Govt help needed to up furniture exports

Leony Aurora, The Jakarta Post , Jakarta

Indonesia may increase its furniture exports by between 10 percent and 15 percent this year, providing the government curbs log smuggling and promotes supporting policies, say furniture associations.

Executive director of the Indonesian Furniture and Handicraft Industries Association (Asmindo) Tanangga Karim is optimistic that this target can be achieved because the U.S. furniture market has regained its vitality after a slow down during the Iraq war last year.

Exports to the U.S. accounted for 31 percent of the country's total furniture exports, which in 2003 was estimated to have increased by 6 percent to US$1.56 billion from $1.47 billion in 2002, he said.

"Although there is an increase, the condition in the field itself is not good," he told The Jakarta Post over the phone on Saturday.

The country's furniture industry is losing its competitive edge due to the increasing price of timber and its scarcity, a result of measures launched by the Ministry of Forestry to protect the local tropical rain forests.

For example, the legal production of teak trees, a popular timber for furniture, reached only 400,000 cubic meters in 2003, while the industry needed around two million cubic meters, according to Asmindo, which has 1,845 member companies.

"Now we import teak from Myanmar to cover the shortage," said Tanangga.

To make matters worse, the government has failed to curb illegal logging and smuggling activities.

Tanangga said that furniture makers from other countries such as Malaysia and Vietnam were able to take advantage of the cheaper smuggled logs from Indonesia, allowing them to become more competitive in the export market.

Illegal logs are cheaper because they are tax free. The World Bank said last year that the government lost some $670 million in tax revenue per year due to illegal logging.

Tanangga described the situation as "critical," urging the government to increase the timber production limit, and distribute the logs directly to the furniture industry.

The logs are usually sold by state-owned forestry enterprise Perhutani through an auction, which is always somehow won by timber traders, he said. "The traders will then sell the logs at double the initial price," he added.

Rampant smuggling and the shortage of timber are not the only problems, said Yos Theosabrata, chairman of the Indonesian Furniture Club, which groups furniture makers from the Greater Jakarta area.

He said that an unfavorable government labor policy, which stipulates that workers should receive severance pay when they are fired, no matter what the reason, had burdened furniture businessmen.

He also claimed that although published data showed an increase in exports last year, some 30 percent of the association's members suffered a declining in export volume.

"The productivity of workers has also dropped significantly," he said.