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ROGUE TRADERS:

The Murky Business of


Merbau Timber Smuggling
in Indonesia
ACknOwlEDGEMEnTS
This document was produced with the financial
COnTEnTS
assistance of the european Union. The contents
are the sole responsibility of eIa/Telapak and can
under no circumstances be regarded as reflecting
the position of the european Union. 1 InTrodUcTIon
eIa/Telapak thank the Uk department for
International development’s Forest Governance
and Trade programme for its support of our work. 2 IndoneSIa’S STrUGGle aGaInST IlleGal loGGInG
This report involved the use of specialist software
from the i2 Group. www.i2group.com

report design by:


6 The MakaSSar caSe
www.designsolutions.me.uk

august 2010 9 SUraBaya SyndIcaTe


ISBn: 0-9540768-9-3

11 MerBaU MarkeTS

13 recoMMendaTIonS

TERMinOlOGy
In this report the term Papua applies to the Indonesian
part of the island of New Guinea. Papua Province and
West Papua Province refer to the two provinces which
make up Papua.
EnViROnMEnTAl inVESTiGATiOn AGEnCy (EiA)
62/63 Upper Street, london n1 0ny, Uk
Tel: +44 (0) 20 7354 7960
Fax: +44 (0) 20 7354 7961
email: ukinfo@eia-international.org M a l a y S I a I n d o n e S I a
BrUneI
www.eia-international.org  SUMaTra
kalIManTan

PaPUa
Makassar
Jakarta
Surabaya

java

TElApAk
Gedung alumni IPB,
jl. Pajajaran no. 54, Bogor 16143,
IndoneSIa
Tel: +62 251 8393 245
Fax: +62 251 8393 246

www.telapak.org 

FROnT COVER:
designed by www.designsolutions.me.uk
inTRODUCTiOn

© eIa/Telapak
Five years ago EIA/Telapak released The investigations into merbau smuggling ABOVE:
Last Frontier report, exposing massive contained in this report show the Merbau logs being shipped
smuggling of merbau logs from Papua in involvement of a well-connected cabal of from raja ampat, West Papua
Indonesia to China. The scale was criminals able to evade detection with the province, april 2003.
breathtaking, with cargo ships carrying support of corrupt officials.
about 300,000 cubic metres of merbau logs
a month to feed China’s wood processing During 2009 and 2010 EIA/Telapak
industry. In response the Indonesian carried out undercover investigations
government of President Susilo Bambang into the illicit merbau trade in China and
Yudhoyono launched an unprecedented Singapore, as well as Surabaya, Makassar
crackdown on illegal logging. and Papua in Indonesia. These investigations
reveal how significant amounts of illegal
This decisive action marked a turning merbau, in the form of square logs and
point in Indonesia’s struggle against rough sawn timber, continue to be smuggled
illegal logging. Since then the country’s out of Indonesia, with the bulk bound
appalling illegal logging rate has fallen for China. They also uncover the illegal
and the flow of illegal timber smuggled out activities of two rogue timber traders;
of the country has declined. As well as Hengky Gosal, the man behind a foiled
improving enforcement, the Indonesian attempt to ship 23 containers of merbau
government has also been active at the logs, and Ricky Gunawan, a serial
policy level; it has mandated a new timber smuggler based in Surabaya.
legality verification system and has been
negotiating a legal timber trade agreement EIA/Telapak recognises the progress made
with the European Union. The international in Indonesia against illegal logging, yet
community has also moved to curb trade in believes stronger action is needed to tackle
stolen timber, estimated to cost developing the timber criminals. Until 2005 the
countries $15 billion a year. In 2008 the Indonesian government estimates that
US amended its Lacey Act, making it an illegal logging cost the country two billion
offence to import or trade illegally-logged dollars a year – a huge environmental
timber, while in June 2010 the EU agreed crime. Yet the prosecution of illegal logging
a new timber regulation prohibiting cases has been woefully inadequate.
imports of stolen wood.
EIA/Telapak call on the Indonesian
Despite this substantial progress illegal government to investigate the cases
logging continues to threaten Indonesia’s detailed in this report, and to staunch the
precious forests. In April 2010 President illicit trade in merbau by placing it under
Yudhoyono expressed frustration with the the UN Convention on International Trade
lack of progress in prosecuting illegal in Endangered Species. It also needs to
logging cases and instructed the ensure that the new timber legality
government’s task force on eradication system is robust enough to guarantee
of judicial corruption to investigate. surveillance is effective. It is time to step
up the campaign against illegal logging.
The President is right to call for renewed
action against illegal logging. EIA/Telapak EIA/Telapak, August 2010

1
inDOnESiA’S STRUGGlE 
AGAinST illEGAl lOGGinG 
© eIa/Telapak

ABOVE: In mid-October 2009 customs officers at Investigations by EIA/Telapak into the


logs seized near jayapura in 2005, the sprawling port of Tanjung Priok, north Makassar case and other seizures of
guarded by troops prior to shipment of the Indonesian capital Jakarta, made a merbau timber during the past few years
to Surabaya, june 2007. startling discovery. While carrying out a highlight the activities of a resourceful
routine inspection of a consignment of group of serial timber smugglers deploying
containers described as “truck flooring”, one a range of methods to avoid detection,
officer’s suspicions were aroused by the often aided by corrupt officials.
sheer weight of one of the containers.
Closer inspection revealed its contents to It has been five years since revelations
be raw logs of merbau, a valuable hardwood. of massive illegal logging and smuggling
The discovery prompted an x-ray scan of of merbau in Papua prompted
all 23 containers which had arrived in a Indonesian President Susilo Bambang
single batch from the Indonesian port of Yudhoyono to launch an unprecedented
Makassar, South Sulawesi, bound for operation against illegal logging. In
export to China, India and South Korea. February 2005 EIA/Telapak released
Inside a total of 120 merbau logs, The Last Frontier report, showing how
weighing 400 tonnes, were found. approximately 300,000 cubic metres of
merbau logs were being smuggled out of
This audacious attempt to evade Papua every month, bound for China(1).
Indonesia’s log export ban indicates A month later a task force of more than
that the fight against illegal logging and 1,500 enforcement personnel was
timber smuggling in the country has still dispatched to Papua under Operation
to be won. It also shows that serious Hutan Lestari II (OHL II), and the flow
flaws in the implementation of forestry of illicit merbau was stemmed.
regulations and timber licensing rules
persist, with corruption a key factor. By the end of the operation in May 2005
over 400,000 cubic metres of timber had
The merbau timber was logged in Papua been seized, and ships, barges and logging
in eastern Indonesia and shipped to vehicles impounded. The effects were
Makassar; permits for transportation soon felt in the global timber trade, with
are supposed to allow all timber to be prices for merbau logs doubling in the
tracked from forest to factory. Once Shanghai market. In total 186 suspects
loaded into containers the “truck were identified by the police.(2)
flooring” should have been physically
checked by an independent surveyor The operation marked a decisive turning
appointed by the government, after point in Indonesia’s struggle against
which a wood export permit is issued. illegal logging. In the first half of the
The 23 containers of illegal merbau previous decade the country’s forests
logs received the necessary timber had been ransacked by illegal loggers,
export paperwork in Makassar and if with Indonesia experiencing an illegal
not for a sharp-eyed customs officer in logging rate of 80 per cent, one of the
Jakarta would have been shipped out worst in the world. At this time illegal
of the country. Clearly a serious failure logging was costing the country $2 billion
in the system for countering wood a year in lost resources and making a
smuggling occurred. fortune for the powerful timber bosses

2
controlling the criminal syndicates Yet illegal logging is far from eradicated
behind the logging.(3) in the country, with more effective field
enforcement failing to translate into
By 2009 the rate of illegal logging in effective action against the main
Indonesia was estimated to have halved lawbreakers, particularly the bosses,
to 40 per cent.(4) EIA/Telapak field financiers and corrupt officials. Of the
investigations found a significant decline 186 suspects identified by OHL II, only
in the volumes of illicit Indonesian timber eight cases resulted in a conviction.
reaching China and Malaysia, with Analysis of 205 illegal logging cases
traders in those counties bemoaning the between 2005-2008 shows that 137 sus-
improved enforcement in Indonesia. pects were released by the court, with
The firm action by the government also only ten cases resulting in a jail sen-
prompted some illegal logging bosses to
move into other less risky enterprises. tence of two years or more. The figures
Abdul Rasyid, behind the illegal logging also illustrate the failure of the
of Tanjung Puting National Park in Indonesian authorities to apprehend the
Central Kalimantan shifted into the oil high-level perpetrators. Of the 205 cases
palm business, while Heng Ijat Hong, just 49 were bosses, financiers or cor-
involved in merbau smuggling in Papua, rupt officials, with the rest targeting
switched to coal mining in Kalimantan. people lower down the
logging chain, such as chainsaw operators
Indonesia has also been actively building and truck drivers.(6)
support at the international level for
actions against illegal logging. It is in Failure to break up the powerful illegal
the final stages of negotiations with the logging syndicates has drawn criticism
European Union over a Voluntary from President Yudhoyono. In April
Partnership Agreement (VPA), under 2010 he called for greater efforts
which only Indonesian wood verified as against illegal logging, stating: “I wish
legal will be allowed to enter the EU to remind everybody that the fight
marketplace. A key element of a VPA is against illegal logging must not ease.
a timber legality assurance system, and The police, military, law enforcers,
in 2009 the Ministry of Forestry issued a governors, district heads and mayors
regulation establishing such a mechanism must all immediately go back into the
called Sistem Verifikasi Legalitas Kayu field and seriously continue the fight
(SVLK). The regulation has yet to be against illegal logging.” (7)
fully implemented. In 2007 the
Indonesian government was behind a
resolution at the United Nations He also drew attention to the poor
Commission on Crime Prevention and performance of the judicial system in
Criminal Justice promoting international dealing with illegal logging cases and
cooperation to tackle trafficking of ordered the government’s Taskforce for
forest products. In 2010 Indonesia and the Eradication of Judicial Mafia, set up
Norway signed a one billion dollar in early 2010, to examine suspicious
cooperation agreement on reducing verdicts in illegal logging cases. He BElOw:
greenhouse gas emissions from announced: “I believe a mafia is behind Illegal loggers collect fresh merbau
deforestation and forest degradation. the illegal logging activities. I call on flitches for delivery to a sawmill,
Under the agreement Indonesia will set the judicial mafia eradication task force near jayapura, Papua province,
up a special unit to tackle illegal logging.(5) to tackle this problem, reduce and put September 2009.
© eIa/Telapak

3
© eIa/Telapak

ABOVE: an end to these activities.” (8) daily livelihoods are inextricably linked
Illegal forest conversion, It remains to be seen how effective the to the forest resources. Papua’s forests
West Papua, april 2009. scrutiny of the judicial system will be. also contain literally hundreds of
25 per cent of Papua’s forests There remains systemic corruption in the millions of tonnes of carbon.
have been lost since the
police, the attorney general’s office and
the courts. Effective action against illegal The fact that Papua contains virtually
late 1990’s.
logging is also hindered by a lack of all of Indonesia’s merbau trees makes it
cooperation between different enforcement a main target for illegal logging operations.
agencies, despite a Presidential Forestry Minister Zulkilfi Hasan recently
Instruction issued in 2005 compelling confirmed that large-scale illegal logging
18 separate government agencies to in Indonesia is now concentrated on
work together to combat forest crimes.(9) Papua.(11) A senior official at the Ministry
of Forestry has admitted the severe
damage already done to Papua’s forests
by illegal logging and forest exploitation
pRESSURE On pApUA’S FORESTS for plantations, stating that a quarter
of Papua’s forests have been lost since
The challenge of combating illegal the late 1990s, with the forest area
logging in Indonesia is epitomised by the falling from 32 million hectares to 23
situation in West Papua and Papua, the million hectares.(12)
country’s two easternmost provinces.
Papua’s unique forests form part of the Management of Papua’s forests is chaotic
last substantial tracts of intact tropical and non-transparent. In the aftermath of
forest in the whole of the Asia-Pacific OHL II many of the forest concessions
region, and constitute the third largest were reported to be inactive. Yet within
remaining tropical forest wilderness in a few years there were indications that
the world, after the Amazon and Congo logging was again on the rise, with a
Basin. As such Papua’s forests are of process of consolidation by some of the
global significance. biggest concession-holders and new
investors arriving.
Papua’s forests harbour an incredible
array of unique biodiversity, approximately For instance in August 2008 CCT
60 per cent of that found anywhere in Resources Holdings Limited (CCT), a
Indonesia; in recent years they have company registered in the Cayman
been described as a “garden of Eden” Islands but operating out of Hong Kong,
after international teams of explorers purchased a 313,500 hectare forest
discovered a host of species new to concession in the remote Mimika
science and the world.(10) regency on the southern coast of Papua
province. The sum paid was equivalent
These forests are also home to more to just $320 per hectare, with timber
than 250 distinct tribal groups, some of stocks on the land worth approximately
the most culturally and linguistically $148 million.(13)
diverse peoples in the world. These
communities have managed the forests Another investor is Robert Joppy
for generations, precisely because their Kardinal, a member of the Indonesian

4
parliament. He reportedly owns a stake with significant movement of logs from
in the forest concession company Wana Papua into neighbouring West Papua
Irian Perkasa in West Papua province. province and then onto processing hubs
In 2005 Kardinal was named in the in Java and Sulawesi. Official documents
press as being linked to illegal logging, show that between June 2009 and June
but was never investigated.(14) A recent 2010 permits were issued by forestry
field investigation found that local officers for the transport of 164,500
communities were accusing Wana cubic metres of logs from Papua to West
Irian Perkasa of ignoring their land Papua, of which 101,000 cubic metres
rights and operating without the comprised merbau logs.(21)
required authorisation.(15)
It comes as no surprise that the log
The biggest single forest concession in shipment controls are not being
Papua, covering 670,000 hectares is implemented, since the wood industry
operated by Mamberamo Alasmandiri in other parts of Indonesia relies heavily
and its operations are certified as on Papua’s forests for raw materials,
“verified legal” by Swiss auditors SGS. especially merbau. This is demonstrated
In November 2009 Yorris Raweyai, a by analysis of RPPBI (Rencana
member of Indonesia’s parliament, Pemenuhan Bahan Baku Industri)
called for an investigation into accusations documents, which all sawmills with a
of illegal logging and log smuggling capacity in excess of 6,000 cubic metres
involving the Mamberamo Alasmandiri a year must provide to the Ministry of
concession.(16) Local communities have Forestry showing where raw materials
also alleged that widespread illegal will be sourced. In 2008 sawmills
logging by the company Sinar Wijaya outside Papua planned to obtain
Plywood Industry (SWPI) had been 311,000 cubic metres of logs from West BElOw:
occurring, including harvesting beyond Papua and Papua provinces, despite the Illegal merbau logs in Seremuk,
the concession boundary.(17) SWPI, a log shipment controls coming into force. South Sorong, West Papua, 2003.
plywood manufacturer, owns 10 per
cent of Mamberamo Alasmandiri and
obtains its raw timber from the
concession. In June 2010 police in
Papua seized 4,500 cubic metres of logs
at a site owned by SWPI. Police officials
said the logs did not have the required
permits, adding that SWPI had been
carrying out illegal logging in the
Mamberamo region for a long time.(18)

Further evidence of widespread


illegalities in Papua’s logging sector is
provided by a series of recent log
seizures. In May 2010 police in Sorong,

© eIa/Telapak
West Papua seized 4,200 cubic metres
of merbau logs from the concession
company Hasrat Wira Mandiri. In June
2010 more than 5,000 cubic metres of
logs were seized by police in the MERBAU
Bintuni area of West Papua, including
2,000 cubic metres of merbau logs. In Merbau is a valuable dark hardwood used to make flooring, decking,
both cases the logs did not have the outdoor furniture, doors and window frames. Merbau logs in Papua
required permits.(19) are sold for between $250 and $300 per cubic metre. Merbau is
heavily targeted by illegal loggers and timber smugglers due to
Forest management and enforcement heavy demand for raw timber in China and India, and for merbau
against illegal logging in Papua is products in Australia, the European Union and the US.
complicated by an uncertain legal
framework. In September 2007 the This demand is also driving over-exploitation of merbau in Papua.
governors of West Papua and Papua Analysis of official export data shows that in 2008 merbau
provinces issued instructions controlling accounted for 192,000 cubic metres out of a total export of 725,000
log shipments from the region to other cubic metre of wood products. Overall merbau comprised more
areas of Indonesia in a bid to curb illegal than 30 per cent of Indonesia’s exports (excluding panel, veneers,
logging and bring investment into the pulp and paper). Between 2003-2007 recorded merbau export
wood processing sector. The instruction volumes trebled.(22)
stated that from the start of 2008 no
transportation of logs from Papua In 2005 the Indonesian Ministry of Forestry began preparations to
Province would be allowed, while a list merbau on Appendix III of the Convention on International
phased control would be put in place in Trade in Endangered Species (CITES). Such a move would have
West Papua Province, with 50 per cent compelled other countries to seize shipments of illegal Indonesian
of logs allowed for shipment in 2009 and merbau, yet the ministry failed to carry out the listing.
a total ban by 2012.(20)
Outside of Papua the main processing hubs for merbau are
Yet research by EIA/Telapak indicates Surabaya, East Java and Makassar, South Sulawesi
these controls are being routinely flouted,

5
ThE MAkASSAR CASE
© eIa/Telapak

ABOVE: The port city of Makassar is a major Furthermore the exporting company
Merbau logs at rajawali Makmur centre for trade and processing of must be registered by the Ministry of
Sejahtera, Makassar, Sulawesi, merbau. Historically much of the house Trade under the ETPIK scheme
May 2010. construction in Makassar used merbau, (Eksportir Terdaftar Produk Industri
which was to be found in Sulawesi’s Kehutanan) and have an endorsement
forests. Nowadays there is hardly any letter for each consignment issued by
merbau left in Sulawesi, but a significant the wood industry organisation Badan
export-oriented merbau processing Revitalisasi Industri Kayu (BRIK).
industry has grown, reliant on supplies In this case the exporter, Makassar-
from Papua. based Menara Mas had been given the
necessary permits.(24)
Makassar’s role in the illicit trade of
merbau came to light with the seizure of After receiving all the necessary papers
23 containers of merbau logs in Tanjung the containers left Makassar bound for
Priok port, Jakarta in October 2009. Jakarta, with the smugglers confident
The consignment was seized by customs the transit to the final destinations
officers for contravening Indonesia’s would be straightforward since the
log export ban. The illegal shipment Sucofindo and BRIK endorsements
comprised 10 containers of 40 foot in had already been obtained. Yet the
length and 13 of 20 foot in length. intervention of alert customs officers in
Inside were found 120 merbau logs Jakarta foiled the plot and triggered a
totalling 350 cubic metres. The value of six-month investigation into the
the contraband was $100,000 based on attempted fraud.
merbau prices in Papua, but more than
double that on the international market. The initial investigation focused solely
on infringement of the customs laws,
Shipping documents show the containers and was conducted by customs officers
were sent from Makassar on September from both Jakarta and Makassar. It
29, destined for three companies in revealed the merbau logs had been
three different countries; Jiangsu Skyrun bought by exporter Menara Mas from
International Group in China, Sri Balaji the company Rajawali Makmur
Logs Products in India and Vary Timber Sejahtera, a large merbau processor
in South Korea. The shipment was routed based in Makassar. Staff from Menara
via Jakarta in order to connect with Mas bribed a Sucofindo employee to
international shipping routes. The contents falsify the surveyor’s report and to give
of the containers were described as them the seals for the 23 containers,
“truck flooring tongue and groove”. instead of carrying out an inspection
Under Indonesia’s sawn timber export himself. BRIK issued the export
ban such part-processed wood products document for truck flooring.
can be exported, but must undergo
physical inspection by an independent The investigation discovered that
surveyor appointed by the Ministry of Menara Mas had customers in China,
Trade(23). The company Sucofindo, which India, South Korea, Australia and
is 95 per cent owned by the Indonesian Singapore, with the latter company
government, has the exclusive contract named as Soh Timber Binders. Three
to carry out this work. suspects were identified; Abdul Hakim,

6
a surveyor at Sucofindo in Makassar, for each barge load of logs brought from
and Halim Perdana Kusuma and M. Papua, even if the shipment has all the
Arsyad, both staff in the export department correct paperwork. Tungadi’s claims
of Menara Mas. The director of Menara about the origin of logs used by RMS are
Mas, Hengky Gosal, claimed to have had contradicted by the company’s RPPBI
no knowledge of the shipment because document, which states that in 2009
he was in Singapore at the time. logs were to be supplied by the
concession Wanakayu Hasilindo in
In February local press reported that the Kaimana, West Papua.
trial of the three defendants had begun
at the Makassar District Court. During Following the visit to RMS EIA/Telapak
the hearing it was alleged that Arsyad investigators attempted to meet with
paid Hakim a bribe of just $20 to falsify Hengky Gosal, director of Menara Mas.
the inspection, with the promise of more After a series of phone calls a secretary
payments later.(25) It was reported in said Menara Mas had changed its
June that Kusuma had been sentenced to name to Nessa Golden Wood, adding
two years in jail.(26) that Gosal often changed his mobile
phone and was difficult to contact. A BElOw:
Yet investigations in Makassar by meeting was finally arranged at a city hengky Gosal, director of Ud Menara
EIA/Telapak show a much wider centre hotel. Mas, admitted shipping 40 - 50
conspiracy, with the leading role played containers of merbau flitches
by Hengky Gosal. At the hotel Gosal presented a business to china per month.
card in the name of Nessa Golden Wood
In May 2010 EIA/Telapak investigators, and told investigators that his factory BOTTOM:
posing as timber traders, visited the was being refurbished, adding that he
Sucofindo’s office in Makassar,
factory of Rajawali Makmur Sejahtera was currently storing his supply of merbau
(RMS) and met with Alex Tungadi, the logs at the RMS factory. He also Sulawesi. a Sucofindo auditor did not
company’s General Manager. The large revealed that Tungadi was his younger inspect containers containing illegal
integrated sawmill and wood processing brother. Gosal contradicted his younger timber following a bribe from
facility lies in an industrial area on the brother, claiming that the logs employees of hengky Gosal.
outskirts of Makassar and deals mostly EIA/Telapak investigators had seen at
in merbau. During the course of an hour- RMS were actually his and had been
long meeting Tungadi told investigators brought from a supplier in the Biak
that his company obtains most of its region of Papua two months before. He
logs from the Mamberamo Alasmandiri said he also obtains merbau logs from a
concession in Papua, described by him number of concessions in Sorong, as
as the only certified concession in well as Mamberamo Alasmandiri, and
Papua. He pays Rp3 million ($300) per travels to Papua every three months to
cubic metre for the logs. He also said buy merbau logs, paying local military
RMS was in the process of obtaining personnel to act as bodyguards during
chain of custody certification. his trips. Gosal told how he used to
work as a log trader in Papua.
Tungadi further explained how he
sometimes buys seized merbau logs from Gosal said his main business is shipping

© eIa/Telapak, May 2010


auctions in Papua. In 2007 he won an merbau flooring blanks to China, about
auction in Manokwari, West Papua, and 25 containers a month, at a price of
paid local armed police Rp 3 million $1,250 per cubic metre (including
($300) a day to guard the logs from a shipping). He also revealed how he used
rival Surabaya-based timber dealer during to ship large quantities of illegal merbau
transport. As well as logs Tungadi buys
rough sawn merbau from “local sources”
in Papua and processes this timber into
flooring blanks for the China market. In
addition to exporting to China, RMS also
supplies merbau decking to Australia
and Europe.

During the conversation Tungadi


revealed that he used to send illegal
square logs of merbau to China but had
stopped last year due to his plan to
obtain certification for RMS. During a
tour of the company’s log yard
EIA/Telapak witnessed around 3,000
cubic metres of merbau logs. Tungadi
explained these logs were the remainder
of a shipment of 8,000 cubic metres
obtained from Mamberamo Alasmandiri
in August 2009. Tungadi said it was
standard practice in Makassar to pay
© eIa/Telapak

“lubrication money” of approximately


$15,000 to local officials from the
police, forestry department and customs

7
flitches to China. About 50 containers reveal how Hengky Gosal is implicated
were sent to Shanghai every month at a in large scale smuggling of illegal
price of $850 per cubic metre. Gosal said merbau flitches to China, and was
he had stopped the flitches business six certainly behind the attempt to export
months ago (around the time the 23 the 23 containers of merbau logs. It also
containers were seized in Jakarta) uncovers connections between Gosal
because a new head of customs had and RMS, run by his brother Tungadi.
been appointed in Makassar and it was This relationship is demonstrated in the
no longer possible to smuggle the illegal RPBBI document for RMS; sale of logs
merbau to China. He added the customs by the company to another wood
chief would change in another six processor involved payment being made
months, and he hoped to resume the to the account of Nessa Golden Wood.
business then. According to Gosal A third brother, Fendy Gosal, is listed as
trade contacts had told him it was still the contact at Menara Mas in the firm’s
possible to ship merbau flitches out ETPIK licence.
of Surabaya.
The 23 containers case demonstrates
Gosal said: “Big size merbau to China, a number of enforcement weaknesses.
have before, like six months ago. But A bribe ensured that the physical
now, everything stopped. Because red checks by the surveyor Sucofindo and
line from the customs. Cannot get out. the BRIK requirements for an ETPIK
Before we can give some money, you licence could be easily circumvented.
can. When the leader of Customs Lack of cooperation between different
change, then come the new person agencies persists. In November 2009 the
coming, then new regulation coming Ministry of Forestry wrote to customs in
again. Before have sent so many to Jakarta asking to join the investigation
China, 40-50 containers a month.” into the 23 containers case. A reply was
BElOw: not received until May 2010, meaning
Tanjung Priok port customs
EIA/Telapak also visited an industrial that the customs law aspects of the case
area to check out the official addresses and the forestry law infringements have
officers display merbau logs to
for both Menara Mas and Nessa Golden not been combined. Finally, the true
the media following seizure of Wood, but could find no trace of culprit, Hengky Gosal, has not been
23 containers belonging to either company. charged while more junior staff at
hengky Gosal’s Ud Menara Mas, Menara Mas and Sucofindo serve as
19th october 2009. EIA/Telapak investigations in Makassar convenient scapegoats.
anonymous

8
SURABAyA SynDiCATE

anonymous
The city of Surabaya in East Java is a shipping illegal merbau flitches to
major centre for timber processing in southern China.
Indonesia, including merbau. It is also
the location of the country’s busiest EIA/Telapak investigators first
port, Tanjung Perak. Due to these factors encountered Gunawan in November
Surabaya has emerged as a major hub 2006. Posing as timber buyers, the
for merbau trade and smuggling. team met with Riki Sumandi, director
of the company Lido in Surabaya, who
Most of the wood processing factories had been advertising merbau flitches
in Surabaya are located in the Gresik for sale to overseas markets.
industrial area of the city. Here merbau
round logs from Papua are processed Sumandi took the investigators to
into a range of finished and semi- Gresik, where they were introduced
processed products for export, principally to Ricky Gunawan, director of

© eIa/Telapak
flooring and decking. While most of Surabaya Trading and Sumandi’s
these operations are legitimate and business partner.
conform to Indonesia’s log and sawn
timber export controls, there is also an Gunawan soon boasted of his ability to
active trade involved in diverting illegal break the law and to supply illegal TOp:
merbau onto international markets, merbau at low risk due to his connections. Surabaya customs officer inspecting
especially China. He claimed to ship up to 3,000 cubic merbau in nine containers owned
metres of air-dried rough sawn merbau by Surabaya Trading following its
In June 2010 alone authorities at to China every month. After sawing the seizure in april 2009.
Tanjung Perak intercepted two illicit logs in Gresik, he explained how the
consignments of timber, including wood was loaded into containers at five ABOVE:
merbau, bound for export. In the first different warehouses in the area and ricky Gunawan, a major Surabaya-
case eight containers of merbau, ebony shipped to the Chinese ports of based merbau smuggler, in 2006.
and meranti wood were seized en route Shanghai, Huangpu, Shenzhen,
to Singapore, Taiwan and China.(27) Guangzhou and Shantou. About 50
The second case involved the detention containers a month were being
of seven containers of merbau and other delivered, with Gunawan dealing with
timber species.(28) two main buyers – one Singaporean
and one from Hong Kong.
EIA/Telapak investigations have
uncovered the on-going criminal activities During the meeting Gunawan said: “This
of Surabaya-based businessman Ricky export is non-legal. Today, no problem.
Gunawan, one of the most active merbau Next week, I don’t know. When the
smugglers in the city. Evidence gathered cargo arrives in China, don’t just open it
in Surabaya, Singapore, and Guangzhou at the port”, adding that occasionally he
and Xiamen in China since 2006 points had to stop the shipments when customs
to Gunawan’s prominent role in the illicit contacts in Tanjung Perak tipped him off
trade in merbau. EIA/Telapak have about impending clampdowns.
submitted several reports on Gunawan
to the Indonesian authorities, but Details of the investigation were provided
he has yet to be investigated. As to the Ministry of Forestry but no action
recently as December 2009 he was still was taken.

9
Gunawan’s name cropped up again in intended recipient of the nine containers
2008. In April of that year the seized in Tanjung Perak.
Indonesian Ministry of Trade granted a
special “dispensation” to the sawn timber During the course of an hour-long meeting,
export ban to three companies based in Zheng claimed to be one of the biggest
Surabaya, allowing them to export importers of Indonesian merbau wood in
“housing components” of merbau timber China, including flitches banned for
to China. The three firms – Surabaya export under Indonesian law. Zheng
Trading, Grafity Merindo and Trias Hasil stated that he sources his supplies from
Alam Lestari – are all connected to Surabaya and Sulawesi, selling the merbau
Gunawan and were granted permission onto factories across China manufacturing
to export 70,000 cubic metres of merbau doors, stairs, windows and flooring. At
timber on the grounds that the “housing no time did he mention any involvement
components” were destined for a in bridge projects, although he did tell
construction project in Mongolia. It was how false blueprints for construction
also claimed that the components were projects are used to get export clearance.
part of a reconstruction efforts after the
Sichuan earthquake. After interventions from several
government officials and some members
Sources in Surabaya state that the of the local parliament on Gunawan’s
shipments of “housing components” sent behalf the customs department had to
by Gunawan were in reality rough sawn release the seized containers for onward
merbau posts, similar to the ones he shipment. Once again Gunawan escaped
was smuggling in 2006. Information official investigation.(30)
obtained by EIA/Telapak in China shows
the shipments were not destined for a The scale of Gunawan’s activities are
housing project in Mongolia, but instead well-known to fellow smugglers. One
were sold on to flooring and furniture such smuggler is Singapore-based
factories in China.(29) Ng Yit Fooi, boss of Soh Timber Binders.
EIA/Telapak first encountered Ng in
One of the main recipients of merbau 2003 while investigating the lucrative
shipments sent by Surabaya Trading in trade in ramin timber. During a meeting
BElOw: 2008 is the company Fujian Pan-Chinese with EIA/Telapak investigators Ng told
Flitches at Soh Timber Binders’
Trading, located in Fujian Province, how he was shipping protected ramin
southern China. During May 2008 timber from Sumatra to China using fake
warehouse, Singapore, May 2010.
Gunawan sent 40 containers of paperwork. He also claimed his main
“merbau housing components” to Fujian business was trading merbau from
BOTTOM: Pan-Chinese Trading. In July 2008 Papua to China.
ng yit Fooi, of Singapore-based EIA/Telapak investigators posing as
Soh Timber Binders, May 2010. timber buyers called the company and EIA/Telapak came across Ng’s name
Mr ng imports illegal merbau were told it receives about 200 containers again while looking into merbau trading
flitches from ricky Gunawan. of sawn merbau a month from Surabaya, in Makassar in 2010, where it was
at a cost of $1,100 per cubic metre, revealed Soh Timber Binders was a
with the wood sold on to Chinese customer of Menara Mas. In May 2010
factories producing merbau flooring, EIA/Telapak investigators met with Ng
doors and stairs. again at his factory in Singapore. Ng
described how his main business was
Gunawan surfaced again in April 2009, now ironwood (belian) from Malaysia,
when customs officers in Tanjung Perak but that he still traded merbau from
port detained nine containers of merbau Makassar and Surabaya via a network
timber destined for export to China. The of agents. He showed EIA/Telapak
owner of the consignment was investigators an invoice for a consignment
Gunawan’s Surabaya Trading and the
shipment had been cleared for export by of illegal merbau flitches he had bought
from Surabaya Trading in December
© eIa/Telapak

the third-party inspection firm Sucofindo


on the grounds that as the timber was 2009 at a price of $1,150 per cubic
destined to be used for bridge construction, metre for shipment to Guangzhou in
it was exempt from the sawn timber China. When asked about Surabaya
export ban. Yet during inspection Trading, Ng immediately mentioned
customs agents discovered discrepancies Gunawan, a “friend” whom he described
between the shipping documents and the as “a smuggler”. He said the reason he
timber inside the container, indicating buys from Gunawan is because “he has
that the wood did not conform to the that channel to get through customs”.
description of bridge components. At Ng’s warehouse EIA/Telapak observed
some of the flitches sent by Gunawan.
EIA/Telapak investigations reveal the
merbau timber was never intended for For five years Gunawan has been
use in bridge construction. In May 2009 successfully smuggling merbau flitches
EIA/Telapak undercover investigators out of Surabaya to China, using a variety
© Telapak/eIa, May 2010

met with Zheng Jianyang, the manager of deceptions. Even when one of his
of a company called Xiamen Sanstar shipments is seized it ends up being
Trading, at his office in Xiamen city, released, testament to his influential
Fujian, China. Shipping documents show allies and explaining why he has yet to
that Xiamen Sanstar Trading was the be prosecuted.

10
MERBAU MARkETS

© eIa/Telapak
The international market for merbau has Previously in 2005 the bulk of merbau
changed in recent years due to factors flooring made in China was exported to
such as the economic recession, Europe and the US. By 2009 merbau
consumer trends, China taxation laws, flooring was sold mainly to the domestic
Indonesian wood export regulations market, due to the growing affluence of
and the availability of timber supplies. Chinese consumers and the economic
Despite these changes, EIA/Telapak recession in Europe and US. It is also a
investigations in 2009 and 2010 reveal consequence of the 10 per cent export
that in key markets such as China, tax on solid wood flooring exports
India, the US and Europe, the trade still introduced in 2006.
flourishes. Both the US and EU have
policies prohibiting imports of illegally Although flooring materials observed at
logged timber; the amended US Lacey factories EIA/Telapak visited in 2009
Act came into force in 2008, while the generally adhered to Indonesian export

© eIa/Telapak
EU timber regulation will be effective requirements, there were companies
from 2012. China continues to import which clearly sourced illegal materials.
large amounts of stolen timber. One such company was Cheerson
Flooring in Nanxun. The firm’s export
manager stated that it regularly imports TOp:
ChinA rough sawn air-dried merbau and Indonesian merbau flitches such
kempas directly from Indonesia. At its as these in Furen Timber Market,
In May and June 2009, EIA/Telapak warehouse, EIA was shown stacks of Shanghai, in May 2009, are a
investigators visited Furen timber market rough sawn timber waiting to be common sight, and evidence of
in Shanghai, China’s main timber trading processed. Such exports are illegal continued smuggling from Indonesia.
centre. Even though there was a decline under Indonesian law.
in the overall availability of Indonesian ABOVE:
timber (due to rising raw material During a visit to Haoweifu Wood, a
Furen Market, near Shanghai,
prices, diminishing supplies and factory producing mainly merbau and
improved enforcement in Indonesia), kempas flooring, the owner revealed to china’s biggest timber market.
merbau remained the key Indonesian EIA/Telapak investigators that he
species traded at the market. sources merbau through a Chinese
agent in Papua, who in turns buys it
EIA/Telapak observed a stream of from “illegitimate” sources. He said:
containers of Indonesian merbau being “They chop it down and sell it to
unloaded at the warehouses. The majority Chinese people. Then they’ll find a
seen was part-processed flooring way to get it to China. Once it reaches
materials, which can be legally exported China, then it becomes legal. Everything
under Indonesian law, but there were before that is all illegal”. He also
also substantial amounts of merbau revealed that the timber legality
sawn timber and flitches, smuggled out documents he obtains “are bought with
of Indonesia. One trader estimated more money from corrupt Indonesian
than 80 per cent of Indonesian merbau government officials”. He stressed that
arriving at Furen is in the form of sawn having the right contacts is crucial to
timber and flitches, and less than 20 per securing the timber and documents.
cent is flooring blanks. Most of these
materials are supplied to factories As well as flooring, a big market exists
around Shanghai and Nanxun, the main in China for merbau sawn timber and
centre for flooring manufacture located flitches. It is used mainly for doors,
in neighbouring Zhejiang province. jambs, window frames, stairs and

11
furniture components. The majority of Part of the consignment of 23 containers
the products are sold domestically. of merbau logs seized in 2009 was
Most of the Indonesian sawn timber and intended for Kolkata-based Sri Balaji
flitches observed at Furen market were Logs Products. Anecdotal information
in violation of Indonesian export laws. from other traders suggests that India
only sources raw materials in the form
When EIA/Telapak investigators visited of logs and flitches, but not semi-finished
Senao Timber, large merbau flitches or finished products.
were openly on display. The owner said
he buys from a Singapore-based trader
but acknowledged that the timber is EUROpE AnD ThE US
sawn and containerised in Surabaya,
Indonesia, before being exported to The EU and US have traditionally been
China. Shanghai Fenghua Wood is major buyers of merbau products,
another company importing Indonesian
sawn timber and flitches, including particularly for flooring and decking,
merbau and kempas. The manager said produced in Indonesia and China. Since
he sources merbau from a supplier in the economic recession hit in 2007
East Malaysia. He said that the timber factories have seen sharp declines in
“is of Indonesia origin… but because exports to these markets.
Indonesia can’t export flitches, it goes
from Indonesia to Malaysia… the logs In 2009, EIA/Telapak met with a major
are sawn in Malaysia, after which they Singapore-based merbau supplier who
are exported to China”. has a factory in Surabaya producing
merbau and bengkirai decking products.
Privately owned wood processing and The trader said that exports to European
trading companies are not the only ones countries such as Belgium, Netherlands
importing illegal merbau from Indonesia and Germany have fallen by about 70
– one of the intended recipients of per cent due to the recession.
the merbau logs seized in Jakarta in
October 2009 was the Chinese Similar situation have been observed in
state-owned conglomerate Jiangsu China where factories have seen reduced
Skyrun International Group. orders from Europe and the US. Many
companies have consequently either
diverted their attention to domestic
inDiA sales or abandoned merbau as a raw
material altogether.
Another growing market for Indonesian
merbau is India. In 2006, EIA met with
Prince Elavarasan of Singapore-based Yet despite the economic downturn
SPB Cons Marine Import-Export who some Chinese manufacturers continue
exports large volumes of Indonesian to export merbau flooring made from
BElOw lEFT:
merbau and bengkirai flitches and logs Indonesian timber to retailers and
Workers at cheerson Flooring,
to India. He revealed that merbau logs distributors in Europe and the US.
nanxun, May 2010. Such firms include Shanghai Lingge
are systematically smuggled on barges
from Papua to Kuantan in Malaysia via Flooring, shipping to the US, and
BElOw RiGhT: Kalimantan. In India, merbau is used Haoweifu Wood, which produces about
Most illegal Indonesian flitches mainly to produce door and window 10,000 square metres of merbau
on sale in Furen are used to frames, whilst bangkirai is used for flooring per month and exports primarily
make stairs and doors. truck flooring. to the US and France. © eIa/Telapak
© eIa/Telapak

12
RECOMMEnDATiOnS
The Indonesian government has made ThE GOVERnMEnT OF inDOnESiA ShOUlD:
significant progress in tackling illegal
logging since 2005. But while the huge l List merbau on Appendix III of the
quantities of illegal timber flowing out Convention on International Trade in
of the country during the first half of Endangered Species (CITES) with a
the decade has declined, effective law sustainable quota for trade
enforcement against those responsible
– the financiers, company bosses and
corrupt officials – has been woefully l Launch formal investigations into the
inadequate. It is no wonder the illegal activities of Ricky Gunawan
Indonesian President has ordered the and Hengky Gosal
country’s judicial mafia eradication
taskforce to scrutinise illegal logging l Clarify the legal status and
cases. The taskforce should certainly implementation of Papua’s log
focus its attention on two merbau transport controls
smugglers named in this report
– Ricky Gunawan and Hengky Gosal. l Ensure that the SVLK is fully
implemented, including penalties
The illegal logging and trade of merbau for verification bodies which fail to
in Indonesia is symptomatic of wider perform effectively
governance and enforcement failures in
the forest sector as a whole. From the
chaotic way in which Papua’s precious l Ensure that the SVLK system requires
forests are managed to the failure of full timber traceability back to a legal
agencies such as government-owned forest source
inspection agency Sucofindo and official
timber agency BRIK to prevent l Review Sucofindo’s position as
violations of the log and sawn timber the only official wood export
ban, the need for more effective control inspection agency
systems is clear if the battle against
illegal logging is to progress. l Review the effectiveness of
Fortunately an opportunity to make the Presidential Instruction 4 of 2005 in
system fit for purpose is available in light of evidence that enforcement
the form of the new Sistem Verifikasi agencies are still failing to collaborate
Legalitas Kayu (SVLK). This Ministry
of Forestry regulation has the potential effectively against illegal logging
– if fully implemented – to bring proper
transparency and regulation to the l Empower a task force (satgas)
country’s notoriously opaque and corrupt reporting directly to the President on
forestry sector. actions against illegal logging

REFEREnCES
1. eIa/Telapak, The last Frontier, 2005 15. Telapak, Bencana dan harapan, March 2010
2. eIa/Telapak, The Thousand-headed Snake, 2007 16. Suara Pembaruan, Stop log exports from
3. human rights Watch, Wild Money, 2009 Mamberamo, 16 november 2009
4. lawson et al, Illegal logging and related Trade, 17. Tabloid jubi, ribuan log Ilegal ditemukan di
chatham house 2010 Mamberamo, 8 june 2010
5. letter of Intent between norway and Indonesia, 18. Tempo, Pengiriman ribuan kubik kayu Ilegal dari
cooperation on reducing Greenhouse Gas Papua ke jawa digagalkan, 21 june 2010
emissions from deforestation and Forest 19. Tempo, 9 june 2010
degradation, May 2010 20. Peraturan Bersama Gubernor Propinsi Papua dan
6. Indonesia corruption Watch, corruption within Gubernor Propinsi Papua Barat, 18 September 2007
illegal logging eradication, 2009 21. www.bpphp17.web.id/database
7. antara, President calls for continued Fight 22. www.dephut.go.id/files/datarelease_bpk08_0.pdf
against Illegal logging, 5 april 2010 23. Ministry of Trade decree number 20
8. antara, President: Mafia Behind Illegal logging M-daG/Per/5/2008
cases, 7 april 2010 24. agro Indonesia, laporan Surveyor sang Penentu,
9. republic of Indonesia Presidential Instruction 27 october 2009
no. 4 2005 25. Tempo, kasus Penyelundupan kayu 23 kontainer
10. eIa/Telapak, Up for Grabs, 2009 Mulai disidangkan, 8 February 2010
11. jakarta Globe, SBy calls for developed 26. Berita kota Makassar, jual 23 kontainer kayu,
countries to help Indonesia in Battle against divonis dua Tahun, 25 june
Global Warming 27. Tanjung Perak customs office press release,
12. Suara Pembaruan, 25% of Papua’s Forests 11 june 2010
Felled, 29 april 2010 28. Surabaya Post, 21 june 2010
13. eIa/Telapak, Up for Grabs, 2009 29. eIa/Telapak, a Backwards Step, 2009
© eIa/Telapak

14. kompas, Military Police Personnel Suspected 30. Surabaya Pagi, dua Pejabat Bea cukai Perak
Involved in Illegal logging, 18 March 2005 Berseberangan, 23 February 2010

13
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