East Kalimantan Environmentally Sustainable Development Strategy

53
GDP Potential
The economic decline of the forestry sector in East Kalimantan can be reversed through
raising productivity and investing in downstream activities. These moves would increase the
forestry sector’s GDP by IDR 16 trillion by 2030 (EXHIBIT 31). The initiatives described earlier will
reduce emissions from our current logging and harvesting activities, but such efforts should be
complemented with efforts to extract more value from these activities. Currently, much of the
felled timber from logging is left as waste in the forest: thiscould be further processed. After forests
are converted to plantations, there are different opportunities to raise productivity within those
concessions. And finally, much of East Kalimantan’s timber is exported to Sumatra and Java
where it is processed into higher value products such as pulp or furniture. East Kalimantan has the
opportunity to capture a larger share of the downstream value-add going forward.
Yield improvements in HTI, and increasing value added production could
increase the GDP of the forestry sector to IDR 19.3 trillion by 2030
East Kalimantan’s real GDP forecast
IDR Trillions
20
15
10
5
0
2005
SOURCE: team analysis
Environmentally
Sustainable
Development
Strategy
Business
as usual
DRAFT
10
15
20
Improving timber utilization could yield IDR 0.7 trillion in additional GDP. Currently, logging
operations produce large volumes of waste. The logging companies currently sell to domestic
plywood and veneer mills or other solid wood applications. These buyers are interested in only
large diameter logs. Thus, large volumes of small-diameter wood (e.g., tree crowns) and wood
residues are left behind in the forest after the trees are cut. A more efficient approach is to fully
utilize the felled trees and thus gain higher revenues from a given land area. A common approach in
Europe, North America, and Brazil is to use large-diameter wood for high-value applications (as is
already done in East Kalimantan), but then to sell small-diameter wood and wood residue for lowervalue
applications like pulp and paper, board manufacturing, and the production of wood chips
and wood pellets (EXHIBIT 32).
25
2030
CAGR
5%
-1%
Exhibit 31
Growth rates in East Kalimantan’s timber plantations could be substantially improved
and idle plantations brought back into production. As noted earlier, growth rates in East
Kalimantan’s industrial pulpwood plantations are low compared with best practice benchmarks in
other parts of Indonesia. The annual growth rate is around 20 cubic meters per ha, while up to 40