Abstract
The integral role of the timber industry in sustaining local reforestation efforts is often overlooked. The processing and retail sectors of the timber industry are significant in that they add value to forest resources, providing local jobs and lumber supplies. This study examines these sectors in Riau, Indonesia, where deforestation and degraded peatlands have been accelerating. Based on a field survey of randomly selected molding mills and timber kiosks in Pekanbaru, the author examines the nature and scale of timber production, sales, and supply chains. Both the molding mills and timber kiosks could be classified into three types: those that function as subcontractors of large pulp and paper companies, those that operate independently and provide timber supplies for local construction needs, and those that specialize in higher-end wood processing. Those providing local timber supplies demonstrated more adaptability in terms of meeting market demands. Depending on the level of the operation’s independence, timber supply chains were more diversified in terms of the relationships among loggers, distributors, and retailers. To develop the timber sector in the context of local reforestation, it is necessary to consider how local people connect with the local timber processing and retail sectors and how to improve local timber supply chains. Reforestation programs must construct sustainable management systems that restore forests while at the same time using forest resources. This includes developing land ownership and use systems to produce timber sustainably and replanting tree species that are useful as timber.
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1 Introduction
The eastern province of Riau in Indonesia has been experiencing an accelerated rate of deforestation and peatland degradation since the 1990s. Furthermore, since the early 2010s, economic and population growth has precipitated a rise in the demand for timber for building construction. Local reforestation efforts are expanding in many areas in Riau, particularly in the context of rehabilitating degraded peatlands. At the same time, the Indonesian government has been developing several reforestation programs with the aim to increase both local timber supplies and employment opportunities. For example, in parts of Java, the planting of Paraserianthes falcataria and Albizia chinensis has successfully benefited the local wood processing industry (van Noordwijk et al. 2007).
Timber supply networks in Java directly connect local timber producers and wood processing companies, stabilizing the timber supply and decreasing gaps in timber distribution (Iwanaga and Masuda 2012, pp. 42–47). Although numerous studies examine the question of “illegality” in the production of timber in Indonesia, particularly in the context of political and economic change in the country (see Obidzinski 2005, pp. 193–205; Casson and Obidzinski 2002, pp. 2133–2151), the question of how timber production and supply by local communities could support reforestation requires more investigation and discussion. This chapter examines the socioeconomic characteristics of the timber processing and retail sectors—which are important hubs of the local timber supply system that connect timber producers, suppliers, and consumers—and discusses these sectors in the context of reforestation by local communities.
The chapter focuses on Pekanbaru, the capital city of Riau. Although the use of concrete has increased in building construction in many areas of Indonesia, timber remains an essential building material. Therefore, timber demand is expected to continue to increase in Riau due to sustained economic and population growth (BPS Provinsi Riau 2019, 2022a, b, c, d). Pulp and paper production in Riau is also expected to increase, as Riau is a main area of pulp production in Indonesia and pulp production has rapidly increased in recent years (Kementerian Lingkungan Hidup dan Kehutanan 2019, 2020). How, then, can Riau fill these demands in an environmentally and economically viable way?
Timber has long been one of eastern Sumatra’s primary marketable products and subsequently is a valuable commodity. Historical research on the timber industry in eastern Sumatra has paid attention to the socioeconomic aspects of logging and timber trading. For example, Barnard (1998) studied the timber trade in premodern Siak, a kingdom located on the east coast of Sumatra, from 1723 to 1946. Local communities living along the Siak River—which is the deepest waterway in the Malay Archipelago and thus an important conduit for trade in the region—exported timber, for which Siak was well known throughout the Straits of Malacca and as far away as Java (Barnard 1998). Pastor (1927) examined the logging practices of the ethnic Chinese in the coastal area of east Sumatra during the 1860s and 1870s. They formed groups of 20–30 people and logged while staying in small sheds in the forest. The timber was then exported to Singapore. By the nineteenth century, the importance of the Siak timber trade was cemented, as other regions of Southeast Asia, particularly those with easily accessible teak forests, became deforested (Barnard 1998). Indeed, ethnic Chinese logging groups continued to actively operate until 1962, when trade between eastern Sumatra and Singapore was controlled by regulation.
After the Suharto period, economic and political crises caused political power to shift from centralized, authoritarian rule to democratization and decentralization, impacting local timber business in ways that are discussed in the context of political ecology. In analyzing the networks of exchange and accommodation surrounding illegal logging, McCarthy (2006) found that in some local villages, people engage in illegal logging when the price of cash crops, such as nilam (patchouli oil), decreases and they need other sources of income. Yet while such practices offer short-term profit, illegal logging is understood to be inherently unsustainable, because the main income source, commodity production, remains only partially developed (Potter and Badcock 2004, pp. 341–356). Iwanaga et al. (2014) investigated how local timber production functions in the global carbon credit system, using the Melaleuca (Melaleuca cajupti) market in Indonesia as a case study of forest management and timber production in a REDD+ (reducing emissions from deforestation and forest degradation) project. Finding that demand for medium-sized Melaleuca timber increased, Iwanaga concludes that Melaleuca silviculture and timber production could be one option to increase local people’s income in the REDD+ project (Iwanaga et al. 2014).
Previous studies such as these illustrate the integral role that the timber industry plays in sustaining local livelihoods and forests. To improve understanding of this role, this chapter clarifies the socioeconomic characteristics of local timber processing and retail operations, focusing on molding mills and timber kiosks in Pekanbaru, Riau. Molding mills are outfits that have a number of circular and band saws to process logs and lumber, but they do not operate sawmills, which process raw wood into logs. Timber kiosks simply sell processed timber and do not have any machines to process the timber.
In describing these operations, I also briefly explain the relationship between pulp and paper companies, which produce and process timber on a large scale, and local business, which produce and retail timber on a small scale. Finally, I conclude by noting some challenges and opportunities of the local timber industry vis-Ă -vis reforestation efforts by local people.
2 Method
2.1 Research Site
Research was conducted in Pekanbaru, Riau, Indonesia (see Figs. 7.1 and 7.2). Although very few logs are produced in Pekanbaru, sawn timber and plywood are produced in the city, making it a timber processing and retail area of Riau. In addition, Riau is the center of the pulp and paper industry in Indonesia, with several major companies operating in the province.
Until several years ago, local molding mills and kiosks in Pekanbaru were mainly located in two areas. The first area, along the Siak River, was the main access point for transporting logs when logging was active along its tributaries.
The second area is in the southern part of Pekanbaru, where molding mills and timber kiosks line the major roads for local commodity distribution in Riau. These local timber businesses continue to be active, for example on the north-south road to Dumai, a mid-coastal city and the east-west road stretching from Tembilahan in Indragiri Hilir to Rengat in Indragiri Hulu.
2.2 Field Survey and Interviews with Stakeholders
Official records and statistical data do not accurately reflect the timber operations in Pekanbaru, because some businesses engage in illegal practices as defined by current forestry policy.Footnote 1 To address this gap in knowledge, a field survey was conducted in November 2011 and February 2012 of randomly selected molding mills and timber kiosks along the major roads in Pekanbaru. The author also interviewed the timber business managers and workers about their production scale, the timber species and sizes that they process and sell, their management practices, and supply chains, with a focus on the relationships among loggers, distributors, and retailers. The interviews provide useful information and perspectives for better understanding the local timber processing and retail sectors in Pekanbaru.
3 Findings
3.1 Local Molding Mills and Timber Kiosks
3.1.1 Business Characteristics and Scale of Production and Sales
The molding mills are classified into three types based on their business characteristics, as shown in Table 7.1. The first type represents the majority of those in Pekanbaru and includes those molding mills that functioned as subcontractors of large pulp and paper companies. They processed wooden pallets for the pulp and paper companies, which then used the pallets to export pulp to foreign countries. This type of molding mill had a comparatively large production volume compared to the other types, which processed timber for building construction and/or furniture. Many of these molding mills began pallet processing a few years prior to the survey. Several managers of these molding mills noted that one of the reasons they work with the pulp and paper companies is that it does not require them to obtain any permission to process and retail timber, because they can work under the permission of the larger companies. Asia Pulp & Paper Co. Ltd. (APP) and Asia Pacific Resources International Holding Limited (APRIL), major pulp and paper companies in Indonesia, plant and harvest Acacia in plantations and process the cut wood into pulp at their plants. Other than the pallets, the local molding mills and timber kiosks mainly sell timber, such as building materials, to the local communities. This division of labor in the supply chain eliminates competition between the pulp companies and local operations. However, some Type 1 mills develop a dependence on the pulp and paper companies.
The second type of molding mill refers to those that processed timber to sell to both local people and government entities for building construction. This included sales of timber to the local government, which had a number of ongoing infrastructure and public projects that required timber. The production scale of these mills depended on the scale of government projects.
The third type includes the molding mills that processed timber specifically for doors, window frames, and roof ornamentation. These mills produced less than 50Â m3 of processed timber per month.
The business characteristics of the surveyed timber kiosks are classified into three categories in Table 7.2. The first type consists of timber kiosks that retail timber to the mills that are subcontracted by pulp and paper companies, local people, and local government. This type of kiosk sold more species and sizes of timber than the other two types of kiosks. Moreover, overall sales were higher in this kiosk than in the other types, with the amounts of timber product sold ranging from 50Â m3 to 200Â m3 per month.
The second type includes timber kiosks that retailed timber to local people and government for house and building construction. Their sales amounted to less than 150Â m3 per month. The third category consists of kiosks that retailed timber for doors, window frames, and roof ornaments. Their sales amounted to less than 50Â m3 per month.
3.1.2 Managers’ Ethnicities and Hometowns
Based on interviews with managers and workers, almost all the managers of both the molding mills and timber kiosks surveyed were born in Riau. Most managers were from Pekanbaru, but some were from Kampar and Siak, neighboring regencies to Pekanbaru. They were predominantly Melayu people, who are traditionally distributed along the east coast of Sumatra. Some Batak and Minangkabau managers were born in North Sumatra and West Sumatra, but had been living in Pekanbaru for more than 10Â years at the time of the study.
3.1.3 Workers
Both the molding mills and timber kiosks were mainly family-operated businesses. As shown in Table 7.3, on average, two family members, for example, the manager’s wife and his relative, worked in the molding mills and timber kiosks. In addition to this core management team, migrant workers were also common in the molding mills and timber kiosks. Based on interviews with managers, working in a molding mill or timber kiosk was a typical way for migrants to make a living in Riau. Almost all these workers were young men in their 20s and 30s, who came from North Sumatra, West Sumatra, and Java.
3.1.4 Business Management
It was extremely difficult to obtain a clear picture of the business operations of molding mills and timber kiosks due to the persistent sensitivity around illegal logging. Many managers did not want to reveal details about their businesses. One molding mill, however, did share about its operations in an interview on October 22, 2011. The monthly income and expenses of this molding mill in October 2011 are presented in Table 7.4.
The Type 1 mill processed wooden pulp pallets for pulp and paper companies. It was managed by the owner; his wife and uncle assisted in management (their salaries are not included in Table 7.4). The owner employed 12 workers. Labor costs amounted to IDR 1,415,000 per month in total. This value exceeds IDR 1,200,000 (approximately USD 80), which is the average monthly wage for a timber processing worker in Indonesia (BPS 2012). He also had to pay annual land rental costs, as the business was operated on borrowed land.
The mill’s operating income was IDR 26,380,000 (approximately USD 1978). This value comprised approximately 21% of total sales. The owner said that the sales during this month were comparatively high because he had produced and sold timber to a public project. The mill sold a total of approximately 200 m3 of timber during the month.
3.2 Timber Supplies in Molding Mills and Timber Kiosks
3.2.1 Change in Species and Sizes of Logs and Timber
The research made clear that the species and sizes available in both molding mills and timber kiosks had changed in recent years. Table 7.5 details the 22 species available in the surveyed businesses. Based on interviews with managers, until a few years prior to the survey, Punah (Teramerista glabra Miq.), Kulim (Sorodocarpus borneesis), Meranti (Shorea spp.), and Tembesu (Fagraea spp.) were mainly sold for house construction, because these species are highly durable and not susceptible to insect damage. However, in recent years, the amount of logs of these species had decreased drastically. As a result, many molding mills and kiosks had difficulty buying these types of logs and timber. At the time of the survey, these species were already recognized as rare and were used only for wooden fittings. Their prices were also continually on the rise.
Conversely, Acacia (Acacia cracicarpa), Mahang (Macaranga spp.), Karet (Hevea brasiliebsis Muell. Arg), and Sengon (Paraserianthes falcataria) had replaced Punah, Tembesu, and Kulim as the main timber species for house construction. These species grow quickly and produce timber in a short time span. They are not planted to be cut, but rather grow naturally in forests. Generally, during hardwood timber shortages, demand for these species was expected to spike. Acacia, Mahang, and Sengon were also essential materials for wooden pallets. The molding mills working as subcontractors of the pulp and paper companies specialized in processing these species. The buying price of Acacia, Sengon, and Mahang from the timber distributors was IDR 300,000 to 350,000 per m3 (approximately USD 23–26). The buying price of timber for house construction ranged from IDR 1,000,000 to IDR 1,500,000 per m3 (approximately USD 75–113).
Some timber kiosks also adapted their operations due to the hardwood shortage, for example, by selling a wider variety of species and buying any timber large enough in size for house construction from loggers and middlemen. In contrast, some timber kiosks concentrated on selling only a few timber species. For example, several timber kiosks sold only Mahang for house foundations, or sold thin Mahang logs, which were easy to obtain and requires no processing (local people place Mahang piles on the muddy ground to prevent houses from sinking). Such specialization indicates an adaptation to local timber supply and demand.
Although the industry classifies 22 timber sizes, the length of a single piece is typically 400 cm. By the time of the survey, however, some kiosks had started to sell hardwood timber in lengths of 200 cm. This could indicate a further adaptation; by shortening the length, kiosks were able to continue selling hardwood. Some timber kiosks had also begun to sell lumber. Lumber was cut roughly by hand saw rather than processed by band or circle saws in sawmills and molding mills. Although the lumber’s surface was not smooth, the longer length could be maintained, with kiosks offering sizes of 5 W × 3D × 400 L (cm) and 6 W × 4D × 400 L (cm). Some kiosk managers indicated that local people preferred larger-sized lumber pieces to smaller-sized timber pieces.
3.2.2 Timber Supply
Based on interviews with managers, until several years ago, the molding mills and kiosks cooperated to share information such as timber distribution channels and prices, but no longer did so at the time of the survey due to the declining number of timber processing and retailing operations in Pekanbaru.
Distributors transported timber to the molding mills and timber kiosks either via the roads or the Kampar River. Table 7.6 depicts the sources of timber for the surveyed molding mills and timber kiosks according to producing district and forest type. The molding mills bought lumber produced in Siak, Kampar, and Pelawan. In Siak, the main areas of timber production were concession forests, which were managed by the pulp and paper companies or their subcontracted mills. In Kampar and Pelawan, village forests were the main areas of timber production.
The timber kiosks bought timber that was processed in Siak and Kampar. Although there were several molding mills in Pekanbaru, the timber kiosks did not buy timber from them, because many molding mills in Pekanbaru processed mainly softwoods for wooden pallets and did not meet their demands. Some kiosk owners said that village forests were the main areas of timber production in both Siak and Kampar. Others did not know where timber was cut.
The author found that at the time of the survey, 22 out of 25 of the molding mills and timber kiosks were facing timber shortages. First, the hardwood supply was declining, as described in the previous section. Second, no one could bring timber to Pekanbaru without the necessary permits.
The survey revealed that there were three main types of timber supply chains in Pekanbaru, as depicted in Table 7.7. There were three stages of supply, namely, logging in forests, distributing logs to mills, and processing logs into lumber or timber in molding mills and, sometimes, in timber kiosks. Although kiosks had no machines to process the timber, kiosks managed timber production, with workers processing logs into lumber or timber in places other than the kiosks. In the first category, workers at the molding mills and timber kiosks managed all stages of the timber supply. This type of operation often managed large concessions and, for this reason, did not require many networks to secure adequate timber supply. The molding mills and timber kiosks that processed and retailed timber for wooden pallets fell into this category.
The second category involved timber distributors working together with molding mills and timber kiosks. The timber distributors often contacted loggers to keep abreast of availability and logging conditions. After preparing logs or lumber for transport, they called the molding mills and timber kiosks. The molding mills and timber kiosks paid half of the money needed for the distributors to buy the logs and covered the costs of transportation and labor. Upon receipt of the logs, they paid the remaining balance. In the case of timber kiosks, the bulk of the timber processing was conducted in a sawmill or molding mill near the forest. The surveyed molding mills worked with an average of two groups of distributors and the timber kiosks worked with three groups.
In the third category, loggers, distributors, and retailers worked together. The molding mills and timber kiosks bought timber that was delivered by the distributors. Some distributors were business partners of the mills or kiosks, while others visited the molding mills and timber kiosks without any prior contact to sell timber. Some managers noted that loggers sometimes brought timber directly to the molding mills and timber kiosks, bypassing distributors. The surveyed molding mills and timber kiosks had an average of three networks with timber distributors.
4 Discussion
This chapter investigated the socioeconomic features of the processing and retail sectors of the timber industry in Pekanbaru, focusing on the nature and scale of timber production, sales, and supply chains. Better understanding these features can inform the improvement of reforestation efforts by local communities.
A random survey and interviews of molding mills and timber kiosks in Pekanbaru found that some operations essentially function as subcontractors of bigger pulp and paper companies. This was because they could legally process and retail timber under the companies’ existing permits without having to obtain any additional permit. These local businesses necessarily grow in line with the pulp and paper companies’ business. The production process of pulp and paper companies has degraded the tropical forest; in response to monitoring and criticism of many institutes and non-governmental organizations (NGOs), the companies have begun producing timber from plantations and preserving the remaining forest in and around their concession area (Suzuki 2016). Previous research has concluded that the growth of pulp and paper companies depends on the level of forest conservation they practice in their business (Suzuki 2016). The molding mills and timber kiosks working for these companies will also need to evaluate the sustainability of their businesses and develop viable business strategies to ensure a stable local timber supply.
While some operations acted as subcontractors to bigger companies, other molding mills and timber kiosks sold timber directly to local people and government entities. They modified their businesses to adapt to emerging conditions, for example responding to timber shortages by changing timber species from hardwoods to softwoods, selling any kind of lumber to retain timber size, and so on. To alleviate the timber shortage, regulations regarding timber production and sales need to be reduced, especially regulations around the production and retail of softwoods that require prior approval.
The survey found that village forests represented an essential timber source for the molding mills and timber kiosks, which supplied timber to local government entities and local people. Village forests are granted forest management rights by the state and are often used in the context of social forestry, which is a sustainable forest management system managed by the state to improve the welfare, environmental balance, and socio-cultural dynamics at the local village level (Peraturan Pemerintah No. 23 Tahun 2021). More discussion is needed on how to connect such village forest management and local timber supply chains.
Successful reforestation by local communities requires developing stable income sources to support and sustain local forest management in the long term. Timber production and retail can be a way for local people to obtain income. To develop the timber sector in the context of local reforestation, it is therefore necessary to consider how local people connect with the local timber processing and retail sectors and how to improve local timber supply chains. In such a consideration, the social networks between molding mills and timber kiosks, which this study analyzed, should be recognized as essential. In this regard, reviving the local timber association may prove useful as a means to recognize and develop closer ties among the various sectors of the timber industry.
In recent years, local reforestation efforts have expanded in many areas in Riau, particularly in the context of rehabilitating degraded peatlands. Forests need to produce timber that fulfills local construction demands, including to supply appropriate sizes of building materials. Reforestation programs therefore must construct sustainable management systems that restore forests while at the same time using forest resources. This includes developing land ownership and use systems to produce timber sustainably and replanting tree species that are useful as timber.
Notes
- 1.
This is based on an interview with the officer in the Department of Forest Production Utilization and Monitoring (Balai Pemantauan dan Pemanfaatan Hutan Produksi, BP2HP) in Pekanbaru, Riau, on October 28, 2011.
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Acknowledgments
My fieldwork was conducted with research permission (0343/SIP/FRP/SM/X/2011) from the State Ministry of Research and Technology (RISTEK), Indonesia. I am deeply grateful to my counterpart Dr. Bambang Subiyanto (LIPI). I am also grateful to Associate Professor Haris Gunawan (Riau University) and Ms. Erli Zani (at Andalas University at the time of my field research) for supporting my fieldwork. I also appreciate the cooperation of all the informants in the local molding mills and timber kiosks in Pekanbaru.
This research was supported by the Global COE Program “In Search of Sustainable Humanosphere in Asia and Africa” and the “Institutional Program for Young Researcher Overseas Visits,” both of the Center for Southeast Asian Studies, Kyoto University.
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Suzuki, H. (2023). The Timber Processing and Retail Sectors in Pekanbaru, Riau: Toward Reforestation by Local People. In: Mizuno, K., Kozan, O., Gunawan, H. (eds) Vulnerability and Transformation of Indonesian Peatlands. Global Environmental Studies. Springer, Singapore. https://doi.org/10.1007/978-981-99-0906-3_7
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