INTERNATIONAL TROPICAL TIMBER ORGANIZATION / FLEGT INDEPENDENT MARKET MONITOR (IMM)

FLEGT VPA Partners
in EU Timber Trade 2019
MAIN REPORT – NOVEMBER 2020

Report authors:
Sarah Storck(IMM Lead Consultant)

Rupert Oliver(IMM Trade Analyst)

Edited by:
Steven Johnson(ITTO Assistant Director
Trade and Industry)

Mike Jeffree(IMM UK Correspondent)High tech furniture plant in Vietnam

This report has been produced with thefinancial assistance of the European Union
The views expressed herein are those of the consultants and the IMM
and do not necessarily reflect the official opinion of the European Union

PHOTO BY MICHAEL BUCKLEYContents
		

Executive Summary

5		

FLEGT-licensed timber in the EU market

5		Expanding range of IMM activities

6		

Trade survey data on market perception of FLEGT-licensed timber7

		

VPA partners in global tropical wood products trade7

		

Requirements for legal timber in VPA partner export markets

8		Conclusions

9		

Recommendations

10

		

Acknowledgements

10		

List of Acronyms

11

Introduction

13

1.
1.1

Background

13

1.2

Overview

13

1.3

Scope and definitions

13

1.4

Report Content

142.

VPA implementation and negotiation – state of play

15

2.1

Overview

15

2.2

FLEGT licensing partner countries

15

2.2.1

Indonesia

15

2.3

VPA implementing partner countries

15

2.3.1

Cameroon

15

2.3.2

Central African Republic (CAR)

15

2.3.3

Republic of the Congo (RoC)

16

2.3.4

Ghana

16

2.3.5

Liberia16

2.3.6

Viet Nam

16

2.5

VPA negotiating partner countries

17

2.5.1

Côte d’Ivoire

17

2.5.2

Democratic Republic of the Congo (DRC)

17

2.5.3

Gabon

17

2.5.4

Lao PDR

17

2.5.5

Malaysia

17

2.5.6

Thailand

17

2.4.1

Guyana18

2.4.2

Honduras18

3.

VPA country export trade – 2019 update

18

3.1

Scope

18

3.2

VPA partner share of global tropical wood product trade in 2019

18

3.3

Product mix of tropical wood trade

20

3.4

Regional supply of tropical wood products

20

3.4.1

Asia

20

3.4.2

Africa21

3.4.3

Pacific and America

23

3.5

Changes in regional demand for tropical wood products

23

4.

VPA partner country competitiveness

25

4.1

Relative international competitiveness of VPA partner countries

25

4.1.1

2019 VPA partner country performance against the UNCTAD LSCI

25

4.1.2

VPA partner country performance against the Global Competitiveness Index

27

4.1.3

VPA partner country performance against the Ease of Doing Business Index

28

4.2

VPA partner competitiveness in IMM surveys

29

2		

MAIN REPORT – NOVEMBER 2020

Contents
4.2.1

Asian VPA partners and competing countries – IMM 2019 survey results

4.2.2

Changes in perception of competitiveness of African VPA implementing partner countries 2017-2019

30
32

4.3

Future tropical timber supply

33

4.4

FLEGT licensing in purchasing decisions

34

5.

Indonesia: Market position and prospects

35

5.1

Scope

35

5.2

Indonesia’s timber supply

35

5.2.1

Production

35

5.2.2

Indonesian certified forest area

36

5.2.3

Imports38

5.3

Indonesia timber product exports

40

5.3.1

Indonesia timber product export data sources

40

5.3.2

Indonesia total timber and timber products exports

40

5.3.3

Indonesia exports of wood (HS 44) products

41

5.3.4

Indonesia exports of wood furniture (HS 94) products

41

5.3.5

Indonesia exports of wood pulp (HS 47) and paper (HS 48) products

41

5.4

EU timber and timber product imports from Indonesia

42

5.4.1

EU imports from Indonesia by product group

42

5.4.2

EU imports of wood (HS 44) products from Indonesia

43

5.4.3

EU imports of wood furniture (HS 94) products from Indonesia

46

5.4.4

EU imports of wood pulp (HS 47) and paper (HS 48) products

47

5.4.5

Indonesia share of EU timber and timber product imports

48

5.5

Overcoming market constraints to FLEGT-licensed timber

50

5.5.1

Background

50

5.5.2

HS Code harmonisation and other Licence mismatches

51

5.5.3

Electronic licensing

51

5.5.4

Communication and marketing

51

5.6

EU market perceptions of Indonesian FLEGT Licences

52

5.7

Cost impact of FLEGT licensing

53

5.8

Price trends for indicator products from Indonesia

54

6.

Requirements for legal timber in VPA partner export markets

56

6.1

Introduction

56

6.2

Overview of VPA partner country trade with regulated and unregulated markets

57

6.3

Americas

58

6.3.1

US		

58

6.4

Asia

59

6.4.1

China

59

6.4.2

Indonesia

59

6.4.3

Japan

60

6.4.4

Malaysia

61

6.4.5

Republic of Korea

61

6.4.6

Viet Nam

62

6.5

Australasia and Pacific

63

6.5.1

Australia

63

6.6

Europe

64

6.6.1

EU		

64

6.6.2

EEA

65

6.6.3

Switzerland

65

7. VPA partners in EU timber and timber products trade

66

7.1

Overview

66

7.2

Wood and wood furniture imports into the EU

66

7.2.1

Total import value and quantity

66

7.2.2

Key economic trends in the EU in 201967

MAIN REPORT – NOVEMBER 2020

3

Contents
7.2.3

EU wood and wood furniture imports by product group

68

7.2.4

Total EU import value and quantity of tropical wood and wood furniture

69

7.2.5

Share of tropical wood and wood furniture in EU imports

69

7.2.6

Tropical wood and wood furniture imports by VPA status

70

7.2.7

EU tropical wood and wood furniture imports by supply country

71

7.2.8

EU tropical wood and wood furniture imports by product group

71

7.2.9

EU tropical wood and wood furniture imports by destination72

7.2.10Largest winners and losers in EU imports of tropical wood and wood furniture72

7.2.11

EU wood and wood furniture imports from African VPA implementing countries73

7.2.12

EU wood and wood furniture imports from Viet Nam

73

7.2.13

EU wood and wood furniture imports from VPA countries in Latin America and Caribbean region74

7.2.14

EU wood and wood furniture imports from VPA negotiating countries in Asia

74

7.2.15

EU wood and wood furniture imports from VPA negotiating countries in Africa

75

7.2.16

EU tropical wood and wood furniture imports from non-VPA countries

75

7.3

Energy wood and wood waste imports into the EU

76

7.3.1

EU energy wood and wood waste market background

76

7.3.2

Total EU import value and quantity of energy wood and wood waste

79

7.3.3

VPA partners in EU energy wood and wood waste trade

79

7.4

Wood pulp (HS 47) and paper (HS 48) imports into the EU

81

7.4.1

Paper and pulp market background

81

7.4.2

VPA partners in EU wood pulp trade

82

7.4.3

VPA partners in EU paper trade83

8.

IMM EU Trade Survey 2019: Summary of key results

83

8.1

Methodology and sample

83

8.2

Economic environment in EU key countries in 2019

84

8.3

Reception of the IMM survey in key countries

85

8.4

Awareness of the FLEGT process and perceptions of tropical timber

85

8.5

FLEGT licensing and EUTR direct impact on EU tropical timber procurement

86

9.

FLEGT in EU timber procurement policies

88

9.1

IMM 2019 survey: FLEGT-licensed timber in private sector timber procurement policies

88

9.2

FLEGT-licensed timber in EU MS procurement policies

88

10.

Promotion of FLEGT-licensed timber and timber products

92

10.1

Background

92

10.2

Update on European wood promotion campaigns’ positions on FLEGT

92

10.3

Update on European timber Trade Federations’ position on FLEGT

93

10.4

NGO/CSO communication role and position on FLEGT

94

10.5

Media references to FLEGT VPAs

94

10.5.1

Media monitoring methodology

94

10.5.2

Media results over time95

10.5.3

Media sentiment

95

11.

FLEGT impact on forest sector investment

97

11.1

Background

97

11.2

2020 investment study – summary of highlights from stakeholder survey

97

11.2.1

Viet Nam

97

11.2.2Indonesia

99

11.3

Preliminary conclusions

101

		

Conclusions

102

		

Recommendations

103

4		

MAIN REPORT – NOVEMBER 2020

Executive Summary
FLEGT-licensed timber in the EU market
This latest IMM Annual Report, “FLEGT VPA Partners in
EU Timber Trade 2019” shows EU import value of timber
and timber products1 from Indonesia, the only FLEGT
licensing country, increased 11% from US$1.24 billion in2018 to US$1.38 billion in 2019. This followed a 6% gain
between 2017 and 2018. In quantity terms, EU imports
from Indonesia increased 14% from 676,000 tonnes in2018 to 769,000 tonnes in 2019, after falling 6% in 2018.

31% to US$379 million. On the other hand, the value ofEU imports of wood (HS 44) products from Indonesia
decreased 3% from US$604 million in 2018 to US$588
million in 2019 losing some of the 9% gain made in 2018.
Imports of wood pulp from Indonesia, always limited,were close to zero in both 2018 and 2019 (Figure S1).

The rise in EU imports of FLEGT-licensed wood products
from Indonesia coincides with a wider recovery in EU
demand for wood products generally. Activity in key
EU wood end-use sectors, such as construction and
EU import growth from Indonesia in 2019 was dominatedfurniture, bottomed out in 2013 and then recovered atby wood furniture, which rose 18% to US$411 million,
a slow, but relatively consistent rate until 2019. China,
and paper products, which also increased sharply, by
Russia and other countries in the Commonwealth of
Independent States (CIS) region remained
the dominant partners in EU importtrade, although some tropical countries,
700
particularly Indonesia, but also including
2015
2016
2017
2018
2019
Viet Nam, India and Brazil, began to600
make new inroads in the EU market, mostnotably in the furniture sector.
Value (US$ million)

500

The total value of EU imports of wood
products was US$19.3 billion in 2019, 3% lessthan the previous year (Figure S2). However
due to weakening of the euro against the
dollar, there was a 3% increase in euro
import value, to €17.3 billion. Import value
in 2019, reported in euro terms, was thehighest level since 2008. Import quantity
declined 2.5% to 26.0 million tonnes in 2019.

400
300
200
100
0

Wood (HS 44)

Wood furniture(HS 94)

Wood pulp(HS 47)

Paper (HS 48)

Figure S1: EU import value of timber and timber products from Indonesia,
by product type – 2015-2019. Source: IMM-STIX35

US$ billion (constant 2019)

30

Other

25

North
America20

Non-EU
Europe15
10
5Russia/CIS
China/HK/
Taiwan POC
Tropical

20
0
20 4
0
20 5
0
20 6
07
20
0
20 8
0
20 9
1
20 0
1
20 1
1
20 2
1
20 3
1
20 4
1
20 5
1
20 6
1
20 7
1
20 8
19

0

Figure S2: EU import value of wood (HS44) products and wood furniture(HS 94) by supply region – 2004-2019. Source: IMM-STIX

MAIN REPORT – NOVEMBER 2020

In 2019, China maintained its position
as the largest external supplier of wood
products to the EU. The total value of wood
product imports from China (excluding
those identified as composed of tropical
hardwoods) increased 3% from US$6.12
billion in 2018 to US$6.29 billion in 2019,
mainly due to a partial recovery in importsof Chinese furniture and to a lesser extent
joinery products and plywood. By contrast,
after several years of rapid growth,
EU imports of wood products from CIS
countries fell 7% from US$4.56 billion in2018 to US$4.25 billion in 2019. The share of
CIS countries in total EU imports declined
from 23.3% in 2018 to 22.0% in 2019. EU
imports of wood products from North
America declined 11% from US$1.15 billion in2018 to US$1.02 billion in 2019. The region’sshare of total EU imports of wood products
fell from 5.9% to 5.3% during this period.
The total value of EU imports of tropicalwood products (including direct imports
and imports via third countries such as

1. In this report, wood, wood furniture, pulp and paper
are referred to collectively as “timber and timber
products”. Wood and wood furniture, when dealt
with separately from pulp and paper, are referred tocollectively as “wood products”.
5Tropical wood products’ share in total EU
wood imports increased slightly, from
21.9% in 2018 to 22.8% in 2019, withcountries engaged in the VPA process
accounting for 76.1% of the total, downslightly from 76.7% the year before.
Summarising EU wood products imports
from VPA partner countries other thanIndonesia, none of which were issuing
FLEGT Licences in 2019:

US$ billion (nominal)

China)2 increased 1% in real terms to
US$4.4 billion in 2019, following a 6%
increase in 2018 (Figure S3). The increasein the total value of EU tropical wood
product imports in 2019 was driven
mainly by wood furniture with othersmaller gains in imports of tropicalsawnwood, ‘other’ (i.e. non-flooring)joinery, and other processed wood
products. These gains offset a decline
in imports of tropical panels/veneers,
flooring and logs.

4.5

No VPA

4.0

Negotiating (As)

3.5

Negotiating (Af)

3.0

Negotiating (Am)

2.5

Implementing (As)2.0

Implementing (Af)

1.5

Licensing(Indonesia)

1.0
0.5
0.0

2015

2017

2018

2019

Figure S3: EU import value of tropical wood (HS44) products and wood
furniture (HS 94) from tropical countries by FLEGT VPA status – 2015-2019.
Source: IMM-STIX• the value of EU imports of wood

products from the five African VPA implementing
countries - Cameroon, Central African Republic(CAR), Republic of the Congo (RoC), Ghana, andLiberia - increased 3% to US$453 million in 2019 afterrising 14% in 2018.

• the value of EU imports of wood products from

Viet Nam, the only Asian VPA implementing country,
increased 4% to US$976 million in 2019 after rising
5% in 2018.

• EU import value of wood products from Gabon,

the Democratic Republic of the Congo, Côte d’Ivoire,the three VPA negotiating countries in Africa,
declined 5.9% to US$283 million in 2019, following arise of 1.3% in 2018.

• EU import value of wood products from Thailand,

Lao PDR, and Malaysia, the three VPA negotiating
countries in Asia, fell 3.7% to US$677 million in 2019.

• the value of EU imports of wood products from

Guyana and Honduras, the two VPA negotiating
countries in Latin America, fell 6%, to US$5 million in
2019, following a 13% increase in value in 2018.

2.

2016

EU imports of tropical wood products from non-VPA
countries increased 5% to US$1.05 billion in 2019, building
on a 17% gain in 2018. The increase was driven mainly bytropical hardwood plywood imported from China, tropical
hardwood sawnwood and mouldings imported from
Brazil, and wood furniture imported from India.
IMM surveys in 2019 flagged up that trade in VPA
partner wood products – just like trade in many othercommodities – was again facing an increasingly
uncertain economic environment, both in the EU andglobally. According to the EU Winter 2020 Economic
Forecast published on 13 February 2020, GDP growthin the EU27 slipped to 1.5% in 2019, down from 2.1% in2018. According to the UK Office of National Statistics,
the UK economy grew by 1.4% in 2019, only marginallyhigher than the 1.3% rate in 2018, and recorded zero
growth in the last quarter of the year.

Expanding range of IMM activities
With an expanding range of activities and outputs, IMM
gained a thorough understanding of the relative market
positions of FLEGT-licensed products from Indonesia,
as well as timber and timber products from other VPA
partner countries in the EU in 2019. The network of IMM

In line with previous IMM Annual Reports, this report focuses on tropical wood products as all current VPA partner countries are tropical and as afocus on tropical wood is stipulated in the IMM project description. However, care has been taken to place timber and timber products from VPA
partner countries in a wider trade context and to ensure that analysis takes account of all competitors, irrespective of whether tropical or
non-tropical. Tropical wood products are defined in this report as:• a ll products in HS 44 and wood furniture products in HS 94 exported by countries located predominantly in the tropics, except Brazil and Mexico(where exports are known from analysis of trade reports and flows over numerous years to be dominated by products manufactured fromplantations outside the tropical zone);• all products from Brazil identified specifically as “hardwoods” (but excluding eucalyptus) in HS 44 (since feedback from regular trade contacts
indicate these are predominantly of tropical species);• and all products identified specifically as “tropical hardwoods” from all other countries (tropical hardwoods can be reliably identified in trade
statistics for logs, sawnwood, plywood and veneers).
This definition of “tropical wood products” creates some inconsistencies – notably in relation to Viet Nam where a significant, but unknown,
proportion of HS44 and 94 products are composed of non-tropical timber, and Brazil, where all HS94 wood furniture is excluded because there
is no way to differentiate tropical from non-tropical, or hardwoods from softwoods, in this product category. However, overall it is believed torepresent a reasonable compromise capturing, at global scale, the vast majority of products more likely manufactured from tropical wood, while
excluding the vast majority of products more likely to be manufactured from non-tropical woods.

6		MAIN REPORT – NOVEMBER 2020

country correspondents continued to monitor market
uptake of FLEGT Licences in the seven “key” EU countries3
accounting for the bulk (i.e. consistently around 90%) of
EU tropical timber and timber product imports. IMM also
continued to employ correspondents in Indonesia andGhana. The two partner country correspondents produced
update reports, used to inform the Indonesia section ofthis report and updates on Ghana on the IMM website,
and acted as points of liaison between IMM and partnercountry authorities and organisations.
The EU trade survey conducted by IMM in 2019 had
a broad scope, in terms both of content and target
audience. The survey sample included EU importers ofsawn timber, decking, plywood, mouldings logs, veneers,
doors, window frames, as well as furniture and furniturecomponents and other wood products from VPA partnercountries. Respondents accounted for up to 75% of thekey EU countries’ total imports of HS Chapter 44 wood
products. IMM correspondents also interviewed theFLEGT/EUTR Competent Authorities in their respective
countries as well as timber trade federations and EUTR
Monitoring Organisations.
In 2019, IMM published four special studies including
on; architects’ attitudes to the use of tropical timberin construction and their awareness of the FLEGT VPA
programme; EU public timber procurement policies; EU wood
promotion programmes and their recognition of FLEGT;
and the impact of FLEGT on forest sector investment.
IMM also continued to organise “Trade Consultations”,
which took place in Antwerp and Barcelona in 2019.
Also during 2019, IMM continued to build its statistical
capacity so that it has access to, and can readily distribute,the latest global timber trade data each month. Thisnow facilitates near real time monitoring, particularly
important during the volatile trading conditions that haveemerged since the onset of COVID-19. The insights gained
from regular analysis of the latest trade statistics, surveysof traders and regulators, and special studies informs theseries of IMM recommendations identified in this IMM
Annual Report to help build market resilience for FLEGTlicensed timber in uncertain and challenging times.

90%
80%
70%

Trade survey data on market perceptionof FLEGT-licensed timber
The 2019 IMM EU trade survey (chapter 8 of this report)
showed continuation of the positive trends in market
perceptions of FLEGT-licensed timber from Indonesia.
There was a sharp rise in the proportion of survey
respondents finding the administrative process ofimporting FLEGT-licensed timber easily understandable
and manageable between 2017 and 2019. Almost 80%
of 2019 respondents said that FLEGT licensing was
making importing wood products from Indonesia easiercompared to EUTR due diligence (Figure S4). Moreover, asignificantly higher number of respondents than in 2018
acknowledged sustainability aspects of FLEGT.
The 2019 trade survey confirmed contrasting impacts of
FLEGT licensing and the EU Timber Regulation (EUTR)
on European importers’ purchasing behaviour. 35% of
respondents in 2018 and 38% in 2019 reported either small
or big decreases in the share of tropical timber in theiroverall timber imports due to introduction of the EUTR.
Survey respondents indicated that EUTR due diligence
had narrowed their supply base in tropical countries.
Respondents also indicated that the EUTR had caused thesector to reconsider its supply chain relationships, which
had frequently resulted in increasing substitution oftropical hardwoods with alternatives, including temperate
hardwoods, chemically or thermally modified timber or
non-wood substitutes. No respondents in 2018 and just
2% of respondents in 2019 said their imports of tropicaltimber had increased as a result of the EUTR.
In the case of the market introduction of FLEGT-licensed
timber from Indonesia, the majority of respondents 87% (2018) and 83% (2019) – reported no change in theshare of tropical timber in their overall timber imports.
13% of respondents in both years registered large orsmall increases.

The IMM Annual Report also provides an update on market
constraints to FLEGT-licensed timber identified in the2017 report (chapter 5 of this report). The sharp decline
in the number of both HS code and other FLEGT Licencemismatches (e.g. relating to shipments’ weightor volume) registered in 2018 has continued
FLEGT Licenses are making importing wood from Indonesia easierin 2019. There was also further progress inthe development of an electronic licensing
scheme, as well as in communication and
2017
2018
2019
marketing efforts, both within Indonesia andin the EU.

60%

VPA partners in global tropicalwood products trade

50%
40%
30%
20%

Agree

Partially
agree

NeutralPartially
disagree0%

Disagree10%

Figure S4: EU trade perceptions of importing FLEGT-licensed timber.
Source: IMM 2017/2018/2019 EU trade surveys

MAIN REPORT – NOVEMBER 2020

The IMM Annual Report includes an analysisof the share of VPA partner countries in global
tropical wood products trade in 2019. This is toensure that trade flows between VPA Partnercountries and the EU are considered in theirappropriate global context. Globally, trade intropical wood products grew at a much slower
pace, by 0.2% to US$41.7bn, in 2019, thanduring the previous two years, when there wasa sharp rebound from the dip in 2016, when
3. Belgium, France, Germany, Italy, Netherlands, Spain, UK
7

40

No VPA

35

Negotiating (As)Negotiating (Af)30
Value (US$ billion)

the speculative rosewood boom in China
had ended. Unlike the 2009 to 2014 period,
when rapid trade growth was driven
largely by China’s imports of primarywood products, particularly rosewood,
recent growth is mainly due to rising wood
furniture exports, notably from Viet Nam
and India destined for the United States.

Implementing (As)25

Implementing (Am)

Implementing (Af)20
Global trade in tropical wood products inLicensing (Indonesia)
152019 was influenced by overall cooling in
the pace of economic growth. The global
10
economy had already slowed sharply inthe last three quarters of 2018, and global
5
economic activity remained weak at least
As=Asian partners,
until the third quarter of 2019, according0
Af=African partners,
2015
2016
2017
2018
2019
Am=Latin American partner
to the International Monetary Fund’sWorld Economic Outlook published on
15 October 2019. The IMF blamed this on“rising trade and geopolitical tensions”,
Figure S5: Global tropical wood-product trade by FLEGT VPA status –which “have increased uncertainty about2015 to 2019. Source: IMM-STIX
the future of the global trading system andinternational cooperation more generally,
compared to 2018. Share of these countries in total
taking a toll on business confidence, investment decisions,
global tropical wood product trade declined fromand global trade”. Global economic growth was estimated
24.2% in 2018 to 22.5% in 2019. The EU accounted forat 2.9% in 2019 according to the World Economic Outlook
8.0% of total export value of wood products by thefrom 9 January 2020. The trade dispute between the US andthree countries in 2019, up from 7.7% in 2018.
China had a direct impact on the trade in tropical wood
products, increasing opportunities for South East Asian
manufacturers, particularly in Viet Nam, in the US market
Total exports of wood products by the three
for wood furniture and other finished wood products.
VPA negotiating countries in Africa, Gabon, theDemocratic Republic of the Congo, Côte d’Ivoire,
Summarising global trade in tropical wood products byincreased 6% to US$886 million and accounted for
VPA partners in 2019 (Figure S5):
2.1% of global tropical trade in 2019, up from 2.0% in
2018. The EU accounted for 31.9% of total export valueE xports of wood products from Indonesia fell 9%of wood products by the three countries in 2019, down
to US$5.93 billion in 2019, reversing gains made thefrom 36.5% in 2018.
previous year. Indonesia’s share of global trade in tropicalwood products fell from 15.6% in 2018 to 14.2% in 2019.
The two VPA negotiating countries in Latin America,
The EU accounted for 17.4% of Indonesia’s export value of
Guyana and Honduras, together exported US$115
wood products in 2019, up from 15.2% in 2018.
million of wood products in 2019, a decline of 18%
compared to the previous year. Their share of total
E xports of wood products from Viet Nam weretropical wood products trade fell from 0.34% in 2018
US$14.0 billion in 2019, a 19% increase compared to
to 0.28% in 2019. The EU accounted for 4.6% of total
the previous year. Viet Nam’s share of global trade inexport value of wood products from the two countries
tropical wood products increased from 28.3% in 2018
in 2019, up from 4.1% in 2018
to 33.5% in 2019. The EU accounted for 7.5% of Viet
Nam’s export value of wood products in 2019, down
Requirements for legal timber infrom 8.6% in 2018.
VPA partner export markets

•

•

•

•

• Exports of wood products from the five VPA

implementing countries in Africa – Cameroon,
Central African Republic (CAR), Republic of theCongo (RoC), Ghana, and Liberia - totalled US$1.69
billion in 2019, a 4% decrease from US$1.75 billion in
2018. These countries’ share of global trade in tropicalwood products decreased from 4.2% in 2018 to 4.1%
in 2019. The EU accounted for 26.8% of total export
value of wood products by the five countries in 2019,up from 25.6% in 2018.

• In 2019, the three VPA negotiating countries in Asia

- Thailand, Laos, and Malaysia - together exported
US$9.4 billion of wood products, a 7% decline

4.

Alongside the assessment of the EU market for FLEGTlicensed timber and of global trade in tropical wood
products, IMM monitors market impacts of policy
measures and regulations with potential to generatedemand for timber from FLEGT licensing VPA partnercountries in non-EU countries. Analysis of trade data
in 2019 shows that the goal of closing world markets toillegal wood products is already well advanced. In 2019,66.5% (US$27.6 billion) of the total value (US$41.5 billion)of recorded tropical wood product exports worldwide
were destined for countries with regulatory measures
to eliminate illegal trade (Figure S6)4. This compares to62.2% of tropical trade in 2018. The rise in the proportionof tropical wood products destined for regulated markets

In addition to the EU (inclusive of the UK), IMM identified the following 10 countries as “regulated markets” in 2019: Australia, Iceland, Lichtenstein,
Norway, Indonesia, Japan, Malaysia, Republic of Korea, Switzerland, and US.

8		MAIN REPORT – NOVEMBER 2020

12Japan Clean
Wood Act

10

Indonesia
SVLK importconditions

20

Malaysia
TLAS Import
Regulation

15

Viet Nam
TLAS Import
Control*
Swiss
Env. Act
Amendment*

10
5

8

US$ billion

US Lacey Act
Amendment

25

6

4

2

EUTR (EEA)
0

2015

2016

2017

2018

2019

EUTR

0

No VPA

35

Australia Illegal
Logging Proh. Act
Rep. of Korea
Sustainable
Use Act

Not regulated

Negotiating (As)Not regulated

30

US$ billion

1440

Australia Illegal
Logging Proh. Act
Rep. of Korea
Sustainable
Use Act
Japan Clean
Wood ActUS Lacey Act
AmendmentIndonesia
SVLK importconditions
Malaysia
TLAS Import
Regulation

Negotiating (Af)IMM survey data and feedback from IMM tradeconsultations suggests that EUTR has prompted EU
importers to reassess their supply chains, especially in

The second IMM investment study, focussing on Viet Nam
and Indonesia and summarised in this report, shows that
FLEGT VPA implementation and licensing has a positive
impact on the investment enabling environment in VPA
partner countries. It identified correlation between the
VPA, investment volumes and a shift in investmentsfrom forestry and logging towards investment in further
processing industries in Indonesia. The study also
demonstrates that the potential of the FLEGT VPA process
for attracting additional investment would likely be
reinforced by integration of relevant stakeholders fromthe banking and financial sector in the process.

Implementing (As)The IMM 2019 Annual Report shows an increasing levelof recognition of FLEGT licensing as a means to reduce
importers’ own risk under the EUTR and increasingawareness of the wider benefits of implementing FLEGTVPAs in partner countries. It also demonstrates EU tradefamiliarity with the administrative processes involved inimporting FLEGT-licensed timber and a very high levelof acceptance of these processes.

It also highlights the importance of continuing efforts tobring more VPA processes to a successful conclusion andwiden the source-base, range and availability of FLEGTlicensed timber and timber products.

Negotiating (Am)Conclusions

This highlights once more the fundamental importanceof raising awareness of the long-term benefits of thesustainable use of tropical timber and addressing
environmental prejudice in EU markets. Partnercountries should be encouraged to develop individual
marketing strategies for their prospective FLEGTlicensed timber products in the EU as they approach theend of the VPA implementation process.

Implementing (Af)The proportion of wood product exports destined forregulated countries was even higher for VPA partnercountries. In 2019, 79% of all wood products exports by
FLEGT licensing and VPA implementing countries was
destined for regulated markets (Figure S7). In addition
to the EU, which accounted for 12% of total exports by
FLEGT licensing and VPA implementing countries in 2019,a large share of exports went to destinations regulatedby the US Lacey Act (42%), Japan Clean Wood Act (13%),
Republic of Korea Sustainable Use Act (7%) and Australian
Illegal Logging Prohibition Act (2%). In 2019, the share ofexports to regulated countries was particularly high forIndonesia (72%) and Viet Nam (85%). The share of exports
to regulated markets was lower, but still significant, for
VPA implementing countries in Africa (53%).

countries considered “high risk” and relationships were notunfrequently modified as a result (see Chapter 8 for details).
However, this has not necessarily led to replacement of non
FLEGT-licensed tropical timber suppliers with licensed.
More frequently, importers reported that imports of certain
products or species were discontinued and the producteither sourced from specialist importers in the EU or
replaced with non-tropical or even non-wood alternatives.

Licensing (Indonesia)

in 2019 was due primarily to the decline in imports by
China, while US imports of wood products from tropicalcountries, particularly Viet Nam, increased sharply
during the year.

Viet Nam
TLAS Import
Control*
Swiss
Env. Act
Amendment*
EUTR (EEA)EUTR

As=Asian partners, Af=African partners, Am=Latin American partner

As=Asian partners, Af=African partners, Am=Latin American partner

Figure S6: Value of global trade in tropical wood products,
2015 to 2019 by consumer country regulatory status.

Figure S7: Value of global trade in tropical wood products
in 2019 by FLEGT VPA status and consumer country
regulatory status. Source: IMM analysis of STIX trade data andSource: IMM analysis of STIX trade data and national legislation(*legislation still in draft at end of 2019).

MAIN REPORT – NOVEMBER 2020

national legislation (*legislation still in draft at end of 2019).

9

Recommendations
The Report concludes with a series of recommendations.

• The second IMM investment study (summary in

Chapter 11) found that VPAs can be a stimulating factor
in the investment-enabling environment in the forest
sector at several levels. FLEGT licensing should bepromoted as a factor to improve the bank rating offorest sector enterprises in VPA countries and relevant
actors should be included in the VPA processes.

• A 2019 IMM study of architects’ awareness andperceptions of FLEGT and tropical timber as abuilding material identified a low level of awarenessof FLEGT itself, VPAs, FLEGT licensing and the EUTR.
Professional bodies representing architects should
be engaged to increase awareness of the FLEGT
process. An important stakeholder group is daily
making decisions on the choice of materials thathas no understanding of the value and achievementsof these processes. Many architectural bodies run
continuing professional development courses forarchitects, and these offer an excellent opportunity toincrease awareness of FLEGT processes.

• A second recommendation from the architects’ study

is to engage with the World Green Building Council(WGBC) to raise awareness of the value of FLEGT
licensing with a long-term goal of gaining credits
for its use in WGBC affiliated programmes. Certified
green building projects are set to increase and suchprogrammes play a key role influencing material
choices. Whilst some standards currently encourage
the uptake of certified wood, only a small proportion
allow solely FLEGT-licensed materials to be used.
Only through recognition and credit within thesestandards will FLEGT licensing become of greater
value to many projects and WGBC could play a pivotal
role in raising awareness and increasing use of FLEGT
within standards.

• Demonstrate the business benefits of the FLEGT

licensing scheme in Indonesia to build trust.
Indonesian furniture producers, in particular, see
the licensing process as a bureaucratic hurdle rather
than as a business opportunity. The current view isthat it is not cost effective and any formerly promised
market advantages are not tangible.

• Complete VPA implementation in other VPA countries
as quickly as possible. All IMM surveys identified
a clear message that FLEGT-licensed timber from asingle country is insufficient.

• Encourage those companies not yet using FLEGT-

licensed timber to do so. Awareness of EUTR varies
among EU-based businesses, with awareness growing
lower further down the supply chain. Some potential
buyers of FLEGT-licensed timber are almost certainly
unaware of it, what it stands for and what the benefits
are for their businesses. Increased awareness atthe business-to-business level would add value tothe “brand” of FLEGT-licensed timber. Researchundertaken in 2019 reinforces the view that EU-based
companies will not re-source to Indonesia purely due
to there being FLEGT-licensed material. Purchasing
decisions are complex, and whilst easier compliancewith the EUTR is a factor, it is not sufficiently
important in its own right to drive a switch.

• The market recognition FLEGT-licensed products
should be strengthened through branding andpreferential treatment for licensed products, forexample in public procurement.

• The private sector both in VPA Partnercountries and in the EU needs to be actively engaged
in the positive market development of FLEGTlicensed timber. Timber trade federations, forexample, could play a leading role and have alreadystarted doing so in some countries. Environmental
non-governmental organisations (ENGOs) that areopen to supporting the FLEGT VPA process andcommercial use of tropical timber should also be
more actively engaged.

• IMM surveys demonstrate that the EUTR is having

a significant impact on importers’ purchasing
behaviour in a number of key EU markets. However,continuing high import volumes in some Member
States, e.g. from Brazil and Myanmar, which are
under special observation by the FLEGT-EUTR Expert
Group, indicate that harmonisation of due diligencestandards across the EU should be further pursued.
FLEGT licensing VPA partner countries could thenpotentially feel a stronger benefit of the “no-risk”
status of FLEGT-licensed timber; however, othercommercial and economic factors would still have tobe taken into account.

Acknowledgements
The authors would like to thank companies, institutions andexperts across Europe, Indonesia and Ghana who gave up
their time to provide the insights presented in this report.
The authors also thank all IMM national correspondents

10		

for their efforts in recording interviews accurately and forthe large amount of information they gathered. Special
thanks also go to the authors of IMM special study reports
for their significant input to this report.

MAIN REPORT – NOVEMBER 2020

List of Acronyms$

United States Dollar

€

Euro

ATIBT

Association Technique Internationale des Bois Tropicaux

CA

Competent Authority

CIF

Cost, Insurance and Freight (relates to shipping)

CIS

Commonwealth of Independent States

CN

Combined Nomenclature of the EU (relates to trade product codes)

CoC

Chain of custody

COMEXT

Eurostat External Trade database

COMTRADE

UN International Trade Statistics Database

CPD

Construction Products Directive

CPI

Construction Production Index

CPR

Construction Products RegulationCWNRA

FSC Controlled Wood National Risk Assessment

DRC

Democratic Republic of Congo

EDB

Ease of Doing Business Index of the World Bank

ENGO

Environmental non-governmental organisation

EU

European Union

EUTR

European Union Timber Regulation

FAO

UN Food and Agriculture Organisation

FC

Forestry Commission of Ghana

FEP

European Parquet Flooring Federation

FII

Forest Industries Intelligence Ltd

FLEGTForest Law Enforcement, Governance and Trade

FOB

Free On Board (relates to shipping)

FRA

Forest Resource Assessment of the UN FAO

FSC

Forest Stewardship Council

FTA

Free Trade Agreement

GATS

USDA Global Agricultural Trade System database

GCI

Global Competitiveness Index of the World Economic Forum

GFC

Global Financial Crisis

GFW

Global Forest Watch

GhLAS

Ghana Timber Legality Assurance System

GTA

Global Trade Atlas

has.

Hectares

HDF

High Density Fibreboard

HS

Harmonised System (relates to trade product codes)

IMM

FLEGT Independent Market Monitoring project of the ITTO

MAIN REPORT – NOVEMBER 2020

11

List of Acronyms
ITTO

International Tropical Timber Organisation

JFSQ

Joint Forest Sector Questionnaire (regularly issued by UN)

LAS

Legality Assurance System

LEI

Lembaga Ekolabel Indonesia – sustainable forest management standard

LIU

Licensing Information Unit

LVL

Laminated Veneer Lumberm2

Square metersm3

Cubic metres

MDF

Medium Density Fibreboard

MLH

Mixed Light Hardwood (applied to plywood)

MO

Monitoring Organisation

MoEF

Indonesian Ministry of Environment and ForestryMS(EU) Member StateMT

Metric tonnes (1000 kilograms)

NTFP

Non-Timber Forest Product

OSB

Oriented Strand Board

PEFC

Programme for Endorsement of Forest Certification

PFE

Permanent Forest Estate (defined by ITTO)

PHPL

Indonesian Sustainable Forest Management Standard

PVC

Polyvinyl chloride

RoC

Republic of the Congo

RWE

Roundwood Equivalent (relates to wood product volumes)

SFM

Sustainable Forest Management

spp.

Several species within a genus

STTC

Sustainable Tropical Timber Coalition

SVLK

Sistem Verificasi Legalitas Kayu

TLAS

Timber Legality Assurance System

TRAFFIC

Trade Records Analysis of Flora and Fauna in Commerce

UK

United Kingdom

UN

United Nations

UNCTAD

United Nations Conference on Trade and Development

UNEP/WCMC

United Nations Environment World Conservation Monitoring Centre

US

United States of America

USDA

US Department for Agriculture

VPA

Voluntary Partnership Agreement

WEF

World Economic Forum

WGBC

Word Green Building Council

12		MAIN REPORT – NOVEMBER 2020

Introduction
1.1 Background
The Independent Market Monitoring (IMM) mechanism
was established under a project of the International
Tropical Timber Organization (ITTO) funded by theEuropean Union (EU) to support the implementationof bilateral voluntary partnership agreements (VPAs)
between the EU and timber-supplying countries.
VPAs are a key element of the EU’s Forest Law
Enforcement, Governance and Trade (FLEGT) Action Plan,
which defines the EU’s policy for promoting legal logging
and the trade of legally harvested timber. A VPA specifies
commitments and actions by both signatory parties withthe aim of developing a timber legality assurance systemand the issuance of FLEGT Licences that certify the legalityof timber and timber products for export to the EU.
IMM monitors the flow of FLEGT-licensed timber to the
EU and its use and acceptance in the EU market5.

1.2 Overview
In 2019, the network of IMM country correspondents
continued to monitor market uptake of FLEGT Licences inthe – at that time – seven “key” EU countries6 accounting
for the bulk (i.e. consistently around 90%) of EU tropicaltimber and timber product imports from VPA partnercountries. IMM also continued to employ correspondents
in Indonesia, the only FLEGT licensing country in 2019,
and Ghana, a VPA country nearing agreement to issue
FLEGT Licences. The two partner country correspondents
produced update reports and acted as points of liaison
between IMM and partner country authorities andorganisations. Information from the Indonesia report has
been included in Chapter 5 of this report and the Ghana
report was used as a basis to update the Ghana page on
the VPA partner country section of the IMM website7.
The EU trade survey conducted in 2019 again had a broad
scope, in terms both of content and target audience.
European IMM correspondents interviewed 109 (2018:5.

196) companies for the general trade survey8. In 2018, a
separate survey for the IMM furniture sector scoping
study9 included interviews with 54 furniture companies.
In 2019, the IMM correspondents interviewed Europeanarchitects (22 companies) for a separate special study 10.
The 2019 trade survey sample included importers ofsawn timber, decking, plywood, mouldings logs, veneers,
doors, window frames, as well as furniture and furniturecomponents and other products from VPA partnercountries. Respondents accounted for between 20% and
75% of the key countries’ total imports of HS Chapter
44 products, except for Spain, where coverage was lower(around 10%). IMM correspondents also interviewed theFLEGT/EUTR Competent Authorities in their respective
countries as well as timber trade federations and EUTR
Monitoring Organisations. The EU trade survey, including
information from correspondents’ national summary
reports is summarised in Chapter 8 of this report.
Besides continuing and refining work initiated in 2017and 2018, IMM also continued to expand its scope ofactivities and outputs in 2019. Also, four special studies
were published in 2019 including; the above-mentioned
study on architects’ attitudes to the use of tropical timberin construction and their awareness of the FLEGT VPA
programme; a study of EU public timber procurement
policies11; a study on EU wood promotion programmes
and their recognition of FLEGT12; and a scoping study of
FLEGT impact on forest sector investment13. IMM also
continued to organise “Trade Consultations”14 which took
place in Antwerp and Barcelona in 2019. Both the special
studies and Trade Consultations provided considerable
contributions to this report.

1.3 Scope and definitions
The report covers all products within the scope ofexisting VPAs and VPAs under negotiation and includes
the following chapters (and parts thereof) of theinternational Harmonized Commodity Description and
Coding (HS) System:

For more details on IMM, visit www.flegtimm.eu

6.

Belgium, France, Germany, Italy, Netherlands, Spain, UK. During the reporting period, the UK was still a Member State of the European Union.

7.

https://www.flegtimm.eu/index.php/vpa-countries/ghana8.

 tabling of views. Scoping study for assessing the impacts of timber legality on the European Union’s wood-furniture sector and the associatedA
tropical timber trade. George White (ITTO/IMM/2018) https://www.itto.int/direct/topics/topics_pdf_download/topics_id=5782&no=1&disp=inline

9.

A tabling of views, a scoping study for assessing the impacts of timber legality on the European Union’s wood-furniture sector and the associatedtropical timber trade. George White (IMM/2018) https://www.itto.int/direct/topics/topics_pdf_download/topics_id=5782&no=1&disp=inline

10. A study of EU architects’ perceptions and experience with FLEGT Licences. George White (IMM/2019)https://www.flegtimm.eu/images/imm_indicators/IMM_Study_of_EU_Architects_Report_Dec19_st3.pdf
11. A study of EU public timber procurement policies, related guidance and references to FLEGT. George White.
https://www.flegtimm.eu/images/IMM_Public_Procurement/IMM-EU-Public-Timber-Procurement-Report---Final.pdf
12. EU Wood Promotion Programmes and their recognition of FLEGT. Mike Jeffree/George White
http://www.flegtimm.eu/images/Mikes_folder/IMM-Promotion-Report---April-4-2019-ST3.pdf)
13. Forest Sector Investments in FLEGT VPA countries. Scoping study on investors’ perspectives and investment monitoring. Christian Held, Katalin
Solymosi, Lincoln Davis, Veronica Alonso. https://www.flegtimm.eu/images/IMM_Investment_Study/IMM_Forest_Sector_Investments_Study_
Final_Version.pdf
14. Trade Consultations are a series of meetings organized by the IMM programme in the EU key tropical timber consuming countries. The
Consultations aim to gauge the trade’s views and discuss opinions of relevant FLEGT-related topics identified as a part of IMM surveys. IMM also
shares latest survey and study results with trade representatives during the Consultations. Consultations were held in London (March 2018), Nantes(May 2018) and Berlin (November 2018) as well as in Antwerp (April 2019) and Barcelona (October 2019).
MAIN REPORT – NOVEMBER 202013• all products in Chapter 44 (Wood);• products identified as containing wood in Chapter 94(Furniture);• virgin wood-based pulp products in Chapter 47 (Pulp); and• all products in Chapter 48 (Paper).
In this report, all the products identified above (wood,
wood furniture, pulp and paper) are referred tocollectively as “timber and timber products”15. Wood andwood furniture, when dealt with separately from pulp andpaper, are referred to collectively as “wood products”.
The report focuses on the trade in 2019 between the – atthat time – 28 EU Member States and the following 15
tropical timber-supplying countries at various stages of
the VPA process in December 2019, which are collectively
referred to as VPA partner countries16:
FLEGT licensing: Indonesia.
VPA implementing: Cameroon, Central African
Republic, Republic of the Congo, Ghana, Liberia andViet Nam.
VPA negotiating countries: Côte d’Ivoire, theDemocratic Republic of the Congo (DRC), Gabon, theLao People’s Democratic Republic (Lao PDR), Malaysia,
Thailand, Guyana, Honduras.

•••

There is a particular focus on “tropical wood products”
in the report because all the VPA Partner countries aretropical, the closest competitors to FLEGT-licensed
products from Indonesia are also tropical, and the IMM
project description and annual reporting frameworkagreed with the EU places particular emphasis on tropicalwood products. However, care has been taken to placetimber and timber products from VPA partner countries
in a wider trade context and to ensure that analysis takes
account of all competitors, irrespective of whether tropicaland non-tropical.
“Tropical wood products” are defined in this report as:
all products in HS 44 and wood furniture products in
HS 94 exported by countries located predominantly inthe tropics except Brazil and Mexico (where exports
are known from analysis of trade reports and flows
over numerous years to be dominated by products
manufactured from plantations outside the tropical zone);
all products from Brazil identified specifically as“hardwoods” (but excluding eucalyptus) in HS 44 from
Brazil (since feedback from regular trade contacts
indicate these are predominantly of tropical species);and all products identified specifically as “tropical
hardwoods” from all other countries (tropical
hardwoods can be reliably identified in trade statistics
for logs, sawnwood, plywood and veneers).

•••

This definition of “tropical wood products” creates someinconsistencies – notably in relation to Viet Nam wherea significant, but unknown, proportion of HS44 and 94
products are composed of non-tropical timber, and Brazil,
where all HS94 wood furniture is excluded because there

is no way to differentiate tropical from non-tropical, or
hardwoods from softwoods, in this product category.
However, overall this definition of “tropical wood
products” is believed to represent a reasonable compromise
capturing, at global scale, the vast majority of products
more likely manufactured from wood from tropical forests,
while excluding the vast majority of products more likely
to be manufactured from wood from other forest types.
The definition is used to place VPA partner countries into
the wider context of trade where there is the most directcompetition and to give an indication of the scope of VPA
partner trade in relation to wood from tropical forests.
Consistent use of this definition, common to all previous
IMM Annual reports, helps ensure continuity in reporting.

1.4 Report Content
Chapter 2 of the Report focuses on the state of VPA
implementation and negotiation in all VPA partner countries,
while Chapter 3 provides an update on the share of VPA partnercountries in global tropical wood products trade in 2019.
VPA partner competitiveness (Chapter 4) is analysed indetail, taking into account not only international indicesof competitiveness but also IMM EU 2019 trade survey
and Trade Consultation results.
Chapter 5 provides an update of IMM’s EU-Indonesia
trade flow analysis. It also includes findings of researchundertaken by the IMM Indonesia correspondent andmarket perceptions derived from the EU trade survey andTrade Consultations.
Chapters 6 updates the 2018 analysis of requirements forlegal timber in VPA partner export markets and provides
an overview of VPA partner trade with regulated markets.
Chapters 7 to 10 focus on the EU market. In Chapter 7, thereport updates key trade data contained in the previous IMM
reports. As far as possible, it does not duplicate analysis in theprevious report, but rather updates trade data and includes acommentary on market trends in the 2019 reporting period17.
Chapter 8 summarises findings from the 2019 EU trade
survey, while Chapter 9 provides an update on therecognition of FLEGT Licences in EU private sector andpublic procurement policies. Chapter 10 informs on EU
wood promotion programmes and their uptake of FLEGT
as well as media coverage of FLEGT VPAs and EUTR.
Building on recommendations from the scoping study,
Chapter 11 provides more detailed insights into potential
impacts of FLEGT VPA implementation on forest sector
investment and the investment enabling environment inIndonesia and Viet Nam.
The Report concludes with recommendations for market
development of FLEGT-licensed timber.

15. This aligns with usage of the term “Timber and Timber Products” in the FLEGT Action Plan and EU Timber Regulation.
16. The reference to VPA negotiating and implementing countries includes such countries, where little or no progress was made in the negotiations orin the joint implementation during 201917. The analysis of trade flows between VPA Partner countries and the EU contained in this report may be read in conjunction with the IMM Data
Dashboard (http://www.stats.flegtimm.eu/). The Dashboard provides data visualisations and full access to statistics on EU imports of timber,
paper and pulp from the 15 VPA partner countries. To facilitate broader market analysis, the IMM Data Dashboard also provides statistics on othercountries which are leading suppliers of tropical timber into the EU.
14		MAIN REPORT – NOVEMBER 2020

VPA implementation and negotiation –state of play
2.1 Overview
In 2019, no changes occurred in the overall number ofcountries involved in negotiating and implementing a
FLEGT VPA with the EU; the process includes 15 tropicalcountries, which together account for around 80% of theinternational tropical timber trade by value (Figure 2.1).
While Indonesia remained the only FLEGT licensing
partner country in 2019, several countries made progresson the path towards licensing, whilst in others there
was no progress in the negotiations or in the joint
implementation (e.g. no Joint Expert Meetings (JEMs) or
Joint Implementation Committees (JICs)) during 201918.
Perhaps most notably in 2019 was progress made by Ghana,
which, together with the EU, launched the Joint Assessmenton the readiness of its timber legality assurance system.
Ghana is now addressing some final non-compliances
identified by the Assessment (see section 2.3.4).

2

database (SILK) and the EU system for receiving andmanaging FLEGT Licences (FLEGIT) electronically, wascompleted in January 2019.19
The Indonesian government also developed an online
portal that can be used by stakeholders to flag-up noncompliances and trace action taken by government on
the SILK website.

2.3 VPA implementing partner countries
2.3.1 Cameroon
Cameroon started VPA negotiations in 2007, signed theagreement in 2010 and ratified it in 2011. However, thepace of VPA implementation has been slow in recent
years. In May 2019, Cameroon and the EU agreed tostop implementation of the SIGIF2 software, which was
supposed to underpin the Legality Assurance System(TLAS). Review of the VPA legality definition is ongoing,
as is reform of the country’s forest code.

Below follows a summary of where VPA negotiations orimplementation stood in each partner country by the endof 2019. More information on FLEGT licensing and VPA
partner countries, including on forest resources, industry
structure and a detailed trade overview, can be found on
the VPA Partner Country section of the IMM website athttps://www.flegtimm.eu/index.php/vpa-countries.

A 2020-2026 roadmap for VPA implementation isunder development and 20 quick results initiatives
have been identified20. Short-term priorities for the
VPA implementation process in Cameroon include
establishing of a VPA monitoring structure, stakeholder
capacity building and improved transparency.

2.2 FLEGT-licensing partner countries

2.3.2 Central African Republic (CAR)

2.2.1 Indonesia
In 2016, Indonesia became the first country to start
FLEGT licensing, having ratified its VPA with the EU in
2014. Indonesia’s established SVLK framework became
the VPA timber legality assurance system. Early issues,
such as mismatches in HS customs codes between those
applied on Licences and those used by EU customs, forexample, have been largely resolved through dialogue.
The EU and Indonesian authorities also responded to
private-sector calls for an e-licensing system to further
streamline administration. A feasibility assessmentof e-licensing, which will link the Indonesian licence

VPA implementation in CAR is still affected by theaftermath of the civil war. After signing of a peaceagreement and appointment of an ‘inclusive government’on 24 March 2019, political priorities centred aroundmaintaining the peace and paving the way fordemocratic elections.
In February 2019, the 2017 joint EU-CAR Annual
Report on VPA implementation was released. Amongdevelopments highlighted were: sanctions for mandated
independent observation of forest law enforcement;
further support for the WWF’s private sector VPA
capacity-building project; reinstatement of the Mobile
Inspection Brigade, which controls forest, wildlife
and fishing activity; launch of acollaborative database within the VPA
Permanent Technical Secretariat (STP)
to monitor timber transport from theforest and tax payment; and missions
18. T he reference to VPA negotiating andimplementing countries includes suchcountries, where little or no progress wasmade in the negotiations or in the joint
implementation during 201919. The e-licensing system reached advanced
stages of development during 2020 and pilot
e-licensing started on 2 November 2020 for aperiod of six months.

Figure 2.1: History of Voluntary Partnership Agreements Source: IMM Monitoring

Dashboard (interactive image at: http://77.68.2.134:3838/sample-apps/imm_stats_2020/)

MAIN REPORT – NOVEMBER 2020

20. https://www.flegtimm.eu/images/Trade_consultations/Barcelona_7Oct19/Laurent_
Cerbonney_201910_EFI_IMM_meeting_VPA_
FLEGT_CAMRoC_udpates_V3.pdf
15

by FAO-EU FLEGT Programme consultants to support the
STP in developing a VPA information website and timbermonitoring database.

2.3.3 Republic of the Congo (RoC)
Progress in VPA implementation in the Republic of theCongo continued at a brisk pace in 2019. In the final
year leading up to this development, civil society andthe private sector actively lobbied Parliamentarians ina bid to secure key asks and seek clarification on somecontentious provisions, such as the much-debatedproduction sharing scheme. National ownership of the
VPA implementation has further strengthened, largely
underpinned by the prospect of enhanced collection offorest revenue.
Pending operationalisation of the Inter-Ministerial
Committee in charge of overseeing the funding androll-out of the timber legality assurance system (SVL),an Inter-Ministerial Working Group is in place tomonitor implementation of the computerised system(SIVL) roll-out strategy validated in July 2019.
Sensitisation campaigns targeting the private sector
were launched, and work to deploy the initial modules(Tax, Legality and Special Permits) has started,
supported by an external service provider.21
While the next phase for the independent audit of thesystem is yet to be launched, all seven reports produced
under the previous phase were validated and madepublic in 2019. Work is underway to address the auditor’srequests for corrective action, in particular at the levelof the decentralised forestry administration. As of May
2019, 22 forest concessions (making up 60% of the 13.8
million ha of forest allocated to commercial use) had
sustainable management plans in place, and work was
in progress in a further five concessions (7%). At the
11th JIC meeting (November 2019), the introduction of an
external forest monitoring system was presented. It is
intended to complement the existing mandated monitor,
thereby increasing the scope and impact of independent
forest monitoring in Republic of the Congo.

2.3.4 Ghana
Ghana’s Forestry Commission started addressing
remaining non-compliances identified during the 2019
Joint Assessment on the readiness of Ghana’s Legality
Assurance System (GhLAS) in 2019.
Remaining non-compliances flagged up by the
Assessment include: Forestry Commission’s evaluation
and approval of remaining applications for conversionsof concessions to Timber Utilisation Contracts(TUCs) and subsequent ratification of the approval by
Parliament; Forestry Commission (FC) updating andrevising several forest management plans that weredeemed incomplete or outdated by the auditor; and (re-)
appointment of an independent monitor.22

2.3.5 Liberia
Liberia started VPA negotiations in 2009, agreed andsigned the VPA in 2011 and ratified and brought the VPA
into force in 2013. The VPA JIC met seven times between
2013 and 2019. During the most recent meeting between
25th February and 1st March 2019, EU and Liberian
government representatives as well as civil society andprivate sector stakeholders discussed progress made in
implementing a system to verify the legality of Liberia’s
timber products from forest to point of export.
During 2019, the Liberian government began the processof taking over management of the Legality Verification
Department (LVD) and the timber tracking system called
LiberTrace from Société Générale de Surveillance (SGS)
the service provider. In November 2019, the Independent
Auditor concluded its 4th Audit of the TLAS.
In the second half of 2019, a series of regional dialogues
was organized by the National Union of Community
Forestry Development Committee (NUCFDC), the National
Union of Community Forest Management Body (NUCFMB),
and the Liberia Timber Association (LibTA) to obtainrecommendations for improving existing laws, regulations,policies, agreements and operations of forest structuresand companies from representatives of communities,
companies and local and national government. Also in thesecond half of 2019, the UK DfID-funded Multi-stakeholder
Forest Governance and Accountability Project (MFGAP)
was launched. This will run to mid-2022 and support
governance reform in Liberia in the context of the VPA.
The EU launched the VPA-SU2 project in 2019, which has
since provided technical support and capacity building
measures to the Forestry Development Authority in Liberia
to support implementation of the VPA.

2.3.6 Viet Nam
Viet Nam began VPA negotiations in 2010 and theagreement was ratified by the EU and Viet Nam in April
2019 and entered into force in June 201923. As foreseen in
the VOA, a JIC, supported on technical matters by a JEM
meets twice a year for the first two years after entry into
force, and after that once a year. The first meeting of the
JIC (JIC-1) took place on 15 November 2019, preceded by a
two-day JEM (JEM-1) on 12-13 November.
Alongside ratification of the VPA, the new Law on
Forestry, which also came into effect in 2019, provides
the legal foundation for institutionalisation of various
elements of the VPA and VNTLAS in national legislation.
To institutionalise commitments under the FLEGT VPA,
the Ministry of Agriculture and Rural Development has
collaborated with relevant ministries and stakeholders
to develop a decree regulating the Viet Nam Timber
Legality Assurance System (VNTLAS). An initial draftof the VNTLAS Decree was posted on the government’s
websites at the end of May 2019. Comments were invited

21. Operations did not stop during the COVID-19 confinement either. During that time, the Inter-ministerial Technical Group worked to develop training
materials and an e-learning platform. Training on the SIVL tax module was completed in July 2020.
22. The Covid-19 pandemic and related lockdowns of business and administration in Ghana, as well as administrative difficulties due to 2020 being anelection year, were regarded as factors potentially leading to delays in parliamentary ratification of steps taken by the Ghana Forestry Commission
by the time of preparation of this report.
23. In 2020, following the national plan issued for VPA implementation (Decision No. 1624/QĐ-TTg of November 2019) following the Joint
Implementation Framework, the central and local government authorities have prepared detailed plans for their regions and areas of jurisdiction.
16		MAIN REPORT – NOVEMBER 2020

from agencies, organisations and individuals affected by
the Decree. Six stakeholder consultation events were alsoorganised on the draft Decree. The draft Decree dossier
was subsequently submitted to the government for
initial consideration in December 2019.
Alongside the FLEGT VPA process, a Multi-Stakeholder
Core Group (CG) was established in 2017. It is cochaired by the Vice Director General of VNFOREST andrepresentatives from CSOs, with participation of 32
organisations and agencies. Its main function is to bringthe voice and contribution from different stakeholders,
especially CSOs, into the FLEGT VPA process. The CG
convened twice in 2019.
As Viet Nam is not only a significant timber producer
in its own right (mainly plantation timber) but also amajor regional processing hub, importing wood fromover 80 countries, tropical and temperate, the VNTLAS
covers not only domestically produced wood, but also
imports. Vietnamese operators will have to undertakedue diligence on imports, assess the risk of illegality andundertake mitigation measures if necessary.

2.5 VPA negotiating partner countries
2.5.1 Côte d’Ivoire

management, conservation and strengthening of forest
carbon stocks, has seen the country progress towards
FLEGT objectives. Pilot projects have included the Mai
Ndombe Province Emission Reduction Program, which istrialling a legality strategy and compliance standard formonitoring logging companies with a view to rolling it
out to the rest of the country.

2.5.3 Gabon
Gabon started VPA negotiations with the EU in 2010.
However, after two negotiation sessions held in 2010
and 2011, respectively, followed by a bilateral technicalsession in 2012 and preparation of a roadmap, there has
been little further progress towards concluding a VPA.
In the meantime, the Gabonese government hascontinued with legal reforms in the forestry sector,
including an ongoing revision of the forestry code.
A new minister, formerly the head of Gabon’s National
Parks Agency, was appointed in June 2019 and prioritised
renewed efforts to stamp out illegal logging. In
November 2019 the minister sent a letter to the head of
the EU Delegation in Gabon, proposing the relaunch of
VPA negotiations.

2.5.4 Lao PDR

As a part of a previous roadmap, launched in 2017, a newforest code had been adopted by the National Assemblyin June 2019, with the objective to accelerate thereforestation of the country by encouraging partnerships
between small holders, private sector and public
sector. Sanctions are reinforced and new issues such asagroforestry, forest concession, independent observation
and a participatory approach are introduced. The codealso clarifies customary land tenure rights.

Lao PDR began VPA negotiations in 2017 after first voicing
interest in 2012 and opening a FLEGT standing officein 2013. The aim is to develop the forest sector and its
skills levels and encourage technology transfer to theindustry. Currently Lao PDR’s main source of timber isforest clearing for conversion to plantation and non-forest
use, including hydropower generation and agriculture.
Underlining its commitment to reform, in January 2019 anational consultation workshop was held to discuss the
final draft of the Ministry of Industry and Commerce’s
policy for monitoring input and output across the woodprocessing and trade sectors. The aim of the latter issystematic timber supply chain monitoring and control
to ensure legality. Lao PDR delegations have also joined
study trips to other VPA countries, including Indonesia
and Ghana, to see how timber legality assurance systems
operate on the ground. Laos aims to achieve 70% forest
cover by 2030. To reach this target, the government iscreating an enabling regulatory environment throughnational strategies including the ‘National Socio-economic
Development Plan 2016-2020’, the ‘Forestry Strategy’ andthe ‘National Green Growth Strategy 2019-2030’.26,27

2.5.2 Democratic Republic of the Congo (DRC)

2.5.5 Malaysia

Discussion about the VPA between the EU and DRC
were brought back into focus late 2016, with thecountry’s FLEGT Technical Commission continuing
work on its legality definition. The draft of the latterfor industrial forest concessions was produced in 2017
and field-tested in December 2018. The FLEGT TechnicalCommission presented the results of that field test
during a consultation and information workshop in
June 2019. Some of the active engagement in the EU
REDD initiative, including action on sustainable forest

Formal VPA negotiations have been on hold in Malaysia
since 2014 as the state of Sarawak refused to be party to
the VPA. No VPA can be reached in Malaysia and no TLAS
evaluated or accepted for FLEGT licensing until thissituation changes.

Côte d’Ivoire entered VPA negotiations in 2013 as part ofa strategy to combat serious deforestation, which has
seen forest cover decline by 80% over the last century.
Since that time, two formal negotiation sessions havetaken place, in addition to regular technical missions
and exchanges24. In 2019, a new roadmap was drawn up
between the Government of Côte d’Ivoire and the EU,with the aim to initial a VPA by 202225. Members of theTechnical Negotiating Committee (CTN) participated inits creation, including civil society, traditional chieftains
and the private sector.

2.5.6 Thailand
Thailand started VPA negotiations with the EU in
2013. Like Viet Nam, it is a significant regional wood
products manufacturing hub and importer from

24. http://www.euflegt.efi.int/cote-ivoire
25. FLEGT VPA Update. Fern, January 2020. https://loggingoff.info/wp-content/uploads/2020/01/VPA-Update-January-2020-2.pdf
26. https://www.euredd.efi.int/laos
27. A fourth round of VPA negotiation took place in September 2020 to look at the timber legality definitions related to conversion forests, plantation
forests, village-use forests, confiscated and imported timber. The TLAS is not yet developed and should be discussed during the next round ofnegotiations, expected to take place in 2021.
MAIN REPORT – NOVEMBER 2020

17

other suppliers in the area including neighbouring
countries with higher deforestation rates; Cambodia,
Malaysia (Sarawak) and Myanmar. After three roundsof negotiations, three updated draft documents are
expected to become the core annexes of the eventual
VPA treaty: The legality definition (LD), the timber
legality assurance system (TLAS), and the supply
chain control system (SCC). While the drafts are welladvanced, clarification and work is needed, in particularon whether private certification should have a role
within the TLAS, and, if so, how best to guarantee
the mutually agreed exclusion of confiscated timberfrom the supply chain and further assurances on how
government departments will enforce legality control.
Updates will also be needed with regard to the productscope, the legality control system on private lands
and the import control system. Conditions for release
for the free circulation in the Union of Thai FLEGTlicensed timber products, and the terms of reference forindependent audit will be left for final negotiations.28

However, the agreement still needs to be ratified by bothparties before it becomes legally binding.

2.4.1 Guyana

Next steps include advancement of the signature andratification process and creation of the body responsiblefor developing the TLAS and its implementation.

Guyana started VPA negotiations with the EU in 2012
and the VPA agreement was initialled in November 2018.

2.4.2 Honduras
Honduras was the first Latin American country to initial
a VPA with the EU in 2018, but the agreement has yet
to be signed and ratified. Implementation of a TLAS
(Sistema para asegurar la legalidad de los productos
forestales de Honduras: SALH) is outlined in a 2019-2023
Multiannual Plan.

VPA country export trade – 2019 update
3.1. Scope
This section reports on the share of VPA
partner countries in global tropical wood
products trade in 2019. This is to ensurethat trade flows between VPA Partnercountries and the EU are consideredin their appropriate global context.
The section considers the relative
contribution of VPA Partners in total
global trade in tropical wood products
in 2019. It considers the changing
composition of wood products in thetropical trade and changing regional
supply and demand during the year.
The section builds on the more detailed
analysis of long-term trends alreadycovered in previous IMM reports30.

3.2 VPA partner share of
global tropical wood producttrade in 201940

No VPA

35

Negotiating (As)Negotiating (Af)30
Value (US$ billion)

3

According to an EU FLEGT Facility report from December
201829, Guyana has developed some “key thematic areas
to focus on over the next three to five years”, including
market improvements and industry development,
the strengthening of implementing structures toensure effective coordination of all the various
implementing bodies, developing a finance mechanism
for implementing the VPA, capacity building, andcommunication, among other things.

Implementing (As)25

Implementing (Am)
Implementing (Af)20

Licensing (Indonesia)

15
10
5
0

2015

2016

2017

2018

2019

As=Asian partners,
Af=African partners,
Am=Latin American partner

Figure 3.2.1: Global tropical wood-product trade by FLEGT VPA status –2015-2019. Source: IMM-STIX

Global trade in tropical wood products (all products in
HS 44 and wood furniture products in HS 94) increased
0.2% to US$41.7 billion in 2019 (Figure 3.2.1). Growthcontinued in 2019, but at a much slower pace thanduring the previous two years when there was a sharp
rebound from the dip in 2016 after the speculative

rosewood boom in China had ended. Unlike the 2009
to 2014 period, when rapid trade growth was driven
largely by China’s imports of primary wood products,
particularly rosewood, recent growth is mainly due torising wood furniture exports, notably from Viet Nam
and India, destined for the United States.

28. The fourth round of negotiations is planned for September 2021.
29. http://www.euflegt.efi.int/publications/high-hopes-for-guyana-eu-partnership-on-legal-timber-trade
30. Longer-term trade trends are analysed in more depth in the ITTO-IMM reports ‘Europe’s changing tropical timber trade 2004 to 2014’ publishedin 2015, ‘FLEGT VPA Partners in EU Timber Trade 2014 to 2016’ published in 2017, and FLEGT VPA Partners in EU Timber Trade 2017 published in
2018. All IMM reports are available at: http://www.flegtimm.eu/index.php/reports
18		

MAIN REPORT – NOVEMBER 2020

fell from 0.34% to 0.28%. Exports from
Guyana declined sharply, particularly
due to falling demand for logs in China.
Its exports to the EU rose in 2019 but, atonly US$4.1 million, were still limited.
Exports from Honduras fell in 2019 due todeclining sales in several neighbouring
Latin American countries and in China
and the EU, although there was good andstable demand in the leading US market.

No VPA
Negotiating (As)Negotiating (Af)
Implementing (As)Implementing
(Am)

2019
2018
2017
2016

Implementing (Af)
Licensing(Indonesia)

Value (US$ billion)
0

2

4

6

8

10

12

14

Exports by the three VPA negotiating
countries in Africa increased 6% to
US$886 million and accounted for 2.1% of
total global tropical wood products tradein 2019, up from 2.0% in 2018.

As=Asian partners, Af=African partners, Am=Latin American partner

Although Gabon’s exports to China
declined during the year, this was offset
by a sharp rise in exports to India. These
Figure 3.2.2: Tropical wood-product trade by FLEGT VPA status – 2015-2019.
increased from just over US$10 million in
Source: IMM-STIX
2017 to US$100 million in 2019, nearly allcomprising veneer, with a much smaller
quantity of sawnwood (log exports have been bannedIndonesia’s wood products exports fell 9% to US$5.93
since 2010).
billion in 2019, reversing gains made the previous year
(Figure 3.2.2). While the country’s furniture exports
After several years of decline, exports by Côte d’Ivoirecontinued to rise slowly, exports of plywood, notably torecovered some ground in 2019 due to a sharp rise in
the US, fell back after a good year in 2018. Its share ofexports to other African countries including Senegal,
global trade in tropical wood products fell from 15.6% in
Mali, Burkina Faso, Morocco and Niger.
2018 to 14.2% in 2019.
Viet Nam exported tropical wood products with total
value of US$14.0 billion in 201931, an increase of US$2.2
billion (19%) on the year before. Its share of global tradein tropical wood products increased from 28.3% in 2018 to
33.5% in 2019. Nearly 50% of Viet Nam’s exports in 2019were destined for the US, while nearly a third were destinedfor other Asian markets, mainly Japan, China and South
Korea. The trade dispute between China and the US boosted
Viet Nam’s exports to the latter in 2019. Viet Nam’s exports
to the EU increased 4% to US$981 million in 2019, when
they accounted for 7% of its total exports.
In 2019, the five VPA implementing countries in Africa
together exported US$1.69 billion of wood products, a
4% decrease from US$1.75 billion in 2018, and accounted
for 4.1% of total global tropical trade, down from 4.2%
in 2018. A decline in exports in Cameroon, the Central
African Republic and Liberia offset a continuing rise in
Republic of the Congo and Ghana. The overall decline
in exports by African VPA implementing countries was
driven mainly by falling demand for logs and roughsawn timber destined for China. Exports of sawn timberto the EU also weakened in the second half of 2019.
However, exports to Viet Nam and India continued torise in 2019.
The two VPA negotiating countries in Latin America
exported US$115 million of wood products in 2019, adecline of 18% compared to the previous year. Theirshare of total global tropical wood product exports

Exports from DRC continued to decline in 2019, a slightincrease to China offset by a fall to Belgium, Taiwan
and Portugal.
In 2019, the three VPA negotiating countries in Asia
together exported US$9.4 billion of wood products, a 7%
decline compared to 2018. Share of these countries intotal global tropical wood trade declined from 24.2% in2018 to 22.5% in 2019.
Malaysia’s exports declined 6% during the year, withfalling shipments to Japan, India, Singapore, Australia,
South Korea, China and the Netherlands offsetting asignificant gain in exports to the US.
Exports by Thailand, which are dominated by sawn
rubberwood exports to China, declined 13% in 2019.
Exports by the Lao PDR Laos remained flat and low.
In 2019, countries not engaged in the VPA processexported US$9.4 billion of tropical wood products, down
7% on the previous year, and accounted for 22.5% of total
global trade, down from 24.2% in 2018.
Although exports by India, the Philippines, Ecuador andBrazil continued to rise, this was offset by a decline inexports, mainly of logs, to China by Papua New Guinea
and the Solomon Islands.

31. Figures reported here for trade by Viet Nam and several other tropical countries are higher than reported by national authorities in those tropicalcountries. This is because the data used in this analysis is primarily derived from “mirror statistics”, that is imports reported by major trade
partners rather than exports reported by tropical countries, the latter being less readily available on a regular basis. Unlike export data, which
is usually based on FOB values, import data is frequently reported in CIF values (i.e. also including freight cost) which will be higher. It is also not
unusual for ownership of shipments to change hands during transit, with the new owner adding a mark-up in price resulting in the recorded importvalue being higher than the value recorded at export.
MAIN REPORT – NOVEMBER 2020

19

3.3 Product mix oftropical wood trade

Between 2018 and 2019, the share offurniture increased from 36.4% to 41.5%
and the share of joinery and other valueadded products increased from 8.3%
to 8.7%. In contrast, share of logs andfuelwood fell from 20.3% to 18.5%, share ofsawnwood and mouldings fell from 15.9%
to 14.1%, and share of plywood, panels andveneer fell from 19.0% to 17.2%.
These shifts in product mix in 2019are closely linked with the strength offurniture and other value-added productexports from Viet Nam, particularly to
the US, and the downturn in the Chinese
market, which is dominated by logs andrough sawnwood, during the year. The year
2019 also saw a downturn in the value ofthe tropical plywood trade, after significant
gains in 2018, particularly for Indonesia
destined for the US, Japan, South Korea, theEU, and Australia.

Logs & fuelwood

90%
80%

Sawnwood &mouldings

70%
Share of USD value

The most notable change in product mixof tropical wood in international tradein 2019 was resumption, after a brief andpartial reversal in 2018, of the long term
trend of rising share of higher value-added
products, such as wood furniture andjoinery, at the expense of less processed
products, such as logs, sawnwood andplywood (Figures 3.3.1 and 3.3.2).

100%

Plywood, panels& veneer

60%
50%
40%

Joinery & othervalue-added

30%

Furniture

20%
10%
0%

2015

2016

2017

2018

2019

Figure 3.3.1: Share of global trade in tropical wood-products
by product group – 2015-2019. Source: IMM-STIX

Logs & fuelwood

2019

Sawnwood &mouldings

2016

2018
2017
2015

Plywood, panels &veneerJoinery & othervalue-added

Value (US$ billion)

Furniture

3.4 Regional supply of
tropical wood products

0

2

4

6

8

10

12

14

16

18

3.4.1 Asia

In the five years between 2015 and 2019,
total wood product exports by the fivecountries of the Mekong region (Cambodia,
Lao PDR, Myanmar, Thailand, Viet Nam)increased from US$14.6 billion to US$18.4
billion. The Mekong region has emerged as
the largest source of tropical wood productsupply, overtaking South East Asia where
exports have fluctuated between US$13.4
billion and US$14.2 billion during thesame period without showing a consistent
trend. While the Indian sub-continent now
exports more tropical wood products thanin the past, rising to US$1.6 billion in 2019,it remains a comparatively smaller supplierto the rest of the world (Figure 3.4.1.2).

20		

Figure 3.3.2: Global trade in tropical wood-products by product group –2015-2019. Source: IMM-STIX

100%

Africa (East)

90%

Africa (West)80%
Value (US$ billion)

In terms of value, Asian countries havedominated the tropical wood trade formany decades, a result of more rapid
economic development and far-reachingsteps up the value chain of Asian countries
compared to countries in other tropicalregions. The overall share of Asian
countries in global trade increased to 84%
in 2019, rising from 82% the previous year
(Figure 3.4.1.1).

Africa (Central)

70%
60%

America (Central)

50%

America (South)

40%

Pacific

30%

Asia (India)

20%

Asia (South East)

10%0%

Asia (Mekong)
2015

2016

2017

2018

2019

Figure 3.4.1.1: Share of global trade in tropical wood-products
by region of supply – 2015-2019. Source: IMM-STIX

MAIN REPORT – NOVEMBER 2020

20
2015

18

2016

2017

2018

2019

Value (US$ billion)

16
14
12
10
8
6
4
2
0

MekongSouth East Asia

India/South Asia

2017

2018

2019

Lao
PD
R

2016

My
an
ma
r

2015

12.0

Ch
ina

14.0

Ph
ilip
pi…

Figure 3.4.1.2: Tropical wood-products exports by Asian region of supply –2015-2019. Source: IMM-STIX

8.0
6.0
4.0

Ca
mb
od
ia

Ind
ia

Ind
on
esi
a

Vie
tN
am

0.0

Th
aila
nd

2.0

Ma
lay
sia

Value (US$ billion)

10.0

Value (US$ billion)

Figure 3.4.1.3: Trade in tropical wood-products by Asian exporters –2015-2019. Source: IMM-STIX

2.6
2.4
2.2
2.0
1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0

2015

2016

2017

2018

2019

Trade by countries within the Mekong
region itself is shifting. Previously driven
by a large and often unregulated trade inlogs and rough sawn timber internallyand to China and India, much comprising
teak and rosewood, and by rising exportsof plantation rubberwood and acacia
from Thailand to China, recent growth ismainly due to Viet Nam’s rising exports
of furniture and plywood to the US and of
biomass to Japan, China and South Korea.
Thailand’s exports, primarily of sawn
wood from plantations, after reachinga record level of US$4.02 billion in
2018, fell 13% to US$3.52 billion in
2019. Cambodia, which previously
exported large quantities of sawnwood
to Viet Nam and China, is becoming
more dependent on exports of plywood
and furniture to the US. Cambodia
exported around US$347 million ofwood products in 2019, 3% more thanthe previous year, with exports to the
US rising 45% to US$263 million during
the year. In Myanmar, where forests
are heavily degraded and log exports
were banned in 2014, exports fell 4% to
US$297 million in 2019, still destined
mainly for China, India and Thailand,
but now focused on sawnwood, veneer
and charcoal. Exports from Lao PDR,
comprising logs and sawn wood
destined principally for China andViet Nam, fell 11% to US$300 million
in 2019, well down on trade value of atleast US$1 billion in 2015 at the height of
the rosewood boom in China(Figure 3.4.1.3).
In South East Asia, exports fromIndonesia declined 8% to US$5.9 billion
in 2019, mainly due to declining plywood
exports to the US and Japan after a surge
in demand the previous year. Indonesia’s
furniture exports continued to rise slowly.
Malaysia’s exports also lost ground in
2019 after a rise the previous year, falling
6% to US$5.9 billion, with a sharp decline
in plywood exports to Japan and the US,
and in plywood, veneer and biomass
exports to South Korea, only partially
offset by growth in furniture exports,
mainly to the US.

3.4.2 Africa

Africa (Central)

Africa (West)

Africa (East)

Figure 3.4.2.1: Tropical wood-products exports by African region of supply –2015–2019. Source: IMM-STIX

MAIN REPORT – NOVEMBER 2020

Exports in the Central region of Africa
decreased 7% in 2019, to US$2.34 billion(Figure 3.4.2.1), with Cameroon exports
down 6% to US$904 million, Equatorial
Guinea down 40% to US$223 million,
the Central African Republic down 25%
to US$69 million, and DRC down 25%
to US$69 million. These declines inexports were only partly offset in 2019by a 4% rise in Gabon exports to US$644
million and an 11% rise in Republic of21

22		

2017

2018

2019

400

CA
R

Co
ng
Mo
o
za
mb
iqu
e
Gh
an
a
Eq
.G
u in
ea
Cô
te d
'Ivo
ir e
Sie
rra
L eo
ne
Nig
er i
a
Ga
mb
ia

Ga
bo
n

Ca
me
roo
n

DR
C

300
200
100
Ma
li

Value (US$ million)

2016

700
600
500

Figure 3.4.2.2: Trade in tropical wood-products by African exporters –2015-2019. Source: IMM-STIX

1.8
2015

1.6

2016

2017

2018

2019

1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0

Pacific

America (South)

America (Central)

Figure 3.4.3.1: Tropical wood-products exports from Pacific and American
region of supply by smaller VPA partner exporters – 2015 to 2019.
Source: IMM-STIX

2016

2018

2019

Pa
na
ma

2015

900

Pa
rag
ua
y

1000
2017

800
700
600
500
400
300
200

na
me

Su
ri

B ra

zil

0

Pe
ru
Gu
at e
ma
la
Ho
nd
u ra
s

100
Ec u
ad
or
So
lom
on
Is.

Exports in East Africa fell 6% in
2019, to US$387 million. Exports from
Mozambique, by far the largest exporterin the region for which data is available,
were US$284 million, the same level
as the previous year. Exports from
Zambia to China, nearly all logs of‘other tropical hardwoods’ (product code
44034990), fell 27% to US$46 million
in 2019. In 2016, Zambia banned thefelling and transport of a tree known

2015

Pa
pu
aN
.G.

Elsewhere in West Africa, exports from
Côte d’Ivoire rebounded by nearly 20%,
to US$188 million, driven mainly byrising regional demand in Africa. The
long-term decline in Côte d’Ivoire’s
exports to the EU resumed in 2019,
falling 12% to US$68 million after abrief upturn in 2018. Ghana’s exports
increased 2% to US$276 million in
2019, with exports of logs, mainly
plantation teak, continuing to rise to
India, and exports of sawnwood rising
to Viet Nam. Ghana’s exports to the EU
increased 4% to US$35.7 in 2019, mainly
due to a rise in exports of sawnwood toGermany. Liberia’s exports declined 57%
to US$21.7 million in 2019 due to weak
demand for logs in China which accountfor around 90% of export value.

900
800

0

Value (US$ billion)

The fall in exports in West Africa in 2019was even larger than in Central Africa,
down over 19% to US$9 billion. However,the downturn was concentrated in justone country, Nigeria, where exports fell
76% decline from US$393 million in 2018
to US$95 million in 2019. This followed
an investigation by CITES revealing
widespread illegal logging and tradein rosewood, and irregularities in theissue of CITES certificates by Nigeria andwhich led to the suspension of all CITES
authorization for rosewood exports
from the country after after November 1
2018. In contrast to Nigeria, exports by
Sierra Leone to China increased 17% to
US$129 million in 2019, the vast majority
under the Chinese code for rosewood(44034980).

1000

Value (US$ million)

the Congo exports, to US$420 million(Figure 3.4.2.2). These trends weresignificantly influenced by the sharp falldemand in China. Exports from Central
Africa to China fell from US$1.3 billion
in 2018 to just over US$1 billion in
2019. In contrast, exports to India fromCentral Africa increased from US$60
million to US$115 million, with most of
the increase comprising veneers from
Gabon. Exports from Central Africa to
the EU also increased slightly in 2019,by 1% to US$642 million, with most of
the gain due to rising EU trade with
Republic of the Congo.

Figure 3.4.3.2: Trade in tropical wood-products by Pacific and American
exporters – 2015-2019. Source: IMM-STIX

MAIN REPORT – NOVEMBER 2020

100%

Other

90%

Middle East80%
Share of US$ value

to US$737 million in 2019 while Solomon
Islands exports fell 28% to US$480
million (Figure 3.4.3.2).

India/South Asia

70%

Southeast Asia

60%

Northeast Asia

50%

China

40%

North America

30%

EU (external)

20%
10%
0%

2015

2016

2017

2018

2019

2017

2018

Figure 3.5.2: Trade in tropical wood-products by region of import –2015-2019. Source: IMM-STIX
locally as mukula - Pterocarpus chrysothrix, a relativeof rosewood – but government sanctioned exports ofconfiscated illegal wood have continued.

3.4.3 Pacific and America
Tropical wood product exports in the Pacific region
are dominated by logs from Papua New Guinea and theSolomon Islands destined almost exclusively for China,
with the remainder destined for India, Japan, South Korea
and Taiwan. After a sharp increase in 2018, total exports
from the Pacific region fell 22% to US$1.30 billion in 2019
(Figure 3.4.3.1). Papua New Guinea exports decreased 20%

2019

Au
str
ala
sia

2016

EU
(ex
ter
na
l)
So
uth
eas
tA
sia
Ind
ia/
So
uth
Asi
a

Asi
a

No
rth
eas
t

Ch
ina

2015

Mid
dle
Ea
st

13.0
12.0
11.0
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
No
rth
Am
eri
ca

Value (US$ billion)

Figure 3.5.1: Trade in tropical wood-products by region of import –2015-2019. Source: IMM-STIX

Tropical wood products exports by SouthAmerican countries increased 1.3% to
US$1.30 billion in 2019 (Figure 3.4.3.1). A
15% rise in exports in Ecuador to US$528
million, and a 5% rise in exports in
Brazil to US$350 million, were offset by
a 16% decline in exports in Suriname to
US$136 million, an 8% decline in Peru
to US$109 million, and a 16% decline
in Paraguay to US$76 million (Figure
3.4.3.2). Ecuador exports an increasingly
diverse range of wood products including
logs, sawnwood, plywood, and panels
destined mainly for the US, China andneighbouring South American countries.
Exports from Brazil32 have been rising
to the United States and India in the last
two years. Exports from Guyana, the only
South American country engaged in the
VPA process, declined 25% to US$38.8
million in 2019 driven by a sharp fall inexports of logs and sawnwood to China.
Tropical wood products exports byCentral American countries33 fell 7% to
US$417 million in 2019 (Figure 3.4.3.1).
Exports from Guatemala, the largest
tropical wood exporter in Central
America, fell 2% to US$94.7 million in
2019. Exports from Honduras, the only
VPA country in the region, declined 14%
to US$76 million (Figure 3.4.3.2). Exports
from Honduras to the US, the largest
destination accounting for around 40%
of total exports, were stable in 2019 but
exports fell to other leading markets in
El Salvador, Nicaragua and St Lucia. A
large proportion of Honduras exports
comprise sawn softwood.

3.5 Changes in regional demand
for tropical wood products

The value of EU imports of tropical wood products(excluding internal trade) increased 2% to US$4.7 billion
in 2019, building on a 7% gain the previous year. The
EU’s share of total global imports of tropical wood
products increased marginally, from 11.4% in 2018 to
11.6% in 2019, mainly due to the sharp decrease in
Chinese imports (Figures 3.5.1 and 3.5.2).
Imports in North America accelerated in 2019 as US tradein wood furniture switched away from China in favour of
suppliers in tropical countries of Asia in response to the

32. Due to the large proportion of Brazilian wood and wood furniture exports composed of softwoods and eucalyptus from plantations outside thetropical zone, unlike for other tropical countries (where it is assumed all wood and wood furniture products are “tropical”) the data reported for
Brazil refers only to sawnwood, veneer, and plywood specifically identified as composed of tropical hardwood in the HS system of product codes.
Trade data for all other product groups does not separate tropical from non-tropical wood and is therefore excluded. In practice this means that
there may be significant under reporting of Brazilian exports of tropical products, particularly of mouldings (HS4409) and furniture (HS94).
33. Due to the large proportion of Mexican wood and wood furniture exports composed of temperate hardwoods and softwoods, including both domestic
wood and imports from the US, the data reported for Mexico refers only to logs, sawnwood, veneer and plywood specifically identified as composedof tropical hardwood in the HS system of product codes. In the case of Mexico these exports are negligible and only a tiny percentage of Mexico’s totalexports of wood and wood furniture, which exceeded US$7.5 billion in both 2017 and 2018 and were mainly destined for the US (94%) and Canada (4%).
MAIN REPORT – NOVEMBER 2020

23

After making gains in 2018, tropicalwood products imports in North East
Asia fell 3% to US$7.4 billion in 2019.
Imports of wood furniture into North
East Asia from tropical Asia remained
stable in 2019, but there were significant
changes in the mix of other tropicalwood product imports. There was a sharp
fall in Japan’s imports of plywood fromIndonesia and Malaysia in 2019. However,Japan’s imports of joinery products
from the Philippines continued to rise,reaching US$1.16 billion in 2019. Japan’s
imports of wood pellets and chips from
Viet Nam also continued to rise rapidly.
During 2019, there was a decline in South
Korea’s imports of pellets and plywood
from Viet Nam, plywood from Indonesia,
and plywood, particle board and pellets
from Malaysia and Thailand.

12.0
2015

10.0
Value (US$ billion)

2016

2017

2018

2019

8.0
6.0
4.0

Fra
nce

Vie
tna
m
Au
str
alia
Ge
rm
an
y

UK
Ne
the
rla
nd
s

Ind
ia

S. K
ore
a

Ch
ina

0.0

Jap
an

2.0

US

US-China trade dispute. Total imports oftropical wood products into North America
increased 22% to US$12.7 million in 2019,building on an 11% rise the previous year.
North American imports from Viet Nam
increased 34% to US$7.60 billion in 2019,
and there were also significant increases
in imports from Malaysia (+17% to US$1.44
billion), India (+10% to US$574 million),
Thailand (+19% to US$305 million) andCambodia (+45% to US$263 million).
Imports from Indonesia declined 9% to
US$1.24 billion. Although North American
imports of wood furniture from Indonesia
increased during the year, this was offset
by a sharp decline in plywood imports
from Indonesia.

Figure 3.5.3: Top 11 importers of tropical wood-products – 2015-2019.
Source: IMM-STIX

North America
China
North East Asia
EU
India/South Asia
South East Asia
Middle East
Australasia
Mekong0%
Logs & fuelwood

20%

40%

60%

Sawnwood & mouldings

80%

100%

Plywood, panels & veneer

Joinery & other value-added Furniture
The expectation that the trade dispute
between the US and China, which
contributed to significant slowdown
in China’s imports of US hardwood in
Figure 3.5.4: Product mix of tropical wood-products trade in 20192019, may increase China’s reliance onby region of import. Source: IMM-STIX
imports of tropical hardwoods has yet
to be realized. Instead, China’s importsof tropical wood declined 17% in 2019 to(-42% to US$199 million). However, imports from
US$7.8 billion in response to weakening demand from
Viet Nam, over 90% comprising wood chips, increased
the plywood and furniture manufacturing sectors and
4% to US$1.35 billion in 2019. As a result, Viet Nam
the interior-decoration markets. This was driven both byreplaced Thailand as the largest single supplier of
weakening in the domestic economy and a deteriorating
tropical wood products to China in value terms. China
external environment, including both a global slowdown,
also imported more from the Republic of Congo andand the US-China trade tensions. Although China’s GDP
Ghana in 2019, trade rising 16% to US$249 million andgrowth of 6.1% in 2019 was strong by the standards of
20% to US$113 million respectively.
other countries, for China it was the slowest since 1990. A
specific factor for wood product manufacturers in China
Tropical wood product imports in the Southern Asian
has been the introduction of relatively strict emission
region, dominated by trade with India, declined 2% tocontrol policies, causing numerous less efficient factories
US$1.88 billion in 2019. The downward trend was mainly
to close since 2017, particularly in the plywood sector.
driven by a continuation of the long term fall in India’s
imports of logs from Malaysia. The total value of India’s
During 2019, there was a 27% decline in China’s
wood imports from Malaysia fell a further 9% to US$369
imports from Thailand, mainly sawn rubberwood, tomillion in 2019. Imports from Indonesia were also down
US$1.28 billion, while there was a large fall in imports
7% at US$153 million in this case due mainly to a fallfrom Papua New Guinea (-24% to US$620 million), thein the plywood trade. In contrast, India’s imports from
Solomon Islands (-27% to US$404 million), Gabon (-10%Gabon rose by 130% to US$100 million in 2019, driven
to US$280 million), Cameroon (-25% to US$243 million),by a sharp rise in the veneer trade. Underlying this
Malaysia (-20% to US$211 million) and Equatorial Guinea
trend is increased urbanization and rising household

24		

MAIN REPORT – NOVEMBER 2020

income, together with declining availability of
traditional teak supplies, notably in Myanmar, whichis increasing demand for modern veneered panels anddomestically produced plywood and other laminates inIndia’s furniture and interiors sector. India’s imports ofplantation teak logs from Ghana also continued to risestrongly in 2019, up 17% at US$76 million.
Tropical wood products imports in the South East Asian
region (including the Malay archipelago and Mekong
delta) declined 1.6% to US$2.8 billion in 2019. However,import trends varied widely across the region in 2019.
Although Viet Nam’s imports of tropical wood products
increased from Cameroon, Lao PDR and PNG, overall
imports were down mainly due to a large decline in tradewith Cambodia, with smaller downturns from Republicof the Congo and Gabon. Malaysia’s imports of tropical
products, which increased in 2018 driven by a rise inimports of plywood from Indonesia and Viet Nam, fellback again in 2019. Indonesian imports of tropical wood

products increased 33% in 2019 driven almost entirely byrising trade in chips from Viet Nam.
The mix of tropical wood products varies widely in eachof the import regions (Figure 3.5.4). Imports into China,
India, and the Mekong region continue to be led by logs
and fuelwood although there are signs of increasing
willingness to import more sawnwood and veneer inall regions as log availability has declined and controls
on logs exports have been progressively tightened insome tropical exporting countries. Rising processing
costs in China are also making imports of sawnwood
more attractive in that region. Imports of tropical wood
products in North America are dominated by wood
furniture. A large proportion of tropical wood products
imports in the Middle East are of sawn wood (much must
be lower grade judging from relatively low unit values).
The EU, North East Asia, South East Asia and Australasia
import a more diverse range of tropical wood products,from logs through to finished furniture.

VPA partner country competitiveness4

4.1 Relative international competitivenessof VPA partner countries

to rank far better in international competitivenessindices than other VPA partner countries.

Previous IMM Annual Reports34 observed that several
VPA partner countries ranked highly in international
competitiveness indices and that there is correlation
between the ranking in these indices and the developmentof countries’ wood processing industries. The previous
reports used three indices, namely the World Bank’s “Easeof Doing Business”35 (EDB), the World Economic Forum
Global Competitiveness36 Index (GCI), and UNCTAD’s Liner
Shipping Connectivity Index37 (LSCI) to identify trends in
VPA partner country competitiveness.

Among the Asian VPA partner countries, Malaysia has
performed best by outranking not only the other VPA
partner countries, but also China on the EBD and GCI,
although China ranks still stronger on the Connectivity
Index. Lao PDR is the only Asian VPA partner country withweak competitiveness ratings by all international standards.

Ranking in these three indices evaluates a country’s
performance against numerous economic performanceindicators, many of which need to be considered whenanalysing trade flow trends for timber and timber
products. The relevance of transport logistics, to mention
just one example, has been highlighted as a key factor
influencing purchasing decisions in the internationaltimber trade – alongside price, quality and reliability – by
all IMM trade consultations, as well as the IMM furnituresector scoping study.
Overall, the 2019 analysis of the three indicesdemonstrates continuation of trends shown in previous
years. Malaysia, Indonesia, Viet Nam and Thailand havethe most developed wood-processing sectors among the
VPA partner countries and are significant exporters ofvalue-added wood products to the EU. They also continue

VPA partner countries that are poorly connected tointernational trade routes and are rated as challenging
places in which to do business are typically also more
focused on the export of primary wood products. The
African VPA partner countries all ranked much lower
on all three indices than their Asian counterparts andcontinued to supply primarily sawnwood and logs to EU
markets in 2019.
The rankings achieved by the South American VPA
partner countries in the international competitivenessindices was more comparable to the African VPA partners
than to the Asian countries (other than Lao PDR). And
like the African partner countries, sawnwood and logs
continue to be the dominant product groups supplied by
Guyana and Honduras to the EU.

4.1.1 2019 VPA partner country performanceagainst the UNCTAD LSCIThe Liner Shipping Connectivity Index (LSCI) aims at“capturing a country’s level of integration into global

34. http://www.flegtimm.eu/index.php/reports/annual-reports (IMM/ITTO 2015; IMM/ITTO 2017; IMM/ITTO 2018; IMM/ITTO 2019)
35. World Bank Group, Doing Business 2020. Comparing Business Regulation in 190 Economies. http://documents.worldbank.org/curated/
en/688761571934946384/pdf/Doing-Business-2020-Comparing-Business-Regulation-in-190-Economies.pdf (WB 2020)
36. World Economic Forum, Klaus Schwab. The Global Competitiveness Report 2019 (WEF 2019)http://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf
37. UNCTAD Liner Shipping Connectivity Index. Table of Results. (UNCTAD 2019) https://unctadstat.unctad.org/wds/TableViewer/tableView.aspx?ReportId=92
MAIN REPORT – NOVEMBER 2020

25

Figure 4.1.1.1: Relative international competitiveness of VPA partner countries - LSCI

VPA partner and competing countries' ranking on the LSCI 2018 vs 2019 (1 = best)
180
LSCI 2018

LSCI 2019

160
140
120
100
80
60
40
20
0

Malaysia

Thailand

VietnamIndonesia

Lao PDR

Gabon

Cameroon

Ghana

Cote
d'Ivoire

DRC

CAR

Congo
Republic

Liberia

Honduras

Guyana

China

India

BrazilFigure 4.1.1.1: Relative international competitiveness of VPA partner countries - LSCI. Source: IMM 2019 analysis of UNCTAD data

confirmed by participants at IMM trade consultations
liner shipping networks”. The level of integration is38
as well as the IMM 2019 competitiveness survey (section
assessed against a combination of six indicators:
Figure 4.1.2.1: Relative international competitiveness of VPA partner countries
4.2) and the competitiveness survey embedded in the
IMM 2018 Furniture Sector Scoping Study39. Besides
The number of scheduled ship calls per week in the
country;
Malaysia, Viet Nam and Thailand, India and China,Deployed annual capacity in Twenty-Foot-equivalent
included by way of comparison with competing non-VPA
Units (TEU): total deployed capacity offered at thepartner countries, also performed better against the LSCI
VPA partner and competing countries' ranking on the GC 2018 vs 2019 (1=best)
country;
than Indonesia. Lao PDR was the only Asian VPA partner
160
The number of regular liner shipping services fromcountry not listed on the LSCI in either 2018 or 2019.
GC 2018
GC 2019
and to the country;
140
The number of liner shipping companies that provide
4.1.1.2 African VPA partner countries on the LSCI
services from and to the country;
As demonstrated by Figure 4.1.1.1 all African VPA partner
120
The average size in TEU of the ships deployed by thecountries are less well connected to international tradescheduled service with the largest average vessel size;
routes by far than their Asian counterparts. While all100The number of other countries that are connected tolisted Asian VPA partner countries are among the 40 best
the country through direct liner shipping services.
connected countries in the world, none of the African
80
countries has been in this category – or even among theThesixth indicator was added as recently as 2019 and the
60 best connected – in recent years.
60
index for previous years (back to 2006) newly generated.
The
Cameroon performed best of the African VPA partner
40 addition to the index caused no significant shift in theranks of VPA partner countries in the LSCI (Figure 4.1.1.1). A
countries in 2018 (63rd) but fell through the ranking (79th)
total
of
178
countries
waslisted
on
the
LSCI
in
2019.
in
2019. Republic of the Congo retained its comparatively
20
good ranking by regional standards (64th) in both years.
04.1.1.1
Asian VPA partner countries on the LSCI
There was also little variation in the – by international
Malaysia Thailand Vietnam Indonesia Lao PDR
Gabon Cameroon Ghana
Cote
DRC
CAR
Congo
Liberia Honduras Guyana
China
India
BrazilThe relative positions on the LSCI remained unchanged d'Ivoire standards weak
– rankings of Côte d’Ivoire (72nd in 2019),
Republicththstamong the Asian VPA partner countries from 2018 to
Ghana (70 ), Gabon (84 ) and Liberia (121 ) between 20182019, although Thailand gained more ground than theand 2019. DRC was rated weakest (159th in 2018 and 141stother countries, improving from 35th to 25th place.
in 2019) of the listed VPA partner countries, while Central
Malaysia has performed best of all VPA partner countries
Africa Republic was not included in the index.
against the LSCI for several years now and held 5th place
globally both in 2018 and 2019. China (1st place) is one of
4.1.1.3 South American VPA partner countries on the LSCI
the few countries world-wide that is better connected to
The international connectivity of the two South
international transport routes than Malaysia.
American VPA partner countries is low by international
standards, with Honduras (92nd in 2018 and 86th in 2019)thth
Viet Nam ranked 19 on the LSCI in 2018 and 18 inbeing more or less comparable to the better performing
2019. Indonesia is facing stronger challenges than mostAfrican countries and Guyana (131st in 2018 and 109 inother Asian VPA partner countries in terms of logistics,
2019) to the weaker performing ones. Local competitor
something that is reflected in its ranking on the LSCI
Brazil (48th in both years) performs much better againstthth(36 in 2018 and 35 in 2019) and has been repeatedly
the LSCI than the South American VPA partner countries.

•
•
•
•
•
•

38. UNCTAD Liner Shipping Connectivity Index: Measure updated in 2019. https://stats.unctad.org/handbook/MaritimeTransport/Indicators.html
39. A tabling of views, a scoping study for assessing the impacts of timber legality on the European Union’s wood-furniture sector and the associatedtropical timber trade. George White (IMM/2018) https://www.itto.int/direct/topics/topics_pdf_download/topics_id=5782&no=1&disp=inline
26		

MAIN REPORT – NOVEMBER 2020

Figure 4.1.2.1: Relative international competitiveness of VPA partner countries

VPA partner and competing countries' ranking on the GC 2018 vs 2019 (1=best)160
GC 2018

GC 2019

140

120

100

80

60

40

20

0

Malaysia

Thailand

VietnamIndonesia

Lao PDR

Gabon

Cameroon

Ghana

Cote
d'Ivoire

DRC

CAR

Congo
Republic

Liberia

Honduras

Guyana

China

India

BrazilFigure 4.1.2.1: Relative international competitiveness of VPA partner countries. Source: IMM 2019 analysis of GCI data

4.1.2 VPA partner country performance against the
Global Competitiveness Index
The GCI was revised in 2018 (GCI 4.0) to better reflect therealities of a globalised economy. Its declared aim is tohelp policy makers to assess “progress against the fullset of factors that determine productivity”. These factors
are analysed against 103 individual indicators, divided
into 12 pillars: institutions; infrastructure; ICT adoption;
macroeconomic stability; health; skills; product market;
labour market; financial system; market size; businessdynamism; and innovation capability.
In 2019, the GCI listed a total of 141 countries, which,according to the report, account for 99% of the world’sGDP. Among the VPA partner countries, Central African
Republic, Republic of the Congo and Guyana were notincluded in the index in either 2018 or 2019. Liberia waslisted 132nd in 2018 but excluded in 2019. Conversely,
Gabon was not listed in 2018 but included in 2019 (119th).
The report overall concludes that “the global economy
is ill-prepared for a downturn after a lost decade for
productivity-enhancing measures” and that “the worldis not on track to meet most of the 17 United Nations’Sustainable Development Goals by the deadline of2030”. Among the VPA partner countries, Viet Nam was
the only one to register a year-on-year improvement
against the GCI.

4.1.2.1 Asian VPA partner countries on the GCI
As on the LSCI, Malaysia is the best-performing ofall VPA partner countries. Malaysia lost five places on
the index (22nd to 27th) in 2019, but is still well-placed
within the ranks of high-income economies rated better
than China (28th) as well as all Eastern European andsome Southern European EU countries (Italy, Portugal,
Greece) and only a few places behind Austria (21st),
Belgium (22nd) and Spain (23rd).
Indonesia ranked 50th in 2019, down five places from 2018.
However, the decline in overall GCI score was small (0.3 to
64.6 points) and “its performance essentially unchanged”,
according to the GCI report. It ranks third among theMAIN REPORT – NOVEMBER 2020

Asian VPA partners, behind Malaysia and Thailand(40th in 2019 and 38th in 2018) but well ahead of Viet Nam(67th in 2019 and 77th in 2018) and Lao PDR (113th in 2019
and 112th in 2018). Indonesia’s main strengths, according
to the report, are its market size and macroeconomic
stability. Indonesia also made improvements in “businessculture” and “a stable financial system”. “Innovation
capacity”, says the report, remains limited in Indonesia
but is increasing.
Viet Nam is the country whose score on the GCI improved
most globally last year, gaining 10 places and 3.5 points.
Viet Nam has improved especially in “ICT adoption”,“infrastructure”, and gained ground on “businessdynamism” and “innovation capability”. Smaller
improvements were also achieved in the “markets” and“human capital” pillars.

4.1.2.2 African VPA partner countries on the GCI
Sub-Saharan Africa is overall the least competitive
region globally, according to the GCI report, with 25of the 34 economies assessed in 2019 scoring below
50 out of 100 points. None of the African VPA partnercountries that were listed in both years achieved an
improvement or even stabilisation on the GCI between
2018 and 2019, with all countries slipping at least one
or two places. Ghana was rated best (106th in 2018 and111th in 2019), followed by Ivory Coast (114th and 118th).
Ghana improved or was rated comparatively well on“institutions”, “market size”, “ICT adoption” and“innovation capability”, but lost ground over 2018 on“macroeconomic stability” and “health”.
As mentioned above, CAR and Republic of the Congo were
not included in the GCI in either year and Liberia (132nd
in 2018) was unlisted in 2019. Gabon was included on
119th place, after not being listed in 2018. Cameroon (121stand 123rd) and DRC (135th and 139th) fared worst among
the listed African VPA partners.

4.1.2.3 South American VPA partner countries on the GCI
Of the two South American VPA partner countries, only
Honduras was included in the GCI in 2018 and 2019. The

27

Figure 4.1.3.1: Relative international competitiveness of VPA partner countries

VPA partner and competing countries' ranking on the EDB 2018 vs 2019 (1=best)200
EDB 2018

EDB 2019

180
160
140
120
100
80
60
40
20
0

Malaysia

Thailand

VietnamIndonesia

Lao PDR

Gabon

Cameroon

Ghana

Cote
d'Ivoire

DRC

CAR

Congo
Republic

Liberia

Honduras

GuyanaBrazil

India

China

Figure 4.1.3.1: Relative international competitiveness of VPA partner countries. Source: IMM 2019 analysis of World Bank data
Figure 4.2.1 Products imported by survey participants

country was ranked 101st in both years, significantly lower
than local competitor Brazil (72nd and 71st). Compared to2018, Honduras improved in the categories of “health”,“financial system” and “product market”, in particular.
On the other hand, it weakened on “ICT adoption”

the latter being achieved through an upgrade of theinformation technology infrastructure. Indonesia madeprogress at several levels last year, including on “startinga business”, “getting electricity”, “paying taxes”, “trading
across borders” and “enforcing contracts”.

Products imported by survey participants
80%
4.1.3 VPA partner country performanceagainst the Ease of Doing Business Index

The World Bank’s EDB index70%
looks at developments
in business regulation in a total of 190 countries.
Specifically, it documents changes
in twelve areas60%
of business activity; starting a business; employing
workers; dealing with construction
permits; getting
50%
electricity; registering property; getting credit;
protecting minority interests; paying taxes; trading40%
across borders; contracting with the government;
enforcing contracts; and resolving insolvency. The EDB
30%
also analyses regulation that encourages efficiency
and supports freedom to do business. The 2020 report
20%
gives some reason for optimism,
stating that developing
economies are “catching up with developed economies
10%
in ease of doing business”. Moreover,
115 out of the 190
countries analysed made doing business easier in 2019.

As on the other indices, Lao PDR plays in a different
league from other Asian VPA partner countries
being ranked 154th in both 2018 and 2019. However,improvement was registered on the ease of “starting abusiness” and “getting electricity”.

4.1.3.2 African VPA partner countries on the EDB index
The 2019 EDB report confirms that the African VPA
partner countries have remained challenging places inwhich to do business. Three countries – Central African
Republic (184th), DRC (183rd) and Republic of the Congo(180th) - ranked among the ten last places globally on
the EDB, with Liberia (175th), Gabon (169th) and Cameroon(167th) faring little better. Ivory Coast (110th) and Ghana(118th) were the best-rated African VPA partner countries.

In Ghana, the latest EDB report highlights progress in“getting electricity”, both through faster administrative
Logs
Sawn timber Decking
Doors andWindow
Plywood
Flooring
Furniture
Furniture
Analysed by region, the results of the
EBDmirror thoseMouldings door
procedures
andincreasing
the availabilityof equipment.
frames scantlings
componentsof the GCI and the LSCI: while some Asian VPA partner
At the same time, it notes a setback in “paying taxes”, bycountries rank highly on the index, none of the African or
making the recoverable VAT system more complicated.
South American VPA partners are listed among the top 100.
0%4.1.3.3 American VPA partner countries on the EDB index

4.1.3.1 Asian VPA partner countries on the EDB index
Malaysia and Thailand were the best-rated Asian VPA
partner countries, with both achieving improvements intheir EDB rating in 2019; Malaysia from 15th to 12th andThailand from 27th to 21st. According to the 2019 report,
both countries streamlined the process of dealing withconstruction permits.
Viet Nam (69th in 2018 and 70th in 2019) and Indonesia(73rd in both years) are ranked relatively equally on the
EDB. For Viet Nam, the World Bank noted improvements
in “getting credit” and “paying taxes” in 2019, with28		

Honduras (121st in 2018 and 133rd in 2019) and Guyana(134th in both years) rank almost at the same level on
the EDB. The report does not specify why Honduras fellin the ranking between 2018 and 2019. The summaryof business reforms merely notes improvements in“starting a business” for Honduras. Therefore, theweaker ranking in 2019 was probably not due todeterioration within Honduras, but rather to stronger
improvements in other countries. Guyana, on the other
hand, scored lower in “trading across borders” in 2019
than in 2018. Regional competitor Brazil ranked 109th in2018 and lost further ground in 2019 (124th).

MAIN REPORT – NOVEMBER 2020

Figure 4.2.1 Products imported by survey participants

In 2018, IMM undertook a similarcompetitiveness survey for its furnituresector scoping study. This study took both
European countries as well as important
Asian suppliers of furniture into account.
Participants in the furniture sector survey
confirmed Indonesia’s strong performancein terms of “quality/technical properties”,
where the country was rated almost at thesame level as Western Europe and ahead ofEastern Europe and all Asian countries. At
the same time, the furniture-sector survey
found other Asian suppliers – especiallyChina and Viet Nam – more competitive on
price and logistics/lead time; the latter isin line with results of the LSCI.

Products imported by survey participants
80%

70%

60%

50%

40%

30%

20%

10%

0%

Logs

Sawn timber

Decking

Mouldings

Doors andWindowdoor frames scantlings

Plywood

Flooring

Figure 4.2.1: Products imported by survey participants.
Source: IMM 2019 survey of VPA partner competitiveness

4.2 VPA partner competitiveness in IMM surveys
IMM began gauging European trade perceptions of
VPA partner country competitiveness in 2017. At thattime, a survey was undertaken of perceptions of all VPA
implementing (including FLEGT licensing) partner countries
against a range of indicators; price; logistics; product range;technical performance of wood products; obtaining legality
assurance; and obtaining assurance of sustainability.
The survey found that Indonesia was playing in a “different
league” compared to the other VPA implementing countries
all of which were in Africa at the time the survey was
undertaken40. 90% of the 2017 survey respondents rated
Indonesia’s overall competitiveness “very good” to“satisfactory”; 58% rated Indonesia’s competitiveness“good” or “very good”. Indonesia was found to beparticularly competitive in terms of “legality assurance”,“technical properties”
and “assurance of sustainability”.
Figure 4.2.1.1 Asian countries competitiveness: price
Selected Asian VPA partner and competing countries'
competitiveness in terms of price(1=very competitive; 5=uncompetitive)
5

4

3

2

1

0

Indonesien

Vietnam

Malaysia

China

Figure 4.2.1.1: Asian countries’ price competitiveness.
Source: IMM 2019 survey of VPA partner competitiveness

MAIN REPORT – NOVEMBER 2020
4.2.1.2 Furniture supplier competitiveness in terms of price, by country/region

In 2019, IMM updated the questions oncompetitiveness with a special focus
Furniture
Furnitureon the Asian VPA partner countries;
components
Indonesia, the only FLEGT licensing
country; Viet Nam, which is now alsoa VPA implementing country; andMalaysia, which is a competitor toIndonesia and Viet Nam for a variety
of wood and wood products on theEuropean markets. These countries wereconsidered alongside India and China, which are major
competitors to VPA partner countries. The African VPA
implementing countries were also included in the survey
to monitor potential changes in EU trade perception of
their competitiveness during the last two years.
Forty-four European companies importing a wide
range of products (Figure 4.2.1) participated in the 2019
competitiveness survey, which was designed as a separate
online survey outside the general IMM EU trade survey.
Participants were asked to only rate countries in which
they had direct experience of doing business. Survey
respondents imported timber and timber products fromand rated the competitiveness of the following countries:
Indonesia (59% of respondents), Malaysia (34%), Viet Nam(16%), India (11%), China (18%), Cameroon (50%), CAR(20%), Republic of the Congo (39%), Democratic Republicof the Congo (16%), Gabon (23%), Ghana (27%), Ivory Coast(20%), Liberia (5%), Guyana (2%) and Honduras (2%). Dueto the limited sample size, the competitiveness survey
cannot be considered representative. However, it can serveas an indication of perceived strengths and weaknesses,
especially when considered in conjunction with previous
surveys and other indices.
The ratings for India were excluded from the 2019 analysis
as they were inconclusive, with the small number of
respondents most frequently just selecting “neutral”
on all categories. However, India has emerged as anincreasingly important supplier of furniture to key EU
markets in 2018 and 2019. The country was therefore
included in the IMM 2020 follow-up furniture study,
the results of which will be published towards the endof 2020. Responses for Guyana and Honduras were also
excluded due to the very small number of respondents:
both countries currently only export very limited volumesof timber and timber products to the EU (see chapter 3.2).
40. IMM Annual Report “FLEGT VPA partners in EU timber trade 2017“.
Chapter 4, page 16ff. Sarah Storck/Rupert Oliver.
29

4.2.1.2 Furniture supplier competitiveness in terms of price, by country/region

Furniture sector scoping study:average competitivness in terms of price from 1=very competitive to 5=uncompetitive
5

4

3

2

1
Figure 4.2.1.3 Asian countries competitiveness: technical performance0

Indonesia

Malysia

Thailand

Vietnam

China

Eastern Europe (EC)

Selected Asian VPA partner and competing countries'
competitiveness in terms of technical performance(1=very competitive; 5=uncompetitive)

Eastern Europe(non EC)

Western Europe

5
Figure 4.2.1.2: Furniture supplier competitivenessin terms of price, by country/region. Source: IMM 2018 furniture sector scoping study
Figure 4.2.1.3 Asian countries competitiveness: technical performance4

4.2.1 Asian VPA partners and competing countries –IMM 2019 survey results
4.2.1.1 Price3

Selected Asian VPA partner and competing countries'
competitiveness in terms of technical performance(1=very competitive; 5=uncompetitive)

5
China was rated the most competitive country (13%“very competitive”) in terms of price among the Asian2
countries by participants in the 2019 competitiveness4
survey, with no respondent rating the country “lesscompetitive” or “uncompetitive”1 (Figure 4.2.1.1).
3
Viet Nam and Indonesia tied in second place, with
Viet Nam rated “less competitive” by only a very small0
number of respondents and “verycompetitive”
by Vietnam
Indonesia
China
2 Malaysia
10% of respondents. Indonesia was found to be “verycompetitive” by 8% of respondents, but “competitive”
by a larger number of companies than Viet Nam and1
China. However, about 20% of respondents, roughly
the same proportion as for Malaysia, rated Indonesia
0“less competitive” compared to only 10% in the case ofIndonesia
Vietnam
Malaysia
China
Viet Nam and none for China. For Malaysia there were no“very competitive” votes, but 47% of respondents foundFigure4.2.1.3:
Asian countries’ competitiveness by technicalFigure 4.2.1.4 Furniture supplier competitivenessin termsof quality
the country “competitive” in terms of price.

performance. Source: IMM 2019 survey of VPA partner competitivenessFurniture sector scoping study: average competitivness in terms of quality from 1=very competitive to 5=uncompetitive

Figure 4.2.1.4 Furniture supplier competitiveness in terms of quality

5

4

Furniture sector scoping study: average competitivness in terms of quality from 1=very competitive to 5=uncompetitiv

3

5

2

4

1

0

3

Indonesia

Malysia2

Thailand

Vietnam

China

Eastern Europe (EC)

Eastern Europe(non EC)

Western Europe

1

Figure 4.2.1.4: Furniture supplier competitiveness in terms of quality. Source: IMM 2018 furniture sector scoping study
0

30		

Indonesia

Malysia

Thailand

Vietnam

China

Eastern Europe (EC)

MAIN REPORT – NOVEMBER 2020

Eastern Europe(non EC)W

(1=very competitive; 5=uncompetitive)
5
Figure 4.2.1.5 Asian countries competitiveness: product range
4

These responses are largely in line with perceptions
from the 2018 IMM furniture sector scoping study, whichfound Viet Nam and China most competitive in terms
of price, followed by Thailand and Indonesia. Malaysia
was considered less competitive than the other Asian
suppliers also by the furniture study.

Selected Asian VPA partner and competing countries'
competitiveness in terms of product range
3(1=very competitive; 5=uncompetitive)
52
4

4.2.1.2 Technical performance and product range

1
3
0
2

Indonesia

Vietnam1

As demonstrated by Figures 4.2.1.3 and 4.2.1.4, Indonesia
was rated highly compared to the other Asian countries
in terms
Malaysia of technical
China performance of wood products.
The technical performance rating in the 2019 surveyaligns with the rating of product quality in the IMM 2018
furniture sector scoping study (Figure 4.2.1.4).

The 2019 IMM survey also rated Indonesia very
highly on product range, with 16% of respondents
Indonesia
Vietnam
Malaysia
China
rating the country “very competitive”. Malaysia,
Viet Nam and China received no such ratings. At the
Figure 4.2.1.6 Asian countries competitiveness: product range
same time, however, there were also respondents
Figure 4.2.1.5: Asian countries’ competitiveness by productwho rated Indonesia “less competitive” (12%) or evenrange. Source: IMM 2019 survey of VPA partner competitiveness“uncompetitive” (4%). Malaysia, Viet Nam and China

0

Furniture sector scoping study: average competitivness in terms of product range from 1=very competitive to 5=uncompetitive
5

Figure 4.2.1.6 Asian countries competitiveness: product range

4

iture sector scoping study:3 average competitivness in terms of product range from 1=very competitive to 5=uncompetitive

sia

2

1

0

Indonesia

Malysia

Thailand

Vietnam

China

Eastern Europe (EC)

Eastern Europe(non EC)

Western Europe

Figure 4.2.1.6 Asian countries’ competitiveness by product range. Source: IMM 2018 furniture sector scoping study
Figure 4.2.1.7 Asian countries competitiveness: logistics
Malysia

Thailand

Vietnam

China

Eastern Europe (EC)

Selected Asian VPA partner and competing countries'
competitiveness in terms of lead times/logistics(1=very competitive; 5=uncompetitive)

Eastern Europe
Western Europe
were(non EC) not rated “uncompetitive” by any respondent andreceived as smaller proportion of “less competitive”
ratings than Indonesia in each case.

5

When looked at in combination with results from the2018 furniture study, where Indonesia was consideredless competitive, especially than China, a possible
conclusion is that Indonesia’s product range may beconsidered less competitive in the furniture sector thanfor other wood products. The IMM 2020 furniture sector
follow-up study will analyse this in more detail.

4

3

2

4.2.1.3 Logistic and lead times
10

Indonesia

Vietnam

Malaysia

China

Figure 4.2.1.7: Asian countries’ competitiveness bylogistics.Source: IMM 2019 survey of VPA partner competitiveness

MAIN REPORT – NOVEMBER 2020
Figure 4.2.1.8 Asian countries competitiveness: logistics

The 2019 rating of logistics and lead times (Figure 4.2.1.7) islargely in line with official data from the LSCI. Malaysia israted particularly highly, followed by China and Viet Nam.
Indonesia’s ratings are more mixed than for the other three
countries, with more respondents than for Viet Nam andChina rating its competitiveness “well” or “very well”, butalso more than 30% of respondents considering Indonesia“less competitive” or “uncompetitive”.

31Figure 4.2.1.8 Asian countries competitiveness: logistics

Furniture sector scoping study: average competitivness in terms of logistics from 1=very competitive to 5=uncompetitive
5

4

3

2

1

0

Figure 4.2.1.8 Asian countries competitiveness: legality assurance

Indonesia

Malysia

Thailand

Vietnam

China

Selected Asian VPA partner and competing countries'
Eastern Europe (EC)Europe assurance
Western Europe
competitivenessin termsEasternof legality(non EC)(1=very competitive; 5=uncompetitive)

5

Figure 4.2.1.8: Asian countries’ competitiveness by logistics. Source: IMM 2018 furniture sector scoping study
4

In the 2018 furniture sector study, the advantages
in terms of logistics of China and Malaysia over theother Asian supplier countries were more pronounced
and China was rated the most competitive among the
Asian countries. However, Western Europe and Eastern
European EU countries have a very clear advantage over
all other suppliers here.

4.2.1.4 Assurance of legality and sustainability
As demonstrated by Figure 4.2.1.8, the VPA and FLEGT
licensing appears to give Indonesia a clear advantage
over all regional competitors when it comes to assuring
legality of wood products. Indonesia also ranks strongly
in assuring sustainability of wood products. Second placein “assuring legality” is held by Malaysia, where European
importers focus on sourcing from Peninsular Malaysia andfrequently on PEFC certified products, which are readily
available there. The latter also explains Malaysia’s strong
rating in “obtaining proof of sustainability”.
Obtaining assurance of legality and sustainability
in China and Viet Nam is still considered a much
more challenging exercise by respondents. This is
in line with the IMM 2018 trade survey, as a part ofwhich respondents also still flagged up difficulties inundertaking EUTR due diligence in China and Viet Nam,and even more so in India41.

3

41. IMM Annual Report “FLEGT VPA partners in EU timber trade 2017“.
Chapter 4, page 25ff. Sarah Storck/Rupert Oliver.
32		Selected Asian VPA partner and competing countries'
competitiveness in terms of legality assurance(1=very competitive; 5=uncompetitive)

52

41

30

Indonesia

Vietnam

Malaysia

China

Vietnam

Malaysia

China

2

1

0

Indonesia

Figure 4.2.1.9 Asian countries competitiveness: sustainability

Figure 4.2.1.8: Asian countries’ competitiveness by legality
assurance. Source: IMM 2019 survey of VPA partner competitivenessSelected Asian VPA partner and competing countries'
competitiveness in terms of assuring sustainability(1=very competitive; 5=uncompetitive)
Figure 4.2.1.9 Asian countries competitiveness: sustainability

54.2.2 Changes in perception of competitiveness of
African VPA implementing partner countries 2017-2019
In the 2017 IMM baseline trade survey on competitiveness,
the African VPA partner countries achieved (very) goodto satisfactory ratings primarily in the areas of “productrange” and “technical performance”. While supplying
primarily sawn timber and some logs to the EU markets,
the African VPA countries deliver several commercial
wood species that can be found nowhere else in the world.
This remained largely unchanged in 2019. Transport
logistics have frequently remained challenging, according
to both the 2019 competitiveness and trade survey as well
as IMM trade consultations.

Figure 4.2.1.8 Asian countries competitiveness: legality assurance

4

3

Selected Asian VPA partner and competing countries'
competitiveness in terms of assuring sustainability(1=very competitive; 5=uncompetitive)

52

41

30

Indonesia

Vietnam

Malaysia

China

2

Figure 4.2.1.9: Asian countries’ competitiveness bysustainability. Source: IMM 2019 survey of VPA partner competitiveness10

Indonesia

Vietnam

MAINMalaysia
REPORT – NOVEMBER
2020
China

Figure 4.2.2.1 African countries competitiveness: legality assurance (2019)2019: African VPA implementing partner countries'
competitiveness in terms of obtaining legality assurance(1=very competitive; 5=uncompetitive)

2017: African VPA implementing partner countries'
competitiveness in terms of obtaining legality assurance
1=uncompetitive; 5=very competitive

5

5

4

4

3

3

2

2

1

1

0

Ghana

Cameroon

CAR

0

Congo Rep

Figure 4.2.2.1: African countries’ competitivenessby legality assurance (2019). Source: IMM 2019 survey of VPA

Ghana

Cameroon

CAR

Congo Rep

Liberia

Figure 4.2.2.2: African countries’ competitivenessby legality assurance (2017). Source: IMM 2019 survey of VPA

partner competitivenesspartner competitivenessThe 2019 ratings for obtaining evidence of legality
showed a positive trend over 2017, especially for Ghana
and Cameroon. Ghana’s lead in this category increased
between 2017 and 2019 (Figures 4.2.2.1 and 4.2.2.2).
Ghana has very likely profited from progress in VPA
implementation and announcements of imminent
FLEGT licensing, which can be expected to haveincreased
overalltrust
in the Ghanaian
timber sector.
2017:
African VPA
implementing
partner countries'
Cameroon
was also in
rated
orassurance
even “verycompetitivenessterms“competitive”
of obtaining legality
5=verycompetitivecompetitive” 1=uncompetitive;
by a significant
numberof respondents
in52019. At first glance, this seems to contradict
assessments made during IMM trade consultations andthe IMM trade survey, where companies frequently still

flagged up significant difficulties in undertaking EUTR
due diligence in Cameroon and called for completionof VPA implementation and FLEGT licensing in orderto facilitate trading with this country. However, when
taking into account repeated and frequent reports ofconcentration of tropical timber import trade in thehands of regional specialists over the last few years,
and given that such specialists were most likely to have
rated Cameroon in the competitiveness survey, theimprovements can be more readily explained: specialist
importers are typically very well connected in the
supply countries and now have years of experience of
EUTR due diligence.

4

Figure 4.2.3.1: Future relevance of tropical timber supply country in IMM surveys

1

Republic of the Congo remained morecompetitive in terms of legality assurance thanCentral African Republic in 2019. Liberia’s 2019
rating had to be excluded from the analysis as
only 4 respondents rated this country and all
voted “neutral”. In 2017, Liberia’s ratings had
been the second weakest before CAR.

45

4.3 Future tropical timber supply

3

IMM 2018/2019 Trade Survey: Most important tropical timber
suppliers 5 years from now

2
60

2019

2018

55
50

0

Ghana

40

Cameroon

CAR

Congo Rep

Liberia

In IMM’s 2019 EU trade survey, Indonesia andMalaysia overtook Cameroon in the question
which country respondents would see as themost important supplier of tropical timber five
years from now (Figure 4.3.1). In 2018, Cameroon
was perceived the most important future
supplier, followed by Brazil, Republic of theCongo, Malaysia and Indonesia.

35
30
25
20
15
10

Nigeria

Suriname

Malaysia

Columbia

China

Indonesia

MyanmarBolivia

Vietnam

HondurasPeru

GuyanaBrazilGabon

Liberia

DRC

Ghana

AngolaCongo Rep.

Ivory Coast

CAR

0

Cameroon

5

Figure 4.3.1: Future relevance of tropical timber supply countryin IMM surveys. Source: IMM 2018 and 2019 trade survey. 95 respondents
Figure 4.4.1:
EU trade
perceptionsof importing FLEGT-licensed timber
answered the questionin 2019and
67 in 2018.

MAIN REPORT – NOVEMBER 2020
Where possible I give preference to FLEGT-licensed timber from Indonesia over

Attitudes to Indonesia, in particular, changed
significantly in 2019, with the country obtaining
the most individual votes by far and overtaking
all four countries that were consideredpotentially more important in the future in 2018.
The VPA and FLEGT licensing was frequently
mentioned as the reason behind this projection,
as was the product range, political stability
and the “overall level of organisation” in the
country. The last two reason also applied to
Malaysia and Viet Nam. Viet Nam also gained33

Figure 4.4.1: EU trade perceptions of importing FLEGT-licensed timbersignificant ground in 2019, after being
mentioned hardly at all in 2018.
Where the African supply countries
are concerned, respondents
mentioned political instability, as well
as a general “lack of organisation”,
also with regards to EUTR due
diligence, as factors potentiallyhampering their future as suppliersto the European market. Cameroon’s
importance was repeatedly
highlighted, both as a supplier in its
own right and as a place of transit
for shipments from the Congo
Basin. However, the unclear politicalclimate makes Cameroon’s future asa supplier increasingly difficult topredict, according to respondents.

Where possible I give preference to FLEGT-licensed timber from Indonesia overunlicensed timber from competing sources
90%
2017

2018

2019

80%
70%
60%
50%
40%
30%
20%
10%
0%

DisagreePartially disagree

NeutralPartially agree

Agree

Similar assessments were madeFigure 4.4.1: EU trade perceptions of importing FLEGT-licensed timber.
for South American countries,
Source: IMM 2017/2018/2019 EU trade surveys
especially for Brazil. After being
considered second most important
only to Cameroon in 2018, Brazil fell through thepurchasing decisions, but only if the product iscompetitive at other levels as well. The 2019 Traderanking in 2019 (9th place). Political instability and theConsultations also confirmed the key findings identified
country becoming an increasingly “complicated andby the 2018 workshops:
risky” supplier under EUTR were quoted as the main
reasons. In this context, several other South Americancountries were mentioned as having potential to gainImporters place tropical timber supply relationships
in importance as suppliers to Europe, including Peru,
under greater scrutiny post EUTR. The tropical
Bolivia, Columbia, Suriname and the VPA partner
timber supply pool and product variety has reduced
countries Guyana and Honduras. However, political
as a result.
instability in these countries was mentioned as afactor potentially affecting this development. On theMarket competitiveness and environmental
other hand, a small number of respondents from therequirements place even greater stress on
Netherlands and the UK remarked that South American
maintaining strong, long-term supply relationships.
countries could gain market share from Asian suppliercountries in the future, due to the limited availability ofFSC/PEFC certification remains a greater purchasing
third-party certified timber in Asia.
preference than a FLEGT Licence for the majority ofparticipants.

•••

4.4. FLEGT licensing in purchasing decisions

As in 2018, the 2019 IMM Trade Consultations in
Antwerp and Barcelona also included workshops on“Priorities and purchase dynamics for tropical wood
products – development of supply chain relationships
and the relevance or impact of FLEGT licensing”.
Participants in Antwerp and Barcelona confirmed theconclusion from the 2018 Consultations that, while
FLEGT can play a role, it is not currently a leading
factor impacting purchasing decisions.
At all 2018 and 2019 Trade Consultations, participants
remarked that they would consider business andcommercial considerations first and foremost. Top of
the list, alongside price, was ensuring that the suppliercan deliver the product in the time frame required andin consistent quality and specification. Only once buyers
are satisfied on those points, does the focus move
more to chain of custody, certification, sustainability,
legality verification and capacity to provide EUTR due
diligence information. As a result, FLEGT licensing
can be considered a factor that can positively impact34		• Importers are not switching from other suppliers toIndonesia solely due to FLEGT licensing.

• There is still lack of awareness of FLEGT down the
supply chain in the EU.

• Suppliers of FLEGT-licensed products must stillcompete on price, availability, quality and consistentdelivery.

Responses in the IMM 2019 Trade Survey to the question
whether companies would give preference to FLEGTlicensed timber from Indonesia over unlicensed timberfrom competing sources also remained mixed against
this background (Figure 4.4.1.). However, the numberof respondents who explicitly said they would not give
preference to FLEGT-licensed timber has declined
sharply since 2017. Respondents to the Survey remarked
that FLEGT licensing was a factor that could impact
purchasing decision, but only where other productcriteria were equal.

MAIN REPORT – NOVEMBER 2020

Indonesia: Market position and prospects 5
5.1 Scope

overcome administrative and communication constraints
to market development of Indonesian licensed timberand considers price trends for Indonesian timber
products in the context of FLEGT licensing.

The section considers timber production in Indonesia
and analyses trends in Indonesia’s timber and timber
products trade spanning the period 2015 to 2019,
covering two years before and three years after
FLEGT licensing began in November 2016. Analysis
of Indonesian production and export data places the
EU in the wider market context for Indonesian timber
products. EU import data is used to assess the changing
scale, direction and share of Indonesia’s trade in timber
and timber products in the EU market.

5.2 Indonesia’s timber supply
5.2.1 Production
According to data from the Indonesian Ministry ofEnvironment and Forestry (MoEF) , following a period ofrising log production between 2016 and 2018, from 48.4
million m3 to 57.9 million m3, driven by increased supply
from plantations42 and community forests43, log production
fell 1% to 57.3 million m3 in 2019. Although production
in community forests increased 7% to 9.2 million m3 in
2019, production in plantations fell 1% to 40.1 million m3
in 2019. Production in natural forest concessions44 also
declined, by 3% to 4.9 million m3 to 4.9 million m3,
and production from land clearance operations45 fella further 30% to only around 500,000 m3 in 2019. Log
imports fell 20% to 700,000 m3. (Figure 5.2.1).

The section also summarizes the results of surveys oftimber traders in Indonesia and the EU during 2019to assess their views of the market impact of FLEGT
licensing. It reports on steps taken during the year to
60
Other
50

Log imports

million m3

40

Community
forests

30

Land clearing
for plantation

20

Industrial/
State Plantation
Natural forest
concession

1002009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Figure 5.2.1.1: Indonesia log production by forest type – 2009-2018.
Source: IMM analysis of Indonesian Ministry of Environment and Forestry datafrom RPBBI website

12.0

2015

2016

2017

2018

2019

In 2019, 70% of Indonesia’s log supply came fromindustrial plantations and 9% from natural forest
concessions, in both cases the same proportion as
the previous year, while 16% came from community
forests, up from 15% in 2018, and 3% came from‘other’ sources46.
Data on timber production published by the MoEF
needs careful interpretation as it is not always
clear the extent to which trends are due to changes
in installed capacity and production levels or in
the range of companies captured by the reporting
process. The progressive roll-out of the SVLK in
Indonesia has coincided with, and is likely partly
driving, a rise in the scope of the production units
captured by the data. This implies more accuratemonitoring of production trends in the future. The
MoEF data indicates that both the number of units
reporting, and the production capacity of reporting
units increased for all the main primary timber
product groups between 2014 and 2019 (Figure 5.2.1.2).

Quantity (million m3)

10.0

42. P
 roduction from ‘plantations’ as defined here, is dominatedby supply from industrial plantations (IUPHHK Pada Hutan
Tanaman Industri atau HTI, mainly for the pulp and paper
sector), but also includes smaller volumes from Perum
Perhutani (state plantations, mainly teak in Java and Madura),
and from ‘other plantations’ (IUPHHK Pada Hutan Tanaman
Rakyat atau HTR).

8.0
6.0
4.0

43. P
 roduction from ‘community forests’ is defined here to include
supply from IUPHHK Dalam Hutan Desa (Village forest), IUPHHK
Dalam Hutan Kemasyara katan (Community forest), Hutan
Rakyat (Peoples Plantations), and Kayu Perkebunan (Woodlots)

2.0
0.0

Capacity
Production
Plywood/LVL

Capacity
Production
VeneerCapacity
Production
Sawnwood

Figure 5.2.1.2: Capacity of reporting production units andproduction quantity of primary timber products in Indonesia
by product type – 2015-2018. Source: IMM analysis of Indonesian Ministryof Environment and Forestry data from RPBBI website

MAIN REPORT – NOVEMBER 2020

44. P
 roduction from ‘natural forest concessions’ is defined toinclude wood from IUPHHK Hutan Alam.
45. Production from ‘land clearance operations’ is defined here toinclude wood from LC Penyiapan Lahan Penanaman HTI.
46. Production from ‘other’ is defined here to include wood from:‘Izin Lainnya Yang Sah (ILS) Atau IPK’ (other legal permits),‘Pemilik atau Pedagang Hasil Hutan Kayu Bulat Dan Asal Usul
Yang Sah’ (private sources), and ‘IPHHK Lain’ (other supplies
to wood processing industry).
35

Data capture for wood pulp production appears
already to be more stable, with figures for thefour years 2016-2019 seemingly derived fromthe same group of six large production plants.
Recorded pulp production increased 2% from
7.62 million tons in 2018 to 7.81 million tons in
2019, continuing the long-term upward trend
although at a slower rate than in the previous
two years (Figure 5.2.1.4).
Data on the production and consumption valueof wood furniture in Indonesia is not readily
accessible from official sources. Estimatesfrom unofficial sources vary widely, probably
due to the high degree of fragmentation in the
sector and differences in the scope of products
covered by the estimates.
Drawing on the total value of furnitureproduction in Indonesia estimated by CSIL, theItaly-based furniture research organisation,and IMM analysis of Indonesian wood furniture
trade data, IMM estimates that the value ofwood furniture production in the country wasaround US$2.3 billion in 2019, a rise from US$2.2
billion the previous year. With export sales of
1.4 US$ billion, and imports of no more than
US$160 million, wood furniture consumption
in Indonesia is estimated to have been US$1.1
billion in 2019. In other words, it is estimatedthat nearly half the wood furniture produced inIndonesia is destined for the domestic market.
(Figure 5.2.1.5).

5.2.2 Indonesian certified forest area
IMM monitors the proportion of forest andplantation area covered by FSC, PEFC or otherindependent forest certification frameworks

36		

2015

2016

2017

2018

2019

Quantity (million million m3)

50
40
30
20
10
0

Capacity

Production
Wood chips

Figure 5.2.1.3: Capacity of reporting production units and production
quantity of wood chips in Indonesia – 2015-2018. Source: IMM analysis ofIndonesian Ministry of Environment and Forestry data from RPBBI website

12.0
2015

2016

2017

2018

2019

10.0
Quantity (million air dried tons)

In 2019, MoEF gathered data on woodchip production from 19 Indonesian mills
compared to 16 mills the previous year and19 mills in 2017. Total production reported bythese mills was flat at slightly more than 31
million m3 per year between 2017 and 2019, up
from around 26 million m3 in 2015 and 2016
(Figure 5.2.1.3). Indonesia’s wood chips areproduced in plantations and destined mainly
for the pulp sector.

60

8.0
6.0
4.0
2.0
0.0

Capacity

Production
Wood pulp

Figure 5.2.1.4: Capacity of reporting production units andproduction quantity of wood pulp in Indonesia – 2015-2018.

Source: IMM analysis of Indonesian Ministry of Environment and Forestry data fromRPBBI website

Production (IMM estimate)

Imports (customs - STIX)

Exports (customs - STIX)
Consumption (assumed)

2500

2000

US$ million

According to MoEF data, in 2019 Indonesia
produced 4.19 million m3 of plywood/LVL, 1.31
million m3 of veneer, and 2.58 million m3 ofsawn wood. For all products, production was
significantly less than 50% of total installedcapacity in 2019. Despite a rise in the number
and capacity of units reporting, there was a 4%
decline in reported production of both plywood/
LVL and sawnwood, suggesting an even larger
decline in the total level of production. For
veneer, reported production in 2019 was 2%
more than in 2018, the rise more likely due
to a 17% increase in the number of reporting
production units than to an actual increase insupply. Overall, the signs are that output oftimber mills in Indonesia declined during 2019in line with the fall in log production.

1500

1000

500

0

2015

2016

2017

2018

2019

Figure 5.2.1.5: IMM estimates of the value of production, trade andconsumption of wood furniture in Indonesia – 2015-2019.
Source: IMM analysis of STIX trade data and CSIL national furniture production data

MAIN REPORT – NOVEMBER 2020

25
2016

2017

2018

3.0

2019

2015

15

10

2017

2018

2019

2.0
1.5
1.0
0.5

5

0.0

0

2016

2.5
Quantity (million tonnes)

Million hectares

20

PHPL

FSC

PEFC

LEI

Figure 5.2.2.1: Indonesian certified forest area by scheme – 2016-2019. Source: Ministry of Environment and Forestry,

FSC, IFCC/PEFC, LEI

Wood (HS 44)

Wood furniture(HS 94)

Wood pulp(HS 47)

Paper (HS 48)

Figure 5.2.3.1: Indonesia timber import quantity by
product group – 2015 -2019. Source: IMM STIX

in each VPA Partner country where FLEGT licensing is
operational. The aim is to assess the extent to which
FLEGT licensing might provide preconditions forindependent certification, and thereby encourage greater
uptake or, alternatively, discourage further investment inforest certification by providing an effective alternative
assurance mechanism.

Forests for which PHPL is mandatory can initially becertified to the SVLK legality standard only. The SVLK
certificate is valid for three years and concessions must
now demonstrate conformance to the PHPL standard by
the end of that period. Both the PHPL and the SVLK’s
forest legality standard are subject to annual audit by a
KAN accredited independent verification body.

An assumption behind this monitoring is that the timber
legality assurance system developed as part of the VPA
is something distinct from private sector certification
initiatives. However, in the case of Indonesia, there
is no clear distinction and some overlap between thegovernment legality assurance framework and private
sector certification.

While certification to the SVLK and PHPL does
not preclude voluntary adoption of private sector
initiatives by individual forest operators, the existenceof a large and expanding mandatory framework raises
questions relating to the costs and efficiency of otherforms of certification in Indonesia. At this stage, there
is no clear evidence from analysis of certification
trends in Indonesia to indicate that the presence of
the SVLK-PHPL framework has either encouraged or
discouraged other forms of certification in the country(Figure 5.2.2.1).

In practice the SVLK system, on which FLEGT licensing
is based and is required by law for all Indonesian wood
product exporters, adopts many of the procedures
pioneered by private sector forest certification.
It requires, for example, on-site audits of forest
management operations and chain of custody by thirdparty verifiers that are accredited by Indonesia’s National
Accreditation Committee (KAN) which operates under
the guidance of the ISO/IEC 17011, the same procedure as
required by PEFC certification.
The SVLK is also regarded by the Indonesian authorities
as a key policy measure to ensure implementationof sustainable practices at national level in allcommercial forest operations and forest types. In linewith this objective, a specific standard for sustainable
management of Indonesian production forest –Pengelolaan Hutan Produksi Lestari (PHPL) – has been
integrated into the SVLK.
Originally launched in 1998, the PHPL was mademandatory for commercial logging concessions,industrial timber plantations, state-owned community
forests and private community forest in 2003. However,in practice, PHPL certificates only began to be issued ona large scale with the development and nationwide rollout of the SVLK.

MAIN REPORT – NOVEMBER 2020

Now driven by the SVLK framework, PHPL certified
forest area increased from around 12 million hectares
at the end of 2016 to 23.51 million hectares at the endof 2019. Despite efforts to promote FSC certification inIndonesia for over 20 years, FSC certified area amounted
to only 2.5 million hectares in November 2016 at thestart of licensing. In the following three years the area
has fluctuated between 2.6 million hectares and 3.1
million hectares without showing a consistent trend.
LEI, a national forest certification system which began
operations in the late 1990s (and for the five-year
period 2000 to 2005 was affiliated to FSC) had certified
2.6 million hectares by the end of 2016, declining to 2.3
million hectares in 2019.
Meanwhile, the Indonesian Forest Certification
Cooperation (IFCC) launched in 2011 and endorsed by
PEFC in 2014, had certified 1.8 million hectares in 2016,
rising to 3.91 million hectares in December 2019. Unlike
LEI and FSC, for which certification is concentrated innatural forest, all PEFC certification to date in Indonesia
is of plantations to supply the pulp and paper sector.

37

2016

2017

2018

1.4

1,200

Quantity (1000 tonnes)

1,400

1.2
1.0
0.8
0.6

2016

2017

2018

2019

1,000
800
600
400

Wood (HS 44)

Wood furniture(HS 94)

Wood pulp(HS 47)

Paper (HS 48)

Source: IMM STIX

18

1,200
2016

2017

2018

2019

600
400
200
0

Quantity (1000 tonnes)

800

5.2.3 Imports
While still dwarfed by domestic production and exports,
Indonesia’s imports of timber and timber products
are rising in several product groups. Total Indonesian
imports of timber and timber products increased 21% to
5.1 million tonnes in 2019. The growth in import quantity
was concentrated in wood (HS 44) products and, to alesser extent, paper products (Figure 5.2.3.1).
In value terms, Indonesia’s total imports of timber andtimber products were stable at US$3.3 billion in 2018 and2019. In 2019, a rise in the value of Indonesia’s imports ofpaper, wood and wood furniture products was offset by afall in import value of wood pulp. (Figure 5.2.3.2).
The growth in the quantity of HS 44 wood products
imports in 2019 was driven almost entirely by chips of
low unit value, mainly destined for the pulp sector andderived from Viet Nam. After rising sharply in 2017,
imports of logs declined in 2018 and 2019. Log imports

2016

2017

2018

2019

14
12
10
8
6
4
2
0

Figure 5.2.3.4: Indonesia import quantity of wood (HS 44)
products by supply country – 2015-2019 Source: IMM STIX

2015

16

1,000

38		

Other

Figure 5.2.3.3: Indonesia import quantity of wood
(HS 44) products by product type – 2015-2019.

Figure 5.2.3.2: Indonesia timber import value
by product group – 2015-2019 Source: IMM STIX

2015

Particle board& similar

0.0

Sawnwood

0

0.2

Logs

200

0.4

Quantity (1000 tonnes)

2015

Fuel wood

Value (billion)

1,600

2019

Plywood& similar

2015

1.6

Fibreboard

1.8

Sawnwood

Plywood & similar

VeneerMouldings

Figure 5.2.3.5: Indonesia import quantity of wood products(excluding logs) identified as of tropical hardwood species
by product type – 2015-2019. Source: IMM STIX

have low unit value and were almost all identified
under Indonesian product code 44034990 which covers
pulpwood logs of tropical species. Imports of all other
HS44 wood products were low and quite flat during the2015 to 2019 period (Figure 5.2.3.3).
During the 2015 to 2019 period, Indonesia chip imports
derived mainly from Viet Nam, with smaller quantities
from Malaysia, South Africa and Thailand. Indonesia’s
imports of logs derived almost exclusively from
Malaysian plantations and were destined mainly forthe pulp sector. Sawnwood imports were dominatedby temperate species from the US and New Zealand,with small volumes from Canada, Germany, Uruguay,
China and Chile. Panel products were sourced almost
exclusively from Thailand, Malaysia and New Zealand(Figure 5.2.3.4).
Indonesian import data indicates that if tropicalwood from third countries is being transited through

MAIN REPORT – NOVEMBER 2020

5.0
4.5

2015

2016

2017

2018

700

2019

2015

Quantity (1000 tonnes)

4.0
Quantity (1000 tonnes)

2016

2017

2018

2019

600

3.5
3.0
2.5
2.0
1.5

500
400
300
200

1.0
100

0.5
0.0

0

Figure 5.2.3.6: Indonesia import quantity of wood products(excluding logs) identified as of tropical hardwood species
by supply country – 2015-2019. Source: IMM STIX

Figure 5.2.3.7: Indonesia wood pulp (HS 47) importquantity by supply country – 2015-2019. Source: IMM STIX

140

250

2015
2015

2016

2017

2018

2019

100

50

0

Figure 5.2.3.8: Indonesia paper import quantity
by supply country – 2015-2019. Source: IMM STIX

Indonesia to obtain a FLEGT Licence, the volumes
involved are small and declining overall (Figure 5.2.3.5).
Indonesian imports of sawnwood products identified
in trade statistics as being composed of tropical timber
species fell from 14,000 tonnes in 2017 to less than
7,000 tonnes in 2019. While tropical sawnwood imports
increased from Republic of the Congo and Malaysia in
2019, they fell sharply from Cameroon and Papua New
Guinea (Figure 5.2.3.6). Indonesia’s imports of tropical
hardwood faced plywood increased in 2018 to 2019, but
to little more than 5,000 tonnes, mostly from China.
In the absence of survey data on Indonesian internal
trade, there is no way of knowing how much of theseimports of tropical wood products were for re-export ordomestic consumption.
Indonesia’s wood pulp imports continued to rise fromthe US and the EU in 2019, but these gains were offset
by declining imports from Canada, New Zealand, South
Africa and Brazil (Figure 5.2.3.7).

MAIN REPORT – NOVEMBER 2020

2017

2018

2019

100
Value (US$ million)

Quantity (1000 tonnes)

200

150

2016

120

80
60
40
20
0

Figure 5.2.3.9: Indonesia wood furniture (HS 94) importvalue by supply country – 2015-2019. Source: IMM STIX

Indonesia’s imports of paper products are sourced froma wide variety of countries, although only in relatively
small volumes. The EU was formerly the largest
external source, supplying around 150,000 tonnes per
year between 2015 and 2019, but recently has been
overtaken by China, which supplied 220,000 tonnes in
2019. Imports from South Korea increase sharply to justover 150,000 tonnes in 2019. Only two other countries– Thailand and Viet Nam – supplied more than 50,000
tonnes of paper to Indonesia in 2019 (Figure 5.2.3.8).
China is the leading external supplier of wood furniture
to Indonesia, with sales of US$117 million in 2019, 14%
more than in 2019. Total wood furniture imports fromthe EU were US$16.4 million in 2019, 10% less than theprevious year. Viet Nam was the only other country
supplying more than US$10 million of furniture toIndonesia in 2019. (Figure 5.2.3.9).

39

5.3 Indonesia timber product exports
7.0
2015

5.3.1 Indonesia timber product export data sources• while data on Indonesian exports of V-legal

timber is published on-line by the Timber
Legality Information System (SILK) at
https://silk.dephut.go.id, there is no comparable
on-line system for regular publication of harmonizeddata on FLEGT- licensed imports in the EU48;• customs data provides a continuous time series, incontrast to the SILK data on V-legal exports whichis available only from 2017 onwards;

With completion of the SVLK roll-out, the SILK data
should in time match Indonesia’s customs data for
product groups requiring V-legal certificates andmay be used to help inform market monitoring in
future IMM reports.

3.0
2.0

0.0

Pacific, 0.26, 1.6%

48. That is not to say there is no reporting system, only thatthe system that exists is designed to assess regulatory
conformance and not market impacts. Article 8(1) of the EU
FLEGT Regulation requires all Member States to submit anannual report including information on imports of FLEGTlicensed products (quantity and number of licenses received)by HS headings specified in the VPAs (not necessarily at thehighest level of HS resolution). Based on the information
submitted, Article 8(3) of the Regulation requires the EC toprepare and make public a synthesis report covering theprevious calendar year by 30 June.
40		Wood furniture(HS 94)

Wood pulp(HS 47)

Paper (HS 48)

Other, 0.86,
5.3%

EU, 0.78, 4.8%

North America, 0.81, 5.0%

India/South Asia,
1.30, 8.0%
China/HK/
Taiwan, 6.00,
36.9%
Middle East, 1.35, 8.3%

Southeast Asia,
1.82, 11.2%

Northeast Asia,
3.06, 18.8%

Figure 5.3.2.2: Destination region share of Indonesia
export quantity of timber and timber products by million
tonnes, % – 2019. Source: IMM-STIX

5.0

2015

4.5

2016

2017

2018

2019

4.0
3.5
Value (US$ billion)

47. Indonesian customs data is supplied to IMM by BTS Ltd, a UKbased company specialising in sourcing global trade flow
data. EU customs data is derived by IMM from the Eurostat
COMEXT system.

Wood (HS 44)

Figure 5.3.2.1: Indonesia export quantity of timber and timber
products by product group – 2015-2019. Source: IMM-STIX

5.3.2 Indonesia total timber and timber
products exports
Indonesia’s worldwide exports of timber andtimber products totalled 16.2 million tonnes in
2019, an 8% gain compared to 15.0 million tonnes
in 2018. Indonesia’s exports were formerly
dominated by wood (HS 44) products, but export
quantity of these products has been falling inrecent years, while exports of wood pulp andpaper have been rising. Wood (HS 44) productexports were 5.1 million tonnes in 2019, down
3% compared to the previous year. Indonesia’s
total exports of pulp and paper were 10.8 million
tonnes in 2019, 15% more than in 2018. Indonesia’s
worldwide exports of wood furniture were flat in

2019

4.0

contrast to the SILK data which doesn’t capture
all trade during the period of SVLK roll-out;share of total EU imports relative to competing
supply countries.

2018

5.0

• customs data covers all Indonesian exports, in• customs data allows assessment of Indonesia’s

2017

1.0

• customs data is fully disaggregated by bothcountry and product group at the highest level ofHS resolution;

2016

6.0
Quantity (million tonnes)

This analysis of Indonesia timber product exports
and of EU trade with Indonesia draws on customs
data47 in preference to data compiled from V-legal
certificates in Indonesia and FLEGT Licences in the
EU for the following reasons:

3.0
2.5
2.0
1.5
1.0
0.5
0.0

Wood (HS 44)

Wood furniture(HS 94)

Wood pulp(HS 47)

Paper (HS 48)

Figure 5.3.2.3: Indonesia export value of timber and timber
products by product group – 2015-2019. Source: IMM-STIX

MAIN REPORT – NOVEMBER 2020

Other, 0.73,
5.9%

Pacific, 0.40,
3.2%

EU, 1.15, 9.3%

In quantity terms, 83% of Indonesia’s exports oftimber and timber products were destined for other
Asian markets in 2019, with China alone accounting
for 37%. Total exports to the EU, of 778,000 tonnes,
accounted for 4.8% of total export quantity in 2019
(Figure 5.3.2.2). This compares to 729,000 tonnes
accounting for 4.9% in 2018.

India/SouthAsia, 0.81, 6.6%

Middle East,
0.91, 7.3%

China/HK/
Taiwan, 3.40,
27.6%

Southeast Asia,
1.34, 10.8%

In value terms, Indonesia’s worldwide exports oftimber and timber products decreased 4% to US$12.3
million in 2019. After increasing 11% in 2018, thevalue of Indonesia’s exports of wood (HS 44) products
declined nearly 14% in 2019, to US$3.8 billion. Export
value of paper fell 3% in 2019, to US$4.4 billion afterrising 18% the previous year. However, export valueof wood pulp continued to rise in 2019, gaining 6% to
US$2.8 billion following a 10% rise the previous year.
Export value of wood furniture also continued to rise,
up 2% to US$1.4 billion in 2019, building on a 4% gainin 2018. (Figure 5.3.2.3).

Northeast Asia,
2.12, 17.2%

North America, 1.50, 12.1%

Figure 5.3.2.4: Destination region share of Indonesia export
value of timber and timber products by US$ billion, % – 2019.
Source: IMM-STIXIX

2.5
2016

2017

2018

2019

2.0
1.5

5.3.3 Indonesia exports of wood (HS 44) products

Other

Sawnwood

VeneerParticle board

Joinery

Fibreboard

Charcoal

Mouldings

Other wood n.e.s.

Fuel wood

0.5
0.0

Figure 5.3.3.1: Indonesia export quantity of wood (HS 44)
by product type – 2015-2019. Source: IMM-STIX

2.5
2015
Quantity (million tonnes)

In value terms, other Asian markets accounted
for 69% of Indonesian timber and timber productexports in 2019. Total export value to the EU, of
US$1.15 billion, accounted for 9.3% of total export
value in 2019 (Figure 5.3.2.4). This compares to US$1.14
billion accounting for 8.8% of export value in 2018.

1.0

Plywood & similar

Quantity (million tonnes)

2015

quantity terms between 2016 and 2019 at around
400,000 tonnes (Figure 5.3.2.1).

2016

2017

2018

2.0

1.5

1.0

0.5

0.0

Figure 5.3.3.2: Indonesia export quantity of wood (HS 44)
products by destination – 2015-2019. Source: IMM-STIX

MAIN REPORT – NOVEMBER 2020

2019

In 2019, there was a decline in Indonesian exportsof plywood (-5% to 1.77 million tonnes), mouldings/
decking (-17% to 501,000 tonnes), charcoal (-5% to486,000 tonnes), joinery products (-4% to 200,000
tonnes), veneer (-17% to 81,000 tonnes) and S4S
sawnwood (-21% to 70,000 tonnes). However,these losses were partially offset by rising exportsof wood chips (mainly for pulp) and pellets (forenergy), which increased 6% to 902,000 tonnes,
fibreboard, up 2% to 352,000 tonnes, and particle
board, up 39% to 96,000 tonnes (Figure 5.3.3.1).
In recent years, there has been a significant shift inIndonesian wood product exports towards Northeast
Asia and away from China (5.3.3.2). These trends
continued in 2019. Indonesia’s exports to Northeast
Asia increased 2% to 2.03 million tonnes in 2019.
Although exports of plywood to Japan fell in 2019, thiswas offset by a rise in exports of wood chips to thisdestination. In contrast, in trade with the Republic ofKorea, exports of plywood and particleboard increased
while exports of wood pellets declined during 2019.
Indonesia’s exports to China fell a further 10% in
2019, to 1.09 million tonnes, after a 30% fall theprevious year. Indonesia’s exports of wood chips
and plywood to China, each close to 1 million tonnes
only a few years before, had fallen to negligible
levels by 2019. Most exports to China now comprisemouldings/decking and “other wood not elsewherestated”, both of which declined in 2019.
Indonesia’s exports of wood products to Middle
Eastern countries were flat in 2019 at 520,000 tonnes.
Most exports to the region go to Saudi Arabia, Iraq,

41

0.7
2015

0.9
2015

2016

2017

2018

2019

0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0

Value (US$ billion)

Value (US$ billion)

0.8

2016

2017

2018

2019

0.6
0.5
0.4
0.3
0.2
0.1
0.0

Figure 5.3.4.1: Indonesia export value of wood furniture(HS 94) by product type – 2015-2019. Source: IMM-STIX

Figure 5.3.4.2: Indonesia export value of wood furniture(HS 94) by destination – 2015-2019. Source: IMM-STIX

Jordan, and Syria and comprise plywood, fibreboard andcharcoal. Indonesia’s exports to North America declined
7% to 331,000 tonnes in 2019. Exports to this region are
dominated by plywood, with smaller quantities of flooring,mouldings/decking and picture frames, almost all destinedfor the United States.

Indonesian wood furniture exports increased to all threeof the main destination regions in 2019 (Figure 5.3.4.2).
Exports to North America increased 6% to US$686
million in 2019, maintaining the strong growth of thetwo previous years. Exports to the EU, increased 5%
to US$317 million in 2019, building on the 2% gain of
the previous year. Exports to Northeast Asia, mainly
Japan, increased 2% to US$158 million after falling 10%
the previous year. However, exports to other smaller
destination regions were generally declining in 2019,
down 15% to US$53 million in China, down 5% to US$52
million in the Oceania/Pacific region (mainly Australia),
down 13% to US$29 million in South East Asia, and down
20% to US$18 million in the Middle East.

Indonesia exported 306,000 tonnes of wood products to the
EU in 2019, a 9% decline compared to the previous year.
In value terms, exports to the EU fell 10% from US$554
million in 2018 to US$504 million in 2019. The decline inexports to the EU in 2019 was concentrated in plywood,
which fell 21% in quantity to 83,000 tonnes and 24% in
value to US$101 million. Exports of joinery products tothe EU lost a little ground in 2019, falling 1% to 91,600
tonnes (-1% to US$199 million), but this followed a 31%
gain in quantity and 30% gain in value the previous year.
There was some slight slippage in Indonesia’s exportsof mouldings/decking (down 3% to 64,500 tonnes) andcharcoal (down 2% to 49,200 tonnes) to the EU during 2019,
and a bigger fall in exports of veneer (down 20% to 2,150
tonnes), and S4S sawnwood (down 33% to 1,770 tonnes).
Small gains were made in exports of marquetry/ornaments(+13% to 8,440 tonnes) and tableware (+4% to 2,410 tonnes).

5.3.4 Indonesia exports of wood furniture(HS 94) products
Indonesia’s exports of wood furniture comprise mainly
products for external use. There is no separate HS code forgarden furniture, so these products are included under HS
94036090 (“other” not elsewhere stated49) and HS 94016900(non-upholstered seating). Exports of both these productgroups increased in 2019, by 2% to US$792 million and by 1%
to US$329 million respectively. In percentage terms, there
were larger increases in exports of two interior furniturecategories, suggestive of new investment for export. Exports
of upholstered seating (HS 94016100) increased 88% to US$35
million and kitchen furniture (HS 94034000) increased 26%
to US$29 million. However, exports of bedroom furniture(HS 94035000) and office furniture (HS 94033000) declined
in 2019, respectively by 2% to US$165 million and 18% to
US$21 million (Figure 5.3.4.1).

5.3.5 Indonesian exports of wood pulp (HS 47)
and paper (HS 48) products
Indonesia’s exports of wood pulp to China, by far thelargest destination, increased 26% to 3.74 million tonnes
in 2019, bouncing back from a 9% decline the previous
year. Exports to other destinations were limited, butrising strongly, during 2019, up 22% to 361,000 tonnes
to the Republic of Korea, up 22% to 335,000 tonnes to
Bangladesh, up 36% to 276,000 tonnes to India, up 137%
to 124,000 tonnes to Turkey, and up 118% to 124,000
tonnes to Viet Nam (Figure 5.3.5.1). Exports of Indonesian
wood pulp to the EU in 2019 were negligible, no morethan 605 tonnes, all destined for the UK.
The largest destinations for Indonesian exports of paper
products are in South East Asia and China (Figure 5.3.5.2).
Exports increased 1% to both regions in 2019, to 1.28
million tonnes in South East Asia and 1.15 million tonnes
in China. In percentage terms, exports increased more
rapidly to other regions in 2019 including the Middle
East (up 7.5% to 569,000 tonnes), North East Asia (up 13%
to 555,000 tonnes), India/South Asia (up 7% to 449,000
tonnes), Africa (up 1% to 433,000 tonnes), the EU (up
27% to 366,000 tonnes), and North America (up 27% to323,000 tonnes).

49. However, unlike the EU, Indonesia has no separate product code for “living/dining room” furniture so the Indonesian code 94036090 for “otherwood furniture not elsewhere stated” may also include a significant, but unknown proportion, of interior furniture.

42		

MAIN REPORT – NOVEMBER 2020

4.0

2015

2016

2017

2018

1.4

2019

2015

3.0
2.5
2.0
1.5
1.0

2018

2019

0.8
0.6
0.4
0.2

0.0

0.0

Figure 5.3.5.1: Indonesia export quantity of wood pulp
(HS 47) by destination – 2015-2019. Source: IMM-STIX

Figure 5.3.5.2: Indonesia export quantity of paper (HS 48)
products by destination – 2015-2019. Source: IMM-STIX

400

700
2015

2016

2017

2018

2015

2019

Quantity (million tonnes)

500
400
300
200

2016

2017

2018

2019

350

600

Value (US$ million)

2017

1.0

0.5

300
250
200
150
100

100
0

2016

1.2
Quantity (million tonnes)

Quantity (million tonnes)

3.5

50

Wood (HS 44)

Wood furniture(HS 94)

Wood pulp(HS 47)

Paper (HS 48)

Figure 5.4.1.1: EU import value of timber and timber
products from Indonesia, by product type – 2015-2019.
Source: IMM-STIX

5.4 EU timber and timber productimports from Indonesia
5.4.1 EU imports from Indonesia by product groupEU trade data (derived from Eurostat COMEXT) records alarger gain in imports from Indonesia in 2019 than indicatedby Indonesia export data. The EU import value of Indonesiantimber and timber products increased 11% from US$1.24
million in 2018 to US$1.38 billion in 2019, building on a 6%
gain the previous year50. In quantity terms, EU imports fromIndonesia increased 14% from 676,000 tonnes in 2018 to
769,000 tonnes in 2019, after falling 6% the previous year.

0

Wood (HS 44)

Wood furniture(HS 94)

Wood pulp(HS 47)

Paper (HS 48)

Figure 5.4.1.2: EU import quantity of timber and timber
products from Indonesia, by product group – 2015-2019.
Source: IMM-STIX

The value of EU imports of wood (HS 44) products fromIndonesia decreased 3% from US$604 million in 2018 to
US$588 million in 2019 losing some of the 9% gain madethe previous year. This decline in imports of Indonesian
wood products in 2019 was offset by an 18% rise in importsof Indonesian wood furniture, to US$411 million, and a 31%
increase in imports of Indonesian paper products, to US$379
million. EU imports of wood pulp from Indonesia, always
limited, were close to zero in both 2018 and 2019 (Figure 5.4.1.1).
In quantity terms, EU imports of Indonesian wood (HS44) products decreased 4% from 326,000 tonnes in 2018 to

50. Higher import values reported by Eurostat COMEXT compared to the export values reported in Indonesian export statistics are expected as the former
are CIF values, including freight costs, while the latter are FOB values, excluding these costs. Differences in annual exports reported by Indonesia
and annual imports reported by the EU are also partly due to the time lag between departure of shipments from Indonesia and arrival in the EU.
However, the size of the discrepancy between the value of trade reported in Indonesian export data and EU import data in 2019 was larger than inprevious years. Much of the discrepancy was due to very high import values reported by the Netherlands for Indonesian joinery under HS44189990(other joinery not elsewhere stated) in May 2019, wood furniture under HS 94036090 (other n.e.s. - usually implies garden furniture in this context)
and HS 94016900 (non-upholstered seating) in June 2019, and an even larger spike in import value for HS 94036090 in September 2019. These highimport values were not reflected in an equivalent increase in import tonnage and implied more than doubling of unit value for these specific products
compared to the long-term average in those months. Although Indonesian data shows a slow rise in export value in the relevant joinery productcategory and both furniture categories to the Netherlands during 2019, the scale of the recorded rise is much less and there are no monthly spikes asrecorded in Netherlands data. This raises questions over the accuracy of the Netherlands data reported by Eurostat COMEXT.
MAIN REPORT – NOVEMBER 2020

43

EU imports of Indonesian mouldings, consisting
primarily of bangkirai decking profiles, increased 1% in
both value and quantity in 2019, respectively to US$121
and to 64,000 tonnes. However, other countries madelarger gains in the EU decking market during the year,
notably Brazil, Russia, Peru and Bolivia. Gabon was also
beginning to make inroads into this market in 2019.
It is likely that the rise in EU imports of mouldings fromIndonesia in 2019 was at least partly due to reclassificationof products previously identified as sawnwood in EU
customs declarations as part of efforts to iron out
mismatches with FLEGT Licences. Sawnwood (HS4407)
is one product group where there has been a particularly
large discrepancy in trade data reported respectively by
Indonesia and the EU. In 2018, the EU reported imports of

2018

2019

140
120
100
80
60
40

Other

Chips/biomass

Picture frames

Tableware

Veneer

Sawnwood

Ornaments

Charcoal

Plywood

Mouldings

0

Joinery

20

Figure 5.4.2.1: EU import value of wood (HS 44) products
from Indonesia by product type – 2015-2019.
Source: IMM-STIX

100
2015

90

2016

2017

2018

2019

80
70
60
50
40
30
20

Other

Picture frames

Chips/biomass

Tableware

Veneer

Sawnwood

Ornaments

0

Charcoal

10
Mouldings

EU imports of Indonesian joinery products were higher
in 2019 than the previous year, rising 10% in value toUS$225 million and 6% in quantity to 86,000 tonnes51.
EU imports of Indonesian wooden doors, mainly destinedfor the UK and Netherlands, continued to strengthen in
2019. Indonesia faces intense competition from China,
Russia, Ukraine, Malaysia, and Viet Nam in the EU
market for other joinery products - such as laminatedwindow scantlings and kitchen worktops. However, EU
imports of these products from Indonesia were rising in2019 and Indonesia maintained its position as the second
largest external supplier to the EU, after China.

2017

160

Plywood

There was some consolation in that direct imports ofplywood from Indonesia increased in 2019 into theNetherlands (+6% to 13,000 tonnes) and Germany(+5% to 17,700 tonnes) despite the overall weaknessof the market. Imports of Indonesian plywood by the
Netherlands in 2019 were double those of 2016 just before
licensing started. However, the gains made in thesemarkets in 2019 were not enough to offset declining
imports in 2019 in the UK, Belgium and Italy.

2016

180

Joinery

EU import trends for Indonesian wood (HS 44) products
varied widely between product groups in 2019 (Figures
5.4.2.1 and 5.4.2.2). There was a sharp fall in importsof plywood, with both value and quantity down 11% in2019, respectively to US$111 million and 83,000 tonnes.
The pace of EU imports of plywood fell from the middleof 2019 in the face of a tightening market and highly
competitive conditions, with particularly low prices for
Russian birch plywood and Chinese mixed hardwood
products that have been taking market share fromtropical products.

2015

200
Value (US$ million)

5.4.2 EU imports of wood (HS 44) products
from Indonesia

220

Quantity (1000 tonnes)

313,000 tonnes in 2019 after rising 1% the previous year.
Import quantity of wood furniture increased by 3% in 2019,
to 100,000 tonnes, and there was a 41% increase in importsof Indonesian paper, to 356,000 tonnes. EU imports ofIndonesian wood pulp fell from a peak of 26,000 tonnes in2016 to only 500 tonnes in 2019 (Figure 5.4.1.2).

Figure 5.4.2.2: EU import quantity of wood (HS 44)
products from Indonesia by product type – 2015-2019.
Source: IMM-STIX

sawnwood from Indonesia of 13,650 tonnes with value of
US$30 million, mainly destined for the Netherlands andGermany. This was around five times exports reported byIndonesia of 2,600 tonnes with value of US$6.5 million.
In 2019, imports of sawnwood from Indonesia reportedby the EU fell 60% in value to US$12.3 million and 63% inquantity to 5,000 tonnes. This large fall brought the EU
figures somewhat closer to exports reported by Indonesiaof 1,770 tonnes with value of US$4.4 million in 2019. Thismay be due to on-going efforts to rectify mismatches
between product codes, with products previously identified
as HS4407 sawnwood now classified as HS4409 mouldings.
The fact that the discrepancy was still large in 2019suggests more work is needed on this issue.

51. There is a significant discrepancy between Indonesia’s export data for joinery products in 2019, which shows a slight decline, and EU imports
which show a strong rise, particularly in US$ value. In part, this may be due to a significant proportion of joinery products dispatched fromIndonesia in late 2018 only arriving into the EU in early 2019. However, the particularly large increase in EU import value from Indonesia in 2019is strongly influenced by an unexplained temporary but sharp increase in Netherlands import value reported by Eurostat for joinery underHS44189990 (other joinery not elsewhere stated) in May 2019. This increase was not matched by an equivalent rise in Indonesian export value
or in Netherlands import quantity and implied a short term and unprecedented rise in unit value of imports from around US$2000-US$3000 per
tonne to over US$25000 per tonne during that month only.
44		MAIN REPORT – NOVEMBER 2020

200

2015

180

2016

2017

2018

2019

EU imports of all other wood product groups fromIndonesia, including tableware and kitchenware, picture
frames, packaging, chips and other biomass, were all
negligible in 2018 and 2019, not exceeding 1600 tonnes andUS$6 million per annum in any single product category.

Value US$ million)

160
140
120
100
80
60
40

Other

Denmark

Greece

Spain

Italy

FranceBelgium

GermanyUK

Netherlds.

20
0

Figure 5.4.2.3: EU import value of wood (HS 44) products
from Indonesia by destination – 2015-2019.
Source: IMM-STIX

100

2015

90

2016

2017

2018

2019

Quantity (1000 tonnes)

80
70
60
50

Most EU imports of Indonesian wood products weredestined for just four countries in 2019: Netherlands,
UK, Germany and Belgium (Figures 5.4.2.3 and 5.4.2.4).
In 2019, the Netherlands overtook the UK as the single
largest EU destination in value terms, although the UK
remained the largest market in quantity terms.
In 2019, there was strong growth in Netherlands
imports of the five product groups which now dominate
Indonesian wood trade with the country; wooden doors,
other laminated joinery products, mouldings, plywood,and charcoal. Netherlands imports of sawnwood fromIndonesia declined sharply during the year, which may,as previously noted, be due to reclassification of products
to iron out mismatches in FLEGT Licences.
UK imports of wood products from Indonesia comprisemainly wood doors, plywood, and mouldings. While UK
imports of wood doors and mouldings increased slightly
in 2019, imports of plywood weakened after strong
growth the previous year.
In Germany, mouldings, plywood, and charcoal are themain wood products imported from Indonesia. In 2019,
Germany’s imports of Indonesian mouldings fell sharply,
continuing the decline of the previous year. Imports ofIndonesian charcoal also declined. However, Germany’s
imports of Indonesian plywood increased slightly.

40
30
20

Other

Spain

Denmark

Italy

GreeceFranceBelgium

Germany

Netherlds.

UK

10
0

regulation, increased 10% in value to US$30 million in2019 and 4% in quantity to 8,600 tonnes.

Figure 5.4.2.4: EU import quantity of wood (HS 44)
products from Indonesia by destination – 2015-2019.
Source: IMM-STIX

The value of EU imports of veneer from Indonesia fell
17% to US$9.8 million in 2019, continuing a decline
on-going since 2016. EU import volume of veneers fell
16% to 2,300 tonnes. Nearly all the veneer is destined forGermany and comprises softwood, perhaps surprising
given the tropical origin, although unusually amongst
tropical countries, Indonesia has areas of pine forest,
some established over 50 years ago.
EU imports of Indonesian charcoal, which is neither
subject to FLEGT licensing nor EUTR regulation, increased
rapidly between 2015 and 2018, but fell back in 2019,declining 7% in value, to US$45 million, and 1% inquantity, to 48,700 tonnes. In 2019, there was a significant
rise in EU imports of charcoal from South Africa, Namibia
and Cuba, while imports from the largest suppliers, which
include Indonesia alongside Ukraine and Nigeria wererelatively flat at a high level after rising in 2018.

As in Germany, wood products imports into Belgiumfrom Indonesia consist primarily of plywood, mouldings
and charcoal. Belgian imports of Indonesian plywood fell
sharply in 2019, while imports of mouldings and charcoal
were flat during the year.
In France, imports of wood products from Indonesia werepreviously dominated by mouldings, but these have been
declining in recent years and fell again in 2019. French
imports of laminated joinery products from Indonesia
also fell in 2019 after rising in 2018. However, French
imports of wood flooring and doors, ornaments, and“other wood products not elsewhere stated” all increased
in 2019.
In Italy in 2019, imports of Indonesian plywood
declined after a rise the previous year, while imports ofIndonesian flooring also continued to decline. However,these losses were partly offset by a rise in Italian
imports of Indonesian mouldings during the year.
Wood products imports into Greece from Indonesia,
almost entirely comprised of charcoal, were declining
in 2019. Imports of Indonesian wood ornaments into
Spain, the leading product group in that market, declined
sharply in 2019. This was partly offset by a rise in Spain’s
imports of Indonesian charcoal during the year.

EU imports of Indonesian ornaments (under HS 4420),
also subject neither to FLEGT licensing nor EUTR

MAIN REPORT – NOVEMBER 2020

45

160

2016

2017

2018

45

2019

2017

2018

2019

20
15

Figure 5.4.3.1: EU import value of wood furniture (HS 94)
from Indonesia by product type – 2015-2019. Source: IMM-STIX

kitchen

Shop

kitchen

OfficeBedroom

Seats notupholsteredSeats
upholstered0

Dining/living

0

Other (n.e.s.)

5
Shop

10

20

Bedroom

60

25

Seats notupholstered80

Dining/living

100

30

Other (n.e.s.)

120

40

Figure 5.4.3.2: EU import quantity of wood furniture (HS 94)
from Indonesia by product type – 2015-2019. Source: IMM-STIX

2018

2019

2015

2016

2017

2018

2019

Other

2017

Sweden

2016

Spain

2015

Belgium

30

140

25
Quantity (1000 tonnes)

120
100
80
60
40

20
15
10

Source: IMM-STIX

5.4.3 EU imports of wood furniture (HS 94)
products from Indonesia
In 2019, Eurostat COMEXT data shows that the valueof EU imports of Indonesian non-upholstered wood
seating – which is FLEGT-licensed but not covered by
EUTR – increased 25% to US$123 million in 2019. There
was also a 34% increase, to US$172 million, in the valueof imports of “other not elsewhere stated” (other n.e.s.)wood furniture from Indonesia.
In contrast to these product groups, which primarily
consist of furniture for exterior use, changes in EU importvalue of interior furniture categories from Indonesia wereless dramatic. EU import value of Indonesian bedroom
furniture increased 9% to US$18 million, a gain offset by
a 2% fall in import value of dining/living room furniture,
to US$80 million, a 4% fall in import value of upholsteredDenmark

Italy

Germany

FranceSwedenDenmark

Italy

Spain

FranceBelgium

GermanyUK

Netherlds.

Figure 5.4.3.3: EU import value of wood furniture (HS 94)
products from Indonesia by destination – 2015-2019.

0

Netherlds.

5

20

UK

Value (US$ million)

2016

35
Quantity (1000 tonnes)

Value US$ million)

140

0

2015

40

Seats
upholstered

2015

Office180

Figure 5.4.3.4: EU import quantity of wood furniture (HS94) products from Indonesia by destination – 2015-2019.
Source: IMM-STIX

seating, to US$12 million, a 2% fall in import value of officefurniture, to US$4.8 million, and a 26% fall in import valueof kitchen furniture to US$1.5 million.(Figure 5.4.3.1).
Changes in EU import quantity of furniture from Indonesia
broadly mirror the changes in import value, although therise in imports of other not elsewhere stated (n.e.s.) wood
furniture (+6% to 42,000 tonnes) and non-upholsteredseating (+12% to 22,000 tonnes) is much more moderate(Figure 5.4.3.2). Taken at face value, this data implies a large
increase in the unit value of EU imports from Indonesia
of other n.e.s. wood furniture from US$3480/tonne in2018 to US$4100/tonne in 2019, and of non-upholsteredseating, from US$4560/tonne to US$5460/tonne. While notimpossible, the fact that the sharp increase in import value
is concentrated in just one EU country, the Netherlands(Figure 5.4.3.3), over a very short period52 and is not

52. Specifically, Eurostat data shows sharp increases in Netherlands import value from Indonesia for non-upholstered wood seating under
HS94016900 in June and July 2019, and “other not elsewhere stated” wood furniture in 94036090 in September 2019. These increases were notmatched by an equivalent rise in import quantity (or in Indonesian export value) and implied a short term, and unprecedented rise in unit value ofimports from around US$3000-US$4000 per tonne to over US$15,000 per tonne for those months only.
46		MAIN REPORT – NOVEMBER 2020

250
2015

200
2016

2017

2018

2019

150

100

2019

100

50

Sanitary in large
Uncoated
sheetswriting/printing inlarge sheets

Coated in large
sheets0

Other

Uncoated
writing/printing

Sanitary

Coated in large
sheetsOther

Figure 5.4.4.2: EU import quantity of paper (HS 48) fromIndonesia by product type – 2015-2019. Source: IMM-STIX

Figure 5.4.4.1: EU import value of paper (HS 48) fromIndonesia by product type – 2015-2019. Source: IMM-STIX

120

120

2015

2016

2017

2018

2019

100

2015

2016

2017

2018

2019

Figure 5.4.4.3: EU import value of paper (HS 48) products
from Indonesia by destination – 2015-2019. Source: IMM-STIX
mirrored in Indonesian export data, raises questions of
the accuracy of the value data reported to Eurostat by the
Netherlands. In this instance, the moderate gain in importquantity is probably closer to the actual trend.
By destination, according to Eurostat data the
Netherlands recorded a very large increase in importvalue and a moderate increase in import quantity ofwood furniture from Indonesia in 2019. In 2019, if theEurostat data is to be believed, the Netherlands becameby far the largest EU market for Indonesian wood
furniture in value terms, with imports rising 59% to
US$130 million, compared to a rise of 13% to US$66
million in the UK, the second largest market. During theyear, the import value of wood furniture from Indonesia
also increased in Germany (+9% to US$55 million),
Belgium (+21% to US$45 million), Spain (+1% to US$18
million), and Denmark (+19% to US$10 million). However,import value declined in France (-7% to US$42 million),
Italy (-14% to US$16 million) and Sweden (-4% to US$8
million) (Figure 5.4.3.3).

MAIN REPORT – NOVEMBER 2020

Other

PolandCroatia

Germany

Romania

Spain

Other

Croatia

Netherlds.

Romania

Germany

Slovenia

Spain

0

Italy

0

Belgium

20

Greece20

Slovenia

40

Italy

40

60

Belgium

60

80

Greece80

UK

Quantity (1000 tonnes)

100

UK

Value (US$ million)

2018

150

50

0

2017

200
Quantity (1000 tonnes)

Value (US$ million)

2015

2016

Figure 5.4.4.4: EU import quantity of paper (HS 48)
products from Indonesia by destination – 2015-2019
Source: IMM-STIXIn quantity terms, the UK maintained its position as thelargest EU market for Indonesian wood furniture in 2019,with imports rising 8% to 23,700 tonnes. In quantity
terms imports of Indonesian wood furniture increased
only 3% in the Netherlands, to 22,300 tonnes. In otherEU countries, import trends in quantity terms moreclosely mirrored the value trends, with imports rising inGermany (+10% to 12,100 tonnes), Belgium (+12% to 10,300
tonnes), and Denmark (+2% to 1,800 tonnes). However,import quantity fell in France (-6% to 15,300 tonnes),
Spain (-9% to 4,200 tonnes), Italy (-8% to 3,300 tonnes),and Sweden (-11% to 1,300 tonnes). (Figure 5.4.3.4).

5.4.4 EU imports of wood pulp (HS 47) and paper(HS 48) products
While EU imports of wood pulp from Indonesia declined tonegligible levels in 2019, imports of certain finished paper
products are significant and rising rapidly (Figures 5.4.4.1
and 5.4.4.2). The leading product category is uncoatedpaper for writing or printing, for which import value
increased 32% to US$208 million in 2019, while import47

quantity increased 39% to 228,000 tonnes. In
2019, imports of sanitary papers from Indonesia
increased by 83% in value, to US$104 million,
and by 97% in quantity, to 94,000 tonnes. In
contrast, EU imports of coated and other paper
products from Indonesia declined in 2019.

5.4.5 Indonesian share of EU timber
and timber product imports
While there was an increase in overall EU
imports of timber and timber products fromIndonesia, following the start of FLEGT
licensing, between 2016 and 2019, rising
25% from US$1.1 billion to US$1.4 billion, thebenefit in terms of market share was muted
as some other supply countries made gains atleast as large. During this period, the shareof Indonesia in EU timber and timber productimport value from the tropics increased from
25.1% to 28.2%, while Indonesia’s share of total
EU timber and timber product import value
increased from 3.4% to 3.7% (Figure 5.4.5.1).

30%

1.4

Value of EU
timber productimports fromIndonesia

25%
20%

US$ million

1.0
0.8

15%

0.6

10%

% share of value

1.2

Indonesia
share of EU
tropical import
value

0.4
5%

2019

2018

2017

2016

0.0

2015

0.2

0%

Indonesia
share of EU
total importvalue

Figure 5.4.5.1: Total value of EU timber and timber product imports fromIndonesia (left axis/bar data) and Indonesian share of EU total import value
and tropical import value (right axis/line data) – 2015-2019. Source: IMM-STIX

25%

20%

% shareMost EU countries now import some Indonesian
paper products and, in 2019, nine EU countries
imported more than US$10 million of paper
from Indonesia (Figures 5.4.4.3 and 5.4.4.4). In
2019, there was significant growth in importsof Indonesian paper products by all five of thelargest importing EU countries: the UK (+37%
to US$106 million), Greece (+54% to US$52
million), Belgium (+119% to US$46 million),
Italy (+23% to US$39 million) and Spain (+10% to
US$22 million).

1.6

15%

Share of EU tropicalimport value

Share of EU tropicalimport quantity

10%
Share of EU total
import value
5%

Despite relatively slow economic andconsumption growth in the EU, the period from
Share of EU total
0%2017 to mid-2019 was characterized by importimport quantity
2015
2016
2017
2018
2019
growth in the EU, the main beneficiaries being
neighbouring countries in the European region,
notably Ukraine, Russia, Belarus, Serbia, Bosnia
Figure 5.4.5.2: Indonesian share of EU wood furniture imports by
and Turkey. More positively, in the second
value (US$) and quantity (tonnes)– 2015-2019. Source: IMM-STIX
half of 2019 there were some tentative signs
that while imports from these other countries
Indonesia’s share of total wood furniture import value
began to slow in response to weakening
increased from 4.8% in 2018 to 5.4% in 2019, while shareeconomic conditions in the EU, imports of some timberof wood furniture import value from the tropics increased
product groups from Indonesia were proving more resilientfrom 19.1% in 2018 to 21.2% in 2019. In 2019, Indonesia
and there was an uptick in share. However, there weremade gains in import value in relation to Viet Nam,significant variations in trends in Indonesia’s market share
Brazil, Thailand, and various non-EU European countries,
for different timber products. The following commentary
including Bosnia, Ukraine, Switzerland, and Norway.
considers each individual timber product category in which
Indonesia is competing for market share in the EU (Figures
Doors and their frames (HS 441820): Indonesia performed
5.4.5.253, 5.4.5.3 and 5.4.5.4 54).
well in the EU market for wood doors between 2016 and2019. Indonesia accounted for 32.2% of import value of all
Wood Furniture (HS 94): Indonesia’s share of EU wood
wooden doors imported into the EU in 2019, up from 31.7%
furniture imports declined between 2015 and 2018,
in 2018 and 31.1% in 2016. Indonesia’s share of all woodirrespective of whether measured in value or quantity.
door imports from tropical countries was 70.5% in 2019,
During this period, Indonesia lost share both in relation toup from 68.8% in 2018 and 69.1% in 2016 when licensing
total imports and to imports from other tropical countries,
began. In 2018, Indonesia overtook China to becomewith intense competition from non-EU European countries,
the EU’s largest non-EU supplier of wooden doors, andChina, Viet Nam, and India. In 2019, while Indonesia’sIndonesia’s exports to EU continued to outperform China inshare of EU wood furniture import quantity continued to
2019. Of other tropical suppliers, EU imports from Malaysia
slide, Indonesia’s share of import value increased. n
53. Due to data discrepancies described in Section 5.4.3, trends in Indonesia’s share of EU imports of wood furniture differ significantly depending on whether
measured in value or quantity. Therefore, Figure 5.4.5.2 shows the trend in Indonesia’s share of EU wood furniture imports in both value and quantity.
54. For product categories other than wood furniture, the analysis of Indonesia’s changing share of EU imports considers only import value. For theseproducts, the trend in share is the same irrespective of whether measured in value or quantity.
48		

MAIN REPORT – NOVEMBER 2020

2016

70%

2017

2018

2019

60%
50%
40%
30%

Charcoal

Marquetry

GlulamFlooring

Paper

Plywood

Mouldings

10%0%

Figure 5.4.5.3: Indonesian share of EU tropical imports by timber
product type (excludes furniture) – 2016-2019. Source: IMM-STIX

35%
Indonesia % share of import value

and 65.3% in 2016. Share is being lost toimports from Brazil, Russia, Peru, Bolivia
and, most recently, Gabon. More generally,
tropical hardwood products are also
under intense competitive pressure fromtreated temperate woods and wood plastic
composites in the exterior decking market,
and from composite panel products in theinterior mouldings market.

20%

Doors andframesIndonesia % share of import value

80%

2016

2017

2018

2019

30%
25%
20%
15%
10%

Plywood (HS 4412): Indonesia accounted for
5.9% of import value of all plywood imported
into the EU in 2019, up from 5.6% in 2018 and5.5% in 2016 before FLEGT licensing began.
Share of tropical plywood import value was
57.1% in 2019 compared to 54.3% in 2018
and 43.5% in 2016. Since licensing began,
Indonesia has significantly outperformed
other tropical producers in the EU market,
although it has struggled to make significant
headway against plywood imports from nontropical sources, notably mixed hardwood
products from China (including a significant
proportion faced with tropical hardwood
veneer) and birch plywood from Russia andBelarus. However, imports from China, Russia
and Belarus, which experienced dramatic
growth between 2016 and 2018, slowed
throughout 2019 and Indonesia was able totake some share from producers in thesecountries during the year.

Paper (HS 48): At 3.9% in 2019, Indonesia’sshare of total EU imports of paper products0%
was still low, but a significant gain comparedto 2.9% the previous year and 2.7% before
licensing started. Indonesia’s share of paper
imports from tropical countries was 52.7%
in 2019, up from 48.3% in 2018 and 45.1%
in 2019. In 2019, the increase in Indonesia’s
Figure 5.4.5.4: Indonesian share of total EU imports by timber productshare was at the expense of several countries
type (excludes furniture) – 2016-2019. Source: IMM-STIX
including US, Turkey, Norway, Russia, andBrazil55 amongst non-tropical suppliers,
and Thailand, Malaysia and the Philippines
are well behind those of Indonesia and have been flatamongst tropical suppliers. Indonesia waslining since 2012, while imports from Brazil have been in
not alone amongst tropical countries in making gains inlong-term decline and are now well below both Indonesia
the EU paper market in 2019. India’s share of EU imports
and Malaysia. A few temperate suppliers made gains in thefrom tropical countries increased from 16.5% in 2018 to
EU market between 2016 and 2019, including South Africa,
18.5% in 2019.
Ukraine, Bosnia, and Turkey, but all are still minor players
compared to Indonesia is this sector.
Flooring (HS 441875/441879): Indonesia lost share in
the EU market for wood flooring in the period since
Mouldings/decking (HS 4409): As noted in section
FLEGT licensing began, continuing a long-term trend
5.4.2, analysis of share in the market for mouldings andin a market heavily dominated by domestic and Chinese
decking is complicated by differing interpretations of
producers and where fashions very strongly favour
product codes. However, the available data indicatesoak-faced products. Indonesia’s share of total EU woodthat Indonesia lost share in the EU market for
flooring import value was 3.2% in 2019, down frommouldings/decking both in the short-term, in 2019,3.5% the previous year and 5.1% in 2016. Share of woodand during the period after FLEGT licensing began.
flooring imports from tropical countries was 38.4%
Indonesia accounted for 24.1% of all EU import value
in 2019, down from 39.7% in 2018 and 44.9% in 2016.
in this product category in 2019, down from 25.3% inIndonesia lost share to China and Ukraine, the dominant
2018 and 28.9% in 2016. Share of imports from tropicaltemperate wood product suppliers, and to Malaysia andcountries was 59.5% in 2019 compared to 63.2% in 2018
Brazil, amongst tropical suppliers. In addition to other
Charcoal

Marquetry

GlulamFlooring

Paper

Plywood

Mouldings

Doors andframes5%

55. For paper products, imports from Brazil are not considered of tropical origin since most derives from pulp produced in plantations outside thetropical forest zone. If Brazilian paper was to be categorized as “tropical”, Indonesia’s total share of EU imports of tropical paper was 41.5% in 2019,up from 34.9% in 2018 and 32.0% in 2016.
MAIN REPORT – NOVEMBER 2020

49

90%

2018

80%
70%

2019

60%
50%
40%
30%

DisagreePartially
disagree0%

Neutral20%
10%Partially
agree

Glulam (HS 44189910): analysis of Indonesia’sshare of the EU market for glulam iscomplicated by data limitations, particularly
lack of information on the division between
the market for structural glulam, in which
tropical wood products do not compete, andfor smaller-dimension non-structural glulam,such as durable laminated window scantlings
and kitchen worktops, in which tropicalwood products are significant. The available
information strongly suggests that Indonesia’sshare of the latter market has declined.
Indonesia’s share of EU imports of glulam fromtropical countries was 36.1% in 2019, downfrom 37.7% in 2018 and 46.4% in 2016. Sharewas lost to Malaysia and, to a lesser extent,
Viet Nam. In 2019, Indonesia, alongside othertropical countries, recovered a little ground fromtemperate suppliers, notably Russia and Belarus,
but lost ground to Ukraine. China lost a lot ofshare in this market between 2016 and 2018 but
recovered some ground in 2019.

FLEGT licensing teething issues such as HS Codeharmonisation have been largely resolved

Agreesolid wood flooring suppliers, this market isunder intense competitive pressure from a wide
range of flooring products with artificial surfaces
and other non-wood materials.

Figure 5.5.2.1: EU trade perceptions of FLEGT Licence mismatches.
Source: IMM 2018&2019 trade surveys

FLEGT licensing is still leading to delays in customs clearance
90%

2018

80%

2019

70%

Charcoal (HS 4402): Charcoal is neither subject to FLEGT
licensing nor regulated by EUTR and Indonesia benefited
from a significant increase in EU imports and market
share in this product category between 2016 and 2018.
Indonesia’s share in this sector was also expanding
well before licensing began. In 2019, EU imports ofIndonesian charcoal declined and there was a loss ofshare to several other supply countries, notably Namibia,
South Africa, Cuba, Russia, and the US. In 2019, Indonesia
accounted for 12.9% of all EU charcoal import value,
down from 14.4% the previous year. Indonesia’s shareof EU import value from tropical countries was 28.3% in
2019, down from 29.3% the previous year.

DisagreePartially
disagree

NeutralPartially
agree

Agree

60%
Ornaments/marquetry (HS 4420): EU imports
50%
from Indonesia under product code 4420 mostly
40%
comprise 44201019 (statuettes/ornaments)
and 44209099/91 (caskets/cases for jewellery
30%
and cutlery), which are neither subject to20%
FLEGT licensing56 nor regulated under EUTR.
10%
Indonesia’s share of all EU imports in this0%
product category declined from 6.4% in 2016
to 5.4% in 2019, before rebounding to 6.1% in
2019. In 2019, Indonesia benefitted mainly froma decline in the share of China, which is hugely
dominant in this section of the EU market.
China’s share of total EU imports increased from
Figure 5.5.2.2: EU trade perceptions of FLEGT Licence import
76.8% in 2016 to 77.9% in 2018 before falling toprocedures. Source: IMM 2018&2019 trade surveys
76.5% in 2019. Indonesia’s share of imports of thisproduct category from tropical countries declined
from 36.1% to 32.5% in 2018 before rebounding
to 34.3% in 2019. Major tropical competitors are India,
5.5 Overcoming market constraints
Thailand, Viet Nam and the Philippines.
to FLEGT-licensed timber

5.5.1 Background
The first IMM EU trade survey in 2017 identified several
administrative and general issues that may have had an
impact on the market for FLEGT-licensed timber in theearly stages after implementation. First and foremost, there
were delays in clearance of shipments for circulation on
the European markets due to FLEGT Licence mismatches.
Some companies also had difficulties adapting to the newadministrative procedures involved in importing FLEGTlicensed timber and called for a fully electronic process to
reduce administrative effort. Besides these administrative
issues, lack of awareness of the Indonesian FLEGT VPA andwhat it means on the ground was frequently mentioned asundermining market development.

56. Of HS4420 products, the EU-Indonesia VPA only references Indonesian product code ‘44209090’ as within the scope of the agreement, while also
noting that this product is ‘Prohibited from export under the Indonesian law. In line with Article 3(3) of the VPA, products under this HS code may
not be FLEGT-licensed and therefore may not be imported into the Union)’. The product referenced in the VPA as prohibited from export fromIndonesia is defined as “Other – Wood in the form of logs or squared logs with simple process in the surface, carved or finely threaded or painted,
does not have significant added-value and no significant change in shape”.
50		MAIN REPORT – NOVEMBER 2020

90%

5.5.2 HS Code harmonisation and other FLEGT
Licence mismatches

The administrative process of importing FLEGT-licensed
wood is easily understandable and manageable

80%

2017

70%

2018

2019

60%
50%
40%
30%
20%

Agree

Partially
agree

NeutralPartially
disagree0%

Disagree10%

Figure 5.6.1: EU trade perceptions of importing FLEGT-licensed
timber. Source: IMM 2017/2018/2019 EU trade surveys

90%

FLEGT Licenses are making importing wood from Indonesia easier

80%

2017

70%

2018

2019

60%

The decline in the number of FLEGT Licencemismatches shown in 2018 has continued also
in 2019. According to an update on licensing
issues presented by the Indonesian licensing
Information Unit (LIU) during a Joint Expert
Meeting (JEM) in July 2020, the number of“problematic cases” dropped by 75% from 2018
to 2019. In all, 98 cases were recorded by LIU in
2019, which was less than 1% of FLEGT Licences
issued during the year.
The IMM 2019 EU trade survey as well as IMM
Trade Consultations during 2019 also confirmed
a declining trend in the number of Licencemismatches (Figure 5.5.2.1). Associations andMonitoring Organisations interviewed as a partof the IMM 2019 round of surveys confirmed thatno major issues regarding importing of FLEGTlicensed timber were flagged up by their members
during 2019.
Simultaneously, the IMM 2019 EU trade survey
also showed a fall in the percentage share ofcompanies that considered FLEGT licensing tocause delays in customs clearance of Indonesiantimber imports (Figure 5.5.2.2)

50%

5.5.3 Electronic licensing

40%

The fact that the process of importing FLEGTlicensed timber was not fully electronic wasemphasised by EU traders in IMM surveys as alimitation of the administrative procedures ofimporting FLEGT-licensed timber. The EU andIndonesia responded to this by working towards
an e-licensing system in 2019.57

30%
20%

Agree

Partially
agree

NeutralPartially
disagree0%

Disagree10%

5.5.4 Communication and marketing

Figure 5.6.2: EU trade perceptions of importing FLEGT-licensed
timber. Source: IMM 2017/2018/2019 EU trade surveys

FLEGT only means legal and has nothing to offer in terms of sustainabilty
90%

2018

80%

2019

70%
60%

57. T
 he e-licensing system had reached advanced stages ofdevelopment by mid-2020 and pilot e-licensing started on
2 November for a period of six months. Before e-licensing canoperate as a standard method for handling FLEGT Licences, theEU and Indonesia will have to take a final decision to this effect.

50%
40%
30%

58. Funded by the UK Department for International Development.

20%

Agree

Partially
agree

NeutralPartially
disagreeDisagree

10%0%

The latest phase of the Multi-stakeholder Forestry
Programme (MFP4)58 contains a component toprovide background assistance to the Ministry ofEnvironment and Forestry (MoEF) and Indonesian
stakeholders in “building confidence and demand”
for Indonesian FLEGT timber. In 2019, MFP4, incooperation with the MoEF, the Global Timber
Forum (GTF) and ID COMM, started developing
national and international communications
strategies for SVLK and FLEGT-licensed timber
products from Indonesia.59

Figure 5.6.3: EU trade perceptions of importing FLEGT-licensed
timber. Source: IMM 2018/2019 EU trade surveys

MAIN REPORT – NOVEMBER 2020

59. B
 oth strategies were ready for consultation withstakeholders in August 2020. The strategies are basedon stakeholder interviews and needs assessment. A
communications strategy was drafted in July 2020
and, at the time of writing of this report, was expected
to be finalised in August 2020, after consultation withstakeholders. The national communications strategy
focusses on the promotion of SVLK among domestic
audiences, with the overall objective to build confidence
in and positive support for the system. The international
strategy is to support promotion of FLEGT-licensed timberfrom Indonesia in the European markets.
51

Chapter 10 of this report updates information on
EU wood promotion campaigns’ and influencers’
support of FLEGT-licensed timber and the FLEGTVPA programme.

Where possible I give preference to FLEGT-licensed timberfrom Indonesia over unlicensed timber from competing sources
80%
2017

2018

2019

60%

5.6 EU market perceptions of Indonesian
FLEGT Licences

40%

The IMM 2017 survey serves as a baseline for EU
trade perceptions of the Indonesian FLEGT licensing
system and day-to-day management of importing
licensed timber. Repetition of the same questions in2018 and 2019 now allows for comparison over time.

Agree

Partially
agree

NeutralFigure 5.6.1 shows a sharp and constant risein the proportion of respondents finding theadministrative process of importing FLEGTlicensed timber easily understandable andmanageable over the last three years. The numberof respondents highlighting challenges continued
to fall in 2019, after declining sharply in 2018.

Partially
disagree0%

Disagree20%

Figure 5.6.4: EU trade perceptions of importing FLEGT-licensed
timber. Source: IMM 2017/2018/2019 EU trade surveys

The positive overall perception of administrative
processes involved in importing FLEGT-licensed timber
was confirmed by the survey question addressed in
Figure 5.6.2 both in 2018 and 2019. In both years, about
80% of respondents said that FLEGT licensing was
making importing wood products from Indonesia
easier compared to EUTR due diligence (full or partial
agreement). With one or two exceptions, the remaining
respondents were neutral on the subject. In 2017, asignificant number of respondents had still partially(12%) or fully (20%) disagreed with this statement. The
number of respondents fully agreeing to the statement
increased by another 10 percentage points in 2019.

The question as to what FLEGT had to offer in terms of proofof sustainability was one of the major issues of interest
that emerged from the 2017 trade survey. As a result, IMM
included the statement “FLEGT means ‘just legal’ and has
nothing to offer in terms of sustainability” for assessmentin the 2018 and 2019 survey. Figure 5.6.3 demonstrates
a significant shift in perception from 2018 to 2019: theproportion of respondents that fully or partially disagreed
with this statement rose from 19% in 2018 to 33% in 2019,
meaning that a significantly higher number of respondents
is beginning to acknowledge wider benefits of FLEGT.
Responses to the question whether companies would give
preference to FLEGT-licensed timber from Indonesia overunlicensed timber from competing sources still remainWith respect to licensing in Indonesia, to what extent are you aware that:
The FLEGT Licence indicates that products comply with a broad range of laws and regulations
including those relating to forest management, environment, labour rights, community benefits,
import and export, and payments of fees and taxes
Indonesia follows the same procedure to issue legality certificates (known as V-Legal Documents)for exports to non-EU markets for the products covered in the VPA

70%

FLEGT licensing authorities in Indonesia are independent organisations registered with the Ministryof Environment and Forestry and accredited by Indonesia's National Accreditation Committee (KAN)60%

The system requires universal nationwide conformance to a legality standard developed throughparticipatory processes involving stakeholders from government, the private sector and civil society

50%

For the Indonesian authority to issue a FLEGT Licence, all suppliers in the exporter's supply chain
must have been covered by a valid legality or sustainable forest management certificate,or a Suppliers Declaration of Conformity

40%
30%
20%

Not aware

2019

2018

Partially aware

2019

2018

Fully aware

2019

0%

2018

10%

Figure 5.6.5: Awareness of the Indonesian FLEGT licensing system. Source: IMM 2018/2019 EU trade survey (figures rounded)52		MAIN REPORT – NOVEMBER 2020

The 2018 and 2019 EU trade surveys also lookedin more detail into the level of information andawareness of the Indonesian FLEGT licensing
100%
system than the 2017 survey. Figure 5.6.5. shows
2018
2019
that, while there is a definite need for additional80%
information on a number of aspects, awareness,
especially of wider environmental, social and60%
economic implications of VPA implementation
has improved from 2018 to 2019. The proportion40%of respondents saying they were fully aware that
FLEGT-licensed products “comply with a broad
range of laws and regulations including those20%
relating to forest management, environment,labour rights, community benefits, import0%
No difference More expensive Don't know/N.A.
Cheaperand export, and payments of fees and taxes”
increased sharply by 17 percentage points, from
43% to 80%. A similar increase, from 35% to
Figure 5.7.1 Cost impact of FLEGT licensing.
52% was shown for full awareness that “for the
Source: IMM 2018/2019 EU trade survey
Indonesian authority to issue a FLEGT Licence,
all suppliers in the exporter’s supply chain must
mixed (Figure 5.6.4). However, the number of respondents
have been covered by a valid legality or sustainable
who explicitly said they would not give preference toforest management certificate, or a Suppliers Declaration
FLEGT-licensed timber has declined sharply since 2017.
of Conformity”.
Respondents to the IMM survey and participants at IMM
Trade Consultations remarked that FLEGT licensing was
A total of 43% of respondents stated that they woulda factor that could influence purchasing decisions, but
be interested in receiving additional or different
only where other product criteria were equal.
information. Where different information was requested,companies typically asked for concise information in
As a part of its Trade Consultations, IMM holds
accessible formats, for example videos or animations.
workshops on purchasing dynamics, decision making
processes and the question as to where FLEGT licensing
5.7 Cost impact of FLEGT licensing
sits within these processes. At all 2018 and 2019 Trade
Consultations, participants remarked that they would
In 2020, a much higher number of survey respondents – 74
consider business and commercial considerations first andout of 109 – chose to answer the question whether FLEGT
foremost. Top of the list, alongside price, was ensuring
licensing was making importing from Indonesia cheaperthat the supplier can deliver the product in the time frameor more expensive than exercising EUTR due diligence;
required and in consistent quality and specification.
35 companies did not answer. In 2018, only 20 out of 96
companies had answered the question, with 76 companies
Only once buyers are satisfied on the above points, does
opting not to respond.
the focus move more to chain of custody, certification,
sustainability, legality verification and capacity to provide
Several companies reported to have experienced price
EUTR due diligence information. As a result, FLEGT
increases for their supplies from Indonesia. Thoselicensing can be considered a factor that can positively
increases were mostly attributed to supply fluctuations
influence purchasing decisions, but only if the product isand purchasing competition but, in some instances,competitive at other levels as well.
especially when working with smaller suppliers, also to
suppliers’ attempts to offload higher costs experienced
Is FLEGT licensing making imports from Indonesia
cheaper or more expensive?

Costs of EUTR due diligence – an example:1
Costs of setting up a due diligence system for a small to
medium-sized company with 10-30 suppliers initiallyinvolves preparation of a manual and training of staff. If
there is no in-house capacity, estimated consultancy fees
would total around €2000.
The main recurrent costs are related to evaluation of
suppliers and documentation of each supply chain.
Costs for evaluation are estimated at 1-2 working days
per supplier/year, (i.e. about €1,000-2,000/supplier/year
if carried out by an external consultant) depending on
the product types, countries of origin etc. The initial
evaluation is typically more expensive, and it getscheaper when a supplier has been evaluated several
1.

times. With this in mind, estimated costs would total€10,000-20,000/year for a company with 10 suppliersand €30,000-60,000/year for a company with 30
suppliers. Some companies, including small ones, hire
an in-house specialist part or full-time to deal with due
diligence and supply chains rather than working withexternal consultants.
Costs incurred when addressing EUTR non-compliances
flagged up by Competent Authority checks varysignificantly depending on the nature of non-complianceand follow-up work with suppliers involved. On average,around €1250-2000 of consultancy fees should suffice toaddress a typical notice of remedial action.

Example based on requirements of a small or medium-sized furniture importer (with typically around 10-30 suppliers). Costs may vary significantly
depending on the complexity of product and supply chain, sourcing area etc. Estimates were provided by the IMM Germany correspondent.

MAIN REPORT – NOVEMBER 2020

53

by Indonesian producers and exporters as a result of
SVLK certification and FLEGT licensing to sales prices.
Where their own administrative costs are concerned,
around one-third of respondents, up from 10% in 2018,
acknowledged saving in 2019, as the administrative
process of importing FLEGT-licensed timber wasconsidered less time consuming than EUTR due diligence.
Only a small number of 2019 respondents, six in total,
felt that their own administrative costs had risen due to“extra paperwork” in connection with FLEGT licensing.
One respondent mentioned slightly increased indirect
costs due to “longer shipping times, overall more
paperwork and frustration”. With one exception, the cost
increases were considered marginal and not affecting
business. Five of the six respondents reporting cost

increases were based in the Netherlands, which indicatesthat there may have been a local issue with processing of
FLEGT-licensed timber in the Netherlands in 2019.
Fees for processing FLEGT Licences were mentioned only
once as a factor impacting costs.

5.8 Price trends for indicator products
from Indonesia
Monitoring price trends is always difficult, as fluctuationsin prices can potentially be caused by a large variety offactors, including but not necessarily limited to:• Demand trends in markets under observation andin competing markets (including changes in fashion
trends, emergence of new products, etc.)

Case Study 1: Trends in Indonesian plywood prices1

1.

The trend lines are indexed and based on analysis of ITTO data,
market interviews and timber-sector media reports. November
2016=100.

54		

120

Index birch
plywood €100

Feb 20Dec 19Oct 19Sep 19Jul 19May 19Mrch 19

Feb 19Dec 18

Oct 18Jun 18March 1860

Dec 1780

Figure 5.8.1: Price index for meranti plywood (18 mm BB/CC) in€ and US$ vs price index for birch plywood (18mm BB/BB) from
Russia. Source: IMM

Index meranti
plywood €Index meranti
plywood US$

Index birch
plywood €120
100

Feb 20

May 19Mrch 19

Feb 1960

Sep 1880

Jun 18

Prices for Indonesian plywood for export to Europe
stabilised towards the end of 2019 and rose againslightly at the turn of the year and in early 2020. The

Index meranti
plywood US$

Index meranti
plywood €Dec 17

In key European markets, thicker film-faced plywood
grades (18/21mm) from Indonesia, in particular, were
facing stiff competition from Russia in 2019 (Figure
5.8.2). However, a slight uptick in demand was again
recorded in early 2020. European demand for thinner(4/8mm) film-faced plywood panels from Indonesia
was reported to have been more stable in 2019 and if
this trend continues IMM will replace the indicator
product accordingly.

Developments after March 2020 and the impacts of
COVID-19 will be analysed in the 2020 Annual Report.

Feb 17This situation changed towards the end of 2018
and especially in 2019, when prices for exports to
Europe quickly fell back to, and temporarily evenslightly below, pre FLEGT licensing levels. Besides
growing competition from Russia, where plywood incomparable qualities was readily available at prices
increasingly below Indonesian levels during 2019,some media reports and IMM survey respondents
also mentioned supply issues as reasons behind thelower European purchases of plywood imports fromIndonesia. These were attributed to both raw material
shortages and purchasing competition for Indonesianplywood from other regions, for example the US. In
the second half of 2019, in particular, specialist media
reported strong US demand for Indonesian plywood,especially thin panels in overlay&better quality.
Against this background, lead times for Indonesianplywood were comparatively long throughout the year.

increases were primarily considered to be attempts to passon rising costs. FLEGT licensing was not mentioned bytimber-sector media as a factor to influence prices.

Feb 17

Prices for hardwood plywood from Indonesia had increased
quite sharply in late 2017 and early 2018, against thebackground of strong demand in a number of export
markets, including Europe and the US (Figure 5.8.1). In
Europe, Indonesian suppliers profited from price hikes (rawplywood) and supply shortages for competing birch plywood
from Russia, in particular.

Figure 5.8.2: Price index for film-faced Meranti Plywood (18/21 mm)
in US$ and € vs price index for Russian birch plywood (21 mm f/f).
Source: IMM

MAIN REPORT – NOVEMBER 2020• Demand trends, availability and prices for substituteproducts
• Supply trends (capacity and weather related, suppliers’changing trading patterns and priorities etc.)• Currency exchange rate trends• Transport related issues (freight capacities and prices)• Other (including FLEGT licensing).

industries – including Indonesia – and increasingly
specific requirements and needs of clients in consumer
countries, only a limited number of products are still
being traded as bulk commodities in comparable qualities
and specifications from countries like Indonesia.
A small number of such products, including raw andfilm-faced plywood in standard dimensions, bangkiraidecking (standard+better) and meranti window
scantlings were identified by IMM for price monitoring.

Moreover, given the growing levels of specification anddiversification in several VPA partner countries’ timber

Case Study 2: Trends in Indonesian joinery prices1
After rising sharply in the first three quarters of 2018,
prices for meranti window scantlings from Indonesia fell
again towards the end of the year (Figure 5.8.3). Recovery
in the first few months of 2019 was short lived andfollowed by another dip in April/May. Between mid-year2019, and February 2020, prices then stabilised at a stillcomparatively high level – roughly 10 % above the prices
achieved in November 2016.
Demand for meranti window scantlings remained
comparatively low in Europe throughout 2019. This did notjust affect Indonesian but also Malaysian suppliers. Fromthe second quarter of 2019 onwards, European importers
reported delays in deliveries of meranti window scantlings,
which lasted into the autumn and were partly blamed on
shipping difficulties and partly on reduced production
activity in Indonesia and Malaysia. As demand failed topick up also in the last few months of 2019 and delayed
140
deliveries arrived at the same time, stocks of meranti
scantlings in Europe were relatively high towards
the end of the year and importers showed reluctance120
when it came to placing new orders for 2020. Subdued
demand in Europe was mostly attributed to continuing
100
replacement of meranti in window production withmaterial prices in Indonesia fell, after increasing sharply
in 2018; abundant supply of finished decking in Indonesia;
and exchange rate fluctuations between US dollar andRuphia, which made sales at slightly lower US dollar prices
acceptable to Indonesian suppliers. The supply situation
remained relaxed throughout the year. However, during
the summer months European media reported increasing
quality issues with deliveries including an increased shareof square log and short decking boards, which are lesspopular in Europe, in mixed-length batches and mixed
species e.g. red balau or kapur rather than pure Bangkirai.
This, in combination with seasonal factors, led to a renewed
decline in prices in May/June 2019. Towards the end of 2019,
media reports flagged up unusually high remaining stocksof bangkirai decking and decline in prices also on Europeansales markets.

temperate wood species and plastic.

1.

The trend lines are indexed and based on analysis of ITTO data,
market interviews and timber-sector media reports. November
2016=100.

MAIN REPORT – NOVEMBER 2020

Feb 20Jan 20

Nov 19Jul 19Index €

Oct 19Apr 19Feb 19Dec 18

Oct 18Apr 18

Feb 18March 18

Sep 17

Jul 17

Nov 1660

Figure 5.8.3 Price index for meranti window scantlings. Source: IMM

160
140
120
100
80

Jan 20

Nov 19Oct 19Index €
Aug 19Jun 19Apr 19Feb 19Jan 19Dec 18

Oct 18Apr 18Jun 18

Jan 18

Nov 17

Index US$Sep 1760

Jul 17

Softening of prices at the start of 2019 was attributedby specialist media to a number of factors: raw

Index US$Feb 17

As in the case of plywood and window scantlings,
FLEGT licensing wasn’t mentioned by specialist
media as a factor to have had an impact on prices.
However, when it comes to the competitive situationof FLEGT-licensed decking from Indonesia, specialist
media mentioned increasing difficulties facing
European importers when sourcing competingdecking products in South America, especially in
Brazil, as a result of increasingly strict checks of
EUTR due diligence by Competent Authorities.

80

Nov 16

Prices for bangkirai decking from Indonesia had also
increased sharply in the first half of 2018
(Figure 5.8.4). After peaking around mid-year, prices
slipped between August and December 2018 and, after
stabilising for a couple of months, again between
March and August 2019. Between August 2019 andJanuary 2020 prices stabilised again at slightly above
pre FLEGT licensing levels.

Figure 5.8.4 Price index for bangkirai decking. Source: IMM

55

The price indices in Case Studies 1 and 2 show thatprices for these indicator products from Indonesia
increased between the start of FLEGT licensing andearly/mid-2018. The price rises did not coincide directlywith the beginning of FLEGT licensing. The strongest
increases occurred in the first half of 2018 or in late2017 at the earliest. Prices slipped again towards the6

end of 2018. There was some temporary recovery forsome products in early 2019. However, during 2019,
plywood prices temporarily fell below pre FLEGT
licensing levels, before recovering again in 2020. Prices
for solid timber products dropped as well in 2019 but
stayed above the level reached in November 2016.

Requirements for legal timber in VPA
partner export markets
6.1 Introduction
In addition to assessing the EU market for FLEGTlicensed timber, IMM monitors market impacts of policy
measures and regulations with potential to generatedemand for timber from FLEGT licensing VPA partnercountries in non-EU countries. The acceptance of FLEGT
Licences (or equivalent documents issued by FLEGT
licensing VPA partner countries for exports to non-EU
countries) as evidence of legality in non-EU countries
has become increasingly relevant as an incentive forcountries to implement a FLEGT VPA over the last
decade, during which Europe’s importance as a player inthe global tropical timber trade has diminished, whileother dominant consumer markets and processing hubs,
notably China and Viet Nam, have emerged.
Section 6.2 of this report provides an overview of
VPA partner country trade with “regulated” and“unregulated” markets worldwide. Regulated markets
are those where a legal framework is in place designed
to prevent market access for illegally harvested wood.
In addition to the EU, IMM considers the following 10
countries as “regulated markets”60:• Australia (Illegal Logging Prohibition Act)• Iceland, Lichtenstein, Norway (EEA countries to which
the EUTR applies)• Indonesia (Import Control under TLAS)• Japan (Clean Wood Act)• Malaysia (Import Regulation under TLAS)• Republic of Korea (Act on Sustainable Use of Wood
Import Provisions)• Switzerland (Swiss Timber Regulation expected toenter into force in 2022)• US (Lacey Act)
Section 6.3 of this report provides an update ofregulations designed to encourage or legally oblige
importers to put in place systems that reduce the riskof illegally harvested timber entering the supply chain,including on the status of FLEGT-licensed timber inexisting regulations. This report does not repeat thedetailed commentary for all countries contained in
the IMM 2018 Annual report as only minor changes
occurred in most countries during the year. However,some new regulatory initiatives that have since beenannounced or adopted are highlighted. Section 6.3 also
includes an update of trends in timber and timber
product trade flows between VPA partner countries andFigure 6.1.1: Global tropical timber trade by regulatory status of consumer country. Source: IMM Data Dashboard - Monitoring Board

60. While China announced a revision to the Forest Law in 2019, which includes a prohibition on trade in timber of known illegal origin, at timeof writing no supporting regulations had been introduced clarifying the extent to which this requirement applies to imported timber and therespective obligations of state and market actors. Therefore, for purposes of this report, China is not considered a “regulated” market
56		MAIN REPORT – NOVEMBER 2020

5

EUTR (EEA)
0

2015

2016

2017

2018

2019

EUTR

Figure 6.2.1: Value of global trade in tropical wood products,
2015-2019 by consumer country regulatory status.
Source: IMM-STIX

2

0

No VPA

Negotiating (As)Malaysia
TLAS Import
Regulation
Negotiating (Af)

4Japan Clean
Wood Act

Indonesia
SVLK importconditions

Negotiating (Am)

6

Australia Illegal
Logging Proh. Act
Rep. of Korea
Sustainable
Use Act

US Lacey Act
Amendment

Implementing (Af)

US$ billion

8

Licensing (Indonesia)

1210

Not regulated

Implementing (As)14

Viet Nam
TLAS Import
Control*
Swiss
Env. Act
Amendment*
EUTR (EEA)
EUTR

Figure 6.2.2: Value of global trade in tropical wood
products in 2019, by FLEGT VPA status and consumer
country regulatory status. Source: IMM analysis of STIX trade

data and national legislation (*legislation still in draft at end of 2019).
As=Asian partners, Af=African partners, Am=Latin American partners

Japan Clean
Wood Act60%

US Lacey Act
Amendment

50%

Indonesia
SVLK importconditions

40%

Malaysia
TLAS Import
Regulation

30%
20%
10%
0%

No VPA

Viet Nam
TLAS Import
Control*
Swiss
Env. Act
Amendment*

10

70%

Negotiating (As)Malaysia
TLAS Import
Regulation

15

80%

Negotiating (Af)

US$ billion

Indonesia
SVLK importconditions

20

Australia Illegal
Logging Proh. Act
Rep. of Korea
Sustainable
Use Act

Negotiating (Am)US Lacey Act
Amendment

25

90%

Implementing (As)Japan Clean
Wood ActNot regulated

Implementing (Af)

30

100%

Licensing (Indonesia)

35

Australia Illegal
Logging Proh. Act
Rep. of Korea
Sustainable
Use Act

US$ billion40

Not regulated

Viet Nam
TLAS Import
Control*
Swiss
Env. Act
Amendment*
EUTR (EEA)
EUTR

Figure 6.2.3: Share of global trade value in tropical wood
products in 2019 by FLEGT VPA status and consumer
country regulatory status. Source: IMM analysis of STIX trade dataand national legislation (*legislation still in draft at end of 2019). As=Asianpartners, Af=African partners, Am=Latin American partners

individual “regulated” markets in the period leading up
to and including 201961.
In addition to the annual overview of timber trade
between VPA partner countries and regulated markets
in the IMM Annual Reports, the IMM Data Dashboard(https://stats.flegtimm.eu) now includes a Monitoring
Board, which among other things, allows for monitoringof trade flow trends between VPA partner countries andregulated markets (Figure 6.1.1).

6.2 Overview of VPA partner country trade withregulated and unregulated markets
Analysis of trade data shows that the goal of closing world
markets to illegal wood products is already well advanced(even if recent steps towards regulation in China are
discounted for now). In 2019, 66.5% (US$27.6 billion) of
the total value (US$41.5 billion) of recorded tropical wood
product exports worldwide were destined for countries
with regulatory measures to eliminate illegal trade (Figure
6.2.1). This compares to 62.2% of tropical trade in 2018.
The rise in the proportion of tropical wood products
destined for regulated markets in 2019 was due primarily
to the decline in imports by China, considered here an
unregulated market, while US imports of wood products
from tropical countries, particularly Viet Nam increased
sharply during the year.
The proportion of wood product exports destined forregulated countries was even higher for VPA partner

61. The EU is included, alongside other regulated markets, in the overview of global trends in section 6.2. Section 6.3 includes a brief overview of trade
between VPA partners and all non-EU regulated markets, plus China, which may be moving towards a more regulated approach. Detailed analysisof trade flows between the EU and VPA partners is contained in Chapter 7.
MAIN REPORT – NOVEMBER 2020

57

countries (Figures 6.2.2 and 6.2.3). In 2019,79% of all wood products exports by FLEGT
licensing and VPA implementing countries
was destined for regulated markets. In
addition to EUTR, which accounted for 12%
of total exports by FLEGT licensing and VPA
partner implementing countries in 2019, alarge share of exports went to destinations
regulated by the US Lacey Act (42%), Japan
Clean Wood Act (13%), Republic of Korea
Sustainable Use Act (7%) and Australian
Illegal Logging Prohibition Act (2%). In 2019,the share of exports to regulated countries
was particularly high for Indonesia (72%)
and Viet Nam (85%). The share of exports
to regulated markets was lower, but still
significant, for VPA implementing countries inAfrica (53%).
Around US$13.9 billion of tropical wood
product trade in 2019, 33% of total recorded
trade, was destined for countries without
import regulations in 2019. More than half
was destined for China (Figure 6.2.4).

Total unregulated imports: US$13.9 billion

China

7.1, 51%
0.4, 3%

0.6, 4%

CanadaOther

1.6, 12%Figure 6.2.4: Tropical wood product imports into unregulated
markets by main importers –2019.
Source: IMM analysis of STIX trade data and national legislation

12
No VPA
10
Value (US$ billion)

US timber imports are regulated through theLacey Act, which is a 1900 United States lawthat bans trafficking in illegal wildlife. In
2008, the Act was amended to include plants
and plant products such as timber and paper.
There are two major components to the plantamendments: a ban on trading plants or plant
products harvested in violation of the law; anda requirement to declare the scientific name,value, quantity, and country of harvest origin
for some products.

TaiwanSingapore

0.6, 4%

6.3 Americas
6.3.1 US6.3.1.1 US regulatory update

India

3.6, 26%

Negotiating (As)Negotiating (Af)8

Negotiating (Am)6

Implementing (As)4Implementing (Af)2

Licensing(Indonesia)

0

2015

2016

2017

2018

2019

Figure 6.3.1.2.1: United States tropical wood product imports by
The Lacey Act is a fact-based statute withFLEGT VPA status – 2015-2019. Source: IMM-STIX. As=Asian partners, Af=African
strict liability, which means that only actual
partners, Am=Latin American partners
legality counts (no third-party certificationor verification schemes or FLEGT licensing
can be used to “prove” legality under theAct) and that violators of the law can face criminal and
US imports from VPA implementing countries in Africa
civil sanctions even if they did not know that they werealso increased, up 11% to US$65 million. Most of thedealing with an illegally harvested product.
increase comprised sawnwood from Cameroon. However,
US imports from Indonesia fell 9% to US$1.2 billion in
No further amendments with relevance for timber and2019. This was due to a sharp downturn in plywood
timber products have been made to the Lacey Act during
imports, which fell 37% to US$283 million during thethe last year. More information on exercising due careyear. In contrast to plywood, US furniture imports fromunder the Lacey Act and the role of FLEGT Licences canIndonesia increased 6% to US$770 million in 2019.
be found in the IMM 2018 Annual Report.
(Figure 6.3.1.2.1).
6.3.1.2 US trade trends
Trade data highlights the potential role of the FLEGTVPA process to assist US importers compliance to the US
Lacey Act. US imports from FLEGT licensing and VPA
implementing countries were US$9.0 billion in 2019,
US$1.9 billion (26%) more than the previous year. In
2019, 73% of all tropical wood imports in the US weresourced from FLEGT licensing and VPA implementing
countries, up from 71% the previous year. US imports
from Viet Nam, dominated by wood furniture andplywood, increased 35% to US$7.6 billion during the year.

58		The prospects for continued trade growth in the US for
VPA partner countries are good, particularly against thebackground of the ongoing US/China trade war which isencouraging importers to look for supplies from other
Asian countries. According to IWPA, Indonesian plywood
products are particularly favoured in the US because of
their quality and producers’ ability to comply with the
Toxic Substance Control Act (TSCA). According to IWPA,
the main concern from the US side is that Indonesian
supply may be limited in the future by lack of capacity
and access to fibre.

MAIN REPORT – NOVEMBER 2020

Negotiating (Af)

departments, making it very challenging
to secure prosecutions. There is no legal
framework at this stage requiring due
diligence or due care on the part of timber
importers and traders in the same way
as EUTR, the Australian Illegal Logging
Prohibition Act or the US Lacey Act.

Negotiating (Am)

6.4.1.2 China trade trends

Value (US$ billion)

98

No VPA

7

Negotiating (As)654Compared to other major importers oftropical wood products, China imports
3
from a much wider range of countries,
Implementing (Af)2
including many not involved in the VPA
Licensingprocess, and with a stronger focus on logs
1
(Indonesia)
and rough sawn timber. In line with the0wider decline in the Chinese market in 2019,
2015
2016
2017
2018
2019
China’s imports of wood products from
FLEGT licensing and VPA implementing
countries fell 8% to US$2.63 billion in
Figure 6.4.1.2.1: China tropical wood product imports by FLEGT VPA
2019. Imports declined 24% to US$610
status – 2015-2019. Source: IMM-STIX. As=Asian partners, Af=African partners,
million from Indonesia and 11% to US$657
Am=Latin American partners
million from VPA implementing countries
in Africa. However, China’s imports from
6.4 Asia
Viet Nam increased 4% to US$1.36 billion.
Overall, due to a larger decline in China’s imports from
6.4.1 China
non-VPA countries, the share of FLEGT licensing and6.4.1.1 China regulatory update
VPA implementing countries in China’s total imports
Probably most significant in the medium and longerof tropical wood products increased from 33% to 37%
term among the new regulatory initiatives announced
between 2018 and 2019. The largest suppliers of tropicalin 2019 was the revision of China’s Forest Law,
wood to China that are not either FLEGT licensing or
which now includes an explicit prohibition of buying
implementing an EU VPA are Thailand, Papua New
illegal timber. Article 65 specifies that “purchasing,
Guinea, Solomon Islands, Gabon, Mozambique andprocessing, or transporting timber that is known
Brazil63.
to derive from illegal sources, such as illegally orindiscriminately logged forest, by any work units or
6.4.2 Indonesia
6.4.2.1 Indonesia regulatory update
individuals, are prohibited”62. China’s National People’s
Congress Standing Committee approved the new Forest
Since 1 January 2016, Indonesia has extended requirements
Law on 28 December 2019 to take effect on 1 July 2020.
onto importers to conduct due diligence on all forest
materials/products to be imported. The requirements
While this has been widely celebrated as a significant step
were set out in the Regulation of the Minister of Tradeforward, the current legal framework still has significant
No. 97/2015 and the Regulation of Director General
limitations for control of illegal wood in imports.
of Sustainable Management of Production Forest No.
P.7/2015. The import regulation has been amended in
Article 65 states that “timber trading and processing
2018, with the due diligence requirements set out under
enterprises shall establish ledgers to record input
the Regulation of the Director General of Sustainable
and output of raw materials”. The revised law also
Management of Production Forest No. P.3 /2018.
empowers relevant forestry authorities to supervise
and inspect timber from illegal sources (Article 67) andIn line with Regulation P.3/2018, demonstrating proof
stipulates specific punishment measures (Article 78).
of legality and traceability of origin of raw materials/
However, the amendments seem to have been preparedproducts can be achieved through meeting any one of themainly with the intent of preventing trade in illegal
following requirements64:
wood from domestic forests rather than in imported
timber. Effective implementation in relation toComes from a country with FLEGT Licences
imported timber would require clearer identification of
Derived from a country with Mutual Recognition
institutional roles, notably closer coordination between
Arrangement (MRA) with Indonesia
Chinese customs and other government agencies, andDerived from countries that have Country Specificthe development of specific regulations and guidelines
Guideline (CSG) with Indonesia
for importers. As things stand, the burden of proof inHave certificates from certification bodies that apply
cases of alleged illegal timber would be on government
sustainability, legality and/or traceability

Implementing (As)

•
•
•
•

62. Unofficial translation and commentary on the amended Forest Law distributed by the UK Department for International Development (DFID) by
email to the Chatham House Forest Governance Advisory Group on 29 January 2020.
63. Further details of China’s changing tropical wood trade with VPA partner countries are provided in Section 3.5 of this report and in Analysis of
China’s trade with the EU and VPA countries 2010-2019, a briefing commissioned by the European Forestry Institute (EFI) as an output of the 2019
meeting of the Bilateral Coordination Mechanism (BCM) on FLEG.
64. https://www.agriculture.gov.au/sites/default/files/sitecollectiondocuments/forestry/australias-forest-policies/illegal-logging/indonesia-countryspecific-guideline.pdf
MAIN REPORT – NOVEMBER 2020

59• Have a certificate from the authority of

6.4.2.2 Indonesia trade trends
Of Indonesia’s imports of tropical wood
products of US$299 million in 2019, US$119
million (40%) was sourced from VPA
implementing countries, most comprisingwood chips from Viet Nam. Most otherwood imports from tropical countries into
Indonesia comprise pulp logs from Malaysia
and panel products from Malaysia andThailand, both VPA negotiating countries.
Indonesia’s imports from VPA implementing
countries in Africa are very limited and fell
4% to US$4.6 in 2019 (Figure 6.4.2.2.1)65.

6.4.3 Japan
6.4.3.1 Japan regulatory update
Under the Japanese Clean Wood Act of 2017,
operators voluntarily register as a wayof being recognised by the Governmentof Japan for their responsible behaviour.
Registered operators are officially recognised
as businesses that take measures toverify the legality of their wood and wood
products. The Government of Japan plays animportant role in promoting the registrationof operators and disclosing good practice byregistered operators.

No VPA

250

Negotiating (As)Value (US$ million)

Further revisions of due diligencerequirements and obligations of importers
have been brought underway in 2019, witha revised version of the regulation expected
to be finalised in the third quarter of 2020,
at the time of preparation of this report.
The revised regulation will include moredetailed due diligence obligations for timber
importers, which will be based on resultsof two round tables on due diligence held in2019 and recommendations from a working
group on timber imports.

300

200

Negotiating (Af)
Negotiating (Am)150

Implementing (As)100

Implementing (Af)50
0Licensing(Indonesia)
2015

2016

2017

2018

2019

Figure 6.4.2.2.1: Indonesia tropical wood product imports by FLEGTVPA status – 2015-2019. Source: IMM-STIX. As=Asian partners, Af=African partners,

Am=Latin American partners

5.5
5.0

No VPA

4.5
Value (US$ billion)

country of harvest or country of origin(government agency, association or
institution authorized by government)
concerning its sustainability, legality or
traceability.

Negotiating (As)

4.0
3.5

Negotiating (Af)

3.0

Negotiating (Am)

2.5

Implementing (As)2.0

Implementing (Af)

1.5

Licensing(Indonesia)

1.0
0.5
0.0

2015

2016

2017

2018

2019

Figure 6.4.3.2.1: Japan tropical wood product imports by FLEGT VPA
status – 2015-2019. Source: IMM-STIX. As=Asian partners, Af=African partners,
Am=Latin American partners

Under the Act, the main penalty is the revocation ofregistration. Registration can be refused or revoked
if the operator cannot prove that it takes measuresto handle only legal timber and timber products.
Fines are also contemplated, but they relate to falsely
claiming registration and not to the trade in illegal
timber or timber products. While not mandatory,
registration as a compliant operator under the Clean
Wood Act can be considered as a significant reputational
benefit. Conversely, the loss of registration can cause
considerable reputational damage.
No amendments have been made to the Clean Wood Act
during the last year. More information on registered
Japanese operators’ obligations under the Clean Wood
Act and the role of FLEGT Licences can be found in the
IMM 2018 Annual Report.

6.4.3.2 Japan trade trends
Japan’s imports of tropical wood products increased
6% to US$5.5 billion in 2019, a trend driven mainly byrising imports of wood pellets, chips and furniturefrom Viet Nam. Japan’s total wood products imports
from Viet Nam increased 18% to US$1.7 billion in
2019. After a strong rise the previous year, Japan’s
imports from Indonesia declined 9% to US$1.1 billion
in 2019 due to weakness in the plywood sector.
FLEGT licensing and VPA implementing countries
accounted for 50% of Japan’s total tropical wood
product imports in 2019, 19% from Indonesia and 31%
from Viet Nam. Japan’s imports from African VPA
implementing countries were negligible in 2019. Other
leading tropical suppliers to Japan in 2019 were thePhilippines, Malaysia and Thailand.

65. Further details of Indonesia’s wood product imports are provided in Section 5.2.3 of this report.
60		MAIN REPORT – NOVEMBER 2020

600

Value (US$ million)

500

No VPA
Negotiating (As)400

Negotiating (Af)300

Negotiating (Am)200

Implementing (As)Implementing (Af)100
0Licensing(Indonesia)
2015

2016

2017

2018

2019

Figure 6.4.4.2.1: Malaysia tropical wood product imports by FLEGTVPA status – 2015-2019. Source: IMM-STIX. As=Asian partners, Af=African partners,

Am=Latin American partners

2.5• Certificate of Voluntary Legality Scheme;or• Legality document issued by a recognised
agency / corporation / association; or• Self-declaration documents by theexporter with endorsement by theauthorities of the exporting country; orCopy of the Customs Export Declarationfrom exporting countries
As the only country yet to issue FLEGT
Licences, Indonesia is the only country tobenefit directly from recognition of FLEGT
Licences in the Malaysian regulation so far.
However, the longer term “network effects”
of mutual recognition of legality licenses by
VPA partner countries may be considerable,
helping to reinforce legal compliance andfacilitate the free flow of trade between
countries which are now themselves
emerging as major consumer markets forwood products. There will also be significant
market pull effects for other tropicalcountries not engaged in the VPA process.

•6.4.4.2 Malaysia trade trends

Value (US$ billion)

In 2019, Malaysia imported US$476 millionof tropical wood products, a 14% decline
2.0
No VPA
compared to the previous year (Figure
6.4.4.2.1). Of this total, 62% was imported
Negotiating (As)from FLEGT licensing or VPA implementing
1.5
Negotiating (Af)countries in 2019, down from 65% theprevious year. Indonesia is the largest single
Negotiating (Am)external tropical supplier, accounting for
1.0
Implementing (As)
US$183 million (39%) in 2019. Imports fromIndonesia, which consist mainly of plywood,
Implementing (Af)
0.5with smaller quantities of furniture andcharcoal, declined 7% in 2019 following
Licensinga 26% gain the previous year. Malaysian(Indonesia)
0.0
imports of wood products from Viet Nam,
2015
2016
2017
2018
2019
also consisting primarily of plywood
with a smaller quantity of furniture, fell
Figure 6.4.5.2.1: Republic of Korea tropical wood product imports
36% to US$95 million in 2019. Viet Nam
by FLEGT VPA status – 2015-2018. Source: IMM-STIX. As=Asian partners,
accounted for 25% of all Malaysian wood
Af=African partners, Am=Latin American partners
product imports during the year. Thailand
is the other large supplier of tropicalwood products to Malaysia, contributing
6.4.4 Malaysia
US$119 million in 2019, 2% less than the previous year.
6.4.4.1 Malaysia regulatory update
Malaysian imports from Thailand are a mix of panel
The Malaysian Timber Industry Board says that a timber
products and furniture. Malaysia imported US$17 million
legality assurance system based on the VPA model hasof wood products from VPA implementing countries inbeen in force since 1 July 201766. Imports of logs, baulks,
Africa in 2019, 19% more than the previous year. Nearlysawn timber, plywood, veneered panels and laminated
all imports from Africa in 2019 were sawnwood fromwood have since required legality documentation from
Republic of the Congo and Cameroon.
producer countries.
To obtain an import permit, importers are required tosubmit either a CITES permit/certificate or proof of legal
origin through one of the following documents:• FLEGT Licences; or• Certificate issued by a recognised timber certification
body; or

6.4.5 Republic of Korea
6.4.5.1 Republic of Korea regulatory update
The Republic of Korea’s compulsory legislation – theAct on the Sustainable Use of Timbers – came into force
on 1 October 2018. After a trial period between late
2018 and September 2019, the government enforced the“Legal Timber Trade Promotion” policy under the Act
on the Sustainable Use of Timbers on 1 October 201967.

66. https://www.marketscreener.com/news/latest/MTIB-Malaysian-Timber-Industry-Board-IMPORT-LEGALITY-REGULATION-UNDER-TIMBERLEGALITY-ASSURANCE-SY--24724334/
67. Kim & Seol. (2020). Case Study of the Legal Timber Trade Promotion System in the Republic of Korea. The Journal of the Korean Society ofInternational Agriculture, 32(2), 172-179.
MAIN REPORT – NOVEMBER 2020

61

The law requires importers to submit
documents, for example harvesting permits, toKorean Customs authorities to show that theirtimber and timber products are legal. FLEGT
Licences are accepted as evidence of legality.
After the Korea Forest Service has confirmedthat the products are legal, Korea Customs willclear the imports for entry into the country. The
processing time for an import declaration is a
maximum of three days.
The Korea Forestry Promotion Institute (KOFPI),
the implementing body of the legislation,
launched some new services for timber
importers in 2020, such as support channels anddocument translations funded by KFS68.

1,400
1,200
Value (US$ million)

The Act on the Sustainable Use of Timbers
initially covers sawnwood, plywood, pallets
and anti-decay, fire retardant or laminatedwood, which together account for a large
portion of South Korea’s imports of timber andtimber products. The Korea Forest Service (KFS)
may extend the product scope in the future;
related discussions are expected to start in
2021 at the earliest.

No VPA

1,000

Negotiating (As)800

Negotiating (Af)

600

Implementing (Af)400

Licensing(Indonesia)

200
0

2015

2016

2017

2018

2019

Figure 6.4.6.2.1: Viet Nam tropical wood product imports, by FLEGTVPA status, 2015 to 2019. Source: IMM-STIX. As=Asian partners, Af=African

partners, Am=Latin American partners

More information on the Sustainable Use of Wood Act
can be found in the IMM 2018
Annual Report.

6.4.5.2 Republic of Korea trade trends
In 2019, the Republic of Korea imported US$1.95 billionof tropical wood products, a 16% decline comparedto the previous year (Figure 6.4.5.2.1). Of this total,
73% was imported from FLEGT licensing or VPA
implementing countries in 2019, up from 68% theprevious year. Viet Nam is the largest single external
tropical supplier, accounting for US$959 million (49%)
in 2019. Imports from Viet Nam, which are varied
and include pellets, chips, plywood and other panelsalongside furniture, declined 11% in 2019 following a
43% gain the previous year. Indonesia is the second
largest supplier, accounting for US$458 million (23%)
in 2019. Imports from Indonesia consist primarilyof plywood and decking/mouldings, with a smaller
quantity of pellets, particle board, charcoal andfurniture. Imports from Indonesia fell 9% in 2019 after
a 25% gain the previous year. Nearly all remaining
imports are from Malaysia (US$225 million in 2019),
mainly plywood, pellets and veneer, and from Thailand(US$202 million in 2019), mainly panels and pellets.

6.4.6 Viet Nam
6.4.6.1 Viet Nam regulatory update
Viet Nam, like Malaysia and Indonesia is developinga system to ensure legality of timber imports closely
linked to the FLEGT VPA. The prohibition of importing
illegal timber and rules for demonstrating legality oftimber imports are integrated into the Vietnamese
Timber Legality Assurance System (VNTLAS) Decree.

The VNTLAS Decree “provides for a system to ensure
timber legality of Viet Nam for import and export”(chapter 1, article 1). The General Regulations on
Management of Imported Timber (chapter 2, section
1, article 4) stipulate that “imported timber must be
ensured to be legal, to go through import procedures
and be subject to inspection and supervision by the
Customs in accordance with the Law on Customs”.
Importers are bound to apply “risk management
measures”, which differ depending on the origin(“positive or non-positive geographical region”) and“risk” or “non-risk” product categories.

6.4.6.2 Viet Nam trade trends
Viet Nam’s imports of tropical wood products were
US$869 million in 2019, down 5% compared to theprevious year and continuing a long-term slide (Figure
6.4.6.2.1)69. Imports from FLEGT licensing (Indonesia) and
VPA implementing countries were US$380 million in 2019,
up 4% compared to the previous year. FLEGT licensing(Indonesia) and VPA implementing countries accounted
for 44% of Viet Nam’s total imports from tropicalcountries in 2019, up from 40% the previous year.
Imports from Indonesia, while still limited at US$30 million
in 2019, were 35% more than in the previous year. The
gain was due mainly to an increase in imports of plywood,
fibreboard and decking/mouldings from Indonesia.
Viet Nam’s imports from VPA implementing countries
in Africa continued to rise in 2019, up 2% to US$350
million, a large proportion consisting of logs andsawnwood from Cameroon. Viet Nam’s imports oflogs from Cameroon declined 16% to US$181 million in2019 while import quantity remained more stable at
500,000 m3 in both 2018 and 2019. However, imports ofsawnwood from Cameroon nearly doubled from US$54
million in 2018 to US$102 million in 2019 (in quantity
terms rising from 110,000 m3 in 2018 to 220,000 m3 in

68. https://www.kofpi.or.kr/index.do
69. Due to lack of direct access to customs data from Viet Nam, this short analysis of Viet Nam wood imports is based on export data derived fromtrade partners and on additional secondary sources, notably the annual analysis of Viet Nam timber trade by Forest Trends supported by various
agencies. The latter report includes a more comprehensive analysis of Viet Nam’s imports and exports (Vietnamese only).
62		MAIN REPORT – NOVEMBER 2020

2019). Viet Nam imports from other VPA implementing
in Africa in 2019 were US$30 million from Republic of
the Congo, US$20 million from CAR, US$16 million from
Ghana and US$10 million from Liberia. In 2019, Viet Nam
also imported around US$2 million of wood products
from Honduras, one of the two VPA negotiating countries
in Latin America.
Viet Nam’s imports of wood products from Cambodia,
which prior to 2016 was the largest tropical supplier,continued to fall in 2019. Imports from the country werearound US$32 million in 2019, 66% less than in 2018
and a small fraction of the US$386 million imported in2015. In volume terms, imports from Cambodia, mainly
sawnwood, fell to less than 100,000 m3 in 2019.
Imports from Lao PDR are estimated at around US$54
million in 2019, a significant rise from US$34 million
the previous year, but well down on US$360 million in2015, the year before the Government of Lao PDR enacted
Prime Ministerial Order (PM15) to ban the export of logs
and sawnwood.
Viet Nam’s imports from Malaysia were US$66 million
in 2019, 24% less than the previous year and continuing
a long-term decline. Viet Nam’s imports from Malaysia,
which were formerly dominated by logs from Sarawak,
now consist of a diverse mix of panels, sawnwood andmouldings, joinery and furniture products.
In 2019, there was a large increase in Viet Nam’s
imports of tropical logs from Papua New Guinea (rising
6% in value to US$42.8 million and 22% in quantity
to 237,000 m3) and Suriname (rising 100% in value toUS$23.8 million and 114% in quantity to 79,000 m3).
These two countries were the two largest suppliersof tropical logs to Viet Nam after Cameroon in 2019.
Viet Nam’s imports of sawnwood from Brazil also
increased in 2019, rising 7% in both value and volume,
to US$61 million and 225,000 m3 respectively. According
to Brazilian trade statistics, sawnwood exports toViet Nam in 2019 comprised, by value, 58% softwood,
40% ‘other’ hardwoods (i.e. non-tropical, possibly
eucalyptus), and only 2% tropical hardwood. Viet Nam’s
imports from Brazil in 2019 were four times the volumeof only five years before.
The decline in Viet Nam’s imports of tropical wood
products between 2015 and 2019 was more than offset
by a dramatic increase in imports from non-tropicalcountries to feed Viet Nam’s rapidly expanding woodprocessing sector. Viet Nam’s imports from nontropical countries, which mainly derive from the UnitedStates and China, increased by around 100% from justover US$900 million in 2015 to US$1.81 billion in 2019.
Viet Nam’s imports from the US were US$340 million
in 2019, 7% more than the previous year. Viet Nam’s
imports from the US are dominated by sawnwood
and logs, nearly all hardwood. Viet Nam’s imports
from China mainly comprise plywood, veneers andother panels, and furniture. According to China’s
trade statistics, only 4% of plywood and 3% of veneer

exported to Viet Nam is identified as of tropical
species. A large proportion of plywood and veneer
imported into Viet Nam from China is likely composedof either Chinese grown poplar and eucalyptus (used to
manufacture so-called mixed light hardwood plywood)or re-exports of temperate hardwoods, notably Russianand American. These temperate hardwood plywood andveneers are used in Viet Nam to manufacture interior
furniture destined primarily for the U.S. market where
the preference is for temperate hardwood finishes morefamiliar to U.S. customers.
China’s exports of wood furniture to Viet Nam also
increased rapidly between 2018 and 2019, from US$242
to US$463 million, leading to speculation that this was
driven by efforts to circumvent US import taxes of up
to 25% imposed on Chinese wood furniture during the
US-China trade dispute. According to Viet Nam customs,
more resources were being allocated in 2019 to prevent
fraudulent labelling of exported products and illegaltrans-shipments70.

6.5 Australasia and Pacific6.5.1 Australia
6.5.1.1 Australia regulatory update
The Australian Illegal Logging Prohibition Act is similar
in design to the EUTR and has been in force since 2012.
It has a broad scope, targets first placers, and importers
are obliged to develop a due diligence system to provetheir timber imports are from legal sources. As in other
non-EU consuming countries, the VPA process has
considerable potential to facilitate Australian market
access for VPA partner exporters and to assist legal
conformance by Australian importers.
In January 2019, the Australian Government publisheda report of the “Statutory review of the Illegal Logging
Prohibition Act 2012”, which examined the first five
years of operation of Australia’s illegal logging laws.
According to the Australian Department of Agriculture,
Water and the Environment71, the review “assessed towhat extent the Illegal Logging Prohibition Act 2012
and associated Illegal Logging Prohibition Regulation2012 have met the Australian Government’s illegal
logging policy objectives; highlighted operational
issues encountered during the Act’s first five yearsof operation; and identified potential options for
improving the Act’s operation”.
Based on results of the review and further consultation,
the Australian Government decided in October 2019 not
to make any significant changes to the Act for the time
being. Future changes “will be considered as part of afurther review of the Act and supporting Illegal Logging
Prohibition Regulation 2012 in late 2021”.
More information on the Australian Illegal Logging
Prohibition Act and the role of FLEGT Licences can be foundin the IMM 2018 Annual Report.

70. From an interview with Au Anh Tuan, head of customs control and supervision in the General Department of Viet Nam Customs, Business Standard,
21 November 2020. https://www.businessstandard.com/article/international/Viet Nam-cracks-down-on-exporters-using-them-to-bypass-higherus-tariffs-119112100602_1.html
71. https://www.agriculture.gov.au/forestry/policies/illegal-logging/review-and-consultation#statutory-review-of-the-illegal-logging-prohibition-act-2012
MAIN REPORT – NOVEMBER 2020

63

6.5.1.2 Australia trade trends

Imports from Indonesia fell 18% to US$249
million in 2019, mainly due to a 23% decline
in Indonesian mouldings imports (to US$121
million). Nevertheless, Indonesia maintained
its position as the largest single supplier oftropical products to Australia, accounting for
31% of all Australia’s tropical wood productimports. Australia’s imports from Viet Nam
fell 12% to US$199 million in 2019. Most otherimports of tropical wood products in 2019came from Malaysia (down 15% to US$247
million), Thailand (unchanged at US$36
million) and India (down 3% to US$31 million).
Nearly two thirds of Australia’s imports oftropical wood products comprise value added
products such as furniture and joinery.
Most of the remainder comprises plywood,decking and sawn wood.

6.6 Europe
6.6.1 EU
6.6.1.1 Regulatory update

1000

Value (US$ million)

900
800

No VPA

700

Negotiating (As)600

Negotiating (Af)

500

Negotiating (Am)400

Implementing (As)300

Implementing (Af)200

Licensing(Indonesia)

100
0

2015

2016

2017

2018

2019

Figure 6.5.1.2.1: Australia tropical wood product imports by FLEGTVPA status – 2015-2019. Source: IMM-STIX. As=Asian partners, Af=African partners,

Am=Latin American partners

70
60

Value (US$ million)

Australia’s imports of tropical wood products
were US$795 million in 2019, down 15%
compared to the previous year (Figure 6.5.1.2.1).
Imports from FLEGT licensing and VPA
implementing countries were US$449 million
in 2019, down 16% compared to the previous
year. FLEGT licensing and VPA implementing
countries accounted for 57% of Australia’s
total imports from tropical countries in 2019,the same proportion as the previous year.

No VPA

50

Negotiating (As)40

Negotiating (Af)
Negotiating (Am)30

Implementing (As)20

The EU Timber Regulation (EUTR), which
Implementing (Af)
has been in force since March 2013, has
Licensing
seen recent changes insofar as the UK
10(Indonesia)
has dropped out of the sphere of direct
influence of the Regulation after the UK left0
the EU on 31 January 2020. However, the
2015
2016
2017
2018
2019
UK decided in 2019 to incorporate both the
EUTR and the FLEGT regulation in UK law
Figure 6.6.2.2.1: Total tropical wood product imports by Norway,
after Brexit72. The green lane advantage
Iceland and Lichtenstein by FLEGT VPA status – 2015–2019.
FLEGT-licensed timber enjoys in the EU
Source: IMM-STIX. As=Asian partners, Af=African partners, Am=Latin American partners
is therefore continuing in the UK as well,even after Brexit. This is significant from a
VPA partner country perspective, given the
UK’s prominent role among the major tropical timber
Programme’s World Conservation Monitoring Centre
consuming markets in Europe (chapter 7).
(UNEP-WCMC). UNEP-WCMC publishes information
on EUTR implementation and enforcement in Briefing
74
6.6.1.2 IMM monitoring of EUTR impacts
Notes several times each year .
The IMM mandate regarding monitoring of market
impacts of EUTR is laid down in indicator group “i” of
IMM survey results on the direct impacts of EUTR
the IMM Global Indicators73. The first three indicators
implementation and FLEGT licensing on importers’
under that group: application of EUTR compliant duepurchasing behaviour are included in the summary
diligence systems by operators in EU member states;of the 2019 EU trade survey in chapter 8 of this report.
sanctions imposed on non-compliant operators in EU
Analysis of EU imports of timber and timber products
member states; and prosecution of non-compliant
from Indonesia is provided in chapter 5 of this report,
operators in EU member states are considered bywhile EU imports from other VPA partner countries andthe European Commission to be fully covered undermajor non-VPA competitors is in chapter 7.
a separate project managed by the UN Environment
72. https://www.flegtimm.eu/index.php?view=article&id=38:eutr-and-eu-flegt-stay-in-uk-law-post-brexit&catid=22
73. IMM Global Indicators I EU Timber Regulation https://www.flegtimm.eu/images/imm_indicators/IMM_Meth_Annex1_Indicators_global.pdf
74. https://www.unep-wcmc.org/resources-and-data/briefing-notes-on-the-implementation-of-the-eu-timber-regulation
64		MAIN REPORT – NOVEMBER 2020

6.6.3 Switzerland
6.6.3.1 Switzerland regulatory update

120

Value (US$ million)

100

No VPA
Negotiating (As)80

Negotiating (Af)60

Negotiating (Am)
Implementing (As)40

Implementing (Af)20
0

Licensing(Indonesia)
2015

2016

2017

2018

2019

Figure 6.6.3.2.1: Switzerland tropical wood product imports by FLEGTVPA status – 2015-2019. Source: IMM-STIX. As=Asian partners, Af=African partners,
Am=Latin American partners

6.6.2 EEA
6.6.2.1 EEA regulatory update
The European Economic Area (EEA) brings together the
EU Member States with three additional countries Iceland, Liechtenstein and Norway. It was established by
the EEA Agreement which enables the three countries
to participate fully in the Single Market. All relevant EU
legislation in the field of the Single Market is integrated
into the EEA Agreement so that it applies throughout thewhole of the EEA, ensuring uniform application of laws
relating to the Single Market. Therefore, Norway, Icelandand Liechtenstein are obliged to implement EUTR in thesame way as all EU Member States.

6.6.2.2 Norway, Iceland and Liechtenstein trade trends
Of the three non-EU countries enforcing EUTR as partof their commitment to EEA membership, only Norway
is a significant importer of tropical wood products75. In
total, US$55.3 million of tropical wood products were
imported by the three countries in 2019, down 6% on
the previous year (Figure 6.6.2.2.1). US$34.2 million (62%)
were sourced from FLEGT licensing and implementing
countries. Indonesia was the largest single supplieraccounting for US$20.4 million in 2019, a 25% gain
compared to the previous year. Indonesia’s share of total
imports into this group of countries increased from
28% in 2018 to 37% in 2019. Imports from Viet Nam, thesecond largest tropical supplier, declined 11% to US$13.7
million in 2019. Other leading suppliers in 2019 wereIndia (-13% to US$7.0 million), Malaysia (-39% to US$3.2
million) and Thailand (-50% to US$2.1 million). Imports
from tropical countries comprise mainly furnitureand charcoal with small quantities of panel products,
sawnwood and various valued added products such astableware, joinery products and tools.

Switzerland has been working on
legislation similar to EUTR for several
years. In 2019, an amendment to thecountry’s Environmental Act was approvedby the Swiss Environmental, Spatial
Planning and Energy Commission (UREK).
In September 2019, the Swiss National
Council and the Council of States both
approved the bill as well76.
The new law is similar to the EUTR. It
prohibits placing illegal timber on the Swiss
market, introduces due diligence obligations
for first placers and traceability obligations
for timber traders further down the supply
chain. Infringements will be fined andprison sentences of up to three years arealso possible for first placers.
However, the new regulation had not yet
entered into force at the time of writing of
this report. 77

6.6.3.2 Switzerland trade trends
Switzerland’s imports of tropical wood products
were US$101 million in 2019, down 2% comparedto the previous year (Figure 6.6.3.2.1). Nearly all of
Switzerland’s imports of tropical wood products
comprise value added products such as furniture,ornaments/marquetry, and joinery.
Imports from FLEGT licensing and VPA implementing
countries were US$43 million in 2019, down 4%compared to the previous year. FLEGT licensing and
VPA implementing countries accounted for 42% of
Switzerland’s total imports from tropical countries in
2019, down from 43% the previous year.
Imports from Indonesia fell 11% to US$9.0 million in
2019, falling across a range of product groups including
furniture, marquetry/ornaments, flooring and charcoal.
Indonesia accounted for 9% of all Switzerland tropicalwood product imports in 2019, down from 10% theprevious year. With value of US$32.4 million in 2019, thesame as in 2018, Viet Nam was by far the leading tropicalwood products supplier to Switzerland, accounting for
32% of the total. Nearly all Swiss wood product imports
from Viet Nam comprise furniture, with a small amountof flooring.
Most other imports of tropical wood products into
Switzerland in 2019 came from Thailand (down 2% at
US$18.4 million), India (up 14% to US$14.3 million),
Brazil (up 22% to US$5.8 million) and Malaysia (-18% to
US$3.4 million).

75. Iceland’s imports of wood products from tropical regions typically do not exceed US$2 million per year. Liechtenstein is a tiny territory of 160 km2,
with a total population of no more than 38,000, trading primarily with neighbouring European countries.
76. Amendment to Swiss Environmental Act (in German) https://www.admin.ch/opc/de/federal-gazette/2019/6603.pdf
77. In April 2020 a process of consultation at state level (Vernehmlassung) was opened, which closed on 20 August. According to information from
UREK, the consultation process indicated that industry needed more time to prepare for changes and the new regulation would not come into
force until the beginning of 2022.
MAIN REPORT – NOVEMBER 2020

65

VPA partners in EU timber
and timber products trade
7.1 Overview

7.2 Wood and wood furniture imports
into the EU

This Chapter extends the analysis contained in Chapter
5 on FLEGT-licensed timber from Indonesia, to consider
economic and timber sector trends in the EU and theirimpact on the competitiveness and imports of timber
products from all VPA partner countries. The Chapter
considers growth in the overall EU timber products
market in 2019, considering this in relation to long-term
trends. It considers the effect of exchange rate and othereconomic trends on the competitiveness of VPA partners
relative to other supply countries, and VPA partner shareof total EU wood product imports during the year.
Unlike other sections of the IMM 2019 Annual Report,
where “wood and wood furniture products” is treatedas a single category including all products in HS chapter
44 and wood furniture in HS chapter 94, this section
gives separate consideration to “wood energy and wood
waste” products in HS chapter 44. This reflects thevery distinctive market characteristics of wood energy
products in the EU and their different treatment inrelation to FLEGT policy measures.
In this chapter, “wood and wood furniture” includes all
products in HS Chapter 44 except 4401 (Fuelwood andwaste) and 4402 (Charcoal), together with wood-based
products in Chapter 94 (Furniture). Nearly all theseproducts are within the scope of both the FLEGT VPAs
and the EUTR, the only notable exception being wooden
seating which is not within the scope of EUTR (HS 9401).
“Wood energy and wood waste” includes all products in
4401 (Fuelwood and wood waste78) and 4402 (Charcoal).
Coverage of these products in FLEGT policy measuresvaries. EUTR includes coverage of 4401 (Fuelwood andwaste) but excludes 4402 (Charcoal). The EU-Indonesia
VPA includes softwood and hardwood chips (440121
and 440122 respectively) as these are equally
likely to be feedstock for the pulp and paper
sector as for the energy sector, but no other40
form of wood for energy is included79.
35

79. In 2016, when the FLEGT licensing system was launchedin Indonesia, chips (subject to licensing) were by far
the largest product exported by Indonesia in the“fuelwood” category, accounting for US$105 million(83%) of total 127 million. At that time pellets (notsubject to licensing), the second largest category
accounted for US$7 million (6%). Over the next three
years exports of chips declined to US$57 million (66%)
while exports of pellets increased to US$27 million(31%) of total US$86 million.
66		

30
Units

78. The official definition of HS 4401 is a follows: “fuelwood, in logs, in billets, in twigs, in faggots or in similar
forms; wood in chips or particles; sawdust and wood
waste and scrap, whether or not agglomerated inlogs, briquettes, pellets or similar forms”. The main
application for the majority of these products is energy,
however chips (440121 and 440122) may equally bedestined for the pulp sector.

7.2.1 Total import value and quantity
The total value of EU imports of wood and wood furnitureproducts was US$19.3 billion in 2019, 3% less than theprevious year. However due to weakening of the euro
against the dollar, there was a 3% increase in euro importvalue, to €17.3 billion. Import value in 2019, reported ineuro terms, was the highest level since 2008. Importquantity declined 2.5% to 26.0 million tonnes in 2019.
While, in fine detail, there were some significant changes
in EU imports of wood and wood furniture products,
review of the bigger picture indicates that total trade
was essentially flatlining in the six years between 2014
and 2019 (Figure 7.2.1.1). During this whole period importquantity fluctuated within a narrow band around 26
million tonnes, while import value increased only slowly
in real terms, particularly when measured in US dollars.
Taking a longer term view, the 15 years between 2004
and 2019, encompassing the whole period since the
FLEGT Action Plan was introduced in 2003, can bedivided into three periods from the perspective of EU
wood and wood furniture imports (Figure 7.2.1.2). Prior
to the financial crises in 2008, import quantity washigh at over 35 million tonnes per annum. At that time,a relatively high proportion of imports still comprised
logs and other primary and secondary wood products,
although imports of furniture were also rising rapidly,
particularly from China and unit values were rising
steeply overall in response to strong consumer demandand limited supply. The unit value of EU imports of woodand wood furniture increased considerably from US$650
per tonne to over US$1100 per tonne during this period.
Imports were buoyed as the euro strengthened against
the dollar and other major international currencies.

million tonnes
US$ billion(constant 2019)€ billion(constant 2019)

25
20
15
10

20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19

7

Figure 7.2.1.1: Total quantity and value of EU imports of wood andwood furniture (excluding intra-EU trade) – 2004-2019. Source: IMM-STIX

MAIN REPORT – NOVEMBER 2020

1100

Unit values

1000

1. 2004-08. Unit values
rise during boom years.
€ strengthens against
US$. US$ prices rise
faster than € prices

1.50

2. 2009-2013. Economic slowdown.
€ weakens sharply against US$. Both US$ and € unit prices
fall with weaker demand and rising imports of low value
products, particularly from CIS

1.45
1.40

3. 2014-2019.
Recovering demand.
US$ & € prices rise in tandom

1.35

900

1.30

800

1.25

700

1.20

600

Exchange rate

1200

1.15
US$ (2019 constant)/tonne€ (2019 constant)/tonne
1 EUR = USD

500

1.05

20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19

400

1.10

Figure 7.2.1.2: USD and EUR value per tonne of EU total importsof wood and wood furniture (excluding intra-EU trade), and EUR-USD
exchange rate – 2004-2019. Source: IMM-STIX

130

Romania

125

Netherlands

120

Poland115

Germany

110

UK
EU28

105

Italy

100

Spain

95

France9085

Belgium
2015

2016

2017

2018

2019

Figure 7.2.2.1: Construction volume index of production in the EU
and selected EU countries – calendar adjusted data, not seasonallyadjusted data – 2015=100. Source: Eurostat

125
PolandLithuania

120

Romania
Belgium

115

Spain
EU28

110

Italy
France
UK

105

100

Germany

2015

2016

2017

2018

2019

Figure 7.2.2.2: Furniture volume index of production in the EU
and selected EU countries – calendar adjusted data, not seasonallyadjusted data – 2015=100. Source: Eurostat

MAIN REPORT – NOVEMBER 2020

The period between 2009 and 2013 was definedby the financial and currency crises, which
led to a very sharp fall in consumption,
progressive weakening in the euro exchange
rate against the dollar, feeding through intoa massive decline in imports, to around 20
million tonnes per annum. The unit valueof imports also declined sharply, a trend
driven both by the intensely competitiveenvironment and by the rising proportion ofimports from Russia and other CIS countries
where currencies had weakened dramatically.
Tropical wood lost a lot of ground in EU
imports during this period, in terms ofvolume, value and market share.
Between 2014 and 2019 was a period ofrecovering demand. Activity in key European
wood end-use sectors, such as construction
and furniture, bottomed out in 2013 andbegan to recover at a slow, but relatively
consistent, rate. The euro made some gains
against the dollar until the beginning of 2019
when concerns again emerged about longer
term economic prospects. China, Russia andother countries in the CIS region remained
the dominant partners in EU import trade,
although some tropical countries, particularly
Viet Nam, Indonesia, India and Brazil, andmost notably in the furniture sector, began tomake new inroads in the EU market.

7.2.2 Key economic trends in the EU in 2019
After the slow recovery since 2013, signs of
weakness in the European economy again
began to emerge in 2019, particularly in thesecond half of the year. According to the EU
Winter 2020 Economic Forecast published on
13 February 2020, GDP growth in the EU27
slipped to 1.5% in 2019, down from 2.1% in2018. According to the UK Office of National
Statistics, the UK economy grew by 1.4% in
2019, only marginally higher than the 1.3% rate
in 2018, and recorded zero growth in the lastquarter of the year.
The volume of construction activity in the
EU increased by 2.6% in 2019, a slight risein growth rate compared to 1.7% in 2018 but
down from over 4% in 2017 (Figure 7.2.2.1).
Relatively high rates of growth in 2019 in
the Netherlands (+4.7%), Germany (+3.5%)
and Poland (+3.8%) offset the continuing
slower pace of growth in France (+0.7%) and
Italy (+2%). Construction activity in the UK
increased 1.9% in 2019, an improvement on thestasis in 2018 but well down on 6% growth in2017. Construction activity declined in Spain(-2.5%) and Belgium (-0.3%) in 2019 after
making gains the previous year.
The volume of furniture production declined
overall in the EU in 2019 by 0.7% after rising
1.3% the previous year (Figure 7.2.2.2). Therewas strong growth in furniture production inseveral eastern European countries in 2019,
including Poland and Lithuania where growth67

On the other hand, EU currencies remained
reasonably strong relative to currencies inseveral key Eastern European supply countries,
including Ukraine, Russia, and Turkey. Theseexchange rate fluctuations generally favoured
EU imports from Eastern Europe and acted as a
drag on imports from North America and Asia.

7.2.3 EU wood and wood furnitureimports by product group
Considering individual products (Figure 7.2.3.1),
the value of EU imports of wood furniture
increased by 5% to US$7.50 billion in 2019
after a 5% rise in 2018. After flatlining in 2018,
imports from China, the EU’s largest externalfurniture supplier, increased throughout 2019.
Imports from Turkey, the second largest
external supplier, also made some gains, but
not as large as those made by several tropicalsuppliers including Indonesia, Viet Nam,
Malaysia and India. Furniture imports from
Bosnia were weakening throughout the year, but
imports from Serbia were rising.

US$ billion (nominal)

7

2015

2016

2017

2018

2019

6
5
4
3
2
1

Fl
oo
rin
g

Lo
gs

Sa
w
n
Pa
ne
ls/
ve
ne
er
Ot
he
rp
ro
ce
ss
ed
Ot
he
rj
oi
ne
ry

Fu
rn
itu
re

0

Figure 7.2.3.1: EU import value of wood (HS44) and wood furniture(HS 94) by product type – Years 2015-2019. Source: IMM-STIX

10
9
8Units as stated

The slowing economy fed through into a 4%
decline in the value of the euro against the
US dollar in 2019 following an 8% fall theprevious year. The British pound dipped to an
all-time low against the US dollar and other top
currencies in the middle of 2019 as concerns
mounted over Brexit, although it did rally tosome extent towards the end year.

8

US$ billion(constant)€ billion(constant)million tonnes

7
6
5
4
3
2

20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19

continued at around 4% during the year, andmoderate growth in several western European
countries including Belgium (2.9%), Sweden(+1.2%), Spain (+0.9%), and France (+0.6%).
However this was not enough to offset declining
production volume in several leading European
manufacturing countries including Italy (-1.2%),
Germany (-4.1%), Romania (-2.5%), the UK(-1.2%), and the Netherlands (-0.6%).

Figure 7.2.4.1: Total quantity and value of EU imports of tropicalwood and wood furniture (excluding intra-EU trade) – 2004-2019.

EU imports of sawnwood declined 6% toSource: IMM-STIX
US$3.99 billion in 2019, losing some of thegains made the previous year when imports
increased 17%. After a strong first quarter,sawnwood imports slowed dramatically from April 2019
fared better than most, a strong rise in plywood
onwards. During this period, the pace of sawnwood
imports from the country in the first half offsetting aimports fell rapidly from all four of the leading
slowdown towards the end of the year.
suppliers, Russia, Belarus, Ukraine, and the US. Of
tropical sawnwood suppliers, imports from Cameroon
EU imports of logs declined 13% to US$740 million inand Brazil increased, partly offset by a continuing fall
2019, after rising 10% the previous year. The downturnin imports from Malaysia.
was due partly to a slowdown in imports from Russia inthe second half of 2019, while all EU imports of logs from
EU imports of panels (mainly plywood) decreased 12%
Belarus ceased in 2019 after tightening of log export
to US$3.15 billion in 2019, wiping out much of the 16%
controls in the country.
gain made the previous year and the first fall in importsof this commodity since 2015. Imports from Russia
After rising 9% in 2018, EU imports of wood flooringand Belarus, which experienced particularly dramatic
fell 1% to US$680 million in 2019. Flooring imports
growth in previous years, slowed throughout 2019.
from China, by far the largest external supplier
While imports of plywood from China were higher inaccounting for around two thirds of the total, continued
2019 than in 2018, the rise in trade was concentrated
to rise strongly in the first half of 2019 but began
in the first half of 2019 and imports were weakening into lose ground in the second half of the year, while
the second half of the year. Imports from nearly all theimports from Ukraine made gains throughout 2019.
other main suppliers – including Brazil, Ukraine, Chile
Imports from Switzerland, Malaysia and Indonesia were
and the US – were weakening during 2019. Indonesia
sliding throughout the year.

68		

MAIN REPORT – NOVEMBER 2020

2200

Unit value

2000

1. 2004-08.
Economic boom.
Rising demand.
€ strengthens vs $.
Sharp rise in $ unit
value, slow rise in€ unit value

2. 2009-2013.
Economic crises. Demandslows. € weakens against$. Shift away from logs &to furniture. $ unit value
falls but € unit value rises

3. 2014-2019.
Some rise in demand.
$ & € unit value broadly flat

1.55
1.45

1800
1.35

1600
1400

1.25

1200
1000

1.15

US$ (2019 constant)/tonne€ (2019 constant)/tonne
1 EUR = USD

1.05

20
0
20 4
0
20 5
0
20 6
0
20 7
0
20 8
0
20 9
1
20 0
1
20 1
1
20 2
1
20 3
1
20 4
1
20 5
1
20 6
1
20 7
1
20 8
19

800

2% to 2.7 million tonnes in 2019 after a 6% gain
the previous year (Figure 7.2.4.1).

Exchange rate

2400

Figure 7.2.4.2: USD and EUR value per tonne of EU imports oftropical wood and wood furniture (excluding intra-EU trade),and EUR-USD exchange rate – 2004-2019. Source: IMM-STIX
100%
90%
Share of value in US$

80%
70%
60%

Other
North
America50%

Non-EU
Europe40%

Russia/CIS

30%
20%

China/HK/
Taiwan POC

10%

Tropical

Considering the long-term perspective, the trend
in tropical wood and wood furniture imports into
the EU can be related to the three distinct periods
for total imports described in Section 7.2.2. Importsof tropical products went through the same
phases of growth (2004-2008), decline (2009-2013)
and slow recovery (2014-2019), although in thisinstance the scale of the decline between 2009
and 2013 was much greater, with value fallingfrom a peak of nearly US$10 billion in 2007 to justover US$4 billion in 2013.
Analysis of the long-term trend in unit values
helps explain the particularly large fall in tropicalwood imports into the EU. Unlike the unit valueof total imports, which declined in both euro
and dollar terms during the economic downturn
due to a large influx of cheaper products fromthe CIS and China, the unit value of tropical
products, when measured in euros, continued torise steadily until 2015. In practice, the persistent
weakness of the euro against the dollar, combinedwith other factors such as increased scarcity
as more wood was diverted to China and otheremerging markets, meant that tropical wood
products became less price competitive during
this period.

20
0
20 4
0
20 5
0
20 6
0
20 7
0
20 8
0
20 9
1
20 0
1
20 1
1
20 2
1
20 3
1
20 4
1
20 5
1
20 6
1
20 7
1
20 8
19

0%

The increase in the total value of EU wood productimports from the tropics in 2019 was driven
mainly by wood furniture with other smaller
gains in imports of tropical sawnwood, ‘other’ (i.e.
non-flooring) joinery, and other processed wood
products. These gains offset a decline in importsof tropical panels/veneers, flooring and logs.

In contrast to the euro unit value, the dollar unit
value of imports was declining continuously
between 2008 and 2016, implying worsening in
Figure 7.2.5.1: Share of EU import value of wood (HS44) products
the terms of trade for tropical suppliers selling
and wood furniture (HS 94), by supply region – 2004-2019.
into the EU, at least those invoicing in dollars.
Source: IMM-STIX
Other markets with stronger currencies, suchas China and the US, became more attractive fortropical exporters than the EU during this period.
EU imports of ‘other’ joinery products (i.e. excluding
At the same time, importers in the EU were strongly drawn
flooring and mainly comprising doors and laminatedto cheaper alternatives from the CIS region.
wood for window frames and kitchen tops) increased
7% to US$900 million in 2019, after rising 8% the
Between 2016 and 2019, there was some improvement inprevious year. There was good growth in imports of thisterms of trade for tropical exporters to the EU as the euro
commodity group from Indonesia, building on gains
recovered some ground against the dollar, unit values formade in the previous year, while imports from China andtropical wood products in the EU stabilized, European
Malaysia also made ground.
demand slowly recovered, and there were also signs ofChina’s international competitiveness beginning to wane
7.2.4 Total EU import value and quantitywith rising labour and other input costs.

of tropical wood and wood furniture
The total value of EU imports of tropical wood and wood
furniture products (including direct imports and imports
via third countries such as China) increased 1% in realterms to US$4.4 billion in 2019 following a 6% increasein 2018. Due to weakening in the euro exchange rate, thegain in the euro value of imports was more significant in
2019, rising 7% to US$3.92 billion following a smaller gainof 2% in 2018. The increase in import quantity of tropical
products was more aligned with the US dollar trend, rising

MAIN REPORT – NOVEMBER 2020

7.2.5 Share of tropical wood andwood furniture in EU imports
The share of tropical products in the total value of EU
wood product imports increased from 21.9% in 2018 to
22.8% in 2019, rebounding to the level of two years before.
Considering the long-term trend, after falling continuously
from 37% in 2004 to 23% in 2014, the share of tropicalcountries in EU imports stabilized in the range 22-23%
during the five years between 2015 and 2019 (Figure 7.2.5.1).

69

In 2019, there was a robust rise in EU imports
from both Indonesia and Viet Nam, by far the twolargest tropical suppliers to the EU during theyear. However, the continued rise in EU importsof competing products from tropical countries
with no engagement in the FLEGT process raisedquestions about the benefits of FLEGT licensing
to improve overall competitiveness.
Of the US$4.40 billion of tropical wood andwood furniture products imported into the EU
in 2019, US$3.35 billion (76%) was sourced fromcountries either already FLEGT licensing (22%),or implementing a licensing system (32%) or in
negotiations towards a VPA (22%). This compares
to 2018, when US$4.29 billion (77%) of tropicalimports was sourced from countries either
already FLEGT licensing (21%) or implementing
a licensing system (32%) or in negotiations
towards a VPA (24%) (Figure 7.2.6.1).

70		

Share of value in US$

Negotiating (As)70%

Negotiating (Af)60%

Negotiating (Am)50%

Implementing (As)40%

Implementing (Af)30%

Licensing(Indonesia)

20%
10%
0%

2015

2016

2017

2018

2019

Figure 7.2.6.1: Share of EU import value of tropical wood (HS44)
products and wood furniture (HS 94) from tropical countries by
FLEGT VPA status – 2015-2019. Source: IMM-STIX

1200

2015

2016

2017

2018

2019

1000
800
600
400

VP
A
No

Ne
go
tia
ti
(A ng
s)

Ne
go
tia
tin
(A g
f)

0

Ne
go
tia
t
(A ingm)

200

Figure 7.2.6.2: EU import value of tropical wood (HS44) products
and wood furniture (HS 94) from tropical countries by FLEGT VPA
status – 2015-2019. Source: IMM-STIX
1000
2015

2016

2017

2018

2019

800
600
400
200
0

In
di
Ca
a
m
er
oo
n
Br
az
il
Ga
bo
n
Ch
in
a
Co
ng
Th o
a
Cô ilan
d
te
d'
Iv
oi
re
M
ya
nm
ar

7.2.6 Tropical wood and wood furnitureimports by VPA status

80%(In Lic
do ens
ne in
sia g
)
Im
pl
em
en
tin
(A g
f)
Im
pl
em
en
ti
(A ng
s)

EU imports from North America declined 11%
from US$1.15 billion in 2018 to US$1.02 billion in
2019. The region’s share of total EU imports fell
from 5.9% to 5.3% during this period. Importsof sawnwood, furniture, and veneers from North
America all declined, only partially offset byrising imports of barrels. Nearly all EU imports ofwood products from North America are now fromthe US and only a small proportion from Canada.

No VPA

Vi
et
Na
m
In
do
ne
sia
M
al
ay
sia

EU imports from non-EU European countries
fell 3% to US$2.03 billion in 2019 and share ofimports from these countries fell from 10.7%
to 10.5%. While imports from Serbia and North
Macedonia were rising in 2019, imports from
Bosnia and Herzegovina, Norway and Switzerland
slowed during the year.

90%

US$ million

After several years of rapid growth, EU importsof wood and wood furniture products from CIS
countries fell 7% from US$4.56 billion in 2018
to US$4.25 billion in 2019. The share of CIS
countries in total EU imports declined from
23.3% in 2018 to 22.0% in 2019. The growth inimports from Russia, Ukraine and Belarus all
began to slow in 2019. The slowing trend wasapparent in imports of sawnwood, plywood andlogs from the CIS region. However, EU imports
of furniture products from the region continued
to rise in 2019.

100%

US$ milion

In 2019, China maintained its position as thelargest external supplier of wood and wood
furniture products to the EU. The total value ofimports from China (excluding those identified
as composed of tropical hardwoods) increased 3%from US$6.12 billion in 2018 to US$6.29 billion in
2019, mainly due to a partial recovery in importsof Chinese furniture, and to a lesser extent
joinery products and plywood. After falling
between 2015 and 2018, China’s share in total EU
imports of wood and wood furniture products
recovered from 31.2% in 2018 to 32.5% in 2019.

Figure 7.2.7.1: EU import value of tropical wood (HS44) products
and wood furniture (HS 94) from tropical countries by supply
country – 2015-2019. Source: IMM-STIX

MAIN REPORT – NOVEMBER 2020

Summarising EU imports by VPA status (Figure 7.2.6.2):

following a rise of 1.3% in 2018. Import quantity was
283,000 tonnes in 2019, down 2% on the previous year.
Imports from Côte d’Ivoire and Democratic Republic ofCongo (DRC) were sliding in 2019, while imports from
Gabon were flat. These countries accounted for 6.4% of
the total value of EU tropical wood-product imports in
2019, down from 7.0% the previous year.

• strong gains were made in the value of imports fromIndonesia, the only FLEGT licensing country in 2019,
rising 6% from US$903 million in 2018 to US$954
million in 2019. In terms of tonnage, imports fromIndonesia declined 3% to 363,000 tonnes in 2019.
Taken together this implies an increase in the unit
value of imports from Indonesia which were focusedmore on furniture than lower value wood products
during the year. Indonesia accounted for 21.7% of thetotal value of EU tropical wood-product import value
in 2019, up from 21.0% the previous year.

• EU import value from the three VPA negotiating

countries in Asia fell 3.7% to US$677 million in 2019.
Import quantity fell 4% to 337,000 tonnes during theyear. Share of these countries in the total value of EU
tropical wood-product imports fell from 15.9% in 2018
to 15.0% in 2019. While imports of wood furniturefrom Malaysia increased, this was offset by a decline
in imports of Malaysian sawnwood and plywood.
Imports from Thailand were stable during the year
and remained negligible from Lao PDR.

• the value of EU imports from the five African VPA-

implementing countries – Cameroon, Central African
Republic (CAR), Republic of Congo (RoC), Ghana, andLiberia - increased 3% to US$453 million in 2019 afterrising 14% the previous year. Import quantity increased
10% to 436,000 tonnes following a 9% gain in 2018,
driven mainly by a rise in imports from Cameroon and
RoC. The share of African VPA implementing countries
in total EU tropical import value increased slightly
from 10.2% in 2018 to 10.3% in 2019.

• EU imports from non-VPA tropical countries increased
5% to US$1.05 billion in 2019, building on a 17% gain
the previous year. Import quantity increased 9%
to 600,000 tonnes in 2019 following a 13% gain theprevious year. Share of non-VPA countries in total EU
tropical wood product import value increased from
23.3% in 2018 to 23.9% in 2019. Most of the gains
comprised wood furniture from India, sawnwood
and mouldings/decking from Brazil, and tropical
hardwood-faced plywood from China.

• the value of EU imports from Viet Nam, the only

Asian VPA implementing country, increased 4% to
US$976 million in 2019 after rising 5% in 2018. Importquantity increased 1% to 289,000 tonnes in 2019 afterrising 9% the previous year. Viet Nam accounted for
22.2% of the total value of EU tropical wood-productimports in 2019, up from 21.9% the previous year.

7.2.7 EU tropical wood and wood furnitureimports by supply country
Viet Nam increased its lead as the largest supplierof tropical wood and wood furniture products to the
EU in 2019, staying just ahead of Indonesia despite
continued strong growth in imports from that country
in 2019. Malaysia maintained its position as the thirdlargest supplier to the EU in 2019 with trade remaining
broadly flat in recent years. India consolidated its
position as the fourth largest supplier in 2019 having
pushed Cameroon into fourth place two years before.
Imports from Cameroon, which recovered ground in
2018, remained at the higher level in 2019. Imports from
Brazil were rising rapidly between 2016 and 2019 while
imports from Gabon were flat. (Figure 7.2.7.1).

• the value of EU imports from Guyana and Honduras,

the two VPA negotiating countries in South America, isnegligible and fell in 2019, down 6% to US$5 million,
following a 13% increase in value the year before.
Import quantity remained level at 6,000 tonnes in 2019
after rising 13% the previous year. These countries
accounted for 0.1% of the total value of EU tropicalwood-product imports in both 2018 and 2019.

• EU import value from the three VPA negotiating countries
in Africa declined 5.9% to US$283 million in 2019,

2000
1800

2015

2016

2017

2018

2019

1600

US$ milion

1400
1200
1000
800
600
400

Ot
he
r

Ve
ne
er
s
Or
na
m
en
ts
Fl
oo
rin
g

W
oo
d

fu
rn
itu
re
Sa
w
nw
oo
d
Jo
in
er
M
y
ou
l
d
de in
ck gs
in /
g
Pl
yw
oo
d

0

Lo
gs

200

Figure 7.2.8.1: EU import value of tropical wood (HS44) products
and wood furniture (HS 94) from tropical countries by product type– 2015-2019. Source: IMM-STIX

MAIN REPORT – NOVEMBER 2020

7.2.8 EU tropical wood and wood furnitureimports by product group
In terms of product mix, the growth in EU
imports from the tropics in 2019 was driven
mainly by wood furniture (Figure 7.2.8.1). Importvalue of tropical furniture products was US$1.96
billion in 2019, up 7% compared to the previous
year. Import quantity of wood furniture increased
6% to 568,000 tonnes in 2019. The main South
East Asian wood furniture supply countries –Indonesia, Viet Nam and Malaysia – have allfollowed a similar trajectory in the EU market in
the last five years. A period of flat or declining
imports between 2015 and 2018 followed by a
sharp upturn in 2019.
The EU market situation for tropical wood
products other than furniture was more mixed in
2019. Overall, if wood furniture is excluded, there
was a slight increase in the tonnage of EU imports
in 2019, but a decrease in value. The EU imported

71

1.79 million tonnes of these products with a
total value of US$2.44 billion, respectively 1.8%
greater and 0.8% less than the previous year.

2018

2019

US$ milion

800
600
400

Sw
ed
en

Sp
ai
n

Ita
ly

Ge
rm
an
y
Be
lg
iu
m

Fr
an
ce

0

UK
Ne
th
er
la
nd
s

200

7.2.9 EU tropical wood and wood furnitureimports by destination

Figure 7.2.9.1: EU import value of tropical wood (HS44) products
and wood furniture (HS 94) from tropical countries by destination –2015-2019. Source: IMM-STIXThe UK was the leading destination fortropical wood and wood furniture imports inthe EU in 2019, posting a 5% gain to US$1.16
billion to build on a 6% increase the previous year.
Imports were also rising strongly into the Netherlands,
the second largest destination, up 8% in 2019 to US$679
million after a gain of 15% the previous year. Importperformance of other EU destinations was more mixed
in 2019, remaining static in France at US$614 million
after gaining 14% the previous year, while declining
in Germany (-2% to US$503 million), Belgium (-2% to
US$476), Italy (-4% to US$259 million), and Spain (-2%to US$174 million) (Figure 7.2.9.1).
There were gains in a few smaller EU markets for tropicalwood in 2019 including Denmark (+3% to US$111 million),
Sweden (+3% to US$65 million), Ireland (+14% to US$63

million), Greece (+22% to US$56 million), Portugal (+6% to
US$47 million) and Romania (+7% to US$22 million).

7.2.10 Largest winners and losers in EU importsof tropical wood and wood furniture
Wood furniture from Indonesia was at the top of theleague of the largest gains in EU tropical wood productimports in 2019. Indonesian furniture imports were
US$63.8 million greater in 2019 than in the previous
year. Joinery products from Indonesia were also
amongst the largest gainers during the year. For VPA
implementing countries, significant gains were seen in
imports of furniture and ‘other (not elsewhere specified)’wood products from Viet Nam, and sawnwood from the

63.8

Malaysia-Furniture

2016

1000

Gains made in EU non-furniture wood
products imports from the tropics in thefirst half of 2019 were eroded in the second
half as the EU economy began to slow. The
first half growth was driven mainly by arecovery in imports of sawnwood from
Cameroon and of sawnwood and mouldings/
decking from Brazil, particularly into
Belgium, together with rising imports ofa variety of joinery products (doors andlaminates) from Indonesia and Malaysia.
These gains offset falling imports of tropicallogs, plywood, and veneers.

Indonesia-Furniture

2017

Po
la
nd

2015

De
nm
ar
k

1200

-47.2

29.9

Malaysia-Sawnwood-17.6

Indonesia-Sawnwood

Viet Nam-Furniture

24.6

-15.6

Malaysia-Plywood

Indonesia-Joinery

20.5

-13.7

Indonesia-Plywood

Brazil-Sawnwood

17.7

-8.6

Singapore-Wood furniture

India-Furniture

16.0

-5.5

Myanmar-Sawnwood

Brazil-Mouldings

13.8

-5.3

Côte d'Ivoire-Veneers

Malaysia-Joinery

10.6

Congo-Sawnwood

10.3

Viet Nam-Other n.e.s.

FLEGT licensed product8.6

Ecuador-Sawnwood

4.8

India-Kitchenware

4.5

Cameroon-Sawnwood

3.7
0

10

VPA implementing product

DRC-Logs-4.3

Gabon-Veneers

FLEGT licensed product-4.0

Côte d'Ivoire-Sawnwood

VPA implementing product-3.6

Philippines-Wood furniture-3.2

Malaysia-Flooring

-3.2
20

30

40

50

60

Figure 7.2.10.1: Largest gains in import value of tropicaland wood furniture products in 2019 (US$ million
increase in 2019 compared to 2018) by partner-productcombination. Source: IMM-STIX

72		

-4.6

70

-50

-40

-30

-20

-10

CAR-Logs
0

Figure 7.2.10.2: Largest losses in import value of tropicaland wood furniture products in 2019 (US$ million
decrease in 2019 compared to 2018) by partner-productcombination. Source: IMM-STIX

MAIN REPORT – NOVEMBER 2020

350

2015

2016

2017

2018

2019

300

US$ milion

250

EU imports from Ghana, mostly of sawnwood
and veneer, remain low but were rising
gradually in 2018 and 2019. Imports increased
11% to US$34 million in 2018 and then another
4% to US$35 million in 2019. Although direct
imports from Ghana into Germany and France
declined, this was offset by rising imports
into Belgium and the UK. Italian imports of
Ghanaian sawnwood and veneer were stable.

200
150
100
50
0

US$104 million in 2019. There was particularly
strong growth in Belgian imports of logs andsawnwood and French imports of veneersfrom the RoC in 2018 and 2019.

Cameroon

Congo
Republic

Ghana

CAR

Liberia

EU imports from Central African Republic(CAR), recovered from a low of US$8 million in2017 to US$13 million in 2018. However, after
a strong start to 2019, imports slowed in the
Figure 7.2.11.1: EU import value of tropical wood (HS44) products
second half and by the end of the year were 19%
and wood furniture (HS 94) from VPA implementing countries indown at US$11 million. Almost all EU imports
Africa – 2015-2019. Source: IMM-STIX
from CAR comprise logs, mainly destined forFrance, Portugal and Belgium. Imports ofRepublic of Congo and Cameroon. Of tropical products
sawnwood, previously destined mainly forfrom other supplying countries, significant gains were
Belgium, had fallen to negligible levels in 2019.
made in 2019 in imports of furniture and joinery from
Malaysia, furniture from India, and sawnwood andEU imports from Liberia, all of which comprises logs, aremouldings from Brazil (Figure 7.2.10.1).
very limited, in recent years averaging around 5,000 tonnes
with value less than US$3 million per year. However, inLess positive from a FLEGT perspective is that2019 there was an uptick, with import quantity rising 29%
Indonesian sawnwood and plywood appear in the list
to 7,500 tonnes and value up 20% to US$3.3 million.
of the biggest losers in EU imports of tropical wood andwood furniture products in 2019 (Figure 7.2.10.2). The
In terms of the mix of products from VPA implementing
fall in sawnwood imports from Indonesia maybe related
countries in Africa, EU imports of logs and sawnwood
to efforts to rectify code mismatches as part of thewere reasonably robust in 2019, but there was a
FLEGT licensing process with some products previously
downturn in imports of veneer. In 2019, imports ofidentified as 4407 sawnwood now reported as 4409
tropical veneer declined from Cameroon (-5% to 18,200
mouldings (see discussion in Section 5.4.2). The decline
tonnes), Republic of Congo (-11% to 10,000 tonnes), andin Indonesian plywood imports in 2019 followed strong
Ghana (-6% to 4,700 tonnes).
gains the previous year.
The downturn in African veneer imports was particularly
For VPA implementing countries there was a significant
dramatic in the second half of 2019 - partly allied
decline in imports of logs from the Central African Republic
to weakness in the European plywood and door
and veneers from the Republic of Congo in 2019. Other large
manufacturing sectors during this period. There weredecreases in EU imports in 2019 were recorded for Malaysianalso signs of tropical wood veneer coming under pressure
sawnwood and plywood, wood furniture from Singapore,from temperate wood substitutes and a wide range ofsawnwood from Myanmar, and veneer from Côte d’Ivoire.
artificial surface materials.

7.2.11 EU wood and wood furniture imports
from African VPA implementing countries

7.2.12 EU wood and wood furnitureimports from Viet Nam

EU wood imports from Cameroon have been very volatilein recent years, rising 14% to US$331 million in 2016
before falling 20% to US$265million in 2017 and thenrebounding 12% to US$297 million in 2018. In 2019
imports remained more stable, rising only 1% to US$300
million (Figure 7.2.11.1).

EU imports of wood products from Viet Nam, the only
VPA implementing country in Asia, which were flat in2016 and 2017, increased consistently throughout 2018
and the first nine months of 2019, before levelling off
in the last quarter of 2019. Imports into the EU from
Viet Nam were US$942 million in 2018, rising 3% to
US$976 million in 2019.

Most EU trade with Cameroon comprises sawnwood
destined for Belgium. The volatility is due to supply
side problems, notably shipment delays caused bybureaucratic red tape and poor infrastructure after
many years with little or no investment at Douala, thecountry’s only major port.

While EU imports from Viet Nam continued to be
dominated by wood furniture (HS 94) in 2019, there
was strong growth in imports of a range of other wood
products in HS Chapter 44, notably plywood, laminatedwood, planed sawnwood, and doors (Figure 7.2.12.1).

EU imports from the Republic of Congo (RoC),
comprising sawnwood, logs and veneers, increased
15% to US$93 million in 2018 and then another 13% to

The UK was the leading EU market for Vietnamese wood
furniture in 2019, accounting for around 40% of all EU
imports, and this market continued to grow in 2019.

MAIN REPORT – NOVEMBER 2020

73

Imports of wood furniture from Viet Nam werealso rising into France and the Netherlands
during the year.

The second largest category of EU import from
Viet Nam comprised dining room furniture,accounting for around one quarter of total EU
imports from the country in 2019. This productgroup was likely manufactured from a mix oftemperate and tropical plantation species, suchas acacia and rubberwood.
The increase in imports of HS 44 wood products
from Viet Nam in 2018 and 2019 was driven
by EU countries other than the UK, notably
sawnwood to France, plywood to Germany,laminated wood to Belgium, and fuelwood toDenmark and Sweden.

7.2.13 EU wood and wood furniture imports
from VPA countries in LAC region
The two VPA negotiating countries in Latin
America, Guyana and Honduras, are still only
small suppliers of timber to the EU (Figure 7.2.13.1).
EU imports from Guyana, mainly consisting of
hardwood logs and sawn destined for the UK
and Netherlands, tend to be quite volatile withdemand strongly focused on a specialist nichemarket for heavy duty sea and river defence
applications. After falling 63% to only US$2.2
million in 2016, imports from Guyana increased
slowly in the next three years to reach US$4.1
million in 2019.
EU imports from Honduras, mainly sawn
softwood destined for France, Germany,
Belgium and Spain, declined from just under
US$3 million in 2015 to US$1.1 million in 2019.

900

2015

2016

US$ milion

600
500
400
300
200
100
0

2017

2018

2019

Figure 7.2.12.1: EU import value of wood (HS44) products and wood
furniture (HS 94) from Viet Nam by major product type – 2015-2019.
Source: IMM-STIX

7

2015

2016

2017

2018

2019

6
5
4
3
2
1
0

GuyanaHonduras

Figure 7.2.13.1: EU import value of wood (HS44) products and wood
furniture (HS 94) from VPA countries in the LAC region – 2015-2019.
Source: IMM-STIX

700

Of VPA negotiating countries, Malaysia is by far
the largest supplier of tropical timber products
to the EU (Figure 7.2.14.1). EU imports from
Malaysia which hit a low of US$550 million in2016, recovered to US$601 million in 2018, but
receded 4% to US$577 million in 2019.

500
US$ milion

600

74		

Wood furniture700

7.2.14 EU wood and wood furniture imports
from VPA negotiating countries in Asia

Imports of wood furniture from Malaysia
strengthened in 2019. Furniture imports from
Malaysia mainly comprise rubberwood productfor interior use at the lower end of the pricespectrum, the UK being by far the largest
market for these products in Europe. Significant
gains were made in 2019 in EU imports of wood
bedroom furniture, wood dining-room furniture
and wood non-upholstered seating.

Other

800

US$ milion

Around a third of EU furniture imported from
Viet Nam in 2019 comprised “Other products
not elsewhere stated” (i.e. not seats or
bedroom, dining room, office or shop furniture),
likely to consist largely of garden furniture
manufactured almost exclusively from tropicaltimber which is not identified separately.

1000

2015

2016

2017

2018

2019

400
300
200
100
0

Malaysia

ThailandFigure 7.2.14.1: EU import value of wood (HS44) products andwood furniture (HS 94) from VPA negotiating countries in Asia –2015-2019. Source: IMM-STIX

MAIN REPORT – NOVEMBER 2020

250

2015

2016

2017

2018

2019

200
US$ milion

7.2.15 EU wood and wood furniture imports
from VPA negotiating countries in Africa

150
100
50

0

Gabon

Côte d'Ivoire

Dem. Rep. of the Congo

Figure 7.2.15.1: EU import value of wood (HS44) products andwood furniture (HS 94) from VPA negotiating countries in Africa –2015-2019. Source: IMM-STIX

400
350

2015

2016

2017

2018

2019

300
250
US$ milion

falling 14% in 2016, and another 4% decline inboth 2017 and 2018, EU imports from Thailand
gained 1% in 2019 to just exceed US$100 million.

200

Of the three VPA negotiating countries in Africa,
Gabon is the largest supplier to the EU (Figure
7.2.15.1). After declining in 2017, EU imports from
Gabon in the next two years were very volatile
on a monthly basis but overall, on an annual
basis, were flat at around US$190 million.
Imports into the EU from Gabon comprisemainly veneer, mostly rotary veneer used to
manufacture plywood in France, sawnwood,much imported via Belgium, and plywood,
which goes mainly to the Netherlands and Italy.
EU imports of sawnwood from Gabon were
strengthening in 2018 and the first half of 2019
but slowed in the second half. Imports of veneer
from Gabon also weakened slightly in the third
quarter of 2019 but stabilized at the lower leveltowards the end of 2019. Imports of plywood
from Gabon were sliding in 2017 and 2018 but
stabilised at US$21 million in 2019. Althoughstill low at around US$7 million in 2019, EU
imports of decking/mouldings from Gabon were
strengthening during the year.
EU imports from Côte d’Ivoire consist primarilyof veneers, destined for Italy, Spain, Romania,
and Belgium, and sawnwood destined mainly
for Italy, Belgium and the UK. After declining
sharply in 2016 and 2017, EU imports from Côte
d’Ivoire stabilised at US$77 million in 2018 before
falling 13% to US$68 million in 2019. The decline
in 2019 affected both veneers and sawnwood, andwas particularly pronounced in Spain, Belgium
and the UK.

150
100
50

In
di
a
Br
az
il
Ch
i
M na
ya
nm
ar
Ec
ua
Si dor
ng
ap
or
e
Pe
ru
Bo
Ph livia
ili
pp
in
es
M
or
oc
Su co
rin
am
e

0

Figure 7.2.16.1: EU import value of tropical wood (HS44) products
and wood furniture (HS 94) from non-VPA countries – 2015-2019.
Source: IMM-STIX

Longer term, Malaysia has lost ground to both Cameroon
and Brazil in the EU market for tropical sawnwood,and to China and Indonesia (and Russia) in the market
for hardwood plywood. The decline in imports of theseproduct groups from Malaysia in 2019 was attributed bysome importers to reduced availability of PEFC certified
product following the suspension of MTCS certification inJohor and Kedar states in May 2019 which led to the total
certified area in Malaysia to fall by around 25%.
This may have been a factor in the Netherlands andUK where there is a stronger preference for certified
wood. However, rising EU imports from other tropicalcountries with even less access to certified wood, suchas Cameroon and Brazil, implies that other factors werealso important for the decline in imports from Malaysia.
EU imports of timber products from Thailand consist
primarily of furniture, with smaller quantitiesof plywood, and fibreboard. The main European
destinations are the UK, Germany and France. After

MAIN REPORT – NOVEMBER 2020

After falling nearly 40% in 2017, EU imports
from DRC stabilised at US$30 million in 2018,
but declined another 21% to US$24 million in
2019. EU imports from DRC consist primarily oflogs destined mainly for France and Portugal,
sawnwood mainly for Belgium and the UK, with asmaller volume of veneer, going mainly to Greece.
Imports of DRC sawnwood into Belgium, and DRC logs
into France and Belgium, were declining steadily in 2018and 2019. After rising in the first half of 2019, importsof DRC sawnwood by the UK and DRC veneers by Greece
declined in the second half of the year.

7.2.16 EU tropical wood and wood furniture imports
from non-VPA countries
EU imports from non-VPA tropical countries increased
5% to US$1.05 billion in 2019, building on a 17% gain theprevious year. Most of the increase in 2019 came from
India and Brazil. Imports from China and Myanmar,
which made significant gains in 2018, slowed in 2019
(Figure 7.2.16.1).
EU imports of wood products from India increased
without interruption between 2015 and 2019, hitting an
all-time high of US$370 million in 2019. Import growth75

from India has been continuous in Germany, now thelargest EU destination for Indian wood furniture, but
slowed in the Netherlands, the second largest destination,from the last quarter of 2019. Imports from India into theUK, the third largest destination, were rising in 2017 and2018, but flat in 2019. Imports in France, the fourth largest
EU destination fell slightly in 2019.
EU imports from India mainly consist of wood furniture
made from local plantation species such as mango,
sheesham, acacia and rubberwood, often in rustic stylewhich are hand-crafted and for which formal quality
standards were not high. Usage of sheesham for Indian
furniture manufacturing has been declining, as it is a
CITES-listed dalbergia species, while use of mango has
been rising in recent years.

of sawn hardwood from Brazil increased 80% to US$27
million in 2019 having fallen 12% the previous year.
There was uninterrupted increase in EU imports ofplywood with a tropical hardwood face from China
between 2015 and 2019, with US$ value rising from US$36
million to nearly US$100 million during this period.
In 2019, 70% of EU imports of this commodity weredestined for the UK, with most of the remainder destinedfor Belgium and France. With a sharp deterioration in
the EU market for plywood in the second half of 2019,
imports of tropical hardwood plywood from China
increased only 3% in 2019, a significant slowing of pacecompared to 23% growth in 2018 and a 77% gain in 2017.

EU imports of tropical wood products from Brazil, which
consist mainly of sawnwood and decking, increased
13% to US$273 million in 2019 following a 24% gain
the previous year. From a price point of view, Brazilian
products have been highly competitive on international
markets in recent years while Brazil’s domestic market
has been weak. In 2019, the value of the Brazilian real
was at historically very low levels on international
currency exchange markets having lost nearly 50%
against the euro in the previous decade.

EU imports of wood products from Myanmar, mainly
sawnwood and a small amount of decking and veneer, afterrising 53% from US$34 million in 2017 to US$52 million
in 2018, declined 7% to US$48 million in 2019. Imports
from Myanmar have continued despite high profile EUTR
prosecutions of importers of Myanmar teak (in Sweden and
the Netherlands) and the conclusions of the EC’s FLEGTEUTR expert group (reiterated at their 12 December 2019
meeting) that “it is not possible to come to a negligible riskof illegally harvested timber from [Myanmar], in particular
due to a lack of sufficient access to the applicable legislationand documentation from governmental sources”.

The European Commission (EC) and EUTR Competent
Authorities introduced, at a FLEGT-EUTR Expert Group
meeting on December 2018 (reaffirmed at their meetingon December 2019), far-reaching guidance which stresses
that “insofar as imports of species harvested in naturalforests in the Brazilian Amazon basin are concerned….
operators should generally consider the level of riskof illegality as not negligible unless adequate risk
mitigation measures have been taken that demonstrably
reduce the level of risk to a negligible level”.

While imports from Myanmar into Germany, Belgium
and the Netherlands fell to negligible levels in 2019,
these declines were more than offset by rising imports
in Italy. Italian imports of Myanmar wood products
increased from 77% to US$27.6 million in 2018 and by
a further 2% to US$28 million in 2019. Imports from
Myanmar into Greece and Croatia increased fromnegligible levels to over US$6.3 million and US$4.7
million, respectively, in 2019. Imports into Sweden from
Myanmar were also close to US$4 million in 2019.

The FLEGT-EUTR Expert Group also specified, in relation
to timber from the Brazilian Amazon, that “to mitigate therisk of illegally harvested timber entering the EU market toa negligible level, due diligence should specifically include
an independent factual verification of the reliability ofthe determination of available timber volumes in AMFs
(Área de Manejo Florestal) as well as on the integrity of theoperator’s supply chain” (this and other measures required
are described in detail in the minutes of FLEGT-EUTR
Expert Group on 7th December 2018).

7.3 Energy wood and wood waste
imports into the EU

Despite these strictures, French imports of Brazilian
hardwood decking increased 29% to US$83 million in 2019
after a gain of 28% the previous year. French imports ofBrazilian sawn hardwood from Brazil also increased by
9% in 2019, to US$ 17.2 million, after gaining 21% in 2018.
French import growth of these commodities from Brazil
only began to slow in the last quarter of 2019.
In Belgium, imports of Brazilian hardwood decking
increased 40% to US$23 million in 2018 but declined 26%
in 2019 to US$13 million. However, Belgium’s imports

7.3.1 EU energy wood and wood waste
market background

According to an EC Policy Brief published in 201980,
biomass81 for energy (bioenergy) plays an important rolein helping to meet the EU’s 2020 target of 20% renewableenergy. Biomass continues to be the main source of
renewable energy in the EU, with a share of almost 60%.
The heating and cooling sector is the largest end-user, using
about 75% of all bioenergy. Germany, France, Italy, Sweden
and the UK are the largest bioenergy consumers in absoluteterms, while the Scandinavian and Baltic countries, as wellas Austria, consume the most bioenergy per capita.
Under the 2010 National Renewable Energy Action
Plans, total biomass demand for electricity, heating andtransport is planned to reach 178 Mtoe (million tonnesof oil equivalent) by 2020. The latest data made available
in the EC Policy Brief shows that by 2016 the biomass
supply for energy had reached 140 Mtoe. Looking further

80. European Commission Knowledge Centre for Bioeconomy, Brief on biomass for energy in the European Union, 2019, http://publications.jrc.
ec.europa.eu/repository/bitstream/JRC109354/biomass_4_energy_brief_online_1.pdf
81. According to the EC, “biomass” is defined as the biodegradable fraction of products, waste and residues from biological origin from agriculture,including vegetal and animal substances, from forestry and related industries, including fisheries and aquaculture, as well as the biodegradable
fraction of waste, including industrial and municipal waste of biological origin as defined in the Directive of the European Parliament and theCouncil on the promotion of the use of energy from renewable sources (EU, 2018). Bioenergy is the energy produced from biomass.
76		

MAIN REPORT – NOVEMBER 2020

ahead, in June 2018 the EU adopted a 32% target for
renewables in total gross final energy consumption by
2030 implying continued growth in demand.

products by 17%. However, the largest relative increaseis needed in bioenergy from waste, where 42% growthwould be required to reach 23.7 Mtoe by 2020”.

In 2016, forestry was the main source of biomass forenergy (logging residues, wood-processing residues,
fuelwood, etc.), accounting for more than 60% of all
EU domestic biomass supply. Most demand was being
met from domestically produced biomass (about 96%
in 2016 with only 4% imported from non-EU countries).
Wood was the most important single source of energy
from renewables in many Member States. Latvia (29%),
Finland (24%), Sweden (20%), Lithuania (17%) and
Denmark (15%) had the largest share of wood and wood
products in gross inland consumption of energy.

In addition to reducing carbon emissions, a goal of
EU policy in promoting renewables is to contribute to
greater energy security, which in turn implies further
reduction in import dependence. Also, the EC policy
brief notes that “bioenergy can play a key role inachieving the EU’s renewable energy targets for 2030 andbeyond. However, biomass for energy must be produced,
processed and used in a sustainable and efficient way inorder to optimise greenhouse gas savings and maintainecosystem services, all without causing deforestation ordegradation of habitats or loss of biodiversity”.

Public funding and governmental incentives aimed toincrease the competitiveness of biomass combustion
systems in the existing EU energy market conditions
have supported the diffusion of biomass power plants.
Besides, the EU has set up programs for financial supportof research and development activities based on biomassenergy. The EC with the “Innovating for Sustainable
Growth: A Bioeconomy for Europe” (2012) – better known
as EU Bioeconomy Strategy – has emphasized thatthe demand for timber and fuelwood in the context ofincreasing renewable energy demand is a strong stimulus
for increasing forest growth and productivity, and for
improving management practices (Paletto et al, 201982).

There may be potential for FLEGT licensing to assist
exporters in VPA partner countries to demonstrate
conformance to the various standards developedin the EU to demonstrate sustainable biomass. The
European Commission (202083) has issued non-binding
recommendations on sustainability criteria for biomass
including: prohibition on the use of biomass from land
converted from forest, and other high carbon stock areas,
as well as highly biodiverse areas; ensure that biofuels
emit at least 35% (rising to 60% for new installations by
2018) less greenhouse gases over their lifecycle (cultivation,
processing, transport, etc.) when compared to fossil fuels;and encourage the monitoring of the origin of all biomass
consumed in the EU to ensure their sustainability.

Wood pellets, mainly for heating and electricity
production, have become a particularly important energy
carrier in the EU. Global production of wood pellets
reached 29 million tonnes in 2016, of which more than
50% was produced in the EU. The EU is also the main
consumer globally (23 million tonnes in 2016, of which
32.6% was consumed in the UK, 9.1% in Italy, 8.7% in
Germany, 8.7% in Denmark and 7.4% in Sweden). In
some Member States, the consumption of wood pellets
relies mostly on imports, notably in the UK (94.7%)
and Italy (81%). Wood pellets are mostly used in theresidential sector for heating (in Italy, Austria, etc.) or forelectricity production (in the UK, Austria, etc.).
While the rise in EU demand for biomass looks set tocontinue, the extent to which future demand will beserviced by forest products, and the balance of domestic
production against imports, is less certain. European
policy goals in relation to renewables imply that forestry
generally is expected to contribute a declining share,
although in an expanding market overall. The EC policy
brief notes in relation to the 2020 target that “while
the share from the forestry sector is above the expectedlevel (already 81 Mtoe in comparison to the 76 Mtoe level
expected for 2020), the supply from agricultural crops
would need to increase by 29% and from agricultural by-

The EC has also encouraged member states to develop
their own sustainability criteria for biomass based onthese recommendations. In consequence, some European
countries have implemented support and voluntary
schemes to govern the sustainable production anduse of solid biomass. Belgium has implemented three
Green Certificate schemes (GCs) for solid biomass used
for electricity generation that include sustainability
principles since 2002. The UK has implemented binding
sustainability criteria for sustainable biomass used
to produce heat and power since 2016. Denmark has
also implemented a voluntary scheme to support thesustainable use of solid biomass for energy production
in 2016. In the Netherlands, sustainability criteria havealso been developed for solid biomass used for co-firingand large-scale heat production. In addition, someindustrial bioenergy users (e.g. RWE, Engie, Drax Power,
Dong Energy) have voluntarily developed their own
sustainability criteria for sourcing biomass. (Thuy MaiMoulin et al, 201784. Manjola Banjaa et al, 201985.)
There is overlap between the product scope of thesepolicy requirements for biomass and FLEGT policy
measures. EUTR includes coverage of all productsin HS 4401 (fuelwood and waste)86. The Indonesian

82. Paletto et al, 2019, Assessment of environmental impact of biomass power plants to increase the social acceptance of renewable energy
technologies, https://doi.org/10.1016/j.heliyon.2019.e02070
83. European Commission, 2020, webpage on “Biomass”, https://ec.europa.eu/energy/topics/property-fieldtopicparent/biomass_en, accessed on 30
July 2019.
84. Thuy Mai-Moulin et al, 2017, Toward a harmonization of national sustainability requirements and criteria for solid biomass,
https://doi.org/10.1002/bbb.1822
85. Manjola Banjaa et al, 2019, Biomass for energy in the EU – The support framework, https://doi.org/10.1016/j.enpol.2019.04.038
86. HS 4401 includes: “fuel wood, in logs, in billets, in twigs, in faggots or in similar forms; wood in chips or particles; sawdust and wood waste andscrap, whether or not agglomerated in logs, briquettes, pellets or similar forms”. The main application for nearly all these products is energy,
although chips (440121 and 440122) may equally be destined for the pulp sector.
MAIN REPORT – NOVEMBER 2020

77

A revealing study of the charcoal market in the
UK was published by the Earthworm Foundationin 201987. The study highlights the potential
for forest degradation resulting from extraction
for charcoal, noting that production of one
ton of charcoal requires between 4 and 12 tonsof dry round wood. The study also indicatedthat misleading claims on origin and lack oftransparency are features of the UK market for
charcoal, one of the largest in the EU.
Earthworm used wood identification techniques
to establish the actual content, in terms ofwood species and likely origin, of the charcoal
contained in bags bought from major retailers
in the UK and comparing this with the claims
on origin made. The study showed that, in
87. Earthworm 2019 Charcoal Bags Analysis (Earthworm
were formerly The Forest Trust - TFT).
https://www.earthworm.org/uploads/files/Europeancharcoal-market_UK_2019_190606_093634.pdf
78		

25

3.0

20

15

Value

2.0
1.5

10

1.0

US$ billion (constant)5billion (constant)

0.5

Million tonnes

0

20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19

0.0

Million tonnes

2.5

Figure 7.3.2.1: Total quantity and value of EU imports of fuelwood
and wood waste (excluding intra-EU trade)– 2004-2019. Source: IMM-STIX

3.5
3.0
US$ billion

2.5
2.0
1.5

Asia-Pacific (excl. tropical)
Africa (excl. tropical)
Europe (Non-EU)
Latin America (excl. tropical)
CIS
North America
Tropics

1.0
0.5
0.0

20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19

Another important energy carrier, charcoal, lies
outside the scope of EU policy measures for bothrenewable energy and FLEGT. Charcoal is notcovered by either EUTR or the FLEGT licensing
system in Indonesia. The market for charcoal
is opaque, both globally and within the EU, andnot driven exclusively by energy demand. The
most visible market in the EU is for cooking,particularly BBQs. There is no specific data
available on the leading distributors in the EU,
but the large supermarkets are believed to beleading players, although no single retailer
appears to dominate in any country and there
are also many smaller distributors and more is
now being sold on-line. There are also a range
of industrial applications and users of charcoal,including the steel sector, for activated carbon(filters), drugs, silicon-making processes(electronics and photovoltaic panels), and biochar(soil fertilization). Data on the extent of usage is
not readily available for any of these sectors.

3.5

Figure 7.3.2.2: Value of EU imports of fuelwood and wood waste
by supply region – 2004-2019. Source: IMM-STIX

2.5
2015

2016

2017

2018

2019

2.0
US$ bilion

FLEGT licensing system covers softwood andhardwood chips (HS 440121 and HS 440122
respectively), which may be feedstock for boththe energy sector and pulp and paper sector,
but no other form of wood for energy. In 2016,
when the FLEGT licensing system was launchedin Indonesia, chips (subject to licensing) wereby far the largest HS 4401 product exported byIndonesia, accounting for US$105 million (83%)
of total US$127 million. At that time pellets (notsubject to licensing), the second largest HS4401
category, accounted for US$7 million (6%) of
Indonesian exports. Over the next three years
Indonesian exports of chips declined to US$57
million (66%) while exports of pellets increased
to US$27 million (31%) of total US$86 million.
Until 2017, China was the leading destination
for Indonesian exports of HS4401 products,
but in 2018 and 2019, nearly all exports weredestined for Japan, South Korea and Taiwan.
Only negligible quantities have been destinedfor the EU.

1.5

1.0

0.5

0.0

Pellets

Chips

Charcoal Fuelwood Briquettes

Other

Figure 7.3.2.3: Value of EU imports of fuelwood and wood waste
by product type – 2015-2019. Source: IMM-STIX

MAIN REPORT – NOVEMBER 2020

910
810
710

Units

610
510
1000 tonnes

410

US$ million (constant)310

million (constant)

210
110

20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19

10

Figure 7.3.3.1: Total quantity and value of EU imports of fuelwood
and wood waste from tropical countries – 2004-2019. Source: IMM-STIX

180

2015

160

2016

2017

2018

2019

US$ milion

120
100
80
60
40
20
Charcoal

Hardwood
chips

Pellets

Other

Figure 7.3.3.2: Value of EU imports of fuelwood and wood wastefrom tropical countries, by product type – 2015-2019. Source: IMM-STIX

50

2015

45

2016

2017

2018

2019

40
US$ milion

30
25
20
15
10

In
di
a
Th
ai
la
nd
Ot
he
r

Cu
ba
Br
az
il
Pa
ra
gu
ay
M
al
ay
sia
Pa
na
m
a
Vi
et
Na
m
Ve
ne
zu
el
a

5
In
do
ne
sia
Ni
ge
ria

The long-term rise in EU imports of energy
and wood waste continued in 2019 although at
a slower pace than in the previous year. Importvalue increased 7% to €3.18 billion in 2019building on 24% growth in 2018. In quantity
terms, imports increased 12% to 23.0 million
tonnes in 2019 after a 22% gain the previous
year (Figure 7.3.2.1).

EU imports of energy and waste wood aredominated by pellets, for which imports increased
12% to US$2.11 billion in 2019. There were more
moderate gains in EU imports of wood chips, up
7% to US$440 million, and charcoal, up 4% to
US$350 million, during the year. However, EU
imports of fuelwood and briquettes declined,
respectively by 15% to US$120 million and 25% to
US$90 million (Figure 7.3.2.3).

7.3.3 VPA partners in EU energy woodand wood waste trade

35

0

7.3.2 Total EU import value and quantity ofenergy wood and wood waste

There was another increase in EU imports ofenergy and waste wood from North America
in 2019, rising 6% to US$1.6 billion, mostly
comprising pellets from the United States
destined for the UK. EU imports of energy andwaste wood also increased 12% from the CIS in
2019, to US$0.9 billion, with strong gains madeby Russia and Belarus, while imports from
Ukraine stabilized. Imports of energy and waste
wood from the tropics were stable at US$210
million in 2019. However, imports from nontropical regions of Latin America increased 15%
to US$200 million in 2019 (Figure 7.3.2.2).

140

02018, 100% of the analysed charcoal bags in the
UK contained tropical or subtropical charcoal,
81% of the bags were certified FSC, and only
38% had a declared country of origin, with only
Namibia or South Africa being identified. The
study concludes that “consumers cannot makean informed choice, because in a majority ofcases, information on the country of timber
origin is not mentioned on charcoal bags….
Retailers highly rely on FSC charcoal, giving
additional guarantee to consumers… There is
still an important opacity in the UK charcoal
industry; steps need to be taken to movetowards greater transparency”.

Figure 7.3.3.3: Value of EU imports of fuelwood and wood wastefrom tropical countries – 2015-2019. Source: IMM-STIX

MAIN REPORT – NOVEMBER 2020

In value terms, EU imports of energy and waste
wood from the tropics have been relatively
stable over the long term, fluctuating in anarrow range between US$170 million andUS$190 million per year in the decade after
2008, rising to around US$210 million in 2018and 2019. Imports in quantity terms tend to bevolatile as trade in low unit value products suchas chips and briquettes is often irregular andconcentrated in a few large shipments each year.
Overall annual import quantity varied between
550,000 tonnes and 810,000 tonnes in the decade
before 2019 without showing any consistent
upward or downward trend (Figure 7.3.3.1).

79

BrazilParaguay
Malaysia
PanamaViet Nam
Venezuela
India
Thailand
Other
0%

20%

40%

Charcoal
Hardwood fuelwood

60%

80%

Hardwood chips
Briquettes

100%
Pellets
Other

Figure 7.3.3.4: Share of EU import value of fuelwood and wood wasteby tropical country and product type – 2019. Source: IMM-STIX

40
35

2015

2016

2017

2018

2019

30
25
20
15
10

Ot
he
r

Ita
ly
Po
la
nd
De
nm
ar
k
Sw
ed
en

0

Sp
ai
n

5
UK

US$ milion

Of FLEGT licensing and VPA implementing
countries, Indonesia and Viet Nam were
the only tropical countries supplying any
significant quantity of energy and waste
wood to the EU in 2019 (Figure 7.3.3.3). In fact,in value terms, Indonesia was the largest
tropical supplier following a sharp rise intrade between 2016 and 2018, from US$29
million to US$48 million. In 2019, EU imports
from Indonesia fell 6% to US$45 million.
EU imports of energy and waste wood from
Viet Nam increased from negligible levels
in 2017 to around US$4 million in 2018 andstayed at that level in 2019. The other leading
tropical suppliers of energy and waste woodto the EU are non-VPA countries, including
Nigeria, Cuba, Brazil, and Paraguay.

Indonesia
Nigeria
Cuba

Po
rtu
ga
l
Gr
ee
ce
Be
lg
iu
Ne
m
th
er
la
nd
s
Ge
rm
an
y

In value terms, EU imports of energy
and waste wood from tropical countries
is dominated by charcoal (Figure 7.3.3.2).
Compared to other energy and waste wood
products, tropical charcoal imports havehigh unit value, around US$400-475/tonne(compared to US$75-100/tonne for chips). Total
EU import value of tropical charcoal declined
4% to US$158 million in 2019, after rising 17%
the previous year. Import value of tropical
hardwood chips also fell in 2019, down 22%
to US$29 million, after a 122% increase theprevious year. Until 2018, the EU imported
only negligible quantities of wood pellets
from tropical countries, but imports surged to
US$21 million in 2019, mainly from Panama88,
Malaysia and to a lesser extent, Viet Nam. The
EU imports a small amount of other energy
and waste wood from tropical countries,
including briquettes and raw fuelwood, withtotal value of US$6 million in 2019.

The mix of energy and waste wood products
exported by tropical countries varies (Figure
Figure 7.3.3.5: Value of imports of fuelwood and wood waste from
7.3.3.4). In terms of value, EU imports fromtropical countries by EU countries – 2015-2019. Source: IMM-STIX
Indonesia, Nigeria, Cuba, Paraguay, Venezuela
and India are dominated by wood charcoal.
EU imports from Brazil comprise mainly
quantity of hardwood chips from Brazil in 2018. Greece ishardwood chips and almost all is destined for Portugal
the largest EU importer of higher value charcoal products
and may be used for paper making rather than energy
from tropical countries, mainly Cuba, Indonesia, andgeneration89. Imports from Malaysia and Viet Nam
Malaysia, after a strong rise between 2015 and 2018. A
were formerly dominated by charcoal but pellets andlarge proportion of the sharp increase in pellet imports
briquettes entered the mix from 2018. Thailand supplies
from Panama and Malaysia in 2019 was destined for
the EU with small volumes of charcoal and briquettes.
Belgium and Denmark. The general rise in imports ofenergy and waste wood from tropical countries between
Until 2018, Germany was the largest EU importer of2015 and 2019 into Netherlands, UK, Spain, Italy, andenergy and waste wood from the tropics, but Germany’s
Poland was all driven by charcoal.
imports fell 40% to US$18 million in 2019 driven by a
sharp decline in imports of charcoal from Indonesia,
A key question is the potential for EU imports of energy
Nigeria, and Paraguay (Figure 7.3.3.5). Portugal became
and waste wood from VPA partner countries to rise in
the largest importer of energy and waste wood fromthe future in response to increased demand for green
tropical countries when imports of hardwood chips fromenergy. In addition to the demand side issues discussed
Brazil surged in 2019. Sweden also imported a significant

88. Panama is not known to have any significant pellet manufacturing facilities, raising questions about the accuracy of this data. It may not be
coincidental that Enviva, the world’s largest pellet producer, operates a large distribution hub in the port of Panama City in Florida in the US and it
is possible that EU pellet imports from ‘Panama’ (destined mainly for Denmark and Belgium) are in fact shipped for the United States.
89. Hardwood chip imports from Brazil are almost certainly plantation eucalyptus and not of tropical origin, but this cannot be confirmed from tradedata, which does not identify tropical hardwood chips separately.
80		MAIN REPORT – NOVEMBER 2020

million tonnes

10
9

Other

8

Indonesia
ThailandSouth Africa

7
6

Canada5

Norway4

Russia3

Chile
Uruguay2

US1

Brazil

20
0
20 4
0
20 5
0
20 6
0
20 7
0
20 8
0
20 9
1
20 0
1
20 1
1
20 2
1
20 3
1
20 4
1
20 5
1
20 6
1
20 7
1
20 8
19

0

Figure 7.4.2.1: EU import quantity of wood pulp by supply country –2004-2019. Source: IMM-STIX

350

1000 tonnes

300

Other

Indonesia

Philippines

Thailand

250
200
150
100
50

20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19

0

Figure 7.4.2.2: EU import quantity of wood pulp from tropicalcountries by supply country – 2004-2019. Source: IMM-STIX
in Section 7.3.1, there are supply side issues likely to limit
this potential in the long term.
The case of Viet Nam is instructive. In the period 2017 to
2019, the total value of energy and waste wood products
exported by Viet Nam into China, Japan, and South
Korea increased by more than 50% to US$2.13 billion.
However, the factors which facilitated Viet Nam’s large
scale exports of pellets and wood chips to other Asian
countries do not exist in EU trade, notably extremely
low freight rates for Viet Nam’s exports to Japan andSouth Korea due to high volumes of incoming container
shipments not balanced by low volumes of outgoingshipments allowing pellet producers to take advantage ofempty containers on the return leg.

The conditions that allow for low-cost
production of pellets in Viet Nam are alsochanging. The availability of low-costfeedstock from furniture factories is nearing
its limit in Viet Nam and producers are
becoming more dependent on forest residuals,
forest thinnings, and other roundwood which
are costlier to procure and require debarking,chipping, drying, and hammermilling prior tobeing densified into pellets90.
Overall, the relatively high costs of shipping andprocessing energy wood in tropical countries,
the presence of large alternative markets closer
to home for the large tropical exporters in Asia,and the EU’s readier access to biomass fromdomestic sources, North America and the CIS,
imply that the EU is unlikely to significantly
increase imports from VPA partners. In addition
to adding significant costs to delivery of a bulky
and relatively low value commodity, longer
transport routes also make it challenging
for exporters to comply with EU low carbon
emission standards for biomass.
However, a recent modelling study91 has
indicated that there is significant potential
to expand production of woody biomass forenergy in Indonesia, and that if prices in the
EU were to increase by around 20% over the
maximum price paid during the period 2009
to 2016, Indonesian biomass could be suppliedcompetitively into the EU in compliance withrequirements for 70% GHG reduction compared
to fossil fuel-based heat and electricity
production set in the Renewable Energy
Directive. However, if the requirements of GHG
emissions are strengthened up to an 80% GHG
reduction, it becomes very challenging forIndonesian biomass to comply.

7.4 Wood pulp (HS 47) and paper(HS 48) imports into the EU
7.4.1 Paper and pulp market backgroundThe year 2019 was a challenging one for the pulp
and paper sector in the EU. The slowdown of the
EU economy, combined with global instability and tradetensions, and the long-term decline in graphic grades due
to progressive digitisation, led to a decline in paper andboard sales, imports and domestic production in 2019.
According to the Confederation of European Paper
Industries (CEPI)92, CEPI member countries paper andboard production decreased by 3% in 2019 compared tothe previous year, while total consumption declined 4%.
Production was 89.5 million tonnes in 2019, the first timesince before the financial crises that production fell below
90 million tonnes. Although new factories came on stream
and some existing ones were upgraded, other closures andlower production rates dragged volumes down.

90. William Strauss, Future Metrics, July 2018, White paper on Viet Nam Wood Pellet Industry, https://www.futuremetrics.info/
91. Thuy Mai-Moulin et al, 2018. Sourcing overseas biomass for EU ambitions: assessing net sustainable export potential from various sourcing
countries, https://onlinelibrary.wiley.com/doi/10.1002/bbb.1853
92. CEPI Preliminary Statistics 2019. CEPI member countries in 2019 were Austria, Belgium, Czech Republic, Finland, France, Germany, Hungary, Italy,
Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, United Kingdom.
MAIN REPORT – NOVEMBER 2020

81

Despite the overall decline in paper
production and sales, total pulp production(integrated pulp, plus market pulp) in CEPI
member countries increased by 0.8%. The gain
was concentrated in market pulp production,
which jumped 6.1% in 2019 following recent
investment in new capacity.
With the weak domestic market in Europe, arising proportion of the new pulp production
was exported. EU exports of market pulp
jumped by close to 40% in 2019 according
to Eurostat. Rising production at a time of
weakening demand led to high stocks of wood
pulp in the EU and a sustained fall in wood
pulp prices during the year.

8

6

82		

4

CanadaTurkey

1
0

2015

2016

2017

2018

2019

RussiaNorwaySwitzerland
China
US

Figure 7.4.3.1: EU import quantity of paper by supply country –2015-2019. Source: IMM-STIX500

No VPA
Negotiating (As)1000 tonnes

400

Negotiating (Af)
Negotiating (Am)300

Implementing (As)200

Implementing (Af)100

Licensing(Indonesia)

20
0
20 4
0
20 5
0
20 6
0
20 7
0
20 8
0
20 9
1
20 0
1
20 1
1
20 2
1
20 3
1
20 4
1
20 5
1
20 6
1
20 7
1
20 8
19

0

Figure 7.4.3.2: EU import quantity of paper from tropical countries
by VPA status – 2004-2019. Source: IMM-STIX

350
300

Indonesia
Thailand

India
Viet Nam

Malaysia

250
200
150
100
50
0

20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19

Indonesia, Thailand and the Philippines are
the only tropical countries supplying pulp tothe EU. The volumes involved have always
been very low and fell to no more than 13,300
tonnes in 2019 of which 11,600 tonnes camefrom Thailand (Figure 7.4.2.2). Although
Indonesia has large pulpwood plantations,consisting primarily of Acacia mangium
with smaller quantities of Acacia crassicarpa,

521000 tonnes

Against the background of weak demand andfalling prices, total EU wood pulp imports
declined 8% to 7.86 million tonnes in 2019.
Most of the decline was registered in imports
from Brazil, which fell 14% to 3.59 million
tonnes in 2019. Imports from Chile also fell
sharply, by 16% to 610,000 tonnes. Imports
from the US increased 8% to 1.50 million
tonnes in 2019, only the second year since2010 in which there was a rise in imports
from that country. Imports from Uruguay also
increased 2% to 1.38 million tonnes in 2019,
continuing an uninterrupted upward trend
on-going since 2013.

UkraineBrazilSerbiaIndonesia3

7.4.2 VPA partners in EU wood pulp trade
EU wood pulp imports are almost all fromSouth and North America, with a negligible
volume from the tropics. Brazil has been theleading external supplier of wood pulp to theEU since 2004. In the following decade, Brazil’s
share of EU pulp imports increased to around50%. Brazil supplies hardwood pulp fromplantations of eucalyptus located in sub-tropicalregions of the country. Uruguay has emerged asanother leading supplier of hardwood pulp, also
from eucalyptus plantations, to the EU in thelast decade. Meanwhile there has been a longterm decline in EU imports of softwood pulp
from the US, Canada, and, more recently, Chile(Figure 7.4.2.1)

Other
South Africa
Rep. of Korea

7

million tonnes

While packaging paper and board productionin CEPI member countries remained relatively
stable in 2019, overall production of graphic
grades – newsprint and printing and writing
papers – fell by more than 8% during theyear. Production of sanitary and household
papers continued to increase, but at a slow
rate of only 1.0% in 2019.

Figure 7.4.3.3: EU import quantity of paper from tropical countries
by supply country – 2004-2019. Source: IMM-STIX

MAIN REPORT – NOVEMBER 2020

countries, particularly Indonesia, imply a strong
improvement in competitiveness during the year. EU
paper product imports from tropical countries increased
30% to 506,000 tonnes in 2019 when they represented
7.0% of total imports (5.3% in 2018) (Figure 7.4.3.2).

Gmelina arborea and Eucalyptus deglupta, nearly all theavailable pulp supply is absorbed by paper, board, andtissue mills in Indonesia and China.

7.4.3 VPA partners in EU paper trade
EU imports of paper products in 2019 declined 3% to 7.21
million tonnes in 2019. The EU imports paper products
from a wide range of countries, of which the US has been
the largest external supplier since 2006 when it overtook
Switzerland. Imports from both countries declined in 2019,by 11% to 1.29 million tonnes from the US and by 4% from
Switzerland to 890,000 tonnes. With imports rising 8% to910,000 tonnes, China overtook Switzerland as the second
largest external supplier to the EU in 2019. Imports fell
from all other leading suppliers during the year including
Norway, Russia, Turkey, and Canada (Figure 7.4.3.1).

EU imports from Indonesia increased 41% to 356,000
tonnes in 2019, after a 9% fall the previous year which
briefly interrupted the longer-term growth trend ongoing since 2012 (Figure 7.4.3.3). In 2019, Indonesia
accounted for 70% of all EU paper imports from tropicalcountries, up from 65% the previous year.
Imports from India, the second largest tropicalsupplier, increased 24% to 89,000 tonnes in 2019.
There was also a slight (1%) increase in imports from
Viet Nam, to 12,700 tonnes. However, imports declined
from Malaysia (-6% to 16,900 tonnes) and Thailand(-14% to 16,700 tonnes).

Against the background of a generally weak market
in 2019, significant gains in imports from tropical

IMM EU Trade Survey 2019:
Summary of key results
8.1 Methodology and sample
In 2019, the European IMM team undertook follow-up
research in the seven key countries accounting for morethan 90% of EU timber and timber product imports
from VPA partner countries. The 2019 studies preparedin Belgium, France, Germany, Italy, Netherlands, Spainand the United Kingdom built on previous researchundertaken in 2015, 2017 and 2018.
The follow-up studies covered a broad spectrum ofprivate sector players, including importers and agents
as well as manufacturers and retailers. Results were

IMM Survey Participants, by company type
100%
90%
80%
70%

8

collected in an online survey tool. As in previous
years, companies did not fill in the survey alone butwere guided through the tool by the respective IMM
correspondents. This process allowed for discussion of
responses and comments provided by respondents andgave IMM correspondents much more detailed insights
into respondents’ opinions.
The sample of 109 companies interviewed as a part of
the IMM 2019 trade survey was larger than in 2018 (96)companies. In 2018, the furniture sector (54 companies)
had been interviewed in a separate survey for the IMM
furniture sector scoping study93. In 2019, the IMM
correspondents interviewed Europeanarchitects (22 companies) for a separate
special study94. The 2019 trade survey
sample included importers of sawn timber,
2018
2019
decking, plywood, mouldings logs, veneers,
doors, window frames, as well as furnitureand furniture components and otherproducts from VPA partner countries.

60%

In 2019, IMM correspondents interviewed
a slightly higher number of wholesalers,
retailers and manufacturers than the year

50%
40%
30%
20%
10%
0%

Importer

Agent Manufacturer Retailer

Wholesaler Building
contractor

Figure 8.1.1: IMM Survey Participants by company type.
Source: IMM 2019/2018 EU trade surveys

MAIN REPORT – NOVEMBER 2020

Other

93. A
 tabling of views, a scoping study for assessing theimpacts of timber legality on the European Union’s
wood furniture sector and the associated tropicaltimber trade. George White (IMM/2018)https://www.itto.int/direct/topics/topics_pdf_
download/topics_id=5782&no=1&disp=inline
94. A study of EU architects’ perceptions and experience
with FLEGT Licences. George White (IMM/2019)https://www.flegtimm.eu/images/imm_indicators/
IMM_Study_of_EU_Architects_Report_Dec19_st3.pdf
83before (Figure 8.1.1). Many of thesecompanies also have their own importing
operations and thus take an interestin FLEGT and EUTR, while at the sametime having insights into attitudes andperceptions further down the supply
chain. Traders further down the supply
chain without own importing operations
have remained difficult to engage, as they
continue to show little interest in FLEGT.

IMM Survey Participants, by EUTR Status
100%
80%
70%
60%
50%
40%

The proportion of EU survey respondents
who acted as operators as defined by the
EUTR95 ranged between 89% and 94%
between 2017-2019. Between 8% and 11%of respondents were purely Traders.
The size and relevance of IMM trade
survey samples in relation to the overall
number of Operators identified in the key
EU Member States by EUTR Competent
Authorities was analysed in the 2017 IMM
Annual Report96. While relatively small
in absolute respondent numbers, the IMM
2019 survey again covered a significant
proportion of EU trade in core products
imported from VPA partner countries,
including tropical sawn timber/mouldings,
joinery, plywood and decking.97
As a result, the survey can be considered
fairly representative where tropical wood
products (HS 44) are concerned. On theother hand, market coverage was lower
when it comes to furniture and furniturecomponents and pulp and paper products.
Specific feedback from an importantconsumer and influencer group was
gathered in 2019 as a part of a study of
EU architects’ perceptions of timber ingeneral and tropical timber in particular,
as well as their level of awareness andattitudes towards the FLEGT VPA process.
A total of 22 architects were interviewed
in the seven IMM key countries.

TraderOperator

90%

30%
20%
10%

2017

2018

2019

Figure 8.1.2: EU trade survey participation by EUTR status.
Source: IMM 2019/2018/2017 EU trade surveys

IMM Survey Participants, by country, 2017 -2019

60%

2017

2018

2019

50%
40%
30%
20%
10%
0%

Belgium

FranceGermany

Italy

Netherlands Spain

UK

Figure 8.3.1: EU trade survey participation by country.
Source: IMM 2019/2018/2017 EU trade surveys

8.2 Economic environment in EU key countries
in 2019
The 2019 IMM survey was undertaken against thebackground of an overall mostly still favourable, but
increasingly uncertain economic environment inmost European IMM key countries as well as subdued
global economic growth98. Issues causing increasing
uncertainty included, among others, the US-China
trade war, a looming trade dispute between the US andthe EU, an overall slow-down of the Chinese economy,

Brexit, as well as weakening of the continental European
powerhouse economy of Germany.
All seven countries monitored by IMM reported
continuing economic growth in 2019, although frequently
at a slower pace than in previous years. Moreover,consumer and business confidence weakened or fluctuatedmore than in previous years in most countries, according
to the national reports prepared by IMM correspondents.
Detailed information on economic and timber-sector
trends in each European key country can be found on the
IMM website.

95. Operators under the EUTR are entities that place timber and timber products on the internal market for the first time and are subject to the due
diligence system, while a trader in the supply chain should be required to provide basic information on its supplier and its buyer to enable thetraceability of timber and timber products.
96. “FLEGT VPA Partners in EU Timber Trade 2017”. Sarah Storck/Rupert Oliver. (IMM 2018) https://bit.ly/2JRlrAK
97. Respondents accounted for between 20% and 75% of the key countries’ total imports of tropical sawn timber/mouldings, joinery, plywood anddecking, depending on the country, except for Spain, where coverage was lower (around 10%).
98. World Economic Outlook, July 2019. An update of the key WEO projections.
https://www.imf.org/en/Publications/WEO/Issues/2019/07/18/WEOupdateJuly2019
84		MAIN REPORT – NOVEMBER 2020

IMM Trade Survey Participants: Awareness of the FLEGT VPA Process
90%

2017

80%

2018

2019

• frustration with the FLEGT VPA

70%
60%
50%

•

40%
30%
20%
10%
0%

In Italy and in particular in Spain, thecorrespondents reported a continuing
reluctance of the private sector to engage indialogue with IMM. Reasons given include:

Fully aware

Partially aware

Totally unaware

Figure 8.4.1: Awareness of the FLEGT VPA process.
Source: IMM 2017/2018/2019 EU trade surveys

Awareness of EU-led process that aims to promote good forest governancein major timber supplying countries and guarantee the legalityof all timber produced in those countries

Yes, mentioned
FLEGT 9%process due to slow implementation inmost partner countries, especially in
Africa (Cameroon);limited relevance of Indonesia as asupplier country.

In spite of this reluctance, thecorrespondent in Italy still conducted ameaningful number of interviews andgained interesting insights into market
perceptions (Figure 8.3.1). In Spain, on theother hand, participation has remained
very low, as it had been in 2017 and 2018.
Given that Spain also ceased to be one of
the seven largest importers of tropicaltimber and timber products in the EU
during 2019, IMM decided to suspend
monitoring in the country as of 2020.

8.4 Awareness of the FLEGT
process and perceptions of tropical timber

No significant changes were recordedin the overall level of awareness of theNo, not aware
FLEGT VPA process (Figure 8.4.1) among
68%
IMM Trade Survey respondents over thelast three years. The number of companies
Yes, butunspecified
claiming to be “fully aware” of the
23%
process dropped by 10 percentage points
in 2018, with some companies stating thatthey only realised that they had not fully
understood the process after beginningto hear more about it. At the same time,
the number of companies claiming to thebe “totally unaware” of the process had
Figure 8.4.2: Awareness of the FLEGT VPA process – IMM Architects Survey.
risen as well. However, this was believed
Source: IMM study of architects’ perceptions and attitudes to FLEGTby IMM correspondents to have mainly
been expressions of frustration with theduration of the process, which resurfaced
8.3 Reception of the IMM survey in key countries
in 2018, after initial euphoria over Indonesia achieving thelicensing stage in late 2016. In 2019, the number of “fully
In 2019, correspondents in five of the seven IMM key
aware” companies increased again slightly, while thecountries – Belgium, France, Germany Netherlands andnumber of “totally unaware” companies fell.
UK – found the private sector more responsive to IMM
surveys than in 2018. Reasons given for this greater
Overall, IMM surveys still indicate a need for awarenessreadiness to participate included:
raising, especially further down the supply chain in the EU
and in important third countries that implement the EUTR
A number of core companies are now used to annual IMM
and give green lane status to FLEGT-licensed timber.
surveys and have developed trust and interest in IMM;
General positivity due to favourable economic
The 2019 IMM study of architects’ attitudes to tropicalenvironment, especially in the Netherlands and France;
timber and FLEGT99, for example, shows very limited
Insecurity due to increasingly strict EUTR
awareness of FLEGT VPAs and FLEGT licensing among
enforcement and hope for information and guidance,
this important group of market influencers. When asked
especially in Belgium;
to name an “EU process that aims to promote good forest
Uncertainties surrounding Brexit and the future ofgovernance in major timber supplying countries and
FLEGT licensing and EUTR in the UK.
guarantee the legality of all timber produced in thosecountries” almost 70% of respondents said they were not

•
•
•
•

99. A study of EU architects’ perceptions and experience with FLEGT Licences. George White (IMM/2019).
https://www.flegtimm.eu/images/imm_indicators/IMM_Study_of_EU_Architects_Report_Dec19_st3.pdf

MAIN REPORT – NOVEMBER 2020

85

aware of such a process. 23% said they were
aware of EU efforts to this effect, but had no
particular knowledge of any specific process
and only 9% were able to name the FLEGTVPA process (Figure 8.4.2).
The architects’ survey also identified
significant knowledge gaps over tropicaltimber as a building material and issues
surrounding sourcing tropical timber,including on the environmental impact ofusing tropical timber in construction. Only
5% of all surveyed architects found thatthey had a reasonable level of knowledge
upon graduation. 88% reportedly have little
or no knowledge of tropical timber when
graduating as architects (Figure 8.4.3).
Interviewees were also asked if knowledge
around forest governance would help with
the narrative for choice of materials. With
one exception, all respondents stated that,to a degree, knowledge of forest governancecould play a role in developing the narrativeof their design or specifically with respect totheir choice of materials (Figure 8.4.4).

8.5 FLEGT licensing and EUTR
direct impact on EU tropical timber
procurement
As a part of the IMM 2018 and 2019 EU trade
surveys, respondents were asked whether
FLEGT licensing and the implementationof the EUTR had had any direct impact
on the share of tropical timber in theiroverall timber imports100. As demonstrated
in Figure 8.5.1, contrasting impacts wereidentified for FLEGT licensing and EUTR.
35% of respondents in 2018 and 38% in 2019
reported either small or big decreases inthe share of tropical timber in their overalltimber imports due to introduction of EUTR.
Survey respondents indicated that EUTR due
diligence had narrowed their supply base intropical countries, in particular in Africa. An
increasing concentration of tropical timber
and timber product import trade in the handsof “specialist” exporters and importers was
also note. Respondents also indicated that
EUTR had caused the sector to reconsider
its supply chain relationships, which had
frequently resulted in increasing substitutionof tropical hardwoods with alternatives,
including temperate hardwoods, chemicallyor thermally modified timber or non-wood
substitutes as a result of EUTR.

Level of awareness around tropical timber upon graduationSomeknowledge
gained prior
to graduation
27%

Little orno knowledge
at time ofgraduation
68%

Reasonable levelof awareness5%

Figure 8.4.3: Level of awareness around tropical timber – IMM Architects
Survey. Source: IMM study of architects’ perceptions and attitudes to FLEGT

Would knowledge of forest governance help with
the narrative for choice of materials?
7
6
5

Yes, it could help but I
would need much more
information/reassuranceYes,
it could help
for somesituations

Yes,
it couldhelp

4
3

Perhaps, but I would
need much more
information/reassurance

2
1
No

0

Figures 8.4.4: Knowledge of forest governance and narrative forchoice of materials – IMM Architects Survey. Source: IMM study of architects’
perceptions and attitudes to FLEGT90%

IMM Survey: Changes of share of tropical timber in imports
due to EUTR and FLEGT licensing

80%

The introduction of EUTR

70%

The market introductionof FLEGT-licensed timber

60%
50%
40%
30%
20%
10%

100. It was not the aim of the EU Timber Regulation topromote or reduce imports of certain types of timber
or timber products. However, market players report
impacts as a side effect.
https://www.flegtimm.eu/index.
php?view=article&id=109:imm-survey-substitutioneconomic-crisis-and-diversion-of-supply-maindrivers-of-eu-timber-market-decline&catid=67
86		

0%

2018 2019 2108 2019 2018 2019 2018 2019 2018 2019
Big increase Small increase No change Small decrease Big decrease

Figure 8.5.1: Impact of EUTR and FLEGT-licensing on tropical timber
imports. Source: IMM 2018/2019 EU trade surveys

MAIN REPORT – NOVEMBER 2020

80%

To what extent has the share of third-party certified orverified legal timber in your imports from tropical countries
changed due to the introduction of EUTR
FSC

70%

PEFC

Other

2018

2019

60%
50%
40%
30%
20%
10%
0%

2018

2019

2018

2019

Big increase Small increase

2018

2019

No change

2018

2019

Small decrease Big decrease

Figure 8.5.2: EUTR impact on certification and legality verification
schemes. Source: IMM 2018/2019 EU trade surveys

To what extent has the share of third-party certified or verified legal timberin your imports from tropical countries changed due to themarket introduction of FLEGT-licensed timber from Indonesia
90%
FSC
PEFC
Other
80%
70%
60%
50%
40%
30%
20%

the same time, 13% of respondents in both
years registered large or small increases
in the share of tropical timber in theiroverall timber imports due to the market
introduction of FLEGT-licensed timberfrom Indonesia. Only a small numberof respondents in 2019 (5%) reported
that their imports of tropical timber had
declined due to the market introductionof FLEGT-licensed timber from Indonesia.
Most of these respondents blamed this on
reputational issues surrounding tropicaltimber, which, they said, had been placedback in spotlight due to the introduction of
FLEGT licensing. Demand for tropical timber
imports – not just from Indonesia but overall– had declined as a result. One or two others
said that some of their small and mediumsized suppliers in Indonesia had not become
SVLK-certified and were thus no longer able
to supply them. No such responses had beenrecorded in 2018.
The 2018 and 2019 surveys also questioned
whether there were any direct impacts fromthe introduction of FLEGT licensing andthe EUTR on imports of timber certified byprivate certification and legality verification
schemes. Figure 8.5.2 shows that private
schemes, especially FSC, profited from theintroduction of EUTR. A number of survey
respondents remarked that they preferredbuying certified timber since the EUTR
came into force and have used certification
as a means of compliance with EUTR due
diligence requirements since.

10%

However, capacity constraints for certified
tropical timber, as already reported in
2018
2019
2018
2019
2018
2019
2018101, persisted also in 2019, against
No change
Small decrease
Big decrease
the background of no further progress inforest certification in tropical countries.
Figure 8.5.3: FLEGT licensing impact on certification and legality
As a result, the stronger focus on certified
verification schemes. Source: IMM 2018/2019 EU trade survey
products, both to support EUTR complianceand to achieve goals set by company
procurement policies, has further intensified
No respondents in 2018 and just 2% of respondents insubstitution of tropical timber products with2019 said their imports of tropical timber had increased asalternatives made of temperate wood, which are mucha result of EUTR. The one or two respondents who noted
more readily available with FSC or PEFC certification.
an increase said that some of their major clients’ trust in
the legality of tropical timber and timber products had
In addition to FSC and PEFC, respondents said theygrown and their demand increased due to EUTR.
had been increasingly looking to other private legality
verification schemes to ensure EUTR compliance.
Roughly 60% in both years said there was no impact
due to the introduction of the Regulation. Companies
When asked whether the market introduction of FLEGTthat did no note any impact of EUTR on their imports
licensed timber from Indonesia had had any impact onof tropical timber and timber products mostly statedtheir purchases of certified timber the overwhelmingthat they had had due diligence processes in placemajority of companies answered “no change”. A smaller
before the introduction of EUTR and thus felt they andnumber or respondents – between 1 and 5% depending on
their suppliers were already fully compliant when thethe year and certification scheme – reported decreases.
Regulation entered into force.
0%

In the case of the market introduction of FLEGT-licensed
timber from Indonesia, the majority of respondents 87% (2018) and 83% (2019) – reported no change. At
101. FLEGT VPA Partners in EU Timber Trade 2018. Sarah Storck, Rupert Oliver (IMM/2019). https://bit.ly/2JRlrAK
MAIN REPORT – NOVEMBER 2020

87

9

FLEGT in EU timber procurement policies
In late 2018 and early 2019, IMM published two
special studies on EU public and private sector timber
procurement policies102. Results from the studies werediscussed in detail in the IMM 2018 Annual Reportpublished in November 2019103. These studies have notyet been systematically updated, as little change was
expected in such a short period.
However, IMM correspondents in the seven key EU
countries monitored by IMM reported changes – as far as
any had occurred – in their respective countries’ public
procurement policies. Where private sector procurement
policies are concerned, the IMM trade survey asked
respondents for an update of information on the role of
FLEGT Licences in their procurement policies.

9.1 IMM 2019 survey: FLEGT-licensed timber inprivate sector timber procurement policies
In 2019, all 109 survey respondents answered thequestion whether their company adhered to a timber
procurement policy with other standards than those set
by EUTR. As demonstrated by Figure 9.1.1., the proportionof companies with such a policy increased from 49% in2018 to 58% in 2019.
When explaining the standards set by such policies, mostfrequently mentioned were commitments to certification
systems or association policies. While the achievement ofa certain proportion of “sustainable timber” purchases,
with “sustainability” typically defined as FSC or PEFC
certified, was by far the most frequently mentioned
additional standard in policies, the role of FLEGT
licensing has been formalised in a number of companies’
timber procurement policies in the last year.
Some respondents said, for example, that their official
policy was to give preference to FLEGT-licensed timberover unlicensed or uncertified timber. Others said it wasused to demonstrate “low risk” or “timber legality”. It
was also considered “an acceptable alternative” where
no certified timber was available or used to satisfy
goals of “mixed origin” of sustainable (certified) andlegal (FLEGT-licensed) timber. There was also general
acknowledgment among respondents – whether
formalised in a policy or not – that FLEGT Licences
provide a green lane and no further Due Diligence isrequired for licensed timber. Two respondents said
their policies consider FLEGT as proof of sustainability
equivalent to certified timber.
However, most respondents stated, as in 2018, thata formal role for FLEGT licensing in policies would
only be considered when Licences are available froma wider range of sources. Many also felt that proof ofwider achievements of VPA implementation and FLEGT
licensing in terms of environmental, social and economic
sustainability needed to be better documented and more
widely communicated.

9.2. FLEGT-licensed timber in EU MS
procurement policies
The IMM study of EU MS public procurement policies
published in early 2018 identified procurement
policies with relevance for timber and timber products(furniture, paper, timber used in construction) in 22 outof the 28 Member States at the time of preparation of
the study. In early 2020, IMM contacted authorities104of the six Member States for which no policy had
been identified by the Study – Estonia, Greece,
Hungary, Poland, Portugal and Romania. At the timeof preparation of this report, replies had been received
from Estonia, Hungary, Romania and Poland.
The Hungarian Public Procurement Authority stated
that, while Hungary did not have a specific public
procurement policy with relevance for timber andtimber products, the country’s Public Procurement
Act would “provide several possibilities for theconsideration of environmental aspects in the field of
public procurement”. Contracts could, for example, beawarded using “criteria representing the best pricequality ratio, covering quality, environmental and social
considerations”. Contracting authorities would also
have the option to “prescribe in the call for competition
that such economic operators shall not participate in
the procurement procedure, which have infringed theenvironmental, labour or social requirements, and such
infringement was established by a final administrative
or a final and binding judicial decision issued within theprevious 3 years”. And a tender would be “deemed to beinvalid, if it does not comply with the environmental,
labour or social requirements laid down by legislationor mandatory collective agreement or the provisions onenvironmental, social and labour requirements listed in(…) the PPA”.
Estonia does not yet have a “stand-alone plan forgreen public procurement”, according to the Ministryof Environment, but is planning to incorporate green
procurement rules into a “circular economy strategic
document and action plan”, which is to be completed
by the end of 2021. Green procurement should then be
mandatory for ten categories, including furniture as wellas copying and graphic paper. Additional products with
relevance for the timber sector may still be included,
as six of the ten categories are still under development.

102. EU voluntary private sector timber procurement policies & the role of FLEGT licensing. https://www.flegtimm.eu/images/procurement/IMM_
Procurement_Study_December_2018_ST3.pdf and A study of EU public timber procurement policies, related guidance and reference to FLEGT.
Both by George White. https://www.flegtimm.eu/images/IMM_Public_Procurement/IMM-EU-Public-Timber-Procurement-Report---Final.pdf.
103. FLEGT VPA partners in EU Timber Trade 2018. Chapters 9&10 p.80ff. Sarah Storck/Rupert Oliver https://www.flegtimm.eu/images/IMM_2018_
Annual_Report/Final_clean_version_Natalie_VPA-Partners-in-EU-Timber-Trade-Annual-Report-2018.pdf. Results from IMM special studies
published in early 2019 were included in the 2018 Annual Report, to ensure timely publication of information.
104. Estonia: Forest Department; Greece: Ministry of Environment and Energy; Hungary: Hungarian Public Procurement Authority; Poland: Public
Procurement Office; Portugal: Ministry of Finance, Customs Department; Romania: Ministerul Medinlui, Apelor si Podurilor.
88		MAIN REPORT – NOVEMBER 2020

90%

Does your company have a timber procurement policies
with other standards than those set by the EUTR?
2018

80%
70%
60%
50%
40%
30%
20%
10%
0%

Yes

No

Don't know

Figure 9.1.1: Respondents’ timber procurement policies.
Source: IMM 2018/2019 EU trade survey

Criteria for purchasing will be based on the EU’s Green
Public Procurement criteria. There will be no specificrequirements for sustainable timber, as legality will
be considered to “encompass the sustainability aspect
as well”. FLEGT Licences will be accepted as proof ofcompliance for relevant products.
Romania adopted a Green Public Procurement Guide
that covers furniture and paper products in October
2018, according to information from the Ministry ofEnvironment, Water and Forests. It includes “minimum
requirements regarding environmental protection forcertain groups of products and services required at thelevel of specifications”.

Country

Criteria

Austria

Level of Definition

2019

Poland adopted a National Action Plan on
Sustainable Public Procurement for 2017-2020
in April 2017. According to information from thecountry’s Public Procurement Office, the document
contains “only general recommendations forcontracting authorities to include environmental
and social aspects in the tendering process (…) it
does not introduce any obligation whatsoever upon
contracting authorities”.
Table 9.2.1. updates an overview of all Member
States’ and the UK’s policies from the IMM
procurement study with information on Estonia,
Hungary, Poland and Romania. The tabledemonstrates that policies vary significantly interms of their definition of criteria, coverageof products, applicability to different levels ofgovernment and whether they are voluntary or
mandatory. However, they all require, or at leastencourage, government buyers to source legal
and often sustainable, timber. FLEGT Licences
are mentioned as a form of acceptable proof forlegality and/or sustainability by 19 policies.

Considering the key EU Member States monitored by the
IMM, there were no major changes or revisions made totheir policies during 2019.
FLEGT licensing is explicitly referenced in four of theseven policies – in France, Italy, Netherlands and the UK– and not directly mentioned in Germany and Belgium,
both of which accept only FSC, PEFC or “equivalent”, andSpain, which accepts FSC, PEFC and ecolabels. The UK
remains the only European key country for tropical timber
consumption in which FLEGT-licensed timber is explicitly
included as evidence of legality and sustainability on
equal footing with FSC and PEFC certification.

Forms of proof acceptable

Introduction orrevision dates

Range of products
coveredDefinedLegal - all productsFederal Procurement
except furniture
AgencySustainable furniture
Paper - preference forrecycled
FLEGT

FSC & PEFC or equivalents.
FLEGT Licences
Voluntary legality verification

Introduced: 2010

All wood-based
products including
paper

Belgium

Sustainable

Detailed
Belgian Government
Procurement Policy

FSC & PEFC or equivalents.

Introduced: 2006 Wood-based products
excluding paper
Reviewed: 2009
& 2014

Bulgaria

Legal
Sustainable(encouraged)
Recycled

Based upon EU GPP
criteria

Legal: FSC & PEFC, FLEGT Licences,
third party legal verification.
Sustainable: Verified as sustainably
managed (with no scheme specified).

Introduced: 2012

Paper

Croatia

Legal
Sustainable(encouraged)
Recycled

Based upon EU GPP
criteria

Legal: FSC & PEFC, FLEGT Licences,
third party legal verification.
Sustainable: Verified as sustainably
managed (with no scheme specified).

Introduced: 2015

Paper

CyprusLegal
Sustainable(encouraged)
Recycled

Based upon EU GPP
criteria

Legal: FSC & PEFC, FLEGT Licences,
third party legal verification.
Sustainable: Verified as sustainably
managed (with no scheme specified).

Introduced: 2007
Revised: 2012

Paper

Table 9.2.1: Overview of EU member state public forest product procurement policies. (Continued on next page.)

MAIN REPORT – NOVEMBER 2020

89Country

Criteria

Level of Definition

Forms of proof acceptable

Introduction orrevision dates

Range of products
coveredCzech
Republic

Legal
Sustainable(encouraged)
Recycled

Based upon EU GPP
criteria

Legal: FSC & PEFC, FLEGT Licences,
third party legal verification.
Sustainable: Verified as sustainably
managed (with no scheme specified).

Introduced: 2010

Furniture

Denmark

Sustainable

Detailed
Danish Government
Procurement Policy
for Tropical Forests

FSC & PEFC acceptable.
Nature Agency assesses schemes
against criteria.

Introduced: 2001
(tropical timber)
General: 2003
Revised: 2013

All wood-based
products including
paper

Estonia

Legality (considered
to encompass
sustainability)

Based upon EU GPP
criteria

FLEGT Licences
FSC & PEFC and “equivalent evidence”
acceptable as proof of “attesting
history of timber”
Documentation of timber legality for
unlicensed and uncertified timber.

Planned: 2021

Furniture, copying
and graphic paper.
Possibly otherproducts as definitionof categories not yet
finalised.

FinlandLegal
Sustainable
FLEGT

Legality based upon
FLEGT, CITES.
Sustainability based
upon „Forest Europe
process“.

FSC & PEFC.
FLEGT Licences
Ecolabels“Other reliable indicators“Introduced: 2009
Revised: 2010

All wood-based
products including
paperFranceLegal
Sustainable
Recycled papers

Detailed.
Policy on Public
Procurement ofTimber and Wood
Products

Any product or chain of custodycertificate.
FLEGT Licences.
Evidence of management plan.
Ecolabels.
Industry code of conduct - self
declaration of compliance.
Customs documents to qualify legal/
sustainable products when entering
the EU market.

Introduced: 2004 All wood-based
Reviewed: 2011
products including
paper

Germany

Legal
Sustainable

Detailed.
German Government
Procurement Policy
Begleitende
Erklärung zur
Beschaffung vonHolzprodukten

FSC & PEFC or equivalents.

Introduced: 2007
Last revised:2017

All wood-based
products mademainly from virginmaterial

GreeceNo criteria seen

Hungary

Public Procurement
Act has no relevancefor timber and timber
products

IrelandLegal
Sustainable
Recycled papers

Detailed.
Green Tenders - An
Action Plan on Green
Public Procurement

FSC & PEFC
FLEGT Licences

Introduced: 2012

Paper
Timber inconstruction

Italy

Legal
Sustainable
Recycled papers

FSC & PEFC
Ecolabels
FLEGT Licences
Verifiable self-declarations
Third party legal verification
State approved export permits

Introduced: 2009
Revised: 2013

Copy & graphic paper.
Windows & doors.
Office furniture

LatviaLegal

Not defined

Certification
FLEGT Licences

Introduced: 2008

All wood-based
products including
paper

Lithuania

Legal
SustainableNot defined

FSC & PEFC
FLEGT Licences
Third party legal verification

Introduced: 2007
Revised: 2013

All wood-based
products including
paper

Table 9.2.1: Overview of EU member state public forest product procurement policies. (Continued on next page.)90		MAIN REPORT – NOVEMBER 2020

Country

Criteria

Level of Definition

Forms of proof acceptable

Introduction orrevision dates

Range of products
covered

Luxembourg

Legal
Sustainable
FLEGT

Detailed

FSC & PEFC acceptable.
FLEGT Licences

Introduced: 2014

All products listed in
EUTR

Malta

Legal
Sustainable(encouraged)
Recycled

Based upon EU GPP
criteria

Legal: FSC & PEFC, FLEGT Licences,
third party legal verification.
Sustainable: Verified as sustainably
managed (with no scheme specified).

Introduced: 2011

Furniture

Netherlands

Legal
Sustainable(encouraged)
Recycled

Detailed.
Dutch Timber
Procurement Policy
Framework for
Evaluating Evidenceof Compliance with
Timber Procurement
Requirements

FSC & PEFC acceptable.
FLEGT Licences.
Timber Procurement Assessment
Committee assesses schemes against
criteria on a case by case basis.

Introduced: 2004 All wood-based
Revised: 2014
products including
paper

PolandRecommendations
to include
environmental andsocial aspects

4th national
action planfor GPP was
introduced in2017

No specific criteria
identified for woodbased products

PortugalNo criteria seen

Criteria
are under
development.

Potentially will include
all EC GPP product /use categories

Romania

Minimum
requirements
regardingenvironmental
protection

Introduced in
2018

Furniture
Paper

Slovakia

Legal
Sustainable(encouraged)
Recycled

Based upon EU GPP
criteria

Legal: FSC & PEFC, FLEGT Licences,
third party legal verification.
Sustainable: Verified as sustainably
managed (with no scheme specified).

Introduced: 2016

Paper
Furniture
Office building design

Slovenia

Legal
Sustainable(encouraged)
Recycled

Based upon EU GPP
criteria

Legal: FSC & PEFC, FLEGT Licences,
third party legal verification.
Sustainable: Verified as sustainably
managed (with no scheme specified).

Introduced: 2011

Paper
Furniture

Spain

Sustainable
Recycled

Not defined

FSC & PEFC
Ecolabels

Introduced: 2008
Revised: ?

Paper
Furniture

SwedenLegal“Acceptable”

Legal: detailed
definition.
Acceptable: No
violations of humanrights, traditionalrights; no loss of highconservation values,
no conversion ofnatural ecosystems.

Legal: FSC & PEFC, FLEGT Licences,
third party legal verification.
Acceptable: FSC & PEFC, FSC
Controlled Wood or equivalent

Introduced: 2011

All wood-based
products including
paper

UnitedKingdom

Legal
Sustainable
FLEGT

Detailed definitions.
UK Government
Timber Procurement
PolicyFSC & PEFC acceptable.
FLEGT Licences.
Until 2014 assessments made byCentral Point of Expertise on Timber(now defunct)

Introduced: 1997
Revised: 2013

All wood-based
products including
paper

EC – Green
PublicProcurement- GuidesRecycled
Legal
FLEGT
CITES

Policy to promote
public green
procurement and toincrease similarities
among procurement
criteria of EU
member states, andprovide guidance
and advice.

Recognizes chain-of-custodycertificates from FSC or PEFC. It
also recognizes EU Forest Law
Enforcement, Governance and Trade(FLEGT) Licences from countries thathave signed voluntary partnershipagreements. For non -certified
products, requires ability to trace
through the supply chain to the origin.

Revised: 2018

Paper
Furniture
Timber in Office
Building Design,
Construction andManagement

Table 9.2.1: Overview of EU member state public forest product procurement policies.

MAIN REPORT – NOVEMBER 2020

91

10

Promotion of FLEGT-licensed timber
and timber products
10.1 Backgroundsince 2019. The programmes should be ready for roll-out
from the end of 2020 (section 10.4).

Improved communication and promotion are frequently
flagged up to IMM as key elements of market success fortropical timber in general and FLEGT-licensed timber inparticular. A number of recommendations made by IMM
survey respondents and Trade Consultation participants
centre on this issue. Awareness raising and promotion of
FLEGT-licensed timber also took centre stage at a virtual
business meeting on wood and furniture organised by
the Indonesian Embassy and Fedustria in Brussels on 5
August 2020 and featured prominently during a similar
meeting organised by the Indonesian Embassy in London
and the UK Timber Trade Federation on September 2020.
IMM undertook a baseline study of the level of support
for FLEGT licensing in EU wood promotion campaigns105
in 2019. Results of the study were summarised in the
IMM 2018 Annual Report106.
A main conclusion of the study was that FLEGT licensing
was not actively promoted by existing pan-European
initiatives aiming at developing the market for tropicaltimber and timber products, partly because it wasperceived to compete with certified tropical timber,which is the campaigns’ primary focus. For the same
reason and also because tropical timber is regarded
as competition for local alternatives, several nationaltimber trade federations, identified by the Study asimportant communicators and influencers of the timber
sector, were also only cautiously promoting FLEGTlicensed timber.
While no dedicated EU promotion or “branddevelopment” scheme for FLEGT-licensed timber exists
to date, in Indonesia, the MoEF, with the support of the
MFP-Programme has been working on two separate
communications strategies – one national and one
international – for FLEGT-licensed timber and the VPA

10.2 Update on European wood promotion
campaigns’ positions on FLEGTThe IMM EU Wood Promotion Study’s comprehensive
analysis of existing wood promotion campaigns,
covering not just tropical but all types of timber in the
EU market, undertaken in early 2019 included sixteen
campaigns, of which thirteen potentially have scope
to promote FLEGT licensing. By the time the study
was undertaken, five of the campaigns made positivereference to FLEGT licensing.
Most relevant from a VPA partner country perspective
are the two main pan-European tropical timberpromotion programmes – the Sustainable Tropical
Timber Coalition (STTC)107 and ATIBT’s Fair&Precious108
campaign. Both support the aims of the FLEGT initiativeand recognise its role in providing legality assurance,
but when the Promotion Study was published, bothstill focussed practically exclusively on advocacy ofcertification. However, while the Fair&Precious campaign
has maintained this stance in its latest communications
and activities, more recently FLEGT licensing has figured
more prominently in STTC events and publications.
It was featured as one of the main topics at the 2019
annual STTC Conference in Berlin109, for example, withadvocates of both certification and FLEGT licensing
giving their views during a panel discussion. At thesame time, a data report on the market development ofsustainable tropical timber in Europe, commissioned
by STTC in 2019 and presented at the same event,included analysis of “exposure to FLEGT licensing” ofEU imports of tropical timber, in addition to “exposure
to certification”110. FLEGT-licensed timber was stillseparated from the category of “verified sustainable

105. EU Wood Promotion Programmes and their Recognitionof FLEGT (April 2019). Authors: Mike Jeffree/George White.
https://www.flegtimm.eu/images/Mikes_folder/IMMPromotion-Report---April-4-2019-ST3.pdf
106. FLEGT VPA partners in EU Timber Trade 2018. Chapter
8. Sarah Storck/Rupert Oliver https://www.flegtimm.
eu/images/IMM_2018_Annual_Report/Final_clean_version_Natalie_VPA-Partners-in-EU-Timber-TradeAnnual-Report-2018.pdf. Results from IMM special studies
published in early 2019 were included in the 2018 Annual
Report, to ensure timely publication of information.

Positive towards
FLEGT licensing
5

Neutral towards
FLEGT licensing
or not mentioned
8107. http://www.europeansttc.com
108. https://www.fair-and-precious.org
109. http://www.europeansttc.com/wp-content/
uploads/2019/12/STTC%20Conference%20report%20
2019.pdf
110. Unlocking sustainable timber market growth throughdata. STTC 2019. https://www.idhsustainabletrade.
com/uploaded/2019/11/IDH-Unlocking-sust-tropicaltimber-market-growth-through-data.pdf The report
uses the exposure method developed by IMM with somemodifications.
92		Campaign/platform
scope not applicable
to FLEGT licensing

3

Figure 10.2.1: Wood promotion campaigns’ position on FLEGT.
Source: IMM Wood Promotion Study (IMM 2019)

MAIN REPORT – NOVEMBER 2020

Position on FLEGT Licensing

Organisation

Promoting FLEGT (as operating at a scale necessary for sustainability)• UK Timber Trade Federation

Mentioning FLEGT as evidence of legality and possibly sustainability (i.e. there arepotentially aspects going beyond legality mentioned)• Fedustria

Promoting EUTR compliance advantages / Promoting FLEGT as evidence of legality• AEIM• CEI-Bois• Le Commerce du Bois
• Fedecomlegno• Fedustria• GD Holz• UK Timber Trade Federation• VVNH

Promoting EUTR compliance advantages, though cautious that FLEGT Licences might gain
share from third party certification• Le Commerce du Bois

Promoting third party certification• AEIM• Le Commerce du Bois
• Fedecomlegno• Fedustria• GD Holz• UK Timber Trade Federation• VVNH

Figure 10.3.1: European timber trade federations position on FLEGT and certification.
Source: IMM Wood Promotion Study + 2020 update

tropical timber”, which only included FSC and PEFC
certification, but was mentioned as evidence of“responsible timber sourcing”. FLEGT licensing was also
acknowledged as an EU effort to “promote sustainable
forest management (SFM)”. In the report, the STTC
stated that “increasing synergies between EUTR/FLEGT
licensing and forest certifications is an importantarea for growth. One system is not a substitute for theother – FLEGT is essential in improving the baseline inproducing countries and should be recognized as such– and increasing feedback from both systems to power
growth in SFM is essential”. It adds that “it is dependent
somewhat on the legality definition set within a VPA,
but, in general, a fully implemented (and licensing)FLEGT VPA lowers the barrier to achieve certified SFM ina producer country and we recognise the large impact it
has; covering a country’s entire forest area and all timber
imports in the case of Indonesia”.

10.3 Update on European timber tradefederations’ position on FLEGTIn terms of European market influencers andcommunicators for the timber industry, the 2019 study
assigned a key role to national timber sector associations
and federations. They are involved in wider promotion
campaigns and relay their messaging through their own
communications channels. They also conduct their own
campaigns and highlight the industry’s efforts to assure
legality of timber placed on the European market and tocombat illegal logging, with the main focus in this area on
the EU Timber Regulation and associated due diligence.
When it comes to their messaging on FLEGT licensing andthe FLEGT VPA initiative, the Study demonstrated that

there is no consistency regarding attitudes and activities.
Generally, all of the associations can be said to besupportive of the wider VPA process and benefits that willaccrue. Beyond this, the level of tangible support aroundcommunicating the message is hugely variable. The UK was
identified as representing one extreme, with its Timber
111
Trade Federation’s (TTF) Timber Transformer campaign,
launched in 2018, and early promotion of FLEGT licensing
as an equivalent of certification for public procurement.
This special role adopted by the UK TTF has manifested
itself even more strongly later in 2019 and in 2020; it now
employs a team of two dedicated FLEGT communications
experts. The TTF has since developed and sponsored
two design contests involving FLEGT-licensed tropicaltimber: Momentto112 and Conversations about Climate
Change113. It is also working on a series of E-Learning
modules focusing around FLEGT, tropical timber and“the positives of VPAs”, including a promotional video,
and is running a separate FLEGT Twitter account. Figure10.3.1 updates a similar table from the Promotion Study toreflect the increasingly leading role of the UK TTF; in theoriginal table it was categorised as “mentioning FLEGT as
evidence of legality and possibly sustainability”.
The primary reason given by other associations for being
more cautious on FLEGT promotion was that they haveinvested their energies in certification or promotion ofdomestic production. Some associations remain at least
partially unconvinced of the wider merits of FLEGT
licensing, willing to accept that it might equate to “legal
compliance” in the country of production, but so far
unwilling to consider that it might mean much more of thisin terms of environmental (or silvicultural) performance.

111. https://www.flegtimm.eu/index.php?view=article&id=90:uk-ttf-flegt-exhibition-nets-environmental-award&catid=21112. https://www.flegtimm.eu/index.php?view=article&id=165:speaking-up-and-out-for-flegt-the-imm-interviews-uk-timber-trade-federationmanaging-director-david-hopkins-on-its-communication-and-promotion-of-flegt&catid=22
113.https://www.flegtimm.eu/index.php?view=article&id=239:uk-ttf-gets-creative-in-flegt-communication&catid=21
MAIN REPORT – NOVEMBER 2020

93NGO / CSO

Summary of position

WWF• Describes legality assurance as prerequisite of timber and forest sustainability.
• Stresses that differentiation between FLEGT and sustainability certification should be made clear.
• Questions whether FLEGT in current form is sufficient to address sustainability holistically.
• Cites governance improvement and stakeholder engagement as FLEGT major achievements.
• Sees opportunities for advocating FLEGT more via social media• It recommends supplier countries consider joining the VPA process.
• It urges communication of the FLEGT initiative outside the EU.

FERN• Describes FLEGT as most effective functioning process to increase forest governance and combat illegal logging.
• Sees FLEGT as helping to meet the EU’s wider objective to encourage sustainable forest management• Recommends EU bring together NGOs to coordinate and support their FLEGT communications.
• Backs proposition that FLEGT is more than just proof of legality and communicates stakeholder engagement, forest
governance reform and social and economic benefits resulting from VPA process.
• Produces six monthly updates on countries’ VPA progress.
• Urges more institutional communication of FLEGT from EU.

Earthworm(formerly TFT)

• Describes legality assurance as prerequisite of timber and forest sustainability.
• Feels FLEGT initiative has ‘stalled’ since Indonesia started licensing.

Greenpeace• Says continued uneven implementation of EUTR could undermine FLEGT process.
• Warns EU against taking shortcuts in VPA process to get more countries to licensing stage.

Environmental
Investigation Agency• Commends FLEGT as template for other forest commodities industries legality assurance.
• Sees the multi-stakeholder aspect and in-country timber legality definition of VPAs as key.
• Communicates wider issues and reforms related to FLEGT and the VPAs. Says FLEGT ‘is about more than licensing’.
• Questions aspects of Viet Nam’s VPA timber legality assurance system.
• Backs VPA for Viet Nam as likely to incentivise it to regulate its timber import/export trade.
• Sees Vietnamese VPA as ‘significant precedent’ for timber legality assurance in China.

Figure 10.4.1: European NGO/CSOs positions on FLEGT. Source: IMM Wood Promotion Study + 2020 update

10.4 NGO/CSO communication roleand position on FLEGTNGOs and CSOs, some of whom wereinterviewed for the IMM study in 2019, are
key market influencers and clearly vitalto be kept in the FLEGT communications
loop. They can, of course, be critical, but
the organisations interviewed for the
IMM study said they are keen to promote
positives in the initiative, where they see
them, and to help inform industry andpublic opinion.
Figure 10.4.1 summarises the positions offive leading NGOs interviewed for the IMM
study. No significant step-change in NGO
attitudes was identified since publicationof the Promotion Study but some additions
to positions have been made.

Figure 10.5.2.1: Media mentions FLEGT VPAs and EUTR June 2019-June 2020.

10.5 Media references to
FLEGT VPAs

8,000

10.5.1 Media monitoring methodology

6,000

IMM has started monitoring media
coverage of the FLEGT VPA process, theEUTR and more generally of forest law
enforcement and forestry practices in
VPA partner countries through a media
monitoring service from mid-2018, withretroactive analysis of one year being
possible.

5,000

The media monitoring programme
takes both print and all types of online/
social media into account. IMM has split
monitoring into three different topics:

94		

Source: IMM analysis of Talkwalker Media Monitoring

Mentions over time: FLEGT VPAs and EUTR

7,000

2018/20192019/2020

4,000
3,000
2,000
1,000
0

FLEGT VPAs

EUTR

Figure 10.5.2.2: EUTR/VPA mentions over time June 2018-June 2020. Source:
IMM analysis of Talkwalker Media Monitoring

MAIN REPORT – NOVEMBER 2020• FLEGT VPAs; keywords: “Voluntary•Partnership Agreement”, “FLEGT VPA”,“FLEGT”, “Forest Law Enforcement,
Governance and Trade”
EU Timber Regulation; keywords: “EUTR”
and “EU Timber Regulation”

• FLEGT Independent Market Monitoring;

keywords: “FLEGT Independent Market
Monitoring”, “FLEGT IMM”, “VoluntaryPartnership Agreement”, “FLEGT VPA”,“FLEGT”, “Forest Law Enforcement,
Governance and Trade”, “Timber Legality
Licensing”, “International Tropical
Timber Organization”, “EUTR” and “EU
Timber Regulation”, “illegal logging”,“illegal timber”, “sustainable forestry andtropical”, “forest certification”.

The third search topic is primarily used fordaily press clipping. Like for the last two
IMM Annual Reports, topics 1 and 2 weretaken into account for the below analysis.
The period covered by this report is June 2019
to June 2020.

10.5.2 Media results over time

Figure 10.5.2.3: Global distribution of media records EUTR and VPA
2019/2020. Source: IMM analysis of Talkwalker Media Monitoring

The media monitoring service recorded 10,600
hits for the two topics in the twelve-month
period, a significant decline from the total
number of hits (May 2018-June 2019: 14,900 ),in the previous twelve-month period. Strong
media interest in the May 2018-June 2019
period had come primarily from Asia andcentred on FLEGT VPAs.
65.1% of all posts registered by the tool in theJune 2019-June 2020 period were accounted
for by FLEGT VPAs and 34.9% by EUTR. Thismeans that the number of posts recorded on
topics surrounding EUTR increased by 12.5%
over the previous period, while those on
FLEGT VPAs declined by 7% (Figure 10.5.2.2).

Figure 10.5.2.4: Global distribution of media records EUTR and VPA
2018/2019. Source: IMM analysis of Talkwalker Media Monitoring

90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

FLEGT VPAs share of media sentiment June 2017 - June 20202017/20182018/20192019/2020

Positive

Neutral

Negative

Figure 10.5.3.1: FLEGT VPAs media sentiment over time.
Source: IMM analysis of Talkwalker Media Monitoring

MAIN REPORT – NOVEMBER 2020

Analysis of global distribution of media
mentions on the world map shows that Europe
remains at the centre of communications,especially on EUTR. The decline registered inmedia coverage of FLEGT VPAs was primarily
due to lower activity in Asia, where almost
4,000 VPA-related hits were recorded in the
2018/2019 period, but only 2,000 in 2019/2020.
Coverage of FLEGT VPAs in South America
declined as well, but not as strongly as in Asia.
Overall mentions of EUTR and VPAs in
Europe fell from around 7,000 in the previous
twelve-month period to 6,000. Distributionof hits between EUTR and VPAs in Europe
was equal in the more recent period, after theprevious period saw slighty stronger coverageof VPAs.

10.5.3 Media sentiment
The positive trend shown last year in media
sentiment expressed towards FLEGT VPAs
continued also in the twelve-month period95

A closer look at sentiment expressed towards
FLEGT VPAs over the most recent reporting
period shows no significant fluctuations in
negative sentiment; it remained at a very
low level throughout the year. However, asharp rise in positive sentiment is showing
in July/August 2019 and then at a smallerscale in November 2019 (Figure 10.5.3.2).
Most of the positive postings in July andAugust 2019 made reference to projects
organised by the EU-FAO FLEGT programmein South America, in particular to forestry
sector round tables or “Mesas Forestales”
organised in Colombia. A number of positive
postings also made reference to growth intimber product exports from Viet Nam andthe Vietnamese VPA. The Vietnamese VPA wasalso mentioned in the context of developing
closer economic ties between Viet Nam andEU.
Overall, media sentiment expressed towards
FLEGT VPAs has been more positive intone than the sentiment towards the EU
Timber Regulation in all three reporting
periods (Figure 10.5.3.3). The share of positive
postings with reference to EUTR ranged
around 10% in all three years, while theshare postings categorised as “negative”
fluctuated between 10% and 16% over thethree years.

Positive200

Neutral

Negative

150
100
50
0

Figure 10.5.3.2: Media sentiment expressed towards EUTR in 2019/2020.
Source: IMM analysis of Talkwalker Media Monitoring

100%

EUTR share of media sentiment June 2017 - June 202075%

2017/20182018/20192019/2020

50%

25%

0%

Positive

Neutral

Negative

Figure 10.5.3.3: EUTR media sentiment over time.
Source: IMM analysis of Talkwalker Media Monitoring

250
200

Sentiment over time: EUTR June 2019 - June 2020. June 2019
Positive

Neutral

Negative

150
100
50
0

17
/0
6/
20
17
19
/0
7/
20
17
19
/0
8/
20
17
19
/0
9/
20
17
19
/1
0/
20
17
19
/1
1/
20
17
19
/1
2/
20
17
19
/0
1/
20
17
20
/0
2/
2
0
17
/0 20
3/
20
17
20
/0
4/
20
17
20
/0
5/
17 202
0
/0
6/
20
20

Analysis of sentiment expressed by EUTRrelated postings over time, identifies two
spikes in media interest in EUTR, one in July
2019 and then again in February/March 2020
(Figure 10.5.3.4). The first was largely neutral
in tone and related primarily to forestryin Brazil and South America overall andimporting of timber from the region in thecontext of EUTR. The smaller rise in negative
reporting at the time was largely triggeredby alleged cases of EUTR breaches in France
and Belgium – involving timber from Gabon
imported via China.

Sentiment over time: FLEGT VPA June 2019 - June 2020

17
/0
6/
20
17
19
/0
7/
20
17
19
/0
8/
20
17
19
/0
9/
20
17
19
/1
0/
20
17
19
/1
1/
20
17
19
/1
2/
20
17
19
/0
1/
20
17
20
/0
2/
2
0
17
/0 20
3/
20
17
20
/0
4/
20
17
20
/0
5/
20
20
17
/0
6/
20
20

from June 2019-June 2020. Almost 10%of all posting regarding FLEGT VPAs had
been categorised “negative” by the media
monitoring tool in the 2017/2018 period. Thisfell to 3.9% in 2018/2019 and then again to
3% in 2019/2020 (Figure 10.5.3.1).

The strong increase in media interest in
February and March 2020 was more negativein tone than the previous spike. Posts
centred mostly around reports of illegal
Figure 10.5.3.4: Media sentiment expressed towards EUTR in 2019/2020.
logging and EUTR breaches in Romania
Source: Talkwalker Media Monitoring
as well as the EU’s opening of EUTR
infringement proceedings against Romania.
There were also some reports of legal action
Hungary, according to which illegal timber confiscatedtaken in Spain against illegal timber imports from Brazil
as a part of EUTR enforcement was made available toand central Africa.
be used as fuelwood by people in need. Other positive
postings during that period were mostly related to
The smaller rise in positive media interest recorded at
private companies advertising their timber products asroughly the same time was partly related to reports fromEUTR compliant.

96		MAIN REPORT – NOVEMBER 2020

FLEGT impact on forest sector investment 11
11.1 BackgroundIn 2018, IMM commissioned a scoping study on forest
sector investment in VPA implementing (including
Viet Nam and Honduras) and FLEGT licensing VPA
partner countries. The study provided a baseline
for monitoring potential impacts of FLEGT VPA
implementation and FLEGT licensing on investment.
The study concluded that, at the time, a FLEGT VPA wasnot considered a criterion to rate partner countries aspreferential investment locations for the following reasons:• Long duration of VPA implementation processes andlack of trust that processes will be completed.

• Relevance: Indonesia is the only country with anoperational timber legality assurance and FLEGT
licensing system. In all other countries, the scopeof reforms implemented and the number of actors
complying with reforms is still perceived to be toolow. Investment decisions are based on the status of
the investment enabling environment at the time thedecision is under consideration.

• Lack of information: some respondents assumed that,for example, timber legality assurance systems will
only apply to exports to the EU and are therefore of
relatively limited importance to the wider industry.
As a consequence, the scope of reforms of law
and governance structures undertaken as a partof VPA implementation were underestimated andrespondents saw no risk mitigation potential of
FLEGT at country level.

The report also made a number of recommendations,
including:• Targeted awareness-raising in the financial sector

was considered key. Information about the scopeof VPAs and their risk-mitigating potential withreference to specific investment risks would be ofparticular interest. Industry investors in naturalforest-based value chains rated VPAs risk-mitigating
potential more important than financial investors.

• Further monitoring of correlations between the

FLEGT VPA process and forest sector investment
should be limited to countries with an operational
licensing system.

•

Due to limitations in data availability, a panel survey
to assess the attractiveness of VPA countries forinvestors with a specific view of VPA implementation
activities should be established.

• Results of such a panel survey could be used toestablish an investment attractiveness index of VPA
countries, ideally disaggregated by investor types(domestic SMEs, international forest industries,
TIMOs and institutional investors).

MAIN REPORT – NOVEMBER 2020

Acting on the second recommendation, IMM
commissioned an in-depth follow-up study of FLEGT
impact on forest sector investment, the investment
enabling environment and forest sector resilience toeconomic crisis in Indonesia in 2020. Viet Nam was also
included in this more detailed study for several reasons:• Viet Nam is a regional competitor to Indonesia

in the wood and forest products sector and a key
processing hub.

• Viet Nam is currently progressing fast through VPA
implementation.

• Availability and quality of investment data allows formonitoring of investment activity in Viet Nam over a
relevant period of time.

The investment follow-up study was in the final stagesof completion when this report was published. To allow
for timely distribution of information, it was decided toinclude a short summary of highlights in the IMM 2019
Annual Report.

11.2 2020 investment study – summary ofhighlights from stakeholder survey
Besides statistical analysis, the 2020 study included
a stakeholder survey aimed at assessing forest sector
investors’ attitudes towards FLEGT VPAs risk mitigating
potential, decision-making pre-2020 and during the
CoViD-19 pandemic. 20 companies were interviewed
across all sub-sectors (forestry and logging, woodindustry, pulp and paper, and furniture); 10 in Viet Nam
and 10 in Indonesia. Interviews with stakeholders
from ministries, NGOs and forest sector associations
complemented the enterprise interviews.
The interviews focused on two topics:
1. M ajor investment risks in the forest sector and theinfluence of FLEGT VPAs on investment decisions
pre-2020.
2. Respondents’ perception of the potential of FLEGTVPAs to strengthen their resilience during the
COVID-19 pandemic and related economic crisis, witha view to positively influencing investment decisions
in the post-crisis reconstruction phase.

11.2.1 Viet Nam
11.2.1.1 FLEGT VPA impact on forest sector investment
In Viet Nam, the in-depth study did not (yet) identify
clear correlation between milestones in the Vietnamese
VPA process and investment activity in the forest sector(chart 11.2.1.1).
In 2000, Viet Nam enacted an enterprise law, which was
an important step towards opening up the economy for
private investments. Investment in the forest sector has
increased steadily since, supported by bilateral trade
agreements with the US and general liberalisation of
trade regulations in 2001.

97

Comparison of the decades before and after start of
VPA negotiations in 2010 shows a significant increasein average investment volumes per year. The averageannual investment volume in the forest sector increased
from US$415 million pre-2010 to US$ 690 million after
VPA negations started.
However, it is not possible to clearly attribute thisincrease to the start of the FLEGT VPA process inViet Nam, because other substantial reforms of theeconomic system were also implemented by the
Vietnamese government at the same time and likely had
significant positive effects in the period after 2010. In
2007, for example, Viet Nam became member of the WTO,
in 2010 the country became partner of the TranspacificPartnership (TPP) and in 2011 the government enforced
a series of resolutions which helped to stabilise thecurrency, curb inflation and improve the investment
enabling environment.
Another reason behind relatively steady rates ofinvestment growth in the Vietnamese forest sector –also during recession periods – is the involvement of
the state in many enterprises. The role of the state has
reduced but enterprises that are fully or partly owned by
the state tend to follow investment plans, regardless ofoverall economic developments and risks.
The stakeholder survey included in the study supports
the results of the statistical analysis. The VPA
negotiation phase up to 2018 was not highlighted

as a major factor having stimulated investment.
Market forces, favourable factor costs and economic
reforms were identified as the major investment
drivers. However, Vietnamese enterprises voiced highexpectations in the fully implemented VPA in terms of
mitigation of market risk, capital mobilisation and sector
governance in the years to come.

11.2.1.2 VPA impact on investment risks and crisis
resilience in Viet Nam
Survey respondents in Viet Nam identified the following
risks as most relevant when assessing investment andexpansion opportunities:
Most frequent
Catastrophic events (storm, fire, diseases, pandemic)
High volatility of market prices
Restricted market access and lack of market
information
Informal activities resulting in unfair competition
and reduced competitivenessRestricted access to capital

•
•
•
•
•

Less frequent• Legal insecurity (land tenure, law enforcement)• Financial risk (exchange rates, inflation)• Increase of production costs• Lack of skilled work force
The VPA, once fully implemented, was expected to havesignificant mitigating impacts on a number of these risks:

Figure 11.2.1.1: Annual increase of fixed assets in Viet Nam’s forest sub-sectors 2001 to 2018.
Source: Annual Statistical Yearbooks for Viet Nam

98		

MAIN REPORT – NOVEMBER 2020

Market risks
Variations of market risks were most frequently namedby the enterprises. Within the set of answers, exporting
enterprise were much more optimistic about the positive
impact of the VPA on reducing market risks thandomestic market suppliers.
Interviewees’ highlighted risk-mitigating potential of
the VPA in terms of:

Other risks
A number of other investment risks were mentioned only
by a few respondents:• Lack of skilled work force: A certain potential of VPA

implementation to enhance qualification of staff
was identified by the interviewees. However, thiswould not resolve the challenge of the forest sector tocompete for talents with other industrial sectors.

• Improved market access in the EU and other• Production cost: VPA implementation is rather seen
regulated markets
to add additional cost and potentially increase cost of
raw material.
• Stabilisation of market share and turnover inexport markets• Diversification of export markets/clients• Financial risk: The VPA is not expected to influenceP
rice
premiums
may
be
paid
for
FLEGT-licensed
timberexchange rates or inflation.
•• FLEGT licensing may help establishing long-termbusiness relationships
VPA impact on forest sector resilience to economic crisisI
mplementation
ofthe
VNTLAS
will
reduceunfairAll Vietnamese survey respondents stated that the COVID-19•
competition from informal enterprises

Catastrophic events
Although most enterprises answered that the VPA´spotential to mitigate the risk of catastrophic events islimited, the following positive impacts were attributed
VPA implementation:• The VNTLAS regulation requires forest owners to apply
good forest management practices including fire risk
management and appropriate silvicultural practices tomitigate other natural hazards (e.g. diseases).

• Forest owners who comply with the VNTLAS may

participate in a (less costly) forest insurance scheme.

Access to capital
Restricted access to capital in form of investment
and working capital was frequently mentioned
by wood processing industries. Interviewees hadhigh expectations for a positive influence of VPA
implementation to mitigate this risk:• Respondents perceived a direct correlation between

the VPA and positive market prospects, increasing
turnover and better rating with commercial banks toaccess loans.

• Complying with TLAS requirements would improvecredibility with clients resulting in more willingness
to pre-finance production.

• Some interviewees expected increasing interest of

private equity investors in their enterprise due to VPA
implementation.

Land tenure
Encroachment, timber theft and informal use of forests
not designated as production forests were mentioned
as important risks by the forestry enterprises in thesample group. They perceived that the VPA significantly
contributes to reducing these risks:• The VPA stimulates the process of issuingland-use certificates.
• Implementation of the VPA comes with enhanced
law enforcement and monitoring reduces land
encroachment and illegal logging.

MAIN REPORT – NOVEMBER 2020

pandemic has resulted in a drop in sales. While there was alarge degree of variation in the amounts of business lost byindividual respondent, market opportunities narrowed forall enterprises, no matter whether they supply just domesticor also international clients.
Impacts of the COVID-19 crisis on respondents’ investment
plans are diverse. A small number of companies said they
were postponing investments planned for 2020, but mostcontinue investing as scheduled.
Most respondents felt that the VPA is not yet contributing
to mitigating the pandemic’s market impacts as the TLAS
is not yet fully implemented. However, with regards topost-crisis reconstruction plans, the VPA was considered
to have potential positive effects.

A majority of respondents stated, for example, thatthey were planning to invest in product and market
diversification and product quality improvements. The
VPA was considered to have a positive impact especiallyin terms of access to new markets and groups of clients.

11.2.2 Indonesia
11.2.2.1 FLEGT VPA impact on forest sector investment
In Indonesia, where the VPA has been operational and
FLEGT Licences issued since late 2016, the study identified
impacts of the VPA on forest sector investment, alongwith several other factors (chart 11.2.2.1).
The long-term trend for Indonesia shows increasing
investment volumes in the forests sector with anincreasing share of investment in the wood processing
and furniture industry. Average annual forest sector
investment in the pre-VPA negotiation period (1998 to2006) of US$1.7 billion almost doubled between 2007
and 2017 (US$3.1bn). At the same time, the focus ofinvestment shifted from pulp and paper more towards
wood processing and furniture manufacturing. Survey
respondents attributed this increase in investment
volumes in wood industry and furniture operationsat least partly to the FLEGT VPA process and related
improvements in forest sector governance as well as
improved Indonesian market access to the EU, the US,
Australia and some Asian markets.
The year 2011, when the VPA was agreed and thenational forest moratorium enforced, was identified99

as a turning point in forest sector investments byIndonesian enterprises and other stakeholders. The
substantial improvements in forest governance andincreasing application of the national timber legality
assurance system (SVLK) led to an increasing interestof formal sector investments in forest industries.
However, quantifying the exact impact of the FLEGTVPA process on forest sector investments in Indonesia
remains difficult.

11.2.2.2 VPA impact on investment risks and crisis
resilience in Indonesia
According to survey respondents, the VPA process has
also had a positive impact on mitigating forest sector
investment risks in Indonesia. The major risks forinvesting in the Indonesian forest sector were identified as:
Frequently mentioned
Legal security
Land tenure
Market related risks (fluctuations, price volatility)
Forest governance (illegal logging, unfair competition)

•
•
•
•

Less frequently
Raw material shortage
Increasing costCatastrophic events (storm, fire, diseases, pandemic)•••

The VPA was considered to have mitigating impacts
on a number of these risks, with significant impacts
mentioned for some and lower impacts for others:Market risks
Interviewees acknowledged the positive impact of the
VPA on market access and market expansion in the
EU and other regulated markets. However, a positive
impact of FLEGT licensing on product prices was not
yet perceived.
In this context, several respondents highlighted thatthe positive impact in terms of market access could besignificantly strengthened, if targeted marketing efforts
for Indonesian timber and timber products would beundertaken in these markets. They also called for abranding strategy for FLEGT-licensed timber to better
compete with third-party certified products in sensitivemarkets and in public procurement
Forest governance (illegal logging, unfair competition)
The VPA has introduced tracing and monitoring of legal
timber flows, reducing illegal and informal competitionin the sector. Respondents unanimously agreed that
this has contributed significantly to risk-mitigation.
However, some said that raw material supply chain
control had occasionally led to material shortages.

Figure 11.2.2.1: Annual increase of fixed assets in Indonesia’s forest sub-sectors 1998 to 2017.
Source: Annual Statistical Yearbooks for Indonesia

100		

MAIN REPORT – NOVEMBER 2020

Land tenure
Conflicts about land tenure and forest use rights werea frequently mentioned risk factor. This includes landclaims of local communities, overlapping user rights,
lengthy processes of land demarcation. This risk was
mentioned by forestry companies, but also by the buyersof roundwood since the situation threatens reliablesupply change management.
Respondents agreed that the VPA has contributed tomitigating this risk since it requires proof of ownership/
user rights and it foresees participatory approaches onforest management and includes provisions for conflict
resolution. However, the issue of unequal land tenure
and overlapping user rights was considered to be going
beyond the forest sector and cannot be fully resolved by
the VPA.
Other risks
A number of other investment risks were mentioned only
be a few respondents:• Raw material shortage: A few enterprises areexperiencing increasing shortage of raw material,
which is threatening the long-term viability of theirbusiness. They mention that the SVLK requirements
are partly contributing to the shortage in raw
material since not all forest producers can easily
comply with the protocol.

•

Increasing production cost: Higher factor costs inIndonesia is perceived to threaten international
competitiveness (e.g. compared to Viet Nam). The VPA
is not contributing to cost reduction.

• Catastrophic events: Forest fires occur on a regularbasis and are most often caused by burning practices
in agriculture and palm oil production, according
to survey respondents. As a result, the VPA wasconsidered not to mitigate this risk.

VPA impact on forest sector resilience to economic crisis
On average, the COVID-19 pandemic has resulted ina substantial fall in Indonesian timber and timber
product sales, including for exporting companies andtheir suppliers in forestry and logging. However, some
exporters with a focus on countries where COVID-19
restrictions were less severe or where increased timespent at home resulted in higher spending on DIY andgardening products (including furniture) reported
unchanged sales or even increasing demand.
Companies perceived only a minor positive impactof the VPA when it comes to mitigating COVID-19
crisis impacts. This includes primarily maintaining
market access to regulated markets for the post-crisis
phase. The need to boost export sales and intensify
marketing efforts for Indonesian wood products
featured prominently in most interviews. A number of
respondents voiced dissatisfaction with EU efforts to

MAIN REPORT – NOVEMBER 2020

“promote a favourable position” of products covered by
the VPA in the EU market and felt that more needed to bedone to comply with Article 13 of the VPA .

11.3 Preliminary conclusions
The 2019 baseline study demonstrated that a FLEGT VPA
alone cannot compensate for the lack of market drivers
for investments such as market potential, investment
friendly environment, efficient production systems
and favourable cost situations, for example. However,in countries where all or some of the above criteria aremet, as is the case in Viet Nam and Indonesia, VPAs
can be a stimulating factor in the investment-enabling
environment in the forest sector by:• Creating improved access to regulated markets;• Improving access to capital and investors throughformalisation/improved credibility of forest sector
enterprises;• Eliminating market distortions through unfair /illegal competition;• Establishing good forest governance, addressing
social and environmental risk factors;• Ensuring long term viability of operations byenhancing sustainable forest management practices.

To further strengthen the positive impacts of VPAs on
forest sector investment, the following aspects should beconsidered:• Strengthen the pull effect of markets by expanding

regulated market demand (i.e. support developmentof timber legality laws in additional countries e.g.
China, India).

• Strengthen the competitiveness of FLEGT-licensed

products through branding and preferential
treatment for licensed products, for example in public
procurement.

• Promote FLEGT licensing as a factor to improvethe bank rating of forest sector enterprises in VPA
countries.

• Speed up the formalisation of all market participants.
• Find ways to avoid additional cost for producers, e.g.
by developing digital solutions.

• Ensure that no raw material shortages occur due totechnical limitations of the TLAS.

The full investment study will be published on the IMM
website in the first quarter of 2021.

101

Conclusions
The IMM 2019 Annual Report shows an increasing levelof recognition of FLEGT Licences as a means to reduce
importers’ own risk under the EUTR and increasingawareness of the wider benefits of implementing FLEGTVPAs in partner countries. It also demonstrates growing
familiarity with the administrative processes involved inimporting FLEGT-licensed timber and a very high levelof acceptance of these processes.
The second IMM investment study, focussing on Viet Nam
and Indonesia and summarised in this report, shows that
FLEGT VPA implementation and licensing has a positive
impact on the investment enabling environment in VPA
partner countries and identified correlation between
the VPA, investment volumes and a shift in investmentsfrom forestry and logging towards investment in further
processing industries in Indonesia. The study also
demonstrates that the potential of the FLEGT VPA process
for attracting additional investment would likely be
reinforced by integration of relevant stakeholders fromthe banking and financial sector in the process.
The EUTR has prompted EU importers to reassess
their supply chains, especially in countries considered102		

“high risk” and relationships were not infrequently
modified as a result. However, this has not necessarily
led to replacement of one tropical timber supplierwith another supplier from a FLEGT licensing VPA
partner country. More frequently, importers reported
that imports of certain products or species werediscontinued and the product either sourced from
specialist importers in the EU or replaced with nontropical or even non-wood alternatives.
This highlights once more the fundamental importanceof raising awareness of the long-term benefits of thesustainable use of tropical timber and addressing
environmental prejudice in the EU markets. VPA partnercountries should be encouraged to develop individual
marketing strategies for their particular FLEGTlicensed timber products in the EU markets during theimplementation process.
It also highlights the importance of continuing efforts tobring more VPA processes to a successful conclusion andwiden the source-base, range and availability of FLEGTlicensed timber and timber products.

MAIN REPORT – NOVEMBER 2020

Recommendations• The second IMM investment study found that VPAs

can be a stimulating factor in the investmentenabling environment in the forest sector at several
levels. FLEGT licensing should be promoted as a factor
to improve the bank rating of forest sector enterprises
in VPA countries and relevant actors should be
included in the VPA processes.

• A 2019 IMM study of architects’ awareness andperceptions of FLEGT and tropical timber as abuilding material indicates a low level of awarenessof FLEGT itself, Voluntary Partnership Agreements,
FLEGT licensing and the EU Timber Regulation.
Professional bodies representing architects should beengaged to increase awareness of the FLEGT process.
An important stakeholder group is daily making
decisions on the choice of materials that has nounderstanding of the value and achievements of theseprocesses. Many architectural bodies run continuing
professional development courses for architects,
and these offer an excellent opportunity to increaseawareness of FLEGT processes.

•

A second recommendation from the architects’ study
is to engage with the World Green Building Council toraise awareness of the value of FLEGT licensing with along-term goal of gaining credits for its use in Green
Building Council affiliated programmes. Certified
green building projects are set to increase and suchprogrammes play a key role influencing material
choices. Whilst some standards currently encourage
the uptake of certified wood only a small proportion
allow solely FLEGT-licensed materials to be used.
Only through recognition and credit within thesestandards will FLEGT licensing become of greater
value to many projects and WGBC could play a pivotal
role in raising awareness and increasing use of FLEGT
within standards.

• Demonstrate the business benefits of the FLEGT

licensing scheme in Indonesia to build trust.
Indonesian furniture producers, in particular, see thelicencing process as a bureaucratic hurdle rather thanas business opportunity. The current view is that it is
not cost effective and any formerly promised market
advantages are not tangible.

• Encourage those companies not yet using FLEGT-

licensed timber to do so. Awareness of EUTR varies
among EU-based businesses, with awarenessdecreasing further down the supply chain. Somepotential buyers of FLEGT-licensed timber are almost
certainly unaware of it, what it stands for and what
the benefits are for their businesses. Increased
awareness at the business-to-business level would
add value to the “brand” of FLEGT-licensed timber.
Research undertaken in 2019 and 2020 reinforces theview that EU-based companies will not re-source
to Indonesia purely due to there being licensed
material. Purchasing decisions are complex and,whilst easier compliance with the EUTR is a factor, it
is not sufficiently important in its own right to drivea switch.

• The market recognition FLEGT-licensed products
should be strengthened through branding andpreferential treatment for licensed products, forexample in public procurement.

• The private sector both in VPA Partner countries andin the EU needs to be actively engaged in thepositive market development of FLEGT-licensed
timber. Timber trade federations, for example, could
play a leading role and have already started doing so
in some countries. ENGOs that are open to supporting
the FLEGT/VPA process and commercial use of tropicaltimber should also be more actively engaged.

• IMM surveys demonstrate that the EU Timber

Regulation is having a significant impact on importers’purchasing behaviour in a number of key EU markets.
However, continuing high import volumes in someMember States e.g. from Brazil and Myanmar, which
are under special observation by the FLEGT/EUTR
Expert Group, indicate that harmonisation of due
diligence standards across the EU should be further
pursued. FLEGT licensing VPA partner countries could
then potentially feel a stronger benefit of the “norisk” status of FLEGT-licensed timber; however, othercommercial and economic factors would still have to betaken into account.

• Complete VPA implementation in other VPA countries
as quickly as possible. All IMM surveys identified
a clear message that FLEGT-licensed timber from asingle country is insufficient.

MAIN REPORT – NOVEMBER 2020

103

IMM
Independent Market Monitoring of FLEGT-Licensed TimberInternational Tropical Timber Organization (ITTO)
International Organizations Center
5th Floor, Pacifico Yokohama, 1-1-1 Minato-Mirai
Nishi-ku, Yokohama, 220-0012 Japan
FLEGT Independent Market Monitor
IMM Lead Consultant, Sarah Storck, lead@flegtimm.eu