Indonesia – Changes of direction on FLEGT?

Indonesia withdraws export legality licensing requirement as part of strategy to revive trade in the Covid outbreak-19

In last February, the Indonesian Ministry of Trade is pushing through a new regulation withdrawing the obligation on timber and wood products companies to provide legality assurance documentation with exports.

Regulation 15 is being presented as part of a Covid-19 trade stimulus strategy. Under the new ruling, set for implementation on May 27, companies will no longer need to obtain so-called V-legal licences (an umbrella term for both FLEGT legality assurance licences for exports to the EU and V-legal documentation for exports elsewhere), but can still secure them if the overseas customer requires them (like EU).

This decision raises many reactions and questions:

What will be the impact for Indonesia? The scrapping of the V-legal licence is a setback for forest protection and for Indonesia’s reputation in the global sustainable timber trade. The SVLK easing might potentially reduce Indonesia’s timber export value caused by a lack of market trust. Furthermore, the country will find itself in a complicated situation with the risk of two domestic markets emerging (one verified legal, and the other unverified, and therefore potentially illegal).
On the European Union side, it is rather the important European market for wood products from Indonesia that could be impacted. Indeed, Indonesian exporters could be tempted to turn to markets other than the EU because they are less demanding. In 2017, 21% of products processed from tropical wood imported on the market came from Indonesia (source: IMM).
Finally, this ministerial trade regulation potentially undermines Indonesia’s agreement with the EU and the FLEGT process. A signatory country that decides to change the rules and no longer apply a provision of its VPA can set a bad example for other signatory countries. In addition, what guarantee will there be that the Indonesian VPA LAS, based on the SVLK system, will be properly applied for products destined for the EU?

EU authorities, trade bodies and European and Indonesian NGOs are urging Indonesia to change course.

As a reminder, the Republic of Indonesia and the European Union signed a Voluntary Partnership Agreement in 2013 on the establishment of a FLEGT licensing scheme.In August 2016, Indonesia became the first country to make operational, through its system for verifying the legal origin of Indonesian timber (SVLK), the issuance of FLEGT licences required to export to the European market. Indonesia, under its VPA, has chosen to apply the SVLK to all exported products.