Many small furniture firms go bankrupt

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.