Low rupiah no boon for furniture makers

Suherdjoko, The Jakarta Post/Jepara

The plunge of the rupiah against the U.S. dollar has not significantly affected the furniture industry in Jepara, Central Java.

This stands in marked contrast to surges in the dollar in 1998 and 2000, which provided huge windfall profits for the Jepara furniture industry.

"In the past few years, buyers have been purchasing furniture in rupiah so that the rise of the U.S. dollar will not have much effect on our earnings," said Afiatun, the owner of the Jati Makmur furniture company.

Instead of reaping higher profits from the rupiah's slide, the furniture manufacturers are likely to see lower profits this time around, said Afiatun. "The price of timber and transportation costs have increased over the past few years, thus reducing our profit margins," said Afiatun.

Furniture producers had planned to increase the price of their products on the back of raising production costs, but none of them dared to do so as they were now facing stiff competition from China and Vietnam, said Afiatun. The two countries had expanding furniture industries and were able to produce good furniture at low cost, she said.

Afiatun's firm normally ships between 10 and 12 containers of furniture each month to various overseas countries, with each container filled with furniture worth between US$18,000 and US$20,000. "The business is in the doldrums. This month we only sent two or three containers. We expect orders to increase in September, however," Afiatun explained.

Meanwhile, the chairman of the Indonesian Furniture Association's Jepara branch, Akhmad Fauzi, said that the plunge in the rupiah would likely lead to an increase in exports. "Overseas buyers will avail of the opportunity to buy more furniture. With the same U.S. dollar, they can buy more furniture. However, the windfall profits will be fleeting," said Fauzi.

The furniture industry is big business in Jepara and employs most of labor force in the regency, which has a population of about 900,000.

The industry exported some US$140 million worth of furniture to various destinations last year. However, Akhmad complained that the business had been slow over the past two years. "Between 1998 and 2000, we dispatched some 1,200 containers a month. Currently, we are only sending between 400 and 500 containers abroad each month," said Fauzi.