Indonesia’s Historical Framework for the Extension of IUPHHK Licences

The extension of a Timber Forest Product Utilization Business Licence (Izin Usaha Pemanfaatan Hasil Hutan Kayu or “IUPHHK”) was historically governed by Minister of Forestry Decree No. 6885/Kpts-II/2002 on Procedures and Requirements for the Extension of Timber Forest Product Utilization Business Licences (“Kepmenhut 6885/2002”).

Kepmenhut 6885/2002 was issued to implement the provisions governing the extension of IUPHHK under Government Regulation No. 34 of 2002 on Forest Planning, Forest Management Planning, Forest Utilization and Forest Area Use.

Although subsequent forestry regulations have developed the licensing framework further, Kepmenhut 6885/2002 is significant in understanding the original structure of IUPHHK extension requirements. The framework treated an extension not merely as an administrative renewal, but as a process through which the government assessed the permit holder’s financial, technical, administrative, social, and sustainable forest management performance.

1. Scope of the IUPHHK Extension Framework

Kepmenhut 6885/2002 established procedures and requirements for the extension of IUPHHK in both natural forests and plantation forests.

For natural forests, the IUPHHK covered activities including harvesting, planting, maintenance, protection, processing, and marketing of timber forest products. For plantation forests, the activities additionally included land preparation and seedling or nursery activities.

The regulation also recognised the concept of Sustainable Production Forest Management (Pengelolaan Hutan Produksi Lestari or “PHPL”), reflecting the principle that the continuation of a forest utilisation licence was linked to the sustainable management of the production forest.

The extension mechanism therefore involved more than the continuation of an existing business licence. The permit holder was required to demonstrate continued compliance with the requirements applicable to forest management and utilisation.

2. Who Could Apply for an Extension?

The extension could be applied for by the existing IUPHHK holder whose licence period was approaching its expiry.

The application was not automatic. The permit holder was required to actively submit an extension application and satisfy the applicable administrative and technical requirements.

Kepmenhut 6885/2002 placed the authority to decide on the extension with the Minister of Forestry. The Directorate General was responsible for reviewing the application and preparing the relevant recommendation for the Minister.

Although the licensing authority was positioned at the central government level, local government considerations remained relevant. Recommendations from the relevant Governor and Regent/Mayor formed part of the administrative requirements for the extension application.

3. The Two-Year Application Deadline

One of the important procedural requirements under Kepmenhut 6885/2002 was the timing of the application.

An application for an IUPHHK extension had to be submitted no later than two years before the expiry of the existing licence.

The application was submitted to the Minister of Forestry together with the required administrative and technical documents, with copies provided to the relevant central and regional government authorities.

The regulation expressly provided that an application submitted after the two-year deadline would be rejected.

This requirement made the extension process a matter that had to be addressed well before the existing licence expired. A permit holder could not simply wait until the end of the licence period and expect the extension process to operate as an automatic continuation.

4. Administrative and Technical Requirements

The extension application was subject to both administrative and technical requirements.

The administrative requirements included recommendations from the relevant regional governments, the company’s deed of establishment and amendments, evidence of settlement of forestry-related financial obligations, and a notarised statement concerning cooperation with local communities and/or local community cooperatives.

The applicant was also required to submit audited financial statements for the preceding five years, prepared with reference to the applicable forestry accounting requirements.

These requirements enabled the government to assess not only the legal status of the applicant but also its financial compliance and capacity to continue operating the forest utilisation business.

The technical requirements included maps of the proposed concession area, vegetation interpretation and topographical information, recent aerial imagery or satellite imagery, and an assessment of the applicant’s performance in utilising timber forest products since the IUPHHK was issued.

The applicant was also required to hold a sustainable forest utilisation certificate issued by the Minister.

Taken together, these requirements demonstrate that the extension process was designed to evaluate the permit holder’s actual performance rather than merely confirm the continued existence of its corporate entity.

5. Initial Review by the Directorate General

The first stage of the assessment was conducted by the relevant Directorate General.

The Directorate General reviewed whether the administrative and technical requirements had been fulfilled. Where the application was incomplete, the applicant was given 60 calendar days to complete the required documents.

If the requirements were satisfied, the Directorate General prepared a recommendation to the Minister for the next stage of assessment concerning sustainable production forest management performance.

Where the requirements were not satisfied, the Directorate General prepared the relevant draft decision for the Minister to reject the extension application.

This created a preliminary administrative and technical screening stage before the applicant proceeded to the substantive performance assessment.

6. Sustainable Forest Management Performance Assessment

The substantive assessment was conducted through a separate evaluation of the applicant’s sustainable forest management performance.

Under Kepmenhut 6885/2002, the performance assessment was conducted against established sustainable forest management criteria and indicators by an Independent Assessment Institution (Lembaga Penilai Independen or “LPI”) recognised by the Minister.

The LPI submitted its assessment to the Directorate General. The Directorate General then established an evaluation team to verify the assessment results.

The evaluation team consisted of representatives from the relevant forestry directorates and agencies, including the Secretariat General, the Directorate General responsible for production forestry, the Directorate General responsible for forest protection and conservation, the Directorate General responsible for land rehabilitation and social forestry, and the forestry planning authority.

The results of this verification were then submitted to the Directorate General as a recommendation for consideration by the Minister in determining whether the extension should be approved or rejected.

The structure therefore involved several layers of review: administrative and technical screening, independent performance assessment, government verification, and ultimately a decision by the Minister.

7. Extension Was Not Guaranteed by Initial Approval

An important feature of the framework was the distinction between principle approval and final approval.

The regulation provided that where an extension application had received principle approval and the applicant had paid the applicable forest utilisation licence fee, the payment could still be returned if the application was subsequently rejected following the sustainable forest management performance assessment.

This mechanism indicates that the initial approval did not itself guarantee the final extension of the IUPHHK.

The final outcome remained dependent on the results of the substantive performance assessment. At the same time, the regulation provided a mechanism for returning the relevant payment where the extension ultimately failed at that stage.

8. Relationship with Subsequent Forestry Regulations

Kepmenhut 6885/2002 expressly replaced the earlier Minister of Forestry and Plantation Decree No. 307/Kpts-II/1999 concerning the requirements and procedures for the renewal of HPH licences.

The framework was subsequently supplemented and developed through later forestry regulations, including regulations concerning the procedures and requirements for extending IUPHHK in natural production forests and later rules governing the granting, expansion, and extension of IUPHHK for natural forests, ecosystem restoration, and industrial plantation forests.

Accordingly, Kepmenhut 6885/2002 should be understood within the broader development of Indonesia’s forestry licensing framework.

Where later regulations specifically govern the same subject matter, the later and more specific regulatory framework becomes relevant to determining the applicable requirements. Kepmenhut 6885/2002 nevertheless provides an important reference for understanding the historical legal structure of IUPHHK extensions.

9. Key Considerations for IUPHHK Holders

The framework established under Kepmenhut 6885/2002 illustrates several principles that were central to the extension of forest utilisation licences.

First, an extension had to be initiated sufficiently early, with the application deadline set at two years before the expiry of the existing licence.

Second, the application required more than corporate and licensing documentation. Financial obligations, local-community cooperation, spatial information, operational performance, and sustainable forest management certification were all relevant.

Third, the extension process involved substantive performance assessment. Compliance with administrative requirements alone did not guarantee continuation of the licence.

Finally, the framework distinguished between the initial administrative approval process and the final outcome following sustainable forest management performance assessment.

Conclusion

Kepmenhut 6885/2002 established an early framework in which the extension of an IUPHHK was treated as a performance-based regulatory process rather than an automatic renewal.

The framework combined administrative and financial compliance with technical requirements and an assessment of sustainable forest management performance. It also established a multi-stage review involving the Directorate General, an independent assessment institution, an evaluation team, and ultimately the Minister of Forestry.

While Indonesia’s forestry licensing framework has subsequently evolved through later regulations, the structure established by Kepmenhut 6885/2002 remains relevant in understanding the historical basis of IUPHHK extension requirements and the principle that the continuation of forest utilisation rights is connected to the permit holder’s compliance and performance.

This alert is part of a series examining developments in Indonesia’s forestry, natural resources, and environmental regulatory framework. Please feel free to contact us should you wish to discuss these developments further.

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