Indonesia has taken a global lead in adopting the European Union’s new timber legality license, making a smooth transition from an existing national system.

The EU’s Forest Law Enforcement, Governance and Trade (FLEGT) license is compatible with Indonesia’s Timber Legality Assurance System (Sistem Verifikasi Legalitas Kayu, SVLK), meaning that businesses holding the national license are automatically eligible to export directly to the EU without the need for further due diligence checks.

The development is good news for licensed businesses, as it opens access to a global market, and provides the guarantee of a supply chain free of illegal logging. But for small businesses, which are often unlicensed, several challenges remain.

Finding ways to maximize the benefits of FLEGT for small and medium enterprises (SMEs) became the focus of a national policy dialogue in Jakarta last week. More than 200 policymakers, scientists, business owners, craftsmen and more came together to come up with equitable solutions for the SVLK and FLEGT systems to work for trade, conservation and livelihoods.

GOLDEN CHILD OR GUINEA PIG?

Indonesia is the first country to adopt the EU FLEGT system, having started issuing licenses in November last year. The change is expected to give Indonesia a comparative advantage in the European market, providing assurance of legal timber for importers and consumers.

“We would like to discard the stigma attached to our country, that Indonesia is a source of illegal timber,” said Ida Bagus Putera Parthama, Director General of Sustainable Forest Management at the Ministry of Environment and Forestry, during the opening remarks.

“FLEGT, I can say, is like a good boy – like anak soleh – whose birth has been long awaited, meaning that everyone should support it,” he said. “But we are a diverse country in everything, including in perceiving illegal logging. A small number still have not welcomed this anak soleh.”

The anak soleh, or ‘golden child’, analogy was carried through the day’s discussions.

Charles-Michel Geurts, Deputy Head of the European Union Delegation in Indonesia, congratulated his host country on setting an example for the region.

“This anak soleh is a role model, everybody likes him, everybody wants to adopt him,” he said. “The EU is working hard with third countries like the US, Japan, Australia, or even China, to promote recognition of the Indonesian licenses.”

Su-Lin Garbett-Shiels from the UK Climate Change Unit (UKCCU) in Indonesia, joked that so many congratulations have been made, Indonesia must be growing tired of hearing them.

“I know it’s been nearly a year, but until there’s a second country with the license, I think you’re still going to get those congratulations,” she said. “We are really proud of our work together on illegal timber in Indonesia.”

But Basuki Kurniawan, Vice Secretary-General of the Indonesian Furniture and Handicraft Association (HIMKI), questioned the benefits of the deal for small business owners.

“Indonesia has certainly been a very, very good boy. But we have also become a guinea pig. And as a guinea pig, we are facing a lot of problems, quite frankly,” he said, adding that obtaining an SVLK or FLEGT license still poses major challenges for small businesses, such as those living on day-to-day profits, or run by as few as one or two people.

The day’s discussions zoned in on what the challenges are for small businesses, how to lessen the burdens posed, and how to ensure a more equitable and sustainable system that can benefit businesses of all sizes.

SIZE MATTERS

Jajag Suryo Putro, who runs a medium-sized furniture business in central Java, said that obtaining timber legality licenses was no problem for a business of his size under the new system.

“A license can cost 15-20 million rupiah [USD 1,130-1,500], but that’s an investment in goodwill, to gain trust,” he said. “Certification is fundamental — it’s really our mindset that poses obstacles, because in the end certification can be used by a business as a tool.”

But for small businesses, others said, an investment of that amount is out of reach. Small businesses often lack the basic paperwork to get started on obtaining a license, may not know the steps involved, and can face discrimination from authorities.

Diah Suradiredja from the Indonesian Ecolabelling Institute (LEI) said that a key area of support is in services, such as from local governments, and that a lot of progress has already been made in this area.

“We should no longer approach licensing from the issues of small business owners not holding national identity cards, not being able to fill out paperwork, finding the cost prohibitive – that’s the old stigma,” she said.

“There have been a lot of improvements in support, new instruments, in governments. And we should be proud of those changes,” she added.

Victoria Simanungkalit, from the Ministry of Cooperatives and SMEs, said that rather than making exceptions for small businesses, more efforts should be made to bring them up to speed.

“We shouldn’t coddle small businesses, we should prepare them to fight in a global market,” she said.

LINK TO LIVELIHOODS

Meanwhile, Su-Lin Garbett-Shiels from UKCCU underlined that the link should always be drawn back to the household contributions of small businesses.

“I think it’s really crucial to recognize the importance of protecting livelihoods as well as promoting trade,” she said.

Herry Purnomo, a scientist at the Center for International Forestry Research (CIFOR) and a co-organizer of the dialogue, has significant experience in this area. He has worked for more than a decade on equity and sustainability with the Jepara Small-scale Furniture Producers’ Association (APKJ) in central Java.

Sustainable business

Helping Indonesian craftsmen go global

Purnomo commented that local governments should be more adaptive to the different situations faced by different sized businesses, rather than push for a one-size-fits-all approach.

“Local governments should facilitate finance and regulations to make it accessible for SMEs,” he said. “For example, furniture business owners cannot use their own house as a workshop, because it is residential property, but they cannot afford industrial property either.”

Margono, a member of the AKPJ, added that for small businesses the government needs ensure that legal timber licenses “should not burden the communities, but bring benefits.”

From this perspective, the multi-stakeholder dialogue in Jakarta offered an important starting point for opening opportunities for small business, promoting equity and livelihoods.