Bridges Trade BioRes • Volume 7 • Number 14 • 20th July 2007

WTO Review: Illegal Logging Continues to Plague Indonesia

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A ban on log exports has done little to stem forest over-exploitation and illegal logging in Indonesia, according to the trade policy review conducted at the WTO in late June this year.

Trade policy reviews (TPR) take place on a regular basis for all WTO Members. The government in question, as well as the WTO secretariat, prepare reports regarding the countries’ trade and trade policies. The reports are then discussed at a meeting open to the full WTO membership.

The TPR of Indonesia focused, among other, on the forestry sector. This sector contributed to three to four percent of Indonesia’s GDP and eight percent of export value during the period examined. The main export products were timber, wood products and paper carton, as well as small amounts of pulp and paper.

The Indonesian government reinstated a ban in 2001 on the export of logs to support the countries’ forestry and wildlife conservation policy. A number of export licensing procedures and export restrictions were used to “promote higher-value-added downstream industries, upgrade the quality of export products, and provide an adequate supply of essential products.”

Illegal logging remains a huge problem, however. It is estimated to account for over 50 percent of timber production. The WTO report said that foreign demand for cheap timber appeared to be overwhelming Indonesia’s enforcement capacity. Internal prices may also have been depressed as a result of the timber export ban, said the report. With time, this could result in inefficient and wasteful production processes. The report further noted the need for strong political will and enforcement in order for the timber export ban to be effective. The Indonesian government noted that the island conditions and porous border regions make enforcement a challenge.

The report also said that an ongoing decentralisation process has complicated taxation of natural resources concessions, increasing uncertainty and raising questions about legality of procedures at the local and regional levels.

For further information on the Indonesian TPR, see Bridges Weekly, http://www.ictsd.org/weekly/07-07-04/wtoinbrief.htm#1

ICTSD reporting; “Steady Economic Progress with Investor Confidence Key to Future Prospects,” WTO PRESS RELEASE, 27 and 29 June 2007.