Wood industry in Indonesia - statistics & facts
Indonesia is one of the world's largest exporters of wood products. It exports a wide variety of timber products, ranging from plywood, pulp, and paper to furniture and handicrafts. Nonetheless, Indonesia is considered to have not yet fully utilized its timber and wood sector potential. Even though Indonesia's log production has increased, the contribution of the manufacturing sector of wood and wood products to the country's GDP has been steadily declining in recent years.
Private-sector-run timber plantations in Indonesia primarily produce acacia wood, whereas public-run timber plantations mainly produce teakwood and pine wood. The most exported product is plywood, followed by sawn wood, industrial roundwood, and, in less proportion, veneer. In terms of downstream industries, Indonesia has long been known as one of the world's leading furniture manufacturers as its teak and rattan products are in high demand both domestically and internationally. Indonesia's wood manufacturing sector also employs one of the country's largest workforces.
Furthermore, despite its vast natural resources, Indonesia only ranks third in ASEAN in terms of the value of its wooden furniture exports. Due to licensing restrictions and complex procedures, several foreign furniture makers have transferred their facilities and operations to Vietnam. In 2021, Vietnam's wooden furniture exports were 13.32 billion US dollars, significantly exceeding Indonesia's furniture sector's export realization of around two billion US dollars in the same year. The relatively low wage for forestry and manufacturing workers in Indonesia also makes the sectors less attractive for the locals. Indonesia's wood sector will gain from better technical knowledge and the removal of ineffective regulatory barriers, thereby increasing the national economy while preserving biodiversity.
Wood production in Indonesia
Over 65 percent of Indonesia's forests are production forests, and the state owns approximately 85 percent of these. However, most state-owned production forests are managed directly by private enterprises and organizations under forest concessions. Indonesia's main log producers are logging concessions in natural forests and industrial plantation forests. Logs are still the main commodity of these upstream industries.Private-sector-run timber plantations in Indonesia primarily produce acacia wood, whereas public-run timber plantations mainly produce teakwood and pine wood. The most exported product is plywood, followed by sawn wood, industrial roundwood, and, in less proportion, veneer. In terms of downstream industries, Indonesia has long been known as one of the world's leading furniture manufacturers as its teak and rattan products are in high demand both domestically and internationally. Indonesia's wood manufacturing sector also employs one of the country's largest workforces.
Challenges facing the Indonesian wood industry
Indonesian timber supply chains and furniture producers must provide documentation that their wood supply is legally harvested and sourced under the Timber Legality Assurance Standard (SVLK/TLAS) and the Forest Law Enforcement, Governance, and Trade (FLEGT) timber export license to export their products, especially to the European Union, one of its largest export markets for wood products. However, these efforts are insufficient to alleviate Indonesia's illicit logging problem because timber laundering, which is the mixing of illegally sourced woods with legal wood, is still prevalent in Indonesia. While the government has done a decent job of incentivizing wood producers with FLEGT licenses, more stringent law enforcement is still required.Furthermore, despite its vast natural resources, Indonesia only ranks third in ASEAN in terms of the value of its wooden furniture exports. Due to licensing restrictions and complex procedures, several foreign furniture makers have transferred their facilities and operations to Vietnam. In 2021, Vietnam's wooden furniture exports were 13.32 billion US dollars, significantly exceeding Indonesia's furniture sector's export realization of around two billion US dollars in the same year. The relatively low wage for forestry and manufacturing workers in Indonesia also makes the sectors less attractive for the locals. Indonesia's wood sector will gain from better technical knowledge and the removal of ineffective regulatory barriers, thereby increasing the national economy while preserving biodiversity.
