The Ministry of Trade of the Republic of Indonesia recently issued Minister of Trade Regulation (Permendag) No. 15/2020, regarding provisions for forest product exports. This new regulation stipulates that V-Legal checks, which verify the legality of all timber products, are no longer required for exports. By removing timber legality verification requirements, the regulation aims to streamline the export process for forest products and thereby boost trade. However, there is considerable risk that this change would instead lead to the opposite of the desired impact.
Permendag 15/2020 risks diminishing Indonesian timber export performance, which has benefited from consistent growth since V-Legal requirements were put in place. Permendag 15/2020 will likely be considered a breach of the Voluntary Partnership Agreement for Forest Law Enforcement, Governance and Trade (FLEGT-VPA) that Indonesia has signed with the European Union (EU). This brings the risk of trade suspensions or costly due diligence processes because timber products from Indonesia will no longer be eligible for FLEGT Licenses.
In Article 10 of the FLEGT-VPA, Indonesia and the EU agreed on the implementation of a timber legality assurance system covering both Indonesia’s domestic timber market and all international exports. By violating this internationally-recognised agreement, negative perceptions of Indonesia will likely emerge across many key markets for tropical timber, where demands for legality verification have become increasingly important: the United States, South Korea, Australia, Japan and, soon, China. Indonesia is at risk of losing its export markets for tropical timber, and lagging even further behind its competitors.
Therefore, the Ministry of Trade should postpone and revise Permendag 15/2020. The revised regulation should be reissued alongside a complementary Regulation of the Minister of Environment and Forestry, which would maintain V-Legal requirements for forest product exports. At the same time, the mechanisms and procedures of the Timber Legality Assurance System (SVLK) should be improved, by streamlining processes for low-risk timber sourced from community forests and timber plantations, as well as for certain industries procuring supplies from such low-risk sources
Policy Brief- Safeguarding Indonesia’s Forest Product Exports – English