1. HIGHER VALUE OF WOOD PRODUCTS Indonesia- ACIAR Consultation on Forestry Jakarta 22 February 2007 By: Dr. Doddy S. Sukadri - CESERF ACIAR- Indonesia Consultation

2. Log supply Assessment Wood- based Industry Trade& Marketing Triangle principle ACIAR- Indonesia Consultation

3. Area of concerns –brief findings Wood-based Industry –Excessive Log Demand – Disequilibrium –Low level of recovery rate –Wasteful Harvest and Conversion –Primary Export Product Orientation –Neglect of Domestic Market Development –Market Distortions – Uncertain True Economic Structure to guide Decision-Making and Investment –Excess/Uneconomic Capacity Liquidation ACIAR- Indonesia Consultation

4. Changing Log Supply ACIAR- Indonesia Consultation

5. Future timber supply ACIAR- Indonesia Consultation

6. Focus on Plywood ACIAR- Indonesia Consultation

7. Area of concerns –brief findings International Trade & Markets –Easy Export Markets – Logs and Primary Products – Weak Competitor Value Products –Global Markets Dynamic - Competitive –Changing Competitive Advantage Old: Low Cost Logs & Labor New: Efficiency & Comparative Advantage Loss of Market Shares except Sawnwood –New Market Opportunities –Mixed Focus Plantation Woods/Composite Products ACIAR- Indonesia Consultation

8. Custom Order Production ACIAR- Indonesia Consultation

9. Export Panels ACIAR- Indonesia Consultation

10. Objectives of the Study To recommend Strategies that will competitively address the wood-based industry structure and capacity, taking into account sustainable domestic logs capacity and market trends ACIAR- Indonesia Consultation

11. Status Quo Situation : Forestry at a Transition Point Status Quo Scenario Findings: Sustainable cut of natural forest: ≈ 9 M m3/yr Existing HTI production: ≈ 11 M m3/yr Alternative supplies: ≈ 1-2 M m3/yr  Timber Gap: 25-30 M m3 into the future Current, Legal Supply - Mainly from natural forests - No increase in plantation rate nor productivity Unsustainable Harvest (IL) Current Industrial Demand: ≈ 50-60 M m3/yr ACIAR- Indonesia Consultation

12. Positive Future Prospects – 20 Yrs: Plantation Timber Helps Balance Supply & Demand Improved Future Supply Potential Assumes: ▲HTI Pulp from 100,000 to 250,000/yr ▲HTI productivity from 15 to 60 m3/yr ▲Alt sources to 3-5 M m3/yr: H.R., Rubber, Imports ▼Pressure on Primary Forest in SR Continue to harvest Secondary Forest in LR Timber Gap Can Be Reduced with Plantations after 8 yrs ACIAR- Indonesia Consultation

13. Cycle of Plantation Timber Creates Three ‘Natural’ 7 Year Phases Short Run Med. Run Short Run: Physical Gap: demand > supply Need to control forest crime Need new, legal sources in SR Need Planting for LR Medium Run: Can fill gap with planting More grown timber New process technology Long Run: Plenty of grown timber Can expand industry Compete internationally Long Run ACIAR- Indonesia Consultation

14. Synthesis Recommendation: Phased Intervention Strategy - Restructuring, Re-engineering, Revitalization Phase 3: REVITALIZATION After 2020 Growth Based on Plantations Increased Exports Legal, Sustainable, Competitive Short Run Med. Run Phase 2: RE-ENGINEERING 2013-2020 Gap Nearly Balanced Retool Industry for Efficiency Focus on High Value Markets Phase 1: RESTRUCTURING NOW to 2012 Intensify Timber Planting Improve HTI Productivity Reduce Forest Crime & Debt Develop Alternative Sources Temporarily Limit Processing Builds on Current MoF Policy ACIAR- Indonesia Consultation

15. Secondary Value-Added Export ACIAR- Indonesia Consultation

16. Flooring & Furniture ACIAR- Indonesia Consultation

17. Prospective research areas Wood-based industry structure based on sustainable log supply and market orientation Determination of new product with high growth capability The uses of new or improved technology in order to achieve a better processing efficiency Financial assistance scheme in developing and researching to improve the processing technology Market intelligence for lesser-known wood-based products ACIAR- Indonesia Consultation

18. Thank You & Have a nice day Ex Post Evaluation ITTO PD 85/01 Rev 2 (I) ACIAR- Indonesia Consultation