Report on Experience Sharing Field Trip and Workshop between Vietnam and IndonesiaNegotiations and Implementation in the FLEGT-VPA Process

17th October 2016Ninh Binh Field Trip

On 17th October, the day before the experience sharing workshop, the Centre for Education and Development (CED) planned a field trip to Ninh Binh for the Indonesian participants. After travelling two hours by bus to Ninh Binh, the group made its first stop at Tai Anh Import and Export Company Ltd in Gian Khau Industrial Park. Here, CED introduced the Indonesian participants to members of staff at the factory. Discussions ensued about how business was conducted at both Tan Anh and at the Indonesian businesses, Famous International Furniture and Mella Kreasi Furniture. This discussion was designed as a mutual exchange of ideas between Vietnam and Indonesia, and was particularly aimed at informing Tai Anh Import and Export Company about the benefits that the FLEGT-VPA licence system could bring.

Following the discussions, all of the participants were given a guided tour around the factory’s showroom containing a huge variety of wooden furniture made on the premises. Next, the participants moved on to a restaurant where further examples of the furniture were on display. The exchange of information and ideas between the Director of Tai Anh Import and Export Company Ltd, the Indonesian participants, and members of the CED team ensued over lunch.

In the afternoon, the Indonesian guests and members of the CED team enjoyed a trip to Trang An, Ninh Binh. This was a great opportunity for the participants to get to know each other in a beautiful Vietnamese setting before the workshop the following day.

Indonesian guests enjoying a boat ride in Trang An, Ninh Binh.

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18th October 2016, 8am-12pmPullman Hotel, 40 Cat Linh, Ba Dinh, Hanoi

Experience Sharing Workshop

All of the participants involved in the Sharing Experience Workshop

Participants

Indonesian: Mrs. Mariana Lubis, Deputy Director of Export and Import of Industrial Forest Products and Director General of Sustainable Management of Forest Production for the Ministry of Environment and ForestryDr. Agus Sarsito, Chief Negotiator of Indonesia FLEGT-VPA and Senior Advisor on FLEGT-VPA Multi-stakeholder Forestry Programme IndonesiaDr. Agus Suratno, Senior Advisor on Forestry and Climate Change, GIZ-ASEAN German Program on Forestry and Climate Change (FOR-CC)Mrs. Laily Maulidya, Director and Owner of Famous International FurnitureMrs. Erik Sunarwati, Director and Owner of Mella Kreasi Furniture

Vietnamese: Mr. Nguyen Van Ha, Deputy Director General of Vietnam Administration of Forestry Representatives from private sectors such as timber association and timber businesses, CSOs, NGOs, stakeholders, and journalists (including Voice of Vietnam).

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Introduction:

In April 2016, Vietnam and the EU reached an agreement that Vietnam’s timber legality assurance system would not only cover exports to the EU, but all exports worldwide as well as timber traded on the domestic market. Both parties have also agreed to conclude their negotiations by the end of 2016.

Having recently passed its FLEGT-VPA agreement through the EU Parliament and EU Council, Indonesia plans to issue the first FLEGT licences on 15th November 2015 at the earliest. Indonesia has also developed its own certification system called SVLK that covers all timber imports and exports. As Vietnam has agreed to develop its own timber legality assurance system and is currently in the final stages of negotiations with the EU concerning FLEGT-VPA, any lessons that can be learned from Indonesia to accelerate and assist them in this process are extremely valuable. As a result, CED invited Vietnamese business associations and civil society organizations (CSOs) to the workshop to learn from Indonesia’s experience of the timber licensing process.

Ms. Kim Lien, Director of CED, opened the workshop by welcoming and introducing all the participants, both Indonesian and Vietnamese. She explained that Vietnam’s FLEGT-VPA negotiations are of interest to all the participants gathered in the room, and that it is important to consider the potential benefits and concerns of everyone. Moving forward, these different viewpoints need to be harmonized so that a system for improved sustainable forest management and legal timber exportation can be successfully implemented in Vietnam.

She highlighted some important topics to be considered and discussed:

How much does the administration fee for providing FLEGT licences cost? What are the challenges in the process of independent monitoring? How does the verification

process of legal timber at local/business sites work in Indonesia? What is the role of the demand for a VPA-FLEGT licence in Indonesia? Is there any potential for cooperation between Vietnam and Indonesia in the FLEGT-VPA process

(from Indonesian and Vietnamese perspectives)? What is the relationship between climate change and forest over-exploitation in Vietnam? What

are the solutions for the idea of prohibiting timber exploitation while the demand for timber is significantly increasing?

Which organizations in Indonesia provide FLEGT licences? Are they state agencies or non-government organizations? What is the capacity and organizational structure of FLEGT licensing bodies? Do they have the capacity to verify compliance of other requirements related to tax, labour, environment etc?

How long does it take to receive a licence?

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Mr. Nguyen Van Ha, ‘VPA-FLEGT Process in Vietnam’

Mr. Nguyen Van Ha, Deputy Director General of Vietnam Administration of Forestry, then spoke to reaffirm the importance of the workshop for learning from the experience of the Indonesian participants about FLEGT negotiations. He stated that so far Vietnam’s own negotiations had taken 6 years and that they hoped to accelerate the final stages of the process with the help of Indonesian advice.

The Deputy Director General of Vietnam Administration of Forestry addresses the workshop

He also drew attention to the necessity of a timber legality definition and the time-consuming nature of the process involved to negotiate this. It must not only be agreed upon by the Vietnamese negotiators but must also comply with the conditions of the EU. Furthering this, he highlighted that a major part of Vietnam’s progression towards FLEGT-VPA licensing was control of the supply chain. In order for timber exports to be considered legal by the EU, all steps in the production process must be conducted legally. He stated that plans were being developed for a classification system whereby enterprises would be ranked from those that fully complied with regulations to those that did not, and that the introduction of a comprehensive to assist those with a poor level of compliance was necessary. He also stressed that the administration system for this should be kept to a minimum to make it simple to understand. Mr. Nguyen Van Ha also reminded the participants of the technical working group meetings that are due to take place on 23rd-24th October.

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Next, Ms. Kim Lien welcomed Dr. Agus Sarsito, the Chief Negotiator for Indonesia FLEGT-VPA and Senior Advisor on FLEGT-VPA Multi-stakeholder Forestry Program in Indonesia.

Presentation by Dr. Agus Sarsito, ‘Indonesia TLAS (SVLK) and FLEGT-VPA Indonesia-European Union’

Dr. Agus Sarsito provided an overview of SVLK and its parallel development process with FLEGT-VPA.

The three main areas were covered: why Indonesia needed to develop SVLK, why Indonesia entered FLEGT, and the progress of negotiations.

(1) Why did Indonesia need to develop SVLK?

SVLK is a mandatory system in Indonesia, whereby all forest management units and companies need to be certified to import or export timber. It is designed to assure the legality of its timber products and Sustainable Forest Management (SFM). So far, SVLK has certified 13.3k hectares of forest and 1,900 timber industries.

Since the 1980s, the sustainability of Indonesia’s forest resources has been threatened by illegal logging. Although there has been law enforcement (hard approach) against it ever since, illegal logging has continued to take place and reached its peak in the year 2000. This was partly due to there being a limited police force to stop ships in Indonesian territory from exporting illegal timber. As a result, SVLK was developed as a ‘soft approach’ that was designed to complement this existing hard approach to illegal logging. Together these approaches aim to implement more effective prevention of illegal logging and illegal trade.The development of SVLK was also a response to international concerns, particularly the need to protect tropical forests worldwide. Dr. Agus Sarsito described tropical forests as the ‘lung of the

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world’ and stated that they played an important role in addressing climate change. In addition, he highlighted that consumer demands for certified timber are growing and that timber-producing countries must respond to this in order to maintain their markets.

SVLK was not simply implemented by the government; instead, it was developed through intensive consultations with different multi-stakeholder groups who continue to have ongoing involvement to ensure that the system functions effectively. These stakeholders are listed below.

- The government (as a regulator and facilitator)- National Accreditation Committee- Conformity Assessment Bodies- Independent Monitors e.g. NGOs – they have full access to data and information about all the

parties involved, and are protected from civil lawsuits related to their monitoring reports.

Essential to the development of SVLK was for all of these multi-stakeholders to agree upon a legality definition that was based on Indonesian laws and regulations, and this was the starting point of the development process in 2002. In addition to this, constant transparency is important for ensuring that everyone is represented and any changes that need to be made are first discussed and agreed upon by all the stakeholder groups.

(2) Why did Indonesia enter FLEGT-VPA?

Timber-producing enterprises cannot prevent illegal logging on their own, instead there needs to be a collaborative effort made by timber-producing countries and timber-consuming countries. Dr. Agus Sarsito explained that if there is no demand for illegal timber then there will no longer be any need for producing countries to supply it. With both Indonesia and the EU demonstrating strong commitment to combating illegal logging and trade, the FLEGT-VPA negotiations began and in 2013 Indonesia became the first country in Asia to sign FLEGT-VPA with the EU. They agreed to work together towards the mutual objective of ‘crafting the new era of timber trade’ in which only legal timber products can be imported or exported.

(3) SVLK Development Progress The development of SVLK began prior to that of FLEGT-VPA and was aimed at preventing Indonesian importation or exportation of illegal timber to or from anywhere in the world, demonstrating Indonesia’s commitment to global change to the timber industry. Later, when Indonesia began to cooperate with the EU, SVLK and FLEGT-VPA were developed in parallel to each other.

Recent progress of FLEGT-VPA implementation:2011: Negotiations ended2013: Agreement signed2014: Ratification

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2015: Concluded joint action plans2016: Indonesia FLEGT-VPA goes livePresentation by Mariana Lubis, ‘Managing FLEGT Licence’

Using a series of diagrams, Mariana Lubis explained the process for the issuance of a FLEGT licence.

Mrs. Mariana Lubis explained that the SLVK-certified companies who want to export timber must begin by submitting a request to the Conformity Assessment Body for each shipment in writing. Licences called V-legal documents are then issued through by the licensing authorities through an online system called SILK (Timber Legality Information System). The licensing authorities are independent organizations registered with the Ministry of Environment and Forestry – there are currently 22 authorities, who are accredited for 3 years and subject to annual checks.

The online application form for the V-legal Document requires information about the type of timber, quality of timber, and details about its planned exportation. The SILK system enables this information to be processed automatically by the Licence Information Unit (LIU), which is a service provided by the Ministry of Environment and Forestry. The system creates 7 copies of the V-legal document which are sent electronically to several places, including to customs at the destination country.

The FLEGT-VPA licence is the same as the V-legal document except that it includes the FLEGT label. All V-Legal documents from 15th November 2016 will include this label, so that effectively the V-Legal document will be replaced by the FLEGT licence and this will be a necessary requirement for the exportation of timber from Indonesia to the EU. For exports outside of the EU, the V-legal document will still be needed for each export.

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It is clear from this that Indonesia’s agreement with the EU is an extension of its prior commitment to preventing illegal timber from being exported or imported from its ports to any country in the world. The development of FLEGT-VPA licensing in Indonesia was not simply a response to EU requests, but part of Indonesia’s wider principles concerning sustainable forest management.

Main Points of Discussion (Question & Answers)

The Question and Answer section of the workshop primarily focused on obtaining information about the Indonesian negotiating process for the development of timber licensing, with the main objective being that the Vietnamese participants would learn from these experiences.

Q: Does Indonesia have different rules for exporting to non-EU countries?A: Out of principle, Indonesia does not want to export illegal timber to anywhere in the world. Development of SVLK began before Indonesia entered into negotiations with the EU. All timber products leaving Indonesian ports have to be certified, the only difference for those being exported to the EU is that they also have the FLEGT licence stamp. Dr Agus Sarsito suggested to the Vietnamese participants that Vietnam should also develop its own national certification that is recognized by other timber-consuming countries. This would widen their market outside of the EU too. He stressed that the process for designing and implementing this in Vietnam may be very different to that in Indonesia. Due to the existence of many autonomous local governments in Indonesia who can define their own legality, the development of SVLK in Indonesia took a year as they had to negotiate a national-level legality definition.

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Q: Is SVLK organized by government or independent bodies? What is done to prevent corruption and bribery? Are there different procedures used for plantations and natural forests?A: SVLK is made up of different elements that each have a role to play to run the system, so no single body is needed to manage it. Certificates are issued through an online system which is linked to the Ministry of Trade system and also to Customs, preventing licences from being bought. The online system prevents fake certificates from passing through. In regards to the final question, the critical indicators for plantations are different to those for natural forests, and also for big and small industries, but there are too many to list here.

Q: How often do the assessment committees evaluate the certificate holders?A: All enterprises in Indonesia have to have the SVLK; it is a mandatory certificate. Based on this certificate, they can also qualify for the FLEGT-VPA licence. SVLK uses surveillance to monitor whether enterprises are complying with the regulations. After certificates are granted, big industries are checked annually and small industries are checked every 2 years.

SVLK has been harmonized to meet the requirements of the EU. Any new EU requests have to be checked to ensure that they are in accordance with Indonesia’s own system. As SVLK is mandatory, industries have to comply with the regulations whether they have a certificate or not. If they can show that you comply then they get the certificate as recognition. In order for a national certificate like SVLK to hold any value, it must be recognized by other countries.

Q: In regard to the SVLK scheme, the Independent Verification Body has the right to question enterprises. Meanwhile, the Accreditation Committee also evaluates the situation, as well as the Independent Monitors. Isn’t this a big burden for the enterprises to receive every year?A: This is a necessary part of ensuring that SVLK functions effectively. The checks that the Independent Monitors do will be different to what the National Accreditation Body does. The Independent Monitor only checks when there have been reports of some kind of illegal activity by an enterprise, whereas the National Accreditation Body checks every 2 years. This should not be a burden if an enterprise is operating legally.

Q: If you receive signals of a violation of the regulations, do you need to get permission from the government to go and check the premises of the enterprise involved?A: There are many stakeholders involved in creating the system so they are all aware of the monitoring system and the regulations. They are all responsible for maintaining different elements of this system.

Q: Can you share with us about the negotiation process that Indonesia experienced and how this was communicated to local people and CSOs? How did you raise awareness?A: In Indonesia, representatives from NGOs, CSOs, industries, and assessment bodies were invited to be involved in the negotiation process. All stakeholders were involved in negotiations with complete transparency. Starting with technical meetings to agree important details, negotiations then progressed up to different levels to negotiate further and any earlier agreements made were carried forward. For example, JIC meetings are conducted on a level of more general understanding and are made easier by the details already agreed upon at the earlier technical meetings. While in the high-level meetings there

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are fewer participants and they can choose their own approach to negotiation, the substance of these negotiations must be agreed upon by all the associated groups beforehand. This means that the government cannot decide to change the regulations of SVLK by itself. Consistent communication between the different groups involved must be maintained, and they must decide together if any alterations need to be made. As negotiations are taking place and agreements are being made, the challenge is to disseminate updates at industry and district level. In terms of Indonesia’s communication and awareness raising methodology, Indonesia used two main approaches:

(1) Communication through the association of timber industry: They are responsible for communicating to their members. In Indonesia, it was not possible to conduct meetings in all the different provinces, but members of the association were invited to Jakarta province to receive information about the progress of negotiations.

(2) Online communication: The SVLK website was used to inform the general public about negotiations and any changes to the progress of SVLK development.

Q: If companies produce timber solely for the domestic market, do they still need to meet the requirements or do they only apply to those who export timber? What about very small companies? Can domestic enterprises afford it?A: SVLK is mandatory for all companies who produce timber in Indonesia. Whether they sell domestically or export they need the certificate. 70% of Indonesia’s industry is made up of small or medium enterprises and they are certified with the help of state funds. These small enterprises can also apply for licences as a group in order to save money. In addition, the validity of certificates for smaller enterprises is for 6 years and they are checked every 2 years, whereas licences for big businesses are valid for only 3 years and are subject to annual checks.

Q: Is there any support provided by the government for technology or machinery to help industries to improve their production processes in order to meet the certificate requirements?A: There is still space for improvement in our system – Vietnam and Indonesia need to learn from each other. Indonesia cannot ignore the fact that more standards will be introduced and must remain aware of this. In Indonesia there are many ministries related to the timber industry. The Minister of Industry is part of the multi-stakeholders and he is responsible for capacity building, providing assistance to the small and medium industries. But it must be remembered that technology and legality are two separate things. Every company involved in the timber industry has had to follow timber regulations since the 1980s so it is not a completely new idea and companies should be able to meet the requirements of SVLK with relative ease as it is based on law. The only new burden for industries is that they now need to be able to convince the SVLK verifier that they are conducting their business legally. Again, the fact that small industries have the option to apply for a certificate in a group makes the process cheaper.

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Conclusions

The experience sharing workshop was a great success in terms of informing the Vietnamese participants about the possible approaches that can be taken in their ongoing negotiations concerning FLEGT-VPA. Clear from the discussion at the workshop was the Indonesian participants’ confidence in the agreement that they had signed with the EU; although the negotiation process was long, it was fruitful as Indonesia has become the first country in the world to be issued with FLEGT-VPA licensing. Furthermore, the workshop illustrated how negotiations in Indonesia were a mutual and co-operative effort by a number of different groups and stakeholders, and that the government acted simply as a regulator. It was essential that they were able to compromise and operate with complete transparency. As the workshop unfolded, the Indonesian participants repeatedly clarified the fact that SVLK is a mandatory certificate for all timber industries, demonstrating that their success is a result of their proactive approach to preventing illegal logging and trade not just in the EU, but worldwide. These are all valuable lessons for Vietnam as they progress towards a FLEGT-VPA agreement; in order to successfully accelerate this process, there must be a commitment by all involved parties not only to Vietnam’s economic concerns but, more importantly, to improving the global environment and community.

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