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Ani Adiwinata Nawir, CIFOR Jakarta, 22 February 2007

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Ani Adiwinata Nawir, CIFOR Jakarta, 22 February 2007. FST/2005/177 Improving economic outcomes for smallholders growing teak in Indonesia (Proposed by CIFOR and ICRAF). Background issues. Teak production & its furniture manufacture is a major industry in Java

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slide1

Ani Adiwinata Nawir, CIFOR

Jakarta, 22 February 2007

slide2

FST/2005/177

Improving economic outcomes

for smallholders growing teak in Indonesia

(Proposed by CIFOR and ICRAF)

slide3

Background issues

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

  • The difficulty in bargaining with Perhutani
  • The wood price is set based on negotiation and no standardised price applied
  • Administration procedure is less complicated and shorter distance to the source of the trees and to their market place
  • Larger sales processing companies are not interested in the smaller market segment
slide7

Impediments to profitable smallholder teak plantations:

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

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

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

3. Restrictive timber regulation policies to smallholders

Regulations designed for large-scale production are applied

(e.g. cutting and transportation permits, registration procedures)

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Project aims: to improve livelihoods of smallholders growing teak

Objectives of the project:

Introduce and adapt silvicultural technologies that improve returns for smallholder teak producers

Identify and design financing schemes providing incentives for smallholder participation in profitable teak production

Enhance market access by smallholder teak producers

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Expected outcomes & outputs include:

Improved silvicultural technologies: Evaluations of current practices & intervention on silvicultural treatments; manuals/guidelines for improved practices

Financing schemes identified & designed;discussed and evaluated with key stakeholders

Improved market access & greater market awareness: Production to consumption chain evaluated (RMA); improved market linkages; best practice marketing guidelines developed; policy disincentives reviewed; policy briefs produced; and associated dialogues related to the regulatory framework implemented

slide10

Potential impacts: ex-ante impact assessment

Through better silvicultural treatments combined with innovative financing schemes and improved marketing:

the project can potentially generate AUD $112 million of benefits over 30 years

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Other relevant activities:

1. EU Project (September 2003-August 2007):

Levelling the playing field: fair partnership for local development

to improve the forest sustainability in Southeast Asia

2. WWF & LEI Certification Program ( as part of Global

Forest Trade Network in linking community-based plantation to

international consumer buyer group)

3. National Movement for Forest and Land Rehabilitation

(GN RHL/GERHAN - Gerakan Nasional Rehabilitasi Hutan dan

Lahan)

4. Hutan Tanaman Rakyat (Community-based Plantation): Ministerial decree is being finalised (MoF is planning to launch the decree within this week)

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