From 2013, Indonesia will only permit the export of timber products, including paper and pulp, licensed through a national legality assurance system.
Under this scheme, 4,500 producers, processors and exporters in Indonesia will be audited by ISO-accredited local companies. The process will not directly involve international forest stewardship organisations.
The Voluntary Partnership Agreement (VPA), the first forest products pact between the EU and an Asian country, was signed in Jakarta on 4 May after four years of formal negotiations. It still has to be ratified by both sides, which should take nine months.
Faith Doherty, head of forests at the Environmental Investigation Agency, a UK-based NGO, said the strength and transparency of the auditing process was crucial, as corruption had dogged Indonesia’s timber and logging industry.
"The VPA stipulates transparency of laws and access to information, something that has not previously been allowed," said Doherty.
"Even though the agreement is now with us, a major challenge lies ahead in keeping it free from corruption and ensuring that the government of Indonesia implements it properly and with robust transparency."
A spokeswoman for the Forest Stewardship Council, the forest certification organisation, said the VPA could result in higher timber and paper prices overall by forcing illegal products from the market.
"There’s a lot of demand globally for certified products and those with verification or certification have a higher value," she said.
A report last year from Chatham House, the international affairs think-tank, said enforcement of laws against illegal logging in Indonesia had "increased substantially" in recent years, and illegal logging had dropped by 75% in the previous decade.
But the country still scored poorly in implementing necessary laws, regulations and policies, and only a quarter of cases resulted in convictions.
Environmental groups, notably Greenpeace, say one of the main culprits is Asia Pulp and Paper. But the claim is contested by the Singapore-based group, which has paper operations in Sumatra and Java.
However, Aida Greenbury, managing director of sustainability and stakeholder engagement at APP, said the company fully supported the VPA and aimed to have the standards in place next year.
She said: "The VPA is truly a massive step forward. It will add another layer of assurance that Indonesia timber exports to the European Union comply with both our national legislation and EU forest law and trade policy.
"When the agreement comes into force, in March 2013, European consumers and businesses will have a very strong assurance that they are not purchasing products made from illegally harvested timber."
EU countries import US$1.2bn (£740m) of timber and paper from Indonesia, around 15% of the country’s exports in the sector.
But the EU will ban the import of any unlicensed Indonesian products, in line with the new EU Timber Regulation, which prohibits the sale of illegal timber from March 2013.
The EU also said it would promote a "favourable position" for products licensed through the VPA, including encouraging public and private procurement policies that "recognise and ensure a supply of legally harvested timber products".
The Indonesian auditing scheme will cover all exports, regardless of destination, making it difficult for producers of illegal products to circumvent the EU rules by routing exports via other countries.
As recently as 2007, the United Nations estimated that up to 88% of timber logged in Indonesia was illegally sourced.
More than one in 10 of Indonesia’s estimated population of 245 million people depend on the forests for their livelihoods, according to the EU-backed European Forest Institute.
The VPA will enable people to push for the suspension of a company’s timber exports if they discover evidence of illegality, while local groups and individuals will be able to file complaints if they feel audits do not reflect the situation in their areas.
The EU has already signed similar bilateral agreements with several African timber-exporting countries, including Ghana and Cameroon.
Australia is also expected to introduce a similar ban on imports of illegal timber, though Japan, a major importer of Indonesian products, is yet to act.
More information on the VPA from http://www.euflegt.efi.int/files/attachments/euflegt/briefing_note_indonesia__en_.pdf
