Many small furniture firms go bankrupt

Abdul Khalik, The Jakarta Post, Jakarta

Many small to medium furniture firms have collapsed in the past few months because of tight competition with products from China and Vietnam, an inadequate supply of raw materials and high costs, an industry spokesman said.

"Dozens of furniture businesses in Jepara, Yogyakarta, Rembang, in Central Java have closed their business because they could not longer stand continued losses," the head of Indonesia's Furniture Industry and Handicraft Association, M. Djalal Kamal, said on Sunday at a furniture exhibition here.

Most of country's furniture producers were small and medium scale firms, he said.

While he couldn't supply exact figures of the closures, reports from the regions confirmed their number was increasing, he said.

The main problem came from the influx of furniture products from foreign countries using illegally cut timber smuggled from Indonesia. Such furniture, which was cheaper than Indonesian products, was being sold in Indonesia as well as internationally.

"We are convinced that China and Vietnam are using illegally cut timber from Indonesia. That is why they can sell furniture at cheaper prices than ours," Djalal said.

Timber costs made up between 50 percent to 60 percent of the total cost of furniture production, he said.

Yos S. Thoesabrata, of furniture maker Thesa Group, said the influx of Chinese products into the local market had put local furniture makers in a grave situation. Almost 85 percent of the country's buyers were in the middle-to-lower income bracket, the main target market of China's furniture, he said.

Local industry could not compete with foreign producers in terms of costs. High loading, electricity and communications costs are other factors that inflate the price of Indonesian furniture.

"The government of China or Vietnam support their industries by cutting infrastructure costs. Here, the government has increased the costs. This creates unfair competition," Djalal said.

Another problem was the government's policy setting quotas on logging, which aimed to curb the pace of deforestation.

"The policy simply creates raw material shortage in the industry. Many of us are wondering if we can get raw material to make furniture a week from now," Djalal said.

Despite the problems, furniture exports last year increased to US$1.6 billion from US$1.47 billion in 2002.