(Appendix 4-Technical Report LONG TERM PLAN).pdf

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TEAM Ahmad Jauhari Yani Septiani Hermawan Thaheer Bambang Widyantoro Togu Manurung Heri Satono Beni Raharjo Address: Project Management Unit (PMU) ITTO PD 397/06 Rev.3 (I) “Sustainable Development of the Wood-Based Industries in South Kalimantan” Dinas Kehutanan Banjarbaru Jl. A. Yani Timur No. 14 Banjarbaru South Kalimantan Telephone : +62 511 4777534 Fax : +62 511 4772234 Copyright @ 2009 International Tropical Timber Organization International Organization Center, 5th Floor Pacifico - Yokohama 1-1-1 Minato – Mirai, Nishi – ku Yokohama – City, Japan 220-0012 Tel. : +81 (45) 2231110; Fax: +81 (45) 2231110 E-mail: [email protected] Web site: http://www.itto.or.jp Financial support from the International Tropical Timber Organization (ITTO) through the project PD 397/06 Rev 3 (I) Sustainable development of the Wood Based Industry in South Kalimantan

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TABLE OF CONTENTS

TABLE OF CONTENTS...................................................................................................... I 

PREFACE.......................................................................................................................VIII 

SUMMARY........................................................................................................................ IX 

1. INTRODUCTION ........................................................................................................... 1 

1.1  BACKGROUND....................................................................................................................................... 1 1.2  PURPOSES AND OBJECTIVES ................................................................................................................. 2 1.3. SCOPE AND CONSTRAINTS.................................................................................................................... 3 1.4.     LINKAGE BETWEEN SOUTH KALIMANTAN MASTER PLAN AND NATIONAL AND KALIMANTAN REGION 

MASTER PLAN.............................................................................................................................................. 5 1.5.  OUTPUT................................................................................................................................................ 6 1.6.  OUTCOME............................................................................................................................................ 7 

2. APPROACH AND METHODOLOGY............................................................................. 8 

2.1. APPROACH............................................................................................................................................ 8 2.2.  METHODOLOGY FOR DATA COLLECTION AND ANALYSIS.............................................................................. 8 2.3.  WORKSHOP AND FOCUS GROUP DISCUSSION .......................................................................................... 15 2.4.  SCHEDULE ............................................................................................................................................ 16 2.5.  DEVELOPING STRATEGY, POLICY AND ACTION PLAN ......................................................................... 17 

3. MAPPING OF TIMBER BASED INDUSTRY IN SOUTH KALIMANTAN ..................... 19 

3.1.  RAW MATERIAL SUPPLY (TIMBER) ..................................................................................................... 19 3.2.  STRUCTURE OF TIMBER BASED INDUSTRY ......................................................................................... 25 3.3.   TIMBER PROCESSING PRODUCTS MARKET........................................................................................ 34 3.4   SUPPORTING FACILITIES..................................................................................................................... 40 3.5.  TIMBER BASED INDUSTRY INSTITUTION ....................................................................................................... 43 3.6.  COMPETITIVENESS OF TIMBER INDUSTRY ......................................................................................... 46 3.7.  COMPETITIVENESS OF INDUSTRY ANALYSIS ...................................................................................... 53 

4. VISION AND MISSION OF TIMBER INDSUTRY IN SOUTH KALIMANTAN.............. 61 

4.1.   VISION AND MISSION OF NATIONAL TIMBER INDUSTRY................................................................... 61 4.2.   VISION AND MISSION OF TIMBER INDUSTRY IN SOUTH KALIMANTAN ............................................. 61 4.3.   THE OBJECTIVE OF TIMBER INDUSTRY DEVELOPMENT IN SOUTH KALIMANTAN.............................. 62 

5. TARGET AND MAIN STRATEGY IN DEVELOPING SUSTAINABLE TIMBER INDUSTRY IN SOUTH KALIMANTAN ................................................................ 63 

5.1.  ASSUMPTION AND ENABLING CONDITIONS ...................................................................................... 63 5.2.  DEVELOPMENT TARGET..................................................................................................................... 66 5.3.   DEVELOPMENT MAIN STRATEGY ...................................................................................................... 72 5.4.     STRATEGY FORMULATION BASED ON TIMBER INDUSTRY SECTOR .................................................. 78 5.5.      STRATEGY FORMULATION OF SPATIAL BASED TIMBER INDUSTRY.................................................. 82 5.6.      STRATEGY  OF PROJOB AND PROPOOR TIMBER INDUSTRY............................................................. 88 

6. PROJECTION AND IMPLEMENTATION AGENDA OF SUSTAINABLE DEVELOPMENT OF WOOD BASED INDUSTRY IN SOUTH KALIMANTAN..... 90 

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6.1.   PERFORMANCE TARGET.................................................................................................................... 90 6.2.   STRATEGIC STEPS OF TECHNOLOGY ADAPTATION............................................................................ 90 

7. CONCLUSION AND RECOMMENDATION .............................................................. 102 

7.1.  CONCLUSION ................................................................................................................................... 102 7.2.  RECOMMENDATION ........................................................................................................................ 103 

8. FOLLOW-UP PROJECT............................................................................................ 104 

BIBLIOGRAPHY ............................................................................................................ 105 

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LIST OF TABLES

Table 2.1. Criteria Group And Criteria For Determining Competency Core Local Industry ........ 10

Table 2.2. Grouping Of Timber Industry ...................................................................................... 11

Table 2.3. Criteria On Determining Primary Products………………………………………………12

Table 2.4. Participants Of The Workshop And Focus Group Discussion…………………………16

Table 2.5. Schedule Of Research Implementation...................................................................... 17

Table 3.1 Potential Of Production Forest Area (Ha) In Each Of The Kph Anf Forest Management System In South Kalimantan Province As Source Of Wood Supply .......................... 21

Table 3.2 Potential Prediction Of Wood Supply (M3) Of South Kalimantan Kph ....................... 22

Table 3.3. Calculation Result Of Stand Potential Prediction At Kph Of South Kalimantan Province ...................................................................................................................... 22

Table 3.4. Progress On Log Supply Imported From Other Provinces Into The South Kalimantan Province In 2004 – 2006............................................................................................. 23

Table 3.5 Progress Of Primary Wood Based Industry In South Kalimantan Province Since 2003-2008 ............................................................................................................................ 26

Tabel 3.6. Fuel Wood Industry Development In South Kalimantan Since 2000 To 2007 ........... 28

Table 3.7. Progress Of Financial Performance Of Timber Processing Industry In South Kalimantan, For The Year Of 2005 -2007 ................................................................. 32

Tabel 3.8. Progress Of Growth Rate And Distribution Of Pdrb Based On Business Sector In South Kalimantan Province, 2004 – 2007 .................................................................. 33

Table 3.9. Destination Countries Of Exported Processed Timber From South Kalimantan In 2007.................................................................................................................................... 39

Tabel 3.10. Length Of State And Province Roads Based On Surface And Type Of Roads In South Kalimantan In The Year Of 2007 ................................................................................ 41

Table 3.11. Vessel Traffic To The Port In Banjarmasin Based On Type Of Vessel In 2007......... 42

Tabel 3.12. Total Power Produced, Installed, Purchased, Self Consume, And Reduced Based On Location At District Level In 2007 ............................................................................... 43

Table 3.13. Key Variables And Indicators On The Buyers And Suppliers Relationships.............. 50

Table 3.14. Criteria Group And Sub Criteria For Identifying Local Primary Industry..................... 54

Tabel 3.15. Aggregation Of Important Level Assessment At Competitive Determining Factor Of Timber Industry In South Kalimantan ......................................................................... 55

Tabel 3.16. Aggregation Of Fuzzy Linguistic Label For Identifying Primary Timber Industry In South Kalimantan ....................................................................................................... 55

Table 3.17. Aggregation fuzzy linguistic label for identifying timber industry group that expected to be highlighted in the future in South Kalimantan........................................................ 56

Table 3.18. Criteria Importance Level (Score) For Identifying Primary Timber Product In South Kalimantan ………………………………………… ……………………………………. 57

Tabel 3.19. Identifying Primary Timber Product Obtained From Primary Timber Industry In South Kalimantan.................................................................................................................. 58

Table 5.1. Several Choices Of Wood Processing Technologies For Environmental Sustainability.................................................................................................................................... 65

Tabel 5.2. Target Of Sustainable Development Of Word Based Industry In South Kalimantan . 67

Table 5.3. Plan Of The Number Of Timber Industry In South Kalimantan…............................... 68

Table 5.4. Planning Of Production Volume (M3) Of Timber Industry In South Kalimantan ….... 69

Table 5.5. Estimation of timber need for industry in South Kalimantan Year 2010 - 2040…...... 70

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Table 5.6. Estimation Of Raw Material Supply For Timber Industry In South Kalimantan Year 2010-2040................................................................................................................... 70

Table 5.7. Estimation Of Contribution Toward The Economic Growth In South Kalimantan Year 2010-2040 … .............................................................................................................. 72

Tabel 5.8. Result of SWOT analysis of leading timber industry in South Kalimantan............... 796

Tabel 5.9. Sustainable Timber Industry Development Strategy In South Kalimantan Based On Swot Analysis.............................................................................................................. 79

Tabel 5.10. Analysis of the general strategy of sustainable development of timber industry in South Kalimantan ................................................................................................... 8079

Table 5.11. Priority Of Plywood Industry Development Strategy In South Kalimantan................. 81

Table 5.12. Priority Of Fiber Based Industry Development Strategy In South Kalimantan………81

Table 5.13. Spatial Analysis Result In Determining The Source Of Wood Raw Material And Establishment Of Timber Terminals……………………………………………………. 85

Table 5.14. The Analysis Result Of KPHP Based Cluster Of Timber Industry In South Kalimantan Province……. ……………………………………………………………………………87

Table 5.15. Priority Of Art And Creativity Based Industry Development In South Kalimantan….88

Table 6.1. Medium-Term Performance Targets Of Sustainable Development Of Forestry Industry In South Kalimantan Province ……………………………………………….…90

Table 6.2. Roadmap Of Timber Industry Development In South Kalimantan Province ……….. 92

Table 6.3. Timber Technology Development In South Kalimantan Year 2010-2040……………97

Table 6.4. Action Plan Of Wood-Based Industry Development In South Kalimantan ................. 98

Table 6.5. The Role Of Stakeholders In The Development Of Sustainable Timber Industry In South Kalimantan Province. ..................................................................................... 100

Table 6.6. Matrix Of Roles And Level Of Difficulty Of Timber Industry Development Strategy In South Kalimantan Province ……………………………………………………………..101

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LIST OF FIGURES

Figure 1.1. Relationship Between The Map Position Of The Industry With A Sustainable Industry…………………………………………………………………….. 4

Figure 1.2. Relationship Long-Term Plan Of A Sustainable Timber Industry In South Kalimantan With Documents National And Regional Planning…………………………………... 6

Figure 2.1. Framework For Long-Term Plan Timber Based Industry In South Kalimantan

Figure 2.2. Generic Industry Value System (Kotler Et Al., 1997) ............................................... 12

Figure 2.3. Generic Industry Value Chain (Source: Porter, 1993) ............................................. 13

Figure 2.4. Matriks Swot Analysis ..............................................................................................14

Figure 2.5. Hytotetic Structure From AHP.................................................................................. 15

Figure 2.6. Logical Diagram On Determining Action Plan Of Timber Industry Development In South Kalimantan…………………………………………….......................................18

Figure 3.1. Developmet of Log Production in South Kalimantan Province, 1990-2007……… 20

Figure 3.2. Consumption and Supply of Timber for Timber Industry in South Kalimantan Province, 1990 -2007…………………………………………………………………….24

Figure 3.3. The development of processed wood production in South Kalimantan Province, 1997-2010 ………………………………………………………………………………..27

Figure 3.4. The Development Of Processed Wood Production (Without Plywood) In South Kalimantan Province, 1997-2006……………………………………………………....27

Figure 3.5. Development Of Non-Timber Forest Production In South Kalimantan, 1990-2007……………………………………………………………………………………….30

Figure 3.6. Corporate Earnings Growth Of Wood Processing Industry With A Capacity > 6000 M3.Years In South Kalimantan Province, 2003-2007……………………………….31

Figure 3.7. Corporate Earnings Growth Of Wood Processing Industry With A Capacity < 6000 M3.Years In South Kalimantan Province, 2003-2007……………………………….31

Figure 3.8. Sales Growth Of Processed Wood Timber Industry In South Kalimantan For The Domestic Market, 1990-2007……………………………………………………..35

Figure 3.9. Export Growth Of Processed Wood From South Kalimantan Province, 1990-2007……………………………………………………………………………………….36

Figure 3.10. Export Growth Of Processed Wood (Without Plywood) From South Kalimantan Province, 1990-2007…………………………………………………………………….36

Figure 3.11. Revenues From Exports Of Wood Processing Industry In South Kalimantan, 1990-2007…………………………………………………………………………………...…..37

Figure 3.12. Comparison Of Levels Of GDP Growth And Employment In The Forestry Sector And Its Distribution, 1990-2007……………………………………………………………..40

Figure 3.13. Illustration Of Institutions Related To Timber Industry In South Kalimantan ........... 45

Figure 3.14. Value Chain Of Forest Products And Processed Timber: Logs, Veneer And Plywood (Kaplynsky. Et Al, 2003 Dimodifikasi).......................................................... 1

Figure 3.15. Value Chain Of Forest Products, Logs, Wood Working And Wood Furniture (Kaplynsky, Et Al, 2003)............................................................................................. 1

Figure 3.16. Supply Chain Of Logs From Natural Forest And Timber Estate, Natural Forest Products And Timber Estate Products In Indonesia (Pensa, 2005 Modified)............ 1

Figure 3.17. Diagram Porter’s Diamond Application On Timber Based Industry In South Kalimantan ............................................................................................................... 59

Figure 5.1. Nine Factors That Influence The Development Of The Industry Cho………………63

Figure 5.2. Projected Growth In Timber Industry In South Kalimantan Year 2010-2040........... 69

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Figure 5.3. Estimation Of Raw Material Need For Wood Industry And Supply Capacity In The Province Of South Kalimantan For The Period Of 2010-2040………………………71

Picture 5.4. Estimation Of Wood Raw Material Composition For Timber Industry ..................... 71

Picture 5.5. Sustainable Wood Based Industry Development In Forest Industry Governance... 72

Picture 5.6. Relation Between Factors Affecting The Achievement Of Timber Based Industry Performance In South Kalimantan Province ............................................................ 74

Figure 5.7. EFE-IFE position of some excellent product/industry that can be developed in South Kalimantan……………………………………………………………….………………..76

Figure 5.8. Value Chain Of Fiber Based Timber Industry...........................................................77

Figure 5.9. Value Chain Of Wood Working Based Timber Industry (Secondary).......................77

Figure 5.10. Wood Industry Value Chain…………………………………………………………….78

Figure 5.11. KPH And Small, Medium And Large Scale Timber Industry ....................................83

Figure 5.12. Cluster Map And Small, Medium And Large Industry Cluster .................................84

Figure 5.13. Mapping Of KPH -Based Cluster Of Timber Industry In South Kalimantan.............86

Figure 5.14. Institutional Model Of KPH-Based Cluster Of Timber Industry In South Kalimantan................................................................................................................87

Figure 5.15. Furniture Industry Tree And The Possibility Of Public Involvement In The Supply Chain ........................................................................................................................ 89

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LIST OF APPENDIX

Appendix 1. The Development Of Log Production (M3) In The Last Five Years (2003 – 2007).......................................................................................................................... ….108

Appendix 2. Types Of Product / Processed Wood Commodity Exported From South Kalimantanfor The Year Of .................................................................................... 109

Appendix 3. Names Of River And Regencies In South Kalimantan Province. .......................... 110

Appendix 4 Processed Wood Exported Abroad In The Last Five Yeasrs In South Kalimantan Province. ................................................................................................................ 111

Appendix 5. Map Stand Potency In Kph In South Kalimantan….…………………………...……112

Appendix 6. Timber Haul Road Network Prediction From The Source To The Timber Terminal ………………………………….………………………………………………………..113

Appendix 7. Rekapitulation Of Total Industries And Wood Demant Year 2008......................... 114

Appendix 8. Governor Regulation No. 017 Tahun 2010 ……………………………………..…… 116

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PREFACE

Timber-based industry in South Kalimantan reached its heyday in the decade of 1980-2000, with the highest production reached 1.9 million m3 in 1998. During that period of time, the development of timber industry in Indonesia was conducted with some economic purposes such as to increase foreign trade through export, open job vacancy and increase the added value in production. This is done regardless of the potential wood supply from forest-based increment which is the basis for result setting in sustainable forest management. Timber industry in South Kalimantan is considered as industry that still survive in Indonesia, where 5 of 20 industries still run in this province (Kompas, 2009). Efforts to maintain and develop need to be undertaken by the Provincial Government. Threfore, Long Term Development Plan of wood based industry in South Kalimantan need to be formulated. ITTO through ITTO Project PD 397/06 Rev. 3 (I) together with the Government of Indonesia - Ministry of Forestry and the South Kalimantan Provincial Forestry Office formulate Long Term Plan of Sustainable Developemnt of wood based Industry in South Kalimantan Province. In this document, long-term plan was developed through several phases namely: Consolidation Phase (2010-2020), Revitalization Phase (2021-2030), Growth Phase (2031-2040) and Stabilization Phase (2040). This Long Term Plan was formulated based on the condition of the timber industry from 1990 to 2008 and the latest conditions, including conditions of supply and market potential. This document describes the Long Term Plan and in its formulation process it involved policy makers, people dealing with timber industry and all other relevant parties. It is expected that timber industry in South Kalimantan could have guidelines in developing it industry in the future. For the Ministry of Forestry this document can be used as the basis for determining policy. For South Kalimantan Forest Service is expected of this document may be referrals to formulate a sustainable industrial policy, because this document has been designated as the governor's rule number 10 of 2010 (see appendix 8). For local people, it is expected that directly or indirectly this document will improve the local economy through the improvement of the existing condition of the wood industry. For the private sector, exporters, industry owner, this document will support the preservation of wood industry and enhance competitiveness for the long term. We hope this document can be used as a reference in the Strategic Plan of Timber Industry in South Kalimantan.

We would like to express our deep gratitude to all parties for all the dedication and hard work in preparing the master plan. We all hope that a genuine desire to pro-actively integrate vision and perception as well as joint missions in order to create synergy and commitment to implement the programs / activities in an optimal development of the timber industry in South Kalimantan will be realized.

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SUMMARY

Timber-based industry in South Kalimantan reached its heyday in the decade of 1980-2000, with the highest production reached 1.9 million m3 in 1998. Nearly 75% or about 1.8 million m3 of raw materials for industry in South Kalimantan is supplied from other provinces, especially Central Kalimantan and East Kalimantan. Efforts are needed to revive the heyday through the preparation of long-term development plan of timber industry in South Kalimantan Province.

This is a spatial based formulation of Long-term Development Plan for the timber industry in South Kalimantan. (in a particular area, natural resources potential can be determined) and clusters (the determination of main and supporting industries). Production area that has been designed as a guarantee of wood supply sustainability is KPH. In particular, it is KPHP (for wood production area). KPH is part of the Long Term Plan of timber industry in South Kalimantan. KPH is the basis of raw material supply and it has just been initiated at KPH Banjar (part of the South Kalimanatn Province KPH).

The establishment of 10 KPH on the total area of 1.4 million ha, is predicted to be able to provide log in the effective area (not including interference by other activities) of approximately 5 million m3 in 2040 (in the year of 2040, 60% of the available area this area can be utilized effectively). It is also predicted the supply is still not able to meet the demand of the industry if the industry growth / demand rate is not adjusted to the ability of forest timber production. KPHP area is also used as a zoning control for the balance of supply and demand in the smallest area. Learning from the dependence in the past, the planning of raw material supply is a top priority.

From the aspect of fulfilling the need of raw material for small-medium scale industries, establishment of timber terminals is one of the main parts in the Long Term Plan for the timber industry. Timber terminals can be used as a tool for monitoring the circulation of legal timber and as a support for the industry.

Wood-based industry cluster development for small and medium-level industry at KPHP level with selected industry is part of this long-term plan. Similarly, wood-based industrial cluster development to large scale at the provincial level.

Industry that is projected to be built in South Kalimantan in the future is the secondary woodworking industry (furniture) and fiber-based industries. Primary woodworking industry will be maintained until the year 2020 as the timber industry fundamentals in South Kalimantan.

In order to revive the wood processing industry heyday in the decade of the 1990s, some fundamental steps such as performance improvement at forest resources unit (raw materials), processing units through re-engineering, and market units through the promotion and public relations, need to be undertaken. This is done to boost competitiveness, efficiency, and "market share" toward the Indonesian processed wood products.

Additionally, some other things to do to arrange all the wood processing industry and improve the condition of wood-based industry, are (a) arrange policies related to the provisions of reengineering, (b) re-register the whole wood processing industry in South Kalimantan province, (c) combating the illegal wood processing industry, and (d) increasing the highly competitive product.

In order to realize the above abjective, several phases of development process need to be undertaken, Consolidation Phase (2010-2020), Revitalization Phase (2021-2030), Growth Phase (2031-2040) and Stabilization Phase (2040).

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INTRODUCTION 1.1 BACKGROUND

Primary timber industry in South Kalimantan has been started since the early 1980s, which indicated with sawn timber, plywood, chip woods and particle board industries development. Afterward, in mid 1980s followed with secondary timber industry development such as moulding, wood working, and pulp & paper. Up to end of 1999, timber based industries were the foremost non-oil & gas export commodity in South Kalimantan. However, since 2000s timber based industries were experiencing rise and fall and heavily in bank debt.1 Explanations on the decreasing timber business are due to lack of raw materials (logs) from natural forests, less accomplishment of timber estate (HTI) development to produce chipwoods and wood working, and inefficient of primary timber processed production. Some companies even suspected using timber from illegal sources from inside and outside of the province such as Central Kalimantan, East Kalimantan, and West Kalimantan.2 Such activities are not only threatening the sustainability of the forests, but also continuation of timber industries for the future, and as well generating negative impacts to the environment due to deforestation and forest degradation.

Such explanation showing the weaknesses of South Kalimantan Province as the timber based industries producer of which province has running of logs from its natural forests, and as well the weaknesses of Indonesia as tropical country, which has comparative advantages to make the best from its climate condition, soil fertility and other dominant factors. Once natural forest and timber estate are well managed, hence timber based industries would not running out of logs as their raw materials. For example, it has been over than 35 years since the forest concessions have been operated in 1970s, which raw materials sources ought to accomplish their second rotation to produce logs using a variety of natural forest silviculture system. It shows that the completion of timber estate development is very slow. Since 1990/1991 timber estates (HTI) were developed for the purposes of pulp, wood working, and mixed with settlement program, however, South Kalimantan Province has just only accomplished of 384,000 hectares (71% out of 0.54 million hectares targeted until 2007). While industry installed capacity is exceeding log supply from the natural forests and timber estates in South Kalimantan, although raw materials can be imported from other provinces. Hence, timber industries in South Kalimantan have to compete with industries at other provinces to obtain logs for the production inputs.

Currently most processing timber industries are no longer efficient because of old machineries and not able to process small diameter timber, whereas new technology equipment that has capacity to process timber with small diameter are not available yet. But other provinces such as Jambi, Banten, East Java, and East Kalimantan have been using the new technology machinery. Similar to other neighboring countries such as Malaysia and China have been using the new technology. Particularly China has been using the new

1 In 2003 there are timber based industries in South Kalimantan Province that were confiscated by BPPN due to debt to the bank. 2 Number of timber absorbed by processing timber industries in South Kalimantan is exceeding the log supply.

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technology machineries that created by itself. Therefore, timber based business competition is very heavy, consequently inefficient companies will not be survived that eventually will lead to bankruptcy and close their business. The condition affected to economic indicator achievement of forestry sector, which decreasing since 2004 – 2007, respectively of 1.77%, -0.28%, -0.42%, and -3.71% (BPS, 2008). Contribution of forestry sector to the Gross Regional Domestic Income (PDRB) is respectively of 1.30%, 1.19%, 1.13%, and 1.06%. While other sectors in average are evidently growing. Compared to plantation sector, the forestry sector is declining sharply. Plantation sector growth in 2004 – 2007 is respectively 5.29%, 5.19%, 6.41%, and 8.39%. Both sectors are accused for competing in land utilization. Plantation sector is often converting forest land to extend its operation; hence forestry sector gets pressure from this sector.

In 2005, the government of South Kalimantan Province initiated policy related to restructuring the forestry industry in order to revitalize processing timber industry, which has been devastated for previous years. Development of long term planning for sustainable timber based industry in South Kalimantan Province is required through developing a 25 years Master Plan of Timber-based Industry (2006 – 2030). The ITTO PD 389/06 Rev.3(I) is expected to be able to accelerate the development of the master plan, through: (1) developing demonstration pilot of forest management unit (KPH) by of dividing designated forest into natural production forest (HAP), timber estate (HTI), people forest (HTR), community forest (HKm), etc., which will produce chipwoods and wood working to supply logs for processing timber industries in South Kalimantan; (2) restructuring industries that have high competitiveness; and (3) reengineering old machineries; and (4) finding out market for processing timber products, both domestic and international markets. Through developing Master Plan it is expected that restructuring timber-based industry would lead to revitalization of forestry industry.

1.2 PURPOSES AND OBJECTIVES

Development of Master Plan of Timber based industry in South Kalimantan year 2010 to 2040 aims to understand general performance related to role and contribution of the industry toward local and national development (PDB) and mapping of timber-based industry, followed by comparing with other industry in South Kalimantan. Performance of industry that will be identified includes its contribution, income and financial performance.

This document elaborates the government policy in the development of sustainable wood-based industry in South Kalimantan as well as the implementation of strategic program conduscted for the period of 2010-2040. Through the formulation of this document , the government intends to give an explanation regarding the plan and implementation of strategic programs to the public, policy makers, industrial management and economic actors, especially in South Kalimantan Province and Indonesia in general.

The objective of this document is to provide an explanation concerning long-term plan of sustainable wood-based industry in South Kalimantan Province which include general performance overview and wood-based industry mapping position in South Kalimantan. The overview of the performance and wood-based industry mapping position will determine the future strategy in order to revive the industry from the downturn during the last five years. This long term plan will be included as part of the Regional Strategic Plan (Renstrada) in South Kalimantan Province - Long Term Development Plan (RPJP) or Medium Term Development Plan (RPJM).

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The formulation of this document refers to long-term plan of forestry industry in Indonesia such as Road Map of Forestry Industry Revitalization in Indonesia year 2006 – 2025 and Long-Term Plan for Wood-Based Industry in Kalimantan. In order to be in harmony with regional development plan, this wood based industry development plan is based on Long Term Development Plan (RPJP) of South Kalimantan Province year 2005-2025.

Specific objectives of the master plan development of sustainable timber based industry in South Kalimantan covers the following development concepts:

(1) Determining raw material sources, both within the province or from other provinces, which will be the most appropriate and efficient for timber based industry development;

(2) Identifying and determining structure of timber based industry that has high competitiveness and has capability to contribute to the local and national economy;

(3) Identifying and determining financial performance of timber based industry, which has high sustainable growth, sustainable growth, and low growth;

(4) Identifying timber processing products that have high demand in the market, both domestic and international markets;

(5) Recommending current condition of timber based industry, which includes performance and industry mapping, and future development planning;

(6) Developing actions to be undertaken to organize every timber processing industry and improve the condition of timber based industry;and

(7) Determining a reference as scientific material for the formulation of Long Term and Medium Term Plan of South Kalimantan Province.

The mentioned objectives have been expanded from the objectives described on the ITTO project PD 385/06 Rv.2 (F), particularly with regard raw material sources and market of timber processing products, since both are closely related to sustainable timber based industry. Whereas raw material sources has backward linkages, while product market has forward linkages.

1.3. SCOPE AND CONSTRAINTS

Timber based industry mapping in South Kalimantan includes general description of performance and industry mapping. Industry performance descriptions that will be identified consist of industry income and its contribution toward local economy (PDRB) and national economy (PDB), and industry financial performance as well. Information concerning financial performance is limited on ratio issue return on investment (RoI) and return on equity (RoE), and profit margin of every type of industry. General description of industry performance that will be illustrated comprises of industry’s growth for the last five years due to data and information constraints. The condition of timber based industry within the last five years has indicated a drastically decreasing trend because of issues related to policy, raw material, industry unit, and market, additionally, global economic crisis impact and strict competition at the international market.

Timber based industry mapping that will be described including structure and industry distribution, both primary and secondary industry at district levels in South Kalimantan Province. Industry capacity is divided into capacity with capacity per year more than 6000 m3 and less than 6000 m3. Afterwards, the timber based industry will be compared with non timber based industry to identify the prospect of timber

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based industry. Non timber based industry includes coal mining, rubber (brown sheet and SIR), and other industries related to timber based industry due to its raw material source.

Other important issue to be identified is log sources for chipwood and woodworking. South Kalimantan Province is more advanced compared to other provinces in Kalimantan, and has drawn investors’ attention to establish timber processing industries. Due to log supply constraints to fulfill timber processing industry demand inside the province, therefore logs are imported from other provinces, moreover, logs also imported from other countries. Figure 1 shows correlation between the three aspects.

The three aspects can be used to identify current condition of timber based industry, whether it is still active of not. Government has put some efforts to organize timber industry to have balance between supply and demand of logs for their raw materials. As described on the national strategy on revitalizing timber based industry, detail action plan required to revitalize the industry is through re-engineering. Which it can be done through machinery modification or plant relocation, and operating industry efficiently to be able to compete with other industries, both in domestic and international markets. Plant relocation is undertaken in the condition of location is not in accordance with district spatial plan.

Government policy related to timber processing industry has been issued through the Minister of Forestry decree Number P.35/Menhut-II/2008 which stipulates permitting for timber forest products industry (IUIPHHK) and IUIPHH for non timber. The regulation does not stipulate plant relocation, however, it stipulates new industry permit to be established at new location. New permit granted should consider raw

Industry general

performance

Raw material condition

Industry condition

Proper test

redesigning

Not active /bankcrupcy

(revoke permit

Active old machinery

(reregirstration)

Modification on

machineryRelocation

New Investment

Industry collaps

Yes

No

Yes No

No

Part of Sustaina

ble industry Master Plan

(industry mapping)

Figure 1. Correlation between industry mapping and sustainable industry

No Yes

Product market

Timber based industry mapping

5

material sources and annual supply for the industry. Otherwise, the mill will face raw material scarcity in the future, and in the continuous condition, the mill will be collapsed as the consequences.

Overall review is aimed to ensure timber based industry will lead to a sustainable industry. Sustainability assurance of an industry has to be supported with an effective institution, sufficient supply, appropriate infrastructure, and available market for the product produced. Mission to accomplish a sustainable industry is not an easy action to do, unless supports from multi stakeholders behind the actions, particularly supports from key actors such as government, business sector, and community. For its development, supports from academics and research agencies will be required to improve industry performance for a long term.

1.4. LINKAGE BETWEEN SOUTH KALIMANTAN MASTER PLAN AND NATIONAL AND KALIMANTAN REGION MASTER PLAN

Master plan of sustainable development of the wood-based industry in South Kalimantan should be a further elaboration of the forestry industry development master plan in Kalimantan region, especially for timber industry. This becomes important since the utilization and exchange flow of the forest product among the provinces in Kalimantan is very influential. In tern of raw material supply, South Kalimantan, as it is known, relies on East Kalimantan, Central Kalimantan and even West Kalimantan. However, so far there is no official document concerning the master plan of timber based industry for Kalimantan region.

The formulated master plan to develop wood-based industry in South Kalimantan has a common thread with the master plan for the development of national forestry industry, or timber industry specifically. Master plan for the improvement of national forestry industry is an integral part of the master plan for the development of national forestry industry. Department of Forestry has remapped the forestry industry development plan which is a comprehensive planning of the forestry industry in each province.

Master plan for timber based industry development in South Kalimantan should be part of the province's

economic development planning, particularly in the industrial sector.That document will be part of the Long Term Development Plan (RPJP) of South Kalimantan Province, and Long Term Development Plan of forestry sub sector in South Kalimantan Province.

With the linkage between the Master Plan of Sustainable Development of Wood-Based Industry in South Kalimantan with various normative documents, which have been issued or will be issued by the Central and Local Government, the document has a very strong commitment to be implemented. Entire interaction of the document is presented in Figure 1.2.

6

Figure 1.2. Linkage between Long Term Development Plan (RPJP) of Sustainable Development of the Wood Based Industries in South Kalimantan and documents of National and Regional Planning

1.5. OUTPUT

Results of review on timber based industry in South Kalimantan are generating the following outputs:

(1) Raw material sources, both supplies from inside the province and imported from outside the province, are clearly identified and suitable for timber based industry development;

Rencana KehutananTingkat Nasional

Rencana KehutananTingkat Provinsi Kal-Sel

RPJ Pendek KehutananProv. Kal-Sel

Rencana KehutananTingkat Regional

(Pulau Kalimantan)

(1) Road Map RevitalisasiIndustri Kehutanan

(2) Forestry Outlook

RPJM KehutananProv. Kal-Sel

RPJP KehutananProv. Kal-Sel

RPJP Nasional(2006 – 2025)

RPJP Prov. Kal-Sel(2006 – 2025)

(1) RJP Industri Lestari Berbasis Kayu

(2) Mekanisme ImplementasiStrategis Ind. Perkayuan

Rencana KehutananTingkat Nasional

Rencana KehutananTingkat Provinsi Kal-Sel

RPJ Pendek KehutananProv. Kal-Sel

Rencana KehutananTingkat Regional

(Pulau Kalimantan)

(1) Road Map RevitalisasiIndustri Kehutanan

(2) Forestry Outlook

RPJM KehutananProv. Kal-Sel

RPJP KehutananProv. Kal-Sel

RPJP Nasional(2006 – 2025)

RPJP Prov. Kal-Sel(2006 – 2025)

(1) RJP Industri Lestari Berbasis Kayu

(2) Mekanisme ImplementasiStrategis Ind. Perkayuan

7

(2) Timber based industry structure has high competitiveness and has potential contribution toward local and national economy, which are identified and can be determined;

(3) Financial performance of timber based industry that has high sustainable growth, sustainable growth and low growth is clearly identified;

(4) High demand in the market toward timber processing products (primary and secondary), both domestic and international markets can be identified;

(5) Recommendation on current timber based industry condition that includes performance and position, and future development plan; and

(6) Steps to be undertaken to organize the entire timber based industry and to improve timber based industry condition systematically.

In particular with output concerning steps to be undertaken to revitalize timber processing industry in South Kalimantan, a matrix will be provided for easier reading and understanding the sequel flow chart. The steps are developed in accordance with strategy that has been determined and follows its scope as well.

1.6. OUTCOME

Overview on timber based industry in South Kalimantan has advantage to identify current condition and efforts for future improvement in order to re-attract investors to invest on timber processing industry. Advantages from the overview on timber based industry are as follows:

(1) For government, to determine policy in order to develop timber sources to fulfill log supply for timber based industry towards sustainable timber based industry. Additionally, the government possibly will be able to targeting revenue and taxes from timber based industry, which figure may closely to the actual quantity. Furthermore, government will be able to supervise industries that have provided sufficient contribution yet.;

(2) For Management Unit, to determine type of timber based industry that has high competitiveness, additionally, will be able to make decision for asset improvement, both through machinery modification and mill relocation toward efficiency and high sustainable growth industry;

(3) For community, to participate in small scale business and cooperative as their contribution share to local and national economy. Business related activities that can be undertaken by community/farmers are including community timber estate (HTR), people forest (HR), community forestry (HK), land/forest rehabilitation movement (Gerhan) or establishing small industry and cooperative at village and sub district levels;

(4) For ITTO, to support the government in developing policy that provides incentives and promoting industry performance I order to be able to compete at regional and international levels;

(5) For business development (timber traders and other subsidiaries) may possibly develop timber business toward more competitive challenges and improving its market segment; and

(6) For other stakeholders, may possibly develop other business sector due to multiplier effects from timber based industry development, therefore, may perhaps expanding business opportunity to improve community’s income, local and national economy to reduce poverty and unemployment.

The mentioned advantages are direct benefits for all stakeholders, particularly the government, businessman, and community. Additionally, there are indirect advantages such as: (1) a healthy business environment in placed; (2) sustainable forest management in placed; and (3) reducing deforestation and forest degradation; and (4) nationally will influence purchasing power of community toward timber processing products (primary and secondary) for housing and other purposes.

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APPROACH AND METHODOLOGY

2.1. APPROACH

Study on master plan development of sustainable timber industry in South Kalimantan is undertaken in some phases, which started with economic condition analysis and current condition on timber industry (existing condition) as well as condition in the 20 years to identify industry and primary products that provide significant contribution. Next step is to find out the core timber industry. Then it was followed with an in-depth review on the identified core timber industry to learn about industry competitiveness. Results of the review enrich with inputs from stakeholders from central and local through interviews and Focused Group Discussion. In general analysis to formulate action plan for developing competency of core industry is presented on Figure 2.1.

Figure 2.1. Study Approach for Developing Master Plan of Sustainable Timber Industry in South Kalimantan 2.2. METHODOLOGY FOR DATA COLLECTION AND ANALYSIS

2.2.1. Collecting Data and Information

The following are activities related to data and information collection:

a. Desk study: collecting data and information available related to timber industry development and development planning in Indonesia within the last twenty years.

b. Surveys: direct data collection in the field or targeted location. Survey is carried out to collect primary and secondary data. Secondary data collected through gathered data and information from service

Kondisi Terkini - Potensi Wilayah Kajian - Keragaan - Tantangan

Analisis Industri Perkayuan Andalan Daerah

Analisis DayaSaing (Berlian

Porter)

Industri/ProdukKayu Unggulan

Analisa Produk Perkayuan Inti/Prioritas

Analisa NilaiTambah danRantai Nilai

Composite Index Kompetensi Inti

Industri Perkayuan

Industri / ProdukPerkayuan Inti

FGD Proyeksi, Visi, Harapan Politik

RumusanKompetensiInti Industri

StrategiPengembangan

Industri Perkayuan

Rencana Tindak

Model 1 Model 1

Model 2Model 3

Model 4 Model 5

Current Condition - Potency Area Review - Physical - Challenge

AnalysisTimber Industry Local

AnalysisCompetitiveness (Porter

Diamond)

Industry/Primary Timer Products

Analysis Core Timber

Product/Priority

Analysis ValueAdded andChain Value

Composite Index Competency Core Timber Industry

Industry / MainTimber Product

FGD Projection , Vission ,

Expectation Politic

FormulationCompetencycore Industry

StrategyTimber industry

Development

Action Plan

Model 1 Model 1

Model 2Model 3

Model 4 Model 5

2

9

office/agencies at targeted location. While primary data is directly collected from the business actors and community at targeted location.

c. Internet Browsing: Browsing on the Internet to collect data and information from relevant websites on the internet.

d. Brainstorming: expert team initiated to establish organizational interface that enable sharing information and inputs from involved parties on the core industry competency study.

e. Expert Acquisition: depth interviews with experts to every aspect related to the core industry competency study at selected sites.

f. Focus Group Discussion: intensive discussion with local stakeholders concerning core industry competency development at selected sites.

2.2.2 Data Analysis

2.2.2.1. Initial Study on Site Potency

Secondary data is processed by using tabulation system. Secondary data on local statistical data within the last twenty years is exercised to examine potency of each selected district/city. Data on gross regional domestic product (PDRB) is utilized to identify main sector in the selected sites. Economic growth data is also exercised to examine contribution of industry sector for local development.

Data on developments of infrastructure, education, and labor rate described on statistical book at district levels is exercised to determine carrying capacity of location in supporting industry development. Secondary data collected from selected sites is used as basic consideration in determining further review on core industry competency at the targeted location.

Through the process of tabulating and mapping, the timber industry survey data is processed into a spatial and non spatial database. The database can be broken down into many kinds of information about the current condition of timber industry through the Pivot Table System. The data such as small and large scale of primary wood industry, secondary wood industry, timber traders, timber resources of the people and timber industry’s profile in general can be reseulted.

Supply potential prediction of raw material has been carried out through some stages. It was started by considering the potential space which can produce wood either from the forest or non forest areas – production forests, garden and people forest. The area should also be managed in a sustainable manner – recently, the Forest Management Unit (KPH) has been implemented in accordance with national policy strategies in the forestry sector. Secondly, the slope has been also considered. When the slope level is <15% THPB system is used and if the slope is 15 – 25% THPA system is used. Then, in the area of THPA some management systems that are suggested to be used are TPTI and SILIN. In the area of THPB, some management systems that are suggested to be used are HTI, HTR and HKM. Thirdly, at each of the management system, some factors such as potential value of timber per hectare, recycling, exploitation, safety factor and effective area are determined. Effective area should be considered since South Kalimantan has a high accessibility, so the possibility of land tenure issues could arise. Additionaly, the possible differences of analysis with the reality regarding the slope grade can occur, because the resolution of the grid data source used is 90m. Once these factors are determined, the prediction of global supply potential per each KPHP still can not be used as values to maintain the balance of supply because many more factors need to be considered such as the industry level and economic growth.

10

The information on prediction of wood supply potential and industry, especially small-medium scale industries in KPHP can be used to plan the ideal number of small-medium scale industries in every KPHP. This will be useful for planning and monitoring the balance of wood supply and demand.

2.2.2.2. Identify Competency of Core Timber Industry in South Kalimantan

Competency of core timber industry is identified based on criteria that developed by Roberts and Stimson (1998). Methodology that known as Multi Sector Qualitative Analysis (MSQA) using 34 criteria that can be divided into eight groups, as presented on Table 2.1.

Assessment toward each criteria for each industry group/sector can be numeric quantitative and description qualitative, which obtained through expert opinions or subjective opinion of researchers based on statistical data, review and study and reports related to industry and trade, interview with experts from business sector and academic, research agencies, NGOs, and government officials at central and local levels. Since there are many different measurements used to

Competency of core local timber industry based on score on criteria and then the highest score is presented by the primary timber industry group. Score is adding vertically and horizontally, which will present competency index for each evaluated sector/group industry and criteria index of competency local for each criteria. Based on total range score, vertically or horizontally, thus competency can be defined with following categories such as Excellent, Good, Fair, and Bad.

Table 2.1. Criteria Group and Criteria for Determining Competency Core Local Industry

No Criteria Group Criteria

1 Strength of domestic economy (1) Sector Performance, (2) Economic dynamics, (3) Value added activities.

2 Trade Orientation

(1) Performance of trade and investment, (2) Participation on the international economy, (3) Openness toward foreign business, (4) Closeness toward market, (5) Strategic business alliance.

3 Technology and Development

(1) Expenses for research and development activities, (2) Agglomeration expertise, (3) Joint research activities, (4) Technology transfer level.

4 Human resource development

(1) High education and training services, (2) Basic education, (3) Labor relationships, (4) Life quality, (5) Fee and salary structures.

5 Management

(1) Consumer services and product quality, (2) Association network, (3) Business efficiency, (4) Marketing capability, (5) Utilizing information system, (6) Entrepreneurship.

6 Financial (1) Basic Modality, (2) Fund availability.

7 Governance

(1) Law and regulations, (2) Business environment,

11

(3) Delegation of authority and local autonomy, (4) Business facility scheme.

8 Infrastructure

(1) physical facilities, (2) Energy cost, (3) Availability and flexibility of facilities, (4) Transportation cost, (5) Management of resources, wastes and environment.

2.2.2.3. Selecting Group/Industry Sector and Primary Products

Selecting group/primary industry sector is carried out using phase methodology by stakeholders during the Focus Group Discussion processes. Prior to determining phases, scoping on selected industry is undertaken through general condition review as described on Section 2.3.2.1. Grouping of industry is carried out based on Table 2.2.

Table 2.2. Grouping of Timber Industry

Group Type of Industry Sawntimber Industry Plywood Industry Wood Working Industry Particle Board Industry

Wood working based Industry (Primary)

Packaging Industry Pulp and Paper Industry Fiberboard Industry Fiber Wood Industry Rayon Staple Fibre Industry Shipping Industry Vehicle Body part Industry Container Industry

Transportation Industry

Railways Industry Charcoal Industry Pirolisis Industry Energy based Industry Bioetanol Industry Handicraft and art goods Furniture Industry

Woodworking based Industry (secondary) art and creative goods

Timber bark Industry Resin Industry Atsiri Oil Industry Latex Industry

Chemical Industry (timber extract)

Liquid Fumes Industry

Primary products are identified through further analysis toward selected primary industry. Primary products are selected through brainstorming based on scoping that prior to implementation. Criteria that used for determining primary products are presented on Table 2.3.

12

Table 2.3. Criteria on Determining Primary Products

No Criteria

1 Availability & sustainability of raw materials 2 Value added 3 Scope & Market segment 4 Local unique value 5 Labor employed 6 Total business unit 7 Environmental impacts 8 Market demand prospect (Export)

Primary product verification is undertaken using SWOT analysis that involving some experts, both from central and local. SWOT analysis is exercised on mapping of primary products based on internal supports (strengths and weaknesses) and external (threats and opportunities).

2.2.2.4. Determining Competency Core Industry

Connection between primary industry with its relevant industry forms development of value system concept that developed by Porter. Every company is formed of some activities that carried out to design, produce, marketing, delivering and supporting the products. All activities can be numbered using value chain.

Kotler et al. (1997) described vertical value chain as field of inputs or output of the industry. Vertical value chain can be formed to the front (upstream) or backward (downstream). From the primary industry point of view, all industries connected vertically are named as “supporting industries” (Figure 2.2).

Figure 2.2. Generic Industry Value System (Kotler et al., 1997)

Upstream chain is industries that supply the primary industry. While downstream chain is industries that become customer of the primary industry. Horizontal chain is other industry that using technology and/or marketing as compliment. All industries involved in horizontal chain called as “involved industries”.

According Porter (1993), value activity is divided into two, such as primary and supporting activities. Primary activities is activities involved in creating physical product and its selling and transferring to buyer, which includes after selling support. While supporting activities are primary support activities and supporting

Upstream Industry

Core Industry

Downstream Industry

End Market

Industry Value Chain

Raw material supply

Processing Equipment

Product Marketing

13

each other through providing inputs for purchased products, technology, human resources, and company basic regulation. Value chain application scheme is presented on Figure 2.3.

Correlation between value chain and capability and competency of a region is based on skills and specific expertise that possessed by the region, which part of the value chain. The skill is required by a region to be able to gain opportunity to go into one market to another market.

Main activity within the value chain of an industry is evaluated intensely to fulfill requirement of competency core industry that should meet the following criteria:

1. Asset, the entire internal power that possessed by the region, both tangible and intangible in providing support toward main activity within the value chain;

2. Contribution, current local’s role in supporting main activity within the value chain; 3. Uniqueness, defines local characteristics (the existence of center of similar industry, power f

technology, product characteristic, and industry managed using local wisdoms), in supporting main activity within value chain.

Main Industry cluster infrastructure (raw material sources, building, mills, roads, transportation, communication, etc.) Human resource management (plantation/forest manager, collectors, timber traders, processor at industry, and others labor) Technology development (silviculture, genetic engineering, processing technology and timber utilization, waste management, information technology, etc, )

Su

pp

orti

ng

Act

ivit

ies

Trade (raw materials, processing equipment, production supporting materials, chemical substances, packaging materials, etc.)

Pri

mar

y A

ctiv

itie

s

Pu

rch

asin

g (l

ogis

tic

into

ind

ust

ry)

Pro

cess

ing

(mai

n

ind

ust

ry c

lust

er

oper

atio

ns)

Mar

ket

ing

and

sel

lin

g

Ser

vice

s

Figure 2.3. Generic Industry Value Chain (Source: Porter, 1993)

The Crteria is in vector form Wc = { c1, c2, c3 }, where Ci is determined using attribute of Very Important (VI), Important (I), Fairly Important (FI), Less Important (LI), and Not Important (NI).

Scored main activities determined based on value chain of each core industry that analyzed at every region. Generically the value chain may consist of some matters as described on the Figure 2.3. Total of main activities within value chain is n, therefore, formulated matrix analysis Vnx3. The matrix consists of attribute as follows: Excellent (E), Good (G), Fairly Good (FG), Less Good (LG), and Not Good (NG).

Data processing method using Non Numeric for pairwise fuzzy decision analysis for making decision based on Non Numeric Multi Criteria Single Person Decision Making, as follows:

Neg (Wc) = Wc-k+1

Vix3 = max [Neg (Wc) Vic]

Although method used is Single Person Decision Making, however, the competency analysis of core industry is reconfirmed through FGD at local levels.

MARGIN

14

2.2.2.5. Analysis on Operational Strategy of Timber Industry Development

The development of operational strategy of primary industry uses SWOT analysis (Strength, Weakness, Opportunity, and Threat) and analysis toward environmental condition, such as external and internal that gives direct or indirect impacts into timber industry development in South Kalimantan. The SWOT analysis is based on information from stakeholders that collected through Focus Group Discussion (FGD), in depth interview, and information gathered from various forum and meetings and literature study.

a. Internal Factors

Internal factors in SWOT analysis is factors that described strengths or exceptional and weaknesses with regard to timber industry development in South Kalimantan. The following is the analysis criteria:

1) Strength that considered as power that can be used to develop timber industry. 2) Weaknesses that considered as constraints faced in developing timber industry in South Kalimantan. b. External Factors

External factors in SWOT analysis are factors that can figure the environmental condition, which may influence the timber industry development in South Kalimantan, such as Opportunities and Threats. Analysis criteria, as follows:

1) Opportunities that can be identified with regard to efforts in timber industry development. 2) Threats that may be occurred during the development of timber industry in South Kalimantan.

Figure 2.4. Matriks SWOT Analysis

2.2.2.6. Operational Program Analysis

Determination on priority of action program uses Analytical Hierarchy Process (AHP) method, which one of methodologies used by decision makers for solving problems related to system, to identify options on priority that consist of many criteria. The AHP method is introduced by Saaty (1983), which principally is simplify the unstructured, non strategic and static complex problems, then divided them into sections, and

15

arrange them into a hierarchy. Furthermore, importance value of every variable to be scored subjectively using numeric value, which describing the importance value of every variable that relatively compared with other variable. After various judgments, synthesis is carried out to obtain variable with the highest priority and has role to influence on the result of the system (Marimin 2004). Results of AHP method graphically can be described as hierarchy diagram, which starts with goal or target or focus, then followed with the first level criteria, tag along with sub criteria and alternatives. Components of every hierarchy are elaborated from AHP results. Hypothetic structure of AHP is presented on Figure 2.5.

Develo pment Stra tegy o fS ustainab le Timber Based Industryin Sou th Ka lima ntan

RawMateriasl Technolo gy i In fra structure

- Modal L ocalR egulations

MarketAccse ss

C ulture

Increasing

Productio

n

Increasing

Pro duc tQual ity

Increa sing

Business ski ll s

E xpan ding

Marke t

Improvemen tonBusinessCondi tion

Stren gthe ning

ins tituti ona l

Clus ter

de ve lo pment

Focus

Develo pme ntOb jective

Environmenta lfacto rs:external an dinterna l

OperationStrat egy

Developing Sustaina ble Timber Indu stry in So uth Ka limantan

Figure 2.5. Hytotetic structure from AHP

AHP provides possibility for the user to grant relative score of compound criteria (or alternative compound towards criteria) intuitively through pirwise comparison. Furthermore, determine a consistent approach to modify pairwise comparison into a figure compilation that represents relative priority of every criteria and alternative. According to Saaty (1980), pairwise comparison techniques that used in AHP is undertaken through direct interview with respondents. Respondent can be a expert or ordinary people, however, should be involved and deeply understood with the issues. Whereas the respondents are a group, therefore the entire members will be asked to provide judgments. 2.3. WORKSHOP AND FOCUS GROUP DISCUSSION

Activities implementation of the master plan development of timber based industry in South Kalimantan through the following stages: 1) Preliminary study to obtain data and information related to study sites that relevant for the research

purposes. 2) Identification on potency of raw materials to support local timber industry development.

16

3) Identification attribute that available at industry group that required for developing competency core industry group.

4) Selecting timber industry group that can be developed as local primary industry. 5) Mapping of competency core primary industry and identification on competency element of core industry

that required further development. 6) Structuring primary timber industry development system. 7) Formulating strategy for implementation of sustainable timber industry development in South Kalimantan. 8) Developing action plan for developing sustainable timber industry in South Kalimantan.

Participants of the workshops and Focus Group Discussions represent multi stakeholders related to industry development in South Kalimantan as presented on Table 2.4. Topics discussed on the workshops and FGDs include forest management, industry planning, and forestry policy.

Table 2.4. Participants of the Workshop and Focus Group Discussion

Institution Representation Contribution Regional Planning Agency Regional Planning Regional Development Planning Ministry of Forestry National Forestry National Forestry Planning Province Forestry Service Provincial Forestry Provincial Forestry Planning District Forestry Service District Forestry Management District Forestry Planning Province Industry and Trade Service

Provincial Industry Provincial Industry Planning

Province Agricultural Service Provincial Agricultural Plantation Planning Settlement Service Infrastructure management Regional Infrastructure

Development Mining Service Mining Mining Allocation Planning Statistical Agency Regional Development Data

Management Regional Development Data

Environmental Agency Environmental management Environmental Carrying Capacity Data

Regional Investment Agency Investment Information on investment Financial Institution Capital Information on Investment Education Institution Intellectual institution Science and Technology Progress Research Institution Intellectual institution Science and Technology Progress Forest Concession Association Private sector Business progress Industry Businessman Industry progress Experts Expert opinions Expert opinions

Beside from workshops and FGD results, inputs are also collected from survey results through questionnaire distributed at some locations. Correspondents of the questionnaire representing stakeholders, such as actors of processing industry and timber traders, and communities live in the surrounding forests.

2.4. SCHEDULE

Schedule in developing the Master Plan on Sustainable Timber Industry Development in South Kalimantan is presented on Table 2.5. Overall activities are scheduled since November 2008 to February 2009, however, since the delayed of improvement from the ITTO, therefore the activities started in December 2008 and completed in March 2009.

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Table 2.5. Schedule of Research Implementation

Activities Implementation Method Targets

1. Introduction with stakeholders

Visiting to some districts and meeting with stakeholders

Dissemination on action plan Identifying initial information Identifying key contacts and contract

persons. 2. Collecting secondary

data Collecting regional statistical data and available regulations/reports

Obtaining general condition/ potency of regional economy

Obtaining condition of local industry.

3. Preliminary observation on condition of studied area

Visiting centers of industry, direct observation and informal discussions with stakeholders through Focus Group Discussion at studied area

Mapping perspective and expectation of parties for timber industry improvement

Formulating competency core timber industry in South Kalimantan

4. Improving study results and formulating action program

Focus Group Discussion involving local stakeholders at studied area

Study results that in accordance with competency core local timber industry and better action plan are in place

2.5. DEVELOPING STRATEGY, POLICY AND ACTION PLAN

2.5.1. Action Plan Development

Action plan development is carried out through FGD that involving local stakeholders. Process in developing the action plan is presented on Figure 2.6.

2.5.2. Developing Implementation Arrangement of the Master Plan

Implementation arrangement of timber industry master plan in South Kalimantan is described on an action plan that formulated based on methodology/analysis of gap on the current condition, which considering and referring to previously selected strategy. During the development process, stakeholders and experts were involved to give their inputs through a Focus Group Discussion (FGD) mechanism.

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Figure 2.6. Logical Diagram on Determining Action Plan of Timber Industry Development in South Kalimantan

Development Strategy of Timber Industry in South Kalimanta

Stak

ehol

ders

’ Rol

e

Development Strategy of Competency Core Industry

Action Plan of Timber Industry Development in South Kalimantan 1. Suprastructure development 2. Infrastructure development 3. Raw Materials 4. Market 5. Human Resources 6. Science and technology

Action Plan of Comptency Core Timber Industry Development 1. Human Resources 2. Technology 3. Raw Materials 4. Modality 5. Industry Management

Industry Development Strategy in South Kalimantan Cpmpetency core industry

19

MAPPING OF TIMBER BASED INDUSTRY IN SOUTH KALIMANTAN

3.1. RAW MATERIAL SUPPLY (TIMBER)

Timber sources can be defined based on its origin, such as natural forest (HA), timber estate (HTI), people forest (HR), community forest (HKm), land clearing (IPK), and so on. In general, timber from various sources can be grouped in accordance with type of industry, namely wood working, fiber wood and fuel wood industries. Timber produced from the grouped industry generated timber assortments (logs, small logs, and wood chips material) in accordance with the purposes. Timber processing industries in South Kalimantan obtain raw materials from various sources from inside South Kalimantan Province and other provinces.

3.1.1 Gap of Log Supply And Consumtion

Raw material sources for timber based industry obtained from forest concession at natural forests, IUPHHK-HA, timber estate (IUPHHK-HTI), land clearing (IPK), land clearing from private land (IPKTM), timber collected from people forest, logging wastes. In the last seventeen years, the highest supply comes from logs harvested from natural forest and it reached its highest number in 1990 with the amount of 657,000 m3. While logging waste has not been utilized yet . The second largest producer is timber estate, and reached it highest production in 2004 with the amount of 265,000 m3. Table on the Appendix 1 summarized log production from various sources in South Kalimantan.

The continuity of timber sources from land clearing (IPK) and land clearing from private land (IPKTM) is not reliable. IPK is a legal permit to harvest timber on a land that to be converted from forest to non forest, such as plantation. Whereas IPKTM is a permit to harvest timber on forest area belongs to local community.

Figure 3.1 shows that raw material sources from natural forest tend to decline every year, even in the year of 2007 only 26 537 m3 remained (4.04% of the highest production ever achieved during the last 17 years). Since 1994, the production of logs from natural forests has been declined sharply to the present, and its been worse since 2004 (below 100 thousand m3 per year). It is because of the potency of natural forests is declining due to illegal logging or logging beyond forest increment. Additionally, activities in combating illegal logging and illegal trade have excess in blocking administration processes and timber transportation. Consequently, timber processing industries in South Kalimantan have to imported logs from other provinces such as East Kalimantan, West Kalimantan, Maluku, Papua, and some other provinces in Java and Sumatra Islands, particularly for raw materials for face-and-back veneer production.

3

20

Raw materials produced from timber estate tend to increase since the year of 2000 with total production of 32 759 m3. The highest wood production happened in the year of 2004 with the total production of 265 250 m3.Out of total production only about 20% that can be developed into timber assortments for wood working (diameter ≥ 18 cm).The remaining is for chipwoods industry (diameter < 18 cm and/or ≥ 18 cm, which can not be used for wood working), in addition, can be used as inputs for pulp industry. Timber harvested from timber estate is often use for sawn timber mill, which then processed into moulding, furniture, building parts, blockboard, which all produced from type of trees, such as acacia (Accacia sp) and false elder/sungkai (Peronema canescens), gamhar (Gmelina arborea), albizia (Paraserianthes falcata). Additionally, these timbers can be utilized as raw material for core-veneer, such as albazia (Paraserianthes falcata) and face-veneer from gamhar (Gmelina arborea), besides can be used for plywood.

Timber source from people forest (HR) in South Kalimantan mostly produced albazia, rubber, false elder/sungkai, durian tree, petai, jackfruit, and other trees can commonly grow in the villager’s yard. These types of log are mostly for wood working for furniture, core-veneer, and sawn timber. The collection of timber from people forest was started in the year of 2005 with the total production of 12 284 m3. Since 2005, logs from people forest (HR) are no longer available. Most of HR production generated from re-juvenile rubber tree, which has limited number. The government program on rehabilitation (Gerhan) has yet to produce logs up to present.

Whereas utilization of logging wastes as timber source is still low. Logging waste from natural forest concession is approximately of 30% of its total log production every year. Logging waste is still ignored in the forest. Up to present only 1% has been utilized. It is because of reforestation fund (DR) and forest levy are still high. Additionally, cost to transfer the timber from forest to temporary logyard and then to the mill is still expensive, as it is not comparable with the outputs. Such condition should get attention, especially from the government in developing policy through resolving dispensation in reforestation fund and forest levy, additionally, awarding permit to take timber processing equipment into the forests, particularly for the purpose of processing timber from logging wastes.

Based on the survey team of ITTO-PD397 year 2008, the total number of the timber industries and timber utilization of industries in 2008 in South Kalimantan Province can be seen in Appendix Table 7.

Natural Forest

Figure 3.1. Developmet of Log Production in South Kalimantan Province, 1990-2007

Natural Forest

Forest State

Forest Private/Urban

Timber Utilization Permit

Local wood Collector

Wood waste logging

Vo

lum

e (m

3)

21

As supporting information, analysis of wood supply potential is limited in production area referred to in the existing Regional Spatial. The review conducted by Forestry Service of South Kalimantan Province in cooperation with the Forsetry Planalogy Board and Forestry Faculty of Lambung Mangkurat University concerning KPH is then processed according to the Decree of KPH area for production or protected forest – Decree number 78/MENHUT-II/2010. This stipulation is in accordance with Ministry of Forestry Decree No. 435/Menhut-II/2009 on Forestry area map of South Kalimantan province. The total area of KPH (from HP, HPT and HL) reached up to 1.403.761 Ha with the following details.

Table 3.1 Potential of Production Forest Area (ha) in each of the KPH anf Forest Management System in South Kalimantan Province as source of wood supply

 Slope Class**   Proposed Space Composistion**  

 >40% & HL  

 25‐40%     15‐25%   <15%  100%  100%  10%  30%  60% 

 Silvikultur System**    Management System**  

Establishment of KPH in South Kalimantan Province*  

 Protected Area**   TPP(A/B)    T(P/J)PB   THPB    TPTI    TPTII    HKm    HTR    HTI15 

 Total area of KPHP/L (Ha)  

KPHP UNIT I  48,595     14,184   17,287  82,068  14,184  17,287  8,125  24,621   49,323  162,135 

KPHP UNIT II  57,455     11,688   9,021  129,472  11,688  9,021  12,818  38,841   77,812  207,635 

KPHP UNIT III  16,854        1,135   1,204  93,066  1,135  1,204  9,213  27,920   55,932  112,258 

KPHL UNIT IV  109,259        5,841   5,547  25,143  5,841  5,547  2,489  7,543   15,111  145,791 

KPHP UNIT V  52,903     18,105   12,527  33,822  18,105  12,527  3,348  10,147   20,327  117,357 

KPHP UNIT VI  101,387     12,192   10,593  138,749  12,192  10,593  13,736  41,625   83,388  262,921 

KPHP UNIT VII  17,330        2,472   3,089  69,750  2,472  3,089  6,905  20,925   41,920  92,641 

KPHL UNIT VIII  67,388        3,078   5,366  14,876  3,078  5,366  1,473  4,463   8,941  90,709 

KPHL UNIT IX  62,537        7,068   12,496  12,817  7,068  12,496  1,269  3,845   7,703  94,918 

KPHP UNIT X  44,013     10,673   11,658  51,052  10,673  11,658  5,054  15,316   30,682  117,396 

Grand Total  577,722     86,435   88,789  650,816  86,435  88,789  64,431  195,245   391,140  1,403,761 

* Assesed by ITTO Team and Forestry Service of South Kalimantan Province according area establishment by KPHP and KPHL of South Kalimantan Province No SK. 78/MENHUT‐II/2010, Dephut dan SK Menhut No. 435/MENHUT‐II/2009

 ** ITTO Team ‐PD397, 2008  

 TPP(A/B) = Tebang Pilih dengan Pemudaan Alam atau Buatan (Selective Logging with Natural or artificial regeneration)

 T(P/J)PB  = Tebang Pilih atau Jalur dengan Permudaan Buatan (Selective Logging or line with artificial Regeneration) 

 HTI15      = HTI (Industry Forest) with  the slope class of < 15%  

Based on the above table, prediction of supply potential can be made, such as the following table. The

total amount of supply of timber in South Kalimantan province is made with the assumption that all space is utilized for maximum production. In addition, the next chapter will discuss on the projected supply predictions for the period of 2010-2040 with several phases.

22

Table 3.2 Potential Prediction of Wood Supply (m3) of South Kalimantan KPH

*) With the assumption of the whole space available for timber production is fully utilized.  See projections prediction year 2010‐2040 

Table 3.3. Calculation Result of Stand Potential Prediction at KPH of South Kalimantan Province

Source: The overlay analysis between the interpretation of satellite imagery and field surveys by ITTO Team, 2009.

KPH Units Fores Protection Limited Forest Production Forest Production

District KPH Units Forest Management System Production

Prediction m3.years

Effective area factor

Cycle (year)

Potential (m3.ha)

Exploitation Factor

Safety Factor

23

3.1.2 Timber Sources from Outside the Province

Raw material is either supplied from inside South Kalimantan Province or imported from other provinces. Logs from out of South Kalimantan province covers of 75 % out of the total timber supply. It indicates that South Kalimantan Province has high demand of logs as raw materials for its timber based industries – industries which have capacity of more than 6000 m3 per year and also for industries with capacity of ≤ 6000 m3 per year. Table 3.1 summarized timber exported from other provinces.

There are some kinds of timber that are imported from other provinces. Meranti timber and mix hardwood are imported from East Kalimantan, Central Kalimantan, West Kalimantan, Jambi, and Riau. Meranti timber (family of Dipterocarpaceae) and merbau (Instia bijuga) are imported from Papua and Maluku. Albizia/sengon (Paraserianthes falcata), teak (Tectona grandis) and mahogany (Swietenia sp) are from Java Island.

In the last seventeen years, the average supply of timber from other provinces covers of 75% or about 1.8 million m3 per year. The highest number was around 2.8 million m3 which accured in 1998 and the lowest in 2007 at around 0.32 m3. One of the reasons on significant decrease of timber supply in 2007 was strict actions on combating illegal logging and illegal trade as instructed through President Instruction No.4 year 2005. Additionally, the timber from the natural forest has been very limited. The timber obtained from IPK and IPKTM has also decreased as a result of the opening of the area for plantation.

Table 3.3 Progress on log supply imported from other provinces into the South Kalimantan Province in 2004 – 2006

Total logs supplied (m3) Province 2004 2005 2006

East Kalimantan 279,850.06 215 068.86 - Central Kalimantan 375,277.52 351 839.04 - South Kalimantan 77,941.33 322 135.05 155 786.75 West Kalimantan 4,406.93 10 657.11 - West Java 27,888.67 - - East Java - - 10 290.05 West Sumatra 39,840.36 3 254.44 - Maluku 63,567.64 21 863.60 15 103.50 Papua - 2 156.49 7 615.08 West Sulawesi - - 8 075.54 USA/Import 3,018.27 1 772.02 3 953.56 Total 871,790.78 928 746.61 588 756.93

Source: Provincial Forestry Service office of South Kalimantan Province, 2008

3.1.3 Selisih Antara Pasokan Dan Konsumsi Kayu Bulat

Most supply of timber for wood based industry in South Kalimantan Province has been form other provinces. Figure 3.2. shows the need of round wood supply from outside the province because the total

24

production in the province itself is very limited or only able to cover between 20-40% of the total need of roundwood. However, due to limited supply of data from outside the province, then the amount of wood supply are not listed (un-Recorded) or considered to have come from illegal logging therefore can not be stated here clearly.

The lowest consumption of wood in South Kalimantan Province occured in 2007, and the highest occurred in the year of 1998 with the total amount of 3:51 million m3. The highest wood supply shortage occurred in 1998 in the amount of 2.8 million m3. The timber supply shortage requires South Kalimantan Province to make an investment in forest plantations and immediately improve the condition of natural forests in the future with high levels of productivity. Furthermore, raw material connectivity with other provinces or abroad should be maintained so that timber industry in South Kalimantan Province can survive and increase in the years ahead.

3.1.4 Timber Price

Price of wood working harvested from natural forests (HA) and fiber wood from timber estate (HTI) and natural forests (HA) fluctuate significantly every year, while data on fuel wood is not available. Appendix Table. 2 summarized progress of price of wood working timber and fiber wood from various places in Indonesia in 2001 to 2007. Following statement shows log price of meranti timber group (family of Dipterocarpaceae) harvested from natural forest and fiber wood produced from timber estate is compared with price of imported hardwood from Asia Pacific (domestic timber price is converted into US $ based on valid exchange rate).

Price of meranti timber group (f.o.b) from Kalimantan, Sumatra, Maluku and Sulawesi Islands (region I) in 2001 was approximately of 640,000 IDR (≈ US$ 95) per m3, which increased into 750,000 IDR (≈ US$ 125) per m3 in 2007. Whereas from region lI (Papua, Bali and Nusa Tenggara), the price is lower than region I, such as 545,000 IDR (≈ US$ 70) per m3 in 2001, which then increased into 645,000 IDR (≈ US$ 115) per m3 in 2007. Timber import price for face-veneer from some countries in Asia Pacific in 2001 was approximately of US$ 120 per m3 and increased into US$ 165 per m3 in 2007. Whereas log and

Figure 3.2. Consumption and Supply of Timber for Timber Industry in South Kalimantan Province, 1990 -2007

Wood Consumption (m3.years)

Wood Supply (m3.years)

Difference (m3.years)

Vo

lum

e (m

3)

25

sawn timber export ban come into effect, log price at domestic market is much lower compared to timber import. Domestic timber processing industry should have been able to compete with international industry, however, it has never been achieved, but instead failed to compete with Malaysia and China.

Timber price (f.o.b) harvested from timber estate in last 5 years has no significant changes. While timber price of chipwood for chipwood and pulp industries in 2001 was approximately 90,000 IDR per ton, which then increased into 165,000 IDR per ton. Timber harvested from timber estate has to compete with BBS produced from natural forests, which has price of 65,000 IDR per ton in 2001, then increased into 135,000 IDR per ton. Additionally, BBS market structure is close to monopoly and oligopoly, therefore, buyers are able to force down the price lower than its competitive market price. Whereas wood working harvested from timber estate has price approximately of 130,000 IDR per m3 in 2001, which then increased into 250,000 IDR per m3 in 2007.

Wood working harvested from forest state-owned company, Perum Perhutani, such as teak has good price of 745,000 IDR per m3 in 2001, which then increased into 1,300,000 IDR per m3 in 2007. Additionally, price of fancy hardwood such as mahogany was also high as approximately of 650,000 IDR per m3 in 2001, which then increased into 950,000 IDR per m3. The price tends to be increased since the timber is highly valued for furniture.

3.2. STRUCTURE OF TIMBER BASED INDUSTRY

Description related structure of timber based industry will be covered general performance and industry mapping. General performance of industry is associated with income level of industry with the result that it is potentially able to contribute to local revenue or gross regional domestic revenue (PDRB). Industry mapping is reviewed through current condition of timber based industry, which then will be compared with non-timber based industry established in South Kalimantan Province.

In the last decade, since 1980s timber based industry in South Kalimantan has important role in providing contribution to the PDRB. Revenue from timber based industry was the second biggest contributor after oil and gas sector. Forestry companies rapidly grew and developed, which then followed with small industries such as sawn timber industries, both licensed and without license.

Timber based industries in South Kalimantan include wood working, fiber wood, and fuel wood industries. Since 1980s, wood working and fiber wood industries have been rapidly growing in South Kalimantan, while fuel wood industry has yet developed particularly bio-energy.

In the last five years, most of timber based industry growth is significantly declining. Some small and medium scale wood working and sawn timber industries are still survive because raw material for the mills are still available since they use small diameter of timber and still has open market for their products. Explanation on reasons of declining performance will be presented on the following sub-chapter.

3.2.1 Condition of Wood Based Industry

Currently timber based industries (primary and secondary or advanced industry) in South Kalimantan are having difficulties due to raw material constraints and instability of forest product price at the international market. A lot of industries have gone bankrupt, discontinue or temporary stop its production, or operated with capacity of 40% - 60% of its installed capacity. Such condition influencing the overall company performance, and consequently will affect to the local revenue, which is sharply declining. Progress on primary timber processing industry up to the year of 2007 is presented on Table 3.5 that summarized number of active and inactive timber processing industries since 2003 to 2008.

26

Table 3.5 shows that timber based industries with capacity less than 6000 m3 per year are relatively stable; in fact, sawn timber and wood working industries are increasing. However, in 2006 the number decreased because of some industries’ lisence were revoked or no log supply due to activities relatd to combating illegal logging and its associated trade. In 2007, number of industry with capacity less than 600m3 per year increased; even go above number in the previous years. Increasing number of the industry is because of stimulated industry as log supply has been fulfilled from timber estates, natural forests, and people forests

Out of active industries, apparently, there are a lot of inactive industries. In the year of 2008, half out of total number of timber based industries in South Kalimantan Province are inactive. Such condition happened since there was scarcity of raw materials and strong market competition with Malaysia and China. A lot of timber businessmen were “walking out” from timber business. Based on interview with some timber businessmen in South Kalimantan, most of them converted their business to other sector, such as palm oil plantation, mining, property (real estate and hotel, and malls). Mill’s machineries and equipment are abandoned and stopping mill’s operation since no future for timber industry or less prospectus compared to non timber based industries.

Table 3.5 Progress of primary wood based industry in South Kalimantan Province since 2003-2008

2004* 2005*** 2006** 2007** 2008***

Tipe Industri

Activ

e

Not

Ac

tive

Tota

l

Activ

e

Not

Ac

tive

Tota

l

Activ

e

Not

Ac

tive

Tota

l

Activ

e

Not

Ac

tive

Tota

l

Activ

e

Not

Ac

tive

Tota

l

Band saw/Wantilan/Sirkel 631 631 28 28 40 101 141 40 101 141 49 2 53 Dowel 1 1

Integrated Wood Industri 30 30 6 20 26 10 16 26 6 20 26 6 20 26 Moulding 3 2 5 Furniture 19 19 Charcoal 6 6 Veneer 4 4

Body Truck 5 5 Tradisional Ship 27 27 1 3 4

Others Wood Based 40 40 1 Grand Total 758 758 34 20 55 46 121 167 46 121 167 65 27 92

Souces: * Included Illegal Wood Based Industries in Small Scalle (SCKPFP-EU, 2003) ** Forestry Services, South Kalimantan Province, 2008. *** Tim Survey of ITTO, 2008

3.2.2 Wood Working Industry

Category for primary wood working industry includes sawn timber, laminating veneer lumber, plywood, particle board, and block board. Whereas the advanced industry is consist of wood working (moulding, furniture, and household utensils. Fancy wood is the word that commonly used at the timber processing industry in South Kalimantan, which based on wood working timber using beautiful pattern timber such as teak, mahagony, durian burung (Durio carinatus), sungkai (Peronema canescens), and so on. Table on Appendix 1 summarized progress of wood working based industry in South Kalimantan in the last five years. Exported timber processes presented on Table on Appendix 2.

27

Figure 3.3 shows that in year 2007, most of timber based industries in South Kalimantan were decreasing, except wood working (moulding, dowel, parquet floor, and so on). Timber industry that drastically declining was plywood industry, including laminated veneer lumber (LVL), and sawn timber. The unfortunate condition on plywood industry was because of old machinery condition, which can only processed large logs (Ø > 30 cm), raw material scarcity, and company cannot compete. While declining on sawn timber industry was because of lack of raw materials due to activities related to combating illegal logging and its associate trade, which resulting many license of industries are revoked or closed due to no legal permit.

Sawn timber industry has been unstable, but still within the range of above production average of veneer, wood-working, block board and particle board. The highest occurred in 2003, amounting to 324.1 thousand m3, and the lowest occurred in 2007 which amounted to 32.9 thousand m3. For molding industry / dowel, the highest production occurred in 2001. The industry has been able to survive until today and its

Figure 3.4. The development of processed wood production (without Plywood) in South Kalimantan Province, 1997-2006

Sawn Timber

Block Board

Figure 3.3. The development of processed wood production in South Kalimantan Province, 1997-2010

Block board

Sawn Timber

Particle Wood

Vol

um

e (m

3)

Plywwood/LVL

28

condition is relatively stable since 1990 because the industry may possibly use small diameter timber and/or waste of logging activities from timber estate (HTI), natural forest concession (HA), land clearing (IPK), and land clearing on private land (PKTM). Small diameter timber is still available in South Kalimantan from harvested timber estate. Small diameter timber is less efficient or expensive when it has to be imported from other province, unless it has high value such as teak, mahogany, sungkai, and rosewood.

3.2.3 Fiber Wood Industry

Fiber wood based industry includes chipwoods industry. Whereas advanced industry is pulp and paper, fiberboard, which consist of medium density fiber-board (MDF) and hard density fiber-board (HDF). Timbers that utilized for fiber wood products are acacia (Accacia sp), eucalyptus (Eucalyptus sp), and pines (Pinus sp), however, it is not limited to the mentioned species. Other species may possibly be used for the purpose, as long as it is not consist of sap, not hard but also not too soft. This type of industry has not developed widely in South Kalimantan.

Chipwood industry has been established in Ale-Ale village, Kotabaru District, South Kalimantan since 2006 with the total capacity of 700.000 m3. The product is raw material for pulp & paper industry. Because of no pulp & paper industry has been established yet, therefore, the product is sold to domestic market and for export as well. Pulp & paper, MDF, and HDF mills have not yet established since raw materials for fiber wood industry have not available adequately in South Kalimantan. In the condition that fiber wood raw materials are imported from other provinces, as a result production cost will be high; consequently it is not competitive with similar industry at other provinces in Indonesia.

3.2.4 Fuel Wood Industry and Other Industry

Fuel wood industry includes charcoal and bio-methanol. Charcoal industry has been developed for yeas, however, since the increased usage of oil and gas, the industry has no significant progress. Charcoal is often use as substitute for fuel wood and oil & gas in some countries. It is used for baking food, maintaining humidity, and energy for ironing at remote areas. Bio-methanol industry has not been developed in Indonesia and in South Kalimantan as well. Currently, such industry is still on trial stage in some countries.

Tabel 3.6. Fuel wood industry development in South Kalimantan since 2000 to 2007

Production Volume Products Unit 2003 2004 2005 2006 2007

Charcoal Kg 349,63 - - - - Roof M3 1.650,00 2.439,60 3.443,42 12.095,00 1.144,00 Gaharu wood Kg 40,00 - - - - Galam wood M3 37.456,86 57.456,86 65.745,78 55.745,78 71.524,69

Source : Provincial Forestry Service of South Kalimantan, 2008.

Up to present fuel wood industry in South Kalimantan are not progressing. The highest production of this industry has ever reached up to 50.15 thousand tons in 1992 and the lowest in 2003 of 0:35 thousand tons since then, the industry did not produce any products. Good raw material for fuel wood industry is

29

mangrove timber, as its characteristic as hardwood and has high heat energy. In fact, the industry may possibly to be developed such as charcoal briquette, which could be produced from sawn timber dust.

Other industries in South Kalimantan include sirap (roofing), gaharu and galam woods. Sirap (roofing) is often made from Borneo ironwood (Eusideroxylon zwageri) and utilze as house roof. Sirap (roofing) is a piece of wood and the size is thickness x width x length - 1 x 15 x 20 cm 3 used for roofing houses. Eaglewood (Equilaria sp), through the process of tissue damage by the virus, produces fragrant resin. Galam wood is a small-diameter wood (between 10-20 cm) used as a foundation for building a house.

Sirap (roof) wood production is fluctuated, during the period of 2003 to 2006 the production was increasing, moreover, it drastically increase in 2006. However, it was declining in 2007. The production of galam wood has increased from year to year. It significantly increased in the year of 1999 and in the year of 2000 the production reached 65.90 and in 2005 it rached 65.75 m3. Both sirap (roof) and galam wood products have been sold in domestic and local market while gaharu product has been exported to Middle east and European countries.

3.2.5 General Performance of Timber Based Industry

For two decades since 1980, timber based industry has been a primary export of non-oil and gas products from South Kalimantan Province. During the period, timber based industry has provided significant contribution toward the gross regional domestic income (BDRB) to the province. However, currently the contribution has drastically decreased; moreover, many timber based industries are experiencing bankruptcy.

General performance of timber based industry includes its revenue, contribution toward the PDRB, and growth for the last five years, and condition (liquidity, solvability, and rentability). All economic indicators are reviewed in accordance with type of industry. However, due to collected data constraints, as it is difficult to obtain financial information from the company, therefore, financial analysis of the industry uses methodology of price (domestic and export) and normal profit approaches. To analyze solvability, particularly on return on investment and return of equity, data was taken from report of Regional Investing Agency (BKPMD of South Kalimantan Province).

3.2.6 Contribution of Timber Based Industry toward Regional Revenue

Gross regional domestic products (PDRB) of South Kalimantan has increased at the average of 7.01% since 1990. The percentage distribution from forestry sub sector is 2.17% and from agriculture sub sector 21.26%. Forestry sub-sector growth rate from 1990 to 2007 was at the average of 2.36 per cent.

30

The growth rate of forestry sub-sector has declined respectively in 1998, 2000, 2005 and 2006 to -3.35, -6.37, -1.47, and -2.29 percent. The growth rate of the gross regional domestic product PDRB experienced a decline in 1998 to -3.33%. It was influenced by the economic crisis that hit Indonesia in 1998 and had an impact until 2000. For the years of 2005 and 2006, the condition is caused, among others, by the illegal logging operations and trading of logs, as well as the limited forest potential.

In the decade of 2000s, the distribution of forestry sub-sectors and its growth rate is sustained by many small-medium scale industries. Big-scale timber industries started to collapse because they lack of raw materials. The contribution of agricultural sector (percentage distribution) toward gross regional domestic product PDRB) averaging around 21.26 per cent, while the forestry sub-sector is only about 2.36 per cent since 1990, (see Figure 3.5).

3.2.7 Timber Processing Industry Revenues

Industry revenue is obtained through products selling carries out by similar company of industry in South Kalimantan, as the economy aggregate of industry every year. For the last five years indicated that timber processing industry is constantly providing the highest income level to the company compared to other industry (Figure 3.6). Income level among timber processing industry is differentiate based on its installed capacity per year, namely more than 6000 m3 and lower than 6000 m3. In particular with wood working based industries that have capacity less that 6000 m3 per year are including veneer, sawn timber, wood working, and furniture industries.

Figure 3.5. Development of non-timber forest production in South Kalimantan, 1990-2007

Vo

lum

e (m

3)

Charcoal (ton)

Ulin Roof (m3)

Rubber Wood

31

In the last five years, revenue of most timber based industries (timber processing) in South Kalimantan Province was declining continuously, except for wood working industry. The highest profit still gained by plywood industry up to the end of 2004. In 2005 and 2006, income of sawn timber industry is higher than plywood industry. Figure 3.6 (7) shows that progress of revenues of industry with capacity of > 6000 m3 per year from year 2003 to 2007. The highest company’s revenue growth occurred in year 2004 on sawn timber industry, whereas the lowest occurred in 2007 on plywood industry. Therefore, the entire industries in South Kalimantan Province have no income growth more than 15% (high sustainable growth) and between 7 – 14% (sustainable growth).

Sawn timber industry gained the highest income. The type of industry is often integrating its operation with advance processing timber such as moulding, dowel, parquet floor, furniture, and other processed timber. However, in the last five years (2003 – 2007), sawn timber industry is rise and fall significantly. Since 2004 the industry has been declining to the lowest point in year 2007 because of decreased supply due to declined forest potency and rapid actions related to combating illegal logging.

Figure 3.6. Corporate earnings growth of wood processing industry with a capacity > 6000 m3.years in South Kalimantan Province, 2003-2007

Per

cen

tag

e (%

)

Plywood/LVL

Sawn Timber

Block board

Particle board

Other processed wood

Figure 3.7. Corporate earnings growth of wood processing industry with a capacity < 6000 m3.years in South Kalimantan Province, 2003-2007

Sawn Timber

Other processed wood

Per

cen

tag

e (%

)

32

3.2.8 Industry Financial Performance

Approaches used for identifying prospect of industry are through liquidity ratio (net working capital to sales in percentage), ration of solvability (solvability and debt to equity), and ratio of rentability (net return on investment and net return to equity). Table 3.6 below shows the ratio during the last five years (2005 – 2007).

Table 3.7 shows plywood industry was the most undergo among other industries. Generally, industry in South Kalimantan experienced shock in year 2006, while in 2007 showed a better financial performance, although there was an improvement. Explanation to the condition is because of actions related to combating illegal logging and its associate trade. Additionally, plywood industry operates with old machineries (unable to modify), therefore, cannot process timbers with small diameter. On the other hand, forestry business sector is no longer attractive. It is because of some reasons, first: as shown on Table 3.7, the average of liquidity of timber based industry is less than 10%, therefore, the company is no longer able to invest for additional asset to improve its performance due to working capital has been eroded by company loss every year.

Table 3.7. Progress of financial performance of timber processing industry in South Kalimantan, for the year of 2005 -2007

Description Plywood /LVL Veneer 2005 2006 2007 2005 2006 2007

Liquidity 178.02 42.90 65.93 171.56 115.38 170.33

Solvability 30.80 41.58 40.00 34.65 29.00 28.00

Rentabiliy:

a. RoI 7.32 -5.75 1.22 4.95 2.90 6.40

b. RoE 9.79 -0.50 4.30 5.79 4.26 8.53

Description Sawn Timber Wood-working/moulding

2005 2006 2007 2005 2006 2007

Liquidity 229.12 64.84 153.92 170.33 105.49 148.35

Solvability 14.55 23.60 21.67 28.00 23.00 30.00

Rentabiliy:

a. RoI 10.13 4.87 10.63 11.65 10.13 13.17

b. RoE 16.49 6.95 7.91 13.04 16.64 13.20

Uraian Block Board Particle Board 2005 2006 2007 2005 2006 2007

Liquidity 140.53 116.08 187.92 117.75 90.50 284.04

Solvability 31.82 33.65 33.21 31.46 33.61 33.02

Rentabiliy:

a. RoI 8.53 2.82 3.75 12.31 5.74 6.00

b. RoE 11.16 3.73 4.63 17.45 8.02 7.30

Note: L (Liquidity) = Net capital X 100% R (Rentability) = Profit after tax X 100% Total Asset income S (Solvability) = Total Debt X 100% Total Asset

33

Second, company is less solvable, namely unable to pay its debts; therefore, a lot of companies are going to bankruptcy. Number of plywood industry in 2003 was 12 units, while in 2007 downward into 5 units. Similar condition with sawn timber and wood working industries, which number of industry in 2003 is respectively of 365 units and 67 units, however, in 2007 become 103 units and 34 units.

Financial performance on industry rentability shows that company competence in return on investment (ROI) is also very low. Most of company can only afford to attain profit level below the investment interest (approximately of 16%). When no business improvement on timber based industry, consequently, in the long term the company will be lose its ability to cover cost of investment that was invested. Similar consequences also occurred to the return of equity (RoE). Due to modest profit, even loss, consequently there are a lot of companies cannot afford to return its capitals. Both indicators are sufficient proves to show that forestry business has loss its attractiveness, hence many businessmen have switched to invest to non forestry sector, such as mining and exploration, plantation (agriculture), trade, hotels and restaurants.

3.2.9 Timber Based Industry Mapping

According to review on industry condition at sub chapter 3.1 and 3.2 mentioned above, as a result on mapping of timber processing industry is on contraction condition in year 2005 and 2006. In 2007 started to develop as there was growth of 2.08%. However, compared to other sector, forestry sector was left behind. Table 3.7 summarized the progress of forestry sub sector compared to other sector in South Kalimantan Province.

Tabel 3.8. Progress of growth rate and distribution of PDRB based on business sector in South Kalimantan Province, 2004 – 2007

Source : Provincial statistical bureau (BPS) of South Kalimantan, 2007 and 2008 (average in bold). Gwt : Growth (growth rate of PDRB in percent ‘%’); Dist : Distribution of percentage of PDRB

Y e a r

2004 2005 2006 2007 Business Sector

Gwt Dist Gwt Dist Gwt Dist Gwt Dist 1. Agriculture

a. Food crops b. Plantation c. Animal husbandry d. Forestry e. Fisheries

6.09 7.59 5.29 12.29 1.77 2.92

24.50 10.97 6.27 1.56 1.44 4.26

5.21 5.45 5.19 14.91 -0.28 2.90

24.53 11.01 6.27 1.71 1.37 4.17

4.75 4.35 6.41 9.68 -0.42 3.12

22.83 9.82 6.03 1.66 1.14 4.16

5.76 4.91 8.39 8.61 2.08 4.08

22.83 9.91 6.00 1.71 1.08 4.13

2. Mining and exploration 4.23 20.69 5.61 20.80 7.38 21.27 6.77 20.48 3. Processing industry 1.39 13.59 -1.98 12.68 -1.70 11.87 2.94 11.93 4. Electricity, Gas and Clean water 5.10 0.53 3.30 0.52 3.83 0.52 4.14 0.51 5. Property 6.95 5.11 8.26 5.27 7.02 5.37 6.90 6.58 6. Trade, restaurants, and hotels 4.09 15.22 4.67 15.16 5.56 15.24 6.18 14.83

7. Transportation & communication 7.63 8.46 8.01 8.70 6.41 8.81 7.02 9.05 8. Finance, renting and company

services 9.19 3.43 13.93 3.71 2.98 3.64 7.44 4.35

9. Services 6.48 8.47 6.91 8.62 7.05 8.79 6.78 9.44

34

Gross regional domestic product (PDRB) growth rate is relatively stable in agricultural sector, construction, transportation and telecommunications, and services. The growth rate increase in mining and quarrying, trade, restaurants and hotels. Processing industry experienced a decline in 2005 and 2006, and began to raise back in 2007. Agricultural sector in sub-forestry sub-sector is most affected due to the small rate of growth and contraction in the year of 2005 and 2006. Later, forestry sub-sector began to receive less attention from the local government because it is only slightly contributing to the gross regional domestic product (PDRB) of South Kalimantan province.

Even though agriculture sector contributes the highest percentage of PDRB in South Kalimantan compared to other sector, however, forestry sub sector contributes modestly (relatively similar to the animal husbandry sub sector). Second and third highest distribution is respectively from mining and exploration, trade, restaurants and hotels sectors. To recover forestry sub sector, both on forest resources and forest industries requires a lot of efforts. Otherwise, forestry sub sector would be more marginalized by other sub sectors or sectors, which provide significant contribution. Consequently, the condition would generate negative opinion on forestry businesses, such as “sunset industry” and Indonesian timber industry would be listed on the negative investment list.

Such condition is supposed to be challenging for forestry sector to revitalize timber industry in Indonesia. Why is it important? The forestry sub sector should not only seen from the business and economy point of view, nevertheless, it should be viewed from the environmental aspects, which its contribution is almost boundless, such as managing hydro-orology, carbon sink, preventing or reducing carbon emission, etc.

3.3. TIMBER PROCESSING PRODUCTS MARKET

Market of timber processed products from South Kalimantan is outside the province and for export as well. While there is no data available on local consumption (inside the province) because the data base system at the local statistical bureau (BPS) categorized it as domestic market. Timber based industry in South Kalimantan produces products that categorized as primary and secondary products. The primary products within two decades are plywood (including fancy plywood), swan timber, and wood working (moulding, dowel, and parquet floor) and furniture.

Industries mentioned above are a mass scale industry and many are large scale industries. While other industries such as sirap (roofing), gaharu, and galam are categorized as small and/or home industries for local consumption. Sirap (roofing) product is exported to outside the province, particularly to Central Kalimantan and East Kalimantan, whereas gaharu is for export abroad. The report will only analyze primary products as describe below.

3.3.1 Processed Timber Domestic Selling

Selling of processed timber consist of domestic selling and export. For local market (South Kalimantan Province area) processed timber selling considered as domestic selling. Progress of processed timber domestic market for the last five years is considered as declining (Figure 3.8).

Depressed domestic market is because of consumers cannot afford to buy the products. Impacts of actions related to combating illegal logging and its associated trade is significant to the price of timber based products. For example, plywood price before 2005 (prior to the issuance of a presidential decree Inpres No.4

35

year 2005) was approximately of 27,000 IDR per piece3 mm x 122 cm x 244 cm), and in year 2007 the price has been increased to 54,000 IDR per piece. Similar to sawn timber, prior to year 2005 the price was around 3 million IDR per m3, however, in year 2007 the price increase to 9 million IDR per m3 at the local market in Java Island.

Therefore, it is obvious that a lot of timber based industries are illegal (have no license) and utilize illegal logs. Hence, the illegal products obviously did not pay the levies (reforestation fund – DR and forest resource provision-PSDH) or other obligations that applied to concession holders (IUPHHK). Reforestation fund (DR) at Kalimantan region (Region I) is applied on the amount of US $16 per m3 for meranti group, and PSDH of 60,000 IDR per m3. Additionally, a lot of processed timber products produced from illegal logs are not paying value added tax (PPN) or selling tax (PPn). Moreover, based on observation the processed timber transported toward provinces outside South Kalimantan was reported only 60 – 70% from the total transported volume.

3.3.2 Processed Timber Export

Export of processed timber from South Kalimantan to the international market within the last five years tends to decline. Main international markets for processed timber are Japan, China and South Korea, and some European countries, USA. Progress of export within the last five years is presented on Figure 3.9.

Figure 3.8. Sales growth of processed wood timber industry in South Kalimantan for the domestic market, 1990-2007

Plywood/LVL

Other Processed Wood

Vo

lum

e (m

3)

36

Figure 3.10 shows that plywood industry has dominated the timber industry in South Kalimantan since the early 1990s. Figure 3.10 shows that the sales of processed wood in the timber industry without plywood in South Kalimantan is still dominated by fancy plywood and film faced plywood, while only some sawn timber products are exported due to the very high export taxes. Sawn timber products are still reprocessed into secondary processed wood products, such as molding, dowel, component sets, door Jamb, furniture, etc.

In the last seventeen years, plywood has been the main export of timber processing industry in South Kalimantan. Export of plywood in 2003 has dominated timber processing industry up to 28%, however, during year 2007 only 3.4% out of total export within five years. Highest export of wood working was achieved in year 2005, which is almost 6%, however, during year 2007 was only 0.01% out of total export within five years.

Table Appendix 2 shows that in year 2003 total export from South Kalimantan Province reached 1.1 million m3, and within year 2007 dropped into 114,000 m3 (decreased of 90%). Particularly to the fancy wood products, which increased in year 2004 and 2005, however, it still significantly below the export in

Figure 3.10. Export growth of processed wood (without plywood) from South Kalimantan Province, 1990-2007

Figure 3.9. Export growth of processed wood from South Kalimantan Province, 1990-2007

Plywood/LVL

Vo

lum

e (m

3)

37

2003. There is no data available on fancy wood product export in 2007. The exported products and country destination are presented on Table 3.8.

3.3.3 Export Value of Timber Based Products

The highest export value of processed timber products occurred in year 1993 reached US $687.6 million. The lowest was in 2006 which reached US$278.3 million. The highest export value obtained from plywood of US $555.7 million, which export volume of 1.2 tones, second from film faced-plywood of US $63.07 million with volume of 0.09 volumes m3, and third is block-board with value of US $17.8 million, and volume of75.8 thousand m3. Other products that have potential prospect are fancy plywood, laminated-board, and flooring/wall paper and woodworking.

Export value of wood processing industry from South Kalimantan has started to decline since 1997, and it was relatively stable until 2007. In the decade of 2000s, proccesed wood industry showed significant decline in performance compared to the decade of 1990s. The highest growth was reached by the year 2007 of 62.7 percent, total value of U.S. $ 452.6 million, still far below 1993.

In 2007, the highest export price of the wood-based products obtained from flooring / wall paper product of U.S. $ 821 per ton, second was from graden furniture / wood furniture at U.S. $ 727 per tonne, the third of the wood carpet U.S. $ 648 per ton. Other products that still provide a good price include sawnwood at U.S. $ 612 per m3, Door Jamb U.S. $ 610 per m3, and fancy plywood U.S. $ 587 per m3, and laminated solid of U.S. $ 601 per m3.

3.3.4 Needed Workers

The need of labor in the agricultural sector is intensive, but for the forestry sector, it is not very intensive since the logging activities that are still using heavy equipment. While in the wood processing industry, especially large-scale plywood industry a lot of labors are needed.

In 1998, the timber industry in South Kalimantan had employed the highest labor up to 28 245 people, consisting of the upstream sector (forest resources unit) of 10 385 people, the forestry services of 850 people

Figure 3.11. Revenues from exports of wood processing industry in South Kalimantan, 1990-2007

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in wood processing industry sector of 17 010 people. Currently only 6497 people, consisting of wood processing industry sector of 4722 people, the forest resource sector of 1539 people and the services sector related to forestry of 236 people.

Initially, the forestry sub-sector, especially the forestry industry in South Kalimantan is very promising in employment, but in fact, termination of employment occurred at a large scale. Massive layoffs occurred in the year 2007 when there were about 6 000 people (49% of the total workforce in the year 2006) lost their job, it still continued in the year 2008, after the global financial crisis.

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Table 3.9. Destination Countries of exported processed timber from South Kalimantan in 2007

Commodity USA AUS NED CHI ENG JAM JPN JER CAN KOR UEA FRA SIN THA BAH QAT QUA MES POR TAI Sawn timber Plywood Fancy plywood Film faced plywood Block-board Door jambs Dowel / Moulding Laminated-board Panchinco frame Flooring / wall-panels Finger joint Garden furniture Building component Stick (S4S) Wood-carpets Laminated solid S2S Box/komponen piano Door frame Lunch box Square tile Garden tile Venner Wooden pallet Decking Particle-board Box for fan Truck-body Component Door panels

Source: statistical bureau of South Kalimantan Province, 2008.

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3.4 SUPPORTING FACILITIES

Supporting facilities that available in South Kalimantan consist of roads, river and sea transportations, port, electricity, others such as hotels, and services have been developed previously. Available facilities in South Kalimantan are relatively better compared to other provinces. South Kalimantan province has been developed because of trade and investment on timber based industry due to its accessibility is very high. Timbers from other provinces, such as Central Kalimantan, East Kalimantan, and Java Island are entering South Kalimantan to be processed as processed timber products.

3.4.1 Road Connection

South Kalimantan province has infrastructure such as state and province roads, which are sufficient for land transportation facilities. State road function is to connect between provinces, while province roads to connect between districts within the province. Economically, the transportation facilities are adequate to support distribution of volume goods. Condition of state and province roads is presented on table below based on data in 2007.

Table 3.9 shows category of state road is only III B, while province road is III C, and undefined road. The road condition may become a disturbance during heavy traffic with load of timber (tonnage), which obviously exceeding the road capacity. Average load of trucks that crossing the roads is more than 15 ton, such as coal, timber and timber products, building materials, etc. But actually the case is the road carrying capacity is 12 ton at the maximum.

Figure 3.12. Comparison of levels of GDP growth and employment in the forestry sector and its distribution, 1990-2007

GDP Prov. Growth (%)

Forestry Sector growth (%), constant price

Distribution of Forestry Sector to GDP (%)

Growth level of employment in Forestry Sector to GDP (%)

Per

cen

tag

e (%

)

41

Tabel 3.10 Length of state and province roads based on surface and type of roads in South Kalimantan in the year of 2007

Road condition State Province Total 1. Road surface

a. Asphalt b. Gravel c. Soil d. others

876.00

- - -

159.40 145.00

- 1 056.38

159.40 145.40

0.00 1 932.38

Total 876.00 751.98 1 627.98 2. Road condition

a. Good b. Mean c. Bad d. Very bad

426.00 300.00 120.00

30.00

453.06 217.67 184.40 201.25

879.06 517.67 304.40 231.25

Total 876.00 1 056.38 1 932.38 3. Road category

a. I b. II c. III d. IIIA e. IIIB f. IIIC g. Undefined

- - - -

340.57 535.43

-

- - - - -

954.23 102.15

0.00 0.00 0.00 0.00

340.57 1 489.66

102.15 Total 876.00 1 056.38 1 932.38

Source: Settlement and Infrastructure in Provincial statistical Bureau (BPS) of South Kalimantan, 2008. 3.4.2. Vessel Traffic to the Port in Banjarmasin

Trisakti Port in Banjarmasin is sufficient for provincial level. According to port administrator, PT (Persero) Pelabuhan Indonesia III brach of Banjarmasin, total vessels in 2007 was 12 592 units with total tonnage of 48,727,712 GT. Table 10 summarized vessel traffic to the port in Banjarmasin based on type of vessel in 2007.

Table 3.10 shows the trend of vessel traffic to the port in Banjarmasin, which in average of exceeding 100%. Meaning that vessel traffic at the port is quite heavy, as it shows from the proposed budget. The highest number of visit is barge with total number of 7,424 with loading volume approximately of 23 million GT. In particular to general cargo, liquid waste of non fuel, etc., within one year, less than proposed budget (average unit is less than 60% and loading volume less than 70%). Most of products produced in South Kalimantan are loaded in the port, additionally; some products are loaded at loading point at each industry.

In addition to the public port, there are loading points at each big scale timber industry (installed capacity more than 6000 m3 per year). Loading points available at (1) PT Daya Sakti, (2) PT Barito Pasific, (3) PT Wijaya Tri Utama, (4) PT Surya Satria, (5) PT Tanjung Selatan Maju Jaya with loading capacity more than 3000 ton. Therefore, each company is able to loading and unloading at its port with supervising from Sucofindo for verifying cargo content, while port administrator (PT Pelabuhan Indonesia III Brach of Banjarmasin) as supervisor for cargo administration for calculation of tax and other retributions.

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Table 3.11. Vessel traffic to the port in Banjarmasin based on type of vessel in 2007

Type of vessel Unit Budget Number of

Vessel Trend (%)

Container Unit GT

940 2 763 764

971 2 764 821

103.30 100.94

General Cargo Unit GT

3 601 10 478 091

1 708 1 759 148

47.43 16.79

Bag Cargo Unit GT

102 193 709

154 266 870

150.98 137.77

Fuel Tanker Unit GT

325 771 934

376 646 968

115.69 83.81

Waste liquid non fuel Unit GT

30 26 433

17 15 326

56.67 57.98

Bulk Unit GT

691 15 989 234

723 19 126 072

104.63 119.62

Barge Unit GT

3 943 11 499 092

7 424 21 907 509

188.28 190.52

Passengers Unit GT

385 1 963 670

404 2 143 626

104.94 109.16

Boat/PLM/Pelra/fishermen boat Unit GT

587 53 820

661 59 980

112.61 111.45

Others Unit GT

373 55 871

154 37 392

41.29 66.93

Total Unit GT

10 977 43 795 618

12 592 48 727 712

114.71 111.26

Source: Port administrator, PT (Persero) Pelabuhan Indonesia III, Brach of Banjarmasin, 2008.

3.4.3. Water Transportation

There are 54 rivers in South Kalimantan province, which among of them are large such as Barito, Riam Kanan, and Riam Kiwa rivers. However, not all of these large rivers can be cruised by big vessels, but only small boat with loading volume of 2 - 10 ton. Therefore, these rivers have an important role in supporting distribution of goods from the upstream to downstream. Table 3.11 shows number of rivers at every district in South Kalimantan province.

River that are often used as transportation facility by timber industry in South Kalimantan is Barito, which is the main river crossing the Central Kalimantan province (Muara Teweh, Murung Raya, Barito Selatan and Timur districts), and South Kalimantan province (Tanjung, HSU, HSS, Tapin, Banjar, Barito Kuala, and Banjarmasin districts). These districts were used to be the producer of timber and timber products. However, currently only Tanjung and. Barito Kuala districts still producing timber. Almost 90% of large timber industries located in adjacent to Barito River (Barito Kuala and Banjarmasin districts).

In the future, in addition to the roads, rivers as transportation connection at every district in South Kalimantan province will have an important role when timber estate develop, including community based forestry (HR, HTR, HKm, etc.). Small scale industries as the “feeder” for the large scale industries, which is grouped into cluster will utilize logs harvested from community based forestry.

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3.4.4. Electricity Network

Electric power produced in South Kalimantan is increasing every year. Up to 2007, it has been produced power approximately of 1.33 million MWH which distributed to every district. Most of timber based industries use generators for power supply to produce processed timber because of timber processing locations are at remote areas, which electricity network has not been reached the area. Table 3.11 summarized the power was produced, installed, purchased; self consume and reduced based on district in 2007.

Balangan is district with the lowest power consumption, while the highest is Banjarmasin district, which follows with Banjarbaru dsitrict. Banjarmasin is the capital city of South Kalimantan province, additionally, a lot of timber based industries located in the district. Similarly, Banjarbaru district is also the place of timber industries, such as plywood, sawn timber and moulding, furniture, and other wood working industries. In the future, demand of power at other districts will also increase as small and medium scale of timber based industries are developed, whereas raw material supplies will be adequate at every district. The progress is depended on government supports and attraction for investors to put their investment at districts levels. Table 3.11 shows distribution of timber industries in South Kalimantan province based on distric

. Tabel 3.12. Total power produced, installed, purchased, self consume, and reduced based on

location at district level in 2007.

District Production

(MWH) Installed (MWH)

Sold (MWH)

Self consume (MWH)

Reduced (MWH)

Branch of Banjarmasin a. Banjarmasin b. Banjarbaru c. Banjar d. Barito Kuala e. Tanah Laut

- - - - - -

- - - - - -

741 371 435 646 118 397 73 862 43 574 69 892

- - - - - -

- - - - - -

Branch of Kotabaru a. Kotabaru b. Tanah Bumbu

- - -

- - -

132 322 84 814 47 508

- - -

- - -

Branch of Barabai a. Tapin b. HSS c. HST d. HSU e. Tabalong f. Balangan

- - - - - - -

- - - - - - -

234 831 41 427 38 267 53 581 48 343 39 348 13 865

- - - - - - -

- - - - - - -

South Kalimantan 2 0 0 7 2 0 0 6 2 0 0 5 2 0 0 4 2 0 0 3

-

1 334 466 1 201 699 1 118 873

-

305 704 305 664 306 496

1 108 524 1 024 295

983 426 918 036

-

112 860 104 968 108 355

-

147 673 139 496 135 648

Source: Power State-owned company (PLN) Region VI Banjarbaru in BPS, 2008

3.5. Timber Based Industry Institution

Reform spirit requires a better mechanism on coordination between central and local governments. It is required in order to have a better forestry development implementation in general, including timber based industry with the intension of improving local economy, social welfare and a better environmental condition.

44

Institution is a supporting system which consist of government, local government and relevant agencies that provide policies and infrastructure as well. Additionally, state-owned companies at national and local levels, association, financial institutions, business development system (BDS) provider to support large and small and medium scale industries (IKM), as well.

3.5.1. Government and Local Authorities

The most important task that should be undertaken by the government is to develop/improve infrastructure and maintain economy and politic stability because declining on economic condition will influence the performance and development of company. It is necessary to develop a flexible coordination for industry and its business component, additionally, adaptable with market condition as well. On the other side, timber administration is essential in the condition of rapid illegal logging and its associated trade.

In current condition, it is important to prioritize on institution function of government, which is less effective due to unsynchronized policies between government and local authorities. For example, awarding permit for timber processing industry with capacity more than 6000 m3/year through the Government (i.e. Ministry of Forestry), while permit for industry with capacity less than 6000 m3/year awarded by the local authority (Governor). Hence, it is often generating problems due to good coordination is not in place, particularly related to monitoring activities which is separated between forestry service and industry/trade service at local levels. The local forestry service is also involved in issuing legality assurance letter for processed timber (Surat Keterangan Sahnya Kayu Olahan - SKSKO).

Additionally, monitoring and reporting implementation is often generating problems on data base system, which eventually resulting data discrepancy. Moreover, it is difficult to monitor potential raw material supply to industry with capacity les than 6000 m3/year. Consequently, raw material stocks decreased which cannot be controlled properly.

3.5.2. State/Local-Owned Company

State/local owned company that related to timber based industry is PT (Persero) SUCOFINDO, which undertakes verification on loading volume and type of timber and timber products at the port that will be loaded/transferred for shipping (selling). Additionally, there is port administrator, PT (Persero) Pelabuhan Indonesia (PELINDO) III branch of Banjarmasin. Roles of these institutions at local level are appropriately. However, it may possibly miss the shipping due to lack of local officials because of a lot of shipping to send products to outside the province.

3.5.3. Association

Timber businessmen in Indonesia are gathered in forestry associations, such as wood panel (APKINDO), sawmills and woodworking (ISWA), furniture and handicraft (ASMINDO) and pup and paper (APKI). Each association has central and local structural organization. Whereas, association related to timber sources is APHI (forest concession holders association). Particularly to APKI, it has only one office in Jakarta, therefore, no affiliation at local levels. However, at local levels particularly in South Kalimantan, these associations are ineffective, whereas they supposedly play a significant role.

During the current situation that forestry sector in difficult condition, association together with the government, including local government, are supposedly working collaboratively to recover the forestry sector for improving the forestry performance. Although the main problem is raw material scarcity, which under the APHI (association of forest concession holders), however, all actors are supposedly work together to define strategic actions to overcome the unfortunate situation before all timber industries are

45

entirely collapse. Such improvement efforts are not only directed to the large scale timber industries, but also to the small and medium scale companies.

Figure 3.13. Illustration of Institutions related to Timber Industry in South Kalimantan

3.5.4. Financial Institution

One of components required in business development is capital; therefore involvement of financing institution is important. The financing institution is most likely required by small-medium scale timber industry. On the contrary, in South Kalimantan shows that small-medium industry has competence in providing capital for their own business (family business).

In overall, due to current condition of timber industry the bank considered forestry business has fewer prospects. Consequently, forestry businessmen find difficulties to obtain loans from the bank. Similar to small-medium scale timber industry, access to obtain loans from the bank is also limited; therefore, it stopped the progress of business development.

Generally, small scale timber industry lack of understanding on business accounting or book keeping. Most of small-medium scale industry are failed to show actual figures related to their business. Lack of financial knowledge generates negative impacts to their business. Without accounting record, it is hard to know the actual cost, proposed selling price, and amount of loan required, developing appropriate business estimation or developing business planning. It is unconditional for them to improve their knowledge related to financial issues.

Buyers

Exporters

Buyers

Exporter associatioProducer

Association

Logs suppliers

Supporting industry

IUPHHK

Port

Financing Institution

Academician

MoF/ Local

Trade Min.

International market

SMEs & Big

Functional relation

Coordination relation

46

3.5.5. Cooperative

At a large scale company, institution is most likely has been able to handling company’s problems. However, small-medium companies require additional attention for their improvement. The district small industry and cooperative service office has the function for improving the SMEs. According to data available related to cooperative in South Kalimantan, most of cooperatives are not able to continue their timber based business. The problems were not only on lack of capability in managing business, but also because of raw material scarcity.

3.5.6. Bussines Development System (DBS) Provider

There is no business development system provider in South Kalimantan that providing management and training, particularly for small industry and cooperatives. Involvement of BDS Provider is required in SMEs development for improving product quality through supervising and training. Usually timber based industry recruiting skilled employee from university or vocational school outside South Kalimantan province.

Schooling and training are limited because the activities are still undertaken by the government institutions, such as Industrial Service or Small Industry and Cooperative Offices at provincial and district levels. Additionally, some companies also undertake education and training through “in-house training”. There has been no involvement of university in South Kalimantan or vocational school related to timber industry, which specifically providing knowledge and skills to actors in timber industries.

3.6. COMPETITIVENESS OF TIMBER INDUSTRY

Competitiveness of an industry can be interpreted as the ability of the industry to compete in domestic and international markets, moreover, can compete with companies that produce similar product at both markets. Industries that compete have comparative and competitive quality. Recently, timber industry already has comparative quality, such as relatively low-cost labor, tropical forest products that are not found at sub tropic countries, and so on. However, on the competitive point of view, the industry is still left behind from company at the neighboring countries such as Malaysia or East Asian country such China.

Processed timber products from Indonesia are supposedly dominating in the domestic and international markets, as it has been occurred during the decade of 1980s and 1990s. However, due to lack of development on utilizing technology, consequently, processed timber products from Indonesia are left behind and uncompetitive. In the future, forest products should be more competitive through producing high supreme products and have high value added.

3.6.1. Supreme Products

In the last two decades, Indonesian processed timber products based on wood working industry have dominated domestic and international markets. Products included plywood, veneer, sawn timber, and wood working, particle board and block board. Fiber wood industry, such as medium and high density fiberboard has not developed yet. Later in the 1990s, pulp and paper industry was rapidly entering international market, which reached to the 9th of pulp largest producer country, while in 2000s became the 12th largest paper producer country.

Based on review on timber based industry and its potential development, there are some timber based industries that have potential for further development in the future, such as: (1) plywood with thickness of 2.4 mm (mass production), includes film-faced and fancy plywood; (2) Laminated Veneer Lumber (LVL); (3) integrated sawn timber with wood working/moulding and furniture made of tropical forest wood that has high value added; (4) Medium and High Density Fiberboard; and (5) chips, pulp and

47

paper produced from short fiber wood; and (6) bio-energy produced from fuel wood to substitute fossil fuel. The quality of processed timber products should be continuously improved using appropriate technology in order to produce competitive products that can compete in the domestic and international markets. Modification on processed timber products should be considered to produce supreme products, such as parquet floor/wall panels, garden furniture, wood-carpet, and decking.

Currently there is no pulp and paper industry in South Kalimantan, however, the industry will be come mainstay product from Indonesia. To become the 3rd largest pulp producer country, Indonesia has to be able to produce pulp at the minimum of 20 million ton per year. Currently Indonesian pulp production has made approximately of 6 million ton per year. Further development on pulp industry is potential since global demand of pulp and paper is continuously increasing. Domestic demand on pulp increased approximately of 23% per year, while demand for paper increase approximately of 5% per year. Currently, Indonesia has share approximately of 2.5% or global pulp production, whereas global market continuously requires pulp and paper.

3.6.2. Value Chain

According to Kaplynsky, R. et al (2003) that value chain of forest products, timber and wood furniture involving multi stakeholders (Figure 3.14), namely seedling, chemical substances, equipment and water suppliers. Afterward, logs and chipswood (usually small diameter timber) entering the timber processing mills, which its primary input from machinery unit.

Domestic and Foreign Retail

Recycling

Consumers

Buyers

Plywood

Veneer

Forestry

Foreign Secondarily Wood-based Industry

Domestic Secondarily Wood-based Industry

Domestic and Foreign Wholesale

Chemicals Machinery, technology

Seeds, Nursery

Water, Fertilizer

Machinery

Chemicals

Machinery, technology

Logystic, Quality Advice

Glue

Figure 3.14. Value chain of forest products and processed timber: logs, Veneer and Plywood (Kaplynsky. et al, 2003 dimodifikasi)

48

Products from processed timber are vary, such as plywood, chips, sawn timber and wood working (moulding, dowel, parquet, etc.), and its secondary products. Primary industries require inputs from other industries such as machine, glue for plywood, and other equipment in order to ensure the production continue.

Secondary product is an advanced processed timber product after going through process of primary product. Secondary product is not part of forestry service management, but under the management of Industry Service office or Small Business and Cooperative Service office. Timber secondary products include furniture, wood working, pulp and paper, parquet floor, etc. For example is value chain of furniture industry, which its initial process requires logs from forest as inputs to the sawn timber mills (sawmill) and afterward requires primary input from engine sector, paint and glue industries, and design from service company. Furniture products are processed through some stages prior to come to an end at the consumers. Figure 3.14 and 3.15 explaining value chain of timber processing industry that produces veneer and plywood, sawn timber and furniture. Value chain of every industry is different. The difference between value chain of plywood & sawn timber and wood working & furniture is on its advanced chain. On plywood and sawn timber industry that categorized as primary industry (intermediate goods), of which products will be the inputs for advanced timber processing industry, whereas wood working and furniture industries require further finishing/servicing.

Domestic Retails

Recycling

Consumers

Buyers

Wood working and

furniture

Sawmill

Forestry

Foreign Retails

Foreign Wholesales

Domestic, Wholesales

Chemicals Machinery, technology

Seeds, Nursery

Water, Fertilizer

Machinery

Design Machinery, technology

Logystic, Quality Advice

Paint, Adhesives, etc.

Figure 3.15. Value chain of forest products, logs, Wood Working and wood Furniture (Kaplynsky, et al, 2003)

49

3.6.3. Suplly Chain

Processed timber products from producers prior to come to an end at final consumers are involving many parties that have roles in supply chain. On the demand side, member of international chain of processed timber includes: special wholesaler, global retailers, and one store retailers. While on the supply side of international value chain, group that member of processed timber supply chain in South Kalimantan is small and medium scale companies, large scale company, international brokers, and exporters.

Primary & Secondary Industry, Manufacture &

Exporter of Wood Working & Furniture (Large or Medium

Integrated Factory)

Big & SME wood working, house component, etc.

Agent/ ”Boss”

Illegal Trading by Staff UM

Perhutani/State/ Community Forest Other Island

Agent/Brokers In Kalimantan

Region

Agent/ Brokers

Auction - Big - Small

Contract-Direct Sales

Contract- Partnership

Community Forest Region Kal-Sel &

others

Logging at Cutting Block and TPK

Integrated Industry

Illegal logging by Local community/Brokers (Rough

Sawn Timber)

IUPHHK-HA/HTI, HTR, HKm (UM), HTHR, HR, etc.

Export Market

Export Market

Export Market

Export Market

Agent/ Brokers

Sawmill

-Log Trader -Log Trader & Wood-based industry in other island

Domestic Market

Medium & Large

exporter

Visiting Foreign Buyers

Domestic Market

Big & SME (Small Medium

Enterprises)

Wood-based Mill (Big, Medium &

Small) -Log Trader -Log Traders & Wood-based Industry in Kalimantan Region

Figure 3.16. Supply chain of logs from natural forest and timber estate, natural forest products and timber estate products in Indonesia (Pensa, 2005 modified)

On Going

50

Through studying the concept of supply chain for teak products developed by Pensa (2005), which is quite complex, illustration for supply chain for timber products in South Kalimantan province is presented on Figure 3.16. Supply chain of forest products starts from logs to exporting market that involving a lot of actors.

According to study undertook by Sijses (2003) in Anonymous (2008), connection between exporters and suppliers is through contract and sub contract. There are key variables that accompany with indicators so as to be used for describing or measuring relationship which explain on a contract or sub contract. (Table 3.12).

Table 3.13. Key variables and indicators on the buyers and suppliers relationships

Key variables Indicators

Commitments Exclusivity, type of contract and sub contract, terms of payment

Sustainability History of relationships (year, evaluation index:: contract volume, frequency of order, products ordered, rejected level’)

Trust Favor index: existence, fixed capital, operational capital, education and training

Ratio power/dependence Proportion of annual selling (outsourcers) that obtained from regular solely supplier/main buyer (%)

Conflicts Conflict index: product quality, on time shipping, price, payment and communication.

Commitments: confirmed through guarantee of accomplished order by producer and producer receives on time payment. Among timber industry network in South Kalimantan, exporters and buyers from abroad relatively have high commitments.

Sustainability: considered as minimum condition to establish commitment. Expectation on sustainability of working collaboratively is depended on duration of collaboration and improvement on cooperation during the period, such as contract volume, frequency of order, type of products ordered, low rejected products. Continuation of a collaboration is not only depending on buyer’s “needs” to increase the order, but also the competence of producers to produce products based on number and variation of product type in accordance with consumer requirements.

Trust: on business community, trust is the key for sustainability and maintaining joint commitments, which considered as an abstract variable, and difficult to be quantified. Developing and maintaining trust depend on obtained satisfaction level, both materials and non-materials such as no conflicts, sharing benefits and information.

Ratio power/dependence: within international chain, the timber processing industry in South Kalimantan, member of downstream supply chain is more dependent on member at the upstream supply chain. Therefore, there is “power imbalance” or “dependence asymmetric” between downstream and upstream. Even though all chains are working efficiently, however, its balance level is very low, particularly for level 2 supply chain. Assistance provided from upstream group toward the downstream group will be able to improve capacity building in the future.

Conflicts: occurred when behavior of one of value chain member is opposing the other party. Conflict issues on timber based industry in South Kalimantan province concerning product quality, on time shipping, price, payment, and communication. Generally, contract and sub contract between members of value chain in South Kalimantan portrayed through low conflict level.

51

3.6.4. Condition of Business Environment

Business environment is determined by some factors such as (1) Political situation, (2) Local/regional, national, and international economic condition, (3) Technology or equipment/manufacture machineries, (4) Legal or government policies, and (5) socio-culture of local community. To understand business environment condition, may well following the Porter’s diamond model, which developed by Porter (2000) to improve the previous theory, namely strategy analysis through SWOT (Strength, Weakness, Opportunity, and Threat) and PETS (Politics, Economic, Technology, and Social). The theory has been applied by developed countries in handling competition on industry products.

With regard to competitiveness weakness in South Kalimantan province, the approach is powerful to enhance competitiveness of processed timber products if consistently applied. Strategy analysis using SWOT will be discussed on the next chapter .

3.6.5. Political Situation

Through the issuance of the Law No. 34 year 2004 on regional autonomy has shifted the pendulum of government administration in Indonesia. Some Government policies (central) related to sector or sub sector are delivered to the Local Government through Local Regulation, meaning that central government has delivered its authority to the local government. Central Government policy will be more focus on standards and criteria that should be followed by local government as guidance in implementing Central Government policies.

Since 1998 as the beginning of reform era has generated overwhelming authority of local government, which creating reform euphoria. The situation is obviously not conducive for legal industries. Industries with capacity of less than 6000 m3 per year were established every where, both legal and illegal. Rapid illegal logging occurred because of high demand on log supply during the period of 1998 – 2005. Initially the Law on local autonomy was enacted in 2000, which then was revised into Law No. 34 year 2004. Authority related to forestry sub sector particularly on forestry industry is delivered to the local, such as permit awarding for industry with capacity less than 6000 m3 per year, however, permitting for industry with capacity more than 6000 m3 per year still remains provided by the Central (Ministry of Forestry). Supervising, monitoring and controlling on industries with capacity less than 6000 m3 per year is undertaken by the Local Government (Industry Service), whereas for industry with capacity more than 6000 m3 per year is undertaken by the Central Government with support from the Provincial Forestry Service.

The above arrangement has generated positive and negative impacts toward general timber industry development, including in South Kalimantan province. Since then, development of industry particularly industry with capacity less than 6000 m3 per year is almost uncontrolled, such as sawn timber, wood working and other timber processing industries. The condition is obviously generates negative impact, and accelerates deforestation, and exploitation of timber potency from forest resources. In addition to negative impacts, apparent positive impact of timber industry development includes contribution to local economy.

3.6.6. Local, National, and International Economic

Indicator of local economy is demonstrated by total amount of timber industry contribution toward gross regional domestic income (PDRB). In the last four years (2004 – 2007), general development in South Kalimantan province provided contribution that continuously improving, except timber industry. Growth rate of forestry sub sector in year 2004 was 1.77; however, in year 2005 and 2006 the growth rate was negative of -28 and -0.42, respectively. While in 2007, the growth rate of forestry industry has increased and turned into 2.08, which presented on Table 3.7.

52

Distribution of forestry sub sector percentage towards PDRB in the last three years of 2004 – 2007 is respectively of 1.48; 1.40; 1.14; and 1.08 (Table 3.7). Thus, such was the case occurred to the processed industry non timber industry. While, contribution from other sector increased or in the case of decreasing, however, it is still higher compared to forestry sub sector contribution.

Such condition was influenced by local, national, and international economic condition. Economic condition of South Kalimantan province considered as better compared to other provinces in the Kalimantan region. Income per capita in the last three years (2005 – 2007) is respectively of Rp8.51 million , Rp9.07 million , and Rp10.1 million since in this region businesses are developed well, namely sectors of mining, plantation, transportation and service, restaurants, etc. Additionally, purchasing capacity of community in South Kalimantan is sufficient; therefore, a lot of products produced from the region may well absorbed by local market.

Domestic market (national) is fewer due to economic crises occurred since 1998 to 2001. Although growth rate PDB increased, however, overall purchasing capacity of Indonesian is not sufficient.3 Price of processed timber products is considered too expensive by most of Indonesian. It is exceeding compared to purchasing capacity parity. Therefore, most of processed timber products are exported to abroad in order to obtain higher margin at the international market.

Influence of international economy is significantly determining export quantity of timber processed products from Indonesia, including from South Kalimantan. Global financial crises occurred in the early 2008 has consequences to the Indonesian processed timber products that were not absorbed in the international market. Demand of processed timber products in the international market is declining and the price declined as well; hence, it has strike the Indonesian timber industry.

3.6.7. Technology

Most of timber industry in South Kalimantan use old technology, therefore, it is not efficient in processing the logs. Additionally, logs processing machine such as rotary lathe has big spindle that remaining core is still big (core diameter around 20 cm). The exist machineries can only process logs with big diameter (Ø log of 30 cm) for hardwood, while logs with small diameter from timber estate and rubber plantation cannot be processed with the current machines, although the small diameter logs are quite a lot.

The latest progress was spindleless machines from China and Malaysia have entered the timber industry, which are able to process logs with small diameter (Ø logs of > 18 cm), and the remaining piled timber still can be processed using the machine up to diameter of 5 cm. Additionally, the machines have capability in diversification of timber type harvested from timber estate or from the villagers’ estate or logs harvested from state-owned plantation company. Logs with small diameter is often have high value (fancy wood), such as sungkai, teak, mahogany, gmelina, etc., can be processed for wood working and furniture.

Technology for processing logs into wood working and furniture are still left behind compared to technology used in Java Island, such as furniture from Jepara and Serenan, or wood working from East Java. Therefore, products from wood working industry from South Kalimantan tends to decline within the last five years along with decreasing of sawn timber industry as its primary product.

3.6.8. Government Policy

3 Poor population in Indonesia around 15% out of total population and purchase parity of community (BPS, 2007).

53

Government policy related to timber industry is the Minister of Forestry decree No. P.35/Menhut-II/2008 on Permitting procedure, Re-engineering, and Utilization of logging wastes. The policy aims to revitalizing the forestry industry. Most of exist industries are not efficient any more. Therefore, it is necessary to undertake re-engineering through machineries/equipment modification with the purpose of processing small diameter logs. For that reason, it requires to re-collecting data of the entire timber processing industries, both with capacity of more than 6000 m3 per year and industries with capacity less than 6000 m3 per year (P.300/Menhut-II/2006). The industry should be supported with sufficient raw material supplies from South Kalimantan and other provinces.

Industry timber supply plan (RPBI) for industries is stipulated on the Minister of Forestry decree No. P.16/Menhut-II/2007. Timber supply for industries in South Kalimantan is very inadequate, as a result required to import from other provinces, moreover should imported from other countries. Logs supply scarcity inside the province has consequence on lack of competitiveness. Log supply from other provinces is often cope with impediment during transferring the logs, which have to be transported through the sea crossing the islands, and ocean if the logs imported from abroad such as USA, Africa, and New Zealand. With regard to timber administration, there are examination undertake by some government authorities (police, navy, and forestry service office), which often generating high cost (high cost economy).

Regulation related to timber administration in Indonesia is stipulated through Minister of Forestry decree No. P.55/Menhut-II/2007, which includes administration on processed timber. Through the issuance of the regulation, timber companies supposedly possessing a proper document. Additionally, on processed timber administration, an assessment on chain of custody is also applied, which legalized the logs, hence, processed timber produced is legal based on the result of the chain of custody assessment.

Furthermore, there is relevant policy related to investment, such as Presidential decree (Perpres) No.114 year 2007 that stipulates arrangement for close and open business, including forestry industry. Therefore, industry that plans to relocate its mill, is suggested to put new investment or reengineering its machineries/equipment.

3.7. COMPETITIVENESS OF INDUSTRY ANALYSIS

Competitiveness of industry defines as capability of industry in competing at both domestic and international markets, hence products produced are sold well in the markets, evermore, managed to compete with similar products in the market. Competitive industry has comparative and competitive advantages. Throughout the time, timber industries have comparative benefits, such as relative cheap labor, tropical timber products that are not produced by sub tropic countries, etc. However, on the competitive side, the products are still less competitive than products produced from neighboring countries, such as Malaysia or East Asian country such as China.

Timber processed products from Indonesia supposedly dominating the markets both domestic and international as previously happened in the 1980s and 1990s. However, since no lack of technology development, therefore, the Indonesia timber processed products are left behind and uncompetitive. In the future, it is necessary to put efforts to produce more competitive products, such as producing primary products and have high added value.

3.7.1. Determining Local Primary Timber Industry Group

Determining primary industry in South Kalimantan is a strategic approach, since information on primary timber industry is important with regard to management and development of local timber industry. Local primary timber industry that meets with local potency and characteristics, such as natural and human resources, is expected to have better competitiveness, and have potency and prospect in the

54

local economic growth. Therefore identifying local primary timber industry should be based on comprehensive criteria.

Identification of local primary timber industry is based on criteria with reference to Roberts and Stimson (1998). Hence, criteria that used aggregately is grouped into nine criteria, which every criteria consist of some aspects or sub criteria, as presented on Table 3.13.

Assessment on important level of every criteria is undertaken through participative approach that involving multi-stakeholders, such as community, businessman, government officials, and experts in South Kalimantan using surveys and Focus Group Discussion (FGD) sessions. Data processing uses Linguistic Label, while data analysis uses Linguistic Label Fuzzy Analysis with criteria, such as Very Important (SP), Important (P), Fairly Important (CP), Less Important (KP), and Not Important (TP), which resulting Wc vector. Results of data analysis are presented on Table 3.13.

Table 3.14. Criteria Group and Sub Criteria for Identifying Local Primary Industry

No. Criteria Group Sub-Criteria 1 Domestic Economic

Strength (1) Sector Performance (PDRB) (2) Contribution toward local economic activities/ economy dynamic, (3) Multiplier effects.

2 Orientation of trade

(1) Domestic market, (2) Export, (3) Trade barriers, (4) Business competition.

3 Technology and Development

(1) Research and development support, (2) Center of industry, (3) Ability to adopt technology.

4 Human resource development

(1) Education ad training, (2) Local skill, (3) labor availability

5 Management

(1) Association/institution networks, (2) Marketing capability, (3) Entrepreneurships (4) Information system,

6 Financial (1) Local financing sources, (2) Investment opportunity

7 Governance

(1) Business opportunity (local regulations) (2) Business facilitating scheme (3). Management

8 Infrastructure

(1) Transportation facilities, (2) Product distribution, (3) Communication (4) Energy, (5) Utility, (6) Waste and environment management.

9 Natural resources Availability and sustainability of raw material supply

Timber industry is grouped as presented on Table 3.13. with Total n, therefore will resulting matrix of analysis Vnx3. The matrix consist of attributes, such as Very Influencing (SB), Influencing (B), Fairly Influencing (CB), Less Influencing (KB), Not Influencing (TB).

55

Tabel 3.15. Aggregation of important level assessment at competitive determining factor of timber industry in South Kalimantan

Note: Data analyzed based on results of some surveyed districts.

Data processing uses Non Numeric for pairwise fuzzy decision analysis method, while for decision making based on Non Numeric Multi Criteria Single Person Decision Making, as follows:

Neg (Wc) = Wc-k+1

Vix3 = max [Neg (Wc) Vic]

Analysis results of identifying primary industry group is presented on Table 3.15.

Tabel 3.16. Aggregation of fuzzy linguistic label for identifying primary timber industry in South Kalimantan

Dom

estic

Eco

nom

ic

Stre

ngth

Nat

ural

Res

ourc

es

Orie

ntat

ion

of T

rade

H

uman

Res

ourc

e D

evel

opm

ent

Fina

ncia

l G

over

nanc

e Ba

sic

Reg

ulat

ion

Tech

nolo

gy a

nd

Dev

elop

men

t

Man

agem

ent

KP P P SP CP SP SP P P

Timber Industry Group

Neg (Wc) P KP KP TP CP TP TP KP KP

Aggregation

SB B SB TB CB B KB B B

Wood working based industry (Primary)

[Neg (Wc) Vic] SB B SB TB CB B KB B B

B

CB KB CB CB SB CB B SB CB Fiber wood based Industry

[Neg (Wc) Vic] B KB CB CB SB CB B SB CB

CB

CB KB CB KB CB KB KB KB CB Transportation based Industry

[Neg (Wc) Vic] B KB CB KB CB KB KB KB CB KB

KB KB KB CB KB KB TB KB CB Energy based Industry

[Neg (Wc) Vic] B KB KB CB CB KB TB KB CB

KB

B B B B TB CB CB CB B Wood working based industry (Secondary)

[Neg (Wc) Vic] B B B B CB CB CB CB B

B

TB TB KB B CB KB CB CB KB

Chemical based Industry

Timber extract [Neg (Wc) Vic] B KB KB B CB KB CB CB KB

KB

Respondents

Dom

estic

Ec

onom

ic

Stre

ngth

Raw

M

ater

ials

Orie

ntat

ion

of

Trad

e

Hum

an

Res

ourc

e D

evel

opm

ent

Fina

ncia

l

Gov

erna

nce

Basi

c R

egul

atio

n

Tech

nolo

gy

and

Dev

elop

men

t

Man

agem

ent

Community KP P P SP CP P P P P Wood Trader KP P P P CP SP SP CP P Small Industry P SP P SP P CP P P P Timber Sources KP P P CP CP CP SP CP P Big Industry P P P SP P SP KP P P AGGREGATION KP P P SP CP SP SP P P NEGATION P KP KP TP CP TP TP KP KP

56

Analysis is also carried out to other timber industry that expected to be highlighted in the future, results is presented on Table 3.16.

Table 3.17. Aggregation fuzzy linguistic label for identifying timber industry group that expected to be highlighted in the future in South Kalimantan

Dom

estic

Eco

nom

ic

Stre

ngth

Nat

ural

Res

ourc

es

Orie

ntat

ion

of T

rade

H

uman

Res

ourc

es

Dev

elop

men

t Fi

nanc

ial

Gov

erna

nce

Basi

c R

egul

atio

n Te

chno

logy

and

D

evel

opm

ent

Man

agem

ent

KP P P SP CP SP SP P P

Timber Industry Group

Neg (Wc) P KP KP TP CP TP TP KP KP

Aggregation

B KB CB TB CB KB KB KB B Wood working based Industry (Primer)

[Neg (Wc) Vic] B KB CB TB CB KB KB KB B

KB

B B CB B SB CB B CB B Fiber wood based Industry

[Neg (Wc) Vic] B B CB B SB CB B CB B

B

CB KB CB KB CB KB KB KB CB Transportation based Industry

[Neg (Wc) Vic] B KB CB KB CB KB KB KB CB KB

KB SB B B B KB KB B B Energy based Industry

[Neg (Wc) Vic] B SB B B B KB KB B B

B

B B B CB B CB B CB CB Wood working based Industry (Secondary)

[Neg (Wc) Vic] B B B B B CB B CB CB

B

KB CB KB B KB KB CB CB KB Chemical based Industry

Timber extract [Neg (Wc) Vic] B CB KB B CB KB CB CB KB

CB

In the future, expected to be primary timber industry in South Kalimantan, are as follows: 1) Fiber based industry; 2) Wood working based industry (secondary); and 3) Energy based industry. Additionally, chemical based industry (timber extract) would be the alternative to be developed, such as vanillin product from black liquor.

3.7.2. Primary Product Group

During the previous two decades, Indonesian processed timber that based on wood working has dominated markets, both domestic and international as well, such as plywood, veneer, sawntimber and wood working, particle board, block board. Processed timber fiber based industry such as Medium and High Density Fibreboard, are not developed. Afterward in the early 1990s, pulp and paper industry is immediately entering the international market, which gets through to the 9th level of pulp producer in global market, while, 12th level of paper producer during 2000s.

In the future, based on review on developed industry in Indonesia and potency of the industry, the following are industry that potentially to be developed: (1) plywood with thickness of 2.4 mm (mass production), including film-faced and fancy plywood; (2) Laminated Veneer Lumber (LVL); (3) integrated sawntimber with wood working/moulding and furniture that based on wood working of tropical timber, which has high value added; (4) Medium and High Density Fibreboard; and (5) chips, pulp and paper that based on short wood fiber; and (6) bio-energy that based on energy wood to fulfill demand to substitute

57

oil and fossil fuels. The processed timber ought to improve its quality using appropriate technology in order to be able to produce competitive products in domestic and international markets. Modification of processed timber products have to be considered with the intention of producing primary products, such as parquet floor/wall panels, garden furniture, wood-carpet, and decking.

Currently, there is no pulp and paper mill in South Kalimantan province, however, the industry possibly will become Indonesia primary industry. To pursue to become the 3rd pulp producer in the world, Indonesia has to be able to produce at the minimum of 20 million ton per year. However, currently Indonesia produces approximately of 6 million ton per year; therefore, opportunity to expand is still possible since the world’s demand on pulp and paper keeps increasing. Domestic demand on pulp increased approximately of 23% per year, while demand of paper increased nearly 5% per year. Currently, Indonesia has share of just about 2.5% of global pulp, while the global demand of pulp and paper keep increasing.

Every industry group has primary products; therefore, it is necessary to determine the core of timber industry development in South Kalimantan. Identification of primary products is undertaken toward three groups of selected primary industry groups as presented on Table 3.6. There are 13 timber products identified from each industry group, every product then scored based on eight key criteria, such as: 1) Production Volume; 2) Availability and sustainability of raw materials; 3) Value added; 4) Scope and market segment; 5) Local Characteristics (local value); 6) Labor employed; 7) Total business units; 8) Environmental impacts; and 9) Prospect on market demand (export and domestic).

Quantitative data available is only Production Volume, which most of them collected from the Statistical Center Bureau, and total of business units that collected during surveys. Data processing using likert scale score (1-5), while criteria for multiplying using Defuzzifikasi from Label linguistic to be converted into score. Score of importance level is presented on Table 3.17.

Table 3.18. Criteria Importance Level (Score) for Identifying Primary Timber Product in South Kalimantan

Criteria Importance Level

Defuzzifikasi (score)

(1) Production Volume SP 0,14706 (2) Availability and Sustainability of raw materials, SP 0,14706 (3) Value Added, P 0,11765 (4) Scope and Market Segment, CP 0,08824 (5) Local Characteristic (Local Value), CP 0,08824 (6) Labor employed, P 0,11765 (7) Total of Business Units, KP 0,05882 (8) Environmental Impacts; and P 0,11765 (9) Prospect on Market Demand (export) P 0,11765

Based on expert assessment and considering importance level score of every criteria, therefore, total score of every potential primary product is identified. Index value, order of primary product in the similar industry group, order of the entire primary products is presented on Table 3.18.

Results of analysis described the order of primary products to be developed in South Kalimantan, as follows: 1) Handicraft and art industry products; 2) Furniture industry products; 3) Wood working industry products; 4) Pulp and paper industry products; 5) Fiber wood industry products; 6) Particle and Block Boards Industry products; 7) Plywood industry products/LVL; and 8) Veneer industry products.

58

Tabel 3.19. Identifying Primary Timber Product Obtained from Primary Timber Industry in South Kalimantan

Prod

uctio

n Vo

lum

e

Avai

labi

lity

and

sust

aina

bilit

y of

raw

m

ater

ials

Valu

e Ad

ded

Scop

e, M

arke

t

Loca

l Val

ue

Labo

r Em

ploy

ed

Tota

l of B

usin

ess

Uni

t

Envi

ronm

enta

l Im

pact

s

Pros

pect

on

Mar

ket

Dem

and

SP SP P CP CP P KP P P 5 5 4 3 3 4 2 4 4

Primary Timber Industry Group

Type of Primary Industry

p(producing primary products)

Production Volume (M3)a)

0,14706 0,14706 0,11765 0,08824 0,08824 0,11765 0,05882 0,11765 0,11765

AG

GR

EG

AT

ION

RA

NK

ING

Sawntimber Industry 32.880 3 2 1 2 1 3 4 4 3 2,52941

Plywood Industry/LVL 272.355 4 2 2 2 1 3 4 3 2 2,55882 7

Veneer Industry 30.300 3 3 1 2 1 3 2 4 3 2,55882 8

Particle Board Industry 2.500 3 4 3 2 1 3 1 3 2 2,64706 6 Wood packaging Industry 1.069 1 3 2 2 1 2 3 4 2 2,20588

Wood working based industry

(Primer)

Blockboard Industry 60.000 3 4 3 2 1 3 1 3 2 2,64706 6

Pulp and Paper Industry 1 5 4 3 1 3 1 2 4 2,82353 4

Fiber board Industry 1 4 4 3 1 3 1 3 3 2,67647 5

Fiber Rayon Staple Industry 1 2 5 4 1 3 1 2 3 2,47059

Fiber based Industry

Chipwoods Industry 1 4 2 2 1 3 1 4 2 2,35294

Handicraft and art goods 12.673 2 4 4 3 4 4 3 4 3 3,44118 1

Furniture Industry 13.764 2 3 4 3 2 4 3 2 3 2,88235 3

Timber Bark Industry 1 3 3 2 4 3 2 4 1 2,52941

Wood working Industry

(Secondary, Art and creative) Wood working Industry 4 4 3 3 1 4 4 3 3 3,29411 2

a) Data from Center of Statistical Bureau (2007), analyzed

59

3.7.3. “Porter’s Diamond” Analysis Model

Porter’s diamond is developed by Porter (2000) to improve the previous two theory, namely strategy analysis through SWOT (Strengthen, Weakness, Opportunity, and Threat) and PETS (Politics, Economic, Technology, and Social). Many people in the developed countries have applied the theory in dealing with competitive industry products. Concerning lack of timber industry competitiveness in South Kalimantan, the analysis approach is very powerful to enhance competitiveness of processed timber industry when consistently applied. Strategy analysis through SWOT will be discussed on special chapter.

Any processing industry cannot be able to getaway from backward linkages (related to inputs) and forward linkages (related to market). In system theory, there are three key elements, such as input – process – output. Input for timber based industry is logs, additive substances, labor, and others. Process of composing timber products is often dependent on raw material that has its nature characteristics, therefore, it required thorough and accurate in processing the products in order to create high value products. Result of timber processing is timber products (output) that can be primary of secondary (advanced processing). Furthermore, the products will possibly sell to the market (local and domestic) or export to international market. Physical transformation of timber to become a certain product will be give back I the form of money transferred into every element that will be continuously on going.

Sustainability of industry very much depends on company’s management performance of timber based industry. Government’s support through regulations will also influence company’s performance, additionally, adequate infrastructure and banking system for investment are also contribute their impacts to the company’s performance. Therefore, the transportation system will play a part in product distribution to the market. The factors mentioned above are discussed in the chapter with the purpose of discovering their significant influence toward the timber based industry in South Kalimantan.

Figure 3.17. Diagram Porter’s diamond application on timber based industry in South Kalimantan

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Porter’s diamond analysis on timber based industry in South Kalimantan in general is presented on Figure 3.17. Some factors analyzed on the Porter’s diamond are obtained directly during the field surveys, as described into 9 (nine) factors that presented on Table 3.17. The balance of four angles in the diamond analysis shows that power of competition capability of timber based industry in South Kalimantan. Situation Factor plays an important role; therefore, when translated into figure, the Porter’s diamond of timber based industry in South Kalimantan would be more unbalanced. Development strategy of timber based industry during the current situation ought to be focused on strengthening the condition factor.

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VISION AND MISSION OF TIMBER INDSUTRY IN SOUTH KALIMANTAN PROVINCE

4.1. VISION AND MISSION OF NATIONAL TIMBER INDUSTRY

Vision and Mission of the timber industry development in South Kalimantan Province can not deviate from the vision and mission of the national timber industry development. The formulation of Vision and Mission of the national timber industry development is as follows:

Vision

Indonesia's high quality timber industry and industry which is highly competitive, supported by a sustainable source of raw materials (progressive sustained yield) Mission

1. to enhance and utilize the availability of raw materials, especially from plantation forest as well as from other sources which are legitimate and sustainable;

2. to restructure and revitalize the primary timber industry to be efficient, competitive and supports the advanced wood processing industry;

3. to develop products that have high value-added and are environmentally friendly and competitive in international markets;

4. to produce certified industrial products. Pengalaman panjang pasang surut industri perkayuan di Indonesia dalam empat dasawarsa, menjadi dasar penentuan visi tersebut di atas. Sumber bahan baku yang menjadi permasalahan besar industri perkayuan, meletakkan kelestarian sebagai isyu utama. Long experience of timber industry in Indonesia within four decades, has become the basis for determining the above vision. Sources of raw materials have been major problems in timber indsutry, and sustainability has been the major issue. 4.2. VISION AND MISSION OF TIMBER INDUSTRY IN SOUTH KALIMANTAN

The formulation of vision and mission of timber industry in South Kalimantan has been conducted through stakeholder discussions. The formulation was based on the history of the timber industry's role in the economic development in South Kalimantan province. Timber industry in South Kalimantan has experienced setbacks in the last ten years, so it is not surprising that a priority in the development of national industry was not given to this sector. However, the availability of potential forest area has given a consideration for building the future of the timber industry in South Kalimantan. Stakeholders in South Kalimantan noticing some forest resource potentials, infrastructure, provision of labor, and a history of timber industry capabilities, have formulated vision and mission of sustainable timber industry development in South Kalimantan as follow, Vision

4

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Indonesia's high quality timber industry and industry which is highly competitive, supported by a sustainable source of raw materials (progressive sustained yield) Mission

1. to enhance and utilize the availability of raw materials, especially from plantation forest as well as from other sources which are legitimate and sustainable;

2. to restructure and revitalize the primary timber industry to be efficient, competitive and supports the advanced wood processing industry;

3. to develop products that have high value-added and are environmentally friendly and competitive in international markets;

4. to develop KPH based small and medium scale timber industry 5. to develop high competitive large scala timber industry 6. to produce certified industrial products.

The formulated vision and mission can not be separated from the vision and mission of the national

timber industry development, however it has a specificity on the interpretation of the sustainability of raw material resources. South Kalimantan Province introduced the concept of Forest Management Unit (KPH) to ensure the sustainability of raw material supply. 4.3. THE OBJECTIVE OF TIMBER INDUSTRY DEVELOPMENT IN SOUTH KALIMANTAN

Based on the vision and mission of sustainable timber industry development in South Kalimantan, some objectives are formulated: 1. to develop timber industry that could absorb more labor (pro job) through small and medium

industries (IKM), through the Production Forest Management Unit (KPHP) based clustering; 2. to develop upstream forestry sector (forest resource unit) through the people forest (HR), plantation

forests (HTR), and community involvement in forest development activities as well as the development of industrial timber plantations (HTI);

3. to develop upstream forestry sector (natural forest resource unit) through the application of intensive Silviculture technique (Silin);

4. to encourage the rejuvenation process, modification, and replacement of the old tool / machine to be able to process small size wood efficiently;

5. to develop future timber industry through fiber-and-energy based timber industry; 6. to focus the development on high competitive timber product; 7. to increase the share of the domestic market and maintain the traditional market, followed later by

the international market penetration; 8. to encourage timber industry product toward certified green products which is internationally

acclaimed; 9. to create a conducive business climate by simplifying regulations and bureaucracy and cut the high

cost economy. The objectives of the timber industry development in South Kalimantan further elaborated in the formulation of operational objectives.

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TARGET AND MAIN STRATEGY IN DEVELOPING SUSTAINABLE TIMBER INDUSTRY

IN SOUTH KALIMANTAN PROVINCE 5.1. ASSUMPTION AND ENABLING CONDITIONS

Sustainable timber industry in South Kalimantan Province could be developed in accordance with the formulated road map if a number of enabling conditions can be fullfiled. Assumptions are made based on the balance of nine factors that were prepared by Cho, as shown Figure 5.1.

Figure 5.1. Nine factors that influence the development of the industry Cho

5.1.1. Politicians and Bureucrats

Timber industry in South Kalimantan had been a major economic driver with with total number of 22 large scale industries and no less than 400 medium and small scale industries. Strong political support from the bureaucrats and politicians to restore the peak era of the timber industry in South Kalimantan is important. Such support is realized through systematic and planned efforts carried out by politicians and bureaucrats in South Kalimantan province to propose deregulation of the forestry policies that are considered not conducive.

Resetting the forest sector governance, the eradication of illegal logging, the forestry sector investment, overlapping land in mining, plantation and agriculture, should have a comprehensive political settlement. Local regulations on investment, growth and leading industry sectors should be settled politically so as to provide an conducive atmosphere to industrial development.

Good Governance, which includes the principle of transparency, accountability,and impartiality have been a major issue which should be addressed in South Kalimantan. Simplification and clarity of

Bestowed Resources

Domestic Demand

Internasional Competitiveness

Related and Supporting industries

Business Environment

Politicians and Bureaucrats Worker

Entrepreneurs Manager and Professional Engineer

5

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obtaining permit to run business in forestry sector, both for the management of land for industrial timber estates and industry have given support in South Kalimantan. The issuance of permits should also be clear to be able to provide certainty for investors in forestry sector.

5.1.2. Entrepreneurs

The mindset of the entrepreneurs should have changed and left the last-millennium mindset. Forest industry is no longer viewed as a medium to exploit natural resource which is then abandoned after it. The entrepreneurs have to change the concept and think that the forestry industry is a sustainable industry with sustainable raw materials. Harvesting should be part of the sub-systems in supply chain, no longer a separate system of the processing industry.

The entrepreneurs play an important role in raw material planning with KPH concept system. The entrepreneurs must be supported by powerful development system for various diversiification efforts and effort to increase added value. Industries which have been established not to be shut down after running out of raw materials.

5.1.3. Manager and Professional Engineer

Experts and managers working in the forest industry need to increase competence on an ongoing basis. The role of training institutions, research, and profession assessment to provide professional recognition became essential. Experts and managers in the forest industry are professions that count..

Experts and managers working in the forestry sector have a forum to communicate to one another and exchange information. They should be proud to have those positions, thereby reducing the displacement between the professions. Switching between the profession of forestry industry to other professions such as plantation or mining sector will disturb the growth of the industry.

5.1.4. Workers

About 70% of workers in forestry and forest industry sector have at least high school education, those who have diploma degree are at the operator level. While workers with low education level are only required for helpers. Operators must be able to overcome the machine 's trouble on their own so that the production process does not loose many hours to do the repair. The process of technology transfer is expected to run faster with many intellectual workers.

Link and match education concept could be used to be able to have many skillfull workers in South Kalimantan. Therefore dependence of workers from outside the area could be reduced.

Expatriate is very restricted, except for foreign investment which is part of a turn key project. In the era of free trade, it is not easy to restrict the flow of expatriates. An important step that can be done is by increasing the capacity and competence of local expatriates to be able to compete with foreign expatriates.

5.1.5. Bestowed resources

Timber forest product is a resource that has been given to the development of sustainable forestry industry in South Kalimantan. The sustainability of raw materials is guaranteed through KPH concept that has been announced in the year of 2009. General assumption for the successful development of sustainable timber industry in South Kalimantan is the success of KPH program.

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Adherence to a number of regulations related with the preservation of the environment becomes the key to success. Industries that are designed to environment friendly concept to maintain Watershed. Some timber technology options for environmental sustainability are presented in Table 5.1.

Table 5.1. Several choices of wood processing technologies for environmental sustainability

No Industry Environmental friendly

Technology

Environment Impact

Adhesives derived tannins; and derived isosianat

Low Emission of formaldehid; biodegradable

Spindeless Rotary; Small Block Peeling

Increase the efficiency of raw material conversion

Turbine Generator Reduce the use offossil fuels Coal Boiler Increase the efficiency of wood fuel use, but

increase emission of sulfur gas

1 Plywood

Steam recovery Reduce water 2 Sawmill Frame Sawing, Precision Band Saw Reduce sawn waste 3 Wood

Working Jointed product Raw material efficiency

4 Meubel Non toxic laquer Reduce Emission, Volatile Organic Compund 5 Handycraft Small component Raw material efficiency

Biopulping Reduce the liquid waste, leachate 6 Pulp Bioblaching Reduce sulfur emission

7 Energy Charcoal, bioetanol, pirolisis Raw material eficciency

5.1.6. Related industry and supporting industry

Related industry and supporting industries are assumed to have balanced growth with the planned timber industry. In its development concept, not all supporting industry exist in South Kalimantan province. Supporting industries and related industries could be developed in other areas, but its distribution system and its provision, is assumed to be safe in South Kalimantan.

Chemical-based industries are not assumed to exist in South Kalimantan. To reduce the potential of land contamination, chemical-based industries such as soda, lacquer, glue, paint, putty, should be developed in Java island. This is in line with the policy of organic rice farms in South Kalimantan.

Machinery and other supporting equipment industries are assumed to be developed either in South Kalimantan or in Java island. Manufacture of spare parts in the country can reduce costs and improve product competitiveness.

5.1.7. Domestic Demand

Sustainable timber industry that has been developed should not depend on international market demand. The basic assumption of timber industry development used in the last three decades which is 90% for exports and 10% for domestic market should be shifted. The local market must be able to absorb at least 30% of the products, so export only about 70%.

Improvement of people living standards is expected to be able to increase the purchasing power, so that domestic wood consumption will also increase. Creative products and art product are expected to be able to meet the domestic market. Product demand from the domestic market can be considered a substitute for the export market.

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5.1.8. Business Environment

Socio-political condition that support the business environment in South Kalimantan province is assumed to be conducive. Growth in other economic sectors to support the growth of the business environment. Infrastructure is available as needed by the of industry.

The community realizes that the timber industry development in South Kalimantan is a social development effort. Corporate Social Responsibility program runs in line with the development of the timber industry so as to provide direct benefits perceived by the public.

Financial institutions both micro and macro play an important role. Financing access is available to small industries, medium and large industries. In addition, access to financing for the business community is also available.

5.1.8. Internasional Competitiveness

Report of the World Economic Forum (WEF) and International Institute for Management Development (IIMD) up to the year of 2006 showed that the global competitiveness of countries in the world is still dominated by European and American developed countries as well as advanced industrial countries in Asia. Finland has been in the first or second position as a country with the best competitiveness for the last five years. Taiwan, Hong Kong and South Korea are the countries with high competitiveness in Asia after Singapore and Japan. Hong Kong's competitive position has improved for the last four years, while Taiwan and South Korea’s competitiveness decreased in 2006. Malaysia competitive position continues to increase in the last five years. The position of Indonesia's competitiveness over the period 2002-2005 has not changed, but in 2006 it increased by 19 ranks to be in 50th position, although in our own country the increase was considered controversial. Indonesia’s competitiveness in 2006 was still below the neighboring countries like Malaysia, Philippines, Thailand, and India. It is different with WEF report that showed an increase in the position of Indonesia’s competitiveness over the Philippines and to RR China.

According to IMD World Competitiveness 2009, Indonesia's competitiveness in the Year 2008 was at rank 51 and in 2009 it was at rank 42 with a value of 55.479. In Asia, Indonesia is below Singapore, Japan, Malaysia, China, Taiwan, Thailand, South Korea, and India.

The assumption made for the development of sustainable timber industry in South Kalimantan is that Indonesia’s competitiveness was below rank 50. The competitiveness is enough to give confidence to the international world toward the conducive condition of national economy.

5.2. DEVELOPMENT TARGET

5.2.1. Target of Sustainable development of Word based industry in South Kalimantan

Target of sustainable development of timber industry in South Kalimantan ia an elaboration of the target that had been formulated previously. The formulation of these targets are presented in Table 5.2.

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Tabel 5.2. Target of Sustainable development of Word based industry in South Kalimantan

Objective Medium Term Target (2010-2020) Long Term Target

Ensuring the availability of sustainable raw material supplies for the timber industry in South Kalimantan

- Ensuring continuity of sustainable raw material supply

- Increasing collector incone and people forest - Overcoming the problems of illegal logging and

timber circulation - Building a log terminal

Promoting forest management and ensuring the sustainability of industrial development for the long term in South Kalimantan

Rejuvenating including repairing, retooling / modification timber industry equipment to become more productive and efficient;

- Rejuvenating of the timber industry machinery - Increasing industrial management

- Increasing the role of timber industry on local economic growth

- Becoming production center and timber industry clusters in Indonesia

Processing alternative materials to enhance competitiveness;

- Establishing fiber-based industries - Optimizing the utilization of waste

- Developing the business scale and product diversification of timber industry

Emphasizing the development of excellent wood products which have high added value

- Establishing fiber-based industries - Building energy center

- Developing the business scale and product diversification of timber industry

- Supporting the energy saving and energy provision

Enhancing the role of small-medium scale industries through cluster approach

- Improving industry management - Building timber industry cluster

Becoming production center and timber industry clusters in Indonesia

Maintaining export markets and increasing domestic market;

- Fulfilling the local market with a variety of creative products

- Achieving diversification of markets for conventional wood products to become more widely known to other countries

- Building product marketing facilities

- Being integrated with tourism sector - Meeting the needs of domestic

market - Positioning its position in world wood

product market

encouraging the timber industry to produce a certified green product

- Improving industry management - Overcoming the problems of illegal logging and

timber circulation

Promoting forest management and ensuring the sustainability of industrial development for the long term in South Kalimantan

Encouraging governments to create conducive business climate.

- Facilitating coordination of both intra-and inter-business industrial people

- Building timber industry cluster

- Having an institution dealing with timber industry problem in South Kalimantan;

- Becoming production center and timber industry clusters in Indonesia

Encouraging the provision of a human resources for the timber industry

- Developing job training workshops for creative industries skills development

- Increasing the role of research and science institutions for human resource development

- Improving human resource capacity for the creative industries product

Ensuring the provision of human resources for the management of the creative industries

5.2.2. Quantitative Target of Industry Development

Quantitatively, the target of industrial development was started with the industrial growth planning in the period 2010 to 2040. Preliminary data that was used was the latest portrait of the timber industry in South Kalimantan, and combined with the planning of future industrial development. Industrial development planning in South Kalimantan are presented in Table 5.3.

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Table 5.3. Plan of the number of timber industry in South Kalimantan

No

Industries Unit Installed capacity 2010 2015 2020 2025 2030 2035 2040

1 Plymill (+LVL, Blockboard) m3.years 90,000 6 9 9 6 5 4 4 2 Sawmill, Capacity >6000 m3 m3.years 18,000 16 16 17 18 18 19 19 Sawmill, Capacity <6000 m3 m3.years 1,500 120 122 125 127 129 130 131

3 Woodworking (+Moulding, Parquet) m3.years 7,500 32 33 33 34 35 35 36

4 Veneer m3.years 25,000 8 8 9 9 9 10 10 5 Chipsmill ton.years 25,000 4 4 4 5 5 5 6 6 Pulp(+IKM) ton.years 2,000 0 0 6 6 7 7 8 7 Pulp dan Paper ton.years 1,000,000 0 0 1 1 1 1 1 8 Meubel (+Rumah Prefab) ton.years 1,000 44 46 48 50 52 54 56 9 Craft (+Kulit kayu) ton.years 60 22 23 24 25 26 27 28 10 Charcoal ton.years 2,500 8 9 10 10 11 11 14 11 Glue ton.years 500 8 12 12 8 7 5 5 12 Dempul ton.years 250 2 3 3 4 4 4 4 13 Partikel Board m3.years 40,000 0 1 1 1 2 2 2 14 MDF m3.years 100,000 0 0 2 5 6 6 6 15 Traditional Shipyard unit.years 24 4 6 6 8 9 10 10 16 Bioetanol Killtr.year 1,000 0 1 1 2 2 2 2 17 Strain Board (OSB,Biomass) m3.years 3,000 0 0 1 2 2 4 4 18 Others m3.years 100 12 30 32 32 36 36 36 Jumlah Industri 286 324 344 353 365 373 384

Planning of production capacity achievement has been prepared gradually with growth rate of 1-5% every 5 years. Fulfillment of the capacity in 2010 was predicted only 50% of the predicted industry. Some woodworking industry is not expected to grow, even the plywood industry is expected to decrease naturally. Creative woodworking industry involving community participation, is projected to grow along with the ability to supply raw materials.

The calculation of production capacity of overall timber industry in South Kalimantan is presented in Table 5.3. Overall capacity is presented in volume, m3 to facilitate the mapping. Supporting industries, such as industrial adhesives, is not included in the conversion. Planning of timber industry in South Kalimantan consists of strategic steps as follows:

1. Maintaining the woodworking industry that has survived until 2010, ie some plywood and wood working indsutry. Both industries are undergoing the process of machinery modernization to remain competitive. Woodworking industry is able to survive if the industry carry out product diversification such as Laminated Veneer Lumber (LVL), Glue Laminated Timber (Glulam), or other products. Plywood industry move the venire production closer to the location of raw materials.

2. Building fiber-based industries in an effort to optimize the use of various raw materials, either from the plantation forest or natural forest. Fiber base industry that was coovers pulp, paper, fiberboard, and other composite products.

3. Building pro-job and pro-poor timber industry, by involving the community. The industries are furniture industry and handicraft products.

4. Building industry that can optimally utilize the natural resources, including waste which has a very high conversion factor. The industry is energy-based industries, such as charcoal, bioethanol, pyrolysis, and others.

5. Maintaining shipping industry. The industry is very needed in South Kalimantan, considering many rivers in South Kalimantan.

The biggest production ever achieved by timber industry in South Kalimantan is in the range of 1.5-

2.0 million m3 per year. Production of the timber industry in South Kalimantan province up to now is supported by the timber supply from outside the province. The planning that has been made optimize the

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production of plantation forest, thus reducing the dependence of supply from outside the province which has now reached 66.03% to only 28.63%. Even if forest management is working well, in the Year 2040 South Kalimantan is estimated to have a surplus up to 1.3 million m3.

Table 5.4. Planning of production volume (m3) of timber industry in South Kalimantan No Industries 2010 2015 2020 2025 2030 2035 2040 1 Plymill 360,000 594,000 648,000 468,000 420,000 360,000 384,000 2 Sawmill 342,000 386,099 432,294 480,666 529,003 579,290 631,601 3 Woodworking 120,000 134,694 149,938 165,747 182,140 199,132 216,743 4 Veneer 100,000 114,583 130,208 146,936 164,833 183,965 206,557 5 Chipsmill 83,333 95,486 108,507 122,447 137,360 153,304 200,000 6 Pulp 0 0 18,000 20,313 22,786 25,431 33,178 7 Paper 0 0 1,000,000 1,083,333 1,166,667 1,250,000 1,333,333 8 Meubel 36,667 42,014 47,743 53,877 58,021 62,165 66,310 9 Craft 1,100 1,260 1,432 1,616 1,741 1,865 1,989 10 Charcoal 20,000 24,444 29,630 33,436 37,509 41,862 55,816 11 Partikel Board 0 22,000 24,000 26,000 56,000 60,000 64,000 12 MDF 0 0 120,000 325,000 420,000 450,000 480,000 13 Traditional Shipyard 9,840 16,236 17,712 25,584 30,996 36,900 39,360 14 Bioetanol 0 550 600 1,300 1,400 1,500 1,600 15 OSB,Biomass 0 0 1,800 3,900 4,200 9,000 9,600 16 Others 600 1,650 1,920 2,080 2,520 2,700 2,880 Total 1,073,540 1,433,017 2,731,784 2,960,236 3,235,176 3,417,115 3,726,968

In contrast to the peak period of 1980-2000 in which the timber industry has become very dominant, the plan for the year 2010-2040, production is projected to rely on fiber-based timber industry. The largest production is projected to be contributed by the pulp and paper industry. In general, the projected growth in timber industry in South Kalimantan is presented in Figure 5.2.

Figure 5.2. Projected growth in timber industry in South Kalimantan Year 2010-2040

Need of wood raw material to fulfill the production plan as projected in Table 5.4. is presented in Table 5.5. Raw material need is calculated based on a conversion factor (recovery rates) from each of the processing industry with corrections as needed.

Traditional Shipyard Charcoal

Others

Pro

duct

ion

(m3)

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Table 5.5. Estimation of timber need for industry in South Kalimantan Year 2010 - 2040

No Industri 2010 2015 2020 2025 2030 2035 20401 Plymill 553,333 997,028 1,078,986 691,106 565,279 413,392 423,7382 Sawmill 624,000 704,852 789,619 878,459 966,937 1,059,013 1,154,8313 Woodworking 300,000 336,735 374,844 414,368 455,350 497,831 541,8574 Veneer 166,667 190,972 217,014 244,894 274,721 306,608 344,2625 Chipsmill 104,167 119,358 135,634 153,059 171,701 191,630 250,0006 Pulp 0 0 45,000 50,781 56,966 63,578 82,9447 Paper 0 0 1,200,000 1,300,000 1,400,000 1,500,000 1,600,0008 Meubel 122,222 140,046 159,144 179,589 193,404 207,218 221,0339 Craft 2,200 2,521 2,865 3,233 3,626 4,047 4,497

10 Charcoal 20,000 24,444 29,630 33,436 37,509 41,862 55,81611 Partikel Board 0 15,714 17,143 18,571 40,000 42,857 45,71412 MDF 0 0 217,500 624,609 811,517 868,211 918,52813 Traditional Shipyard 13,120 21,648 23,616 34,112 41,328 49,200 52,48014 Bioetanol 0 209 228 494 532 570 60815 OSB,Biomass 0 0 0 0 0 0 016 Others 857 2,357 2,743 2,971 3,600 3,857 4,114

Total 1,906,566 2,555,884 4,293,964 4,629,684 5,022,469 5,249,876 5,700,423

Some supplies of raw materials from panel woodworking industry can be supplied from the veneer industry. Similarly, the supply of furniture and wood working industries related to sawmill industry. The needs of timber will be met from several sources as presented in Table 5.6. This projection is influenced by three dynamic factors which are time function, namely: 1. Exploitation factors such as timber harvesting technology and waste utilization; 2. Security factors such as death, fire, disease, and encroachment; 3. Level of space utility Table 5.6. Estimation of raw material supply for timber industry in South Kalimantan Year 2010-

2040

Description: * Depends on economic growth (>5%) and the ability of investment in the forestry sector **Effective supply potential in forest production if all existing space in KPHP utilized.

The difference between the planned demand for industrial wood with the estimation of supply capacity of wood resource in South Kalimantan province is still being considered , as shown in Figure 5.3.

Sources Supply Potential Eff.**

m3.years

Wood demand prediction

Forecast supply from outside

Forest Area

Non Forest Area

People Plant Forest

Community Forest

Industrial Plantation Forest

Silviculture Intensif

TPTI

Community Forest

Community Farm

Predicted surplus supply in the future

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Figure 5.3. Estimation of raw material need for wood industry and supply capacity in the

province of South Kalimantan for the period of 2010-2040.

Furthermore, estimation for the composition of wood raw material for the timber industry can be seen in Figure 5.4 below. The table shows that the future composition of wood utilization is more dominated by fiber industry.

TPTI LOA+SILIN PHT+Rimba HTI HTR/HKm/HTHR Lain-lain (Kebun+HR)(2.9%) (15.1%) (1.6%) (50.2%) (24.1%) (6.1%)

Kayu Bulat

Olah kayu limbahDaur ulang

KB (Logs) Kayu Bulat Kecil/Kayu Serat/Kayu Energi

Sawmill = 40%Veneer = 10% Plymill = 35%Chipmill = 15%

Pabrik panelRekonstitusi

(papan struktural)

Chip/Pulpmills

Produk kayu solid Papanpartikel,Dan Setengah jadi papanserat

F-jointing,Moulding,Veenering wood

KomponenFurniture and parts

Joinery

Flooring (parquet, carpets) Lainnya:Pre-fab,Rumah,

etc

Paper mills

4%

80%

Prod.KB

Ind.KyPrimer

Industri KO lanjutan

HTI, HTR, HR, HTHR, HD, HKm

65.7%34,3%

Gambar 4.6. Komposisi struktur sumber bahan baku kayu untuk Industri Perkayuan

Kayu Serat20%

14% 10%

20%

Vol.(m3)

40%

100%

Kayu Energi

Picture 5.4. Estimation of Wood Raw Material Composition for timber industry

5.2.3. Contribution Target to Economic Development

Development of timber industry in South Kalimantan is considered to give real effect on the economy of South Kalimantan province. Several indicators of economic growth that can be contributed from the timber industry development in South Kalimantan are presented in the table below,

Deficit

Production

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Table 5.7. Estimation of contribution toward the economic growth in South Kalimantan Year 2010-2040

Indicator  2010  2015  2020  2025  2030  2035  2040 

Timber PDRB, Fixed Value (xBillion) 

35,0  42,5  74,2  90,7  113,8   145,2   200,5 

Economic Growth, Timber Contribution(%/Year) 

   4.31  14.89  4.45  5.10  5.53  7.61 

Timber Distribution toward Economic Growth(%/Year) 

1.23  1.32  1.73  1.59  1.49   1.43   1.48 

Labor (persons)     11,277  20,984  26,694  39,779   46,827   64,781 

5.3. DEVELOPMENT MAIN STRATEGY

The development main streategies include: (1) implementation of sustainable forest management through the development of Forest Management Unit (FMU) which also can be a zoning system control unit of the balance of wood supply and demand, (2) mapping and the development of superior products from South Kalimantan province to revitalize and develope selected industries in the future while considering the development of timber industry - propoor and projob; and (3) market and investment in timber industry. The mechanism will help the actors (policy makers, industrialists, community and marketers) in achieving the goals in accordance with its main strategies.

The main strategies to achieve the vision, mission and goals of sustainable wood-based industry development in South Kalimantan province have some stages, (1) consolidation phase, (2) restructuring phase, (3) revitalization phase, which consists of two steps, step oneI industrial selection and step two industry strengthening, and (4) stabilization phase. Other strategies are derived from key strategy in achieving industrial sustainability in the medium term (5 years). The mechanism can be arranged through the regulation stipulation which has integrated-based and linkages among industrial management units, sources of raw materials and markets. One thing that needs attention for "integrating" all policies, strategies and programs is a good governance of the forestry industry (Figure 5.1).

Picture 5.5. Sustainable wood based industry development in forest industry governance

Source : Ngadiono, 2008 (modified).

Social - Cultural

FORESTRY INSTITUTIONS

Governance of Forest Industry

Government

Industry Environment

Forestry Industry

Community Private

FOREST AREA AND POTENTIAL

FORESTRY LOCAL AND NATIONAL STRATEGY &

REGULATION & LAW OF TIMBER

INDUSTRY

FOREST MANAGEMENT AND TIMBER INDUSTRY

Production Economy

73

5.3.1. Linkage among factors

Linkages among the major factors in the development of sustainable wood-based industries are (1) policies and strategies of the timber industry at a macro level, (2) units of the timber industry at the micro level, (3) financial performance of timber companies, (4) timber industry development program, (5) procedures and mechanisms, (6) supervision and control, (7) economic performance of timber industry, (8) investment and re-investment. These factors affect one another in achieving the sustainability of wood raw material supply, processing of timber industry and product markets. (see Figure 5.2).

At macro level, the following policies and strategies must be implemented (1) KPHP establishment as the basis for sustainable supply of raw materials, (2) industrial development through spatial-based approach, and (3) circulation and trade of wood and wood products. All of these factors greatly affect the sustainability of timber industry and the three above policies can run as expected depends on the enabling condition (business climate) as a prerequisite in achieving the desired conditions in the future.

At micro level, the timber industry as wood processing management unit through an adequate management of timber business determines the sustainability of the industry. This requires (1) skillful and professional human resources, (2) timber industry management information system and market information, and (3) adequate capital and investment plans for industry development. All those three sources determine whether the implementation program runs or not. The program includes (1) providing the raw material, (2) revitalizing the timber industry (restructuring, re-engineering, and revitalization), (3 ) distribution of wood (wood legality) and trade of wood & wood products.

Industry development program must be in line with macro and micro policies. Procedures and mechanisms as well as effective supervision and control are needed to contribute to the growth of economic performance in form of regional gross domestic income (GDP), financial performance and company’s health. These factors will assist the growth of timber industry through investment and re-investment of industry. It is expected that sustainable supply of raw materials, wood processing and domestic and international markets can be achieved.

5.3.2. Mapping of Regional Competitive Industrial Products

Mapping of 9 competitive products is undertaken to facilitate the preparation of development strategies of each industry group. Preparation of the timber industry development strategy in South Kalimantan is based on a SWOT analysis (Strength, Weakness, Opportunity, and Threat) to internal and external environment condition that affect both directly and indirectly to the development of the industry.It has been based on FGD activities and in-depth interviews as well as information that was taken from various forums and meetings and the results of literature review to identify strengths, weaknesses, opportunities and threats.

74

Technology Adaptation

KPHP Unit as

sustainable wood

supply(1.1)

Forest Sustainability Wood Raw material

Industry Sustainablity

Market Sustainaility

Industry sustainability

(1 3)

Spatial and Sectoral Based

Approach (1.2)

Suitable Financial

Resources(2.1.3)

Human Resources (2.1.1)

Business Management Timber Industry (Business

Planning, Organizing, Actuating, and controlin) (2.1)

Procedur e and Mechanism(5)

Timber industry development program in South Kalimantan - Pro-Growth, Pro-Job

And Pro-Poor (4)

(1) Raw material provision (HA, HTI, HTR, dll) For timber industry(4.1)

(2) Revitalization (restructurzation, re-engineering and industry revitalization), including IKM (4.2)

Timber Industry economy Performance(7)

Supervision and control(6)

POLICY & STRATEGY OF INDUSTRIY IN SOUTH KALIMAN

(Level Makro) (1)

TIMBER INDUSTRY

TIMBER INDUSTRY UNITS IN SOUTH KALIMANTAN(Level

Mikro) (2)

Timber based industry development in South Kalimantan Province

Industry Investment and

Re-investment(8)

Company Finance Condition(3)

Information system and data (2.1.2)

Enabling condition South Kal Timber

Industry

Ya

No

Ya

No

Circulation, Trade of Log

and Word Product(1.3)

Picture 5.6. Relation between factors affecting the achievement of timber based industry performance in South Kalimantan Province

75

5.3.1.1. Internal Factor

Internal factors are factors in SWOT analysis that identify strengths and weaknesses that can be used in the development of a sustainable timber industry in South Kalimantan.

Strength:

The power which can be used for the development of sustaonable timber industry in South Kalimantan: 1. Contribution to Gross Regional Domestic Income (PDRB) and people economy from the timber

industry; 2. Woodworking industry and crafts supported by Skill / Culture / Local Skills 3. The number of existing industry today is considered enough. 4. The availability of domestic and internatioanl markets for wood products 5. Strong support from local government for the development of the timber industry 6. Infrastructure for the timber industry has been built properly, except for the future industry 7. Timber industry does not damage the environment, the development of some forest

management systems in South Kalimantan have been heading to the sustainable forest. Weaknesses:

In general, the weakness is a constraint factor in the development of sustainable timber industry in South Kalimantan:

1. The availability of skilled human resources is a major constraint, particularly in the development of excellent product industry in South Kalimantan - fiber-based industries

2. Limited capital (solvency) and bad financial performance are still regarded as factors of weakness in developing modern industry in South Kalimantan

3. Mastery of modern industrial technology is also considered as a constraint 4. Poor market access with regard to fiber-based industrial products 5. Infrastructure for the future industry is still not enough 6. Political policies, especially related with provision of raw materials 7. Institutional strengthening for timber industry is still considered inadequate.

5.3.1.2. External Factor

External factors in SWOT analysis are factors that can describe the environment out of sustainable development of timber industry in South Kalimantan, which includes opportunities and Threat.

Opportunities:

The opportunities can be identified in connection with the efforts to develop timber industry in South Kalimantan:

1. Both export market and inter-regional market for products from the timber industry 2. Development of timber industry can provide better added value. This is supported by the fact

that log from Central Kalimantan is processed in South Kalimantan 3. The development of timber industry requires a large number of workers 4. Timber industry has given good multiplier effect in several areas in Indonesia, including South

Kalimantan; 5. The opportunity to run new businesses in timber industry is still open widely in South

Kalimantan. Threats:

Threats may arise in the development of sustainable timber industry in South Kalimantan: 1. Competition from the surrounding area which also produce similar products.

76

2. Changes in regional / national policy which raised concerns in the development of timber industry, especially related to environmental factors. This is related to illegal logging team activities set by the government.

3. Decrease in raw material supply can be regarded as a threat. 4. Decrease of product attraction

After a discussion of an expert team, every element of external and internal factors is formulated into

5 elements each. From the evaluation of internal and external factors then a matrix that describes the development of timber industry is compiled as shown in Figure 5.4. The result of the SWOT calculation is presented in Table 5.8. Thus, development strategies for each quadrant will differ from one another.

Figure 5.7. EFE-IFE position of some excellent product/industry that can be developed in South

Kalimantan

Table 5.8. Result of SWOT analysis of leading timber industry in South Kalimantan

Wood IndustrI/Product STRENGTH WEAKNESSES OPPURTUNITY THREAT

Craft and art product industry 2,206 1,753 3,846 3,750 Furniture industry 2,627 2,351 4,346 3,500 Fiber board industry 2,331 2,582 4,320 3,375 Particle board industry 2,091 2,409 3,692 3,500 Pulp and paper industry 2,467 2,332 4,000 3,750 Plywood industry 2,923 1,522 3,307 4,000 Veneer industry 2,812 1,138 2,922 3,875 Block board industry 2,923 1,445 3,307 3,500 Wood Working industry 3,071 1,445 3,384 3,500

77

5.3.2 Value chain of some competitive wood industry

Based on an analysis of some products, it has been identified that at Quadrant 4 the support of external and internal factors is very strong. Fiber-based timber industry and primary woodworking are competitive timber industry product in South Kalimantan. Industrial products that fit that category and can be developed in South Kalimantan are: 1) the pulp and paper industry; 2) furniture, and 3) wood crafts.

Identification of the core competencies that become competitive products in South Kalimantan is based on the concept of value system developed by Porter - a connection between a major industry with all the related industries. An industry is a set of activities performed to design, produce, market, deliver, and support its products. Kotler et al. (1997), describes the vertical and horizontal value chain, which is an input or output connection of the industry. Image of the value chain of leading pulp and paper industry is presented in Figure 5.5.

There are two types of vertical value chain - forward and backward. From the standpoint of major industries, all industries related vertically are known as "supporting industries". Horizontal chain is the industry or other businesses that are complementary to each other with technology and / or marketing. All industries / businesses involved in the horizontal chain are called "relatedindustry / business." Horizontal chain includes industry / business of crop production inputs and farming equipment, and industrial / commercial business of cultivation and processing tools / equipment, transportation service industry / distribution, and wood byproduct procerssing industry. The second and the third competitive industry in South Kalimantan is woodworking based industry, especially art products and creative product. Competitive industries in South Kalimantan are Furniture and Woodworking Industry. Those two industry are closely related with the development of industry and small businesses that involve the community. Timber industry value chain which is based on art and creativity is presented in Figure 5.6.

Figure 5.9. value chain of wood working based timber industry (Secondary)

MutiarTambkMutia

PeralatPengraji

Pemasarmutia

IndustriAksesorimutiarFurniture Interior

Design Perhiasan mutiar Perumahan/ Hunian

wood component

Wood Raw material

Furniture marketing

Wood

Log

or s

awn

timbe

r

Wood Craft

Sebetan

Figure 5.8. Value chain of fiber based timber industry

Mutiara

TambkMutia

PeralatPengraji

Pemasar

mutia

IndustriAksesorismutiarPulping Paper Perhiasa

nmutiar Stationeries Chips

Chemical

Pulp Marketing

Fiber Board(MDF.HD

Building material

Wood

Raw

Mat

eria

l

Waste Biomass/ Liquor

Fertilizer/ Energy

78

The concept of value chains, according to many experts, is a powerful way to conceptualize business, where companies create value for buyers with the company activities. Value chain approach is based on a series of sequential events, a set of value activities performed to design, produce, market, send and support their products and services. Application scheme of value chain in timber industry in general is presented in Figure 5.10.

Main Industry cluster infrastructure (forest, infrastructure, road transportation, energy, communication, etc.) Human resource management (forest management, production, , and others labor) Technology development (cultivation, production technology, information tecnology, etc, ) Su

ppor

ting

Act

iviti

es

Trade (raw materials, processing equipment, production supporting materials, chemical substances, packaging materials, services, etc.)

Prim

ary

Act

iviti

es

Purc

hasi

ng o

r pr

ocur

emen

t of r

aw

mat

eria

ls to

sup

port

in

dust

ry

proc

essi

ng, p

roce

ssin

g af

ter h

arve

stin

g in

the

upst

ream

and

dow

nstre

am

indu

strie

s

mar

ketin

g an

d sa

les,

whi

ch

is a

bout

mar

ket

cont

rol a

nd s

ubst

itutio

n of

go

ods

serv

ices

in p

rodu

ct

deve

lopm

ent d

owns

trea

m ti

mbe

r ind

ustry

Figure 5.10. Wood Industry Value Chain

Value activity according to Porter (1990) is divided into two, primary activities and support activities. Primary activity deals with the physical formation of products and sales, and transfers to the buyer as well as after-sales assistance. Supporting activity support the primary activities and support each other by providing purchased inputs, technology, human resources (HR) and the basic rules of the company.

5.4. STRATEGY FORMULATION BASED ON TIMBER INDUSTRY SECTOR

Development startegy of timber industry in South Kalimantan by using SWOT analysis is presented in

Table 5.9. The analysis was prepared based on the competitive industrial sector which has been identified in previous analysis.

MARGIN

79

Tabel 5.9. Sustainable timber industry development strategy in South Kalimantan based on SWOT Analysis

Strengths (S) 1. Contribution to gross regional domestic revenue (PDRB) and the economy 2. The number of existing industries 3. Market Availability 4. Strong support from local government 5. Conventional timber industry infrastructure

Weaknesses (W) 1. The availability of skilled human resources (design) 2. Limited capital and a decrease in financial performance 3. Mastery of technology (processing, finishing) 4. Future product markets access (Association)

Opportunities (O) 1. The market potential is still very big 2. Providing better added value 3. Require a number of labors 4. Giving multiplier effect 5. New business oppurtunity

Strategi SO : 1. Increased scale of business 2. Development of advanced procesing industry 3. Development of timber industry cluster (wood working and furniture) 4. Maintaining market

Strategi WO 1. Improving human resource skills through education and training 2. Investment policy 3. Policy on raw materials 4. Strengthening the product market 5. Infrastructure Improvement

Threats (T) 1. Increasing competition (substitution, global demand, and product competition) 2. Changes in regional/national policy 3. Scarcity of raw material supply 4. Produvt attraction decrease 5. Institutional and infrastructure

Strategi ST 1. Improving the business climate through regional and national policies 2. The policy of raw materials 3. Build a feeder for the industry 4. Policy on legality of processed wood products 5. Product diversification

Strategi WT 1. Improving education and training facilities 2. Policy on raw materials; 3. Improvement of institutions and infrastructure 4. Strengthening the domestic market 5. Costly reserve

Note: There are only 5 selected factors that were analyzed Based on the analysis of quadrant 1 product, the internal and external factors are weak, not found. In general, there is no weak and threatened industry. Fiberboard and particle board industries that are in quadrant II have weak internal factors but strong external factor. The strategy that needs to be developed is the strategy WO: 1. Improving human resource skills through education and training 2. Investment policy 3. Policy on raw materials 4. New product market strengthening and opening 5. Infrastructure improvement.

Industries that are in quadrant III, have weak external factors but strong internal factor - Plywood, Blockboard, and Wood Working. Thus, some strategies need to be run: 1. Improving the business climate through regional and national policies 2. The policy of raw materials 3. Build a feeder for the industry 4. Legality policy of processed wood products 5. Product Diversification.

The industry that has both internal and external strength of SWOT analysis is furniture, wood crafts, as well as pulp and paper. It has been agreed that pulp and paper industry will be the new future industry that will be developed on a long-term period in South Kalimantan. The strategy that needs to be developed are: 1. Business scale increase 2. Development of advanced processing industry 2. Development of cluster of timber industry (wood working and furniture) 3. Maintainance of market control.

INTERNAL

EKSTERNAL

80

Table 5.10. Analysis of the general strategy of sustainable development of timber industry in South Kalimantan

General Strategy Resources Technology and knowledge Skill/ Competence Analysis

Production Increase (Including

feeder)

1. Installed capacity of the timber industry in South Kalimantan, shows that only 1 / 10 of raw material fulfilled. The difficulty to fulfill the raw materials effect the production,

2. Over 50 % production of plantations forest sold to other provinces

1. Conventional industrial production technologies does not progress in two decades, low productivity;

2. Future production technology has not been intensively prepared

1. Skills and the willingness of resources for conventional timber industry is no doubt;

2. Preparation of human resources for future timber industry needs to be prepared intensively

The strategy for increasing production from existing industry is currently very closely related to the provision of raw materials and repairs teknoogi become more productive, including feeder

Provision of security of raw material supply

1. Natural forest management system (KPHP) to ensure security of raw materials;

2. Reducing the supply from outside of the province which now reach more than 50%

1. Conventional industrial production technologies does not progress in two decades, low effiiciency;

2. Future production technology should be more efficeint, raw materil conversion

Skills in managing forest resources, service improvement

Strategy to provide supply of raw materials associated with the implementation of KPHP and industrial process technology imrovement for efficient use of raw materials

Market Mastery

1. Market requirements toward source of raw materials associated with the Sustainable Forestry Management (SFM).

2. The market for plantation forest products

Wider product marketing require improvement in the quality of products and packaging

Have very good marketing capability

Market demand fulfillment strategies of SFM requirements toward raw materials including promotion

Strengthening the Processing Technology

Improvement of exploitation technique, transportation, and raw material handling

1. Improvement of conventional industrial production technologies to be more productive;

2. Future production technology should be mastered

1. Improvement of skills for the quality maintenance and future technological mastery of the timber industry.

2. Increasing the role of the institutions of science and R & D

Technology improement through rejuvenation of the conventional timber industry machinery and development of future industry technology.

Human Reources Development

1. Improvement of forest management skills;

2. Improvement of raw materials management skill.

Mastery of technology through the involvement of various education and training institutions

Skills development, especially for creative industries

Resource development toward modern technology mastery and creative industry skills development

Institutional Business

Build institution for business people and raw material trade (for clusters) and the empowerment of existing associations (large industry). Compilation of institutional policies related to resource

Institution connecting the mastery of industrial technology in the form of clusters and the empowerment of existing associations (large industrial) Compilation of institutional policies related to the development of science and technology

Institutional capacity building and skill.

The development of creative industries cluster model

Improved Business Climate

Creation of conducive climate in the provision of raw materials through the rearrangement of circulation forest products

Facilitating the establishment and provision of modern technology for industrial development

Facilitation of local human resources

Restructuring the system of monitoring illegal logging rules and facilitation to get licensie of industrial development

Processed wood legality Policy

Product diversification, assistance for processing industries with high raw material conversion

Policy on the use of of raw materials associated with the application of technology and knowledge

The policy of raw material for handicraft business and creative products

Cosly reserve

Based on this strategy, General Strategy on the sustainable development of the timber industry in South Kalimantan is then formulated, as presented in Table 5.10. Sustainable timber industry development strategy in South Kalimantan is formulated using the method of Analytical Hierarchy

81

Process (AHP). The analysis was made according to three industry groups referring to the quadrant on the SWOT analysis.

Operational strategy of woodworking based timber industry development, plywood industry in particular, have priority in quadrant II. In principle, plywood Industry still can be developed into a sustainable industry through technology improvement and product diversification. The technology which has been used used up to now has not changed for more than two decades. AHP results from the plywood industry strategies are presented in Table 5.11.

Table 5.11. Priority of plywood industry development strategy in South Kalimantan

RA

W

MA

TER

IAL

TEK

NO

LOG

I

INFR

AST

RU

CTU

RE

CA

PITA

L

LOC

AL

REG

ULA

TIO

N

MA

RK

ET

AC

CES

S

CU

LTU

RE

STRATEGY ALTERNATIVE

0,3062 0,0884 0,0685 0,2165 0,1531 0,0884 0,0791

CO

MB

INED

VA

LUE

Ran

king

Production Increase 0,17333 0,25004 0,14330 0,19417 0,09327 0,07271 0,04774 0,15149 3

Raw Material Supply 0,40629 0,31862 0,43553 0,51064 0,36801 0,05180 0,11693 0,36307 1

Market Contral 0,24329 0,25004 0,19054 0,05393 0,03369 0,42374 0,03401 0,16660 2

Technology mastery 0,03446 0,03982 0,04004 0,07061 0,09327 0,05180 0,13502 0,06162 6

HRD Development 0,04603 0,03482 0,03186 0,03276 0,03369 0,07271 0,31782 0,06315 5

Instituional Strenthening

0,05898 0,03448 0,02400 0,04007 0,02592 0,08864 0,21348 0,06010 7

Business Climate Improvement

0,03763 0,07218 0,13473 0,09782 0,35215 0,23859 0,13502 0,13397 4

Strategies option for the development of woodworking industry, especially plywood, rely on: 1) raw materials control, 2) market control, and 3) production increase.

Development strategy of fiber-based timber industry which is in quadrant III was developed with a

similar analysis but produces a different opinion. AHP analysis results toward strategic priorities are presented in Table 5.12. Fibreboard and particle board industry shows the following priority strategies: 1) raw materials cupply control, 2) mastery of technology; and 3) market control. Those three strategy are relevant considering the fact that fiber-based timber industry in South Kalimantan has not been developed. Table 5.12. Priority of fiber based industry development strategy in South Kalimantan

STRATEGY ALTERNATIVE R

AW

M

ATE

RIA

L

TEK

NO

LOG

I

INFR

AST

RU

CTU

RE

CA

PITA

L

LOC

AL

REG

ULA

TIO

N

MA

RK

ET

AC

CES

S

CU

LTU

RE

STRATEGY ALTERNATIVE

0,0742 0,1960 0,2104 0,3234 0,1474 0,0254 0,0233

CO

MB

INED

VA

LUE

Ran

king

Production Increase

Peningkatan\ Produksi

0,04070 0,05828 0,24372 0,17837 0,12843 0,11821 0,04774 0,14644 3

Raw Material Supply

Pengamanan Pasokan Bahan Baku

0,21535 0,04294 0,33767 0,31710 0,45777 0,04342 0,11693 0,26928 1

Market Contral Penguasaan Pasar 0,09969 0,02318 0,06293 0,04813 0,04170 0,51257 0,03401 0,06068 7

Technology mastery

Penguasaan Teknologi

0,26374 0,24620 0,17234 0,34588 0,03375 0,08422 0,13502 0,22620 2

HRD Development

Pengembangan SDM

0,14098 0,34387 0,07036 0,02998 0,04170 0,03393 0,31782 0,11675 5

Instituional Strenthening

Penguatan Kelembagaan

0,05755 0,14276 0,03591 0,03546 0,04170 0,05752 0,21348 0,06385 6

Business Climate Improvement

Perbikan Iklim Usaha

0,18200 0,14276 0,07707 0,04509 0,25494 0,15014 0,13502 0,11681 4

82

5.5. STRATEGY FORMULATION OF SPATIAL BASED TIMBER INDUSTRY

5.5.1. Supply-Demand linkage of KPH based raw material

Spatial based timber industry development strategy is adjusted with maps of raw material potential sources. South Kalimantan province has divided the forest land using Forest Management Unit (FMU), -11 KPH. The number of KPH is less than the number of the existing District, so there is a KPH which covers two districts. The legal basis for the stipulation of KPH has been issued by the Director General of Planning Ministry of Forestry of Indonesia through Directorate general decree No.S.370/VII-WP3H/2009. By using the concept of KPH, then the idea of Wood Terminal was developed, with the following objectives: 1. Ensuring supply balance through timber circulation administrative arrangements; 2. Ensuring the availability of legal timber and reduce the illegal timber circulation; 3. Assuring the quality of timber; 4. Moving the economy in each KPH to become more dynamic 5. Assisting the monitoring of stocks in every KHP.

The establishment of wood terminal is a requirement for the development of industry in an KPH area. The concept is relevant to the planning of industrial cluster. In general, planning of wood terminal is based on spatial concepts presented in Figure 5.12.

Spatial based industries planning is also considering several issues related to the infrastructure. Primary woodworking industry - Wood Panel (Plymill) currently has been posotioned along the Barito River, in Banjarmasin. Therefore, the whole infrastructure for the plymill industry has been available, the industry will be maintained in the city of Banjarmasin.

Fiber-based timber industry such as pulp and paper has been constructed according to the characteristics of the industry and its trade orientation. The industry is planned to be developed on the southeast coastal locations, to reach the export transportation access. The pulp and paper industry cluster in the southeast coast will also help the supply of industrial chemicals from East Java.

83

Figure 5.11. KPH and small, medium and large scale timber industry

84

Figure 5.12 Cluster map and small, medium and large industry cluster

85

The industry also can not be developed around the Banjarmasin or Banjar Regency because it

has a potential to contaminate agricultural land, particularly the national rice production centers. Results of analysis of raw material potential sources with KPHP concept is presented in Table 5.13 Table 5.13. Spatial analysis result in determining the source of wood raw material and establishment

of timber terminals

Note: Lackof supply in major industries in other KPH was allocated tobig industry.

Scenarios I and II were made without taking into account the development of large-scale industry until the year 2040. When considering the development of large industries such aspulp industry, it will be in short supply

Results of production potential analysis in each KPH indicates that there can be at least 7 (seven) timber terminal in South Kalimantan. 5.5.2. Industry Clusterring Enright (2000) identified some level of cluster development as follows: 1. Operational Cluster, a cluster which has reached critical mass of knowledge, expertise,

personnel and resources to form aglomeration economies used as a cluster to compete with companies outside the cluster;

2. Latent cluster, the cluster has also reached critical mass, but it is still not fully developed to utilize the interaction and information flow within the cluster. This could be due to lack of knowledge about other companies that exist in the area, lack of interaction between companies and among individuals, and lack of common understanding about the future vision or lack of confidence among companies to seek and exploit together.

3. Potential cluster, is a cluster that already has some important elements for successful cluster development, however, deepening and broadenin are still need to be done in order to utilize the agglomeration. Often there are gaps in the input, services or the flow of information needed to develop the cluster. As is the case of latent clusters, this cluster does not have interaction and awareness required by an operational cluster.

KPH Units Production forecast

Supply for Industries

Big Small

Wood Demand in 2008

Small Ind.

Big Industries

Remaining Supply

Small Ind. Big Industries

Wood

Terminal

Wood available in

Wood Terminal

Legal Industries existing

Proposed small Industries

Potential Actual

Skenario I => if all the available production area utilized alll

Skenario II => prediction of utilization of production area based oneconomic growth and the ability of investorsin forestry sector

86

4. Conditional clusters, a cluster selected by the government to be given support, but has not reached critical mass of the number of companies. Based on an assessment of timber industry in South Kalimantan, craft based woodworking

industry and furniture are potential to be developed on KPH based. Cluster development can be undetaken per KPH geographically. The evaluation results show that the cluster development of timber industry in South Kalimantan is still on the Conditional Cluster.

According to Keeney and Swirski (Austrian, 2000) cluster mapping can be done by dividing the members of the 4 components: 1) Market (customer); 2) Export products (products that are sold out KPH; 3) suppliers (suppliers of raw materials, related industries and supporting industries), and 4) Infrastructure (physical and non physical). Thus, the timber industry cluster mapping at a KPH is presented in Figure 5.9.

Figure 5.13. Mapping of KPH -based cluster of timber industry in South Kalimantan

Network structure is a central organization that relies on other organizations to perform activities - logistics, production, distribution, marketing or other business functions - on the basis of agreements. In order to be effective, cluster development in a KPH requires an institution for Timber Industry Cluster Development - KPH, as a forum of communication to perform the functions of coordination, facilitation, and supervision. The institution consists of representatives from government, business, financial institutions, educational institutions and training and research development, testing agencies, standardization and certification, producer associations, chaired by both the government and the business world.

The linkage among parties in instituion design model may include information or material. The material linkage may be in the form of technology, capital or equipment. In general, the institutional model of KPH based cluster of timber industry in South Kalimantan is presented in Figure 5.10.

Trader and Product Distributot

MARKET (Customer)

Forest Management, Wood Collectors, Wood Traders

Last Customer

PRODUCT (Export)

Intermediate product – out of KPH

- Veneer - Chips - Sawn Timber

Finished Product – out of KPH

- Moulding - Laminated product

Finished product for Last Customer market - Moulding - Furniture - Craft

SUPPLIER

Raw material and additional material

- Logr - Special wood - Adhesives - Finishing materials - Packing materials

Factory Maintenance & Supplies

- Workshop - Sanding paper, router

bit, saw tip, blade, dll - Power plant supplies - Workers equipment

Non Physical Supplies - Transportation - Communication - Electricity - Insurance - Entertainment

INFRASTRUCTUR

Bus

ines

s A

ssoc

iatio

n an

d co

oper

ativ

e

For

est M

anag

emen

t Uni

t (K

PH

)

Log

term

inal

M

anag

emen

t Uni

t

Res

earc

h In

stit

utio

n

Fina

nce

Inst

ituti

ons

Edu

catio

n In

stitu

tions

Voc

atio

nal S

choo

l

Inst

ituio

ns to

dev

elop

in

dust

ry

87

Supply-demand analysis formulated at least 3 (three) kinds of cluster core industry that can be developed in South Kalimantan. Industrial cluster that can be built are: 1) furniture industry cluster, 2) fiber industry cluster, and 3) the veneer cluster industry. The strength of veneer-based industry is not expected to be as strong as the other two clusters, but it is only a buffer until the year 2020. Table 5.14. presents the analysis results of KPHP-based industry in South Kalimantan KPHP. Table 5.14. The analysis result of KPHP based cluster of timber industry in South Kalimantan

province

Factuals Additions* KPH Unit

Administrative Regional Coverage

Total of current

Industry** Pesimistic Optimistic

Feeder Claster Core

Klaster

KPHP UNIT I Banjar,Banjarbaru,Tapin,Bjm 43 8 13 Venir, Sawn Timber I W I

KPHP UNIT II Cantung, Kotabaru 0 12 20 Chips Pulp

KPHP UNIT III Pulau Laut, Kotabaru 3 8 14 Chips Rough Pulp

KPHL UNIT IV Sengayam, Kotabaru 0 3 4 Sawn Timber Meubel

KPHP UNIT V Tabalong kanan, Balangan 4 4 6 Venir Plywood

KPHP UNIT VI Tanah Bumbu 0 13 21 Chips Pulp

KPHP UNIT VII Tanah laut 15 3 6 Chips Pulp

KPHL UNIT VIII Balangan 3 0 0 Sawn Timber Meubel

KPHL UNIT IX HST, HSU, HSS 20 0 0 Sawn Timber Meubel

KPHP UNIT X Tabalong Kiwa 4 5 8 Venir Plywood

Total 92 66 92 Note: * Factual Addition based on the assumption all production area has been managed in KPH ** Current conditions are the industry has official permission

Figure 5.14. Institutional model of KPH-based cluster of timber industry in South Kalimantan

Note: Flow of information

Flow of material

Wood Industry Cluster Development Institutions per KPH

Wood Industry Strategy Unit and Cluster Facility

Exporters and Traders

Financial Institutions

Regulatory Bodies - Industry and Trade

Serv - KPH

Timber Industry(core)

Timber Industry (related)

Association of cluster business actor

Supporting Industri

Standardrization and sertification Institutions

Education Institutions

Research Institutions

Capital

Insurance

Product

Regulation

Capital IInsurance

Regulation material

informationTeknologi Management Mechine,

Equipment, Sub Material, Service Transportation, technical things.

Certificate Competent Labor

Management Technology

88

The analysis result also designed the total number of industry that can be developed in each KPHP according to the potential of wood resources that can be supplied independently. The data presented here is adjusted to the conditions of industrial production capacity at this time.

Determination of the core cluster industries should actually be done through a process of FGD Focus Group Discussion), in which various parties are invited to brainstorm the industry's core competencies in each area. As an initial stage of the process of wood-based industrial cluster development in South Kalimantan, the determination of the core clusters in the early stages is predicted by the following considerations: 1. Determination of Fiber-Based Industrial Cluster Core, consider: a) the location of chip industry

which is the origin of fiber industry; b) Cluster interaction with sources of raw materials; c) cluster interaction with source of chemical supply; d) cluster interaction with the market; and e) environmental impact of fiber-based wood industry cluster;

2. Determination of Furniture Industry Cluster Core, consider: a) the community - projob and propoor; b) technologies that can be adopted by the area close to the raw materials, and c) move the wood added value closer to the source of raw materials;

3. Determination of Veneer Cluster Core is considered to be a feeder for the existing timber industry in Banjarmasin.

5.6. STRATEGY OF PROJOB AND PROPOOR TIMBER INDUSTRY

In general, timber industry in Indonesia is actually propoor and projob – intensive semi-

automated technology. The largest employment is in wood panel industry, it reach 1.300 people for the capacity of 10.000 m3/month. Wood working and other wood processing industries employ of about 300-400 people for the capacity of 1.200m3/month.

. Added value of some industries can be transferred to the industry upstream chain, thus opening the widest possible opportunities for entrepreneurs with small and medium-sized capital. Plywood and LVL industries can move theirs production to a location close to the raw materials so it will add value for community around the forest. Fiber-based industries enable community to produce fibers using simple and environmentally friendly technologies, such as biopulping process. As for the furniture and wood craft industry can use the community to produce a variety of turning products.

Table 5.15. Priority of art and creativity based industry development in South Kalimantan

RA

W

MA

TER

IAL

TEC

HN

OLO

GY

INFR

A-

STU

RC

TUR

E

CA

PITA

L

LOC

AL

REG

ULA

TIO

N

MA

RK

ET

AC

CES

CU

LTU

RE

STRATEGY ALTERNATIVE

0,2553 0,0737 0,0571 0,0737 0,2553 0,1042 0,1806

INTE

GR

ATE

D

VALU

E

Ran

king

Production Increase 0,12416 0,23589 0,15517 0,18990 0,07435 0,17080 0,06980 0,12134 5 Provicion of raw material supply 0,32496 0,09630 0,48142 0,42720 0,34511 0,05546 0,02181 0,24689 1

Market control 0,28727 0,06809 0,04904 0,04977 0,02741 0,55249 0,13125 0,17313 2

Technology Mastery 0,02594 0,03757 0,03380 0,04846 0,02741 0,07464 0,09797 0,04736 7

Human Resources Dev 0,08779 0,22856 0,10973 0,15273 0,07548 0,05546 0,36449 0,14765 3 Institutional Strrengthening 0,06208 0,16680 0,02494 0,03698 0,12360 0,04477 0,26852 0,11701 6

Business Climate 0,08779 0,16680 0,14590 0,09495 0,32663 0,04638 0,04615 0,14661 4

89

In the system of value chain, the community could benefit the added value through a sub-system of supporting material. The use of iron frame, leather lining, rattan woven, fiber woven, for furniture products can provide added value for communities. Art and creativity based secondary woodworking industry is the most concrete type of industry to realize the concept propoor and projob. An illustration of supply chain systems for furniture products is presented in Figure 5.11.

Figure 5.15. Furniture industry tree and the possibility of public involvement in the supply chain

Fiber, art and creativity based timber industry development strategy in quadrant IV is presented in Table 5.15. Craft and furniture industry strategic priorities are: 1) Securing supplies of raw materials, 2) controlling the market, and 3) developing human resource. Market control has become a a priority after securing raw materials since the marketting of furniture and handicraft products from the South Kalimantan province is still low in the domestic and export market. Meanwhile, human resource must be developed toward skillfull labor with world-class design.

ProductDerivates Industry Wood Working Industry

Logging

Sawmill

Dryer

Joining (butt, finger, clamp)

Forming (Moulding)

Meubel Industry

Handycraft Industry

Home Industries

Sawn Timber

Waste Logging

Dry Sawn Timber

Biomassa Processing Energy

Compost For

estr

y P

rim

ary

Woo

dwor

king

In

dust

ry

Sec

onda

ry W

oodw

orki

ng I

ndus

try

Not Component of Wood; Chemical

Not Component of Wood; Chemical

industry that can be developed directly in South Kalimantan

industry that can be developed by individual investors

industry that can be developed in elsewhere

90

PROJECTION AND IMPLEMENTATION AGENDA OF

SUSTAINABLE DEVELOPMENT OF WOOD BASED INDUSTRY IN SOUTH KALIMANTAN

6.1. PERFORMANCE TARGET

Performance target has been set to be a benchmark for the program achievement in sustainable development of timber industry in South Kalimantan province. The target is derived from the measured or calculated objective that had been formulated. Performance targets consist of medium-term target (2010 - 2020) and long-term target. Medium-term targets have been prepared as presented in Table 6.1.

Table 6.1. Medium-term performance targets of sustainable development of forestry industry in South Kalimantan province

Medium term target (2010-2020) Meausred target

- Ensuring continuity of raw material supply - Increasing revenue of collectors and people forest - Overcoming the problems of illegal logging and timber

circulation - Building log terminal

1. The stipulation of the establishment of KPH in 2010 2. All KPHs start functioning in 2015 3. Log terminal are established in 2010 in two locations and all

KPHs in 2015

- Rejuvenating of the timber industry machinery - Increasing industrial management

1. Plymill industry that survive should do rejuvenation in no later than 2015

2. All plymill industry obtained ISO 9001:2008 and CoC in 2015 - Establishment the fiber-based industries - Optimizing the utilization of waste

1. Construction of pulp and paper mill starts in 2010 and should ne completed in 2015

2. investment in energy-based industries in the Year 2010 Building energy center Additional power plant should be built in each district in 2015 Building a creative industry cluster At least 2 clusters of timber industry should be built in two KPHs

in 2015 - Fulfillng local market with a variety of creative products - Achieving market diversification for conventional wood

products to other countries - Building product marketing facilities

1. Promotion center of handicraft products and furniture should have been built in provincial capitals in the Year 2012;

2. Traditional market distribution of 60:40 in the year 2015

Overcoming the problems of illegal logging and timber circulation

Local government has full authority in the of arrangement timber circulation in 2020

Facilitating the coordination of both intra-and inter- business industrial activities

Industry associations play an active role again in 2012 Finance Institutions for small and medium scale industry should have been built in 2015 Professional Group in 2013

- Developing workshops for creative industries skills development

- Increasing the role of research and science institutions to human resource development

- Improving human resource capacity for the production of creative industries

Modern workshop for timber training in Year 2012 Vocationall institution in 2012

6.2. STRATEGIC STEPS OF TECHNOLOGY ADAPTATION

Development of sustainable timber industry in South Kalimantan can not be separated from several existing factors such as: 1) topography and natural environment, 2) socio-cultural conditions;

6

91

3) existence of industries, 4) infrastructure; and 5) strong commitment from stakeholders. The development of an industry should also consider the following:

a. raw material base, especially for forestry industry; b. worker base, for intensie industry – furniture and craft c. market base, for consumer’s good industry; d. infrastructure base, for industry with dominant supply chain system; e. foot lose, industry that can be establsihed everywhere.

The mapping result of the condition of timber industry in South Kalimantan shows that there are

at least three dominant factors: 1) the availability of raw materials, 2) the location of the timber industry, and 3) market. It has been analyzed that support for raw materials is supported by adequate forest. Then, the market can be integrated with the existing traditional markets, as well as opening new markets.

Roadmap of timber industry development, particularly the woodworking-based industry, fiber, arts and crafts industries cover these aspects: 1) Forest management aspect, 2) production aspect; 3) Infrastructure Aspect, 4) Human Resources aspect ; 5) Marketing; and 6) Institutional Aspects.

6.2.1. Raw Material Aspect

Sources of raw materials which are available today include natural forests, industry forest, and community forest, still need improvement. Overlapping land of mining, plantation, agricultural require special attention for its settlement. Raw materials come from the management unit or IUPHHK, other sources IUPHHK, Gerhan, restoration, community forests, etc.

The development of KPH based wood processing center is required, at least per district. Creativity and art based woodwroking industry such as furniture and handicraft products is more suitable to be developed.

Development of a new timber industry center can be done in collaboration with several parties:

a. Ministry of Industry, through the local industry services; b. State Owned enterprise (SOE) through a Partnership Program (CSR); c. National private companies through its Corporate Social Responsibility (CSR) d. Private investment.

Wood workshop, either for new business developemnt or expanding the existing businesses, is a

program that needs to be developed in the short term.

6.2.2. Aspect of Wood Processing Production

Aspects of production is ranging from volume improvement, product diversification, improvement of processing technologies, to byproduct processing. Aspects of production can be generally grouped into three concerns: 1) product, 2) management; and 3) processing technology.

Plywood products still need to be improved, in terms of productivity, quality, and efficiency. Plywood products in the future should have lead to the special products which have high added value such as Laminated Veneer Lumber (LVL), Plywood Coated, and other secondary products.

Technology that should be developed to be more efficient and more productive are the use of Spindleless Rotary, Horizontal Plywood Presssing, Jet Drying System, blade connector machine, and some other modern machines. For fiber-based industry, environmentally friendly technologies should be selected to reduce environmental pollution in South Kalimantan.

Production management needs to get attention, in term of productivity, quality, efficiency, security and product sustainability. Business doers need training and guidance on: 1) Production

92

Planning and Inventory Control (PPIC), 2) Good Manufacturing Practises (GMP); 3) Quality Management System (QMS), 4) Sustainable Forestry Management; 5) Environmental Assurance, 6 ) Cost leadership; 7) Efficiency and 8) the Occupational Safety and Health Management. Training and guidance are needed as a short term target.

6.2.3. Infrastructure Aspects

In general, infrastructure for the plywood industry has been very good in South Kalimantan. Infrastructure needs to be built for the development of fiber-based and creativity-based timber industry. Production centers are mapped in such a manner in accordance with the characteristics and the availability of land and raw materials.

Fiber-based industry is established close to production center of industrial forest and on the coastal area, by considering the marketing and pollution aspects. Fiber-based industries can not be undertaken in Banjar District since it has been set as a moratorium on permanent paddy fields. South Kalimantan has now successfully become a national rice barns.

Plywood industry, in the banks of the Barito River in Banjarmasin, do not need to be relocated since the infrastructure is already good and so is its supporting industry.

Infrastructure for strengthening the marketing aspect is needed to open more outlets and product distribution channels. Channels of distribution are still urgently needed to market art and creative products.

6.2.4. Human Resources Aspect

Human resources development can be done through training, as an effort to improve the capability of business people. The training includes: 1. sustainable forest management; 2. development of new processed products such as fiber-based products and creative product 3. waste utilization, especially for creative and energy based production; 4. management system training as discussed in production aspect; 5. training related to the operation of equipment; 6. business training in timber industry; 7. other relevant training.

The above training should be given to business people and some topics from the above training should also be given to extension workers in the area per district.

6.2.5. Marketing/circulation aspect

Market control for plywood product is relatively strong with more than 70% towards the Asian market. Opening of new markets is necessary for fiber-based products and creative products. There are at least two advantages that may drive the marketing of wood products in South Kalimantan Province namely: 1. High demand of wood; 2. The available wood resources potential is still available in the province.

Demand for wood products coming from sustainably managed forests in the last ten years has increased rapidly. KPH is expected to be able to provide the raw materials needed by Green Product market. In the country, the legal aspect has become an integral part in the timber trade, so the success of KPH is really expected.

93

Circulation of raw material is controlled through an integrated timber terminal system. Timber terminals are built at efficient and effective spots. Timber terminal has been prepared to be built as of KPH-a supply for industries that are built in clusters in KPH.

6.2.6. Institutional Aspects

The initiation phase of new business development of wood processing requires assistance from a number of parties - the government, SOEs, private, or other third parties. Such assistance is generally given to farmers' groups or cooperatives. Cooperative and other groups of artisans require special attention to accelerate the development of the timber industry. The existence of these institutions are expected to be able to overcome the problems of raw materials. A very strong commitment is needed to address the issue of illegal logging..

Forestry business associations have had an important role in maintaining the market and the production of wood products in Indonesia. The association needs to be revitalized, either the organizations or the policies. The Association is also expected to participate in ensuring the supply of industrial raw materials. The role of the association will be able to cut the high cost economy and transactions cost.

6.2.7. Policy Aspect

It has been known that in the last ten years, the forestry sub-sector has not been an attractive business sectors in South Kalimantan, even in Indonesia. This sector has been classified as sunset industry - negative list for investment. A strong policy of local government in South Kalimantan on the development of the forestry industry, especially the timber industry is needed.

The local government policies can be specified in the Long Term Development Plan document (RPJP) or Medium Term Development Plan (Development Plan) in South Kalimantan. The document (RPJP and RPJM) can be used as a reference for all parties in the province for planning operations.

Table 6.2. Roadmap of Timber Industry Development in South Kalimantan Province

Existing Condition Action Program Program Code

Medium Term Plan (2010-2020) Long Term Plan

A. Raw Material Aspect Overlapping land, not all parties implement SFM, circulation problems, illegal logging

1. Strengthening the implementation of SFM

2. Revitalization of KPH function

3. Development of log terminal

4. Overcoming the problems of the circulation of raw material

5. Diversification and conservation of raw

6. materials

(P-A1) (P-A2) (P-A3)

(P-A4)

(P-A5)

- Ensuring the continuity of supply of sustainable raw materials

- Increasing revenue of collectors and people forest

- Overcoming the problems of illegal logging and timber circulation

Promoting forest management and ensuring the sustainability of wood based industry development in the long-term in South Kalimantan

B. Production Aspect

Carpentry technology has not been developed, wood fiber industry has not been developed. Utilization of wood waste has not been intensive. Aspects of quality and production management still need improvement

1. Rejuvenation of woodworking machine

2. Mastery of fiber base woodworking technology

3. Establishment of woodcraft production centers

4. Development of waste treatment technology

(P-B1)

(P-B2)

(P-B3)

(P-B4)

- Rejuvenating timber industry machinery

- Establishing fiber-based industries

- Optimizing the utilization of waste

- Improving the industrial management

- Developing the business scale and product diversification of timber industry

- Increasing the role of the timber industry on local economic growth

- Become centers of production and timber industry clusters in Indonesia

94

C. Infrastructur Aspect

Transportatioan roads are good enough. Creative industry clusters have not formed. Fiber based timber industry infrastructure has not been built

1. Improving of timber transportation road

2. Development of log terminal

3. Development of container port

4. Development of craft center

5. Construction of power plants

(P-C1) (P-C2)

(P-C3)

(P-C4) (P-C5)

- Building log terminal - Building creative industry

cluster - Building product marketing

facilities - Building energy center

- Maintaining the supply of log

- Supporting the energy preservation

- Becoming creative production center of the wood products

D. Human Resources Aspect

The competence of human resources for the fiber based and creative timber industry is still to be improved

1. Development of woodcraft

training centers 2. Increased role of local

intelligent institution 3. Development of training

center for technology development

(P-D1)

(P-D2)

(P-D3)

- Developing job training workshops for creative industries skills development

- Increasing the role of research and science institutions to human resource development

- Improving human resource capacity for the production of creative industries

Ensuring the provision of human resources for the management of creative industries

E. Marketing Aspect

Product marketing of plywood and other crafts are still limited to the upstream and conventional products.

1. The establishment of craft promotion center

2. Market development 3. Improvement of promotion

(P-E1)

(P-E2) (P-E3)

- Fullfilng the local market with a variety of creative products

- Realizing the diversification of markets for conventional wood products to other countries

- Being an integral part of tourism.

- Fullfilng the domestic needs

- Establishing itself in world markets wood products

F. Institutional Aspect

There are no institutions that focus on the development of modern timber industry in South Kalimantan

1. Strengthening the timber trader institutions

2. Strengthening the marketing institutions

(P-F1) (P-F2)

- Facilitating coordination of both intra-and inter-business industrial activities

- Building a wood craft industry cluster

- Having institutions that are able to overcome problems of timber industry in South Kalimantan;

- Becoming centers of production and timber industry clusters in Indonesia

G. Policy Aspect

Some development policy is not conducive to the forestry sub-sectors in South Kalimantan

1. Strengthening the position of the forestry sector in the Regional Development Plan

2. Balanced policy on land use in forestry sector

3. Conducive policies on the raw material timber industry in South Kalimantan

(P-G1)

(P-G2)

(P-G3)

- Strengthening the position of the forestry industry development in South Kalimantan

- Providing land for raw material of industry

- Simplifying timber administration

Providing strong political support to the development of timber industry in South Kalimantan

In short, roadmap of timber industry development in South Kalimantan is presented in Table 6.2. The action plan of timber industry development in South Kalimantan is oriented and refers to the third short-term development goals of competitive industry, namely: 1. Ensuring continuity of supply of raw materials; 2. Improving efficiency and productivity of woodworking timber industry; 3. Preparing for the establishment of fiber-based industries and creative industries 4. Building a creative industry center; 5. Developing markets of wood products; 6. Improving human resource capabilities; 7. Strengthening the institutions.

Fiber-based and creative-based product development are expected to increase added value of wood and expand the employment. The development of creative based product support the marketing potential as a unique tourism product in South Kalimantan. Strategies and action plans for development of timber industry in South Kalimantan are directed to market domination.

95

Development of timber industry in South Kalimantan is expected to provide several advantages namely:

1. increase the production to improve regional economy 2. utilize the livestock waste into compost, fertilizer substitution in the agricultural sector; 3. support sustainable forest management; 4. solve environmental problems; 5. open employment; 6. increase added value of wood products. 6.3. STRATEGIC STEPS OF TECHNOLOGY ADAPTATION

6.3.1. Consolidation Period

Consolidation period is a period in which identification and collection power of the timber industry in South Kalimantan are undertaken. The ability and commitment to the development of the industry of each timber business in South Kalimantan is identified. Industrial capability identification is acquired through the current technology performance map. Commitment is a strong will of corporate leaders to maintain or even expand their industry, including their commitment to develop industrial forest.

Consolidation is required as a baseline or capital for planning the growth of the timber industry in South Kalimantan. The activity is held at the period of 2010-2020. Data consolidation currently owned by South Kalimantan can describe the existing condition for the development of timber industry.

The existing industries that have commitments are expected to be dominated by: 1) primary woodworking industry - plywood, block board, sawmill industry, wood working industry and 2) the secondary woodworking industry and handicraft, furniture industries. Plywood industry is still needed to the year of 2020 since it is a foundation for the development of modern industry. The sawmill and wood working industry still needed as foundation for the furniture industry.

The structure of the plywood industry technology should be rejuvenated because it was inefficient. Almost all units need to get attention, especially peeling machine (lathee), drying machine, the pressing machine and finishing machine. Paring technologies can be rejuvenated to be able process log and small diameter log efficiently. If the plywood industry does not do the rejuvenation of the parer, then peeling machine can be placed close to the resources (feeder). Thus, veneer industry - as the supplier of the plywood industry is expected to start growing during the period of consolidation.

Consolidation for the secondary wood industry is a preparation for fiber-based raw materials, including the establishment of several chip production companies. In this period, plans has also been made to establish a number of fiber-based industries, such as pulp, paper, and fiberboard, in South Kalimantan. 6.3.2. Revitalization Period

This period was marked by the completion of the technological revitalization of production machines of primary timber industry. In the period of revitalization, decade 2020-2030, the plywood industry will transform to secondary plywood and Laminated Veneer Lumber (LVL). Although the technology has not changed to LVL technology, but at least plywood industry will have produced these products.

Furniture industry technology that is developed at the stage of revitalization has experienced improvements in design and production. The use of modern machines like CNC Router for the

96

establishment will be able to increase productivity. Furniture and craft industries have been developed into a KPH based cluster system. Furniture industry which has been developed in South Kalimantan is expected to take over some market in Java.

In the revitalization phase, the development of fiber-based timber industry will have been planned, and even some fibreboard industries are expected to have established. Small-scale production of pulp will have been built, of course with the environmentally friendly technology. Wood pulp production center will support the growth of fiberboard industry.

Other timber industries such as energy and transport-based indusrtri will also be built during this period. Transport-based industry may maintain and develop the existing production centers. While the energy-based industry will be started from the very beginning. 6.3.3. Growth Period

Decade of 2030-2040 was a growth period for the timber industry in South Kalimantan, especially fiber-based and energy-based industries. Fiber-based industries are expected to be a stimulant for generating foreign exchange from the timber industry. Fiber-based technology which will be developed is improved by using the most advanced and environmentally friendly technology. 6.3.4. Stabilization Period

After the year of 2040, the timber industry in South Kalimantan will be in a stable condition. The turnover of wood production from sustinable plantation forests is predicted to have one cycle so as to provide assurance of raw materials. Timber industry is directed at the most modern technology adoption.

97

Table 6.3. Timber technology development in South Kalimantan Year 2010-2040

98

Table 6.4. Action Plan of Wood-based Industry Development in South Kalimantan

No Strategy Program

Code Action Plan Description and Justification Verifier 20

10

2011

2012

2013

2014

2015

Standarization, and the principles of good forest management through KPHP

- Mobilization of KPHP - SFM certification as an effort to meet market

requirements

- KPHP mobilized - 30% area SFM Certified

in 2015 Planning the management of timber resources in accordance with the KPH and the establishment of timber terminal

- Communities around the forest could provide added value and direct benefit

- Industry is set up close to raw materials - Utilization control of forest products more easily

and openly - Establishment of several veneer feeders

- Improving the welfare of forest communities

- Industry is set up near the raw material

- Veneer feeder terminal is available

Solving problems related with the circulation of raw materials - extortion and illegal logging team function

- Ensuring the supply of raw materials - Encouraging timber trade - Combatting illegal logging

- The timber trade run well

- No illegal logging in 2015

1

Supply of Raw Material

P-A1 P-A2 P-A3 P-A4 P-C1 P-C2 F-F1

Building institutions related with timber trade either at timber terminal or merchants

- Strengthening the bargaining position of timber traders

- Facilitating the supervision of groups of timber merchants

- Facilitating the planning of the raw material supply for industry

Timber trade control system is organized and easily monitored

Rejuvenation of carpentry production machinery (Plywood)

- Use of Rotary Spindeless Lathee, Kild Dryer, Jet Drying System, Intelligent Pressing, Scarft Joint, and other modern production machinery

- Replacement of power generation with coal

- Rejuvenated machine in 2015

- The use of coal of more than 50% by 2015

The change from conventional plywood products into high value-added products

Production of LVL, Fancy, Coated Plywood, wood utilization plants, particle board, and other innovative products

Various products in 2015

Reducing environmental pollution - Improving recovery rates and reducing the

environtmental burden - Giving attention to the fiber-based industrial

waste treatment

- Recovery rates above 70% in 2015

- Recognition of environmental friendly industry

2

Production Increase

P-B1 P-B2 P-B3 P-B4 P-C4 P-C5

Building a fiber-based timber industry Starting to plan the construction of the pulp industry. Paper, MDF, hardboard, Gypsum Board, and other fiber-based products

Fiber-based industry will have been set up in 2015

99

Tabel 6.4. Continuation

No Strategy Program

Code Action Plan Description and Justification Verifier 20

10

2011

2012

2013

2014

2015

Establishment of craft training centers or workshops and timber technology

- A forum of human resources capacity building - Planning center for qualified human resource

Skills training workshop established before 2012

Counseling / guidance in implementing SFM

Awareness efforts for each actor of forest management on the importance of SFM

KPH will have worked well in 2015

Increasing the role of intellectual institutions in the development of timber industry

- The role of education and research institutions - The participation of nongovernmental

organizations

Institutional relations between the industrial and intellectual institutions will have been established

3 Human Resources Development

P-D1 P-D2 P-D3 P-A1

Institutional strengthening (cooperatives, groups of traders, industry associations)

Ability to cope with various issues related to trade in timber and wood products.

The role of institutions is influential

Establishment of a special training workshop for the production of fiber-based products

- Knowledge of local human resources on fiber-based industrial control

- As a vehicle for development

Skills training workshop will be established before 2013

Comparative study of fiber-based wood processing industry to other areas that have established similar industry

- Conducted by local stakeholders - Comparative studies in Indonesia and abroad - Identifying the various aspects of production,

markets, and environmental impact

Having done some comparative studies of both within and outside the country

Socialization and dissemination of fiber-based industry to stakeholders in the region

- Involving local intellectual institutions - Inviting investment in fiber-based industries

Dissemination will have been done

4

Mastery of Technology

P-B2 P-D2

Feasibility study of the establishment of fiber-based industris

- Preparation of fiber-based industrial development in South Kalimantan

- Planning the location and environmental impact

Several feasibility studies will have been prepared

Opening new markets for conventional products

- Export markets other than Japan and the U.S. for plywood products

- The export and local market for furniture and handicraft products

Shift in market share is more diverse

The establishment of regional promotion center and establishment of promotion cooperation

Center for promotion of creative products in the region, in other areas, or in foreign countries

Promotion center will have been established and functioned in 2013

5

Market Control P-E1 P-E2 P-E3 P-C3 P-F2

Building institutions for marketing strengthening

- Media cooperatives and groups of artisans - Strengthening the function of the Association

Joint Marketing Agency functions again

100

Table 6.5. The role of stakeholders in the development of sustainable timber industry in South

Kalimantan Province.

No Action Plan

Loca

l G

over

nmen

t

Trad

e &

Cop

Se

rvic

e

Man

pow

er

Serv

ice

Fore

stry

Ser

vice

Settl

emen

t & R

eg

infr

astr

uctu

re

Serv

ice

Uni

vers

ity/N

GO

Ban

king

Sec

tor

Inve

stor

/Priv

ate

Fore

strr

y D

ept

1 KPHP execution-coaching certification program, and the principles of good forest management

2 Problem solving efforts on the circulation of raw materials, related to extortion and illegal logging team function

3 Building timber trade institutions either on the terminal or moving traders

4 Rejuvenation of carpentry production machinery of timber industry (Plywood)

5 The shift of conventional plywood products into high added-value products

6 Reducing environmental pollution

7 Building a fiber-based timber industry

8 Establishment of craft training centers or workshops and timber technology

9 Counseling / guidance in implementing SFM

10 Increasing the role of intellectual institutions in the development of timber industry

11 Institutional strengthening (cooperatives, groups of traders, industry associations)

12 Establishment of a special training workshop for the production of fiber-based products

13

Comparative study of fiber-based wood processing industry to other areas that have established similar industry

14 Socialization and dissemination of fiber-based industry to stakeholders in the region

15 Feasibility study of fiber-based industries 16 Opening new markets for conventional products

17 The establishment of regional promotion center and cooperation for promotion

18 Building institutions for strengthening the market

Table 6.5. simplified matrix of timber industry development program in South Kalimantan as presented in Table 6.6.

101

Table 6.6. Matrix of roles and level of difficulty of timber industry development strategy in South Kalimantan province

Easy Difficult Actor Short Term (2010-2020)

- Development of KPHP - Dissemination of efficient wood

processing technology - Establishment of vocational

training institutions - Administrative bodies /

associations - The establishment of creative

product promotion center - Establishment of energy center

- Securing the circulation of raw materials, solving the problem of illegal logging

- Opening new markets of carpentry wood products

- Construction of timber terminal - Development of the secondary

woodworking industry cluster - Rejuvenation of the timber

industry

Private Investors Forest Service Local Government Local Development Board Related Service NGO Educational Institutions Research Institutions

Long Term (2020 – 2040)

- Planning and feasibility study of future industry

- Comparative study for the establishment of future industries

- Establishment of energy center

- Investment in fiber based timber industry

- Investments in energy-based industries

- Infrastructure development of modern timber industry

- Cluster Stabilization - Wood Terminal Development –

Continuation - KPH Stabilization –

Continuation - Becoming Center of Wood

based Industry in Indonesia

Private Investors Department of Forestry Local Government Local Development Board NGO

102

CONCLUSION AND RECOMMENDATION

7.1. CONCLUSION

Based on results and discussion on Long Term Plan of Wood Based Industry in South Kalimantan, the following are some conclusions:

(1) Timber industry in south Kalimantan reached its heyday in the decade 1980-2000, with the highest production of 1.9 million m3 in 1998. Nearly 75% or about 1.8 million m3 of wood raw materials for industry in South Kalimantan had been supplied from other provinces, especially Central Kalimantan and East Kalimantan. It’s not surprising that the timber industry in this province lost its independence when the two provinces were also experiencing difficulties to supply raw materials.

(2) It is predicted that log can be provided in an effective area of 3.3 million m3 in 2040 through several phases (Consolidation - 2010-2015, Revitalization - 2020-2025, Growth-2030 to 2035 and stabilization - 2040) of construction 10 KPHs of the total land area of 1.4 million ha, in South Kalimantan province. . However, it is also predicted the supply is still unable to meet the demand of the industry if the industry growth / demand rate is not adjusted to the capaity of forest timber production.

(3) KPH Development is part of the Long Term Plan for the timber industry in South Kalimantan, as the power basis of raw material supply and wood supply-demand zoning. Learning from the dependence in the past, the planning of raw material supply is a top priority.

(4) The establishment of timber terminals is one of the main parts of the Long Term Plan for the timber industry, the development of primary industry is also expected to become the embryo of the establishment of industrial clusters. Timber terminal can be used as a tool for monitoring the circulation of legal timber and a support for the weak industry.

(5) Industry which is projected to be built in South Kalimantan in the future is the secondary woodworking industry (furniture) and fiber-based industries. Primary woodworking industry is maintained until the year 2020 as the timber industry fundamentals in South Kalimantan.

(6) To revive the heyday of wood processing industry in the decade of the 1990s, some fundamental steps need to be undertaken - performance improvement of forest resources unit (raw materials), processing units through re-engineering, and market units through the promotion and public relation. This is done to boost competitiveness, efficiency, and "market share" toward the Indonesian processed wood products.

(7) The steps that must be taken to order all wood processing industries and improve the condition of wood-based industries are (a) stipulating a policy realted with reengineering, (b) reregistering all the wood processing industries in South Kalimantan province, (c) combating unlicensed (illegal) wood processing industries, and (d) increasing the market of highly competitive product.

7

103

7.2. RECOMMENDATION

Based on in-depth analysis of the planning of timber industry in South Kalimantan, the following recommendations are prepared:

Industry Actor 1. Conducting an inventory and planning of the development direction until the year 2015; 2. Planning on more efficient production technology reengineering by 2015; 3. Modifying the equipment / machineries industry; 4. Providing special funds for the replacement of equipment / machinery - more efficient and

environmentally friendly equipment; 5. Improving the design and the finishing process of superior products, particularly secondary wood

processing industry to be able to be sold to potential markets; 6. Conducting the diversification of products to optimize the strengths and threats faced by the timber

industry using alternative wood materials, 7. Focusing on cost to be more efficient in processing timber so as to improve the competitiveness of

products; Local and Central Government

8. Accelerating KPH development in the province of South Kalimantan; 9. Controlling the circulation of raw materials; 10. Establishing KPH based timber industry cluster institution for medium and small scale industries,

while for large industry can be a combination of several KPHs; 11. Developing an integrated policy on the investment of the timber industry in South Kalimantan; 12. Inserting the timber industry development in the strategic planning of regional development in South

Kalimantan province; 13. Establishing incentive and stimulus policies to overcome the global financial crisis; 14. Accelerating the formation of professional groups to bridge the growth of KPH based small

industries; Other Stakeholders

15. Preparing adequate human resources to support the development of timber industry in South Kalimantan;

16. Developing a financial concept that can stimulate the development of timber industry in South Kalimantan;

17. Conducting a strategic step towards accelerating the mastery of timber technology in South Kalimantan.

Multi stakeholder Cooperation 18. Using public relations to enhance the promotion of exports, both to the traditional markets and

potential markets. Increasing the role of association as an effort to avoid friction inside to increase the service activity;

19. Improving the ability of investigation in the forestry sector by Civil Servant Investigator.

104

FOLLOW-UP PROJECT

Some follow up programs to be proposed to the sustainability of the development of wood-based industry in South Kalimantan province include:

1. Implementation of the master plan on the proposed location - KPH unit 1 Banjar Regency and KPH Unit VII Tanah Laut Regency.

2. Preparation for the establushment of timber industry cluster in South Kalimantan;

3. Formulation study of wood supply chain management in South Kalimantan in order to design timber terminal

4. Integration of the timber industry into the formulation of industrial core competencies in South Kalimantan, related with the planning of the national industry

5. Technical program of KPH acceleration in South Kalimantan

6. Studies on Concervation Vakue High Forest (HCVF) that has been used for plantation land related with the conception of the Round Table Sustainable Palm Oil (RSPO)

7. Legal aspects of the circulation of timber in South Kalimantan

8. Development of promotion center for marketing wood products in South Kalimantan

9. Pilot project on sustainable forest product certification system in South Kalimantan. Model development: of People's Business Furniture

10. Potential study of downstream timber industry development, especially energy and chemical derivatives wood based;

11. Revitalization of data and information center of the forest industry in South Kalimantan.

8

105

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APPENDIX

108

Appendix 1. The development of log production (m3) in the last five years (2003 – 2007)

Producer 2003 2004 2005 2006 2007 ------------------------------------------------------- M3 -----------------------------------------------------

Natural Forest 107 205.20 65 729.52 46 587.88 5 441.63 26 537.38 Hutan Tanaman Industri 165 272.35 265 250.42 162 033.42 20 994.88 187 290.68 IPK-Tanah Milik 237 358.75 386 605.24 328 952.15 123 302.12 73 198.65 Izin Pemanfaatan Kayu 97 136.03 42 520.71 25 290.51 6 048.12 23 367.58 Pengumpul Ky. Rakyat 81 899.40 86 061.59 - - - Limbah Tebangan 3 669.77 538.49 - - - Total 692 541.50 846 705.97 562 863.96 155 786.75 310 394.29

Source: Forestry Service of South Kalimantan Province, 2008 inBPS, 2008.

109

Appendix 2. Types of product / processed wood commodity exported from South Kalimantanfor the year

of 2003-2007

Types of Commodity Volume (Ton) Value(000 US $) Price(US $/M3) Sawn Timber 969.64 217 320.67 Plywood 171 097.78 172 856.62 Fancy plywood 6 930.69 9 045.27 Film faced plywood 20 662.98 20 967.85 Block-board 21 292.16 15 462.72 Door jambs 1 059.96 1 437.72 Dowel / Moulding 1 328.96 1 362.65 Laminated-board 3 560.58 2 281.35 Panchinco frame 0.00 0.00 Flooring / wall-panels 3 419.37 6 240.65 Finger joint 744.46 595.64 Garden furniture / wood-furniture 193.86 313.31 Komponen bangunan 176.97 118.13 Stick (S4S) 554.47 382.98 Wood-carpets 637.65 1 408.94 Laminated solid 1.10 1.47 S2S 0.00 0.00 Box / komponen piano 0.00 0.00 Door frame 151.71 188.25 Lunch box 121.00 28.59 Square tile 0.00 0.00 Garden tile 342.59 226.95 Venner 1 093.99 986.44 Wooden pallet 64.12 14.50 Decking 1 371.13 1 365.71 Particle-board 51.30 7.13 Box kipas angin 0.00 0.00 Komponen truck-body 0.00 0.00 Door panels 0.00 0.00

Kalimantan-Selatan 2 0 0 7 2 0 0 6 2 0 0 5 2 0 0 4 2 0 0 3

235 826.47 270 393.56 518 989.20 595 547.52 613 266.73

452 613.54 278 257.32 329 616.88 371 876.91 329 552.47

Source: Badan Pusat Statistik Provinsi Kalimantan Selatan, 2008

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Appendix 3. Names of river and regencies in South Kalimantan Province. Regencies/City River

TL KB BJ BK TP HSS HST HSU TBL TBU BLG BJM BJR Maluka Tabanio Sebuhur Sawarangan Kintap Asam-asam Cuka Banyuhirang Cantung Bangkalan Sampanahan Manunggal Cengal Serongga Sejakah Bekambit Sekonyang Pasir Amb. Embungan Sebati Martapura Riam Kanan Riam Kiwa Mangkaok Alalak Paring Apukan/Banyu H. Barito Kapuas Negara Puntik Tapin Bungur Binuang Tambarangan Muning Tatakan Angkinang Amandit Kajang Batang Alai Labuhan Kasarangan Tabalong Kumap Tabalong Kiwa Ayup Satui Batulaki Sebamban Kusan Batulicin Balangan Awayan

Sumber: Badan Pertanahan Nasional Provinsi Kal-Sel, 2008.

111

Appendix 4 Processed wood exported abroad in the last five yeasrs in South Kalimantan Province.

Types of Product 2003 (M3) 2004 (M3) 2005 (M3) 2006 (M3) 2007 (M3)

Plywood 907.915,4230 599.805,2123 709.749,6189 345.723,9276 112.175,8796

Moulding 52.212,3338 96.193,1983 190.414,3184 12.783,8343 478,0486

Blockboard 109.390,2816 24,938,4008 24.938,4008 8.792,1624 1.313,8335

Fancy wood 34.038,2589 1.732,4436 1.732,4436 3.306,2921 -

Total 1.103.556,2973 917.362,8435 917.362,8435 370.606,2514 113.967,7617

112

Appendix 5. Map of Stand Potetntial at KPH of South Kalimantan

113

Appendix 6. Prediction of road from log terminal to wood industry

114

Appendix 7. Rekapitulation of total industries and wood demant year 2008

Illegal Legal Regency Type Industri

Total Demand Total Demand

Total industri

es Demand

Kotabaru Sawmil 2 688 2 688

Moulding 8 392 8 392

Sirkal 1 1 -

Industry 1 66,500 1 66,500

Chipmill 1 294,000 1 294,000

Furniture 1 51 1 51

Kotabaru Total 12 1,131 2 360,500 14 361,631

Tanah Bumbu Moulding 8 398 8 398

Sirkal 9 9 -

Furniture 27 1,380 27 1,380

Galangan Kapal 1 1 -

Pembuatan Sirap 2 2 -

Tanah Bumbu Tot 47 1,777 47 1,777

Barito Kuala Moulding 1 50 1 50

Meubel 2 102 2 102

Bandsaw 1 3,600 1 3,600

Sawmil 15 5,160 8 46,000 23 51,160

Wantilan 21 1,050 1 22 1,050

Dowel 1 2,400 1 2,400

I W I 5 1,716,822 5 1,716,822

Barito Kuala Total 39 6,362 16 1,768,822 55 1,775,184

Banjarmasin Meubel 6 307 6 307

Wantilan 4 200 4 200

Banjarmasin Tot. 10 507 10 507

HSU Bandsaw 2 688 1 3 688

Sawmil 1 1 -

HSU Total 2 688 2 4 688

Balangan Moulding 9 448 9 448

Meubel 7 358 7 358

Bandsaw 2 688 2 1,800 4 2,488

Wantilan 13 594 13 594

Veneer 1 22,860 1 22,860

Balangan Total 31 2,776 3 24,660 34 26,775

Banjar Moulding 1 50 1 2 50

Bandsaw 10 3,440 2 1,800 12 5,240

Sawmill 2 6,000 2 6,000

Wantilan 1 50 1 50

Band saw, Mould 1 1 -

Banjar Total 12 3,540 5 10,600 19 11,340

115

Continuation Appendix 7 tanpa ijin Legal

Kabupaten Type Industri Jumlah

keperluan kayu

Jumlah keperluan

kayu

Jumlah Industri

Kebutuhan kayu

HSS Bandsaw 2 96 13 21,528 15 21,624

Sawmill 3 10,000 3 10,000

Wantilan 20 1,056 20 1,056

HSS Total 22 1,152 16 31,528 38 32,680

HST Band saw 8 360 2 180 10 540

HST Total 8 360 2 180 10 540

Tapin meubel 4 204 4 204

Wantilan 2 100 2 100

Bandsaw 11 6,400 4 4,600 15 11,000

bandsaw + mould 1 344 1 344

moulding + wantil 2 1,800 2 1,800

moulding 1 50 1 50

Tapin Total 21 8,200 4 4,600 25 12,800

Tabalong Bandsaw 13 642 3 4,896 16 5,538

Veneer 3 79,338 3 79,338

Tabalong Total 13 642 6 84,234 19 84,876

Tanah Laut Bandsaw 8 2,752 14 27636 22 30,388

Plywood+ B. Saw 1 1 -

Tanah Laut Total 8 2,752 15 27636 23 30,388

Banjarbaru Moulding 2 5,400 2 5,400

Band saw 18 7,200 2 700 20 7,900

Banjarbaru Total 18 7,200 4 6,100 22 13,300

Batola Bandsaw 13 3,600 13 3,600

Sawmil 1 5,700 1 5,700

Batola Total 14 9,300 14 9,300

Grand Total 243 37,087 75 2,324,699 318 2,361,786

Keterangan: Nilai dengan huruf miring adalah nilai prediksi berdasarkan data yang ada. Sumber: Hasil Kompilasi Database Industri Perkayuan Kal-Sel tahun 2008

116

GUBERNUR KALIMANTAN SELATAN

PERATURAN GUBERNUR KALIMANTAN SELATAN

NOMOR 017 TAHUN 2010 TENTANG

RENCANA JANGKA PANJANG PENGEMBANGAN INDUSTRI LESTARI BERBASIS KAYU

DI PROVINSI KALIMANTAN SELATAN TAHUN 2010-2040

DENGAN RAHMAT TUHAN YANG MAHA ESA GUBERNUR KALIMANTAN SELATAN

a.

Menimbang bahwa memperhatikan Project Agreement PD 397/06 Rev. 3 (I) ”Sustainable Development of the Wood-Based Industries in South Kalimantan” (ITTO) dan Pemerintah Indonesia dan Dinas Kehutanan Propinsi Kalimantan Selatan;

b. bahwa hutan sebagai karunia dan amanah Tuhan Yang Maha Esa yang dianugerahkan kepada bangsa Indonesia, merupakan kekayaan yang dikuasai oleh Negara, memberikan manfaat serbaguna bagi umat manusia, karenanya wajib disyukuri, diurus dan dimanfaatkan secara optimal serta dijaga kelestariannya untuk sebesar-besar kemakmuran rakyat, diantaranya melalui kegiatan pembangunan industri perkayuan;

c. bahwa untuk melaksanakan pengelolaan industri perkayuan di Kalimantan Selatan yang benar sebagaimana dimaksud pada huruf a dan b dipandang perlu disusun Rencana Jangka Panjang Pengembangan Industri Lestari Berbasis Kayu di Provinsi Kalimantan Selatan Tahun 2010 – 2040;

d. bahwa berdasarkan pertimbangan sebagaimana dimaksud dalam huruf a, huruf b, dan huruf c, perlu menetapkan Peraturan Gubernur Kalimantan Selatan

1.

Mengingat Undang-Undang Nomor 25 Tahun 1956 Jo. Undang-Undang No. 21 Tahun 1958 tentang Penetapan Undang-Undang Darurat Nomor 10 Tahun 1957 antara lain mengenai Pembentukan Daerah Swatantra Tingkat I Kalimantan Selatan (Lembaran Negara Republik Indonesia 1956 Nomor 65, Tambahan Lembaran Negara Republik Indonesia Nomor 1106);

2. Undang-undang Nomor 5 Tahun 1960 tentang Peraturan Dasar Pokok-Pokok Agraria (Lembaran Negara Republik Indonesia

Tahun 1960 Nomor 104, Tambahan Lembaran Negara Republik Indonesia Nomor 2043);

3. Undang-Undang Nomor 5 Tahun 1990 tentang Konservasi Sumber Daya Alam Hayati dan Ekosistemnya (Lembaran Negara Republik Indonesia Tahun 1990 Nomor 49, Tambahan Lambaran Negara Republik Indonesia Nomor 3419);

4. Undang-Undang Nomor 41 Tahun 1999 tentang Kehutanan (Lembaran Negara Republik Indonesia Tahun 1999 Nomor 167, Tambahan Lembaran Negara Republik Indonesia Nomor 3888) sebagaimana telah diubah dengan Peraturan Pemerintah Pengganti Undang-Undang Nomor 1 Tahun 2004 tentang Perubahan Atas Undang-Undang Nomor 41 Tahun 1999 tentang Kehutanan (Lembaran Negara Republik Indonesia Tahun 2004 Nomor 29, Tambahan Lembaran Negara Republik Indonesia 4374) yang telah ditetapkan dengan Undang-Undang Nomor 19 Tahun 2004 (Lembaran Negara Republik Indonesia Tahun 2004 Nomor 67, Tambahan Lembaran Negara Republik Indonesia Nomor 4401);

5. Undang-Undang Nomor 10 Tahun 2004 tentang pembentukan Peraturan Perundang-undangan (Lembaran Negara Republik Indonesia Tahun 2004 Nomor 53, Tambahan Lambaran Negara Republik Indoensai Nomor 4389);

6. Undang-Undang Nomor 25 tahun 2004 tentang Sistem Perencanaan Pembangunan Nasional (Lembaran Negara Republik Indonesia Tahun 2004 Nomor 104, Tambahan Lembaran Negara Republik Indonesia Nomor 4421);

7. Undang-Undang Nomor 32 tahun 2004 tentang Pemerintahan Daerah (Lembaran Negara Republik Indonesia Tahun 2004 Nomor 125, Tambahan Lembaran Negara Republik Indoensai Nomor 4437) sebagaimana telah diubah beberapa kali, terakhir dengan Undang-Undang Nomor 12 Tahun 2008 tentang perubahan kedua atas Undang-Undang Nomor 32 Tahun 2004 tentang Pemerintahan Daerah (Lembaran Negara Republik Indonesia Tahun 2008 Nomor 59, Tambahan Lembaran Negara Republik Indoensai Nomor 4844);

8. Undang-Undang Nomor 26 Tahun 2007 tentang Penataan Ruang (Lembaran Negara Republik Indonesia Tahun 2007 Nomor 68, Tambahan Lembaran Negara Republik Indonesia Nomor 4725);

9. Undang-Undang Nomor 32 Tahun 2009 tentang Perlindungan dan Pengelolaan Lingkungan Hidup (Lembaran Negara Republik Indonesia Tahun 2009 Nomor 140, Tambahan Negara Republik Indonesia Nomor 5059);

10. Peraturan Pemerintah Nomor 6 Tahun 1988 tentang Koordinasi Kegiatan Instansi Vertikal di Daerah (Lembaran Negara Republik Indonesia Tahun 1988 Nomor 10, Tambahan Lemabaran Negara Republik Indonesia Nomor 3373);

11. Peraturan Pemerintah Nomor 44 Tahun 2004 tentang Perencanaan Kehutanan (Lembaran Negara Republik Indonesia Tahun 2004 Nomor 146, Tambahan Lembaran Negara Republik Indonesia

Nomor 4452); 12. Peraturan Pemerintah Nomor 6 Tahun 2007 tentang Tata Hutan

dan Penyusunan Rencana Pengelolaan Hutan, serta Pemanfaatan Hutan (Lembaran Negara Republik Indonesia Tahun 2007 Nomor 22, Tambahan Lembaran Negara Republik Indonesia Nomor 4696), sebagaimana telah diubah dengan Peraturan Pemerintah Nomor 3 Tahun 2008 (Lembaran Negara Republik Indonesia Tahun 2008 Nomor 16, Tambahan Lembaran Negara Republik Indonesia Nomor 4814);

13. Peraturan Pemerintah Nomor 38 Tahun 2007 tentang Pembagian Urusan Pemerintahan Antara Pemerintah, Pemerintahan Daerah Provinsi dan Pemerintahan Kabupaten/Kota (Lembaran Negara Republik Indonesia Tahun 2007 Nomor 82, Tambahan Lembaran Negara Republik Indoensai Nomor 4737);

14. Peraturan Pemerintah Nomor 26 tahun 2008 tentang Rencana Tata Ruang Wilayah Nasional (RTRWN) (Lembaran Negara Republik Indonesia Tahun 2008 Nomor 48, Tambahan Lembaran Negara Republik Indonesia Nomor 4833);

15. Peraturan Presiden Nomor 1 Tahun 2007 tentang Pengesahan, Pengundangan dan Penyebarluasan Peraturan Perundang-Undangan;

16. Instruksi Presiden Nomor 4 Tahun 2005 tentang Pemberantasan Penebangan Kayu Secara Ilegal di Kawasan Hutan dan Peredarannya di Seluruh Wilayah Indonesia;

17. Keputusan Menteri Kehutanan Nomor 292/Kpts-II/1995 tentang Tukar Menukar Kawasan Hutan, yang telah beberapa kali diubah terakhir dengan Peraturan Menteri Kehutanan Nomor P 16/Menhut-II/2009;

18. Keputusan Menteri Kehutanan Nomor 32/Kpts-II/2001 tentang Kriteria dan Standar Pengukuhan Kawasan Hutan;

19. Keputusan Menteri Kehutanan Nomor 70/Kpts-II/2001 tentang Penetapan Kawasan Hutan, Perubahan Status dan Fungsi Kawasan Hutan, sebagaimana telah diubah dengan Keputusan Menteri Kehutanan Nomor SK.48/Menhut-II/2004;

20. Keputusan Menteri Kehutanan Nomor SK 382/Menhut-II/2004 tentang Izin Pemanfaatan Kayu;

21. Peraturan Menteri Kehutanan Nomor P.31/Menhut-II/2005 tentang Pelepasan Kawasan Hutan Dalam Rangka Pengembangan Usaha Budidaya Perkebunan, yang telah beberapa kali diubah terakhir dengan Peraturan Menteri Kehutanan Nomor P.22/Menhut-II/2009;

22. Peraturan Menteri Kehutanan Nomor P.20/Menhut-II/2005 jo Peraturan Menteri Kehutanan Nomor SK.37/Menhut-II/2009 tentang Kerjasama Operasi pada Izin Usaha Pemanfaatan Hasil Hutan Kayu pada Hutan Tanaman;

23. Peraturan Menteri Kehutanan Nomor P.27/Menhut-II/2006 tentang Rencana Pembangunan Jangka Panjang Kehutanan Tahun 2006-2025;

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24. Peraturan Menteri Kehutanan Nomor P.55/Menhut-II/2006 jis Nomor P.63/Menhut-II/2006 dan Nomor P.8/Menhut-II/2009 tentang Penatausahaan Hasil Hutan yang berasal dari Hutan Negara;

25. Peraturan Menteri Dalam Negeri Nomor 15 Tahun 2006 tentang Jenis dan Bentuk Produk Hukum Daerah;

26. Peraturan Menteri Dalam Negeri Nomor 16 Tahun 2006 tentang Prosedur Penyusunan Produk Hukum Daerah;

27. Peraturan Menteri Kehutanan Nomor P.45/Menhut-II/2007 jo Peraturan Menteri Kehutanan Nomor P.2/Menhut-II/2008 tentang Tata Cara Izin Peralatan Pemanfaatan Hasil Hutan Kayu dan Bukan Kayu pada Hutan Tanaman Industri dan Hutan Tanaman;

28. Peraturan Menteri Kehutanan Nomor P.62/Menhut-II/2008 tentang Rencana Kerja Usaha Pemanfaatan Hasil Hutan Kayu Hutan Tanaman Industri dan Hutan Tanaman Rakyat;

29. Peraturan Menteri Kehutanan Nomor P.11/Menhut-II/2009 tentang Sistem Silvikultur dalam Areal Izin Usaha Pemanfaatan Hasil Hutan Kayu pada Hutan Produksi;

30. Keputusan Menteri Kehutanan Nomor SK. 432/Menhut-II/2009 tentang Perubahan Peruntukan Kawawan Hutan Menjadi Bukan Kawasan Hutan Seluas ±59.503 (Lima Puluh Sembilan Ribu Lima ratus tiga) Hektar, Perubahan Antar Fungsi Kawasan Hutan Seluas ± 99.594 (Sembilan Puluh Sembilan Ribu Lima Ratus Sembilan Puluh Empat) Hektar dan Penunjukan Areal Bukan Kawasan Hutan Menjadi Kawasan Hutan Seluas ± 39.747 (Tiga Puluh Sembilan Ribu Tujuh Ratus Empat Puluh Tujuh) Hektar di Wilayah Provinsi Kalimantan Selatan;

31. Keputusan Menteri Kehutanan Nomor SK. 435/Menhut-II/2009 tentang Penunjukan Kawasan Hutan Provinsi Kalimantan Selatan;

32. Instruksi Presiden Nomor 3 Tahun 2005 tentang Pemberantasan Penebangan Kayu Secara Ilegal di Kawasan Hutan dan Peredarannya di Seluruh Wilayah Indonesia;

33. Peraturan Daerah Provinsi Kalimantan Selatan Nomor 15 Tahun 2006 tentang Rencana Pembangunan Jangka Menengah Daerah (RPJMD) Propinsi Kalimantan Selatan Tahun 2006 – 2010 (Lembaran Daerah Provinsi Kalimantan Selatan Tahun 2006 Nomor 15);

34. Peraturan Daerah Provinsi Kalimantan Selatan Nomor 5 Tahun 2008 tentang Urusan Pemerintahan yang Menjadi Kewenangan Pemerintah Propinsi Kalimantan Selatan (Lembaran Daerah Provinsi Kalimantan Selatan Tahun 2008 Nomor 5);

35. Peraturan Daerah Provinsi Kalimantan Selatan Nomor 6 Tahun 2008 tentang Pembentukan, Organisasi dan Tata Kerja Perangkat Daerah Propinsi Kalimantan Selatan (Lembaran Daerah Provinsi Kalimantan Selatan Tahun 2008 Nomor 6);

36. Peraturan Daerah Provinsi Kalimantan Selatan Nomor 17 Tahun 2009 tentang Rencana Pembangunan Jangka Panjang Daerah Provinsi Kalimantan Selatan Tahun 2009 Nomor 17);

MEMUTUSKAN: Menetapkan: PERATURAN GUBERNUR TENTANG

RENCANA JANGKA PANJANG PENGEMBANGAN INDUSTRI LESTARI BERBASIS KAYU DI PROVINSI KALIMANTAN SELATAN TAHUN 2010-2040.

BAB I KETENTUAN UMUM

Pasal 1 Dalam Peraturan Gubernur ini yang dimaksud dengan: 1. Daerah adalah Provinsi Kalimantan Selatan. 2. Pemerintahan Daerah adalah Penyelenggaraan Urusan Pemerintahan oleh

Pemerintah Daerah dan DPRD menurut asas Otonomi dan Tugas Pembantuan dengan Prinsip Otonomi seluas-luasnya dalam sistem dan prinsip Negara Kesatuan Republik Indonesia sebagaimana dimaksud dalam Undang-Undang Dasar Negara Republik Indonesia Tahun 1945.

3. Pemerintah Daerah adalah Gubernur dan Perangkat Daerah sebagai unsur Penyelenggara Pemerintahan Daerah.

4. Gubernur adalah Gubernur Kalimantan Selatan. 5. Dewan Perwakilan Rakyat Daerah yang selanjutnya disebut DPRD

adalah Lembaga Perwakilan Rakyat Daerah sebagai unsur Penyelenggara Pemerintahan Daerah.

6. Otonomi Daerah adalah hak, wewenang dan kewajiban Daerah Otonom untuk mengatur dan mengurus sendiri urusan Pemerintahan dan kepentingan masyarakat setempat sesuai dengan Peraturan Perundang-undangan.

7. Rencana Jangka Panjang Pengembangan Industri Lestari Berbasis Kayu di Provinsi Kalimantan Selatan Tahun 2010-2040 adalah Rencana Jangka Panjang Pengembangan Industri Lestari Berbasis Kayu di Provinsi Kalimantan Selatan dalam tahun 2010-2040.

BAB II RENCANA JANGKA PANJANG

Pasal 2 1. Rencana Jangka Panjang Pengembangan Industri Lestari Berbasis

Kayu di Provinsi Kalimantan Selatan Tahun 2010-2040 adalah rencana Jangka Panjang Daerah dalam Provinsi Kalimantan Selatan dalam Tahun Anggaran 2010-2040, yang dijabarkan menjadi Rencana Jangka Menengah (2010-2020) dan rencana jangka panjang (2020-2040).

2. Rencana Jangka Panjang Pengembangan Industri Lestari Berbasis Kayu di Provinsi Kalimantan Selatan diklasifikasikan ke dalam beberapa tahapan yaitu: - Tahap Konsolidasi (2010-2020); - Tahap Revitalisasi (2020-2030); - Tahap Pertumbuhan (2030-2040); dan - Tahap Stabilisasi (2040).

3. Rencana Jangka Panjang Pengembangan Industri Lestari Berbasis Kayu di Provinsi Kalimantan Selatan Tahun 2010-2040 sebagaimana dimaksud pada ayat (1) disusun dengan sistematika sebagai berikut:

Bab I. Pendahuluan Bab II. Pendekatan dan Metodologi Bab III. Pemetaan Industri Perkayuan di Kalimantan Selatan Bab IV. Visi dan Misi Industri Perkayuan di Propinsi Kalimantan

Selatan Bab V. Sasaran dan Strategi Utama Pengembangan Industri

Perkayuan Lestari di Provinsi Kalimantan Selatan Bab VI. Proyeksi dan Agenda Implementasi Program

Pengembangan Industri Perkayuan Lestari di Propinsi Kalimantan Selatan

Bab VII. Kesimpulan dan Rekomendasi Pasal 3

Isi beserta uraian sebagaimana dimaksud dalam Pasal 2 ayat (3) adalah sabagaimana tercantum dalam Lampiran yang merupakan bagian tidak terpisahkan dari Peraturan Gubernur ini.

Pasal 4 Rencana Jangka Panjang Pengembangan Industri Lestari Berbasis Kayu di Provinsi Kalimantan Selatan Tahun 2010-2040 merupakan Dokumen Perencanaan Pembangunan Daerah yang strategis, perlu dimasyarakatkan dan dijadikan acuan dalam penyusunan rencana dan pelaksanaan pembangunan daerah tahun 2010-2040.

BAB III KETENTUAN PENUTUP

Pasal 5 Peraturan Gubernur ini mulai berlaku pada tanggal diundangkan. Agar setiap orang mengetahuinya, memerintahkan pengundangan Peraturan Gubernur ini dengan penempatannya dalam Berita Daerah Provinsi Kalimantan Selatan.

BERITA DAERAH PROVINSI KALIMANTAN SELATAN TAHUN 2010 NOMOR 17