BOGOR, Indonesia — Encouraging Indonesian smallholders to view timber plantations as an attractive business opportunity could have far-reaching economic and environmental impacts, according to a new study.

Indonesian government initiatives have sought to promote plantation development in a bid to reduce poverty in rural areas, increase forest cover, and boost wood supply to industry.

But the study – from the Center for International Forestry Research (CIFOR) – found that many smallholders do not understand how to effectively cultivate and market timber, and steps must be taken to make plantation establishment an attractive business opportunity.

“The point is to empower farmers who don’t make very much money,” says CIFOR scientist Dede Rohadi, one of the study’s lead researchers.

“I have calculated that planting timber is actually more profitable than planting food crops, but the problem with planting timber is that you have to wait too long to harvest, whereas crops you can harvest every year,” he says.

“Most people living in the villages are poor; they have to struggle for their daily lives. So the land is typically allocated to food, so that they can get paid regularly.”

Due to the lengthy cropping cycle, it is middle and upper income farmers typically cultivate timber plantations. But for those who can afford to invest longer term there remain additional challenges to maximize the benefits from timber cultivation.

PLANT FOR THE FUTURE

Firstly, farmers are often uneducated in proper silvicultural practices and consequently produce thinner, low-quality timber.

“This is a big problem because there are huge differences in the sale prices depending on timber quality,” Rohadi says. “For example, teak logs can sell for as little as IDR 500,000 (USD38) or as much as IDR 5 million (USD380) per cubic meter, depending on the log diameter and quality.”

Secondly, farmers also tend to be “price takers” and have a weak bargaining position when going to market. Typically they are dictated to by intermediaries (or middlemen), due to lack of market knowledge and business expertise.

READ THE RESEARCH:

• Making timber plantations an attractive business for smallholders

In a previous study, Rohadi discussed how timber plantations often are seen as “household savings accounts” to be used for a specific purpose.

“Often timber is seen as a savings account that is harvested for an immediate need. Perhaps they need to pay for a motorbike or a child’s schooling and that will be the sum they have in mind, rather than the timber’s actual market value.”

Selling timber is also often a “last resort” he says – during emergencies or hard times – and often farmers are not in the best position to bargain for the best price.

“Farmers often don’t realize the asset they’ve got, or the opportunities that are available in the market,” he says.

To promote smallholder plantation development the research recommends that central and regional government provide outreach services to improve farmer’s skills and market knowledge, and to encourage collective marketing among groups of farmers.

Rohadi’s work in the field brings him face to face with farmers. On a recent trip to rural Java, where 70 percent of Indonesia’s smallholder plantations are located, he interviewed farmers who had been taught silvicultural techniques.

“About two thirds of those farmers said that the knowledge improved their skills and they implemented the new techniques — so it’s reasonably effective in terms of adoptions,” Rohadi says.

“In these programs there are always those who really pay attention and who might function as ‘agents of change’ within the community. These people are our hope for the future.”

A COMPLICATED SYSTEM

The Ministry of Environment and Forestry must also simplify timber trade regulations for smallholders to reduce obstructively high transaction costs that are often passed on to the farmer, Rohadi says.

Currently smallholders are obligated to provide two certificates:  The Origin of Timber Certification (Surat Keterangan Asal Usul Kayal or SKAU) – issued by the Village Head to indicate valid origin, and the Timber Legality Assurance Certification (Sistem Verifikasi Legalitas Kayu or SVLK), which assures the legality of the timber products.

The SVLK was implemented in 2013  and must be issues for all timber produced from Indonesia started as part of the government initiative to “improve the brand image of timber produced from Indonesia and (therefore providing) better market access for international trading.”

In 2012, a CIFOR study indicated farmers may benefited from timber certification, either the voluntary system such as the Forest Stewardship Council (FSC) or a mandatory system like the SVLK.

They got better prices for their timber with the certification, and being involved with the process, meant they felt that their knowledge of timber and forestry processes had increased.

But certification pricing is also often seen as prohibitively expensive for smallholders, says Rohadi.

While the costs for the SVLK certificate vary on location, type of timber, and size of farm, the most expensive part of the process lies in the cost of preparing farmers to comply with the certification requirement.

The CIFOR study indicates that the social benefits of reducing red tape and increasing the incomes of smallholder farmers are clear.

It recommends that the SVLK should replace the SKAU to reduce transaction costs and making the certification process more attractive.

And encouraging more plantation farming has major environmental benefits according to Rohadi.

“The cultivation of timber on private land has the potential to boost forest cover and improve the local environment,” he says.

“The shade provided by the forest cover also lowers temperatures and creates a more pleasant local environment, and many farmers realize this.”

Rohadi used the example of Gunungkidul District, in Central Java. In early 1960 forest cover was only 3 percent in the region, but now the forest cover is 30 percent.

“And that’s mostly smallholder plantations,” he says. “So the smallholders can and do dramatically change local environments.”

For more information about smallholder timber plantations in Indonesia please contact Dede Rohadi at d.rohadi@cgiar.org

The research for this policy brief was supported by the Australian Centre for International Agricultural Research (ACIAR)