The voluntary agreement signed by Zulkifli Hasan, Indonesia's minister of forestry and Karel De Gucht, EU trade commissioner, will track and monitor timber exports, to ensure they meet Indonesian laws and sustainably standards.
The EU is a key market for Indonesian forest products, with timber and paper exports worth $1.2 billion each year.
"European traders congratulate the government of Indonesia and the European Commission on their progress, which will make it easier for companies to be sure of the legality of products they buy from Indonesia," Andre De Boer, secretary general for the European Timber Trade Federation, said in a statement.
The agreement, which followed four years of negotiations, will affect all Indonesian timber exports, helping the archipelago attract business from the United States and other consumer nations that have adopted policies ensuring the legality of imports.
"This regulation will support our quest for a level playing field in the market, encouraging buyers to purchase legal and sustainable timber, and therefore supporting producers who act responsibly," added De Boer, whose group represents twelve national timber federations.
Both the EU and Indonesia must now ratify the agreement, which is expected to take about nine months. For Indonesia, the real challenge may be enforcement, with corruption rampant.
Indonesia will be the largest timber exporter by far to enter into such an agreement and the first in Asia. Indonesian timber and wood product firms include APRIL, Sumalindo Lestari Jaya and Barito Pacific .
Indonesia is seen as a key player in the fight against climate change and is under intense international pressure to curb its deforestation rate, as palm oil, timber and mining firms seek land to expand.
Norway signed a $1 billion deal last year with Indonesia to put a two-year ban on forest clearing from 2011 to reduce greenhouse gases from deforestation, though this has yet to be signed into law as the government wrangles over the details. (Reuters)
