Plywood export monopoly<\/p>\n
The fall in both the volume and value of Indonesian plywood
\nexports last year should cause grave concern because that wood
\nproduct alone contributes more than 14 percent of the country's
\ntotal export earnings. Final export figures for the whole year
\nhave yet to be announced by the Central Bureau of Statistics but
\nfor the first nine months of last year the exports were nine
\npercent smaller than those in the corresponding period of 1993.<\/p>\n
We would like to accept the analysis of the Indonesian Wood
\nPanel Association -- the plywood export monopoly -- which blamed
\nthe export fall on the economic recession in major importing
\ncountries, such as Japan and South Korea.<\/p>\n
However, the explanations ventured on the basis of anonymity
\nby major plywood companies and the representatives of importers
\nlead us to a worrisome conclusion: The export fall might not be a
\ntemporary down cycle caused by economic recession.<\/p>\n
Blaming the plywood export decline -- the first over the past
\n10 years -- largely on the economic recession in major importing
\ncountries seems to be too simplistic an inference. For example,
\nJapan's economy last year was not worse, but was instead better
\nthan that in 1993, even though its recovery was still very weak.
\nAnd South Korea's economy posted a respectable growth rate. In
\nfact, the average growth rate in the industrialized countries
\nlast year was estimated to have doubled the 1.3 percent expansion
\nof 1993.<\/p>\n
For sure, the decline in exports to South Korea from 1.2
\nmillion cubic meters in 1993 to about 700,000 cubic meters last
\nyear was not caused by economic recession, but by what Korean
\nimporters see as the Indonesian Wood Panel Association's arrogant
\nmarketing policies. Many importers in Korea have turned to
\nMalaysia because they have been upset by the association's heavy-
\nhanded marketing practices since early 1993. The association
\nrequires all buyers to file orders through an association-
\nappointed sole importer in Seoul. The sole importer itself is
\nmerely the extended marketing arm of Indo Kor Co. Ltd., a
\nsubsidiary of the association in charge of handling exports to
\nKorea.<\/p>\n
In fact, many plywood companies and importers predicted a few
\nyears ago -- when the association began appointing a sole
\nimporting agency in each of the major importing countries or
\nregions -- that Indonesian exports would sooner or later be
\nchallenged by suppliers with a more efficient exporting
\nmechanism. It is regrettable, though, that none of them was
\nwilling to speak openly for fear of upsetting the politically-
\nwell connected Chairman of the Indonesian Wood Panel Association,
\nMohammad (Bob) Hasan.<\/p>\n
Indeed, the system of sole importing agency not only increased
\nthe export chain and consequently the exporting costs, but also
\ncompletely barred direct contacts between Indonesian plywood
\nproducers and importers overseas. The system thus forced plywood
\ncompanies to abandon their marketing effort because all export
\nactivities are now handled by the association's trading arms.<\/p>\n
We should magnanimously acknowledge that the export
\ncoordination through joint marketing boards enforced by Bob Hasan
\nin the second half of the 1980s succeeded in gaining market
\ndominance for Indonesia in major importing countries. The market
\ndiscipline also prevented a price war among exporters. But the
\nassociation aroused the anger of many importers when he replaced
\nthe joint marketing boards with the monopoly system through sole
\nexport windows and sole importing agencies for each of the major
\nimporting countries or regions.<\/p>\n
No wonder, importers began to turn their eyes to other
\npotential suppliers, such as Malaysia, Papua New Guinea and
\nBrazil, and began to substitute materials, such as medium-density
\nboard. Malaysia, for example, has expanded its plywood
\nmanufacturing capacity within less than three years from less
\nthan one million cubic meters to almost five million cubic meters
\nlast year. Importing from Malaysia is obviously cheaper and more
\nexpedient as buyers can deal directly with producers, thereby
\nenabling them to better communicate technical specifications and
\nsettle any claims speedily. In so far as Indonesia is concerned,
\nimporters are always kept in the dark as to which producers will
\nfulfill their orders. As claims have to go through several
\nchains, their settlement also is much more arduous.<\/p>\n
We think, therefore, that the government, notably the trade
\nministry, should look deeper into the causes of the export
\ndecline last year and thoroughly analyze the pluses and minuses
\nof the association's monopoly system. We are afraid that if the
\npresent monopoly system is maintained, we will continue to lose
\nour market share as other suppliers steadily increase their
\ncapacity. Moreover, the present system has completely killed the
\nmarketing initiative of our industrial companies at a time when
\nmarketing skills are becoming increasingly crucial in the
\ninternational market.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/plywood-export-monopoly-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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