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Untangling the Regulatory Environment: Why do wood processing businesses in Indonesia fail to be competitive in the global market?

Wibowo, Lukas and Hayati, Nur and Bisjoe, Achmad and Kurniasari, Dewi and Wahyudiyati, Kristiana and Race, Digby (2022) Untangling the Regulatory Environment: Why do wood processing businesses in Indonesia fail to be competitive in the global market? Small-scale Forestry, 21 (3). pp. 1-29. ISSN 1873-7617

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Smallholder tree planting has long been practiced by rural people throughout the tropics. However, the competitiveness of Indonesian wood products has decreased in the global market. Indonesia’s wooden furniture for instance, was assessed to have declined in competitiveness during 2006 to 2015. In addition, the World Economic Forum in its latest annual Global Competitiveness Index report (2019) lowered Indonesia’s position from 45th position to 50th in the product market. Although the small- and medium-scale wood processing businesses have begun to focus on commercial forest management goals, the way in which the competitiveness of their timber products is affected by forestry regulations remains a debate with significant policy implications. New regulations have been designed and implemented to solve various problems associated with smallholder-managed forests, such as specific administration of smallholder forest products, regulation of access to forests for people living near forests, and attempts to bridge the gap in forest management expertise between forestry companies and rural communities. However, rather than producing positive results for those concerned, new regulations appear to have become an additional constraint. This study aimed to map how regulations have influenced small-scale tree planting and wood processing industries in Indonesia, both directly and indirectly. It also examines the extent to which these regulations can be reformed to become an efficient and effective legal instrument in governing small-scale tree planting and wood processing industries. In addition, this study explored two less examined issues, namely: (1) Have the regulations become too complex and constraining? and (2) How does Indonesia create an ‘enabling’ regulatory environment? The study found that excessive regulation of commercial timber production reduces the interest by smallholders in tree growing. In addition, complicated regulations tend to increase the transaction costs incurred by those involved in commercial timber production.

Item Type: Journal Article
Uncontrolled Keywords: incentives, permits, small-scale wood processing industries, transaction costs
Subjects: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HF Commerce
Divisions: School of Business and Management (SBM)
Depositing User: Digby Race
Date Deposited: 18 Aug 2022 21:41
Last Modified: 18 Aug 2022 21:43

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