Furniture industry gets creative for global market

The Jakarta Post, Jakarta

With the country's furniture and handicraft industry facing price competition, creativity has proved to be a strong selling point for products in penetrating the global market.

Home accessories and furniture exporter Warwick Purser said recently that his workshops in Java, Bali and Lombok had been able to send at least a container of goods per day to the United States, Europe, Japan and Australia.

"We try to focus on using unique materials from Indonesia such as bamboo, pandanus leaves and banana trunks, aside from wood," he said, adding that his Out Of Asia company had experienced a steady 40 percent growth in its yearly sales.

Purser's company outsources production of its home accessories and furniture to 80 local small businesses employing more than 4,000 craftsmen to meet overseas orders.

Aside from channeling local furniture abroad, Purser, an Australian, is also aiming to "convince more Indonesians to have more enthusiasm in buying local products and to be proud of them."

Purser sells only 5 percent of his products into the domestic market.

The Indonesian Furniture Industry and Handicraft Association (Asmindo) executive director Sae Tanangga Karim explained that the value of locally made furniture in the domestic market only reached around Rp 40 billion (US$4.3 million) last year.

Meanwhile, imports of furniture have been increasing. According to data from Asmindo, furniture imports increased by 78 percent last year.

Chairman of the Indonesian Furniture Club (IFC), an association of furniture exporters, Yos S. Theosabrata, said imported furniture was taking advantage of the country's growing market as overseas manufacturers could produce their goods much cheaper than Indonesian producers, who were also lacking in supplies of raw materials.

The Indonesian furniture industry relies on timber as its raw material, and although Indonesia is the world's second largest supplier of wood, the industry faces a shortage of this material.

The government kept reducing the annual logging quota, Tanangga said, saying that it lowered the quota from 5.7 million cubic meters last year to 5.4 million cubic meters this year.

"The furniture industry itself needs 4.5 million cubic meters every year," he said.

Illegal logging and timber smuggling influenced the policy and caused price rises for wood domestically. Local furniture manufacturers had to bear 15 percent to 20 percent rises in wood prices, as reported by Antara.

"Smugglers take Indonesian wood and sell it cheaply to similar industries abroad, while within the country the prices of those same raw materials becomes expensive," said Yos.

The surging price of wood has reportedly forced almost 400 furniture factories to close their workshops and 500 others to temporarily stop operations, leading to a significant number of job losses as each of the workshops employs an average of 100 laborers.

Aside from losing share in the domestic market last year, the furniture industry also experienced a decline in exports, primarily due to lack of raw materials.

Tanangga said furniture exports declined from $1.53 billion in 2003 to $1.35 billion last year. The sector had previously experienced steady annual growth of 4 percent for the last five years.

He said the decline was primarily due to a 9 percent decrease in exports of wood furniture alone. According to data from the Central Statistics Agency (BPS) and Asmindo, wood furniture topped the list of furniture exports in 2003.

Aside from urging the government to overcome illegal logging, the association also suggested that the government revise the labor law to balance the rights of employers and workers, and lower high economic costs.

However, manufacturers should also start figuring ways out of the problems themselves. Purser's success in finding alternative materials and producing unique Indonesian furniture was an example to furniture manufacturers to better market their products.

"Manufacturers must try to overcome this situation by trying to be creative in finding alternative raw materials and creating a certain uniqueness of their products to increase their added value in the global market," said Yos.

"Plain products (using only wood) are not competitive. We have to try to specialize and use the country's richness of materials and produce unique products that can be sold," said Purser. (003)

Indonesian Furniture Exports and Imports

Jan-Dec 2002 Jan-Dec 2003 Jan-May 2004

(in million U.S. dollars)

Exports 1,474.67 1,529.30 582.28

Imports 11.04 20.15 11.74

Source : Central Statistics Agency & Asmindo