Representatives from Indonesian government agencies, Civil Society Organisations, and the private sector came together in Jakarta on the invitation of the FLEGT Independent Market Monitor (IMM) on 17 and 18 May 2022 to give feedback to the project team and discuss needs for future market monitoring. The stakeholder consultation was held in three separate sessions and convened around 35 key stakeholders in total.

One of the conclusions across all three sessions was unanimous support among Indonesian forest and timber sector stakeholders for continuation of the work of the IMM. In fact, there is interest for its role to broaden. Stakeholder recommendations for extending the IMM’s future role stretched from further analysis of Indonesia’s and other VPA countries’ competitiveness in international timber markets, more in-depth analysis of Indonesia’s trade with regulated markets outside the EU, and improved communications (including a stronger social media presence), to requests for IMM to undertake advocacy work on behalf of VPA partner countries. Clearly many of these suggestions fall outside the mandate of IMM at present, though they may be worthy of future discussion between the partners.

Established in 2015, the IMM has been designed to comply with the role of an Independent Market Monitor as outlined in Annex VII of the VPA between the EU and Indonesia. It has focussed on monitoring timber trade flows from Indonesia, other VPA supplier countries, and competing countries to the European Union (EU), assessing the impact of FLEGT licensing and other market-related measures implemented in the EU (e.g. the EUTR or public procurement policies) on trade, and gauging EU trade perceptions of FLEGT and FLEGT licensing. Currently the project is set to wind down at the end of 2022.

Feedback on past IMM activities

Of IMM’s past and ongoing activities, government stakeholders highlighted “information and data on the EU market and EU policy”, the IMM website and data dashboard and background information on market dynamics as particularly useful.

The private sector appreciated especially that IMM was operating independently and considered the published data as “comprehensive, high quality and great value”.

Delegates from Civil Society Organisations stated that they would value all IMM studies and use them as points of reference for their own work. They were also very appreciative of the IMM data dashboard, and several delegates were regular users of the more comprehensive STIX database.

Stakeholders from all three groups unanimously agreed that the IMM “has an important role in measuring the achievements and impacts of the VPA” and should continue in 2023 and beyond. Ideally, it was felt that the project should not re-start from scratch in 2023 but build on past work and capacity.

Stakeholders propose stronger communications function

Stakeholders across all three groups also highlighted a range of additional activities, some related to previous and ongoing IMM work and some entirely new, in which IMM could support the FLEGT VPA process in Indonesia and beyond. The latter activities are not necessarily reflected in the role of the IMM as envisioned by the VPA, but highlight critical gaps in support and cooperation identified during the first five years of FLEGT Licensing that could be taken into consideration for future VPAs or other types of partnerships.

Communications and outreach

Communications and outreach featured highly on the agenda of all three groups, although with different priorities and interests.

 Private sector stakeholders asked for IMM to communicate more frequently and in more digestible formats, in addition to the main reports. A proposal that met with general approval of the group was to set up a “communications hub” in the form of an IMM app, through which news stories and comments could be shared more easily on mobile devices. It was also suggested that links to the IMM newsletter and other communication materials should be distributed via WhatsApp in addition to email.

Another private sector proposal was that IMM should work more closely with VPA partner country trade associations and reach out more to SMEs and MSMEs, recognising their key role in implementation of the VPA.

Private sector stakeholders also asked that IMM should help raise awareness and understanding of SVLK inside and outside of Indonesia.

The need for more frequent and shorter publications using social media more widely was also emphasised by the CSO and government groups. In addition, CSOs asked for more materials to be translated to Bahasa and for IMM to coordinate more closely with VPA monitoring projects in Indonesia. A stakeholder from the CSO group also proposed that IMM should help build links between Independent Monitors in Indonesia and other VPA partner countries to facilitate information-sharing and coordinate approaches.

Stakeholders representing government agencies proposed even wider outreach and advocacy functions for the IMM that would go far beyond the original mandate. Proposals included that IMM should “act as an unofficial channel between governments (and the EU)”, support closer coordination and exchange of experience between VPA partner countries, and represent VPA partner country interest on issues including:

• harmonisation of public procurement policies;
• further harmonization of the use of HS codes between the EU and VPA partner countries as well as other producer countries;
• the role of FLEGT Licences under the proposed EU regulation for deforestation free supply chains.

Market and policy analysis

The EU’s share in global tropical timber trade and the related level of leverage has declined over the last two decades. Besides China, other regulated markets, especially the US, have played a more dominant role in recent years and additional countries, e.g. Japan and South Korea, have introduced import regulations for timber and timber products.

The share of product from Indonesia and some other VPA partner countries destined for regulated markets has been rising and stakeholders from the government and private sector groups asked IMM to provide more in-depth analysis of trade between Indonesia and the other regulated markets outside the EU and to highlight market opportunities – created by the FLEGT Licence and otherwise – in these regions.

Stakeholders from the CSO sector were particularly interested in more in-depth information on the Indonesian domestic market, including on the provenance of Indonesian timber imports and the functioning of the Indonesian import regulation.

Other suggestions included:

 From Government agencies:

• Providing more information on the status of VPA processes in other countries;
• Comparison of Indonesia’s market development with non FLEGT-licensing competitors and assessment of the relative competitiveness of the countries included in the analysis;
• Building links with researchers in Indonesia to improve data and to fill gaps on both sides. Contribute to MoEF’s “State of Forests in Indonesia” report due for publication in 2024;
• Explaining the draft EU regulation on deforestation and forest degradation-free supply chains and how due diligence for FLEGT-licensed products will work under this regulation;
• Covering also other commodities included in the new EU regulation on deforestation and forest degradation-free supply chains;
• Systematically comparing SVLK and TLAS systems in other producer countries.

 From Private sector:

• Providing more information on EU consumer purchasing preferences;
• Providing more regional and sectoral analysis, including on China;
• Explaining the new EU regulation on deforestation and forest degradation-free supply chains and how due diligence for FLEGT-licensed products will work under this regulation.

 From Civil Society Organisations:

• Providing updated analysis of acceptance of FLEGT licensing in EU MS public procurement policies;
• Working more closely with CSOs to help them better understand the level of market acceptance of SVLK inside and outside Indonesia;
• Systematically analysing if/how the EU complies with Article 13 of the VPA.

 Perceived benefits of FLEGT-licensing in Indonesia

One private sector representative called Indonesia’s “pride of achievement” the “ultimate benefit” of the VPA and FLEGT licensing. And this sense of pride of being the first country to reach FLEGT licensing status, along with a strong spirit of optimism and eagerness to take the achievements further and build on structures and systems created by the VPA, was predominant across all three stakeholder groups.

Private sector representatives said that they now felt reassured regarding the timber supply situation for the longer term. They also highlighted a “feeling of solidarity” between the government and industry, as both parties were committed to improving governance, which in turn had led to widespread legal compliance.

The existence of the “green lane” in trade with the EU was mentioned as the key trade benefit.

Civil Society representatives cited improved forest management and better market access as perceptible benefits of the VPA. Moreover, they appreciated the formalisation of their own role and that their input was sought after and valued in the process. The CSO sector in Indonesia has been perceptibly strengthened by the multi-stakeholder process of VPA negotiation and implementation, said CSO representatives.

Perceived challenges facing FLEGT-licensing in Indonesia

When asked to highlight concerns or difficulties facing the FLEGT VPA process in Indonesia, private-sector representatives raised the costs of SVLK certification, which, from their perspective, had not yet resulted in sufficient growth in trade and which SMEs, in particular, were struggling to meet.

Other than that, the main issues highlighted were doubts regarding the reception and acceptance of FLEGT Licences in the EU market, the level of support given by the EU Commission and member state governments to the market development of FLEGT licensing, as well as concerns regarding the impact of the proposed regulation on deforestation on forest degradation-free products on market advantages for FLEGT-licensed timber.

Mixed opinions of support in Europe

Several delegates said that the level of market acceptance of FLEGT Licences in the EU market was insufficient from their perspective and the impression prevailed that EU institutions had “failed to promote licensing” both to member states and to businesses within the EU. Stakeholders also pointed to perceived “inconsistencies in EU member states’ positions and communication around licensing” and that, in their experience, some Competent Authorities within the EU would “not value licensing”.

Delegates further criticised that public procurement policies in EU member states did not specifically give preference to FLEGT-licensed timber.  “The EU does not seem committed, and the market incentives are not there” summarised one participant.

This general feeling of disappointment was further intensified by uncertainties created by the draft regulation on deforestation and forest degradation-free products and the expected status of FLEGT Licences under the new regulation. In its current form (November 2021), the Regulation requires additional due diligence for FLEGT-licensed timber and timber products, which would “be the end of the green lane/zero-risk of illegality status”, which is currently considered the key trade benefit of the FLEGT Licence, both in Indonesia and by EU traders.

 “It would be a tragedy if the new EU Regulation undermined the success we had”, summarised one delegate.

European stakeholders consulted during a similar meeting in Nantes, France, on 2 June 2022 shared their Indonesian counterparts’ concerns regarding the deforestation regulation.