GTF Trade Dialogue: FLEGT – unlike due diligence – creates a level playing field

Alexander de Groot and Koen de Witte talking to GTF

Alexander de Groot and Koen de Witte, CEOs of Fepco and Altripan, have been among the first European importers to receive FLEGT licensed wood from Indonesia. In an interview with GTF they talk about the importance of FLEGT for the European trade and their hopes for the future. They also call upon European governments to support FLEGT.

GTF: What does it mean for Fepco and Altripan that there is FLEGT licensed wood available in Indonesia now – has day-to-day business changed and if yes how so?

 Alexander de Groot (AdG): The main improvement is of course that due diligence is no longer required and that we can be absolutely sure that all Indonesian wood comes from legal sources.

Koen de Witte (KdW): We have to bear in mind that due diligence is not a science and that the way it is done always depends on how seriously companies take it and how large a company’s resources are for carrying out due diligence. FLEGT, on the other hand, finally creates a level playing field –for both buyers and suppliers. Moreover there is a large group of customers in Europe that have been afraid of touching tropical wood because of possible EUTR problems and related negative publicity. FLEGT means that we can now start talking and promoting tropical wood to these companies again. I see a lot of potential and opportunities there.

GTF: Do you think Indonesia will have a competitive advantage from FLEGT licensing?

KdW: Products from Indonesia are rather expensive compared to competing materials from China or Malaysia. However, we will promote them as a legal and high quality, sustainable product. Indonesia will also have an increasing advantage over the time as Competent Authorities are getting stricter and there are more checks on operators. Due diligence is thus becoming tougher and FLEGT licensed timber will have a greater advantage. It will be our job to make the product available now and make our customers – some of whom are operators themselves – aware of the advantage.

 AdG: Yes, making customers aware of FLEGT is important. We’ll need to see how the next months go, but I think FLEGT will give Indonesia a very good position in the market.

GTF: What else would be necessary for Indonesia to take full advantage of the potential competitive edge granted by FLEGT licensing? Does the country need better infrastructure and shipping opportunities, for example?

KdW: It is certainly true that logistics can be a challenge in Indonesia – given the enormous amount of islands and the long coastline. But I’m sure this will improve, once larger volumes are being shipped Europe again.

 AdG: Fepco has a very long experience of working in Indonesia – where Indonesian plywood is concerned we are the market leader in Europe – and I personally don’t see much need for improvement. Europe and Indonesia will have to continue to work together to make certain things even better – like improvements on sustainability. And there are some minor things that could be made easier on the website system European operators need to use to get FLEGT licenses confirmed. Fepco was among the first companies to use this system and we are giving feedback of our experience to the European Commission.

 GTF: How are your customers responding to the availability of FLEGT licensed timber – or in your cases plywood? Has there been a perceptible increase in demand?

KdW: Unfortunately not yet. But companies like Fepco and Altripan will push for it by making the product available in the market and promoting it – this is our responsibility now. In my opinion Indonesian wood products are competitive and the market share will increase. Although an increase in market share for commodities of course always depends on developments in competing products as well – for Indonesian plywood the main competition comes from Russia and China. The great variety of products from China – in very different qualities and not always correctly declared – is making life difficult. But there are initiatives now to increase transparency and show customers how the plywood is made and what the differences are. This will improve Indonesia’s position.

AdG: It will also be the responsibility of the European governments to help promote FLEGT licensed wood. FLEGT should, for example, immediately be incorporated in public procurement rules and given the same status as FSC or PEFC. One of our customers just had a case in Luxembourg, where authorities would not accept FLEGT licensed wood on a bid for a public building project – they only wanted FSC. This situation cannot continue. If European governments are not behind FLEGT this will sabotage the process.

 GTF: Are all your customers aware of the FLEGT/VPA concept and the meaning of FLEGT licenses? If not, what would you suggest should be done?

AdG: Our customers are typically importers, like Altripan – and they are aware. But I think it might be different for the customers of Altripan.

KdW: Yes, it is. We are selling mainly to big distribution groups and merchants. The big distribution groups know what FLEGT means, but being big their decision-making processes are fairly slow, so it might take some time until they start purchasing more FLEGT licensed wood. Merchants are less aware of FLEGT. In the UK and the Netherlands FSC and PEFC are playing a very important role. I think merchants there are quickly becoming aware of the importance of FLEGT licenses as well. France, Belgium and Germany are more difficult as companies there use less certified wood in general – we already notice that interest in FLEGT is perceptibly lower in these countries than in the UK or the Netherlands.

GTF: How much FLEGT licensed plywood was delivered to FEPCO and Altripan up until today?

AdG: Fepco had several containers on the first ever FLEGT licensed shipment that was celebrated in Indonesia in November. And we have since taken delivery of one break bulk vessel as well.

KdW: We also had several containers on that first shipment. And a proportion of the plywood on Fepco’s break bulk vessel belongs to us. My feeling is that arrivals of wood from Indonesia have increased over the last few weeks as importers and traders are stocking up on FLEGT licensed material.

 GTF: How did the issuing of FLEGT-licenses work for the first shipment – what did you have to do and what did your partners in Indonesia do?

KdW: For the European trade it is very easy. We had to register and get our number and the rest is pretty much what we always had to do when importing wood. So it basically comes down to uploading some information on a website.

AdG: Suppliers on the other hand have worked very hard to get their SVLK certificate. SVLK guarantees that the goods Indonesian companies are buying and selling are traceable and legal. It’s been a tremendous effort. And it continues to be a lot of work. Companies get audited on a regular basis and there is the administrative work to organise traceability.

KdW: Yes, the system is very complicated and costly. Especially for smaller landowners and companies. It is and will continue to be a lot of work.

GTF: Would you like to add anything else?

KdW: Only that I think we have a good, legal and sustainable product from Indonesia which we will promote. And we would be happy about any support in promoting it.

AdG: I agree. We all need to create awareness that using legally sourced, sustainable and durable tropical wood does benefit and not harm the environment.