The Voluntary Partnership Agreement aims to ensure that by 2013 all the timber products exported to Europe from Indonesia are certified as having been logged sustainably.

"Not only is Indonesia the first Asian country to conclude VPA negotiations with the EU, it is also by far the largest timber exporter to enter into such an agreement," EU Trade Commissioner Karel de Gucht said.

Indonesian Forestry Minister Hasan Zulkifli said demand for cheap timber products from bargain-hunting consumers was one of the main reasons Indonesia struggled to control what is known locally as the "forest mafia".

"Illegal logging is stimulated by high demand for illegal timber and timber products. Therefore, efforts to combat illegal logging will not be effective if we only address the supply side, ignoring the demand side," he said.

Illegally harvested wood until recently represented about 50 percent of timber exported from Indonesia and 20 percent of timber products imported into the EU, according to an official statement announcing the agreement.

"In less than 50 years, Indonesia has gone from being 82 percent forest to only 49 percent today, a trend that has led to social problems, environmental degradation and a loss of economic opportunities on a massive scale," it said.

"Between 1990 and 2005, Indonesia lost 28 million hectares (69 million acres) of forest, almost enough to cover the landmass of the Philippines," it said.

Scientists say that when forests are destroyed, particularly those growing in peat, vast amounts of carbon are released into the atmosphere, contributing to man-made climate change.

Indonesia is often cited as the third biggest emitter of greenhouse gases, thanks mainly to deforestation.

Indonesian President Susilo Bambang Yudhoyono has vowed to get tough with the "forest mafia" including corrupt forestry officials and military officers, but watchdogs such as Greenpeace say progress has been halting at best.

The EU imported $1.2 billion-worth of timber and paper from Indonesia in 2010, about 15 percent of the country's total exports in the forestry sector.

Brussels has already signed similar accords with Cameroon and Ghana, and others are being negotiated with countries including DR Congo, Malaysia and Vietnam.

In 2010 the EU introduced legislation obliging importers to ensure timber products were legally sourced.

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