28 August 2008

[sobat-hutan] Re: [mediacare] Press Release Telapak - Merbau, a Backward Step

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Sent: Thursday, August 28, 2008 3:26 PM
Subject: [mediacare] Press Release Telapak - Merbau, a Backward Step

A Backwards Step – How demandfor merbau timber is undermining Indonesia's anti-illegal logging policies


Recentdevelopments weakening the control of Indonesia's merbau exports and trade are drivingillegal logging and timber smuggling and undermining coherent existing policesdesigned to secure sustainable forest management.

Merbau (Intsia spp.) is a luxurious hardwoodprized for its dark red colour and durability. Found only in Indonesia, Papua New Guinea and Malaysia, merbau has beensystematically looted from the forests of Papua, Indonesia, to feed internationaldemand for flooring, decking, doors and furniture. These forests form part ofthe last remaining tracts of intact rainforests in the Asia Pacific region, provideessential livelihoods for local communities and support a wealth of uniquebiodiversity.

The merbau trade isemblematic of the problem of illegal logging in Indonesia and the limitationsof government actions to tackle the problem. In 2005 the Environmental Investigation Agency (EIA)and Telapak released a landmark reportdetailing how around 300,000 cubic metres of merbau logs were being smuggledout of Papua, Indonesia, to China every month to be made intoflooring. The sheer scale of the theft and the involvement of corruptgovernment officials prompted a swift response from the Indonesian government. An enforcementteam was dispatched to Papua and the illegal logging ofmerbau virtually halted. By the end of the operation in May 2005 over 400,000cubic metres of illegal merbau logs had been seized, and 186 suspects named bythe police. The effects of the operation were quickly felt overseas; the pricefor merbau logs in China more than doubled to $700 per cubic metre and tradersin southern China were struggling to source raw merbau timber.

Yet despite suchdecisive action, overseas demand for merbau has remained high, and the loggingand trade of merbau in Indonesia remains riddled with illegality. In thiscontext a host of timber processors and traders have continued to find ways tosmuggle illicit merbau out of Indonesia. This briefing exposes some of therecent scams, and explains how government policies are making it easier formerbau smugglers to thrive.

Special Treatment for Merbau Smugglers

In 2004 theIndonesian government banned the export of sawn timber. The relevant decree wasrevised in 2006 to clarify the types of timber covered by the ban; in essenceall exports of rough sawn timber are banned, as are shipments of planed timber(S4S) above a specified size.

In April 2008 the IndonesianMinistry of Trade granted a special "dispensation" to the sawn timberexport ban to three companies based in Surabaya, a major timber processingcentre and port in Java, allowing them to export "housing components" of merbautimber to China. The three firms CV Surabaya Trading & Co., GrafityMerindo, and TriasHasil Alam Lestari were granted the exception on the grounds that the"housing components" were destined for a construction project in Mongolia. Initial permissionwas granted for the three firms to ship 24,000 cubic metes of merbau, with atotal of 70,000 cubic metres being requested before the end of 2008. Thecompanies began shipping the timber in May 2008.

Superficialanalysis of the exception shows it to be highly suspicious; both the use ofmerbau for house construction and the stated destination of Mongolia do notmake economic or practical sense. Sources also state that the exception hasbeen further justified on the grounds that the merbau timber is to be used forearthquake reconstruction in China. More detailed investigations by EIA/Telapakreveal that the exception is an outright fraud, designed purely to allow thethree firms to ship prohibited merbau sawn timber to China.

The threecompanies are all controlled by one man – RickyGunawan. EIA/Telapak undercover investigators first encountered Gunawan andSurabaya Trading & Co. in late 2006 while investigating merbau smuggling.Gunawan admitted his company was shipping around 3,000 cubic metres of roughsawn square merbau "posts" in containers every month from Surabaya to China, inblatant contravention of the sawn timber export ban. He said he had beensmuggling the timber out for a year-and-a-half, assisted by a contact in thecustoms department of Surabaya port.

EIA/Telapakprovided a detailed briefing on the activities of Gunawan to the Ministry of Forestry in March 2007. Despitesuch comprehensive evidence of flagrant law-breaking by Surabaya Trading noaction has been taken against the company or its owner Gunawan. Instead heappears to have found new way of supplying sawn merbau to Chinese buyers, withthe help of a suspicious government dispensation.

Sources inSurabaya state that shipments of "housing components" sent by Gunawan are infact rough sawn merbau posts. Information obtained by EIA/Telapak in China alsoshows that the shipments are not destined for a housing project in Mongolia, butare instead being sold on to flooring and furniture factories in China.

One of the mainrecipients of merbau shipments sent by Surabaya Trading is the company FujianPan-Chinese Trading, located in Fujian Province, southern China. During May 2008Gunawan sent 40 containers of "merbau housing components" to Fujian Pan-Chinese Trading. InJuly EIA/Telapak posing as timber buyers called the Chinese company to askabout the availability of merbau. A company representative confirmed thatFujian Pan-Chinese receives around 200 containers of sawn merbau a month from aSurabaya sawmill. Each cubic meter of Indonesian merbau is worth $1,100 onarrival in China, and is sold on to factories producing merbau flooring, doorsand stairs. The company is even offering the sawn merbau for export out ofChina.

Given Gunawan'spast activities, the award of a "dispensation" to ignore the sawn timber exportban by the Indonesian government is extremely suspicious. In essence the permitis providing a cover for him to continue smuggling merbau to China. It iscertainly a lucrative operation; based on market prices in China the quantityof merbau timber covered by the exemption is worth $26 million.

Weaker Control of Merbau Exports

The Ministry of Trade is also pushingthrough a wider revision of the original sawn timber export ban that will meanmore merbau will be exported to overseas  manufacturers.

Under the reviseddecree, merbau is singled out as the only species that can be exported in S4S(Squared on 4 Sides) in larger profiles. While all other timber species musthave a profile of 4000 mm2 or less to be exported, the new decree (Ministry ofTrade decree no. 20/M-DAG/PER/5/2008) permits exports of merbau posts withprofiles of up to 10,000 mm2, more than double the currentpermissible size. Only merbau is exempted.

Such an exemptionwill undermine enforcement efforts in Indonesia by weakening export controls ona species which remains one of the main targets of illegal logging operationsin the country.

Papua's Merbau Controls Undermined

Within Indonesia merbau is only found in Papua, where it is the backbone of thelogging industry. In September 2007, Papuan GovernorBarnabas Suebu and West Papua GovernorAbraham Atururi issued new regulations limiting log shipments from Papua toother parts of Indonesia, effective from the beginning of 2008.

A global audienceheard Governor Suebu explain the Papuan log shipment ban at the climate conference held in Bali inDecember 2007 when he outlined a range of policies designed to protect Papua'sforests while creating incentives for inward investment to support developmentfor local people.

Yet powerfulinterests outside of Papua are seeking to undermine the new controls. In midMarch 2008, at a meeting of 40 forest sector investors and the provincialgovernment in Jayapura, industry representatives requested Governor Suebu to weakenhis policy by allowing logs to be shipped to manufacturers in Java andelsewhere in Indonesia. In responding, Governor Suebu told the investors andjournalists gathered how both President Susilo Bambang Yudhoyono, and VicePresident Jusuf Kalla had also requested a similar revocation of the policy,but that the policy would not be withdrawn.

Despite this, overthe following days local media falsely reported that the policy had beenrevoked, significantly adding to the high level political and commercialpressure on the governor to succumb to outside interests. Governor Suebu subsequentlyfelt compelled to issue a press release explaining that the policy remained inplace, and logs were not allowed to be shipped out of Papua to anywhere,regardless of media reports to the contrary.

With internationaldemand for merbau remaining high, logging in Papua remains riddled withillegality. In May 2008 police seized 13,000 cubic metres of illegal merbaulogs in Kaimanaand Nabire, West PapuaProvince. Some of the seized logs were cut by the companies Kaltim Hutama and Centrico, which operateforest concessions in Papua.   

Double Standards

While thegovernment is offering suspicious dispensations to get round current sawntimber export laws, and designing new ones to intentionally weaken controls onmerbau exports, it has failed to act decisively to implement a much-needed TimberLegality Assurance System (TLAS). The TLAS has been developed over severalyears of wide-ranging consultations and field tests. It represents the best wayof clearing up confusion generated by Indonesia's multiple overlapping andcontradictory forestry laws, and will also bring much needed transparency tothe sector. The TLAS does not introduce new legislation, but merely clarifiesexisting laws and legal requirements in the forestry and timber trade sectors.

Yet despite itsstated policy priority of tackling illegal logging, the Ministry of Forestry hasstill not adopted the TLAS, ensuring legal uncertainty continues to underpinthe timber trade across Indonesia. Pushing for the weakening of merbau tradecontrols, while delaying the introduction of a widely-endorsed system toguarantee timber legality, raises concerns about the government's statedintentions to curb illegal logging and log smuggling and implement sustainableforest management. Since 2005 the Indonesian government has taken decisivesteps to curb illegal logging. Now is the time to push these efforts further,not to weaken timber trade controls and reward merbau smugglers withdispensations.   


The Government of Indonesia should:

<!--[if !supportLists]-->·        <!--[endif]-->Immediatelycancel the "dispensations" for exports of merbau "housing components".

<!--[if !supportLists]-->·        <!--[endif]-->Launchan inquiry into how the dispensation was allowed, and the activities ofcompanies linked to Ricky Gunawan.

<!--[if !supportLists]-->·        <!--[endif]-->Ensurethat the sizes of Papuan merbau sawn timber permitted for export are notweakened by new Ministry of Trade Decree No.20/M-DAG/PER/5/2008.

<!--[if !supportLists]-->·        <!--[endif]-->Formallycommunicate export regulations on sawn timber to known import destinations,especially China and Malaysia.

<!--[if !supportLists]-->·        <!--[endif]-->Adopt andimplement the Timber Legality Assurance System across the country.

<!--[if !supportLists]-->·        <!--[endif]-->SupportPapua's log shipment controls, and encourage relevant authorities to enforcethem.

Consumers should:

<!--[if !supportLists]-->·        <!--[endif]-->Notbuy merbau products until the TLAS is implemented, and merbau is provided withindependently audited proofs of legality under the TLAS or certificationschemes.

For further information contact:

• Husnaeni Nugroho, Telapak Forest Campaigner (email:unang@telapak.org, mobile: +62 813 288 413 07)

• Mardi Minangsari, Telapak Forest Campaigner Coordinator (email:mardi_minangsari@telapak.org, mobile: +62 811 11 1918)




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