Concept Note detail
FUNDED
1. General Description:
ID:CN-22016Project resulting from this CN: PD928/22 Rev.1 (I)
Note: CNs are developed into project proposals following consultation with donor(s).
Development of Sustainable Domestic Market for Wood Products
Indonesia
Java Island, Indonesia
| ITTO | 241,472 |
|---|---|
| Counterpart | 11,000 |
| Total | 252,472 |
Other project type related to this project including community/field-based project implementation, analytical work/studies, and workshop/meeting/seminar
This project concept note is submitted for consideration of donors who are willing to support ITTO producing member countries to stimulate forest plantation and sustain their industry by promoting sustainable domestic wood use.
One of the strengths of Indonesian wood products is that it has met the requirements of Wood Legality (V-Legal) to ensure the legality of wood sources used as raw materials. At present time, contrary to the decline in economic performance due to the Covid-19 pandemic, the production of wood products showed an increment during the pandemic. The production raises from 40.08 million m3 in 2019 to 46,48 million m3 in 2020 to 48,42 million m3 in 2021. Most of the timbers used in wood product industries are supplied by forest plantation estates for 64.85 percent followed by private forests for 19.33 percent. Most of the wood products in Indonesia are exported dominated by pulp and paper, wood panel and furniture. Four of the five biggest wood production exporter province are located on Java Island, namely Jakarta, East Java, Central Java and West Java. Unfortunately, there is no comprehensive data at current time regarding the demands or consumption of wood products at domestic level as the gap be wood production and wood products export.
Tropical timber-producing countries in particular Indonesia needs to strengthen their wood supply system to provide the demand for domestic wood use, while the existing preference of the community is more the substitute material such as metal or plastic that are inexpensive, handy, and long-lasting. To this end, Indonesia needs to promote green growth and sustainable development by increasing bio-based economy value in new market segments and promoting sustainable wood production and consumption. In response to this situation, the Government of Indonesia will initiate the strengthening of its wood production and wood products in domestic markets to support the national GDP from the forestry sector.
2. Proponent Information:
DIRECTORATE GENERAL OF SUSTAINABLE FOREST MANAGEMENT (DG SFM), MINISTRY OF ENVIRONMENT AND FORESTRY REPUBLIC OF INDONESIA
Dr. Rina Kristanti
cumieinfahutan@yahoo.com
+6221-5730258
+6221-5730258
https://phl.menlhk.go.id/
N/A
DG of SFM is in charge to carry out the formulation and implementation of policies in in the field of SFM through policy formulation, policy implementation, providing technical guidance and supervision, implementing evaluation and reporting in the field of forest management units, development of business diversification, and utilization of timber and NTFP as well as forest service, forest product processing, and marketing, forestry levies and distribution of forest products.
3. Relevance:
Under ITTA 2006, ITTO has two closely related and overarching objectives: 1) To promote the expansion and diversification of international trade in tropical timber from sustainably managed and legally harvested forests and 2) To promote sustainable management of tropical timber-producing forests.
SAP 2022 – 2026 adopted at the ITTC-57 provides a new mission statement “To promote the expansion and diversification of international trade in tropical timber from sustainably managed and legally harvested forests and to promote the sustainable management of tropical timber-producing forests.
This proposed project is relevant to ITTO’s program line on Legal and Sustainable Supply Chains (LSSC). In particular with forest timber product, for local wood processing industries and downstream manufacturers, the impact of LSSC will be two-fold. From the market perspective, LSSCs bring improved opportunities to formalize and professionalize their business and accrue through partnerships a higher share of the previously forgone investments and value added from tropical wood products. Price premiums are also within possibility. In reverse, those operators who fail to adhere to legal and quality standards will find fewer channels to the market, making it harder to continue their business as usual. From the forest management and timber supply standpoint, more efforts will have to be concerted to apply SFM certification, legality verification, traceability, and chain-of-custody standards to own concessions and scrutinize those wood supplies coming from other concessions or traders.
The Activity contributes to the achievement of SDGs, especially SDG 1 (No Poverty), SDG 12 (Responsible Consumption and Production), SDG 13 (Climate Action), and SDG 15 (Life on land).
This activity will help to promote the sustainable consumption of wood and wood products. Concerted efforts to promote legal and sustainable forest products will be facilitating the economic, environmental, and social benefits of the management of forest plantations. This activity links with Sustainable Development Goals through climate change mitigation actions, community empowerment, low emission development, energy independence, and sustainable consumption. Also, projects are also part of an effort to support Indonesia’s FOLU Net Sink 2030 and Gender Equity and Social Inclusion developed by MoEF.
This proposed project is relevant to the forest utilization business process policies in Indonesia. Following are the key policies that are in favor of project implementation:
Presidential Decree Number 23 Year 2021 concerning Forest Governance, issued on 2 February 2021, creating Forestry Multi-Business Development in the form of implementing several forestry business activities including forest area utilization and timber, non-timber forest product utilization in Production Forest and Protection Forest.
Minister of Environment and Forestry Decree Number 8 Year 2021 concerning Forest Management and Preparation of Forest Management Plans, and Forest Utilization in Protection Forests and Production Forests, issued on 1 April 2021, creating breakthroughs in risk-based forestry business, scope of area for forestry business development, and forestry multi-business scheme.
Director General of Sustainable Forestry Management Decree Number 4 Year 2020 concerning Strategic Plan of Directorate General of Sustainable Forestry Management Year of 2020-2024, issued on 7 September 2020, guiding sustainable forest management with strategies to increase forest productivity and forestry contribution to national income, increase forestry business diversification, investment, and forest product exports, optimize legal access for the community in forest management and forest governance.
Circular Letter of the Goods and Services Policy Agency Number 16 Year 2020 concerning Determination of Green Products in Sustainable Government Goods and Services Procurement, issued on 28 May 2020, encouraging the process of Procurement of Goods/Services Sustainable at government institutions according to national priorities and policies.
To support the role of DG SFM in conducting its function, DG SFM has collaborated with ITTO in several projects namely:
- ITTO TFL PD 010/09 Rev. 1 (M): Strengthening the Capacity of Related Stakeholders in Java on Implementing New Indonesian TLAS;
- ITTO PO 396/06 Rev.2 (F): Strategy for Developing Plantation Forest: A Conflict Resolution Approach in Indonesia;
- ITTO Project PD 737/14 Rev. 2 (I): Developing Supply Capacity of Wood-based Biomass Energy through Improved Enabling Conditions and Efficient Utilization of Degraded Forest Lands Involving Local Communities in North Sumatera Province of Indonesia.
Those projects have been conducted provide relevant and important information and networking to the implementation of the proposed project.
4. Project synopsis:
The proposed project aims to enhance the competitiveness of the Indonesian forest industry through sustainable and efficient utilization of the huge supply of wood as raw materials dominated by planted timbers. Its specific objective is to promote the development of domestic consumption for wood products, in anticipation of population and economic growth, through increased resilience of consumption, enhanced integrated supply chains from timber producers and wood industries, and improved government policies.
Available time series data with MoEF for recent five years indicate that consumption and production of wood products have been growing. Surprisingly, in Covid-19 pandemic, the productivity of wood products has been increased from 40.08 million m3 in 2019 to 46.48 million m3 in 2020 and increased to 48.42 million m3 in 2021. Furthermore, wood products including panels, chips, furniture, and veneer has increased significantly by more than 30% in 2021. Unfortunately, these raising productivity is focused to supply the export markets while the domestic consumption or market has not been well targeted and supported by comprehensive related data.
The development wood processing industry will encourage the increment of potential of export and domestic markets for wood products which is still widely open. The key problem to address is defined as “strong penetration of substitutes for wood products to domestic market”. This key problem was truly analyzed during the consultative meetings organized by DG SFM involving Forest Industry Associations (FIAs) and wood market practitioners which revealed that the key problem is closely associated with the problem of consumption, production, and government policies on domestic market for wood products.
The underlying problem relating to consumption identified are: lack of updated information on consumption of wood products; weak strategy for product development; limited assortments of wood products offered by the market; lack of understanding on the advantage of using wood products; weak marketing strategy for wood products; and, poor understanding on substitute products. As regards governments, policies, the underlying problems identified are: weak capacity building program on wood industry development; weak policy intervention on wood use in public building; weak policy incentives on wood industry development; weak outreaching program on domestic and international costumers; and, poor networking with the construction sector.
Ministry of Environment and Forestry;
Related ministries include the Ministry of Industry, Ministry of Trade, Ministry of Public Works and Public Housing, Agency of Government Goods and Services Procurement Policy;
Forest Concession holders;
Wood industries and traders;
Community as consumers of wood products;
FIAs include Indonesian Forest Entrepreneurs Association (APHI), Indonesia Sawmill and Wood Working Association (ISWA), Indonesia Wood Panel Association (APKINDO);
Think tank, university, or research institute in the field of wood production and supply chain.
Output 1: Consumers’ need for wood products satisfied by domestic market
Activities:
1.1 To conduct study on domestic wood consumption (quantity: Java, urban and younger costumer; quality: product features, quantity)
1.2 To enhance strategy for sustainable wood product development;
1.3 To enrich assortment of wood products;
1.4 To launch public education on advantage of using wood products with the target of school student, community groups, business communities, etc);
1.5 To fortify domestic marketing strategy for wood products (product, place, price, promo);
1.6 To examine features of substitutes adored by consumers.
Output 2: Institutional arrangement for domestic wood market enhanced
Activities:
2.1 To enhance program on capacity building for available wood industries;
2.2 To promote policy intervention on wood use;
2.3 To improve policy incentives for wood industry development;
2.4 To enhance outreaching program on domestic and international customers;
2.5 To promote coordination and cooperation between FIAs and the consumer sectors.
At the end of the project, the strong penetration of substitutes for wood products is significantly reduced by proper dissemination to the public of the regulations on strengthening the position of wood products in the domestic market;
The consumers’ need for wood products satisfied, indicated by: 1) updated information on domestic consumption of wood products available; 2) strategy for product development enhanced; 3) assortments of wood products widened; 4) advantage of using wood products understood by the costumers; 5) domestic marketing strategy for wood products fortified; and, 6) features of substitute products is appreciated;
Institutional arrangement for domestic wood market enhanced, indicated by: 1) capacity building program on wood industry development promoted; 2) policy intervention on wood use in public building enhanced; 3) policy incentives on wood industry development improved; 4) outreaching program on domestic and international costumers improved; 5) networking between FIAs and construction sector promoted;
Demonstrated legal and sustainable wood supply chains with effective incentives which improve domestic market access to wood products in particular in Java Island as one of the biggest producers of wood products at the national level.
N/A
N/A
The success of the proposed activities depends on the continued shared commitment and political will of the authorities in the country both at the national and local levels and related stakeholders in supporting sustainable production through PBPH including SMEs. In order to mitigate the risk of being unable to implement the project and to achieve the project’s objectives, the project will select qualified personnel with high acceptance by the authorities to manage the project and to hire (or sub-contract) qualified consultants with extensive and in-depth knowledge in the encountered issues. The project will also work with highly performance PBPH and SMEs and will closely collaborate with ITTO for guidance in implementing the project’s activities.
5. Indicative Budget (in US$):
| Description | ITTO | Counterpart | Total |
|---|---|---|---|
| Personnel | 57,600 | 0 | 57,600 |
| Sub-contracts | 55,000 | 0 | 55,000 |
| Travel and DSA | 25,000 | 0 | 25,000 |
| Capital Items | 15,000 | 5,000 | 20,000 |
| Consumables | 12,000 | 2,000 | 14,000 |
| Publication / Dissemination | 7,000 | 2,000 | 9,000 |
| Miscellaneous | 20,000 | 2,000 | 22,000 |
| Total | 191,600 | 11,000 | 202,600 |
| ITTO Project Monitoring & Review | 12,000 | - | 12,000 |
|---|---|---|---|
| Annual/Final Audit | 4,000 | - | 4,000 |
| ITTO Programme Support | 25,872 | - | 25,872 |
| ITTO Ex-post Evaluation | 8,000 | - | 8,000 |
| GRAND TOTAL | 241,472 | 11,000 | 252,472 |