Furniture exporters face another bad year

Rendi A. Witular, The Jakarta Post, Jakarta

It is estimated that Indonesia's furniture exports this year will plunge to US$1.04 billion from $1.8 billion last year.

The chairman of the Indonesian Furniture Club, Yos S. Theosabrata, told The Jakarta Post on Thursday the prospects for 2003 were even gloomier, with export value projected to decline to below $1 billion.

He said that, ironically, the falling exports were occurring at a time when overseas demand for furniture was quite strong.

Yos said local furniture makers were unable to take advantage of the growing export opportunities because their products were becoming less competitive, mainly due to excessive levies imposed by provincial governments and rising labor wages.

He added that the smuggling of illegally cut logs from Indonesia to China also harmed exports, with furniture makers in China benefiting from the cheap illegal logs and undercutting the competitiveness of Indonesian furniture.

For example, he said, Meranti timber, which is the most popular raw material for furniture makers and grows only in Indonesia, is cheaper in China than it is in Indonesia.

The availability of cheap timber has helped China take over much of Indonesia's overseas markets.

The main export markets for Indonesian furniture are the U.S., Europe and Japan. These destinations account for at least 80 percent of the country's furniture exports.

"Many buyers have postponed placing orders for Indonesian furniture because China offers cheaper prices with the same quality wood," Yos said.

He also said that over the last two years, the local furniture industry had been burdened with various fees imposed by provincial administrations recently empowered to manage their own economic affairs.

The fees vary from province to province, but Yos said the highest fees could account for some 50 percent of total production costs.

The association is also critical of the recent increase in provincial minimum wages, which it says harm the profitability of the furniture industry.

Yos fears that if the government continues to increase the minimum wages amid an unfavorable business climate, the industry will collapse costing thousands of people their jobs.

Illegal levies during shipment is another obstacle that increases costs for the industry, he said. The association, which groups furniture makers, traders and bankers, has long complained about this problem.

Furniture makers, particularly those that ship their goods through Tanjung Priok port in Jakarta, are forced to pay illegal levies to corrupt public servants and hoodlums. These levies can account for up to 10 percent of the production costs.