68 concessions), Central Kalimantan
(50 concessions), Papua (23 concessions), West Irian Jaya (23 concessions), West Kalimantan (21 concessions), Riau
(15 concessions), Central Sulawesi (14 concessions), North Maluku (12 concessions) and Maluku (10 concessions),
which, when combined, made up 84% of all active HPH/IUPHHK concessions in the country10.
By August 2006, the number of HPH/IUPHHKs had increased slightly to 303 concessions covering an area of
28.1 million ha. However, only 149 of these were active with a combined area of 14.6 million ha. The large number

8 The Annual Allowable Cuts agreed by the Ministry of Forestry for the 2002 to 2007 period are as follows: 12 million m3
(2002), 6.3 million m3 (2003), 5.7 million m3 (2004), 5.1 million m3 (2005), 8.2 million m3 (2006) and 9.1 million m3 (2007).
9 Ministry of Forestry. 2005. Forest Cover Recalculations for Indonesia 2003. Forest Inventorization and Mapping Centre,
Forest Planology Agency; and “Identifikasi lokasi lahan pada kawasan hutan produksi untuk HTI.” A paper presented by Ir.
Wardoyo, MSc. from the MoF Forest Planology Agency at a regular meeting of the In-house Experts Working Group, 15 June
2006
of HPH/IUPHHKs not in active operation (154 units with an area of 17.38 million ha) was due to a number of factors
that can be categorized into two groups: internal factors covering poor company health, lack of professional human
resources, low levels of commitment to forest management, and permit holders waiting only for a more conducive
situation; and external factors including: inconsistency and lack of integration in central and regional rules, continued
illegal logging, excessive claims by local communities and a lack of business certainty.
When compared to the total area of production forests (60.9 million ha), the total area of HPH/IUPHHKs
is far smaller. This means there are vast regions of ‘open-access’ production forest, the area of which is reportedly
around 16.4 million ha11.
Based on round wood production reports for the 1977 to 2000 period12, the average volume of commercial
round wood produced from production forests was 22.14 m3 per ha with an annual incremental growth of 1.13 m3
per ha. This growth in volume is far lower than that observed by Sumarna, et al. (2002)13 which ranged from 0.53 m3
per ha annually in Aceh to 3.26 m3 per ha annually in East Kalimantan, with an average annual incremental growth
of 1.82 m3 per ha. The figure is, however, far higher than growth estimates by Sist, et al. (1998)14 of 0.3 to 0.5 m3 per
ha annually. Some logged-over natural forests can now be exploited as they have reached their rotation age of 35
years.
3.2. Forest plantations
Aside from the 1.78 million ha of forest plantations managed by state-owned enterprise Perum Perhutani,
the government also processed permits for 10.26 million ha15 of industrial forest plantations (HTI) during the 1989
to 2006 period for producing pulpwood and lumber. The cumulative number of HTIs developed by 2006, however,
was very low at 3.03 million ha or only 30%. Of this number, 60% was planted for producing pulpwood while only
32% are for lumber. Currently, of the 45 IUPHHK pulpwood forest plantation companies, 12 own a total share of 73%.
Whereas, of the 166 IUPHHK lumber forest plantation companies, 32 companies, each with forest plantation areas of
more than 9000 ha, own a total share of 61%.
Lumber production from Perum Perhutani forest plantations declined sharply during the 1994 to 2005
period, from 1.87 million m3 in 1994 to 0.76 million m3 in 2005 (Table 1), indicating a depletion in forest resources
managed by Perum Perhutani. This contrasts markedly with wood production from HTIs, all of which was pulpwood,
which continued to rise throughout the same period16. Nevertheless, HTI pulpwood production was still insufficient
11 “Penyediaan bahan baku berasal dari produk hutan alam HPH/IUPHHK.” Paper presented by Dr. Hilman Nugroho, Director of
Natural Forest Development – MoF, at the Timber Raw Material Supplies for Indonesia’s Timber Industry workshop. Twin
Plaza Hotel, Jakarta, 12-13 October 2006.
12 Indonesian Forestry Statistics (1980 - 2002) and Forest Conservation Management Plan (RPKH) reports.
13 Sumarna, K., D. Wahjono and H. Krisnawati. 2002. Stand volume prediction of logged-over areas in natural production
forests and annual production quota formulas. Paper presented in a discussion on silviculture for natural production forests
to achieve sustainable forests on February 21, 2002. Forestry Research and Development Agency
14 Sist, P., T. Nolan, J. Bertault and D. Dykstra. 1998. Harvesting intensity versus sustainability in Indonesia. Forest Ecology and
Management (108): 251-260.
15 ‘Kondisi dan tantangan pembangunan HTI di Indonesia saat ini.’ Paper presented by Ir. Deny Kustiawan, Director of Forest
plantation Development, in a reguler In-house Experts Working Group meeting, 8 June 2006.
16 Until now there are no official records of HTI lumber production.
to meet timber industry needs since not enough were planted, and planting times were unsuited to timber industry
development. Average HTI per hectare timber production still remains low.
Observations on the ground in several IUPHHK forest plantations17 showed that pulpwood production
(Acacia spp, Eucalyptus spp) with a rotation period of 6 to 8 years is sufficiently high, ranging from 125 to 200 m3 per
ha. These wood production figures are still far lower than expected because current incremental volume growth for
pulpwood is already between 35 to 60 m3 per ha annually, depending on the species and clone seedlings planted.
3.3. Community Forests
From 2003 to 2005, around 219,000 ha of community forests were developed through the national
movement on forest and land rehabilitation program ( GN-RHL/Gerhan) and a further 2,000 ha through government
and community partnership schemes18. In addition, approximately 7,606 ha of community forests were developed
through partnership schemes involving companies and communities. Nevertheless, the total area of community
forests developed is in fact far smaller than the area of 1.56 million ha reported by the Central Statistics Agency
based on the 2003 Agriculture Census. Further, Santoso (2006)19 pointed out that at least 6 million m3 of round
wood is produced by community forests each year. The discrepancies in these figures imply that no accurate data
on community forests is presently available at the national level.
3.4. Estate Crops
In 2005, the total area of estate crops in Indonesia was estimated at around 18.64 million ha, 13.89 million
of which were smallholder estates and 4.74 million ha were large crops estates. Of this figure, 70.8% was made up
of only three species of crops: rubber (Hevea brasiliensis) covering 3.28 million ha, coconut (Cocos nucifera) on 4.32
million ha and oil palm (Elaeis guineensis) on 5.59 million ha. Almost all the coconut plantations, around 83% of
rubber and 35% of oil palms are of smallholder estates.
Unlike Malaysia and Thailand20, Indonesia’s timber industry has not yet to use rubberwood (Hevea
17 Observations in HTIs belonging to PT Toba Pulp Lestari in North Sumatra, PT Wira Karya Sakti in Jambi and PT Arara Abadi
and PT RAPP in Riau.
18 ’Ketersediaan pasokan bahan baku kayu saat ini dan upaya peningkatan pasokan dari hutan rakyat di masa depan.’ Paper
presented by Ir. Djoko Winarno, Director of Forest and Land Rehabilitation Management, at the Timber Raw Material Supplies
for Indonesia’s Timber Industry workshop, Twin Plaza Hotel, Jakarta, 12-13 October 2006.
19 ‘Hutan Rakyat: Menuju alternatif sumber bahan baku industri perkayuan di Indonesia.’ Paper presented by Ir. Hery Santoso, MSc.
member of the National Forestry Council and Director of the Java Learning Centre, at the Timber Raw Material Supplies for
Indonesia’s Timber Industry workshop. Twin Plaza Hotel, Jakarta, 12-13 October 2006.
20 80% of Malaysian made furniture products use rubberwood where the export value of furniture made from rubberwood is
around US$ 1.1 billion. Thailand also uses rubberwood as the raw material for its furniture industry with a total export value
of approximately US$ 300 million annually (FAO, 2005).
brasiliensis)21, coconut wood (Cocos nucifera)22 or oil palm wood (Elaeis guineensis)23 as raw materials because of
the abundant supply of round wood from natural forests in the past. Ironically, this still remains the case despite
the drastic decline in round wood supplies from natural forests. This situation must change; the three estate crop
species must be considered as alternative sources of raw materials, particularly as so much information is available
on their physical and mechanical characteristics in connection with their processing.
21 A brightly coloured, medium density, wide-leafed and easily tooled wood. Rubberwood can be a substitute for a number
of timber species, including ramin (Gonystylus spp.), meranti (Shorea spp.), teak (Tectona grandis), oak (Quercus spp.) and pine
(Pinus spp.). The majority of rubberwood is processed into sawnwood and then made into furniture. Rubberwood is now
often used as a raw material for particleboard, cement board and medium density fibreboard. Tests have also been carried
out on the utilization of rubberwood as a raw material for oriented strandboard (FAO, 2005)
22 Through sorting and certain treatments to parts of mature coconut stems, coconut wood can be a substitute for timber
(Killmann and Fink, 1996). Currently, sawing coconut stems remains the domain of small-scale enterprises. Sawnwood
from coconut palms is generally used for rebuilding houses and simple bridges in rural areas, though coconut wood is also
used for things other than construction. New processing technologies have managed to expand the utilisation of coconut
wood to make cabinets and crafts such as jewellery boxes, cups, vases, plates and bowls (Arancon, 1997)
23 Current developments in research and tests on oil palm fibre in mechanical and chemical pulp production are highly
promising. Similarly, research into the use of oil palm wood as panel wood and in gypsum fibreboard is developing rapidly
(Kollert, Killmann and Sudin, 1994).
IV
Problems Facing
the Timber industry
IV. Problems Facing the Timber industry
The In-house Experts Working Group, through activities explained in the Introduction section, identified
problems facing each of the timber industries. These are presented in Table 3.
Table 3. Problems facing Indonesia’s timber industries
Industry Problems
High instance of unofficial charges
Inappropriate taxation on round wood
Mediation with banks still lacking
Labour legislation remains unconducive
Prevalence of illegal sawnwood companies
Sawnwood dan
Woodworking Negative brand image resulting from widespread illegal logging
Low quality of products compared to those from other countries (China, Malaysia, Brazil and other Latin
American countries)
Preferences for certificated products
High prices of Indonesian products compared to those of competitors such as China
Low industry efficiency resulting from antiquated machinery
Lack of raw materials or excessive installed capacity
Sharp fall in product competitiveness
Plywood and High instance of unofficial charges
Other Panel
Woods Inconsistent central and regional policies
Low industry efficiency resulting from antiquated machinery
Lack of raw materials
Pulp and paper industrial waste yet to be managed professionally
Pulp and Paper In company social conflicts
Companies bad image relating to the utilization of raw materials from natural forests
Unconducive investment climate
Lack of raw materials
Negative brand image resulting from widespread illegal logging
Furniture and Low quality of products compared to those from other countries (China, Malaysia, Brazil and other Latin
Handicrafts American countries)
High prices of Indonesian products compared to those of competitors such as China
Subsequently, the In-house Experts Working Group together with the Woodworking, Furniture, Panel Wood,
Pulp and Paper Working Groups and other stakeholders discussed these problems and agreed that there were 6 (six)
major problems currently facing Indonesia’s timber industry, i.e.:
1. Insufficient supply of raw materials
2. Over capacity
3. Industry inefficiency
4. Low product competitiveness
5. Diminishing market share
6. Low added value of wood products
V
Road Map of
Indonesia’s Wood
Industry
V. Road Map of Indonesia’s Wood Industry
As previously stated in this document, key problems faced by Indonesia’s wood industry are not without
causes nor it is stand-alone. It is almost impossible to discuss the performance and the development of timber
industry without exploring the supply side of raw materials. On the other hand, the supply side of timber industry
raw materials will be less important unless we look at the distribution or where such raw materials are processed to
gain a higher added value. Furthermore, the role of timber industry will be reduced if the resulted products are less
favorable, low quality with non-competitive market price. Raw materials, industry and market are closely related and
have a high inter-dependency. As such, these three factors should become the foundation and a starting point in
developing the strategy. In other words, the strategy should be based on how forest resources as the main supplier
of timber is properly managed so as to fulfill timber industries demands sustainably. The subsequent issue will be
how the timber industry can operate in an efficient manner, creating high quality timber products with high added
value where such products can be traded in a wide market segment and can compete in international market.
With such understanding, this Road Map is meant to be a depiction of a trajectory, a road map for activities
that need to be carried out by Indonesia’s forestry industry to the future. The road map explains the strategic
concepts to achieve expected condition in certain period of time, which are then, elaborated into a more detailed
policy and action plans. Milestones are also placed and presented as indicator of successes. In addition, actors
related to certain activities (who should do what, how, when and where) were identified, taking into consideration
that the development of timber industry need to be in synergy with similar activities in related government agencies
in central or regional, such as Ministry of Industry, Ministry of Trade , Provincial and Local Governments (Figure 6).
To achieve the ultimate goal there are other prerequisite, such that they become an enabling condition.
This includes political will, national stewardship, availability of economic institution, guarantees for access to land
and business, delegation of authority to local decision makers, clear rules and regulation for community and public
institution and human resources capacity, and most importantly, the link between macro and micro economic
development.
Figure 6. Road Map to Forestry Industry Revitalization.
EXPECTED CONDITION
Sufficient raw materials

M-1 M-3 Legal & sustainable
EXISTING CONDITION
M-2 Effisient & value added
Raw product industry
Materials f
ro
ato Competitive
ic s Market
? Ind ces
uc
S
Industry Market Strategy
WHAT ?
HOW ?
WHO ?
WHEN ?
WHERE?
ENABLING
CONDITIONS
In relation to the 18 forestry development focuses stated by the Ministry of Forestry, implementing the
road map for forestry industry revitalization is of the heart of forestry development. This is because 11 out of 18
development focuses emphasize the legal and sustainable supply of log as the main raw material for the industry,
one focus is related to marketing and trading and one focuses on the development of forest industry itself.
VI
Expected Conditions
VI. Expected Conditions
In the future, wood processing industries are expected to be sturdy, efficient, and competitive, and to
develop and use legal and sustainable supply of raw materials. By considering current conditions, problems faced
and timber industry trends, a clear vision and mission, as well as objectives and targets had to be set regarding
plans for the future development of wood processing industries. To bring these into a reality, appropriate strategies,
policies and action plans are deemed necessary.
6.1. Vision
A vision is an expected condition to be occurred for a certain period of time, for instance twenty years into
the future. This vision could become a reality if all stakeholders, including government, business practitioners and
communities, have a strong commitment to undertaking their tasks and responsibilities in revitalizing Indonesia’s
timber industry. The proffered vision constitutes a shared vision of the government and business practitioners
involved in the plywood and wood panel, wood working, pulp and paper and furniture industries. The following is
of a vision statement for developing timber industry in Indonesia:
“A high quality and competitive Indonesian timber industry supported by sustainable and growing sources of raw
materials”
A quality timber industry is expected to generate high-quality processed wood products able to penetrate
markets that demand high quality such as those in Japan, the United States and Europe. Further, a quality timber
industry must be highly competitive; meaning the processed wood products it generates must be capable of
competing with those of its competitors such as Malaysia, China and Japan.
6.2. Mission
The mission is an operational level elaboration of the vision. In the mission, there is the desire for the vision
to be attained as effectively as possible. Nevertheless, elaboration had yet to go as far as how, how many, or who
would be involved in its implementation. It was hoped that in the mission statements, implicit milestones could be
passed before final objectives are realised. The mission statements are as follows:
a. Increase the availability of raw materials for utilization, especially from forest plantations and other legitimate
and sustainable sources of timber;
b. Restructure and revitalise timber mills making them efficient, competitive and supportive to woodworking
industries;
c. Develop environmentally friendly high added value products able to compete in the international market
place; and
d. Produce certificated woodworking industry products.
6.3. Objectives and targets

The four missions were broken down further into objectives and targets which could hopefully be achieved
at every milestone. The objectives are of desired situations, whereas targets are quantitative measurements indicating
the successful achievements of the objectives. Of course, in this respect there are enabling conditions that constitute
preconditions to the achievement of particular objectives and targets. These enabling conditions are not analysed
here, but will be discussed later in the following section. The objectives and targets expected to be attainable within
twenty years are as follows:
a. Legal and sustainable supplies of raw materials achieved from a number of sources, particularly from
sustainably managed and certified production forests (allocation and estimated supplies of timber raw
materials from various sources for the 2007 - 2025 period are presented in Tables 4 and 5).
b. Processed wood production levels in accord with sustainable supplies of raw materials
c. Industry operates efficiently, with a high recovery rate and a capacity utilization rate of above 70 percent.
d. Highly competitive processed wood products with at least 20 percent of exported primary and secondary
processed wood products being certificated.
e. Improved market share with effective and efficient marketing systems and patterns in place for both
domestic and export markets.
f. Processed wood production focuses on environmentally friendly high added value commodities by
strengthening the woodworking industry.
Estimations for legal and sustainable timber raw material supplies for the 2007 to 2025 period presented in
Table 5 were calculated by considering input from practitioners and were based on the following assumptions:
a. Log supply figures for natural forests were based on actual timber production (from annual work plans) and
an annual increase of 10% where timber production from natural forests in 2006 was 5.3 million m3.
b. Log supply figures or pulp HTIs were based on: an annual cumulative plantation realization rate of 1.8
million ha from 1989 to 2006; plans for new plantations on 250 thousand ha in 2007 and 300 thousand ha
annually during the 2008 to 2014 period; a rotation cycle of 7 years; annual incremental volume growth of
25 m3 per ha; and a realization factor of 60%.
c. Log supply figures for lumber HTIs were based on: an annual cumulative plantation realization rate of 1.3
million ha from 1989 to 2006; plans for new plantations on 75 thousand ha annually for the 2007 to 2014
period; a rotation cycle of 20 years; annual incremental volume growth of 15 m3 per ha; and a realization
factor of 60%.
d. Log supply figures for HTR community forest plantations were based on: planned plantation of 200
thousand ha in 2007, 400 thousand ha in 2008, 600 thousand ha in 2009, and 770 thousand ha annually for
the 2010 to 2013 period; 570 thousand ha in 2014, 370 thousand ha in 2015, and 180 thousand ha in 2016;
a rotation cycle of 8 years; annual incremental volume growth of 25 m3 per ha; and a realization factor of
60%.
e. Steady annual timber supplies from Perhutani, community forests, rubber estates, oil palm estates, coconut
plantations24 and imports of 0.9 million m3, 6.0 million m3, 6.0 million m3, 10 million m3, 8 million m3, and 0.2
million m3 respectively throughout the 2007 to 2025 period. Supplies from ISLs and IPKs are expected to fall
by 15% annually in the 2007 to 2009 period, and then drop by 60% every year beginning in 2010.
f. Allocations of timber raw materials from various sources for each branch of the timber industry used the
assumptions presented in Table 4.
24 Until now, actual utilisation of coconut wood and oil palm wood by domestic wood processing industries remains extremely
low compared to potential annual figures for these estate crop woods.
Table 4. Percentages of timber raw materials allocated to wood-based industries
Percentage of timber raw material allocated (%)

Log supply source
Sawnwood Plywood Particle board Pulp
Natural Forests 60 40 0 0
Pulp HTI 0 0 0 100
Lumber HTI 40 40 20 0
HTR 60 20 10 10
HTHR 60 30 10 0
Perhutani 90 10 0 0
Community Forests 60 30 10 0
Rubber Estates 45 45 10 0
Oil Palm Estates 70 20 10 0
Coconut Plantations 100 0 0 0
ISL and IPK
2007-2009 10 10 0 80
2010-2025 50 40 10 0
Imports 90 10 0 0
Table 5. Estimated timber raw material supplies from various sources and their allocation to wood-based
industries
Log supply projections by year (million m³)

2007 2008 2009 2010 2011 2012 2013 2014
Log supply source: 69.0 67.8 78.1 79.2 76.0 82.1 82.5 94.9
Natural Forest 5.8 6.4 7.1 7.8 8.5 9.4 10.3 11.4
Pulp HTI 18.0 18.3 26.2 31.7 29.3 34.6 33.6 44.2
Lumber HTI 0.0 0.0 3.6 4.5 5.4 6.3 7.2 8.1
HTR 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Perhutani 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9
Community Forests 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0
Rubber Estates 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0
Oil Palm Estates 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0
Coconut Plantations 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0
ISK and IPK 14.0 11.9 10.1 4.1 1.6 0.6 0.3 0.1
Imports 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2
Industry log supply 69.0 67.8 78.1 79.2 76.0 82.1 82.5 94.9
allocation: 27.2 27.4 29.0 30.8 30.4 30.8 31.5 32.4
Sawnwood 10.3 10.4 11.9 13.1 12.8 13.1 13.7 14.4
Plywood 2.2 2.2 2.9 3.5 3.4 3.5 3.7 3.8
Particle board 29.2 27.8 34.3 31.7 29.3 34.6 33.6 44.2
Pulp
Table 5. Estimated timber raw material supplies from various sources and their allocation to wood-based
industries (Continued)
Log supply projections by year (million m³)

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Log supply source: 126.5 160.5 192.3 213.7 223.5 230.2 245.3 197.3 207.3 217.5 221.4
Natural Forest 12.5 13.7 15.1 16.6 18.3 20.1 22.1 24.4 26.8 29.5 32.4
Pulp HTI 49.8 57.7 63.2 60.8 66.1 65.1 75.7 49.8 57.7 63.2 60.8
Lumber HTI 9.0 9.9 10.8 12.7 15.6 21.4 23.9 23.6 23.3 24.0 25.1
HTR 24.0 48.0 72.0 92.4 92.4 92.4 92.4 68.4 68.4 69.6 72.0
HTHR 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Perhutani 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9
Community Forests 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0
Rubber Estates 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0
Oil Palm Estates 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0
Coconut 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0
Plantations 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
ISK and IPK 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2
Imports
Industry log supply
allocation: 126.5 160.5 192.3 213.7 223.5 230.2 245.3 197.3 207.3 217.5 221.4
Sawnwood 47.8 63.3 78.9 92.8 95.0 98.4 100.6 87.4 88.7 91.4 95.0
Plywood 20.0 25.7 31.4 36.8 38.6 41.7 43.5 39.5 40.3 41.9 44.0
Particle board 6.4 9.0 11.6 14.0 14.6 15.7 16.2 13.8 13.7 14.0 14.4
Pulp 52.2 62.5 70.4 70.1 75.3 74.3 85.0 56.6 64.6 70.2 68.0
VII
Strategy
Recommendations
VII. Strategy Recommendations
7.1. Road maps for Indonesia’s timber industries
The Ministry of Forestry took an initiative to hold round-table discussions involving all stakeholders,
including forestry associations, academics, the Ministry of Industry and the Ministry of Trade. The round-table
discussions generated road maps for the development of 4 (four) forestry industries: the panel wood, woodworking,
pulp and paper, and furniture industries. The road maps were prepared using the SWOT approach by including the
most influential key factors determining S (strengths), W (weaknesses), O (opportunities) and T (threats). Every key
factor was given a weight and ranking, that was subsequently multiplied. The results of multiplications were then
added up for the S, W, O, and T, and put into diagrammatic form where strengths were contrasted with weaknesses
and opportunities with threats. The selected strategy for each road map was the one that generated the highest
multiplication out of S-O, S-T, W-O, and W-T. Table 6 below is the result of the highest multiplication and selected
strategy for each of the four industries.
Table 6. Selected strategies for each of the industries

Highest multiplication
Industry between SWOT elements Selected strategy
Plywood 4.80 * W-T

Woodworking 5.10 * W-T
Pulp and Paper Provision of raw materials 13.51 ** W-T
Industry expansion 18.04 ** S-O
Industry competitiveness 21.00 ** S-O

Furniture 5.15 * W-O
Note: * Weighted value calculated by multiplying weight and rating,

where the rating is on a scale of 1 – 3
** Weighted value calculated by multiplying weight and rating,
where the rating is on a scale of 1 – 5
The selected strategy for each industry was subsequently developed further by looking at results of a
synthesis of three studies on the development of wood-based industries undertaken by the Forestry Research and
Development Agency (Badan Litbang Kehutanan) and ITTO (2004), NRM and the National Development Planning
Agency (Bappenas) (2005), and by CIFOR and the World Bank (2005). Time period adjustments were made for these
strategies by dividing them into two periods: 1) the restructuring period from 2007-2014, and 2) the revitalization
period from 2015-2025.
7.2. Grand Strategy for the Development of Wood Processing Industries
Outcomes of SWOT analyses on all four of the wood processing industries (plywood, woodworking, pulp
and paper and furniture) showed both the weaknesses and threats to the supply of raw materials for timber industry.
Therefore, select strategies ithat could overcome the threats and cut the weaknesses to the minimum extend
possible.
Wood processing industry development strategies aimed at carrying out modifications to wood processing
machines, retooling (replacement with new machines) and investments, mainly in the plywood industry. For other
secondary industries, meanwhile, more focus was put on creating high added value and superior products.
For pulp, the recommended growth strategy was industrial capacity expansion in line with growth rate
and crop expansion. Further necessary strategies were diversification of pulp products and finding alternative
mechanical pulp processing techniques to reduce environmental impacts. The future strategies for panel products
were improved technology, and utilizing low-value wood for the core of products, and high-value wood for the
facing. For woodworking and furniture, products had to be responsive to market demand. In the case of furniture,
unique products with ethnic designs needed to be developed.
Recommended strategies for market development are maintaining existing markets (traditional markets)
and capturing potential markets. To do this, marketing systems for export and domestic consumption need to be
improved and made more effective and efficient. For pulp, fulfilment of the domestic market is prioritized with a
ratio of 2:3, i.e. 2 for domestic consumption and 3 for export. Fulfilling the domestic market is necessary as input for
the domestic paper industry. The expansion of pulp export markets requires an intensive marketing strategy (market
intelligence) covering promotion, penetration and expansion. Problems, objectives and recommended strategies
are presented in detail in Table 7 and Table 8.
Table 7. Problems, Targets and Strategies in the Restructuring Period (2007-2014)
Problem Objective Strategy

Intensify forest plantation development
Increase forest plantation productivity
Insufficient log Achieve a sustainable and legal Eradicate forestry crime
supply supply of timber Develop and use alternative supply sources
Optimise distribution of timber raw materials for
industries
Increase utilization of natural production forests
Over capacity Processed wood production
levels not exceeding sustainable Curb timber industry operations
raw material supply
Industry Industries operating efficiently Invest in improved wood processing technology
inefficiencies
Keep production costs down
Low High competitiveness for Be proactive in building a positive image in the
competitiveness processed wood products international market
Facilitate clustering of timber industries
Diminishing Recovery and increased market Develop new markets and maintain traditional markets
market share share
Low added value Processed wood products Investment in woodworking technologies
wood products focus on high added value Product diversification
commodities
Table 8. Problems, Targets and Strategies in the Revitalization Period (2015-2025)
Problem Objective Strategy

Low added value wood products Intensify forest plantation development, mainly for
Insufficient log supplies of lumber
supply Increase forest plantation productivity
Expand the use of alternative log supply sources
Expand implementation of intensive silviculture in
natural production forests
Industry Industries operating efficiently Continue to invest in improved wood processing
inefficiencies technology
Expand clustering of timber industries
Low competitiveness High competitiveness for processed Continue to keep production costs down
wood products Develop a positive image
Market share yet to Market share continuing to increase Expand export markets and maintain old market
rise significantly significantly segment
Work on potential markets
Low added value Processed wood products focus on Invest in secondary wood processing technology
wood products high added value commodities Continue with product diversification
7.3. Necessary Policies and Action Plans
In reference to the vision, mission, objectives, targets and grand strategies explained above, at least 36
policies are necessary in a framework of forestry industry restructuring and a further 20 policies for achieving forest
industry revitalization. Some of the latter constitute follow up on policies from the previous period. These policies
cover aspects of raw materials, industries and markets. For every policy, one or more actions plans are recommended.
These are detailed in Table 9 and Table 10.
Forest industry restructuring policies are as follows:

1. Accelerate establishment of forest management units
2. Accelerate infrastructure development
3. Simplify and shorten permitting processes for forest plantationry development
4. Apply forest plantation certification
5. Create mechanisms and facilitate resolution of landuse conflicts (after forming forest management units)
6. Provide alternative capital assistance for community forest plantation development
7. Use high quality seedlings
8. Provide a forest land suitability database
9. Eradicate illegal logging
10. Eradicate illegal timber trading
11. Remove transaction cost opportunities (high-cost economy)
12. Improve law enforcement
13. Utilise wood produced from estate crop regeneration
14. Perfect community wood administration
15. Organize the distribution of raw materials for industries
16. Increase implementation of intensive silviculture in natural production forests
17. Accelerate establishment of Annual Allowable Cut
18. Utilization of timber waste from logging in natural forests
19. Eradicate use of illegal timber
20. Control sawmills without Industrial Raw Material Requirement Plans (RPBBI)
21. Replace old and inefficient machines and tools
22. Modify machines to keep up with wood processing technology developments
23. Develop transportation infrastructure
24. Increase productivity
25. Review rules on sample import items and exhibitions
26. Undertake diversification into more efficient energy
27. Remove transaction costs (unofficial charges)
28. Apply log tracking systems
29. Undertake regular product promotion efforts
30. Build integrated sawmills and woodworking industries
31. Develop domestic markets
32. Intensify promotion to international markets
33. Overcome tariff and non tariff barriers to international trade
34. Make procurement of capital goods easier (equipment and machines)
35. Increase quality of workforce
36. Prompt research and development
While forestry industry revitalization policies are listed below:

1. Prioritise development of lumber forest plantations
2. Continue capital assistance for community forest plantation development
3. Continue with forest plantation certification
4. Continue with infrastructure development
5. Continue to use improved seed resulting from improvement and genetic engineering
6. Continue to use wood produced from estate crop regeneration and alternative raw materials
7. Oblige sawmill permit holders to implement intensive silviculture
8. Modify machines to suit product demand developments
9. Continue to integrate sawmills and woodworking industries
10. Remove transaction costs (unofficial charges)
11. Develop transportation infrastructure
12. Increase productivity
13. Continue with log tracking
14. Undertake regular promotion of products
15. Continue with intensive promotion to export markets
16. Overcome tariff and non-tariff barriers
17. Develop products to suit market demand
18. Continue to make capital goods procurement of capital goods easier (equipment and machines)
19. Continue to increase quality of workforce
20. Prompt research and development
Further, for every action plan recommended, aside from proposing which stakeholders should be involved in
their implementation, success indictors were also developed along with methods for their verification in monitoring
and evaluating successes achieved. These are presented in detail in Table 11 and Table 12.
Table 9. Strategies, Policies and Action Plans necessary in the restructuring period (2007-2014)
Strategy Policy Recommended Action Plan

Accelerate the passing of appropriate legislation and
Accelerate formation of forest coordinate with regions
management units Optimise regional ‘land teams’
Accelerate development of
Integrate HTI development and regional development
infrastructure
Accelerate IUPHHK application processes for forest
Simplify and shorten permitting
plantations
processes for forest plantationry
Affirm forest plantation IUPHHK areas throughout the
development
duration of their concessions
Apply forest plantation Promote and facilitate a certification system for forest
Intensify forest certification plantation developed by national initiatives
plantation Create mechanisms and
development facilitate resolution of landuse
Optimise regional ‘land teams’
conflicts (after forming forest
management units)
Provide alternative capital Accelerate establishment of Forest Development
assistance for community forest Funding technical implementation units
plantation development Increase community access to capital
Provide tree improvement and forest plantation
silviculture technologies by establishing an integrated
Increase forest Use high quality seedlings research centre
plantation Optimise capacity of seed centres
productivity Provide a forest land suitability
Integrate and update land suitability data
database
Eradicate illegal logging Improve integrated eradication of illegal loggers
Eradicate illegal timber trading Improve integrated eradication of illegal traders
Socialise and implement Minister of Forestry Regulation
Remove transaction cost 55 on Timber Legality to law enforcers
opportunities (high cost Put FAKB into effect for certain conditions so it can apply
economy) for 1.5 times the normal time
Eradicate forestry Activate PPNS civil servant investigators to look at
crime circulation of forest timber products
Increase law enforcement Harmonise overlapping regulations, particularly those
relating to circulation, fees and charges
Make letters from estate crop companies sufficient as
Utilise wood produced from
certificates of origin for estate crop timber
Develop and use estate crop regeneration
Socialise alternative raw materials from crop estates
alternative supply
sources Perfect community wood
Revise Minister of Forestry Decree No. P51/2006
administration
Optimise Build timber raw material terminals in industry centres
distribution
Organise the distribution of raw
of timber raw Develop a GIS based database/information system on
materials for industries
materials for the potential and distribution of timber supplies
industries
Table 9. Strategies, Policies and Action Plans necessary in the restructuring period (2007-2014, continued)

Increase implementation of intensive
Accelerate application of intensive silviculture
silviculture in natural production
and the possibility of incentive mechanisms
forests
Increase utilization of Accelerate establishment of Annual Accelerate permits for Annual Work Plans and
natural production Allowable Cuts disembarkation of heavy machinery
forests Utilization of timber waste from Revise systems of taxes and levies such as PSDH
logging in natural forests and DR
Make log auditing by independent third parties
Eradicate use of illegal timber
more effective
Close down companies that knowingly use
Curb timber industry Control sawmills without Industrial illegal timber
operations Raw Material Requirement Plans Close down illegal companies
(RPBBI) Control the issuing of new permits for timber
industries
Facilitate industry access to the banking system
Replace old and inefficient machines
Accelerate and simplify machine replacement
and tools
permitting processes
Invest in improved
Provide technical assistance on machine
wood processing Modify machines to keep up with
replacement to small and medium enterprises
technology wood processing technology
Encourage development of a domestic
developments
woodworking machine industry
Build container ports in export product centres
Develop transportation infrastructure between
Develop transportation infrastructure from raw material sources to industry centres
and ports
Hold training sessions for machine operators,
Increase productivity
supervisors, management and designers
Review rules on sample import items Reduce or remove import tax on sample
and exhibitions furniture items
Keep production
costs down Undertake diversifi cation into more Encourage the use of cheap energy generation
efficient energy (coal, gas, biodiesel)
Revise government rules on company operation
Remove transaction costs (unofficial
licences to reduce the risk of unofficial charges
charges)
arising
Be proactive in Encourage application of product legality
Apply log tracking systems
building a positive certification
image in the Undertake regular product promotion Conduct integrated promotion and intensify
international market efforts public relations
Accelerate the development of wood
processing industry clustering at the district and
provincial levels
Facilitate clustering of Build integrated sawmills and Map the distribution of raw material sources in
timber industries woodworking industries each district
Develop timber industries in accordance with
regional characteristics
Table 9. Strategies, Policies and Action Plans necessary in the restructuring period (2007-2014, continued)

Standardise wood products
Promote and campaign for use of domestically
produced wood products
Develop domestic markets Provide information on imported processed wood
products to protect consumers
Hold roadshows for forestry industry products
Lobby international markets, particularly traditional
ones like Japan, the United States and the European
Union
Conduct market research and benchmarking for
Indonesian products and competitors’ products
Collaborate with forestry associations and NGOs with
Develop new Intensify promotion to regional level and international wood marketing
markets and maintain international markets networks
traditional markets Strengthen the role of national forestry associations
in regional and international promotion and
marketing
Carry out international lobbying, particularly with
Overcome tariff and non tariff
major export destination nations
barriers to international trade
Actively negotiate with APEC on trade tariffs
Reduce or remove import tariffs on capital goods
Make procurement of capital
Provide low-interest credit for importing capital
goods easier (equipment and
goods
machines)
Facilitate industry access to the banking system
Invest woodworking
technologies Hold training for machine operators and supervisors
Develop educational institutions that create
Increase quality of workforce
certificated skilled labourers
Provide incentives in marketing new products for
companies that conduct research and development
Develop cooperation/collaboration with processed
Prompt research and wood product design centres
Product diversification
development Facilitate registration of new products to secure
patents
Table 10. Strategies, Policies and Action Plans necessary in the revitalization period (2015-2025)

Integrate lumber forest plantation development
and regional development
Prioritise development of lumber Provide incentives for and simplify investment
forest plantations in lumber forest plantation development
Continue to facilitate land conflict resolution
Intensify forest Continue capital assistance for
Expand and increase community access to
plantation community forest plantation
capital
development, mainly development
for supplies of lumber Continue with forest plantation Develop an international forest plantation
certification certification scheme
Continue with infrastructure Integrate forest plantation development and
development regional development
Continue to use improved seed
Increase forest
resulting from improvement and Increase implementation of integrated research
plantation productivity
genetic engineering
Continue to use wood produced
Use alternative log Continue socialisation of the utilization of
from estate crop regeneration and
supply sources alternative raw materials
alternative raw materials
Expand implementation
Make the intensive silviculture a condition for
of intensive silviculture Oblige sawmill permit holders to
Annual Work Plans of companies operating in
in natural production implement intensive silviculture
natural production forests
forests
Continue to invest
Modify machines to suit product Continue with technical assistance in machine
in improved wood
demand developments replacement
processing technology
Expand clustering of Continue to integrate sawmills and Continue with plans to integrate industries with
timber industries woodworking industries regional development
Table 10. Strategies, Policies and Action Plans necessary in the revitalization period (2015-2025;
continued)

Remove transaction costs (unofficial
Continue to eradicate unofficial charges
charges)
Build container ports in product export
centres
Continue to keep Develop transportation infrastructure
Develop transportation infrastructure from
production costs down
industry centres to ports
Continue to hold training for machine
Increase productivity
operators, supervisors and management
Be proactive in building Continue with log tracking Continue with product legality certification
a positive image in the Undertake regular promotion of Continue with integrated promotion and
international market products intensifying public relations
Continue with roadshows for superior wood
products
Continue international lobbying
Continue with intensive promotion to
Expand export markets Continue market research and benchmarking
export markets
and maintain old for Indonesian products and competitors’
market segment products
Continue with processed wood product
Overcome tariff and non-tariff barriers
certification
Work on potential Develop products to suit market Develop new products to suit market
markets demand preferences
Reduce or remove import tariffs on capital
Continue to make capital goods goods
procurement of capital goods easier Provide credit for importing capital goods
Invest in secondary
(equipment and machines) Facilitate industry access to the banking
wood processing
system
technology
Continue to increase quality of Hold training for machine operators and
workforce supervisors
Provide incentives in marketing new products
for companies that conduct research and
development
Develop cooperation/collaboration with
Continue with product processed wood product design centres
diversification Prompt research and development Keep up with standards for processed wood
products to suit target markets
Protect intellectual property rights
Table 11. Action Plans, Success Indicators, M&E Verification Methods and Implementing Agencies in the
restructuring period (2007-2014)
Recommended Action Success Indicator M&E Verification Implementing Agencies

Plan Method
Government Regulation / Dated and numbered MoF, Min. Home Affairs, State
Minister of Forestry Decree on Government Regulation Secretariat, Dept. Law and Human
Forest Management Units issued / Minister of Forestry Rights
Accelerate the passing of by 2008 Decree
appropriate legislation and One (1) forest management unit Dated and numbered Forest Planology Agency, Prov.
coordinate with regions established in each province by decree establishing forest Govt., District Govt.
2009 management unit and
map showing area
All production forest Dated and numbered Forest Planology Agency, Supreme
management units established decree establishing Audit Agency, Prov. Govt., District
by 2014 production forest Govt.
management unit
Optimise regional ‘land Reduced instances of landuse Number and intensity of Forest Planology Agency, Regional
teams’ conflict conflicts has declined Land Team, Companies
Integrate HTI development HTI development planning Map exists showing HTI Forest Planology Agency, Supreme
and regional development constitutes synchronised development and is Audit Agency, Provincial and
planning between central, signed by the Minister of District Development Planning
provincial and district Forestry Agencies
governments
All IUHPPK-forest plantation Supreme Audit Agency, Forest
Accelerate IUPHHK processes from applications Time sheets exist Planology Agency, Governor,
application processes for to ratification (by decree) take showing time from District Head, Prov. & District
forest plantations a maximum of 180 days to application to issue Forestry Offices
complete
Area gazzettement decrees Forest Planology Agency, Supreme
Affirm forest plantation for IUHPPK-forest plantations Dated and numbered Audit Agency, Governor, District
IUPHHK areas throughout issued within a maximum of decree reaffirming Head, Customary Head, Prov. &
the duration of their 180 working days following IUPHHK forest plantation District Forestry Office Heads
concessions application boundaries
Reduced instances of landuse Number and intensity of Forest Planology Agency, Regional
conflict in forest plantations conflicts has declined Land Team
Promote and facilitate 50 certified forest plantation Dated and numbered Supreme Audit Agency, LEI, APHI,
a certification system management units by 2014 certificate of HTI Certification Agency, Companies
for forest plantation management unit
developed by national certification
initiatives
Optimise regional ‘land Reduced instances of landuse Number and intensity of Forest Planology Agency, Regional
teams’ conflict in forest plantations conflicts has declined Land Team, Companies
Accelerate establishment Organizational procedures and Dated and numbered Forest Development Funding
of Forest Development terms of reference in place decree establishing Agency Work Unit, Law Bureau
Funding technical Development
implementation units Funding technical
implementation units
70% of targeted credit is Development Forest Development Funding
Increase community channelled to communities Funding technical Agency, Communities, District
access to capital every year implementation Unit Forestry Office, District Head
reports
Provide tree improvement Companies, Supreme Audit
and forest plantation Superior HTI tree crop species Agency, Research and
silviculture technologies created (incremental volume Crop production reports Development Agency, Land
by establishing an growth of 30m³ per year in the Rehabilitation and Social Forestry
integrated research centre field) Office, District & Provincial Forestry
Offices, Forestry Companies
restructuring period (2007-2014 continued)
Recommended Action
Success Indicator M&E Verification Method Implementing Agencies
Plan
Designated seed
Land Rehabilitation and Social
centres, producers and Numbered and dated decree
Forestry Office, Horticultural Crop
distributors of certificated of designation
Optimise capacity of seed Research Institute, Companies
seeds
centres and producers/
Land Rehabilitation and Social
distributors of certificated
Certificated superior seed Audit reports on certificated Forestry Office, Horticultural Crop
seed
requirements met superior seed production Research Institute, Companies,
Auditor
Land suitability data Forest Planology Agency, Provincial
Integrate and update land
for forest plantations Land suitability maps & District Development Planning
suitability data
available Agencies
Forest Protection & Nature
Improve integrated Illegal logging practices OHL sustainable forest Conservation Office, Inspectorate
eradication of illegal reduced significantly operations reports General, Police, Civil Service
loggers Investigators, Prosecutors, Dept. Law
& Human Rights
Improve integrated Illegal trading practices Trade statistics between Central Statistics Agency, Customs &
eradication of illegal traders reduced significantly countries (export – import) Excise, Supreme Audit Agency, Dept.
Trade, FAO, ITTO
Socialise and implement Increased understanding Police, Forest Protection & Nature
Minister of Forestry of raw materials legality Reports on the number of Conservation Office, Supreme
Regulation 55 on Timber so timber circulation runs illegal timber circulation Audit Agency, Inspectorate General,
Legality to law enforcers smoothly cases Provincial & District Forestry Offices
Under certain conditions FAKB document validity Circular from the Directorate
make FAKB documents periods accord with General of the Supreme Supreme Audit Agency, Provincial
apply for 1.5 times the time necessary for Audit Agency on FAKB Forestry Office
normal length of time transportation document validity applying
for longer transportation
times
Activate PPNS civil servant
investigators to look at Cases resolved by the Closed case reports Civil Service Investigators
circulation of forest timber PPNS
products
Harmonise overlapping Uniform legal Police, Prosecutors, Courts, Secretariat
regulations, particularly interpretation (no Memoranda of General
those relating to circulation, more contradictory understanding issued
fees and charges interpretations)
Make letters from estate Certificates of origin in Supreme Audit Agency, Law Bureau,
crop companies sufficient use for transportation of IPHHs have LMK timber Provincial/District/Municipal Govt.,
as certificates of origin for timber from estate crop transportation reports Provincial/District/Municipal Forestry
estate crop timber regeneration Offices, Companies
Socialise alternative raw Significant increase in LMK timber transportation Provincial/District/Municipal Govt.,
materials from crop estates timber from estate crop reports Companies
regeneration used by
IPHHs
Revise Minister of Forestry Minister of Forestry Number and date of revised Supreme Audit Agency, Law Bureau
Decree No. P51/2006 Decree No. P51/2006 decree
revised
Build timber raw material Timber raw material Number of operating timber MoF, Dept. Industry, Dept. Trade,
depots in industry centres depots built in Surabaya raw material depots Provincial Govt., Associations,
and Semarang Perhutani
M&E Verification
Recommended Action Plan Success Indicator Implementing Agencies
Method
Develop a GIS based
database/information Database on potential
system on the potential Timber raw materials database and distribution of Forest Planology Agency, Supreme
and distribution of timber available timber supplies and Audit Agency, Associations
supplies maps
Accelerate application of Timber raw materials
Supreme Audit Agency, Provincial/
intensive silviculture and contribution from natural
Intensive Silviculture District Govt., Associations,
the possibility of incentive forests managed through
Annual Work Plans Companies
mechanisms intensive silviculture
Annual Work Plan permits
Annual Work Plan Supreme Audit Agency, Provincial/
completed in a maximum of
Accelerate permits for approval time sheets District Govt., Companies
30 working days
Annual Work Plans and
Permit processes for heavy
disembarkation of heavy Heavy machinery permit Supreme Audit Agency, Provincial/
machinery completed in a
machinery approval time sheets District Govt., Companies
maximum of 7 working days
Revise systems of taxes and Various aspects of PSDH and Research & Development Institute,
Review reports
levies such as PSDH and DR DR levies reviewed Associations
Make log auditing by
Use of illegal timber prevented Companies, Supreme Audit
independent third parties Audit reports
in all IPHHs Agency, Provincial/ District Govt.
more effective
Cross check real recovery
Companies, Supreme Audit
Close down companies that rates against raw
Agency, Inspectorate General,
knowingly use illegal timber All companies use legal timber materials procurement
Provincial/ District Govt.
reports
Check raw materials
Police, Forest Protection & Nature
documents against
Close down illegal All illegal industries closed Conservation Office, Provincial/
source location on
companies down District Govt.
permits
Installed capacity of wood
Number of wood
Control the issuing of processing companies in
processing factory
new permits for timber accordance with available Dept. Industry, Supreme Audit
permits and RPBBI
industries supply of legal timber raw Agency
reports
materials
Increased amounts of new
credit channelled by banks Banks, Associations, Investment
to the forestry industry Banking reports Coordinating Board
sector
Facilitate industry access to New presidential
the banking system Forestry industries not listed decrees do not include Investment Coordinating Board,
in the Negative Investments timber industries on the Supreme Audit Agency, State
List Negative Investments Secretariat, Dept. Industry
List
Accelerate and simplify Permits for retooling
Supreme Audit Agency, Dept.
retooling permitting completed in a maximum of Company reports
Industry, Companies
processes three months
Labourers trained in the use Companies, Associations, Dept.
Provide technical assistance of new technology machines Manpower reports Manpower, Supreme Audit
on machine replacement available Agency,
to small and medium Wood processing
New technology Associations, Supreme Audit
enterprises technologies are more
machines in use Agency
efficient
Recommended Action M&E Verification

Success Indicator Implementing Agencies
Plan Method
Encourage development Increased use of
Dept. Industry wood
of a domestic domestically produced
processing machine use Dept. Industry, Associations
woodworking machine wood processing
reports
industry machines
Container ports
Build container ports in Container port numbers Pelindo, Provincial Govt., District
provided in necessary
export product centres and operations Govt., Associations
places
Develop transportation
infrastructure between Dept. Public Works, Dept.
from raw material sources Adequate Transportation numbers Transport, District Govt.,
to industry centres and transportation available and operations Municipal Govt.
ports
Hold training sessions Increased number of
Companies, Associations, Dept.
for machine operators, trained and certificated
Manpower, Supreme Audit
supervisors, management workers in forestry Manpower reports
Agency
and designers industries
Number and date of
Reduce or remove import Removal of import Minister of Finance
tax on sample furniture tax on sample and decree on removal of M o Finance, Associations
items exhibition items import tax on sample
and exhibition items
Encourage the use of
Increased use of cheap
cheap energy generation Company reports Companies, Associations
energy
(coal, gas, biodiesel)
Revise government rules
Revised government
on company operation Law Bureau, Dept. Industry,
rules on company
licences to reduce the Numbers and dates of Dept. Manpower, Provincial
operation licences in
risk of unofficial charges revised rules Govt., District Govt
place
arising
Certification Agency,
Encourage application Processed wood
Number of companies Companies, Associations,
of product legality products have
securing certificates Environmental Standardisation
certification certificates of origin
Centre
Increased volume Trade reports, Central
Conduct integrated Dept. Industry, MoF,
and export value of Statistics Agency
promotion and intensify Associations, Dept. Trade,
Indonesian processed reports, timber industry
public relations Companies
wood products associations’ reports
Accelerate the Wood processing
Supreme Audit Agency, MoF,
development of wood industry clustering in
Dept. Industry, Provincial Govt.,
processing industry place at the district
RPBBI reports District Govt., Municipal Govt.,
clustering at the district and provincial levels by
Associations
and provincial levels 2009
Distribution of raw Forest Planology Agency,
Map the distribution of
material sources for Supreme Audit Agency,
raw material sources in District forestry office
each district available Provincial & District Forestry
each district annual reports
by 2009 Offices

Plan Method
Primary and
Provincial/District Provincial/District/
Develop timber industries secondary timber
Forestry Office and Municipal Govt., Dept.
in accordance with industries integrated
Industry Office annual Industry, Supreme Audit
regional characteristics in accordance with
reports Agency, MoF
regional characteristics
National Standardisation
Increased number of
Board, MoF Environmental
standardised wood National Standardisation
Standardise wood products Standardisation Centre,
products Board reports
Associations
Increased domestic
Promote and campaign Domestic processed
consumption of
for use of domestically wood products trade Dept. Trade, ASMINDO
processed wood
produced wood products reports
products
Provide information on Accurate information
imported processed available for consumers
Interviews with
wood products to protect on imported processed YLKI, ASMINDO
consumers
consumers wood products
High-quality processed
Central Bureau of Statistics,
Hold roadshows for forestry wood products
Dept. Trade, Associations,
industry products increasingly well know in Trade statistics reports
BRIK, FAO, ITTO
the international market
Lobby international markets, Indonesian processed
particularly traditional ones wood products enter Dept. Trade, Associations,
International trade
like Japan, the United States destination countries BRIK, FAO, ITTO
reports
and the European Union wise ease
Conduct market research
Types and prices of Central Bureau of Statistics,
and benchmarking for
competitors wood Dept. Trade, Associations,
Indonesian products and Trade statistics reports
products identified BRIK, FAO, ITTO
competitors’ products
Collaborate with forestry
associations and NGOs Regional and
Dept. Trade, Associations,
with regional level and international marketing International trade
BRIK, FAO, ITTO
international wood networks established reports
marketing networks
Strengthen the role of
Increased number of
national forestry associations
new markets for wood Timber product trade
in regional and international Dept. Trade, Associations
product exports reports
promotion and marketing
Carry out international
Reduction in non tariff
lobbying, particularly with
trade barriers for wood Timber product trade
major export destination Dept. Trade, Associations
products reports
nations
Reduction in tariffs for
Actively negotiate with Timber product trade
wood products within Dept. Trade, Associations
APEC on trade tariffs reports
APEC
Recommended Action M&E Verification Implementing

Success Indicator
Plan Method Agencies
Number and date of M o Finance, Dept.
Reduce or remove import Import tariffs on capital
capital goods import tax Industry, Dept. Trade,
tariffs on capital goods goods removed
decree Associations
Provide low-interest credit
credit channelled by banks
for importing capital Bank of Indonesia annual
to the forestry industry Bank of Indonesia
goods reports
sector
Facilitate industry access to credit channelled by banks
Bank of Indonesia annual
the banking system to the forestry industry Bank of Indonesia
reports
sector
Increased numbers of
Companies, Associations,
Hold training for machine trained and certificated
Dept. Manpower,
operators and supervisors labourers in forestry Manpower reports
Supreme Audit Agency
industries
Develop educational
More certified educational Companies, Dept.
institutions that create Manpower reports, Dept.
institutions teaching Manpower, Work Training
certificated skilled Manpower
tradesman skills Centre
labourers
Provide incentives in
marketing new products
Increased number of
for companies that Increased number of Associations, Dept.
innovative R&D activities
conduct research and product designs Industry, Companies
development
Develop cooperation/
Increased number of Companies, Associations,
collaboration with
processed wood product Manpower reports Dept. Manpower,
processed wood product
designers Supreme Audit Agency
design centres
Number of patented
Facilitate registration of Increased number of
products registered in Dept. Law and Human
new products to secure processed wood product
the Intellectual Property Rights
patents designs registered
Rights Office
revitalization period (2015-2025)

Plan Method
HTI development planning Location map Forest Planology Agency,
Integrate lumber forest
constitutes synchronised exists showing HTI Supreme Audit Agency,
plantation development
planning between central, development and is Provincial and District
and regional
provincial and district signed by the Minister Development Planning
development
governments of Forestry Agencies
All IUHPPK-forest plantation
Supreme Audit Agency,
processes from applications to
Time sheets exist Forest Planology Agency,
ratification (by decree) take a
showing time from Governor, District Head, Prov.
maximum of 180 calendar days
application to issue & District Forestry Offices
Provide incentives for to complete
and simplify investment Area gazzettement decrees Forest Planology Agency,
in lumber forest for IUHPPK-forest plantations Dated and numbered Supreme Audit Agency,
plantation development issued within a maximum of decree reaffirming Governor, District Head,
180 working days following IUPHHK forest Customary Heads, Prov. &
application plantation boundaries District Forestry Office Heads
Number and intensity Forest Planology Agency,
Continue to facilitate Reduced instances of landuse
of conflicts has Regional Land Team,
land conflict resolution conflict in forest plantations
declined companies
Forest Development Funding
Expand and increase 70% of targeted credit is Forest Development
Agency, Communities,
community access to channelled to communities Funding Agency
District Forestry Office,
capital every year reports
District Head
Develop an Dated and numbered
All forest plantation Supreme Audit Agency, LEI,
international forest certificate of HTI
management units certified by APHI, Certification Agency,
plantation certification management unit
2025 Companies
scheme certification
Forest plantation development Location map Forest Planology Agency,
Integrate forest planning constitutes exists showing HTI Supreme Audit Agency,
plantation development synchronised planning development and is Provincial and District
and regional between central, provincial and signed by the Minister Development Planning
development district governments of Forestry Agencies
Companies, Supreme Audit
Agency, Research and
Development Agency, Land
Increase
Superior forest plantation tree Rehabilitation and Social
implementation of Crop production
crop species created Forestry Office, District &
integrated research reports
Provincial Forestry Offices,
Forestry Companies
Continue socialisation Significant increase in timber
of the utilization of from estate crop regeneration LMK timber Provincial/District/Municipal
alternative raw materials used by IPHHs transportation reports Govt., companies
revitalization period (2015-2025 continued)

Plan Method
Make the intensive
Significant timber raw
silviculture a condition
materials contribution
for Annual Work Plans Supreme Audit Agency,
from natural forests Intensive Silviculture
of companies operating Provincial/ District Govt.,
managed through Annual Work Plans
in natural production Associations, Companies
intensive silviculture
forests
Labourers trained in the Companies, Associations, Dept.
use of new technology Manpower reports Manpower, Supreme Audit
machines available Agency
Continue with technical
Labourers trained
assistance in machine Wood processing
in the use of new Associations, Supreme Audit
replacement technologies are more
technology machines Agency
efficient
available
Primary and secondary
Provincial and District
Continue with plans to timber industries Provincial/District/Municipal
Forestry Office and
integrate industries with integrated in accordance Govt., Dept. Industry, Supreme
Trade Office annual
regional development with regional Audit Agency, MoF
reports
characteristics
Uniform legal
Continue to eradicate interpretation (no Memoranda of Police, Prosecutors, Courts,
unofficial charges more contradictory Understanding signed Secretariat General
interpretations)
Container port
Build container ports in Container ports provided Pelindo, Provincial Govt., District
numbers and
product export centres in necessary places Govt., Associations
operations
Develop transportation Dept. Public Works, Dept.
Transportation
infrastructure from Adequate transportation Transport, Provincial Govt.,
numbers and
industry centres to ports available District Govt., Municipal Govt.
operations
Continue to hold Increased number of
Companies, Associations, Dept.
training for machine trained and certificated
Manpower, Supreme Audit
operators, supervisors workers in forestry Manpower reports
Agency
and management industries
Certification Agency, Companies,
Continue with product Processed wood products Number of companies
Associations, Environmental
legality certification have certificates of origin securing certification
Standardisation Centre
Trade reports, Central
Continue with
Increased volume and Bureau of Statistics
integrated promotion Dept. Industry, MoF, Associations,
export value of Indonesian reports, timber
and intensifying public Dept. Trade, Companies
processed wood products industry associations’
relations
reports
High-quality processed
Continue with Central Bureau of Statistics, Dept.
wood products
roadshows for superior Trade statistics reports Trade, Associations, BRIK, FAO,
increasingly well know in
wood products ITTO
the international market
Indonesian processed
Continue international wood products enter International trade Dept. Trade, Associations, BRIK,
lobbying destination countries wise reports FAO, ITTO
ease
revitalization period (2015-2025 continued)
M&E Verification Implementing

Recommended Action Plan Success Indicator
Method Agencies
Continue market research Central Bureau of
Types and prices of
and benchmarking for Statistics, Dept. Trade,
competitors wood products
Indonesian products and Trade statistics reports Associations, BRIK, FAO,
identified
competitors’ products ITTO
Certification
Agency, Companies,
Continue with processed Increased number of
National Standardisation Associations,
wood product certification certificated wood products
Board reports Environmental
Standardisation Centre
Increased domestic Domestic processed
Develop new products to suit
consumption of processed wood products trade Dept. Trade, ASMINDO
market preferences
wood products reports
Number and date of M o Finance, Dept.
Reduce or remove import Import tariffs on capital
capital goods import tax Industry, Dept. Trade,
tariffs on capital goods goods removed
decree Associations
credit channelled by banks
Provide credit for importing Bank of Indonesia annual
to the forestry industry Bank of Indonesia
capital goods reports
sector
Facilitate industry access to credit channelled by banks
Bank of Indonesia annual
the banking system to the forestry industry Bank of Indonesia
reports
sector
Increased numbers of Companies,
Hold training for machine trained and certificated Associations, Dept.
Manpower reports
operators and supervisors labourers in forestry Manpower, Supreme
industries Audit Agency
Provide incentives in
marketing new products Increased number of
Increased number of Associations, Dept.
for companies that conduct innovative R&D activities
product designs Industry, Companies
research and development
Companies,
Develop cooperation/ Increased number of
Associations, Dept.
collaboration with processed processed wood product
Manpower reports Manpower, Supreme
wood product design centres designers
Audit Agency
Keep up with standards for Increased number of new
Processed wood Dept. Trade,
processed wood products to markets for wood product
products trade reports Associations
suit target markets exports
Number of patented
Increased number of
Protect intellectual property products registered in Dept. Law and Human
processed wood product
rights the Intellectual Property Rights
designs registered
Rights Office
VIII
Enabling Conditions
VIII. Enabling Conditions
In timber industry development, after a vision, then a mission, objectives, targets, strategy recommendations, and
follow-up steps all constitute recipes or necessary conditions in order that final aims can be realised. Nevertheless, all
of these on their own remain insufficient; enabling conditions or sufficient conditions are necessary so that strategies
and follow-up steps can be carried out according to the plan. Enabling conditions consist of preconditions and
macro and micro economic relationships.
1.1. Preconditions
Below are seven essential preconditions for bringing about the sturdy forestry industry explained in the vision
and mission sections above. These seven preconditions are as follows:
a. Political will - Clarity, and high levels of commitment from policy makers and all stakeholders involved.
Political will must be consistent and continual, so necessary requirements are stable political support,
adequate funds, and encouragement from all government and non-government stakeholders. Commonly,
not all stakeholders will feel comfortable with policy changes, as some will benefit and some will lose out,
despite changes being aimed purely at national interests. Therefore, without long-term political support
and commitment from all stakeholders, these strategies will merely be references on paper.
b. National stewardship – The sense of ownership over national assets. Article 33 paragraph 3 of the 1945
Constitution says that the land, the waters and all the riches contained therein shall be controlled by the
state and exploited to the greatest benefit of the people. The government is therefore responsible for
organizing rights and responsibilities to manage all of the country’s resources, including forest resources.
Without this sense of ownership, many national assets will be discarded, used illegally, or neglected and
exhausted. Illegal logging, groups of people having control over state forests, and poor supervision on the
ground are all examples of a weak sense of national stewardship.
c. Economic institutions – Open, transparent and equitable economic relations between all stakeholders
involved. These economic relationships must be encouraged and strengthened through fair and transparent
transactions among all stakeholders, and must adhere to all applicable laws and regulations. Rules of play
such as these will encourage the government, investors, and all stakeholders involved to implement
policies together and bear any risks that might arise as a result of their implementation. These economic
institutions will be explained in more detail in the sub-section below on Macro and Micro Economics.
d. Land accessibility and business guarantees – Forestry sector activities are long-term investments
requiring business guarantees for investors. However, on the other hand, forestry activities also come into
contact with various interests outside forestry, and also with communities living in and around forests.
Conflicts of interest between stakeholders occur frequently in the field. Therefore, the ability to manage
costs and benefits at all times is absolutely essential. Without tenurial certainty and clarity over access to
forest resources, investments in the forestry sector will probably struggle to succeed. The point is how
government, communities and business practitioners are organized within a clear tenurial system with
rules, obligations and bundles of rights for stakeholders to utilise land and forest resources transparently,
sustainably and equitably.
e. Delegation of authority to policy makers on the ground – This is closely connected with the
decentralization process; the delegation of authority in forestry from the central to provincial and
district governments. Decentralization requires fundamental changes in working relationships between
the different levels of the goverment, and between the government and business practitioners and
communities. When authority and responsibility at every level of government is unclear or interpreted
differently by stakeholders, then the mismanagement and excessive exploitation of forest resources will be
inevitable.
f. Clear rules for community institutions and public institutions – The provision of access and forest
exploitation permits has frequently been vague, and as such has often led to confusion on the ground.
Policies carried out should have been done so with market-based institutions with DR and PSDH costs
incurred, for instance, becoming a part of forest benefit accountability between the government and
business practitioners. Meanwhile, things relating to community rights and responsibilities have been paid
little attention. As a result of these weaknesses, many state forests have been left unmanaged and become
‘open access’ with encroachment occurring as if it has always been intended.
g. Human resources capacity – Educational backgrounds, levels of prosperity, experience, beliefs and
cultures of stakeholders are all determining factors in the success or failure of forest management and
timber industry development. Therefore, human resources play a highly significant part in good forest
governance. Nepotistic practices and KKN have a far-reaching impact on forestry sector performance.
To change stakeholders’ habits, perceptions and behaviour, social investment should become a central
component in human resources development.
1.2. Macro and micro economic connections
The timber industry does not stand alone and apart from all social, economic and political frameworks
and development systems, either in national or regional, or in international spheres. As explained above, the timber
industry has provided a vital contribution to the national economy, though its contribution is declining from year
to year. For that reason, in future the timber industry will be aimed towards being able to compete in the global
marketplace. Competitiveness is determined by an increase in productivity, with increased output being generated
from the same input. Productivity itself is determined by the value of products and services, as well as production
efficiency.
According to Porter (2006), competitiveness is determined by macroeconomic success, social stability,
politics and legislation. These, however, are still insufficient. Genuine macroeconomic success must be developed
from micro-economic successes. In the context of the timber industry, microeconomics involves how companies
conduct sophisticated strategies in their operations. It is these strategies that will determine a healthy and conducive
business climate in the national timber industry.
Porter also stressed things needing to become priorities in order to improve Indonesia’s macro economy
were the need for legislative system reform, avoiding policies that constantly change, simplification of government
bureaucracy, development of a social safety net, and effective coordination between public and community
institutions.
At the company level (micro economy), to advance business systems, things requiring improvement are the
quality and quantity of existing industry facilities and infrastructure, human resources skills, and the development of
certain economic zones. In this respect, economic development should also be based on the concept of clustering;
timber industries included. In a broader context, economic cooperation could be increased within the ASEAN
region.
IX
In Closing
IX. In Closing
Forest industry restructuring and revitalization in the short and long terms must involve all stakeholders in
order to implement the selected strategies explained in Chapter VI (Strategy Recommendations). The implications
of these strategies are that production levels and the number of people employed in timber industries will decline
for a period of time. Coordination and cooperation from several ministries and agencies is absolutely vital. On the
other side, these strategies will reduce pressure on natural forests and at the same time provide room for efficient
timber companies to operate.
When the results of the first stage’s forest plantation extensification and intensification (short term) can be
realised, the gap between the demand and supply of pulpwood will narrow. This gap, however, will remain wide for
lumber. Other short-term strategies in terms of demand are modifying machines and equipment so timber industries
become more efficient, focusing on high added value products, and supporting the growth and development of
small and medium wood processing enterprises, particularly for secondary wood products that can adapt to market
changes and dynamics and create more job opportunities.
Demand and supply of sustainable lumber is expected to stabilize in the long term, and pulpwood supplies
are expected to exceed domestic demand, while timber industries will operate efficiently and manage to adapt
to market changes and different raw materials. Other long-term strategies are maintaining and increasing the
international competitiveness of timber products and developing a timber industry in Indonesia that produces high
added value products and creates new job opportunities.
The main things requiring attention are enabling conditions to support the realization of a sturdy and
competitive timber industry so Indonesia can regain its position as a major timber industry producer and so it can
play a greater role in contributing to the national economy.
References
Anon. 2007. Road Map for the Development of Indonesia’s Pulp and Paper Industry. Pulp and Paper Road Map
Working Group. Jakarta, 18 April 2007.
Anon. 2007. Road Map for the Development of Indonesia’s Plywood Industry. Panel Wood Working Group. Jakarta,
18 April 2007.
Anon. 2007. Woodworking Industry Road Map for 2007-2016. Woodworking Industries Working Group. Indonesian
Sawmill & Woodworking Association (ISWA). Jakarta. April 2007.
Anon. 2007. Road Map for the Development of Indonesia’s Furniture and Handicrafts Industries. Indonesian Furniture
and Handicrafts Industries Association (ASMINDO). Jakarta, 18 April 2007.
APKI. 2005. Indonesian Pulp & Paper Industry. Directory 2005. Indonesian Pulp & Paper Association. Jakarta.
Arancon, R.N. 1997. Asia Pacific Forestry Sector Outlook Study: focus on coconut wood. Asia-Pacific Forestry Sector
Outlook Study Working Paper No. APFSOS/WP/23. Rome, FAO.
Brown, T. H., B. C. H Simangunsong, D. Sukadri, D. W. Brown, S. Sumirta, A. Dermawan and A. Rufi’ie. 2005. Restructuring
and Revitalization of Indonesia’s Wood-Based Industry: Synthesis of Three Major Studies. MoF-NRM-CIFOR-MFP-
Forest Trends-ITTO. Jakarta.
BPS. 2006. Economic Indicators. Central Statistics Agency. Jakarta.
BRIK. 2006. Kondisi dan permasalahan industri sawmill dan woodworking serta keadaan pasarnya pada saat ini dan
kecenderungannya di masa mendatang. Paper presented at the Indonesian Timber Industry Workshop on 19-20
December 2006 in the Hotel Santika, Jakarta.
Ministry of Forestry. 2005. Executive, Indonesian Strategic Forestry Data 2005. Ministry of Forestry, Jakarta.
Ministry of Forestry. 2006. Executive, Indonesian Strategic Forestry Data 2006. Ministry of Forestry, Jakarta.
Ministry of Forestry. Indonesian Forestry Statistics 1980-2002. Ministry of Forestry, Jakarta.
Ministry of Forestry. 2005. Rekalkulasi Penutupan Lahan Indonesia tahun 2003. Forest Mapping and Inventorization
Centre, Forest Planology Agency, Jakarta.
FAO. 2005. State of the World’s Forests 2005. FAO, Rome.
FAO. 2005. FAOSTAT Database home page (http://www.fao.org/). Food and Agriculture Organization of the United
Nations, Rome.
FAO. 2006. FAOSTAT Database home page (http://www.fao.org/). Food and Agriculture Organization of the United
Nations, Rome.
Killmann, W. & Fink, D. 1996. Coconut palm stem processing. A technical handbook. Eschborn, Germany, Protrade,
GTZ.
Kollert, W., Killmann, W. & Sudin, R. 1994. The financial feasibility of producing gypsum bonded particle boards
from oil palm trunk fibres. In Proceedings, 3rd National Seminar on Utilization of Oil palms and Other Palms,
Kuala Lumpur, 27–29 September 1994, pp. 117–137.
Kustiawan, D. 2006. Kondisi dan tantangan pembangunan HTI di Indonesia saat ini. Paper presented at a reguler In-
house Experts Working Group meeting on 8 June 2006, Manggala Wanabakti Building. Jakarta.
Machted Spek. 2006. Financing Pulp Mills: An Appraisal of Risk Assessment and Safeguard Procedures. CIFOR.
Manurung, E.G.T. 2002. Dampak Kebijakan Larangan Ekspor Kayu Bulat pada Periode 1985-1997 Terhadap Sektor
Kehutanan Indonesia: Suatu Analisis Kritis. Paper for the World Bank, Jakarta.
Nugroho, H. 2006. Penyediaan bahan baku berasal dari produk hutan alam HPH/IUPHHK. Paper presented at the
workshop on Timber Raw Materials Supplies for Indonesia’s Timber Industry. Twin Plaza Hotel, Jakarta, 12-13
October 2006.
Porter, M. E. 2006. Raising Indonesia’s Competitiveness at Workshop on 28 November 2006. Jakarta.
Santoso, H. 2006. Hutan Rakyat: Menuju alternatif sumber bahan baku industri perkayuan di Indonesia. Paper
presented at the workshop on Timber Raw Materials Supplies for Indonesia’s Timber Industry. Twin Plaza
Hotel, Jakarta, 12-13 October 2006.
Simangunsong, B. C. H. 2007. Revitalisasi industri Kehutanan: Analisis Sisi Pasokan. Paper prepared for the Forestry
Industry Revitalization In-house Experts Working Group, Ministry of Forestry.
Simangunsong, B. C. H. 2004. The Economic performance of Indonesia’s forest sector in the period 1980-2002.
Briefing Paper No. 4. Indonesian Ministry of Forestry and GTZ-SMCP. Jakarta.
Sist, P., T. Nolan, J. Bertault, and D. Dykstra. 1998. Harvesting intensity versus sustainability in Indonesia. Forest
Ecology and Management (108): 251-260.
Sumarna, K., D. Wahjono, and H. Krisnawati. 2002. Stand volume prediction of logged-over area in the natural
production forest and the annual production quota formula. Paper presented in discussion of silviculture
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Development Agency
Wardoyo. 2006. Identifikasi lokasi lahan pada kawasan hutan produksi untuk HTI. Paper presented at a regular
meeting of the In-house Experts Working Group on 15 June 2006, Manggala Wanabakti. Jakarta.
Winarno, D. 2006. Ketersediaan pasokan bahan baku kayu saat ini dan upaya peningkatan pasokan dari hutan rakyat
di masa depan. Paper presented at the workshop on Timber Raw Materials Supplies for Indonesia’s Timber
Industry. Twin Plaza Hotel, Jakarta, 12-13 October 2006.
Annex 1. Raw Material Supply Capacity in 2005 and prediction for 2006
2005 (Cubic Meters) 2006 (Cubic meters) Remarks
No. Raw Material Source Estimated
2004 stock Current year Amount Current year Amount
2005 stock
Raw material stock at IPHHK as of 31 December 3,563,940.00 0.00 3,563,940.00 4,162,535.36 0.00 4,162,535.36
1 in previous year
Annual Work Plan of Concessionaires in natural 354,323.89 4,692,332.30 5,046,656.19 337,610.10 6,640,000.00 6,977,610.10
2 forest
a. Chip wood (mangrove) 59,117.36 183,002.39 242,119.75 59,117.36 230,000.00 289,117.36
The Forest Industry Revitalisation In-house Experts Working Group

b. Round wood (large) 295,206.53 4,509,329.91 4,804,536.44 278,492.74 6,410,000.00 6,688,492.74
Annual Work Plan of concessionaires in forest 1,020,444.98 18,215,301.87 19,235,746.85 1,000,000.00 18,000,000.00 19,000,000.00
3 plantation (plantation timber)
Planned quota for
Natural forest timber from land clearing for 1,329,498.20 13,164,383.86 14,493,882.06 1,263,023.29 12,506,164.67 13,769,187.96
2006 is 8 millions M3.
annual work plan (RKT) forest plantation
Based on monitoring
4 concessionaires
and evaluation efforts
1. Small round wood and BBS 1,172,620.34 10,195,056.75 11,367,677.09 1,113,989.32 9,685,303.91 10,799,293.23 in previous years, the
2. Large round wood 156,877.86 2,969,327.11 3,126,204.97 149,033.97 2,820,860.75 2,969,894.72 amount of round wood
IPK plantation estate, transmigration and 2,073.00 2,009,459.62 2,011,532.62 192,807.65 1,908,986.64 2,101,794.29 in concessionaires ranges
5 mining between 75% to 85% of
1. Small round wood and BBS 0.00 641,641.99 641,641.99 61,565.55 609,559.89 671,125.44 logging quota within that
2. Large round wood 2,073.00 1,367,817.63 1,369,890.63 131,242.10 1,299,426.75 1,430,668.85 year
6 Perum Perhutani (*) 0.00 80,081.00 80,081.00 0.00 91,575.79 91,575.79
7 Community forest (*) 0.00 904,319.00 904,319.00 0.00 1,015,658.78 1,015,658.78
A Road Map For The Revitalization Of Indonesia’s Forest Industry

8 Import (*) 0.00 470,690.00 470,690.00 0.00 500,000.00 500,000.00
9 Auctioned timber (*) 0.00 10,287.00 10,287.00 0.00 12,487.61 12,487.61
10 Plantantation estates timber (*) 0.00 104,481.00 104,481.00 0.00 437,066.28 437,066.28
Total, including stock per 31 December the 6,270,280.07 39,651,335.65 45,921,615.72 6,955,976.40 41,111,939.77 48,067,916.17
previous year
Total, not including stock per 31 December the 2,706,340.07 39,651,335.65 42,357,675.72 2,793,441.04 41,111,939.77 43,905,380.81
previous year
Source: Directorate General for Forestry Production Development (2007)
Notes:
• (*) for 2005 is planned number for RPBBI IPHHK and for 2006 it is the prediction number for IPHHK plan
• Based on monitoring and evaluation data, timber stock per 31 December previous year in natural forest concessionaires is 5% of that year’s logging quota
• Based on monitoring and evaluation data, timber stock per 31 December previous year in forest plantation concessionaires is 6% the production in the
following year
• Based on monitoring and evaluation data, timber stock per 31 December previous year in IPK is 10% of the production in previous year.
59
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A Road Map for the

The Forest Industry Revitalization

The Forest Industry Revitalization

Table 1. Round wood production by production source (m3) 9

Figure 1. Indonesian wood products production 1980-2005 6

Minister of Forestry, Republic of Indonesia

Finally, we hope this writing will be of beneﬁt to us all.

Jakarta. August 15, 2007

E. G. Togu Manurung, Ph.D.

Figure 1. Indonesian wood products production 1980-2005

Figure 2. Timber industry wood consumption 1980-2005

Note: RWE = Round wood equivalent

3 Sawnwood, plywood, wooden furniture, pulp and paper.

Figure 4. Share of timber supplies from various sources

4 Ministry of Forestry (2006). Executive, Strategic Forestry Data 2006.

Table 1. Round wood production by production source (m³)

1994/95 17,308,737 4,708,696 138,106 1,871,737 0 24,027,277

Total 107,287,240 54,768,147 5,749,312 17,942,033 41,149,310 226,896,042

Figure 5. Wood consumption vs. supply

50.0 RWE wood consumption

Note: RWE = Round wood equivalent

2.1. Sawnwood and Woodworking Industries

2.2. Plywood and Other Panel Wood Industries

Table 2. Pulp industry developments in Indonesia in the 2000 – 2005 Period

2.4. Furniture and Handicrafts Industries

3.1. Natural Production Forests

7 Ministry of Forestry (2006). Executive, Strategic Forestry Data 2006.

3.2. Forest plantations

3.3. Community Forests

3.4. Estate Crops

Table 3. Problems facing Indonesia’s timber industries

Figure 6. Road Map to Forestry Industry Revitalization.

Sufficient raw materials

6.3. Objectives and targets

Percentage of timber raw material allocated (%)

Log supply projections by year (million m³)

Log supply projections by year (million m³)

Table 6. Selected strategies for each of the industries

Plywood 4.80 * W-T

Industry competitiveness 21.00 ** S-O

Note: * Weighted value calculated by multiplying weight and rating,

7.2. Grand Strategy for the Development of Wood Processing Industries

Table 7. Problems, Targets and Strategies in the Restructuring Period (2007-2014)

Problem Objective Strategy

Problem Objective Strategy

7.3. Necessary Policies and Action Plans

Forest industry restructuring policies are as follows:

While forestry industry revitalization policies are listed below:

Strategy Policy Recommended Action Plan

Strategy Policy Recommended Action Plan

Strategy Policy Recommended Action Plan

Strategy Policy Recommended Action Plan

Strategy Policy Recommended Action Plan

Recommended Action Success Indicator M&E Veriﬁcation Implementing Agencies

Recommended Action M&E Veriﬁcation

Recommended Action M&E Veriﬁcation

Recommended Action M&E Veriﬁcation Implementing