Indonesia furniture exports stagnant

Anissa S. Febrina, The Jakarta Post, Jakarta

The furniture industry saw its exports stay flat and production capacity decline in the first half of the year, with the trend set to continue into next year unless the government speeds up measures to address the high-cost economy, an association says.

The Indonesian Furniture Producers Association (Asmindo) has reported furniture exports in the first half of the year were valued at US$775 million, about half of total exports in 2004.

However, the Central Statistics Agency (BPS) put first-half exports at $900 million. It also reported that Indonesia exported $1.55 billion worth of furniture in 2004, slightly lower than the $1.6 billion booked in 2003.

"The facts from the field show there has been a decline in the production capacity since last month, when 46 producers stopped operating and 79 others temporarily halted operations," Asmindo executive director Sae Tanangga Karim said, adding that the situation affected between 4,000 and 6,000 workers.

Currently, there are 2,016 furniture producers under the association -- 90 percent of which are exporters -- with about two million workers nationwide.

While Asmindo did not give a reason for the differences in its export numbers and those of the BPS, Minister of Trade Mari E. Pangestu warned earlier that reports on export growth might need to be revised due to a shift in statistical and data collecting methods.

Asmindo also noted a decline in total on-the-spot transactions at the recent Export Commodity Expo, from $8.3 million last year to $6.5 million this year.

Taking into account the fuel price hike, Asmindo estimates that this year's total exports will stand at about $1.6 billion.

"We estimate the value will remain stagnant in 2006, even while global demand grows by 5 percent to 7 percent," Tanangga said.

Last year, global demand for furniture was valued at $66 billion, with China and Italy leading market suppliers with combined exports of $9.3 billion.

"We only had a 2 percent share of the market. Our ranking in the Southeast Asian market has also declined, and we were outclassed by Malaysia and Vietnam," Tanangga said.

With the fuel price hike, furniture producers have to deal with an increase of up to 25 percent in production costs, a situation that has led to four local companies employing at least 900 workers to consider relocating their businesses to Vietnam, Tanangga said.

"Vietnam offers a three-year tax holiday for any investors willing to invest at least $500,000 to set up a business in the country," he said.

Tanangga said similar measures could be taken in Indonesia, along with other policies to lower economic costs, such as reducing the terminal handling charges at ports.