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SmartWood Certification Assessment Report for:

PT Intracawood Manufacturing,

East Kalimantan, Indonesia

Date Draft Report Completed: May 2001 Date Final Report with Preconditions Completed: November 2001

1st Update to Final Report Completed: April 2003 2nd Update to Final Report Completed: May 2005 3rd Update to Final Report Completed: March 2006

Dates of Field Visits: March 2001, July & October 2002, February 2004, June 2005

Phase II- Certification Assessment Team:

Jim Schweithelm, Team Leader, Social/Communities Scott A. Stanley, Forestry/Production

Jim Jarvie, Ecology/Environment Aisyah E. Sileuw, Social/Communities

Phase III - Precondition Audit Team:

Jeffrey Hayward, Team Leader/Environment Alex Hinrichs, Forestry/Production

Dwi R. Muhtaman, Social/Communities

Phase IV - Verification Audit Team: Bart Willem Van Assem, Forestry/Production

Dwi R. Muhtaman, Social/Communities

Phase V – Performance Verification Audit Team: Cecep Saepullah, Forestry/Production

Ating Sobari, Social/Communities Machmud Thohari, Ecology/Environment

SmartWood Forest Assessment Report – PT Intracawood Mfg. of 65 April 2006

TABLE OF CONTENTS

ACRONYMS AND INDONESIAN TERMS ......................................................................... 3 1. INTRODUCTION ......................................................................................................... 5

1.1. NAME AND CONTACT INFORMATION ................................................................................. 6 1.2. GENERAL BACKGROUND.................................................................................................... 6 1.3. FOREST AND MANAGEMENT SYSTEM ................................................................................ 7 1.4. ENVIRONMENTAL AND SOCIOECONOMIC CONTEXT ........................................................ 12 1.5. PRODUCTS PRODUCED...................................................................................................... 16

2. CERTIFICATION ASSESSMENT PROCESS........................................................ 19 2.1. ASSESSMENT SCHEDULE & DATES................................................................................... 19 2.2. ASSESSMENT TEAM AND PEER REVIEWERS ..................................................................... 22 2.3. ASSESSMENT PROCESS ..................................................................................................... 24 2.4. GUIDELINES ...................................................................................................................... 29 2.5. STAKEHOLDER CONSULTATION PROCESS AND RESULTS .................................................. 30

3. RESULTS, CONCLUSIONS AND RECOMMENDATIONS ................................ 39 3.1. GENERAL DISCUSSION OF FINDINGS ................................................................................ 39 3.2 CERTIFICATION DECISION ................................................................................................ 58 3.3 PRE-CONDITIONS AND CORRECTIVE ACTION REQUESTS (CARS).................................... 58


ACRONYMS AND INDONESIAN TERMS AAC Annual Allowable Cut ACIAR Australian Centre for International Agricultural Research ALP Annual Logging Plan AMDAL Analisis Dampak Lingkungan (Environmental Impact Analysis) Bupati District Leader CAR Corrective Action Request CBD Convention on Biological Diversity CIFOR Center for International Forestry Research CITES Convention on Trade in Endangered Species DBH Diameter at Breast Height DHH Daftar Hasil Hutan Untuk Kayu Bulat (Forest Production List). DR Dana Reboisasi (Reafforestation Fee) FMO Forest Management Organization FSC Forest Stewardship Council Gaharu Valuable incense harvested from Aquilaria spp. trees Gunung (Gg.) Mountain Ha hectare HCVF High Conservation Value Forest HPH Hak Pengusahaan Hutan (license granted by the Indonesian government for selective

harvest of natural forest over a 20 year period) HRD Human Resource Development HTI Hutan Tanaman Industri (Industrial Timber Plantation) Hutan Lindung Protection Forest ILO International Labor Organization Inhutani Indonesian parastatal FMO IPK Izin Pemanfaatan Kayu (Wood Utilization Permit) IPPK Izin Pemanfaatan dan Pemangkuan Kayu (Wood Utilization Permit issued by District

Leader) IUPHHK Izin Usaha Pemungutan Hasil Hutan Kayu (Permit for Extraction of Timber Based

Forest Product) ITTA International Tropical Timber Agreement ITTO International Tropical Timber Organization IUCN World Conservation Union (formerly International Union for the Conservation of

Nature) Kabupaten District Kalimantan The Indonesian portion of Borneo Island KalTim East Kalimantan Province LEI Lembaga Ekolabel Indonesia LHP Laporan Hasil Produksi (Forest Production Report) OSH Occupation Safety and Health P&C Principles and Criteria of the FSC P1.2 Used throughout as reference to specific P&C, i.e. Principle 1, Criteria 2 NTFP Non-Timber Forest Product Petak 100 ha cutting block or “compartment” PMDH Diagnostik Studi Pembinaan Masyarakat Desa Hutan (Concession-financed village

development activities) PSDH Pungutan Sumber Daya Hutan (Forest Resource Royalty) PUP Plot Ukor Permanen (Permanent Sample Plot) PSP Permanent Sample Plot RIL Reduced Impact Logging RKL Rencana Karya Lima Tahun (Five-Year Working Plan) RKPH Rencana Karya Pengusahaan Hutan (Forest Management Plan) RKT Rencana Karya Tahunan (One-Year Working Plan) RPL Rencana Pengelolaan Lingkungan (Environmental Management Plan)


RPL Rencana Pemantauan Lingkungan (Environmental Monitoring Plan) RTE Rare, Threatened or Endangered species RTRWP Rencana Tata Ruang Wilayah Propinsi (Provincial Land Use Plan) Rupiah (Rp.) Unit of Indonesian currency (US$1=~Rp. 11,000) SAKB Surat Angkotan Kayu Bulat (Transfer Record for Round Logs) SFM Sustainable Forest Management SKSHH Surat Keterangan Sahnya Hasil Hutan (Official Approval Document of Forest

Production) SPSI Serikat Pekerja Seluruh Indonesia (Indonesian Labour Union) TFF Tropical Forest Foundation TGHK Tata Guna Hutan Kesepakatan (National Land Use Plan/ National Forest Function

Agreement) TNC The Nature Conservancy TPTI Tebang Pilih Tanam Indonesia (Indonesian Selective Felling and Planting System) UMR Upah Minimum Regional (Minimum Regional Wage Standard)


1. INTRODUCTION This report presents the findings of an independent certification assessment conducted by a team of specialists representing the SmartWood Program of the Rainforest Alliance. The purpose of the assessment was to evaluate the ecological, economic and social sustainability of PT Intracawood Manufacturing (referred to as either PTIM, “Intraca”or “Intracawood” throughout the rest of this report) forest management. The assessment was conducted jointly with a team from the LEI-accredited certification body, PT TUV International Indonesia. According to a Joint Certification Protocol between FSC and LEI, Intracawood must satisfy the requirements of both the LEI and FSC systems in order to be certified. Final approval of an FSC certification for Intracawood requires formal approval by an LEI decision-making body, as per the LEI certification system. This report focuses solely on the results of the FSC assessment1. It contains five sections of information and findings. Sections one through three will become public information about the forest management operation that may be distributed by SmartWood or the Forest Stewardship Council (FSC) to interested parties. Sections four, five, and the appendices are confidential, to be reviewed only by authorized SmartWood and FSC staff and reviewers bound by confidentiality agreements. Most of this report was written after the assessment in March 2001 and finalized by December 2001. As the company had significant pre-conditions (requirements that must be met prior to certification), a update of the public summary sections of the report was produced to indicate the developments to meet those pre-conditions, and to present new information, evidence of progress, and stakeholder concerns that took place from the period between December 2001 and April 2003. In June 2003 the certification process was put on hold when the acting Minister of Forestry issued a letter halting operations on the concession. Subsequent SmartWood auditing of the company in February 2004, June 2005, and developments to the present are summarized and updated in this report. It is SmartWood’s sincere intent to be transparent about what was found, determined, and written based on the original assessment (Phase II) and that which has taken place in the periods after the finalization of that first version of the final certification report up to the present (Phases III, IV, and V). Where significant new information, data, and progress has taken place, this has been added to the public summary report, and the addition is indicated by identifying this as Phase II, Phase III, Phase IV, and Phase V material. These phases correspond to subsequent precondition and performance monitoring audits conducted by SmartWood. Each such audit resulted in an individual report, however, these are summarized together herein. The final certification assessment report and public summary were completed in March 2006. The complexity inherent in an extended certification process of six years duration means that much detail and clarification may best be sought by contacting SmartWood with specific questions. The purpose of the SmartWood program is to recognize conscientious land stewardships through independent evaluation and certification of forestry practices. Forestry operations that attain SmartWood certification may use the SmartWood label for public marketing and advertising. As per FSC requirements, operations that are certified by SmartWood are subject to both annual and random audits on a continuous basis. Thus, the findings and other results of this assessment will be used by Intracawood to implement continuous improvement of their forest operations, and for the purposes of future SmartWood auditing.

General Observations on the Forestry Situation in Indonesia and Relevance to FSC/LEI Certification and Intracawood

Forest certification initially started in 1990 in Indonesia. Since that time there has been an active debate on certification in general, operations that have been certified, and the future of FSC/LEI joint certification. Parallel to the certification discussion, there are multiple and crucial debates going on about Indonesian forest policy, land tenure, commercial forest management, community forestry, non- 1 For results of the LEI assessment process, contact LEI at www.lei.or.id.


timber forest products management, and social conditions for workers, communities and contractors. In addition, there has been fundamental change within the structure and function of the Indonesian national government itself, with implications at all levels. The above dynamics have major implications for forest certification. Certification discussions reflecting on these and other issues have taken various forms. For example, a “Joint Certification Protocol” (JCP) has been developed between LEI and FSC. As a result of this process, various parties involved in LEI and FSC have worked together to ensure that national realities and dynamics are respected, while at the same time the global implications of Indonesia’s forest products trade must be dealt with. Many different stakeholders have gotten involved. Major, multi-stakeholder workshops have taken place to explore land tenure, indigenous peoples and high conservation value forests (HCVFs), among other relevant topics. In the current Indonesian environment, it is clear that any type of forest certification should be seen not as an end result, but as a starting point on the path towards social, environmental, economic and silvicultural sustainability. Clearly, SmartWood (and FSC and LEI) expect a certain minimum level of performance in order to be certified. In our experience, this minimum level of performance represents a major improvement in the quality of commercial and community forest management in Indonesia. The actions taken by candidate operations to meet FSC or LEI certification standards require not only documents, but field performance that is observable by auditors. Given the many uncertainties that Indonesian forest operations face, both FSC and LEI have taken the approach that positive recognition of operations that have already demonstrated in practice their commitments to the environment and local communities is not just important, but crucial. In addition to fostering forest products industry and trade that is built on much more sustainable foundations, it is SmartWood’s perspective that the operations that meet FSC/SmartWood and LEI requirements, could provide the basis upon which future forest policy revisions and improvements can be made. SmartWood does not see certification as a panacea, or the answer, to all of Indonesia’s forestry challenges.

GENERAL SUMMARY

1.1. Name and Contact Information Source Name: PT Intracawood Manufacturing

Contact Person: Mr. Totok Lestiyo Address: Jalan Terusan Lembang D51-53 Jakarta Pusat, Indonesia 10310

Tel: 62 21 3905751, 3148505 Fax: 62 21 3908469, 3908470

E-mail: [email protected]

1.2. General Background

1. Type of operation

Phase II - PT Intracawood Manufacturing (PTIM) is part of the Central Cipta Murdaya Group (CCM), a diversified conglomerate of privately owned companies. Three companies hold the majority of stock in PTIM, and are as follows: PT Inhutani I (24.7%), PT. Altracks ‘78 (49.5%) and PT Berca Indonesia (24.7%). Both PT Altracks and PT Berca are owned by the CCM group. The PTIM Employees Cooperative also holds a small portion of stock in the company (0.96%). PT Intracawood was established as a joint business venture with PT Inhutani I to manage a natural forest concession (HPH) of 226,326 hectares, selectively harvesting timber to supply raw logs to the Intraca plywood mill in Tarakan. A large portion of the concession (42,050 ha) has been reclassified by the government as industrial plantation (HTI) and is managed jointly by an Intracawood subsidiary and Inhutani (the quasi-state enterprise that manages some State forestlands). The operations of the HTI have been stopped


since 2001. HTI license revoked in October 2002. The HTI is not being considered for certification2. Phase III - Improved mapping and GIS analysis of the FMU has produced more accurate area statistics for the total concession and HTI, particularly with respects to conservation areas, which are described in Section 1.3 B, below. Phase IV – Company received 45 year HPH concession right for the natural forest management of an area of 195,110 hectares in August 2004, which is described in Section 1.3 B, below.

2. Years in operation Phase II - Intracawood acquired the sub-contracted concession rights from PT Inhutani I (the state forestry enterprise) in 1988, on the condition that Inhutani become a major stockholder of the new concession. In return, Intraca secured a long-term tenure agreement of 75 years, far longer than the 20-year tenure usually granted to concessionaires. Timber harvesting began in 1990, after almost 15 years of Inhutani management. Under Indonesian regulations, annual coupes or compartments are combined into five-year blocks, and PTIM began in the last year of the third five-year block. Phase IV – Right to harvest thrown into question when Minister of Forests issues brief letter in May 2003 halting operations. December 2003 letter from Minister allows for operations to resume and in August 2004 company secures new license for 45 years. 3. Date first certified

April 2006

4. Latitude and longitude of certified operation

The Intracawood concession lies between the geographic coordinates: N2º48’27’’ – 3º37’30’’ and W116º30’00’’ -- 117º37’30’’.

1.3. Forest and Management System

Forest Type and Land Use History

Most of the area of the Intracawood concession is covered by lowland mixed Dipterocarp forest with a high level of species diversity. Overall species diversity should be expected to be about 200-250 tree species greater than 10 cm DBH per ha, and perhaps 800-1,200 tree species greater than 10 cm DBH in the whole concession. While the area is largely homogeneous in terms of forest types, there is some minor variation in species composition. There are at least two forest sub-types: forest rich in kapur (Dryobalanops spp.) and ulin (Eusideroxylon zwageri) generally occurring on higher ridge/valley systems, and forests without these species, on generally lower elevation systems. The larger river courses in the more mountainous areas are

2 The HTI establishment and management process is a major concern for many stakeholders, including SmartWood. LEI and FSC are currently exploring how to deal with HTI issues in Indonesia, given that there are numerous HTI operations, as classified by government, which often are at the cost of natural forest (through conversion). HTI’s are legally permitted in Indonesia, however as per general FSC policy, those that are being established currently or since 1994, as a result of forest conversion, cannot be certified in the FSC system.


bordered by riparian forest. Fresh water peat swamp forest remnants remain on the northern border. The forests that currently comprise the Intracawood concession were used for hundreds if not thousands of years for low intensity swidden cultivation, hunting, and NTFP collection by indigenous peoples (see section 1.4). A timber concession was issued to PT Inhutani I in the early 1970s for an area of 2,465,000 hectares, of which is included the forestland that would constitute the 250,000 hectare HPH area3 to be managed by Intracawood. During the 1970s and 80s the forests to the north and east of the current Intracawood concession were logged by Inhutani as well as some of the forest within the eastern part of Intracawood’s HPH concession. Much of the land logged in the past by Inhutani is now designated as a HTI timber plantation and at the time of the assessment was in the process of plantation establishment by Intracawood, as legally permitted in Indonesia. Intracawood acquired its HPH concession license in 1988 as described in section 1.2 A.

5. Size of Management Unit and Area in Production Forest, Conservation, and/or

Restoration Phase II - The PTIM concession right covered a total of 226,320 hectares and classified into production, limited production, conservation, and plantation areas. The company reallocated land use classifications based on input from the Smart Wood scoping report. PTIM has also had to respond to recent government decentralization initiatives, whereby the Bupati (District Head) has granted nearby villages cutting permits (IPPK) with the right to harvest timber within PTIM’s concession. This scheme has generated conflict; partly being fuelled by outside timber entrepreneurs who have encouraged the village heads to pursue land tenure rights in order to buy logs from them at very low prices. Thus, Intracawood has had to deduct land from their effective production area, and it was not clear at the time of the original assessment how much more land Intracawood will lose before the process is stabilized. The company had been negotiating with various surrounding communities, offering cash and other in kind contributions as an alternative for villages, in lieu of seeking these cutting permits (IPPK). Table 1 illustrates the changes in land use designation in the natural forest concession (HPH). Phase II:

TABLE 1. LAND USE CLASSES IN THE PT INTRACAWOOD CONCESSION [EXCLUDES THE PLANTATION PORTION (HTI)]

Description (Land Use Classes) Extent

(Ha) Percent (%)

Land use classes assigned by Forestry Dept. (excludes HTI, plantation)

Production Forest (HP) 146,386 68.6 Limited Production Forest (HPT) 66,972 31.4 Total 213,358 100.0 Deduction for Conservation and Restricted

Areas (inside of total HPH area above)

Steep slopes over 40% 18,441 8.6 Stream-side buffer zone corridors 3,867 1.8 In-situ germ plasma reserve 1,070 0.5 Wildlife reserve 100 0.1 Outstanding or unique ecological reserve 957 0.4 Buffer zone between protected forest & HPH 2,950 1.4

3 As of August 2003 this amount is 195,000 hectares.


Buffer HPH 2,925 1.4 Subtotal 30,310 14.2 Deduction for non-productive & community

set-aside areas

Non-productive areas 4,729 2.2 Community set-aside areas 9,124 4.3 Subtotal 13,853 6.5 TOTAL (effective area for timber production) 169,195 79.3

Source: A. Salim (Head of GIS section for PTIM at time of assessment) HP: Hutan Produksi (Production forest) in areas with slopes less than 30%, Min Cut Diameter >= 50 cm DBH. HPT: Hutan Produksi Terbatas (Limited production forest) in areas with slopes between 30 to 40%, w/ Min Cut Dia. >= 60 cm DBH. HTI: Hutan Tanaman Industri (Planted industrial forest) Logged-over forest that has been or will be converted to tree plantations. Protected: Forest areas with slopes exceeding 40%, 500-m buffer zones between protected forest on southern boundary, 100-m buffer zone on main rivers, and Kebun Plasma Nufta (KPN). Table 1 includes community set-aside areas that the company has deducted from their HPH. Not shown in Table 1, but included in Intracawood’s social monitoring map is an area of approximately 30,000 ha claimed by villagers, which coincided with the current and next two years’ harvest coupes (RKT 2001-2003). At the time of the original assessment, this area was still under negotiation. The Intracawood efforts to negotiate agreements with the communities were a pivotal part of the company’s resolution of existing conflicts and to manage the forest with increasing community acceptance from mid-2002 through mid-2003. Phase III UPDATED Table 1 FROM OCTOBER 2002.

LAND USE CLASSES IN THE PT INTRACAWOOD CONCESSION [EXCLUDES THE PLANTATION PORTION (HTI)]

Description (Land Use Classes) Extent (Ha)

Percent (%)

Production Forest (HP) 127,384 59.7 Limited Production Forest (HPT) 50,870 23.8 Total Production Forest 178,253 Reserve area awaiting local gov’t approval 35,192 16.5 Total FMU (without HTI) 213,445 100.0 Deduction for Conservation and Restricted Areas (from total Production Forest area above)

Steep slopes over 40% 23,043 12.9 Stream-side buffer zone corridors 6,987 3.9 In-situ germ plasma reserve 753 0.4 Wildlife reserve 0 0 Outstanding or unique ecological reserve 1,898 1.1 Buffer HPH 3,249 1.8 Other High Conservation Value Forest (HCVF) 8,331 4.7 Subtotal 44,261 24.8 TOTAL (effective area for timber production) 133,992 75.2

Source: (PTIM Forest Planning Division) Phase IV – In preparation for the new 45 year license, the Intracawood forest planning division reclassified the extent and use of forest cover in October 2004 from the previous reporting of October 2002. This updated area comprises the total certified area.


Phase IV UPDATED Table 1 FROM OCTOBER 2004.

LAND USE CLASSES IN THE PT INTRACAWOOD CONCESSION [EXCLUDES THE PLANTATION PORTION (HTI)]

Description (Land Use Classes) Extent (Ha)

Percent (%)

Production Forest (HP) 140,750 72.1 Limited Production Forest (HPT) 54,360 27.9 Total Production Forest 195,110 Total FMU (without HTI) 195,110 100.0 Deduction for Conservation and Restricted Areas (from total Production Forest area above)

Steep slopes over 40% 20,172 10.6 Stream-side buffer zone corridors 8,078 4.1 In-situ germ plasma reserve 753 0.4 Wildlife reserve 0 0 Outstanding or unique ecological reserve 1,450 .7 Buffer HPH 5,273 2.7 Other High Conservation Value Forest (HCVF) 7,287 3.7 Subtotal 43,546 22.3 TOTAL (effective area for timber production) 151,564 77.7

Source: (PTIM Forest Planning Division) 6. Annual Allowable Cut and/or Annual Harvest Covered by Management Plan Phase II - Intraca has calculated its annual allowable cut (AAC) based on the area remaining to be harvested during the first 35-year cutting cycle. Timber harvesting began on the concession in 1976; thus, ten years remain in the first cutting cycle. PTIM estimated that the area remaining in the current cutting cycle (unlogged forest) is 40,545 ha consisting of 21,411 ha classed as production forest and 19,134 ha in limited production forest. According to the new management plan, commercial harvestable volume in production (> 50 cm dbh) and limited production forests (> 60 cm dbh) is 136 and 108 m3/ha, respectively. After adding 5,194 ha of logged-over forest (LOA) they calculated the maximum size of annual coupes and volume that could be harvested as follows:

AAC (area) = yrhayears

/574,410

194,5545,40 =+

AAC (HP) = (21,411 ha x 136,87 m3/ha x 0.7 x 0.8)/10yrs = 164,109 m3/yr

AAC (HPT) = (19,134 ha x 108,40 m3/ha x 0.7 x 0.8)/10yrs = 116,151 m3/yr TOTAL = 280,260 m3/yr

The AAC by volume was calculated based on the available harvest area in the two production classes, the average volume estimated per hectare, and the government mandated reduction factors. These factors attempt to compensate for trees that cannot or should not be cut (safety factor – 0.8) and those trees that are defective or damaged during felling (exploitation factor – 0.7-0.8). This most recent calculation of the AAC is substantially different than PTIM’s own AAC estimation in the company profile of March 2000, which shows 166,700 m3/yr. The March 2000 AAC calculation for HP and HPT forests uses 99 and 67 m3/ha, respectively as mean harvestable volumes. Their earlier estimates of mean volumes are comparable for other HPHs in similar forests, whereas PTIM’s newest AAC calculation appears exaggerated. Past production from annual coupes also suggest that the AAC is not realistic, maximum volume


obtained was 140,000 m3 (1997). The new management plan reviewed at the time of the original assessment did not go into detail describing how the mean volumes were estimated, nor in justifying the additional 5,194 ha of logged-over forest. One of the preconditions to certification required that Intracawood clarify and justify the calculation of AAC, including a full explanation of the forest inventory used as a base to calculate the AAC. Statistical analyses should be incorporated in this explanation, including the sampling error of the inventory, before certification could be granted. Phase III: Intracawood had been in process of recalculation and re-evaluation of the basis for the annual allowable cut (AAC) almost since the conclusion of the 2001 field assessment. Additional inventory information was acquired and prior information used to calculate the AAC was no longer used by the SmartWood audit of October 2002. The company has used the results from growth and yield plots, however the information is still in a preliminary state. The process of improving the inventory information was underway, but in lieu of more accurate data, the company had taken the approach of reducing the annual cut. See section 3.1, Precondition Compliance Summary. 7. General Description of Details and Objectives of the Management Plan/Sytem

The forest is managed under the standard Indonesian silvicultural prescription for natural forests - TPTI (Tebang Pilih Tanam Indonesia - The Indonesian Selective Felling and Planting System). TPTI is an uneven-aged system that includes 11 silvicultural operations with the intention of insuring an adequately stocked stand at the next cutting cycle and maximizing growth of future crop trees. The cutting cycle is 35-years based on, from SmartWood’s perspective, an overly optimistic mean diameter growth rate of one cm/yr. Government regulations require a long-term management plan (20 years), as well as five-year plans and one-year harvest plans. Inventories of the standing stock are undertaken at sampling intensities of 1% at the time of the preparation of the 20-year plan, 5% for the five-year plan and 100% for the 1-year plan. Post felling inventories at 100% intensity are also undertaken to determine the degree of stocking and during this time, PTIM liberates future crop trees from competition by either ring barking or applying an arboricide (Roundup) after ring barking. Enrichment planting and roadside planting are undertaken, depending on the results of the post-felling inventory. Intracawood is mostly using native species for its enrichment planting, of which the majority are commercial Dipterocarps. The concession is required to establish permanent sample plots in each 5-year harvest block. These plots are measured and the results sent to the Department of Forestry's research branch for analysis. The results of this analysis should be returned to the company, but this has yet to happen with PTIM. For this reason, the company is attempting to analyze the growth data from these plots, but have not yet incorporated the results into improving their forest management. The concession is also mandated to reserve one 100-hectare compartment as seed tree orchard (KB) and one 100-hectare compartment for genetic resources (KPN) per RKL (five-year compartment.) Chainsaw teams consisting of a chainsaw operator and assistant fell trees. Felled trees are skidded to spur roads using D7 tracked tractors. Skid trails are laid out in advance of harvest and at the time of active logging. From log landings, trucks haul the logs to the log pond at kilometer 0, along the Sesayap River. From this log yard, the logs are barged or rafted to the company mill in Tarakan. Intracawood has a workforce of over 500 employees to carry out the forest management activities in the concession. There are 24 degree holders in forestry, 13 with associate degrees in forestry, 5 with vocational diplomas. There are 44 government-recognized cruisers, 10


plant/tree identifiers, 52 scalers, and 11 log graders. In addition, there are numerous skilled workers such as tractor operators, chainsaw operators, workshop mechanics, and drivers. Forty percent of the workforce is employed from Tarakan and surrounding areas, but few permanent workers are from the communities within or adjacent to the concession.

1.4. Environmental and Socioeconomic Context

Environmental Context The northern and western portions of the Intraca concession drain into the Sesayap River, with its north-flowing tributary, the Bengalun River, providing the means to reach the base camp and move logs to the company’s manufacturing facility in Tarakan. The eastern and southern portions of the concession are drained by the smaller Betayau, Sekatak, and Bengara Rivers.

Intraca lies primarily over extensively folded sedimentary mudstone, shale, and sandstone, with limited outcrops of karst and volcanic rocks. The highest sedimentary ridges are about 800 m. in elevation. Steep slopes predominate much of the southeastern portion of the concession. Soils are typical for Borneo and the tropics on similar landforms: much-leached tropudults on the gentler-sloped, more weathered areas, and dystropepts on the steeper, younger surfaces. Dystropepts should also form on the steep igneous rocks; theoretically with slightly better nutrient status than dystropepts on siliceous sedimentary rocks, although it appeared that on the very pale rhyolite of Gg. Tete, soils with a deep peaty humus layer were forming. Peat formations are found along the river to the north of the concession.

The characteristics of the forests in the Intracawood concession are described in section 1.3 A. These are high conservation value forests (HCVF) because they represent important, and increasingly scarce, stands of lowland Dipterocarp, limestone, and peat swamp habitat. To the south a large protected forest – hutan lindung – remains intact. Satellite imagery and a fly-over showed that areas to the east and west are being largely cleared. Intracawood is surrounded by other concessions, timber plantations (HTI) and coal mines. Given the large area of Intracawood, and the tracts of good forest within its boundaries, the company has a special responsibility to manage its forests well. Intracawood’s long-term concession license and large investment in processing facilities give it a financial incentive to manage its forests on a sustained basis.

During the original assessment, representatives of the UK-based Royal Society and Sabah-based Danum Valley Centre visited Intracawood to look at the viability of setting up a long term conservation and research facility within the concession. The management has seized upon this opportunity and an area has already been selected in the southern part of the concession. This demonstrates a willingness to conserve and protect forest resources, which Intracawood needs to do in order to be certified. At the time of the original assessment, only about 14% of the forest was classified for conservation purposes, and that was mostly on , largely on steep slopes. The peat swamp areas in the north may have been lost when 42,050 ha of the original concession was re-classified as a timber plantation (HTI) in 1996. Intraca has focused its attention on looking after karst features, which are of low commercial value, and have zoned what they call “hutan unik” conservation zones. It is the lowland and hill dipterocarp forests that now need to be conserved in strategic locations to insure their long-term viability. Phase III: In late 2001, Intracawood began an assessment project to identify areas of High Conservation Value Forest within the concession in collaboration with the The Nature Conservancy office based in Samarinda. The output of that work was an identification of Intracawood’s responsibility to conserve and manage (using RIL techniques) the lowland Dipterocarp forest sub-habitat, as this type is of high value at a regional and forest scale. Similarly, TNC identified critical areas, to prioritize conservation and protection, in areas that could optimize conservation gains in the face of numerous threats (such as IPPK logging). Other key habitat types, such as mangrove and swamp forest and montane forest were also identified for conservation. The study provided indication of the sizes and locations of areas to be conserved.


Intracawood proceeded to map all of the proposed HCVF sites within the company GIS. The company is in the process of developing a new forest management plan that will fully integrate the conservation management planning, strategies, and measures for the HCVF and other conservation zones that will receive special treatment or protection. On January 25, 2003, a Memorandum of Understanding to develop the Intraca Rainforest Research and Training Programme was signed between PT Intracawood Manufacturing, Innoprise Corporation Sdn. Bhd., Sabah, Malaysia, and the Royal Society Southeast Asia Rainforest Research Programme, United Kingdom. These three parties, with approval from the Government of Indonesia and the Regional governments of Bulungan and Malinau Districts, have designated to Intracawood an area of 26,257 hectares of primary forest adjacent to the concession area, to be used expressly for purposes of conservation (fauna, flora, and watershed) and for related purposes of research, training and eco-tourism. The parties agreed to conduct joint research, development and design projects, with an exchange of scientists, specialists, and researchers, to implement a field research centre and scientific programme that will enable Intraca to become a model of conservation and forest management by an industrial manager in the tropics. See section 3.1, Precondition Compliance Summary. Phase IV: High Conservation Value Forest areas are explicitly mentioned in the 2004 HPH licence signed by the Minister of Forests, which is unique for a HPH licence and demonstrates a growing acceptance for the integration of HCVF management within production forests. HCVF now features as an issue in company planning documents and mapping. The MOU activities with the Royal Society Southeast Asia Rainforest Research Programme were put on hold, as the Society deferred to be involved with a company that was not certified as a result of pressure from the Forest Peoples Programme. There exists the possibility that after certification the initiative will be started again. Intracawood resumed discussions with TNC regarding technical assistance in HCVF management.

General Socioeconomic Context The Intraca concession lies within the territories of two districts in the province of East Kalimantan on the eastern side of the island of Borneo. East Kalimantan is one of Indonesia’s largest and wealthiest provinces, with an economy based on oil and gas production, logging, wood processing, and mining. The Intraca concession was wholly within Bulungan District until that district was divided into three districts in 1999. Approximately three quarters of the concession now lies within Bulungan District and the remainder within the newly-created Malinau District.

Human habitation in and around the Intraca concession is sparse, with several villages just inside the concession boundary along the Bengalun River, a few just to the north of the boundary along the Sesayap River, and the remainder clustered on the concession boundary along the Sekatak and Bengara Rivers in the southeast. The southern and central western parts of the concession appear to be uninhabited, although land claims and forest use may exist. The team leader and social assessor on the current assessment were able to gather information over the weeklong period by visiting villages along the Bengalun and Sekatak Rivers and discussing land claim issues at public meetings in the two district capitals. These discussions provided indicative information regarding the nature and extent of land claims, which clearly exist in the Sekatak and Bengara drainages. Social fieldwork during the Intracawood scoping evaluation was limited to villages along the Bengalun and Sesayap Rivers, where the company has invested considerable effort and money to provide development assistance and cash compensation.

Dayak is a generic name for the indigenous inhabitants of Borneo. While each Dayak group has distinguishing linguistic, cultural, and social characteristics, all groups traditionally relied on the forest for food, building materials, medicines, and trade goods. A minority of the Dayak groups were hunter-gatherers, but most used some form of shifting cultivation to produce rice and other food crops in cleared forest plots. The ethnic group that is most prominent in and around the Intracawood concession are the Berusu, but there are also Punan, Kenyah and Lun Dayeh people.


Some of the villages along the Bengalun River on the northeast side of the concession were formed relatively recently and contain families from several ethnic groups. The livelihood patterns of many Dayak groups have evolved over time to include sedentary agricultural practices, the sale of high value forest products such as gaharu, and wage labor.

Indigenous Peoples’ Land Claims Traditional land claims in Kalimantan are based on past and current use of forest tracts by indigenous Dayak groups. Evaluating current land claims requires an understanding of the historical context of settlement and land use. Over periods of decades, communities typically moved their village site and not infrequently migrated over great distances to improve access to resources or escape pressure from nearby groups. During the late colonial period, some Dayak groups began to move from remote headwater areas to downstream sites in order to gain access to government services and modern conveniences. During the late 1960s and early 1970s, the Indonesian government virtually forced many groups to move to more accessible, consolidated settlements. The string of Dayak villages along the Sekatak River on the eastern side of the Intraca concession was created by the government three decades ago by moving communities down from the river’s tributaries. Some members of these groups remained in their ancestral lands, others returned permanently over the years, and the rest visit their lands periodically for hunting and gathering of forest products such as gaharu, rattan, honey, and tengkawang nuts.

The history of migration and forced resettlement creates a complex land ownership history in and around the Intracawood concession, but individual groups retain an understanding of the boundaries of their village lands with respect to natural features and the lands of other groups. While land disputes among groups no doubt exist, these may be settled through the arbitration of district governments that now have a political incentive to recognize land claims and to play a facilitation role. Intracawood management fears that the process of documenting and recognizing local land rights will lead to spurious land claims and unreasonable demands for compensation for past and future logging. The assessment team interviewed leaders of a sample of communities claiming traditional lands within the Intraca concession in the Sekatak drainage and found that they believe that Intracawood is obligated to recognize their claims and negotiate with them prior to future logging. These leaders are aware that operators working under IPPK permits are currently offering communities a royalty of between Rupiah 15,000 and 40,000 for each cubic meter of wood harvested plus additional enticements such as construction of schools and churches. The Status and Changing Political Context of Forest Management Kalimantan’s species-rich and commercially valuable forests have been subject to intensive timber extraction over the past three decades. The quality of logging and forest management throughout Kalimantan has generally been extremely poor by international standards, resulting in forest degradation, biodiversity loss, and dim prospects for sustainable forestry. The forests are being degraded and lost by poor land management, illegal logging, and wild fires. Those remaining are high conservation value forests (HCVF) facing severe threats, which can be abated through responsible forest management. Thought threats to the forest are exacerbated by the chaotic political and legal situation that has resulted in a virtual free-for-all in the forests.

Indonesia is in the midst of what appears to be a lengthy political transition that is creating uncertainty about how authority over land and natural resources will be shared among the various levels of government. Significant authority has been devolved to the district level under the Regional Autonomy Law, but ambiguity remains over the extent to which this power overrides the provisions of existing national laws. Under Indonesia’s former hierarchical political system more than 70% of the nation’s total land area was controlled by the Ministry of Forestry, and the Minister had clear authority to grant exclusive timber harvesting rights to commercial firms. The 1967 Forestry Law and the former political system did not recognize the tenure rights of indigenous groups that traditionally used the forests.


Since the fall of the Suharto regime in May 1998, political reformers have tried to redress past injustices by giving rural communities more rights over their traditional lands and shifting much of the authority for natural resource management to the district level of government. Community management is addressed in the 1999 Forestry Law, although procedures for legally establishing land rights to indigenous peoples are not clearly articulated in the law. The evolving legal framework does not provide a mechanism to balance the rights of forest concession holders against those of traditional land owners. Unscrupulous businessmen are exploiting legal and political uncertainty to manipulate community leaders in order to obtain permission to clear fell forests under licenses (IPPK) issued by district leaders. District leaders see the issuance of IPPK as a means to build political and financial capital.

District leaders are now elected rather than appointed, as was the case under the Suharto regime, making them more responsive to the desires of their constituents as well as subject to pressure from local business interests. District parliaments now have much more authority than in the past to create local regulations covering areas formerly under the national legal framework. Each district may therefore have its own set of regulations regarding community land rights and other natural resource management issues. At the time of the original assessment, the parliament of Malinau was even considering the wording of regulations related to the process of legalizing community land claims and the issuance of IPPK timber harvest licenses. District governments are starting to work with communities to document the boundaries of community land claims. Once these claims are formally recognized by the district leader, they will have a reasonably strong legal standing within the current political environment. Intracawood and other concession holders are now in the position of having to build agreements with district leaders and local governments, as well as negotiate directly with communities. A nationally-issued HPH license will not in itself insure the sole use of forest resources within a concession. Phase III: In its efforts to stop the issuance of IPPK licenses, Intracawood intensively lobbied at the Ministry and District level and has regularly reported to all government agencies involved, including the police. By regulation No. 543/2001 (Bupati Bulungan) and No. 68/2002 (Bupati Malinau) respectively, all of the current licenses, besides one, were stopped. In the Bulungan area, all IPPK contractors had moved out. Intracawood set in place a monitoring and reporting protocol that was very effective in their assessment of the extent of the HPH area impacted by IPPK harvesting. There were mapping and photographic records, written reports, and documented accounts of the locations of all IPPK operations happening within the concession. The information was useful in the precondition verification audit, and field checking did correspond with the GPS points in company records. See section 3.1, Precondition Compliance Summary. Phase IV: In 2001 and 2002, notably in the villages of Sekatak and Rian, there were disputes raised by local communities that resulted in conflict with the company and village members. In the study evaluating the implementation of Principle 2 and Principle 3 in Indonesia, prepared by consultants for WALHI, AMAN, and Rainforest Foundation Norway, these conflicts were raised as issues of pointed criticism towards FSC certification in Indonesia. Similarly, the customary rights of communities to the forestlands that they claim and the need for PT Intracawood to recognize and respect such rights, and to secure negotiated agreements prior to harvesting were indicated as pivotal issues for certification in Indonesia. While these issues were of concern to SmartWood in the original assessment, after the January 2003 publication of the P2/P3 study and the meeting to discuss the study in Jakarta SmartWood further evaluated the actions taken by Intracawood to settle disputes and to obtain consent for forestry operations in lands claimed by local communities. In extensive discussions with community members, the company, and independent NGOs and researchers who evaluated the Sekatak and Rian disputes, SmartWood understands that the root cause was the absence of agreements between the company and the community to meet the demands for benefits and compensation. Communities expected more benefits from Intracawood operations in their areas. At the time of the acute conflict, Intracawood was not able to


satisfactorily resolve the dispute, however, after the incident, and through 2002 and 2003, Intracawood did settle the disputes through appropriate agreements that appear to have been reached without any pressure. According to firsthand reports from a wide range of community members, the communities of Rian and Sekatak have agreed to the amount and forms of compensation they asked for based on voluntary agreement. The company has established the "structures" needed for a workable dispute resolution mechanism. However the mechanism is one developed by Intracawood, and will need greater community involvement and feedback to make it a fully mutual dispute resolution process. It was clear to the assessment team that with land claims pertaining to areas throughout the concession, the company would have to secure agreements prior to each year’s forestry operations and perhaps even for a longer term. While the company follows the formal laws of the state which gives "a right" to Intracawood to manage forest areas, since 2002 the company has needed to discuss and arrive at solutions that fit with community interests prior to any harvesting. While Intracawood does not have the authority to officially recognize legal status of community claims, the company has been trying to accommodate them. Intracawood has fostered an approach of trying to “work together, so that both company and community can get benefits in short and long term.” To do this, agreements are negotiated prior to each annual operating plan is approved. In 2002, Intracawood delayed cutting for 4 months until an agreement was acceptable to the community of Seputuk. Currently the process can take less than a month, as communities and company have set a precedent. This is not a perfect process, and there are grounds for improvement in the extent of community members involved in the negotiations and the agreements, which will be monitored through the certification.

1.5. Products Produced

A. Species and products There are about 60 species that are used commercially for veneer and plywood, plus several minor species that are extracted during road building and used for blockboard. The principle species are listed below.

Red meranti (Shorea spp., ca. 10) - pink veneer. Yellow meranti (Shorea spp., ca. 5) - yellow veneer. White meranti (Shorea spp., ca. 5) - pale-yellow veneer. Bengkirai (Shorea laevis) - hard veneer for flooring. Selangan batu (Shorea spp., ca. 5) - veneer. Kapur (Dryobalanops spp., ca. 2) - pink veneer. Keruing (Dipterocarpus spp., ca. 5) - veneer. Nyatoh (Sapotaceae spp., ca. 10) - veneer. Jelutong (Dyera costata) - veneer. Binuang (Duabanga moluccana) - core wood. Sepetir (Sindora sp.) - core wood. Terap (Artocarpus spp., ca. 5) - core wood. Dara-dara (Myristicaceae spp., ca. 5) - core wood. Semangkok (Scaphium macropodum) - core wood. Agathis (Agathis borneensis) - veneer. Table 2 -- Types of products made by Intracawood and their primary markets Plywood Dimensions (for USA Market): Plywood Dimensions

(other than USA Market): 2.7 mm x 3’ x 7’ 2.4 mm x 3’ x 6’


2.7 mm x 4’ x 6.5’ 2.7 mm x 4’ x 7’ 2.7 mm x 4’ x 8’

2.4 mm x Odd sizes 11.5 mm x 3’ x 6’ 12.0 mm x 3’ x 6’

3.4 mm x 4’ x 6.5’ 3.4 mm x 4’ x 7’ 3.4 mm x 4’ x 8’

5.2 mm x 4’ x 8’ 12.0 mm x 4’ x 8’ 15.0 mm x 4’ x 8’

18.0 mm x 4’ x 8’

B. Actual (and potential) annual volumes produced

According to the RKPH 1997-2016, written in 1996, the commercial species with the greatest contribution to actual and potential timber volumes are in the family Dipterocarpaceae. The potential volumes of the dominant commercial dipterocarps are: Keruing (Dipterocarpus spp.), 29.18 m³/ha on average; red meranti (Shorea spp.), 22.95 m³/ha; white meranti, 17.63 m³/ha; and yellow meranti, 10.33 m³/ha. Other commercial timbers may contribute less than 8.00 m³/ha.

C. Description of current and future production / processing capacity and plans

Intracawood has focused its production on high-quality export products such as plywood, laminated veneer lumber, and blockboard. The company exports 90% of its products to Japan, Europe, and North America. The primary push for certification is currently coming from the US and Europe. Installed capacity at the plywood mill is 12,000 m3/month and for the blockboard is 1,600 m3/month. The average production for plywood is 11,000 m3/month and for blockboard is 1,400 m3/month. D. Reference stable sources of product

In Figure 1, the volume of logs processed in Intracawood’s mill is listed, along with their sources. In many years, over 50% of mill demand was supplied by outside sources, and reached a maximum of 64% of mill demand in 1994. Outside log sources in this area typically have come from HTIs, other HPHs, and from other unknown sources. Figure 1 indicates that starting in 1997 the mill began using logs from the Intracawood HTI area. These logs were from the natural forest that was converted and are not logs from plantation grown forest. As part of the certification conditions for Intracawood, the mill will need to reduce the consumption of wood from sources that are not nominally legal (i.e., HPH or HTI or other legally approved licenses) and which do not meet the FSC standard for controlled wood.


020,00040,00060,00080,000

100,000120,000140,000160,000180,000

1991

1992

1993

1994

1995

1996

1997

1998

1999

Log

Pro

duct

ion

(m3

HPH HTI Other

Figure 1. Annual log volume and sources used at PTIM’s Tarakan mill (source: Company Profile, March, 2000)

The Intracawood mill was certified for FSC Chain of Custody by Scientific Certification Systems in 2002 for the production of a percentage based plywood product. The SmartWood certification of PT Intracawood Manufacturing will be for the forest concession only, from the forest concession to the receiving log pond at the mill in Tarakan, East Kalimantan.


2. CERTIFICATION ASSESSMENT PROCESS

2.1. Assessment Schedule & Dates The forest certification process for Intracawood has been ongoing, off and then on, for over six years, from 2000 to 2006. The different steps and phases and key dates are provided in the chronology below. Key dates are referenced, but these do not encompass the complete extent of actions, meetings, and evaluation of company compliance to FSC standards, which has been an exhaustive effort involving SmartWood staff in the US and Indonesia, multiple international and local assessors, and frequent meetings with the company staff, as well as discussions and communications with stakeholders and FSC.

Phase 1 Scoping YEAR 2000 11 to 17 March A full SmartWood scoping, combined with a LEI Expert Panel One

(EPI) field scoping, was undertaken in March 2000 over a period of six days by an interdisciplinary team consisting of Jeff Hayward, Scott Stanley, Campbell Webb, Wibowo Sudjatmiko, and Dwi Muhtaman.

Phase II Main Assessment YEAR 2001 February 5 Public Stakeholder notification through email, newspaper, and fax

begins March 6 Public stakeholder meeting in Jakarta March 11 Initial Team Meeting in Jakarta March 12 Public stakeholder meeting in Samarinda (Province capital) March 13 Opening meeting, Intraca field staff, Tarakan March 14-21 Field assessment at PT Intracawood, East Kalimantan March 20 Public stakeholder meeting in Malinau (District capital) March 21 Public stakeholder meeting in Tanjung Selor (Bulungan District capital) March 22 Out-briefing for PT Intracawood staff in Tarakan March 23 SW Team returns to Jakarta March 25 Begin report write-up and continue stakeholder interactions (emails

and interviews) May 29 Draft report to PT Intracawood for initial review & fact-

checking/comment June 18 Meeting with PT Intracawood to clarify and respond to company

questions regarding preconditions and the next procedural steps. July 17 Comments received from PT Intracawood Aug. 10 – 25 Draft report to peer reviewers and SmartWood headquarters Sept. 1 – 30 Comments received from peer reviewers Oct. 30 Final draft reviewed by SW task manager Dec. 1 Final draft submitted to SW Certification Committee Dec. 17 Final draft with preconditions sent to PT Intracawood YEAR 2002 Jan. 22 Progress report on PT Intracawood activities to address pre-conditions

submitted to SmartWood by consultants working for The Nature


Conservancy on High Conservation Value Forest issues at Intracawood.

Feb. 7 SW task manager meets with PT Intracawood to clarify pre-conditions and expectations for closing out these requirements.

July 4 SW clarifies to PT Intracawood that SW is respecting the request of FSC Director Heiko Leideker to await the recommendations of the research currently being undertaken {on FSC Principles 2 and 3} before issuing further certificates of forest management operations in Indonesia.

July 8 – 10 SW task manager visits PT Intracawood Tarakan office to evaluate readiness to proceed to a precondition verification audit.

July 15 SW issues report to company indicating that a field based inspection was warranted to audit existing preconditions.

Aug. 2 Plan elaborated to conduct precondition verification audit in October. Phase III Precondition Verification Audit Oct. 7 – 12 Precondition verification audit conducted at office and in HPH. November 1: Draft Precondition Verification Audit Report submitted to

Intracawood, which indicates that 6 of 7 preconditions (actions mandatory prior to a certificate being issued had been met.) One precondition remained to be closed out.

November 7: Meeting with Intracawood and Director General of Forest Production, Department of Forestry, Jakarta, as a precursor to Bupati agreement to end cutting permits.

November 15: Malinau Bupati issues letter terminating extension of cutting permits in Malinau regency – effectively to end such activity in Intracawood concession as of March 2003 at the latest. It is evident from this letter by the Bupati of Malinau that this is not an agreement singled out between Intracawood and the government, but a wider reaching government policy that will change the legality of the IPPKs/IUPHHK holders in their area and cease their operation – the desired outcome.

Nov. 22 Audit report finalized with 1 remaining precondition December 11: SmartWood articulates additional specifications for what would

constitute complete close-out of Precondition 01/02. YEAR 2003 Jan. 20 Intracawood submits a six-month action plan that explains what the

company will do to handle the potential negative impacts from the Bupati of Malinau decision to terminate IPPK/IUPHHK licenses. In particular, what assurance of monitoring and evaluation, and proactive meetings with local communities (especially in Desa Sesua), villagers, and IPPK Contractors.

Jan 20 Intracawood submits an update on progress with the RIL action plan that indicates the steps that have happened since October 12, 2002.

Jan 28 – 31 Intracawood (and SmartWood) attend the P2P3 workshop in Jakarta. Feb. 13 Intracawood submits comments to the study team who wrote the

P2P3 study. Mar. 1 – 31 SW incorporates audit report information and new findings regarding

Intracawood based on activities occurring in year 2002 to update report.

Apr. 7 Updated Final Certification report sent to SW HQ for decision making.


May 21 Initial decision to certify and certification agreement sent to PT Intracawood

May 29 SmartWood enters into certification agreement with PT Intracawood June 5 SmartWood learns that the Minister of Forests issued a letter halting

Intracawood operations. Certification code suspended. June 10 SmartWood verifies MOF letter to Intracawood and requests that the

company destroy certification agreement letter and certificate. June 18 Certificate agreement revoked due to temporary stoppage of

operations called for in letter from the Minister of Forestry, dated May 23, 2003 (325/Menhut-I/200).

Dec. 15 SmartWood receives copy of Ministry of Forestry letter (661/Menhut-VI/2003), issued December 12, 2003 permitting resumption of activities for PT Intracawood

Dec. 17 SmartWood renews certification process for Intracawood, informing that a field audit must be completed prior to certification.

Phase IV Verification Audit II, new Precondition, and new licence YEAR 2004 Jan 23 SmartWood invited key environmental and social NGOs to meet and

discuss the Intracawood management and certification issues. Feb 4 – 8 Verification monitoring audit conducted in Intracawood concession. Feb 9 SmartWood sends second mailing asking for stakeholder input. Feb 27 SmartWood sends draft verification audit report to Intracawood. New

precondition issued requesting that Intracawood develop a plan to implement a permanent monitoring system to determine the rate of timber extraction by local communities.

Mar 24 Intracawood responds to draft report, questioning the need for new precondition.

May 18 Intracawood submits the evidence of a monitoring system developed to meet the precondition.

Jun 1 SmartWood postpones review of Intracawood certification process as some outstanding payments had not been made by company.

Sep 1 SmartWood renews certification process upon receipt of payments. Oct 18 Intracawood presents SmartWood with new HPH license signed by

the Minister of Forestry on August 31, 2004. Nov 1 SmartWood agrees to commences review of new HPH license, maps,

information on land use areas, annual harvest planning, agreements with communities, dispute monitoring, etc.

Dec 17 SmartWood informs Intracawood that review will be postponed until 2005 due to delays resulting from other assessment work.

YEAR 2005 Mar 1 SmartWood resumes review of Intracawood documents. May 10 SmartWood completes review and updates assessment report, closing

out precondition and including new conditions. May 12 SmartWood sends updated report to Intracawood and to translator for

preparation of Indonesian version. Phase V Performance Verification Audit, new Preconditions, and

finalization


June 21 - 25 TUV surveillance team audits Intracawood (because more than 12 months had passed since last field audit), conducts inspection of maintained compliance to FSC P&C at the concession.

Sept. 16 TUV surveillance team submits performance audit report draft to SmartWood.

Nov. 30 SmartWood completes performance audit report draft. Dec. 12 SmartWood submits completed audit report to Intracawood for

acceptance with 2 new preconditions. YEAR 2006 Jan. 23 Intracawood accepts the performance verification audit report and

submits evidence to comply with two new preconditions. Jan. 27 SW informs Intracawood that precondition related to preparation of

public summary of management plan not yet closed. Feb. 13 SW finalizes review of new public summary of management plan and

informs Intracawood that the precondition is closed. Mar. 22 SW submits certification assessment report to Intracawood with all

pre-conditions closed. Mar. 22 SW Final Certification Assessment Report completed. April 2006 Intracawood is certified.

2.2. Assessment Team and Peer Reviewers Phase I – Scoping Team: • Jeffrey Hayward, Team Leader, Forester, was International Program Associate,

SmartWood Program of the Rainforest Alliance. M.Sc. Forestry, (Univ. of British Columbia, Canada); B.Sc. Latin American Development and Forestry (Univ. of Washington, USA). He has conducted silviculture and ecology research for the B.C. Ministry of Forests and UBC Alex Fraser Research Forest in Canada. In Oregon State, he worked for the federal government in the U.S. Bureau of Land Management in forest inventory and timber sale administration. Three years as U.S. Peace Corps community forester in Guatemala, providing technical extension services in a tripartite agro-forestry and conservation of natural resources program. Private forestry consulting for the B.C. Ministry of Forests, the FSC and IIED. Publications include research on forest certification and forest silviculture. He had conducted 5+ forest management assessments, scopings, and/or audits; conducted 10+ chain of custody assessments and/or audits at the time of the scoping.

• Campbell O. Webb (Ph.D.), Arnold Arboretum of Harvard University; 10 years experience of research on the plant ecology of Kalimantan forests.

• Scott A. Stanley, MSc. Forest Production – Team Leader and Senior Forester with Community-based Forest Management Project administered by Harvard University. Fifteen years experience in tropical forest management and silviculture, specifically with community use of natural resources in Latin America and Indonesia.

• Dwi Rahmad Muhtaman, MPA (Auburn University, Alabama, USA), certification specialist who has been working on certification for more than five years and has been working in forestry and biodiversity policy issues for more than ten years. He has been working as a social auditor of certification and experience conducting assessment in forest concessions, as well as actively involved in chain of custody certification assessment. He was lead writer of a book on Criteria and Indicator for Sustainable Plantation Forestry in Indonesia, published by Center for International Forestry Research


(CIFOR) and Australian Centre for International Agricultural Research (ACIAR), 2000. Founding member of the Indonesian Tropical Institute (Lembaga Alam Tropika Indonesia/LATIN). Current position in LATIN as Director of Certification and Consultation Division, and coordinator for SmartWood-LATIN Initiative, SW international collaborator in Indonesia (1998-April 2002).

• Wibowo Dajatmiko, Indonesian Tropical Institute (Lembaga Alam Tropika Indonesia/LATIN); ecologist.

Phase II – Assessment team: • James Schweithelm, Ph.D. Team Leader and Social assessor – independent consultant

with twenty years experience working on forest policy and planning, biodiversity conservation, and community development in countries of Southeast and South Asia.

• James J. Jarvie, Ph.D. Ecological and environmental assessor – independent consultant with 15 years international experience in tropical biodiversity, forestry, natural resource management, and community use of natural resources, particularly in Indonensia.

• Scott A. Stanley, MSc. Forest Production – Team Leader and Senior Forester with Community-based Forest Management Project administered by Harvard University. Fifteen years experience in tropical forest management and silviculture, specifically with community use of natural resources in Latin America and Indonesia.

• Aisyah E. Sileuw, S-1 Forestry. Social assessor with extensive experience in community forestry and forest certification over the past eight years in Indonesia. Currently senior staff of a national Indonesian environmental NGO.

Phase II - Peer Reviewers: Three locally-based peer reviewers (international and national) were used for this assessment, all of whom possess experience with forest management and/or forest policy issues in east Kalimantan. • 1 PhD level forest management specialist; • 1 lawyer with a background in Indonesian local and national laws, and impacts on natural

resource management; and, • 1 PhD level researcher of community forestry issues. Phase III – Precondition Verification Audit team: • Jeffrey Hayward, Team Leader, Forester, description provided above. • Alexander Hinrichs, Ph.D, Forester, specialist in Forest Planning, Management and Forest

Politics/Economics. Freelance consultant and part-time lecturer at the University of Freiburg, Germany. He has served between 1996 and 2002 as Deputy Teamleader of the Indonesian-German Sustainable Forest Management Implementation Project in East Kalimantan, Indonesia and has worked during this time with numerous Government institutions, NGOs and more than 30 concessionaires. He currently coordinates all forest certification support activities of the German Government to Asia-Pacific. Before his employment in Indonesia, he has worked for 10 years as researcher, management consultant, lecturer and trainer in Germany, interrupted by up to one year long stays in Brazil, New Zealand, China and Poland. In Indonesia alone, he has worked on 30+ Publications on Forest Planning, Forest Policy and Forest Management including RIL. He is a trained SmartWood lead assessor and has conducted several forest management assessments and peer reviews.

• Dwi Rahmad Muhtaman, MPA (Auburn University, Alabama, USA), certification specialist, description provided above.

Phase IV – Verification Audit Team:


• Bart W van Assen, MSc, Forester (Wageningen Agricultural University, Netherlands), is

an independent consultant in tropical forestry. He has worked in Indonesia for 8 years on various assignments, including for the Indonesian Ecolabelling Institute (LEI), the UN-ESCAP CGPRT Centre and the Dutch Institute for Agro-Technological Research. He has been involved in both assessment and scoping evaluations for SmartWood.

• Dwi Rahmad Muhtaman, MPA (Auburn University, Alabama, USA), certification specialist, description provided above.

Phase V – Precondition Verification Audit team: • Dr. Ir. Machmud Thohari (Ecologist) PhD, specialist in wildlife conservation.

Graduated from Université des Sciences et Technique du Languedoc (USTL) at Montpellier, France. He has worked since 1980 as lecturer at Department of Forest Resource Conservation and Ecotourism, Faculty of Forestry, Bogor Agricultural University (IPB) and at Graduate School, IPB and University of Indonesia (UI). He currently coordinates conservation program of genetic resources at National Committee for Genetic Resources. Publications include research on wildlife ecology and captive breeding.

• Cecep Saepulloh (Forester), BSc., Bogor Agricultural University (IPB) in Forest Management Department, graduated in 1995. Worked as a forestry consultant from 1995 to 1996 and as forest manager with PT. Kiani Lestari from 1996 to 2001. Currently he is an ISO auditor and Project Manager for the Forest Certification program of PT. TUV International Indonesia (TUV Rheinland Group), accredited by LEI.

• Ating Sobari (Social), BSc., Bogor Agricultural University, in Social-Economic Department, graduated in 1990. He has received training as Assessor for Sustainable Forest Management at Forest Plantation (2003) and Production Natural Forest (1998).

2.3. Assessment Process

PT Intracawood first applied to SmartWood for FSC certification in December 1999. Shortly thereafter, company Director Totok Lestiyo signed an agreement to undergo a SmartWood scoping evaluation in March 2000. The primary reasons for undertaking the scoping evaluation were: • Intracawood wanted to gain additional information regarding certification and its potential

benefits prior to undertaking a full assessment. • To identify strengths and potential obstacles to certification, with particular attention for

High Conservation Value Forests, Tenure and Use Rights of Indigenous peoples. • To design a certification strategy and process for Intraca that will address the unique

characteristics of its situation and the sensitivities of conducting certification in Indonesian HPH.

PT Intracawood signed an agreement in January 2001 to proceed to a full assessment of the concession area. This assessment was conducted under the auspices of a joint certification protocol that came into effect on September 20, 2000, in conjunction with the September 1999 MOU between FSC and Yayasan Lembaga Ekolabel Indonesia (LEI). The JCP is intended to operate for one year or until revised or renewed, which it has been subsequently in 2001 and 2003. As the terms of this JCP effect the FSC assessment process, it is helpful to state main tenants of the JCP here:

1. LEI-CBs and the FSC-CBs agree that the process of joint certification should be open, transparent and co-operative and that all parties will benefit from the process.


2. The JCP among LEI-CB’s, and FSC-CB’s will cover co-operation through out all stages of the certification process to gain experience in working together and understanding each other’s systems.

3. FSC, LEI, and the accredited certification bodies agree that the JCP will meet all requirements under both FSC and LEI certification systems.

4. Under the JCP all parties agreed that criteria and indicators of LEI will be used by all certification bodies operating in Indonesia. This means that FSC-CB’s will use all LEI C&I, including those exceeding the requirements of the FSC, as well as any additional FSC requirements, not included in the LEI C&I.

5. Only FMU that passes both LEI and FSC system requirements will be certified. 6. The FMU will receive both an LEI certificate and an FSC certificate. The FMU

will be allowed to use both LEI and FSC logos. 7. Under the JCP, an FSC scoping is not compulsory. Past experience indicates that

typically a scoping is required. 8. The FSC-CBs and LEI-CBs agree to use a single team in the case of a joint LEI

screening and FSC scoping process, and in the full field assessment. 9. Public consultation is a fundamental component of the JCP. It starts with a joint

public announcement a minimum of 30 days before a field assessment takes place. 10. Public summaries of certification decision will be made available in both Bahasa

Indonesia and English and will include a full description of the joint certification process.

11. Surveillance visit will be done according to each system’s requirements, a joint surveillance is preferable. Results shall be shared between both the LEI-CB and FSC-CB.

Given these terms of engagement, and upon other technical details within the JCP, the SmartWood assessors worked together with assessors from PT TUV International Indonesia, as a joint field team. As a result of the joint process, Intraca has been approved for certification under the LEI system, with the LEI certification to be announced if and when Intraca is able to attain FSC/SmartWood certification. For a full description of the LEI certification process and system, see the LEI website www.lei.co.id. Both systems have fairly rigorous requirements that must be understand in order to appreciate the full extent of the certification process that Intraca has gone through. The field team evaluated the Intraca managed forest concession using the SmartWood Generic Guidelines for Assessing Forest Management (March 2000) that had been locally adapted and cross-referenced to incorporate and cover the LEI criteria and indicators from LEI Standard 5001. The team examined both management documents and field performance, and relied considerably upon the input of local stakeholders. The team focused on a range of issues including those related to land tenure, forest security, silvicultural prescriptions with respect to long-term productivity, technical quality of forest harvesting, environmental impacts, forest utilization, effects on local communities and economic viability of forest operations. To accomplish the field component of the assessment, the team followed the standardized steps in the SmartWood certification process: 1) Pre-assessment Analysis – Based on the findings of the scoping, the team made an

evaluation of existing documentation including management plans (20 year plan; 5 year plan and annual plan), Intraca operational plans, volume and harvest data, community development activities, an environmental impact assessment and follow-up environmental management and monitoring plans, standard operating procedures and available maps. A LANDSAT VII image of the concession taken in May 2000 was acquired before the visit. This was analyzed at the landscape scale to determine obvious habitat diversity and location, quality of forest and impact of operations. In addition, this image was used by the assessors to plot the course of a light aircraft over-flight of the concession.


2) Selection of Sites – The team selected the sites to be visited based on the pre-assessment materials, satellite image analysis, the over-flight, and discussions with Intracawood staff. Communities were chosen for visits based on proximity to and within the concession, their ethnic composition, evidence of past or present conflicts with Intraca, and participation in the PMDH program. Sites were chosen for forest production and ecological assessment in order to view cutting compartments harvested over time, visit habitats conserved by the concession, and see areas where illegal harvesting was suspected. The GPS coordinates of sites visited and trails covered are shown in map in appendices to this report. A similar process was used during the Precondition Verification Audit, with an emphasis on meeting with communities and evaluating tenure security in the face of widespread IPPK operations within the concession since the time of the original assessment.

3) Field Interviews and Site Reviews – The assessment team met with Intracawood’s field management team on a daily basis and the forestry/ecology assessors were accompanied in the field by staff counterparts on all occasions. The social assessors were introduced to village leaders by Intracawood staff, who then waited elsewhere while interviews were conducted. The forestry and ecology assessors made some site visits separately and others jointly. The social assessors conducted most interviews with the LEI/TUV sociologist and shared data and impressions after the interviews. The Bupati of Bulungan was interviewed during the assessment to determine the status of IPPK permits inside the Intraca concession. In the Precondition Verification Audit, the team conducted another round of interviews and meetings with community members residing in a cross-spectrum of villages with existing land claims within the concession.

Table 3. Summary of Forest Areas & Other Sites Visited by SmartWood Assessors During the Scoping, Assessment and Precondition Verification Audit Phase I – Scoping Inspection Sites:

Site Forester Ecologist Social scientists

HPH Forest Base Camp X X X Forest Nursery X X Workers quarters X Rehabilitated skid trail in RKT 1990/91 X X X Permanent research plot (PUP) X X X 1-month-old cutting block (petak 2508) X X X Water & sediment monitoring station (SPAS) X X X Active cutting block (petak 2523) X X X Genetic resources conservation area (KPN) X X X Under-brushing (petak 2481) X X X Old base camp site (abandoned 1997) X X X New road construction (RKT 2000/01) X X Gunung Tete (petak 2564) X X Recently liberated block (RKT 1994/95) X X Enrichment planting of commercial & fruit trees X X Desa Tanjung Keranjang X Desa Lidung X Desa Seputuk X Desa Kelembunan X Desa Sekatak X Phase II – Full Assessment Inspection Sites Site Forester Ecologist Social


scientists Unlogged Forest X X Active Logging X X Kebun Plasma Nutfah X Planned for logging 2001 X X Logged 2000 X X X Log Pond X X Hutan unique X X Ulin Protected Site X Permanent Forest Monitoring Plot X X River Water Quality Monitoring Site X Nursery X X Vehicle repair facility X Concession Fly Over X X Bengalun Camp facilities/office X Tarakan facilities X X IPPK X X Malinau Asst. Bupati X Bulungan Bupati X X Desa Seputuk X Desa Sesua X Desa Tanjung Keranjang X Desa Batu Lidung X Desa Punan Dalau X Desa Tenggiring X Desa Ujang X Desa Pekiliu X Desa Pungit X X Desa Mangkuasar X Phase III – Precondition Verification Audit Inspection Sites

Site Forester EnvironmentalSocial

scientists Camp Pembinaan, PT. Intracawood; X X X Boundary (ex. IPPK) CV Gunung Agung Lestari X X X Boundary marker site between Intraca and HTI X X X Pondok illegal logging in (ex. IPPK) CV Gunung Agung Lestari X X CV Prima Wana Bakti (ex. IPPK): landing & logging camp X CV Prima Wana Bakti (ex. IPPK): harvested site X PT Bakti Bumi Perdana (ex. IPPK): Base camp Km. 43 X PT Bakti Bumi Perdana (ex. IPPK): Logging site X Log pond IPPK hulu X X Logging camp CV. Sengon Agung Jaya X Cutting block 2002 (active logging in petak No. 3453 & 3478) X X Cutting block 2002 (block inspection petak No. 3475) X X Ex-cutting block 2001 (petak 3432, 3462) X X


Planning cutting block URKT 2003 X X Maritam village X Sekatak Kecamatan office in Sekatak Buji X Sekatak Buji X Seputuk village X Sedulun village X Sesua village X Ujang village X Klembunan village X Camp Km 9 (CV Sengon) X X Camp Km 13 (CV Sengon) X X Camp Sekatak, PT Intracawood X Camp Rian, PT Intracawood X WWF field office Malinau X Phase IV – Performance Verification Audit Inspection Sites

Site Forester Social scientist

PTIM Tarakan office X X IPPK logponds at Sempayang and Sesua village X X Nursery, Bengalun Camp X Felling block 3424 (2001) X felling block 3433 (2001) X X Felling block 3453 (2002) X Felling block 3486 (2003) X Felling area 2004 X Mendupo village X Seputuk village X Rian village X Sesua village X Ujang village X PTIM Camp Rian (log pond) X PTIM Camp Bengalun X X PTIM Camp Sekatak X X PTIM Camp Rian X X PTIM Camp Samit (workshop) X Phase V – Performance Verification Audit Inspection Sites June 20, 2005 Tarakan Office Opening meeting, document review June 21, 2005 Tarakan office, Base camp

Bengalun Document review, trip to Base camp Bengalun, meeting at base camp

June 22, 2005 RKT Block 2005, LOA RKT 2003, LOA RKT 2004,

Field inspections: RIL Implementation, standing stock condition, erosion monitoring, Planting

June 23, 2005 PT. Bumi Alam Lestari Area (SK Bupati holder which overlaps with Intracawood), Nursery, Desa Gong Solok I, Desa Mendupo, Camp Sekatak

Field checking, Interview with staff

June 24, 2005 Base camp Bengalun, Desa Punan Dulau, Location MHR in Desa Punan Dulau, camp Sekatak

Document check, Interview with staff

June 25, 2005 Tarakan Office Closing meeting, Back to Jakarta


4) Assessment Report Development – Responsibilities for the report sections were

confirmed at initial team planning meetings. Subsequently, during the field assessment team meetings were held to go over findings and identify gaps. Following the field assessment the team met to discuss and agree upon team findings for each of the criteria that would be scored, and for which preconditions, conditions, or recommendations would be assigned. Following this meeting, the team split up and development of the draft report was facilitated by the Team Leader over a four week period. The report was submitted to SmartWood Task Manager, Jeffrey Hayward for preliminary review and editing, then sent to the client for their review, and thereafter to three independent peer reviewers. Upon receipt of the peer review comments, the report was subsequently revised to reflect reviewer input into the preconditions, conditions, and other recommendations/findings of the assessment team. The peer reviewers agreed with the decision of the assessment team, that certification should be granted only after the company could successfully close out the preconditions to certification stated within this report. The assessment report was finalized and presented to PT Intracawood in December 2001. After multiple meetings on progress through 2002, and a short visit to the concession site in early July 2002, the company indicated preparedness to conduct the Precondition Verification Audit in October 2002. The PVA report was completed in November 2002 and submitted to PT Intracawood. The PVA report has been incorporated in the finalization of the public summary certification report to indicate areas of progress since the initial assessment. These reports were approved by SmartWood Headquarters Decision Committee of Richard Donovan and Jon Jickling in April 2003.

Phase IV - After the 14 month hiatus from the time of the field audit in October 2002 to the company request to proceed with certification in December 2003, another field audit was conducted in February 2004. Another 8 months had passed when the company requested SmartWood to review the new license and to finalize close out of the single remaining precondition. The delay to completion was due to a heavy workload for SmartWood which did not permit the Indonesia office to attend to the report finalization until April/May 2005. At that point, since 12 months had passed since the previous audit in February 2004, SmartWood required that another performance verification audit be scheduled. Phase V - The performance verification audit was undertaken in June 2005 to evaluate company compliance to certification standards since the time of the last field evaluation. Based on the recommendation of the auditors, two preconditions to certification (major CARs) were issued. Company submissions demonstrating compliance to the preconditions were reviewed by SmartWood, determined to be closed, and the decision to certify PT Intracawood Manufacturing was made on March 22, 2006. The certification assessment report and public summary of that report were finalized at that time.

2.4. Guidelines

The Intracawood assessment was conducted using the Forest Stewardship Council-approved SmartWood Guidelines for Assessing Forest Management, March 2000, which were related to the LEI Criteria and Indicators. At the time of the assessment, there were no endorsed FSC national or regional guidelines for assessing forest management in Indonesia. Within the context of the joint certification protocol, the LEI standard had to be incorporated within the field guidelines used by assessors. SmartWood developed its first version of a locally adapted generic standard for Indonesia in October 2000. Then a second version, with the same title, was prepared in February 2001 to be available for stakeholder comment and finished prior to the assessment in March 2001. These guidelines incorporate specific indicators and verifiers from the LEI Criteria and Indicators within the structure of the FSC P&C. The LEI C&I were the most applicable set of indicators and verifiers to bring into a standard for Indonesia, and referenced for relevant national laws, regulations, and administrative requirements. Rainforest


Alliance saw the MOU between LEI and FSC as the grounds upon which one could incorporate the LEI C&I from a position of their having been put through a long process of consultation. This effort was coordinated throughout with LEI staff. In 2003, the standards were revised based on incorporation of feedback arising from the P2/P3 workshop and in consideration of recommendations from the “Implementation of FSC Principles No. 2 and 3 in Indonesia, Obstacles and Possibilities”, Aman, WALHI, Rainforest Foundation, 2003. Revision of standards was also based on lessons learned from conducting forest assessment in country, based on the following documents “SmartWood Forest Certification Assessment Report for PT Intracawood Manufacturing”, Rainforest Alliance, November 2001; “SmartWood Forest Certification Assessment Report for PT Inhutani I - Labanan”, Rainforest Alliance, November 2001; “SmartWood Forest Certification Assessment Report for PT Xylo Indah Pratama”, Rainforest Alliance, April 2000; and, “SmartWood Forest Certification Assessment Report for PT Sari Bumi Kusuma”, Rainforest Alliance, December 2002. As per SmartWood’s FSC accredited certification system, the findings, scores, preconditions, conditions, and recommendations are presented according to structure of the FSC P&C and the applicable LEI C&I are inserted within the logical criterion or criteria to which they fit. Public notification of the assessment informed stakeholders of the availability of the standards for comment and input prior to the assessment. SmartWood maintained a copy of the stakeholder lists used in building awareness of the assessment and kept the few comments received on file. A copy of the guidelines used for this assessment may be obtained by accessing the SmartWood worldwide web site, www.smartwood.org and/or contacting SmartWood either in Vermont, USA (email: [email protected]) or in Jakarta, Indonesia (email: [email protected]).

2.5. Stakeholder consultation process and results SmartWood prepared a public stakeholder briefing note that was widely distributed more than 30 days before the assessment. This public stakeholder consultation document was prepared by jointly by SmartWood and PT TUV International Indonesia (in English and Indonesian) and was distributed by email, fax and hand delivery in Indonesia to seek input on the Intracawood certification process. The stakeholder briefing note indicated when the assessment would take place, the scope of the evaluation, the availability of the forest assessment standard, and the contact details of the certification bodies involved. This same information was posted in the national and local newspapers 30 days prior to the assessment start. SmartWood contacted environmental, social welfare, and community-based natural resource management organizations, as well as foundations, regional universities, government agencies and the press. Invitations were sent to these stakeholder organizations to invite them to the public stakeholder meetings that were organized:

- at the national level in Jakarta;

- at the province level in Samarinda;

- at the two district capitals; Malinau (Malinau District) and Tanjung Selor (Bulungan District).

It is worthwhile to note that within a one month period before the Intracawood assessment, SmartWood had conducted assessments of PT Austral Byna (Central Kalimantan) and PT Inhutani Labanan – I (East Kalimantan), with the same three levels of stakeholder consultation, thereby offering additional opportunity for concerned stakeholders to meet with SmartWood representatives and to comment on the standards or the certification process.

Prior to assessment, individual consultations were also conducted with scientists and NGO staff having relevant knowledge regarding sustainable forest management in East Kalimantan. (An extensive list of interviewees is within Appendix I of the full certification report.)


The field assessment was conducted over a 10 day period (Mar 12-22, 2001), including an introductory meeting and out-briefing with the Intracawood staff at the concession’s production offices in Tarakan. Individual interviews and discussions with Intracawood staff were held throughout the assessment process. The schedule was very full, especially considering the long periods required to move from place-to-place around the concession, but series of interviews and public meetings provided sufficient opportunity to assess, at a general level, the full range of social issues. In addition to the NGO stakeholders consulted during the assessment there were key stakeholders representing other ‘domains’. For example these included, but were not limited to: community groups affected by Intraca operations; universities or research institutions familiar with the company (i.e., Universitas Mulawarman – Samarinda, Pajajaran University – Bandung, Universitas Tujuh Belas Agustus – Samarinda, Balai Penelitian Kehutanan – Forest Research Headquarter – Samarinda, Badan Penelitian dan Pengembangan – Institute of Research and Development – Jakarta); government agencies familiar with the company (Kanwil – Forest Service Regional Office – Samarinda, Dinas Kehutanan – Department of Forestry – Samarinda, Departemen Kehutanan – Department of Forestry – Jakarta, Departemen Tenaga kerja – Department of Labor – Samarinda); environmental government agencies familiar with the company (BAPEDALDA – Institute of Environmental Impact Monitoring – Samarinda, Reboisasi dan Rehabilitasi Lahan – Reforestation and Rehabilitation, Kanwil Dephutbun – Samarinda, Bidang Konservasi Sumber Daya Alam – Conservation of Natural Resources – Kanwil Dephutbun – Samarinda). Besides the public meetings, consultations with stakeholders at the village level were conducted through small group meetings, generally with village leaders but also with other community members and Intracawood workers, including those from surrounding villages. Communities were selected for interview based on the criteria discussed in section 2.3. Representatives of local NGOs were very forthright in expressing their views at the public meetings in the two district capitals. NGO representatives from Samarinda were interviewed by telephone. Finally, the field visits were complemented by a 2 hours aerial survey of the concession, which enabled the team to respond to stakeholder concerns that required a landscape perspective and inspection of: habitat types and forest quality; stream quality, erosion, the extent of deforestation around the concession; and the extent of logging by other operators inside the concession boundaries. During the Precondition Verification Audits, the SmartWood social assessors held numerous meetings with local people and local stakeholders, often starting visits to communities in the early morning and continuing until late into the evening. A full list of all individuals and organizations consulted with from these audits has been included with the certification record. Issues Identified Through Stakeholder Comments and Public Meetings The stakeholder consultation activities were organized to give participants the opportunity to provide comments according to general categories of interest based upon the assessment criteria. SmartWood received valuable input from stakeholders during these meetings. Some informal and formal submissions were received by stakeholders after the initial assessment, and these were acted upon during the Precondition Audit. In general, the extent of national and international NGO direct engagement with SmartWood on this certification process was limited - as many of these organizations had signed on to a letter from WAHLI (FoE Indonesia) in March 2001 calling for a moratorium on certification. This call was accentuated by the commencement of a study on the application of FSC Principles 2 and 3 in Indonesia, which was commissioned by AMAN (Alliance of Indigenous People of the Archipelago) and WALHI, and funded by DfID, GTZ and the Ford Foundation. During the period this study was underway, SmartWood was sensitive to the request of FSC Director


Heiko Leideker that FSC accredited certification bodies await the recommendations of this study prior to issuing any new certificates in Indonesia. SmartWood collaborated fully with this study and received the findings of the ‘Analysis of FSC Principles 2 and 3 relative to Indonesian law and reform processes with great anticipation, as this furthered the extent of input to the certification process substantially. SmartWood assessors who had been involved with the PT Intracawood assessment (Jim Jarvie, Aisyah Sileuw, Alex Hinrichs, and Jeff Hayward) participated in the multi-stakeholder workshop which took place on 29th, 30th and 31st of January 2003. Applicable to the Intracawood certification, some of the comments brought forth from the case study have been added to the stakeholder comment table in order for SmartWood to specifically respond to these. The table below summarizes the issues identified by the original assessment team, with a brief discussion of each based upon specific interview and/or public meeting comments. In addition, new or re-occurring issues for which stakeholders advanced comments at a later date, after the assessment, have been included to this table. Table 4. Summary of Issues Raised by Stakeholders

FSC Principle Stakeholder Comments SmartWood Response P1: FSC Commitment and Legal Compliance

1.1. (Compliance with national/local laws)

Phase II: Participants at the Samarinda meeting warned that the government policies regarding forest management are conflicting. Particularly notable was the issuance of short term cutting permits within the concession area. A participant in the Tanjung Selor meeting said that there is no agreement between levels of government over what forests may be converted to agriculture. They suggested that government should give Intracawood clear tenure to allow them to practice SFM. Phase III: Incomplete forest gazettement process of PT Inhutani and/or PT Intracawood, thereby calling in question the legality of the tenure. Phase V: Concerns were raised to SmartWood that the license extension may not have followed proper process.

Phase II: Intraca is in fact caught between conflicting policies. The team formulated a pre-condition that requires Intracawood to be pro-active in stabilizing their control over the concession, while recognizing that they must have cooperation from district governments to do this. {Precondition 1} Phase III: As a sub-contracted FMU within the larger PT Inhutani – I HPH, the responsibility of legal gazettement is for the total FM, i.e., PT Inhutani – I. Intracawood has had legal gazettement of boundaries with hutan lindung (government protected forest) and with boundaries shared with Adindo, a non-PT Inhutani company. Full boundary delineation of the Intracawood FMU would be desireable, but this could only take place after PT Intracawood requested and were granted an individual concession. {New condition 09/02} Phase V: SmartWood issued a precondition requesting the company to provide official/legal clarification regarding the licence extension. {CAR 1 – 2005}

1.4. (Conflicts between laws, regulations and the FSC Principlesand Criteria)

Phase II: International and National NGOs expressed written concern over the compatibility of Indonesian laws (especially the New Forestry Law 41/99) with FSC principles concerning the rights of indigenous people

Phase II: The team reviewed the law and concluded that additional implementing guidelines are needed to safeguard the rights of indigenous peoples. However, the team thinks that Intraca could still be certified


over their land. Some NGOs worry that the law recognizes only privately owned land and state land (which includes land considered by traditional communities as theirs), and that this prevents any recognition of the rights of indigenous people. Phase III: Ninety per cent of the forest lands in Indonesia are not properly legally gazetted, nor transferred to the jurisdiction of the Department of Forestry, so legal gazettement should happen before certification.

within the present legal framework, under pre-conditions/conditions that it takes specific steps to identify and accommodate the rights of local people in practice. {Preconditions 3 & 4} Phase III: Legal gazettement of state forest is the responsibility of the government. For concession issued where the government has not fulfilled its obligations, this conflict between the law and what is within the control and authority of the forest manager presents a problem. Boundaries have been established on the HPH borders where compulsory, in the given case. Other measures of border and tenure security must be accepted while FMU managers await government to fulfill its responsibilities to completion of the gazettement process. Intraca has solid base maps, satellite imagery, and GIS/GPS technology in place to document and plan for the defined forest area. Interviews with local people indicate a working understanding of community and Intracawood areas. {Condition 07/02} Phase IV: The border delineation consistent with the new HPH license (not a new area) must be completed within 3 years from the issuance of the license. Intracawood took the first steps to continued monitoring of Intracawood’s influence on police or authority agents to handle larger disputes will be evaluated as part of the first six month audit.

1.5. (Illegal harvesting)

Phase II: Scientists and NGOs expressed written and oral concern over the excess capacity of the Indonesian wood processing industry and the extent of illegal logging, at a national level, which are estimated to represent more than half of the wood harvested in Indonesian forests. Phase III - IV: Analysis of raw material intake at the PT Intracawood mill for 2002 indicated close to

Phase II: Illegal logging is a major issue throughout Kalimantan and the rest of Indonesia. Logging currently being undertaken under IPPK licenses from district leaders is of uncertain legality, but has popular political backing. Generally, Intracawood has taken multiple steps to control illegal wood harvesting, with the main issue today being the future of the IPPK logging. Specific conditions/pre-conditions require that Intracawood negotiate with district governments and communities to reduce the threat of IPPK logging. {Precondition 1}; {Condition 5/02} Phase III - IV: The scope of the FM/COC certificate is for the Forest Management Unit (the HPH) to


70% of the logs did not originate from a ‘nominally legal’ source (i.e., HPH, HTI, or government approved land conversion area – IPK)

the forest gate (the mill), however it does not include the mill or it’s sourcing requirements. As stakeholders have raised this concern, SmartWood has required that the Intracawood mill institute a sourcing plan to phase-out and reduce wood at the mill within the period of the certification.

P2: Tenure & Use Rights & Responsibilities 2.1. (Tenure use rights and free & informed consent)

Phase II: International and national NGOs asserted that concessions are operating in areas where free and informed consent has not been granted by local communities with land claims existing within the concession area. Phase III: Conflicts of interest between national, provincial, and district forest offices undermine the manager’s tenure security, as with the allocation of IPPK and IUHPPK.

Phase II: The concession was issued by the government, who should have secured free and informed consent in the first place. Failing this, SmartWood has evaluated what the forest manager has been able to do to document and resolve the nature of land claims. Of fundamental importance was to see that Intracawood obtained proper agreements with legitimate claimants to grant free and informed consent prior to management activities. These were addressed in conditions /pre-conditions to certification. {Preconditions 3 & 4, Condition 5} Phased III: Intracawood has worked closely with national, provincial, and district forestry offices, government, local communities and with IPPK/IUHPPK operators to successfully broker a consensus to terminate all of these licenses within the concession area and to stop their activity. Few other concessions with IPPK problems in Indonesia have been able to bring these under control. That PTIM was able to get the IPPK stopped and out of the HPH is a major undertaking. {New Condition 1/02}

2.2. (Rights of local communities)

Phase II: NGO and local government representatives at public meetings pointed out the need to meet directly with affected local communities during the assessment to get their views. They felt that Intracawood must accommodate the rights and needs of these communities in their operations. The team was warned to beware of individuals who might try to make false land claims.

Phase II: The assessment team visited most of the villages that have a direct stake in lands within the Intracawood concession and interviewed village leaders and community members. Dayak NGO representatives were active participants in the district public stakeholder meetings. {Preconditions 3 & 4}

Phase II: Community leaders, especially those in the Sekatak River drainage, consider that their rights over traditionally-held village land within the Intraca concession have not been recognized or respected by the company. Some villages have grievances against Intraca related to past harvesting activities, and all wish to be consulted prior to any forest operation on their territory.

Phase II: Interviews were conducted in several affected villages to discuss these issues and determine the extent of claims. The claims were discussed with Intraca’s management. The need to document and resolve these claims are addressed in conditions /pre-conditions to certification. {Preconditions 3 & 4}


Phase II: The PMDH (Forest Village Development Program) is not implemented in a participatory manner and does not include many villages that have been directly impacted by Intracawood harvesting operations. Some development activities are not matched to the needs and skills of the target communities. Phase III: No agreements have been negotiated with the communities allowing Intracawood to log the communities areas with their prior and informed consent. Have customary rights areas been mapped?

Phase II: This allegation was checked through field visits and found to have some merit even though Intracawood does appear to make a sincere effort to implement the PMDH program effectively. A condition was included that requires Intracawood to conduct more comprehensive consultation before selecting PMDH villages and designing activities. {Condition 11} Phase III: Intracawood is securing formal written agreements with all communities that have adat forest claims for any area within which Intracawood will log, well in advance of the logging operation. For some of the 2002/2003 harvest blocks, this process took over 3 to 4 months to complete. These formal agreements are being linked to fees payable per cubic meter extracted, to in-kind community development projects, to identification of special sites and approval of harvest plans, and resolution of other disputes. {Condition 3/02} Intracawood has already done some village mapping working with members of local communities, and this is a continuing effort as part of the process outlined above. These maps have been used as part of the process for settling claims and for negotiating with communities regarding customary rights areas.

2.3. (Mechanisms to resolve disputes)

Phase II: Local NGOs and communities reported a number of unresolved traditional land use claims within the concession. Implicit in this complaint is the need to devise a mechanism to resolve disputes.

Phase II: Interviews were conducted with affected community leaders to learn more about the nature and scope of these claims. Intraca management was informed of the need to extend village land claims negotiations to all parts of the concession. Conditions /pre-conditions require Intraca to identify and resolve claims. {Conditions 4, 5, 7, & 8} Phase III: Intracawood has now documented the mechanisms to handle community land claims and disputes. As of November 2001, there have been identified with local communities and government 92 different types of community claims/demands. There is an approved list for these claims. For every village there is an appointed Intracawood supervisor with a mandate to work with communities and solve conflicts. This process is in place. It could be made more participatory and become ‘mutually


Phase III: Appropriate dispute resolution methods have not been established. Intraca has relied on authorities, such as Brimob and the police, to settle disputes.

agreed upon’. {Condition 03/02}

P3 – Indigenous Peoples’ Rights 3.1. (Land Rights of indigenous peoples)

Phase II: SAME AS 2.1, 2.2. ABOVE Phase III and IV: Have indigenous peoples lands been ‘recognized and respected’ by Intracawood? Have these claims been legally established?

Phase II: SAME AS 2.1, 2.2. ABOVE Phase III and IV: PT Intracawood does not have the authority to ‘legally establish’ customary rights areas. This can only happen by government with communities. PTIM has been willing to recognize and to accommodate claims. PTIM has certainly been willing to discuss best solutions to balance their interests and those of the communities. Efforts to forge written agreements (even delaying logging for several months) are strong indications that the company is serious about respecting indigenous peoples claims.

3.2. (Resources of indigenous people)

Phase II: Some local community representatives indicated that forest operations have reduced the abundance of NTFPs, game animals, and medicinal plants. Most communities complained that water quality in rivers had declined and fish abundance is drastically reduced in areas that were harvested by Intraca.

Phase II: Interviews were conducted to evaluate the validity of these claims. Continued in-depth fact-finding is required to determine the causes and monitor the extent of the impacts. Specific conditions /pre-conditions were formulated that require Intraca to assess and monitor impacts on forest resources and water quality and develop procedures to avoid these impacts in the future. {Preconditions 3 & 6, Conditions 4, 14, 18, & 21}

3.3. (Respect of sites of special significance)

Phase II: A small number of villages claim that burial sites have been damaged by logging. Phase III and IV: Stakeholders raised to SmartWood the old and pre-existing case of Punan villages in Bengalun where damages to graveyards had occurred.

Phase II: Specific cases were investigated through interviews with local communities. This does not appear to be a widespread problem, but should be addressed through the new dispute resolution mechanisms. Specific conditions /pre-conditions were formulated requiring Intraca to identify sites of special significance and to develop procedures to avoid impacting these sites. {Preconditions 3, 4, & 5, Conditions 4, 5, 7, & 8} Phase IV: Compensation and settlement of damage to two Punan ancestral graveyards, originating from 1997, was settled in 2002


to the satisfaction of community. This was handled through a traditional musyawarah process to build consensus.

P4: Community Relations & Workers’ Rights 4.1. (Employment opportunities for adjacent communities)

Phase II: Most community leaders interviewed complained that Intraca does not give enough opportunities for employment and training to Dayak people from villages located in and nearthe concession. This opinion was also voiced at the Tanjung Selor public meeting.

Phase II: The team checked the list of employees and their origin and cross-checked the informationthrough discussion with Intracawood’s employees. A significant portion of employees come from the Tarakan area, but not many from villages in or near the concession. The majority of the work force are people with ethnic affinities to Java and Sulawesi and some from elsewhere in Kalimantan. Among the villages visited by the assessment team, only Tanjung Keranjanghad more than one or two of its residents working for Intraca. Local people tend to be employed as cruisers or in temporary positions. Management stated that local people are not qualified for work requiring technical knowledge. The need to increase local employment is addressed as a condition for certification. {Condition 10}

4.4. (Consultations with people affected by management operations)

Phase II: Almost all community leaders interviewed stated that Intraca did not consult them before starting harvesting operations on their village lands, nor had the company been effective in maintaining contact.

Phase II: A condition was formulated to require prior consultation and agreement with affected communities before logging operations commence. {Condition 5} Phase III and IV: Intracawood does not begin its annual operations until after it has consulted with local people about operations. In areas where there will be active harvesting in a given year, the communities know the borders. This is a process of building relationships which the Intracawood social forestry team has developed considerably over the 5-year period.

4.5. (Mechanisms for solving disputes)

Phase II: SAME AS 2.3. ABOVE

Phase II: SAME AS 2.3. ABOVE

P5: Benefits from the Forest. 5.5. (Maintain/ enhance watersheds and fisheries)

Phase II: Some communities complained that harvesting operations have increased suspended sediment in rivers draining current cutting compartments, hence reducing the quality of the water used for household needs. Fish yields have also declined dramatically, which the communities believe is due to use of poison for fishing be Intraca staff. Malinau residents reported that the Malinau River floods more frequently and unpredictably as

Phase II: Field visits indicated that road construction in current cutting compartments is increasing sediment loads in smaller streams. Water quality in the Bengalun River is affected by harvesting operations of other companies and a coal mine, making it difficult to know how much sediment is the result of Intracawood’s operations. Conditions and pre-conditions require that


the result of Intraca’s operations. A participant at the Tanjung Selor meeting complained that Intraca’s operations have contaminated rivers that people rely on for domestic use.

Intraca reduce and monitor sediment from road and skid trail construction. {Preconditions 5 & 6, Conditions 13, 14, & 23}

5.5 (Maintain enhance watersheds/fisheries)

Phase II: A participant at the Tanjung Selor meeting charged that Intraca manages timber rather than the forest ecosystem.

Phase II: Intraca is required by conditions to revise its management plan and improve field operations to achieve SFM, including implementation of RIL. {Conditions 13 & 20}

5.6. (Sustainable rates of harvest)

Phase II: SEE POINTS 1.1. AND 1.5. ABOVE

Phase II: SEE POINTS 1.1. AND 1.5. ABOVE

P6: Environmental Impacts

Phase II: Participants in both the Malinau and Tanjung Selor meetings said that Intraca shows little regard for the environment in its operations. Refer to 5.5 for discussion of water quality.

Phase II: Field inspections and interviews of Intraca staff indicate that the company’s system for environmental management (primarily operations and hauling road construction) is weak. The development of stronger environmental management procedures built into operational planning was a pre-condition to certification. {Preconditions 2, 5, & 6, Conditions 1 & 20}

P7: Management Plan

Phase II: Refer to 1.1


7.4. (Public documents available)

Phase II: No specific comments were made regarding this point, but it is obvious that current conflicts with communities could be reduced through public disclosure of operational information.

Phase II: Conditions require Intracawood to publicly divulge key information about its management plan and monitoring results. {Condition 20} Phase V: Intracawood was required to prepare public summary of management plan. {CAR 4 – 2005}

P8: Monitoring & Assessment

Phase II: No comments were made regarding this point other than those already indicated with respects to monitoring water quality.


P9: Maintenance of High Conservation Value Forest

Phase II: All of the ecological experts interviewed by the assessment team expressed the opinion that remaining virgin forest in Kalimantan should be considered HCVF. The increasingly rare lowland forest within Intraca’s concession must therefore be considered HCVF.

Phase II: The precautionary principle was used in assessing forest habitats during the assessment, assuming that forest in the Intraca concession is HCVF. A pre-condition requires Intracawood to identify and protect representative habitat types in proportion to their occurrence in the concession. {Precondition 2, Conditions 2, 3, 16, 17, 18}

P10 – Plantations Phase II: Not applicable to Intracawood – there are no plantations under management in the area assessed for certification.

No response necessary.


3. RESULTS, CONCLUSIONS AND RECOMMENDATIONS

3.1. General Discussion of Findings

Principle/ Subject Area

Strengths Weaknesses {pre-conditions/conditions indicated}

P1: FSC Commitment and Legal Compliance

Phase II – strengths: • Intracawood is one of the first

companies to commit to FSC certification in Indonesia.

• The company has begun investing in changes necessary to achieve certification standards by providing RIL training for field staff.

• Intracawood has an incentive to meet certification standards in order to continue to reach desired markets in the US.

• Participants at both the Samarinda and Tanjung Selor public meetings stated their support for Intracawood’s efforts to become certified as a means to maintain access to global markets.

• Intraca compliance with tax laws has been excellent.

Phase III – Phase IV: • Intracawood has kept applying itself to

the goal of obtaining FSC certification

Phase II – weaknesses: • Intracawood has repeatedly harvested on

slopes that are steeper than the legal limit. {Precondition 5}

• Intracawood’s attempts at compliance with the recommendations in the scoping report were in many cases superficial, focusing on selected requirements while not responding to the intent of each FSC Principle.

• The corporate culture of Intracawood is still too oriented towards logging rather than sustainable forest management. An SFM philosophy and strategy must be developed and more consistently adopted at every level in the organization. This will require new ways of planning and implementing forestry operations. The culture of innovation currently demonstrated by Intracawood’s wood processing plant must be extended to the forests. {Precondition 7, condition 1}

• Intracawood is currently caught in a situation in which compliance with national forestry and tax laws does not necessarily prevent legal conflicts with evolving laws at the district level. The company is beginning to explore how to deal with this uncertain situation. {Precondition 1}

[Weakness addressed, see precondition summary below]

P2: Tenure & Use Rights & Responsibili-ties

Phase II – strengths: • Intracawood has a 75-year forest

concession right, a longer period than is the norm for Indonesia. The company appears committed to managing its production forest on a long-term sustainable basis.

• Intracawood recognizes traditional forest access rights of local people for hunting and NTFP collection.

• Intracawood has developed procedures to deal with claims by local people related to land use, timber harvesting, and damage to trees and sites of special interest. The concession maintains detailed documentation of these cases and has paid significant

Phase II – weaknesses: • Intracawood has not yet reached a forest

use agreement with all communities claiming land within the concession to insure stable long-term management of the entire concession. Piecemeal exploitation is beginning to occur under license from the district leader in some villages within the concession.

• Intracawood has not standardized procedures for dealing with community claims, nor has it dealt with all claims proactively. The company has yet to establish community dialogue in the Sekatak drainage despite serious claims issues.

• Intraca has not yet comprehensively


compensation in several cases. Intracawood’s relations with villages around the northwest part of the concession are relatively good.

identified traditional land and forest use rights of the local people. {for all of the above: Preconditions 3 & 4, Conditions 5, 6, 7, 8, 9}

Phase IV – V weaknesses: • Two companies, PT. Bumi Anugrah

Lestari (PT. BAL) and PT. Gunung Hutani Lestari (PT. GHL), who received Bupati and Governor Licenses that overlap in places with the Intraca concession, in February 2003 were found to have extracted 650 logs. The Ministry of Forestry has requested the overlap tenures be cancelled and the companies took the MOF to court. Intracawood has been monitoring the activity, which had stopped due to court injunction, of these companies. {CAR 2 – 2005}


P3 – Indigenous Peoples’ Rights

Phase II – strengths: • Indigenous people comprise the local

communities in the vicinity of Intracawood’s concession. Intracawood has begun addressing land claims and allows hunting and NTFP collection on its concession as described in P2.

Phase IV – V strengths: • During the period since the first

assessment, Intraca has demonstrated in audits that it has working procedures to negotiate with indigenous peoples for forest that is adat area or claimed by communities within the concession.

• Intraca is obtaining agreements with each village which has forest area that would be impacted by operations, before the activity of the annual plan (RKT) is started.

• Intraca initiates marking of boundaries with local communities collectively in the field, which is then mapped as participative map according to agreement. Parties involved are representatives from local communities such as adat head, heir or ancestral representative, formal village head, and representative community members.

Phase II – weaknesses: • Indonesia’s political reform movement

has raised the expectations of forest-dwelling peoples that their customary rights will be respected and that they will be able to share in the economic benefits of the forest. There is anger among many forest dwellers towards the timber industry because of past unwillingness to recognize customary land and forest use rights. Intracawood is aware of changing attitudes and has begun to engage communities, but has not yet taken effective steps to establish a cooperative relationship with them. {Preconditions 3 & 4, Conditions 5, 6, 7, 8, 9}

• Refer to P2. [Weakness addressed, see precondition summary below]

P4: Community Relations & Workers’ Rights

Phase II – strengths: • Through its government-mandated

PMDH (Forest Village Development) Program, Intracawood attempts to address development needs of some

Phase II – weaknesses: • Intracawood’s PMDH program reaches a

limited number of villages and a select group of people within those villages. Community participation in selecting


local people by implementing development activities in several villages. The company contributes twice the required amount of funds to the program and has a staff of several professionals and facilitators to implement PMDH activities. Intraca’s commitment to the program is higher than is typical in the industry..

• Intracawood’s worker salaries and benefits exceed mandatory minimal regional standards. Workers receive health insurance, retirement benefits, and death/disability insurance. Health clinics and meals are provided as well as housing at a nominal fee. Day care and pre-school school are available for worker’s children.

• Three trade unions are active among Intracawood employees and the company does not interfere with their activities.

• Refer to 2.3.

and implementing activities appears to be limited, and some activities do not respond to local needs. {Precondition 4, Condition 11}

• Intracawood lacks a plan and commitment to assist under-represented concession villages to gain equitable employment opportunities. {Condition 10}

• Intracawood has worker safety policies, but these are not enforced in the field. This relates specifically to the use of safety equipment during heavy machine operation and tree felling. {Condition 12}


P5: Benefits from the Forest

Phase II – strengths: • Intracawood is a significant economic

force in Tarakan, where it is the largest employer. The company contributes to local development through employment and payment of taxes.

• Intracawood currently uses about 60 species in 16 major groups. Also minor commercial species cut during road building are used for blockboard.

Phase II – weaknesses: • Intracawood has focused on timber

production and appears to be in the early stages of a fundamental transition to a forest management system that more effectively considers the roles of communities and local government.

• Intracawood has made no credible attempt to investigate the feasibility of using a wider range of timber species and no attempt has been made to identify and develop NTFPs and handcrafts for village development initiatives.

• Inadequate attention has been paid to the assessment of forest biodiversity and conservation value and how to reflect these values in forest management. {for all of the above: Preconditions 2 & 3, Conditions 1, 3, 18, & 20}

Phase V – weaknesses: • Intracawood has operated at a loss in the

recent years, due to factors such as costs from settling community claims and IPPK harvesting, as well as suspension of license in 2003 and declining plywood prices. {CAR 3 – 2005}


P6: Environmental Impact

Phase II – strengths: • Generic environmental impact

documents have been produced to meet government requirements.

Phase II – weaknesses: • Intracawood’s logging operations have

high environmental impact, especially when they occur on steep slopes (as was the case in recent cutting compartments).


• Intracawood has sent several employees to a course in Reduced Impact Logging (RIL) in Sabah and plans to send more staff.

• Chemicals are stored and used

properly. Waste engine oil is used as a chain saw lubricant rather than discarded.

• Exotic species are used sparingly in

re-forestation.

There is no environmental impact policy in place to predict and mitigate damage, assess damage done, develop damage control measures, nor feed back into concession management and planning documents. {Preconditions 5 & 6, Conditions 13 & 14}

• Skid track design and construction standards are in need of substantial improvement. Skid track networks must be designed to match the terrain to minimize impacts. {Precondition 5 & 6, Condition 13}

• Intracawood has not adequately identified the biodiversity and conservation values of its forests thereby making it impossible to consistently plan forest operations for protection of the most valuable areas. {Precondition 2, Condition 1 & Condition 18}


P7: Management Plan

Phase II – strengths: • Intracawood has written a new

management plan in 2001 with improved planning from their older version.

• Planning documents and procedures according to TPTI are detailed and diligently produced.

Phase II – weaknesses: • Despite the recent revision of the

management plan, it still requires significant improvement to reach international standard in terms of forest operations and controlling environmental and social impacts.

• Planning tools and human resources need to be strengthened to enable higher quality forest operations.

• Training and supervision of field workers needs to be upgraded to enable forest planning and procedures to be implemented in the field.

• Lack of ecological knowledge among Intracawood staff has resulted in a weak management plan from a conservation viewpoint. Set-aside areas and wildlife corridors are not sufficiently considered and there is no apparent concept of the fragility and high diversity of much of the concession.

• There are no clear procedures for environmental and social impact monitoring in the management plan or mechanism for feeding information from monitoring back into concession management and operations. {for the above: Preconditions 2, 3, 6, & 7, Conditions 1, 17, 18, 19, & 20}

Phase V – weakness: • Intraca has not produced a new public

summary of the company’s management plan. {CAR 4 – 2005}



P8: Monitoring & Assessment

Phase II – strengths: • Water quality sampling is conducted. • Post harvest forest monitoring and

other procedures of the TIPI are undertaken as required.

• Intracawood has conducted a government-mandated Environmental Impact Assessment (AMDAL) and produced Environmental Monitoring and Environmental Management Plans.

• The results of the PMDH Program are reported annually.

Phase II – weaknesses: • Non-timber biodiversity monitoring and

assessment are not undertaken due to lack of staff expertise.

• With the exception of one river flow recording structure (SPAS), the Environmental Monitoring Plan is a generic document that does not reflect conditions or operations on the ground.

• Environmental impact monitoring is limited, has no obvious impact on planning or operations, and does not sufficiently address damage caused by road and skid trail construction. No feedback mechanisms are in place to ensure that mistakes found in one place are not later repeated in another.

• Social impact monitoring and assessment have not been conducted. {for the above: Preconditions 3, 6, & 7, Conditions 3, 18, 19, 20, 21, 22, 23}


P9: Maintenance of High Conservation Value Forest

Phase II – strengths: • Intracawood set aside a “hutan unik”

recognizing this feature and its forests as rare in the concession.

• Small areas of ulin forest have been protected.

• A small germplasm reserve has been established.

Phase II – weaknesses: • There is no consistent clear

understanding of the high conservation value of the forests in the concession, their diversity, nor is there a plan in place to conserve representative habitat.

• The conserved areas were small, less that 1% of the concession, and are not representative of the forest habitats actively being logged. However, much more forestland has been designated for conservation since Phase II. {for the above: Preconditions 2 & 3 Conditions 1, 2, & 18}


P10 – Plantations Not applicable Not applicable

Precondition Compliance Summary Following is a review of the process for reviewing Pre-Conditions established during Phases II – V. As described elsewhere in this Public Summary document, SmartWood auditors conducted field work, stakeholder interviews and documentation reviews in order to assess compliance with the Pre-Conditions. Pre-condition 1: Prior to certification, Intraca shall reach an agreement with the district governments of Bulungan and Malinau Districts that will result in: 1) respect for the


concession’s nationally-recognized boundary; and 2) stop the issuance of IPPK licenses, or extensions of current IPPK licenses, within the concession. Findings: During 2000 and 2001, 30 IPPK licenses were issued inside the company’s area, 19 by the district head of Bulungan and 11 by the district head of Malinau, covering about 28.000 ha. All are based on hutan adat claims. About half of the license holders directly started operations, by giving their license to logging contractors, who often arrived from Sabah, Malaysia. In its efforts to stop the issuance of IPPK licenses, Intraca has intensively lobbied at the Ministry and District level. By regulation No. 543/2001 (Bupati Bulungan) and No. 68/2002 (Bupati Malinau) respectively, all of the current licenses, besides one, were stopped. In the Bulungan area, all IPPK contractors had moved out. On June 30, 2002, Intracawood reached a preliminary boundary agreement with 4 contractors of the Bulungan area, witnessed by several Government officials. It can be expected that no new IPPK licenses will be issued in Intracawood’s part belonging to the Bulungan district. This part of the pre-condition was fully met at the time of the Precondition Verification Audit. In the part of the concession that pertains to Malinau district, there was one IPPK area being operated by an IPPK holder (CV. Wana Bhakti), representing the villagers of Sesua. Furthermore, the Bupati of Malinau had replaced the withdrawn IPPK licenses with IUPHHK licenses (Izin Usaha Pemungutan Hasil Hutan Kayu), a similar annual harvesting permission. Granted, most of these IPPK/IUPHHK holders have not yet started operations, and given the very steep terrain and the usually poor condition of the contractor’s machinery, may never do so. A road was being built by IPPK contractors of the Malinau district and approaching the southern part of Intraca’s area, to deliver access to the not yet operating IUPHHK area of KSU Alam Pandan Jaya (in the URKT 2004). The road was checked in July 2002 and again during the pre-condition audit (October 2002) and was on the edge of the concession buffer, but moving south and outwards.

Conclusion: SmartWood has viewed the issuance of IPPK and IUPHHK licenses as one of the biggest threats to Intracawood’s area security. This was not resolved in the Malinau part of the concession; thus during the Precondition Verification Audit the auditors found that the Precondition had not been met. Therefore, the following new precondition was issued to PT Intracawood for completion prior to SmartWood approval of certification.

New Precondition issued in November 2002:

Precondition 01/02: Prior to certification, Intraca must secure an agreement with the Bupati of Malinau as follows: The current license holders shall not be allowed to operate in the Intraca area, unless a joint management scheme (between Intraca and the license holder), based on SFM principles, can be developed. The agreement shall state that no new small scale logging permits shall be issued in the concession area. Meeting NEW Precondition 01/02:

Findings: The Bupati of Malinau issued an SK Nomor 522/254/EKPM/XI/2002 on November 15, 2002 that stated that all IPPK/IUPHHK would not be extended and will automatically terminate at the date stated in each of the still valid permits (many had already expired). This decision/agreement from the Bupati of Malinau was not between Intracawood and the government or the IPPK/IUPHHK contractors, but a change in the legality of the short term cutting permits. As there had been 23 such permits issued in Malinau District, and six of these had overlapped with the Intracawood concession, the action on the part of the Bupati was a district wide action, not specifically or exclusively related to Intracawood. The Bupati stated the terminations mentioned in his decision were done because there had been conflicts in the field (between these IUPHHK operators and villagers; large environmental impacts that jeopardize sustainability, and changes in the legal framework (as the responsibility for issuance of utilization permits had reverted back to the Minister.) This decision pertained to all of the


existing short term permits that overlapped with the Intracawood concession, an approximate area of 5,975 hectares. The two operational IUPHHK areas of CV Wana Bakti expired on 15 and 18 March 2003. The non-operational IUPHHK of PT Malinau Jaya Sakti and KSU Alam Pandan Jaya expired on 18 March 2003 and 20 May 2003, though the latter is not likely to commence operation as access is difficult. The areas of Koperasi Tumu Bagu expired on 8 January 2003. Furthermore, the representatives of the operating contractor, CV Wana Bakti, signed letters on 15 November and 15 December, 2003, agreeing to respect the request of the Bupati and to stop their operations within the Intracawood concession area. Intracawood monitored the activities of these contractor companies and provided detailed monitoring information to SmartWood, including maps, photos, and field reports. On January 20, 2003, PT Intracawood provided a full dossier that documented the chronology of events initiated by the company to encourage government at various levels to influence the decision made by the Bupati of Malinau. The company submitted an Action Plan for working together with local communities in the post-IPPK/IUHPPK period. The company explained its commitment to expand their social forestry obligations and programs, with a variety of proposed training, education, cooperative, and business development initiatives. Significant to this approach was the emphasis on mechanisms to enable profit sharing from forest management activities and development of agreements and MOUs that involve local people to define rights and obligations.

Conclusion: Based on these developments and clarifications, which occurred from the period after the submission of the certification report up through January 20, 2003, the recommendation from the SmartWood task manager was that the Precondition 01/02 had been met. In lieu of the fact that the stoppage of such operations must be closely monitored, and evidence that these have not re-started activity, SmartWood proposes the following new condition: New Condition: Condition 24: Within the first six months of certification, Intraca and local government will successfully move industrial scale logging contractors out of the concession in the district of Malinau, so that the boundaries are respected by such operators.

Pre-condition 2: Prior to certification, Intraca shall establish a protocol/methodology and criteria for assessing and identifying the conservation and biodiversity values of the concession, as HCVF. Intraca will set targets for implementation and demonstrate that initial fieldwork has begun. Furthermore, Intraca will be expected to hire or contract an individual or team that is sufficiently well qualified in conservation biology in Kalimantan to assist Intraca in meeting conditions related to conservation issues. Findings: Intracawood utilized the expertise of The Nature Conservancy to establish the protocol or methodology for assessing conservation and biodiversity values. Intracawood planning and environment staff along with TNC consultants and employees worked together to do the assessment work at the end of 2001. The protocols developed were focused on the ecological and biological attributes/values, primarily, while social assessment of HCVFs was done internally by the Intraca social forestry department. With the methodology employed, TNC and Intraca planned forest sites that they would sample. The FMU was stratified according to virgin and logged over forest (LOF). Within LOF, damage or disturbance classes were created, along lines of high, medium, or low disturbance. Sites were selected within these for purposive sampling considering topographical/elevation; forest cover; uniqueness, etc. Within those sites, information was gathered to assess forest condition more than to inventory/survey biodiversity, such as tree species, elevation, basal area (a surrogate for damage intensity), and soil. The field visits took place in the month of December 2001.


As with most concessions in Indonesia, there was initial confusion and concern for what the concept of HCVF meant and how the forest manager was supposed to change management to address areas with some defined High Conservation Values (HCVs). The TNC study was of benefit to Intraca in helping to further develop their understanding of the HCVF concept and to provide a starting point for how to structure a habitat level assessment of the areas that are of value for conservation. Intraca took the results of the TNC study and entered the information into their maps through GIS. Intraca then went through a process of evaluating the likelihood that the recommended conservation and/or protected areas could be given some level of protection as HCVF. Intraca also incorporated this concept into their revision (or “re-design”) of the FMU management plan and have prepared some Draft management plans for protection of HCVF. Within the social survey and impact assessment, Intraca developed more comprehensive indicators of the community forest uses and identification of High Conservation Values. While some areas have been set aside, and boundary marking has taken place around the area of swamp and mangrove forest (north of the HPH), Intraca has not yet implemented an approach for identification and management of stand level biodiversity values, as their effort to date has largely been at the habitat level of analysis and definition. Conclusion: Based upon the above, the Precondition Verification Auditors found that the precondition had been met.

Some areas of weakness still persist with respects to identification and management of HCVF for Intraca:

• Increased and ongoing consultation with locals with respects to identification of HCVs

and for boundary delineation; • Development of specific management regimes or scenarios that define how harvesting

treatments, road construction, management, monitoring, and protection will be instituted in areas of HCVF, i.e., which sites will receive strict protection as set asides, which will receive limited harvest or harvest employing RIL;

• Expansion and development of inventories and databases of biodiversity values and attributes within the concession, particularly as these will be used in planning for the conservation of critical and significant values;

• Further definition is needed of defining specific values of importance to Intraca and local communities so that these can be managed at an operational (compartment) level as well as at the habitat or landscape level.

No new conditions were added, however Intraca is strongly recommended to refer to existing conditions 1, 2, 3, 14, 16, 17, and 18, from the original assessment report, which were conceived to detail management actions for Intraca to take after conducting their preliminary assessment of HCVF and which apply in this situation.

Pre-condition 3: Prior to certification, Intraca shall conduct a Community Survey to document and map community land claims, resource use, and sites of special community interest within the concession, including existing and potential areas of conflict. The Community Survey will:

1) Establish social baseline data; 2) Assess social impacts from Intraca logging operations;


3) Make recommendations about actions to be taken to compensate for and/or mitigate impacts;

4) Make recommendations for social impact monitoring procedures; and, 5) Recommend ground rules for community relations, including the steps required

to establish the Community Forum described in pre-condition 4. Findings: There were two main documents produced to address the issue of the community survey, i.e., the database and the social impact assessment. First, was the community survey database, which Intracawood initiated by having a social group team from P3AE UI (Pusat Penelitian dan Pengembangan Antropologi dan Ekologi Universitas Indonesia) come to Intracawood. The team suggested conducting a social survey to identify and map local resources. The result of the social survey could then can be used as the basis for community-company interaction. The PT Intracawood Social Planning and Management Division, Supervisor Section, designed the database format in mid 2001. After the design was completed, all 14 field supervisors working within the 36 villages used the format to fill in appropriate data indicated in the forms. The database was completed in about six months (from August 2001 to February 2002). Data were collected from Kecamatan office, village heads and community members. The data included the boundary of each village (according to community agreements), area in hectares and its geographic condition, village and adat governance structure with names of officials, demographic data, infrastructure available in the village, and village/local potential for development. Some data was not complete in some villages (such as in Desa Terindak, Desa Bunau, Desa Bambang, Desa Kendari). The supervisor recognized that it is difficult to identify the exact area of the villages at the time of survey. It was also challenging to differentiate with consistency the area that is village area (as defined by government as “Desa”) and adat area (as defined by community as “adat”). Most villages, however, succeeded in setting boundaries between villages. The company requested government to take action for setting the definite boundaries, yet the Government has not formally delineated village boundaries in the area surrounding Intracawood. The database covers the use of non timber forest products (flora and fauna) by the communities. Based on the survey, there are at least 94 plants and 25 animals that are used by the communities. Some are commonly used across the village, some are quite seldom used. Although the data has not yet been analyzed, the survey information collected has been used for the preparation of the new forest management plan draft. The social section of that plan is very informative. The Forest Mapping Section of Intraca has actually initiated what they call “participatory” mapping (involving a few members of each community hired as resources) for the villages in Mendupo and Bebakung. This process has begun to identify the village areas as well as boundary with other villages and with the Intraca area. This was a positive effort which should be expanded to other villages with appropriate participatory mapping approaches and link with social section activities. The information from the community survey is linked to the company GIS and can be spatially referenced. The second key document towards meeting the precondition is the Social Impact Assessment. Similar with that of the database, the impact assessment is designed by the Social Planning/Management Department in cooperation with Research and Development Section of Intracawood. The assessment was conducted by the supervisor of the Social Planning and Management department in tandem with the social survey (August 2001 to February 2002).


There were two forms designed to catch community opinions, one related to environmental quality and one related to social, economic, and cultural conditions. The environmental form had 12 questions ranging from the opinion on logging activity, forest fire, non timber forest products, hunting, rehabilitation, causes of erosion and water quality, and overall forest condition. The social form covered demographic data, employment, economic infrastructure and local norms such as social/communal life. The findings are not yet discussed and analyzed to be useful for social/technical interventions (programs). However, the documents come up with some conclusions based on the summary of the data gathered. The conclusions were divided into three categories as requested by pre-condition 3. First, there were Intracawood’s recommendations to compensate and mitigate impacts. Some of these recommendations have already been implemented or in process of implementation. For example: • Months before any logging operation, the company should consult the community on the

compensation and sharing of the benefits arising from the operation. (i.e., Mendupo and Bebakung villages have achieved an agreement for RKT 2003).

• Cemetery and other culturally and spiritually significant areas should be marked, protected and, where appropriate, mapped.

• Soil and water conservation should be seriously taken into account during the forest opening to prevent river sedimentation and pollution above the allowable standard.

• Logging roads should be constructed outside ladang or housing areas with agreements and appropriate compensation if the road or other logging activities use the community ladang or house.

• Local government must settle village boundaries as soon as possible to prevent conflict due to disagreement on the village boundary such as in Kecamatan Sesayap and Sekatak.

• Avoid doing the cleaning under growth silvicultural treatment, because it will destroy the seeds, rattan roots that are useful for community needs.

Second, was the recommendation for social impact monitoring procedure. Intracawood has begun to: • Identify parameters of the social component that may get impacted; • Identify all logging activities that may potentially impact community life; • Identify village/community areas; • Identify base line condition of the village/community; • Develop monitoring system of the impact at the time of operation and post-operation;

and, • Develop social impact monitoring system through regional approach watershed areas. This procedure is in place but is in the process of being implemented more systematically. Currently the company has developed a format to monitor the social impacts and to test these in the field around 13 social parameters as related to critical logging activities such as boundary delineation, road construction, base camp establishment, harvesting, etc. Third, was the recommendation for community relation ground rules. Basically this recommendation was to deal with conflict resolution, the procedure and steps to achieve and build mutual agreements. The company now has appointed supervisor staff that is responsible to maintain direct community relationships with each community. When there is a community complaint the first channel is to be in touch with the supervisors. The supervisor tries to solve the complaint. If he/she could not solve it the supervisor will bring the issue to the camp manager, then the negotiation team, then up to the Kabupaten levels respectively, as needed. If the camp manager gets the problem solved, then the issue will stop there.


Intracawood has actually documented the mechanisms to handle community land claims through another set of documents. As of November 2001, there have been identified 92 different types of community claims/demands. The local government has approved this list of claims. In the audit, many communities visited (i.e., Ujang village, Klembunan village, Maritam village) confirmed that Intracawood was meeting and resolving their claims/demands. Some claims have not yet been resolved. For example, Sedulun village had a claim on fruit trees since April 14, 2001 and a community request to stop using the log pond in the community area in Limbu Sedulun since April 25, 2001. All the community complaints and claims including resource use and sites of special community interest (cemeteries, water springs), existing and potential areas of conflict have been well-documented. Maps have been produced to identify these. Conclusion: Based upon the above the auditors found that the precondition has been met with the addition of the following new condition: Condition 25: By the end of year 1, Intraca shall complete, improve/update the accuracy of the social data currently gathered. The completed data be processed and analyzed appropriately into information that can be used as the basis for social/community-related intervention. Intraca shall implement their recommendations made by social survey. The use of participatory approaches (participatory mapping, participatory inventory) should be integrated with other relevant sections such as Forest Mapping Section and Inventory Section so that the findings would be complementary.

Pre-condition 4: Prior to certification, Intraca shall establish a consultative community forum composed of legitimate representatives of communities whose lands are fully or partially within the concession and including representatives from company management and local government. Community members of the forum should be transparently selected by the community. The purpose of the forum is to set guidelines and policy for relations between Intraca and villages, to resolve specific land and resource-related disputes, and to help the company select the villages to be assisted under the PMDH program. Intraca will support the forum financially and administratively. Findings: Intracawood held a major meeting in Tarakan on January 26, 2002 to fulfill the precondition 4. There were two meetings held to prepare for this big meeting. The first planning meeting was attended by 33 participants, including HPHs, IPPK association, MPI forestry association, NGOs, Bulungan government and universities. The second meeting discussed the funding for the multi-stakeholder meeting, which was provided by DfID. The multi-stakeholder meeting was attended by 101 signed participants (excluding organizers). Total participants reported 135. Participants consisted of representative from Kepala Desa, Kepala Adat, youth, local government, local forestry office, NGOs, military and policy officials, HPH, IPK and communities from Sekatak and Sesayap. The participants agreed to establish what they called a Forum Konsultatif Pengelolaan Sumberdaya Alam Wilayah Kecamatan Sekatak. The main purpose of the Forum, was to improve the prosperity of all (including but not limited to community around the forest) and improve the unity of the stakeholders. The Forum was chaired by Mr. Supriyadi, a lecturer from Universitas Borneo. The meeting did not receive follow-up, as it was determined (and verified by numerous participants spoken with during the precondition verification audit) that such a large scale forum was not a practical or culturally sensitive way to create effective community relations. To create the desired understanding/relationship between Intraca and the community there needs to be continually adaptive approaches, based on well established communication and


mutual trust. Much of this has been done through lengthy and repetitive meetings with communities regarding the consent process and negotiating agreements prior to harvesting. Yet, Intraca has proposed to hold more regular, small-scale community level meetings and fora. The precondition 4 intended to address the lack of appropriate fora that enable community to discuss concerns, build mutual trust and long-term better understanding. It is recognized that most of the disputes, claims and demands have been addressed through direct approach between the affected community, with the help of village elders or adat leaders, as well as up to the Kabupaten official (i.e., the case with IPPK and land claims). At the local level some of the substantial issues, which SmartWood expected the Forum to deal with, such as resolving specific land and resource-related disputes, have been directly overcome on a case-by-case basis. A series of negotiated agreements have been signed by parties to settle the adat land claims and pertaining to other conflicting issues. Other mandates of the Forum stipulated by the pre-condition were to set policy and guidelines to build better relations and solve relevant problems related with the company operations. At the practical level all the current policy and guidelines are developed by the company. This is partially because the large forum was not effective. Internally, the Intraca social team has periodic meetings for planning and evaluation at their working region/wilayah kerja and camp, for which there is a plan to extend and maintain through periodic meetings with a wide audience of the village and not only the village elite.

Conclusion: Based upon the above the auditor finds that the precondition has been met with the addition of the following condition, which is targeted at a scale that should lead to more effective results. Condition 26: Within six months, Intraca shall establish consultative community forum (groups) at the village level and/or consisting of several villages in a given region. These consultative processes shall be composed of legitimate representatives of communities whose lands are fully or partially within the concession and include representatives from company management and local government (at village, and/or kecamatan, and/or kabupaten levels). These village forums shall meet periodically to set guidelines, agendas, and policy to improve relations between Intraca and villages, particularly to resolve specific land and resource-related disputes and to help the company select villages to be assisted under the PMDH program. Intraca will support these forums as needed financially and administratively.

Pre-condition 5: Prior to certification, Intraca shall fully and formally commit to implement RIL throughout future annual harvest plans (RKT). Commitment to RIL will be demonstrated through: 1) additional training and the incorporation of an incentive system for logging and skidding teams; 2) technical training for the planning department on map production and interpretation; 3) creation of specific plans/procedures for logging steep areas that explain how Intraca will log on steep slopes, what type of technology will be used, how to reduce, monitor, and mitigate impacts, and how permission will be obtained to exceed the TPTI slope limits; 4) creation of technical Standard Operating Procedures for road or skid trail construction and maintenance, with particular attention to minimize impacts on watercourses, and procedures to optimize wood use by limiting felling damage and log waste; 5) revision of management plan to reflect the adoption of RIL as the logging approach. Finding: Intraca has made several efforts to move forward with RIL implementation. The company has appointed 3 logging supervisors to the contractor’s 6 logging teams and employed itself one trained tractor operator as possible on the job trainer. Already in 2001, the company adopted a block inspection scheme, based on performance indicators. Intraca is providing a financial bonus to the logging crews, if logging is done according to the agreed upon RIL


standard (a maximum of 2 million Rp. per logging compartment is offered based on the results of the block inspection team). Recently, 3 background papers/SOPs on RIL (waste reduction, map production and road & skid trail construction and maintenance) were written by Intraca’s Philippine logging advisor. These papers are a good step forwards but still need to be developed further to become practical and short SOPs. In June 2001, Intraca, supported by Tropical Forest Foundation (TFF), conducted a 2 week training course on topographic surveys and RIL implementation as well as a rapid training needs assessment for the logging crews. The need for SOP development, better contour mapping, improved felling techniques, higher utilization rates and careful skidding were clearly stated. Topographic surveys were conducted on a try-out basis, but do not yield accurate information yet. The company has looked into remote sensing sources for digital elevation modeling (IKONOS, DOSAR-Radar). Even though these techniques are excellent tools for general forest planning tasks, it remains doubtful that pre-harvest planning can be based on them, especially considering the steepness of the highly undulated terrain of the concession area. For the time being, Intraca should apply a joint ITSP-Topo Survey as standard pre-planning procedure. Intraca has sent its logging supervisor to PT. Sumalindo to examine their cable logging system and has joined a cable logging workshop in Samarinda (in September 2002). The company has decided not to embark on cable technology, given the short slopes of their area and the magnitude of the investment needed. The applied reduced impact tractor logging will lead to a larger percentage of areas un-logged within each steep compartment, due to an unavoidable inaccessibility, if tight environmental thresholds are applied. Top management officials stated realistically, that full RIL implementation takes 3 years and that the company has reached some 50% so far. Field observations in the current cutting block revealed the following problems: • The used topographic data is of unsuitable quality for pre-harvest skid trail planning in

steep terrain (contour lines are based on aerial photo interpretations, leading to a misplacement of skid trails on the maps in 40% of all cases);

• Skid trails are build in areas where harvest of an economic viable minimum number of trees per trial seems questionable;

• Pre-harvest maps miss important information (several good quality maps exist, but no effort was undertaken to combine all important information into one map featuring tree positions, planned skid trails, environmental and social protection zones, roads, rivers, boundaries, etc);

• Felling technique still leads to high waste and unacceptable risks for the operators (no wedges are used, no chain saw helper is employed);

• Tractor maneuvers and blading are still too large, especially in the steeper parts of the cutting block (winching is only partly conducted);

• Closing up still needs improvements (water bars are too high and become themselves a source of erosion).

The 3 block inspectors understand the RIL system well enough and are able to determine weak performance. They follow the operators on a daily basis and should be encouraged to give instant feed back and provide better data on the economical impacts of RIL implementation. The sites visited in last years cutting block showed good recovery and little erosion on the skid trails. Erosion was still large along the main roads and Intraca measures taken to prevent erosion after road construction showed little effect (refer to pre-condition 6). Road construction in the 2002 cutting block demonstrated some improvements (road widths, water management),


but overall road construction needs improvement. The need of excellent road engineering, the use of excavators during construction, more regular maintenance, the application of measures to mitigate erosion directly after road construction and the closure of secondary roads can not be emphasized enough, especially given the steepness of Intraca's current cutting blocks. The company prepared a Six Month Action Plan (half-year work plan) to improve RIL and Road construction. The following activities were proposed starting from the month of October 2002 through to May 2003: A. Topographical Survey and Timber Cruising Goals: 1. Accurate contour maps have to be produced with accurate tree mapping. 2. Surveyors must be able to measure accurately with the application of standard

surveying procedure. Activities:

a. Preparation of SOP draft on topographical survey and timber cruising (15 Oct.-5 Nov. 2002). b. Discussion on the said draft (6-15 Nov. 2002). c. Formulation of a final SOP (16-25 Nov. 2002). d. Preparation of field training (10-15 Dec. 2002). e. Field training (5-25 Jan. 2003).

B. Felling and Skidding Goals: 1. SOP that will fulfill the requirements of RIL shall be prepared. 2. Tractor and chainsaw operators should be able to work according to the SOP. 3. Block Inspectors should be able to supervise and monitor the work according

to the SOP. Activities:

C. Bonus system Goals: 1. Incentives as well as sanctions shall be applied to tractor and chainsaw operators. 2. Incentives as well as sanctions shall be applied to timber cruisers. 3. Incentives as well as sanctions shall be applied to block inspectors. Activities:

a. Evaluation of incentive system applicable to RIL implementation (15-30 Dec. 2002). b. Formulation of incentive system (15-30 Dec. 2002). c. Preparation of a draft on incentive system for cruisers and block inspectors (15-30 Dec.2002). d. Discussion and formulation of a final incentive system for cruisers and block inspectors (15-30 Dec. 2002).

D. Inspection and monitoring of RIL Goals: 1. Standard procedure for the inspection and monitoring of RIL shall be formulated. 2. Block inspectors should have the complete knowledge of RIL to be able to conduct the

inspection and monitoring of RIL. Activities: a. Formulation of a SOP for implementation on RIL inspection and monitoring (5 Jan. 2003) b. Field training for block inspectors on RIL inspection and monitoring (as scheduled).

a. Discussion and evaluation of SOP (15 Oct.-5 Nov. 2002). b. Formulation of a final SOP (6-20 Nov. 2002). c. Field training for tractor and chainsaw operators (26 Jan.-10 Feb. 2003) d. Field training for Block Inspectors (11-15 Feb. 2002).


E. Road and Skid Trail Construction Goals: 1. SOP for road and skid trail construction conforming to RIL requirements. 2. Tractor operators should be able to implement such standard procedures. Activities: 1. Formulation of SOP for road and skid trail construction {16-20 Feb. 2003). 2. Field training for tractor operators on road and skid trail construction {21-25 Feb. 2003). The activities drafted can be achieved in the time given. They provide an important step forward on RIL implementation and better roading and shall be considered binding to the company. Conclusion: Based upon the above, the auditor finds that the precondition has been met with the addition of the following new condition(s):

Condition 27: Within 6 months, Intraca must submit to SmartWood a progress report on the implementation of the action plan for RIL and improved road construction methods. Pre-condition 6: Prior to certification, Intraca shall develop, and demonstrate preliminary implementation of, an environmental assessment and impact monitoring plan/program. This will be designed to assess impacts before harvesting operations, monitor operations in progress, and conduct post-harvest damage assessment. The purpose of such planning is to avoid environmental damage by planning all concession activities in advance. This system of environmental management is expected to be integrated into overall planning and management operations, and to reduce impacts that occur at the landscape level, particularly focusing on downstream impacts on watercourses. Monitoring within Intracawood is under the responsibility of the Forestry Division, Environment and Research Section. The team has put together a more thorough program for environmental monitoring. The primary emphasis of this program is water quality (erosion and sedimentation) and species diversity (flora and fauna composition, abundance, frequency, etc.) The program has begun to establish measurement plots along streams and rivers that flow through the harvesting blocks and for which local communities depend. The program has begun to monitor vegetation plots at sites at different stages of harvesting intervention. For both water/soil quality and species/ecosystem functioning values, the Intraca staff are planning to gather data pre-logging, during logging, and after logging. Intraca staff has maintained monitoring reports. In the period prior to the certification assessment, Intraca collected water data only at a permanent sampling station, which was often far from the site of active logging, and therefore not a good indicator of the impacts of road construction, skid trail construction, or other elements of harvesting. Since the certification assessment, the program has been developed to set up monitoring plots within the blocks that are being logged. Data collection began before logging to establish baselines, and was to continue during and then after logging. The sampling stations were set up on the 1st, 2nd, and 3rd order water courses within the 2002 harvesting compartment. The team was able to explain the monitoring procedures and the various tests that were performed. Data was available for the water debit, velocity, brightness, and sediment. It is within the monitoring program to also collect information on stream animals although this is at an introductory phase so far. The Intraca monitoring staff has used CIFOR and governmental protocols to develop their stream monitoring programs. Initial analysis of data shows that the logging does contribute to an increase in sedimentation during logging.


Some other types of monitoring did occur that were important given the circumstances. Intraca set in place a monitoring and reporting protocol that was very effective in their assessment of the extent of the FMU area impacted by IPPK harvesting. There were mapping and photographic records, written reports, and documented accounts of the locations of all IPPK operations happening within the concession. The information was useful in the precondition verification audit, and field checks of IPPK harvest sites corresponded with GPS points from company records. The identification and awareness of the problem have not yet led to a rehabilitation strategy. Intraca put in place some terraces on areas where slope and cutbank failures were causing substantial landslides, particularly into stream zones. Intraca monitored terraces for their effectiveness; however, the indication is that these are not effective at detaining erosion which resulted from poor road construction. For such monitoring to be more useful, Intraca will make comparative study of the erosion from areas using conventional road construction methods versus those that are using improved road building methods. Intraca has improved the extent to which the impacts of harvesting take into consideration the local forest uses. The pre-harvest block inspections take place with the Social Team walking the harvest area with different village leaders, such as ketua adat and kepala desa, or other community elders. These teams are identifying burial / cemetery sites and putting buffers around these. Furthermore, the social impact monitoring is collecting the data on identification of honey trees, manggis trees, ulin trees, tenkawang, gaharu, rattan, all of which are important to local uses. Conclusion: Based upon the above, the auditors found that the precondition has been met. Due to the fact that there are local communities operating on a limited scale some sawmilling within the forest and given that Intraca has an informal, but not systematic, monitoring program to evaluate the extent of this harvesting or utilization, the following condition should be added to the contract:

Condition 28: During the period of certification, Intraca shall provide evidence that systematic steps are taken to control the incidence of illegal logging (harvests for commercial purposes within the concession area for which agreement between concession, communities, and local government does not exist). Intraca shall implement measures aimed at reducing the level of illegal logging, such as:

• Implementation of a methodology for monitoring the extent and amount of illegal logging, with estimation of the volumes of timber removed;

• Analysis and reporting on the location, extent and types of illegal harvesting, encroachment, and illegal settlement are occurring;

• Identification of the most critical sites and parties involved in these activities and coordination with local authorities responsible for controlling illegal logging.

Pre-condition 7: Prior to certification, Intraca will have recalculated the AAC based on a realistic appraisal of their effective timber management area. Furthermore, Intracawood will need to clarify and justify the calculation of AAC, including a full explanation of the forest inventory used as a base to calculate the AAC. Statistical analyses should be incorporated in this explanation, including the sampling error of the inventory. Findings: Intraca is currently preparing a new long term forest management plan, based on a far-reaching re-design of the area. Major boundary changes are:


• HTI boundary to HPH side determined and HTI excluded • Some areas in use by local people within HPH will be excised. • Overlap between Intraca and Inhutani II excluded • Southern area between conservation area and Intraca (RKL VII) integrated to existing

concession There was a proposed plan to manage the concession in 3 sub-units, each receiving its own annual working plan (sub-management plan) and AAC. The company believed that working simultaneously at 3 locations would establish better contacts to the surrounding villages and provide for better area control, even at the disadvantage of higher production costs. The new area layout was based on an intensive zoning exercise, including set-asides according to HCVF considerations. The draft re-design proposal had been presented to DINAS Kehutanan in Samarinda, but the area calculation, especially the determination of workable and economic viable RKT blocks, which are also based on social considerations, needs more work. The Precondition Verification Audit team was impressed by Intraca’s willingness to accommodate environmental and social considerations in its new management plan and is eager to see a further elaborated version of the re-design plan, including realistic AAC calculations for each sub-unit. Intraca expects that harvesting would follow the new layout earliest in 2004, however in communications after January 2003, indicated that the plan would most likely involved two sub-management units, divided between the Districts of Malinau and Bulungun. The company had prepared several documents and provided additional insights into its inventory data. Available data sources are:

• Pre- harvest inventory of the 5 year cutting blocks RKL IV-VI (5% sampling intensity) • Pre-harvest inventory of the cutting blocks 1992/93-2003 (ITSP, 100% sampling

intensity, conducted 2 years before felling) • Post-harvest inventory of the 5 year cutting blocks RKL I-III (5% sampling intensity,

conducted in 1998/99) • Post-harvest inventory of the 1 year cutting blocks 1994-2000 (100% sampling

intensity, conducted 2 years after felling) • Re-check of earlier post-harvest inventories in 4 compartments in cutting blocks

1991/92, 1993/94, 1994/95 (conducted in 2002; not yet finished) • Orientation inventory of the logged-over forest (0,2% intensity, conducted by

consultant in 1998) • Detailed annual production reports since 1991/92

The amount of data is impressive, but the applied inventories for pre- and post harvest data collection are difficult to compare and do not permit meaningful statistical analyses, mainly due to their line sampling design. The orientation inventory conducted by a consultant in 1998 would allow statistical analyses and was used for the AAC estimation given to the main assessment team in 2001. However, the results of this inventory seemed highly questionable, leading to standing volumes that are 42% higher than the average volume determined in the annual pre-harvest inventories of the last 10 years (ITSP). Due to this, Intraca agreed to discard its AAC calculation based on this orientation inventory (called RKPH 1999) and now uses the data of its RKL IV-VI inventories (5% sampling intensity) for the AAC determination, as done so in its RKPH proposal dated 1996. This data is still 18% larger than the average volume determined in the annual pre-harvest inventories of the last 10 years, resulting in an AAC of 56 m3/ha. The company provided an overview of all trees harvested between 1991 and 2001 and presented its harvesting plan for 2003. In average, 108,769 m3 were harvested annually,


equaling 5.8 stems per Hectare or 32.5m3/Ha. Given the size of the concession and the quality of the forest, this utilization seems rather low, well reflected in an average realization rate of the legal AAC (named Jatah Penebangan Tahunan; JPT) of 69%. This is partly due to the earlier company policy of leaving most heavy trees behind (sinkers), but also due to an inappropriately large exploitation factor of 0.8 for the steep HP area, which was given to Intraca by the government. A more realistic exploitation correction factor could be calculated during the recommended RIL study (refer to pre-condition 5). In 2001, the company achieved an even lower realization rate, due to more careful logging in steep areas and accommodations for claims by the local people. In 2002, not even 40% of the JPT will be harvested. For 2003, a smaller area than in 2002 and only 31 m3/ha shall be harvested. One can summarize, that the current annual cut, even though the AAC/JPT determination is not satisfactorily based on accurate data and seems to overestimate harvesting possibilities, does not lead to an overexploitation of the area and is - for the time being - justifiable. The good impression of the forest, which the team received during the over-flight and other field observations, supports this assumption of sustainable harvest. Growth & Yield data is available from 12 one Hectare plots (2 series PUP). The data shows slow growths of the commercial species (0.4 cm/year in average in all untreated plots), but major differences between plots occur, which should be analyzed further (number of trees harvested, site conditions, amount of large trees with poor quality). It is too early to already use this data for the AAC determination. Careful data gathering should be maintained and data analysis, especially regarding the growth differences between the plots, should be intensified to learn more about the future AAC and silvicultural options. As already stated in condition 17, some additional PSP are needed. The company has asked the forest planning laboratory of the Mulawarman University in Samarinda for support on AAC determination. A first study was carried out with the program MYRLIN, whose application is still in a try-out stage. The draft report, dated 7.Feb.2002, reveals a smaller AAC than the current harvesting practice, but some assumptions are questionable and the result is more of research interest than of direct use for AAC determinations. Conclusion: Based upon the above, the auditors found that the precondition has been met with the addition of the following new conditions to improve upon the calculation of the AAC:

Condition 29: By the end of year 1, after the government has in general agreed to Intraca’s re-design plans, the company shall conduct an orientation inventory of the entire FMU, allowing for better data on standing stock and accommodation of the impacts of IPPK and/or illegal harvesting. The future AAC calculation for the 3 sub-units shall be based on this inventory. The company shall choose an inventory design which allows for statistical analysis’s (e.g. plot or line-plot layouts), provide training to its workforce before execution of the inventory and conduct intensive field control. Condition 30: By the end of year 1, Intraca shall finalize its new long term forest management plan including a detailed zoning exercise and AAC determination on sub-unit scale and submit its plan for Government approval. The plan shall describe social, environmental and economical management considerations for each sub-unit. New Precondition issued in February 2004:

During the audit of February 2004, there was evidence of timber extraction by local communties. During the audit team’s visit to the working areas teams of local extractors were active and one was interviewed. Based on the field observations and an interview with these locals, the following observations were made:


1. Logged trees or use of waste logs are sawn into boards in the forest or along the main road.

2. The boards extracted by the locals are sold to Malinau; 3. No information was available on the rates of extraction or on the effects of extraction

on the annual increment of the logged-over areas, although it was estimated to be less than 10%. Pre-condition 01/04: Prior to certification, the company shall develop a plan to implement a permanent monitoring system to determine the rate of timber extraction by local people, and its effects on the forest ecosystem. Meeting NEW Precondition 01/04:

Findings: In May 2004, Intracawood submitted an action plan and monitoring system to estimate the number of pieces and volume of waste logs as well as standing timber that was being utilized and extracted by local communities in the form of sawn boards. The company (and SmartWood) accepts that some level of local extraction will persist, especially as these communities are living around and within the forest. The importance of monitoring this usage is to understand if the level and rate of extraction will effect the dynamics of forest growth and ecosystem function. The company prepared a 4 month immediate action plan to map and inventory the locations of community sawn timber extraction; to evaluate the volume in relation to the standing stock; to train workers on monitoring procedures; and to carry forth with monitoring. By August 2004, the company had data from May to August, 2004 monitoring. Volumes of the sawn timber extracted were not approaching amounts that would be significant. The ratio of extracted sawn timber to standing stock was less than 0.01%. The company has continued to monitor the extraction levels by local communities. Conclusion: Based upon the above, SmartWood finds that the Precondition had been met.

New Preconditions (Major CARs) issued in November 2005:

During the performance verification audit of June 2005, there were two non-conformances identified that led to SmartWood issuing new preconditions. These are listed below, with indication of the non-conformity. CAR # 1 - 2005: Reference Standard #: 1.1 Non-compliance: Major Minor

Some minor issues was found in newspaper in June and august 2005 which is informed that PT. Intracawood was suspected of incorrect procedures in the process to getting the license (SK IUPHHK).

Corrective Action Request: PT. Intracawood Manufacturing shall clarify the issue raised in the newspaper regarding the perceived mis-procedure of the license process by the Ministry of Forestry. Timeline for Compliance: 60 days after the report received. CAR #4 - 2005: Reference Standard #: 7.4 Non-compliance: Major Minor

Company has not make a public summary of the primary elements of the management plan, including those listed in criterion 7.1

Corrective Action Request: Company shall make publicly available a summary of the primary elements of the management plan, including those listed in criterion 7.1 Timeline for Compliance: 60 days after report received. Meeting NEW Precondition CAR 1-2005:


Findings: SmartWood asked Intracawood to provide a clarification on the legal status of the license extension that the company would acquire from the MoF. As the MoF is a defendant in a court case brought about by PT Bumi Anugerah Lestari and PT Gunung Hijau Lestari, the MoF would abstain from commenting on the license as this could be interpreted as an intervention in the judicial process. The company submitted to SmartWood on January 23, 2006 the verdicts from two court cases, which support the validity of the license. Also, Intraca had a legal opinion prepared for the purpose of clarifying the legal decisions. SmartWood reviewed the text of the two legal verdicts. The verdict of the Jakarta Administrative Court of First Instance from March 8, 2005 (No. 168/C/TUN/2004/PTUN.Jkt) found that the Minister of Forestry was authorized to issue the the licence (Decree SK Menhut No. 335/Menhut-2/2004) dated August 31, 2004 and that the issuance was in conformity with the provisions of law prevailing in the sector of forestry. The verdict of the Jakarta Administrative High Court from August 4, 2005 (No.87/B/2005/PT.TUN.Jkt) found that the prior verdict was correct and reinforced the decision that the issuance of the license was in conformity with the law. Conclusion: Based upon the above, SmartWood finds that the major CAR 1-2005 had been met. Meeting NEW Precondition CAR 4-2005:

Findings: Intracawood submitted a draft version of a public summary of the management plan on January 23, 2006. SmartWood determined that the summary was inadequate and asked the company to improve missing elements. They submitted these to SmartWood and were deemed acceptable on February 13, 2006. Conclusion: Based upon the above, SmartWood finds that the the major CAR 4-2005 had been met.

3.2 Certification Decision Based on a thorough field review, analysis and compilation of findings by this SmartWood assessment team, and the subsequent field auditing of a precondition verification audit team, and stakeholder inputs, it is the recommendation that, as the company has met all 7 of the original pre-conditions and 4 subsequent pre-conditions imposed as mandatory requirements prior to certification, the PT Intracawood forest concession should receive SmartWood Forest Management and Chain of Custody (FM/COC) Certification for the management unit under evaluation, with conditions. The LEI accredited certification body, PT TUV International Indonesia reached the decision that PT Intracawood Manufacturing passed the LEI system at the bronze level, for which a certificate could be issued. In order to maintain certification, Intraca will be audited within the first six months of certification, and then at a minimum of once yearly on-site and as required to remain in compliance with the FSC principles and criteria, LEI Criteria and Indicators, and Intraca will also be required to fulfill the conditions as described below. Experts from SmartWood will review continued forest management performance and compliance with the conditions described in this report, annually during scheduled audits (and if needed, random audits).

3.3 Pre-conditions and Corrective Action Requests (CARs)


Pre-conditions were verifiable actions that PT Intracawood needed to undertake prior to SmartWood certification being granted. All preconditions listed in 3.3, below, have been closed out by the company and are no longer barriers to certification. They are listed here for documentation purposes. CARs are verifiable actions that will form part of the certification agreement that PT Intracawood will be expected to fulfill at the time of the first audit or as required in the CAR. Many of the CARs below have been met or partially met by the company since they were originally framed, however, SmartWood has not conducted an audit with the expressed intent to fully evaluate the completion of such CARs, they are included in their entirety and will be reviewed at the time of the first audit of Intracawood after certification. Each CAR has an explicit time period for completion. Non-compliance with conditions will lead to de-certification. Phase II: Pre-conditions (Result of Full Assessment): Pre-condition 1: Prior to certification, Intraca shall reach an agreement with the district governments of Bulungan and Malinau Districts that will result in: 1) respect for the concession’s nationally-recognized boundary; and 2) stop the issuance of IPPK licenses, or extensions of current IPPK licenses, within the concession. Pre-condition 2: Prior to certification, Intraca shall establish a protocol/methodology and criteria for assessing and identifying the conservation and biodiversity values of the concession, as HCVF. Intraca will set targets for implementation and demonstrate that initial fieldwork has begun. Furthermore, Intraca will be expected to hire or contract an individual or team that is sufficiently well qualified in conservation biology in Kalimantan to assist Intraca in meeting conditions related to conservation issues. Pre-condition 3: Prior to certification, Intraca shall conduct a Community Survey to document and map community land claims, resource use, and sites of special community interest within the concession, including existing and potential areas of conflict. The Community Survey will: 1) establish social baseline data; 2) assess social impacts from Intraca logging operations; 3) make recommendations about actions to be taken to compensate for and/or mitigate impacts; 4) make recommendations for social impact monitoring procedures; and 5) recommend ground rules for community relations, including the steps required to establish the Community Forum described in pre-condition 4. (Note to Pre-condition 3: The Community Survey is not intended to resolve disputes, only document the facts and make recommendations. Furthermore, Intraca will be expected to hire or contract an individual or team that is sufficiently well qualified in rural community appraisal and forest mapping in Kalimantan. It is recommended that the Community Survey should be done using rapid assessment techniques so that it can be completed within a period of several months. Intraca may wish to consider a partnership with an NGO or research organization with relevant expertise. Final completion of the survey is addressed in condition 4.) Pre-condition 4: Prior to certification, Intraca shall establish a consultative community forum composed of legitimate representatives of communities whose lands are fully or partially within the concession and including representatives from company management and local government. Community members of the forum should be transparently selected by the community. The purpose of the forum is to set guidelines and policy for relations between Intraca and villages, to resolve specific land and resource-related disputes, and to help the


company select the villages to be assisted under the PMDH program. Intraca will support the forum financially and administratively. Pre-condition 5: Prior to certification, Intraca shall fully and formally commit to implement RIL throughout future annual harvest plans (RKT). Commitment to RIL will be demonstrated through: 1) additional training and the incorporation of an incentive system for logging and skidding teams; 2) technical training for the planning department on map production and interpretation; 3) creation of specific plans/procedures for logging steep areas that explain how Intraca will log on steep slopes, what type of technology will be used, how to reduce, monitor, and mitigate impacts, and how permission will be obtained to exceed the TPTI slope limits; 4) creation of technical Standard Operating Procedures for road or skid trail construction and maintenance, with particular attention to minimize impacts on watercourses, and procedures to optimize wood use by limiting felling damage and log waste; 5) revision of management plan to reflect the adoption of RIL as the logging approach. Pre-condition 6: Prior to certification, Intraca shall develop, and demonstrate preliminary implementation of, an environmental assessment and impact monitoring plan/program. This will be designed to assess impacts before harvesting operations, monitor operations in progress, and conduct post-harvest damage assessment. The purpose of such planning is to avoid environmental damage by planning all concession activities in advance. This system of environmental management is expected to be integrated into overall planning and management operations, and to reduce impacts that occur at the landscape level, particularly focusing on downstream impacts on watercourses. Pre-condition 7: Prior to certification, Intraca will have recalculated the AAC based on a realistic appraisal of their effective timber management area. Furthermore, Intracawood will need to clarify and justify the calculation of AAC, including a full explanation of the forest inventory used as a base to calculate the AAC. Statistical analyses should be incorporated in this explanation, including the sampling error of the inventory. Phase III Preconditions (added as result of Precondition Verification Audit 2002): Precondition 01/02: Prior to certification, Intraca must secure an agreement with the Bupati of Malinau as follows: The current license holders shall not be allowed to operate in the Intraca area, unless a joint management scheme (between Intraca and the license holder), based on SFM principles, can be developed. The agreement shall state that no new small scale logging permits shall be issued in the concession area. Phase IV Preconditions (added as result of Verification Audit 2004): Pre-condition 01/04: Prior to certification, the company shall develop a plan to implement a permanent monitoring system to determine the rate of timber extraction by local people, and its effects on the forest ecosystem. Phase V Preconditions (Major CARs) added as result of Performance Verification Audit 2005: CAR # 1 - 2005: Reference Standard #: 1.1 Non-compliance: Major Minor

Some minor issues was found in newspaper in June and august 2005 which is informed that PT. Intracawood was suspected of incorrect procedures in the process to getting the license (SK IUPHHK).

Corrective Action Request: PT. Intracawood Manufacturing shall clarify the issue raised in the newspaper regarding the perceived mis-procedure of the license process by the Ministry of Forestry.


Timeline for Compliance: 60 days after the report received. CAR #4 - 2005: Reference Standard #: 7.4 Non-compliance: Major Minor

Company has not made a public summary of the primary elements of the management plan, including those listed in criterion 7.1

Corrective Action Request: Company shall make publicly available a summary of the primary elements of the management plan, including those listed in criterion 7.1 Timeline for Compliance: 60 days after report received. Final Corrective Action requests for 2006: Since SmartWood adopted a system of minor and major CARs (instead of Conditions) in 2005, all prior conditions have been re-named and re-numbered. A table that indicates what the original Condition was and what the new CAR is, follows at the end of this section. CAR 1-2006: By the end of year 1, Intraca will have conducted baseline studies to identify the biodiversity and conservation values of the concession, as HCVF, to include 1) vegetation and habitat types; 2) rare, threatened, and endangered (RTE) and legally protected species; 3) potential ‘keystone’ tree species; 4) principle threats from hunting and trade; and 5) landscape level planning considerations. The study will include management strategies for conservation of individual species or habitat types; recommendations for how to integrate these strategies into concession management planning, field operations, and monitoring; and recommendations for relevant training as called for in CAR 2. CAR 2-2006: By the end of year 1, Intraca shall produce a guidance document for its staff that summarizes the key elements of CITES, CBD, the relevant ILO accords, the LEI C&I, the FSC P&C, and RTE species (as identified in the baseline studies called for in CAR 1). Intraca shall have initiated a program to train appropriate staff to understand the provisions of higher level conventions, agreements and certification principles as they pertain to their jobs. CAR 3-2006: By the end of year 2, Intraca will have monitoring systems in place to determine the effects of hunting and harvesting on threatened and vulnerable species based on the findings of the biodiversity surveys required in CAR 1 and the community survey required in pre-condition 4. CAR 4-2006: By the end of year 1, the results of the Community Survey required in Pre-CAR 3 will have been presented to affected communities and district government for their comments and recommendations, and Intraca will have begun to implement the recommendations. Intraca shall include location specific measures for avoiding and mitigating social impacts in their RKT and RKL plans. Based on the recommendations of the survey team, a system of social impact monitoring will be established and followed throughout the remainder of the certification period.

CAR 5-2006: By the end of Year 1, Intraca shall establish a standard procedure for negotiating a written agreement with communities prior to commencement of operations. These agreements should define the boundary of the area to be harvested, explain special precautions to be taken during harvest and post-harvest operations, identify sites of special community interest that must be protected, and describe in detail any royalties, compensation, or assistance to the community in exchange for the harvest. Intraca shall include the location of all sites of special community interest on its operational and planning maps.


CAR 6-2006: By the end of year 1, Intraca shall formalize the position and role of community relations officer and provide staffing and funding necessary to perform the tasks described under pre-condition 4 and CAR 5. CAR 7-2006: By the end of year 1, Intraca shall formalize its community dispute resolution approach into a standard operating procedure, develop a list of communities and issues related to each (based on the results of the Community Survey described in pre-condition 3), develop a reasonable timetable for settling disputes with these villages, and begin the process of resolving disputes. Throughout the period of certification, new disputes will be resolved in accordance with this timetable. CAR 8-2006: By the end of year 1, Intraca shall form a committee, in agreement with the Community Forum (refer to pre-condition 4), to act as an arbitrator for disputes that cannot be resolved directly between the company and communities or individuals. CAR 9-2006: By the end of year 3, Intraca will have demonstrated significant progress to resolve all community disputes dating from prior to certification. Part of the dispute resolution process with communities that claim land within the concession will be written agreements or contracts that these communities will not sell their timber to an outside operator or undertake commercial harvesting operations on their behalf, but would sell their timber to Intraca in exchange for defined benefits. CAR 10-2006: By the end of year 1, Intraca shall develop a policy to hire and train people from all villages in and around the concession, setting reasonable and equitable hiring and training targets over the certification period. During each year of certification, Intraca will meet the local hiring and training targets set forth in the its own policy. CAR 11-2006: By the end of year 2, Intraca will develop and implement procedures for participatory selection and implementation of activities in the PMDH program. CAR 12-2006: By the end of year 1, Intraca will take measures to insure compliance with company safety policy as evidenced by universal use of required safety equipment by field workers. CAR 13-2006: By the end of year 1, Intraca will be fully functional in carrying out RIL throughout their annual coupes. Secondary road and skid trails closure will have taken place, water bars, culverts and drainage ditches installed, road fill left on the road sides will be minimized, etc. CAR 14-2006: By the end of year 1, Intraca will determine where its activities continue to have detrimental effects on waterways and take measures to stop activities that are causing these impacts. Intraca will survey all villages within the concession downstream of its harvesting operations to determine their effects on sedimentation and fisheries. Particular attention should be paid to assessing continuing impacts from steep slopes that have already been logged. The use of poison for fishing by Intraca staff will be banned and sanctions against violators will be imposed. CAR 15-2006: By the end of year 1, Intraca will have assessed the risk of fire within the concession and have developed a fire management plan to deal with outbreaks of wildfire. CAR 16-2006: Within six months of certification, Intraca will negotiate with communities in the northeastern part of the HPH/HTI to preserve representative areas of peat swamp forest in the north of the concession. If the biological survey team determines that the area is already too degraded, efforts will be made to secure peat swamp area in the HTI.


CAR 17-2006: By the end of year 2, PSP plots will be demonstrated to represent the range of habitats being logged in the forest, and data from them will feed into the management plan to determine what the optimal cutting cycle should be. Correct biological identification of trees will be done. CAR 18-2006: By the end of year 1, HCVF forest must be designated in management plans and maps, and procedures developed to monitor and manage this forest according to the conservation management strategies. By the end of year 2, Intraca will have begun to implement a concession wide conservation strategy to set-aside and protect areas, that is based upon the biological survey and recommendations for strategic management of habitat types (as referred to in CAR 4). CAR 19-2006: By the end of year 2, Intraca will have prepared and be implementing a Waste Management Plan that includes the protocol to monitor and document waste disposal at all working sites. CAR 20-2006: By the end of year 1, Intraca will have revised the management plan so that it will substantially integrate the dominant economic, social/community and environment/conservation issues confronting management of the concession. The plan must provide coverage of the issues that have been raised within the certification process, and should offer sufficient description and explanation of company policies and practices with respect to SFM criteria, so that company staff clearly understand how to successfully implement the plan. Intraca must have a procedure in place to periodically review and update the management plan based on the results of monitoring forestry operations as well as environmental and social impacts. CAR 21-2006: By the end of Year 1, Intraca will produce a summary of the primary elements of its revised management plan (CAR 20) and information related to monitoring indicators (see criterion 8.1) in language that is suitable for public distribution. This summary will include a general map showing the location of the concession boundaries and current and planned cutting compartments. A notice will be made in regional newspapers that provide information on how to contact the company and request the summary management plan. The summary of the management plan and monitoring indicators will be updated annually. CAR 22-2006: Prior to the sale of certified product, Intraca shall have documented and begun to implement a Chain of Custody System that clearly tracks logs by petak from the forest to the log pond. Within the log pond, logs from the HPH will be stored and tracked separately from those from the IPK sources, or any logs purchased on the open market from third parties. CAR 23-2006: Throughout the period of certification, Intraca will implement the monitoring of indicators of environmental impacts (as described in pre-condition 6) and the social impacts (as described in precondition 3 and CAR 4). CAR 24-2006: Within six months of certification, Intraca and local government will successfully move industrial scale logging contractors out of the concession in the district of Malinau, so that the boundaries are respected by such operators. CAR 25-2006: By the end of year 1, Intraca shall complete, improve/update the accuracy of the social data currently gathered. The completed data be processed and analyzed appropriately into information that can be used as the basis for social/community-related intervention. Intraca shall implement their recommendations made by social survey. The use of participatory approaches (participatory mapping, participatory inventory) should be integrated with other relevant sections such as Forest Mapping Section and Inventory Section so that the findings would be complementary.


CAR 26-2006: Within six months of certification, Intraca shall establish consultative community forum (groups) at the village level and/or consisting of several villages in a given region. These consultative processes shall be composed of legitimate representatives of communities whose lands are fully or partially within the concession and include representatives from company management and local government (at village, and/or kecamatan, and/or kabupaten levels). These village forums shall meet periodically to set guidelines, agendas, and policy to improve relations between Intraca and villages, particularly to resolve specific land and resource-related disputes and to help the company select villages to be assisted under the PMDH program. Intraca will support these forums as needed financially and administratively.

CAR 27-2006: Within six months of certification, Intraca must submit to SmartWood a progress report on the implementation of the action plan for RIL and improved road construction methods. CAR 28-2006: During the period of certification, Intraca shall provide evidence that systematic steps are taken to control the incidence of illegal logging (harvests for commercial purposes within the concession area for which agreement between concession, communities, and local government does not exist). Intraca shall implement measures aimed at reducing the level of illegal logging, such as:

• implementation of a methodology for monitoring the extent and amount of illegal logging, with estimation of the volumes of timber removed;

• analysis and reporting on the location, extent and types of illegal harvesting, encroachment, and illegal settlement are occurring;

• identification of the most critical sites and parties involved in these activities and coordination with local authorities responsible for controlling illegal logging.

CAR 29-2006: By the end of year 1, after the government has in general agreed to Intraca’s re-design plans, the company shall conduct an orientation inventory of the entire FMU, allowing for better data on standing stock and accommodation of the impacts of IPPK and/or illegal harvesting. The future AAC calculation for the sub-units shall be based on this inventory. The company shall choose an inventory design which allows for statistical analysis’s (e.g. plot or line-plot layouts), provide training to its workforce before execution of the inventory and conduct intensive field control. CAR 30-2006: By the end of year 1, Intraca shall finalize its new long term forest management plan including a detailed zoning exercise and AAC determination on sub-unit scale and submit its plan for Government approval. The plan shall describe social, environmental and economical management considerations for each sub-unit. CAR 31-2006: Within six months of certification, Intraca shall establish a consultative workers forum that organizes regular consultations with union leaders and workers as a means to avoid disputes and to provide a mechanism for two-way communication. During the period of certification, Intraca shall report to the SmartWood office any labor strikes and disputes. The report should also include the resolution of the dispute taken by the company. Based on the case, the report will allow SmartWood to consider sending an independent investigation team. CAR 32-2006: By the end of year 1, Intracawood will have made a formal request to receive an approved concession right which may be independently gazetted from that of PT Inhutani. By the end of year 3, Intracawood shall have met all compulsory obligations of a concession holder to execute the boundary delineation process. It is expected that Intracawood will work cooperatively with local peoples and the government agencies responsible to complete the task.


CAR 33-2006: By the end of year 1, PTIM shall formalize and document the dispute resolution approach/mechanism agreed between community and PTIM whether through the Tim 10 or other agreed upon mechanism. The agreed upon mechanism should be communicated well and understood to the community. PTIM shall responsible to distribute this information to the communities. CAR 34-2006: Within six months of certification, PTIM shall develop a strategic plan to reduce the purchase and consumption of logs at the company mills in Tarakan that do not originate from a source with a legal right to harvest (HPH, HTI, or other legally approved licenses). The reduction plan shall provide a detailed, measurable, and auditable framework to progressively phase out such sources over a five-year period. The company shall report to SmartWood on implementation and monitoring of the reduction plan.

CAR 35-2006 Reference Standard #: 1.5 Non-compliance: Major Minor

Some unauthorized logging activity reported in Intraca’s area where overlapped by PT. BAL and PT. GHL. These are two concession holders issued from Bupati Malinau and Governor Kalimantan Timur. Currently the parties above are in process in the court.

Corrective Action Request: PT. Intracawood shall monitor the logging activity of PT. BAL and PT. GHL in the overlap area and recorded of the log harvested while waiting the finalization of the law process in the court. Timeline for Compliance: Within 6 months

CAR 36-2006 Reference Standard #: 5.1 Non-compliance: Major Minor

Last three years, the financial performance of Intraca has been in a negative position according to the financial reports.

Corrective Action Request: Company shall forecast their planned way to improve financial performance in the future to recover from the negative cash flow during the last three years. Timeline for Compliance: Within 12 months

Table referencing prior conditions and CARs to re-numbered CARs Was Condition # Now is CAR # Was Condition # Now is CAR # Condition 1 CAR 1-2006 Condition 19 CAR 19-2006 Condition 2 CAR 2-2006 Condition 20 CAR 20-2006 Condition 3 CAR 3-2006 Condition 21 CAR 21-2006 Condition 4 CAR 4-2006 Condition 22 CAR 22-2006 Condition 5 CAR 5-2006 Condition 23 CAR 23-2006 Condition 6 CAR 6-2006 Condition 01/02 CAR 24-2006 Condition 7 CAR 7-2006 Condition 02/02 CAR 25-2006 Condition 8 CAR 8-2006 Condition 03/02 CAR 26-2006 Condition 9 CAR 9-2006 Condition 04/02 CAR 27-2006 Condition 10 CAR 10-2006 Condition 05/02 CAR 28-2006 Condition 11 CAR 11-2006 Condition 06/02 CAR 29-2006 Condition 12 CAR 12-2006 Condition 07/02 CAR 30-2006 Condition 13 CAR 13-2006 Condition 08/02 CAR 31-2006 Condition 14 CAR 14-2006 Condition 09/02 CAR 32-2006 Condition 15 CAR 15-2006 Condition 1/04 CAR 33-2006 Condition 16 CAR 16-2006 Condition 2/04 CAR 34-2006 Condition 17 CAR 17-2006 CAR 2-2005 CAR 35-2006 Condition 18 CAR 18-2006 CAR 3-2005 CAR 36-2006 [End of Public Portion of Report]

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