Ani Adiwinata Nawir, CIFOR

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Ani Adiwinata Nawir, CIFOR Jakarta, 22 February
2007
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FST/2005/177 Improving economic outcomes for
smallholders growing teak in Indonesia (Proposed
by CIFOR and ICRAF)
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Background issues

• Teak production its furniture manufacture is a
  major industry in Java
• Logs sawn timber sales more than 680,000 m3
  valued AUD 115 million (2001)
• In Jepara (Central Java) more than 15,000
  factories depend on teak to survive
• Production from the parastatal plantations is in
  decline
• Approximately 1.5 million households in Java
  growing teak (mostly on degraded land)

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Major sources of teak wood supplies
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Teak plantation management involving Perhutani
community
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Small home industries have preferred to buy logs
sourced from community, because

• The difficulty in bargaining with Perhutani
• The wood price is set based on negotiation and no
  standardised price applied
• Administration procedure is less complicated and
  shorter distance to the source of the trees and
  to their market place
• Larger sales processing companies are not
  interested in the smaller market segment

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Impediments to profitable smallholder teak
plantations

• Poor silvicultural techniques

• low quality timber
• lack of capital to invest in teak planting
• limited ability to wait the duration of a teak
  rotation before

2. Limited market knowledge, access to markets
market inf.

• smallholders are price takers
• prices are often well below market rates
• inability to overcome transaction costs faced by
  timber buyers

3. Restrictive timber regulation policies to
smallholders
Regulations designed for large-scale production
are applied (e.g. cutting and transportation
permits, registration procedures)
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Project aims to improve livelihoods of
smallholders growing teak
Objectives of the project

• Introduce and adapt silvicultural technologies
  that improve returns for smallholder teak
  producers
• Identify and design financing schemes providing
  incentives for smallholder participation in
  profitable teak production
• Enhance market access by smallholder teak
  producers

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Expected outcomes outputs include

• Improved silvicultural technologies
  Evaluations of current practices
  intervention on silvicultural treatments
  manuals/guidelines for improved practices
• Financing schemes identified designeddiscussed
  and evaluated with key stakeholders
• Improved market access greater market awareness
  
  Production to consumption chain evaluated (RMA)
  improved market linkages best practice marketing
  guidelines developed policy disincentives
  reviewed policy briefs produced and
  associated dialogues related to the regulatory
  framework implemented

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Potential impacts ex-ante impact assessment
Through better silvicultural treatments combined
with innovative financing schemes and improved
marketing the project can potentially
generate AUD 112
million of benefits over 30 years
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Other relevant activities
1. EU Project (September 2003-August 2007)
Levelling the playing field fair partnership
for local development to improve the
forest sustainability in Southeast Asia
2. WWF LEI Certification Program ( as part of
Global Forest Trade Network in linking
community-based plantation to international
consumer buyer group)
3. National Movement for Forest and Land
Rehabilitation (GN RHL/GERHAN - Gerakan
Nasional Rehabilitasi Hutan dan Lahan)
4. Hutan Tanaman Rakyat (Community-based
Plantation) Ministerial decree is being
finalised (MoF is planning to launch the decree
within this week)