Indonesia’s Forestry Industry Development

II. LITERATURE REVIEW

2.1. Indonesia’s Forestry Industry Development

From the beginning, the existence of Indonesia forestry industry was expected to cover domestic wood demand, to increase the foreign exchange generation through exports, to create jobs opportunity, and to increase added value in production. These expectations were realized by the development of forestry industry in the early of 1980; started with rapid growth of various secondary industries, sawmill industries, plywood industries, pulp industries and Medium Density Fiberboard MDF industries; and achieve the highest increase in 1993 Kartodihardjo, 2004. It was reported that the number of forestry industries until December 1982 were consisted of 171 units plywood industries and 393 units of sawmill industries Department of Forestry, 1985. The increasing number of forestry industry, undoubtedly, was affected by the cheap and abundance of wood material Kartodihardjo, 2004. Government policies in log export ban, free opened of foreign and domestic investment in forestry effort, and vertical integration in Indonesia forestry micro organization were also stimulated the growth of Indonesia forestry industry Nugroho, 2001. Nowadays, various problems i.e. wood material, safety in business enterprises, manpower, environmental issues, and instability of currency exchange has been threatening the sustainability of forestry industry and impacting the significance decrease of forestry industry numbers Kartodihardjo, 2004. Data reported from Department of Forestry that there were 1725 units of forestry industry until March 1999, which consisted of 107 units of plywood industries and 1618 units of sawmill industries Department of Forestry, 2000. However, the numbers was decreased in 2002 into 1540 units; consisted of 327 units of plywood and 1213 unit of sawmill industries Department of Forestry, 2002. The uncertainty of wood material supplies has become a major problem for Indonesia forestry industry. The large imbalance between the diminished sustainable capacity of the forest and the seemingly unlimited appetite of forestry industry for raw material necessary has known as the reason behind the problem. Factually, this condition has been reported from study in 1998 where the capacity supplies of forest nature was only 19 million m 3 , conversely, industry raw material demanded was exceeds 60 million m 3 Ibrahim, 2003. Moreover, highest decrease of forest covers has also influenced the sustainability material supply of forestry industry. FAO and Department of Forestry 1990 reported that the average of forest degradation reaches 1,298,200 hectare per year or 1,20 in 1982 – 1990 period, and increase 2,804,000 hectares in 2005 Kompas, 2006. The difficulty situation in material supply, however, pushed industry to operate below their capacity setting and obtained their supply from illegally material Iskandar, 2004. To overcome industry material problem, Government Department of Forestry established regulation number 342002 about forestry industry revitalization. From the regulation, Government attempted to revitalize and create industry which efficient in material used, to improve wood product value, and to control industry product capacity. In order to achieve the goals, the first revitalization action was taken by monitoring and evaluating industry performance based on criterion and indicators regulated on P.172004 Greenomics, 2004. However, the revitalization actions can not be smooth to be carried out due to the disintegrated policy and authority between central government and regional government. This can be realized from different authority in publication license. Regional government through the Governor, has an authority to publish license for sawmill industry which have product capacity less than or equal 2000 m 3 or has range product capacity between 2000 and 6000 m 3 . Regional government also can publish license for veneer, plywood, laminated veneer lumber, and chip wood industries with product capacity less then 6000 m 3 . Conversely, industry with product capacity more than or equal to 6000 m 3 can have the license from Ministry of Forestry. This condition, unfortunately, creates difficulties for central government in monitoring and evaluating forestry industry, especially in data and information exchange Greenomics, 2004.

2.2. Performance Assessment of Indonesia Forestry Industry