Rattan deregulation will benefits farmers, consumers

By Sylvia Gratia M. Nirang

JAKARTA (JP): After a decade of government trade policy restricting rattan exports, Indonesia's rattan industry will now enjoy freer trade which should bring benefits, especially to farmers and foreign consumers.

Some experts have noted, however, that the government and rattan farmers need to make further efforts to boost domestic production, largely diminished by the restrictive decade-long trade policies, to meet international demand.

They have said the government must provide incentives to farmers to work their rattan fields or forests, many of which have been abandoned due to worsening domestic prices of raw rattan.

Hans-Dieter Haury, marketing and processing advisor at the German-funded Sustainable Forest Management Project (SFMP), said rattan producers face many challenges in boosting rattan production.

Haury told The Jakarta Post recently that the export ban on raw and semi-finished rattan, introduced in 1986 and 1988, did not immediately stimulate the development of the domestic rattan industry.

He argued that the ban resulted only in the oversupply of rattan in the domestic market, leading to the fall of raw rattan prices.

The depressed prices slowly drove rattan farmers and gatherers out of business, and consequently vast areas of cultivated rattan were abandoned.

He added that lower rattan prices had resulted in decreasing rattan forests as much of the land was converted into industrial timber estates and palm oil plantations.

"This situation discouraged rattan gatherers and farmers from growing rattan," Haury said.

The ban also resulted in rampant smuggling of raw rattan to Singapore, Malaysia and the Philippines.

He noted that Singapore, which does not have rattan resources, exported semi-finished rattan worth $21 million last year. The country claimed that 90 percent of the raw material for its products was imported from Indonesia.

Haury said the export restrictions had also caused a crisis in the rattan-processing industry in Java because most producers of semi-processed rattan in Kalimantan and Sulawesi had been edged out of the market.

Former minister of forestry Djamaludin Suryohadikusumo said that the overseas market for raw and processed rattan was not as promising as several years ago.

He said many rattan furniture companies in Japan, South Korea and Taiwan had closed down after Indonesia, the main supplier of raw rattan in the world, banned the export on raw and semi- finished rattan in the mid-1980s.

"The sharp drop in rattan prices forced most rattan gatherers to stop collecting rattan in the forests and work in the illegal timber trade instead," Djamaludin said.

He said that before the government ban, the price of sega and irit, two major species of small-diameter rattan, was Rp 900 per kilogram and Rp 2,000 for thick rattan. Currently, sega sells for Rp 200 per kilogram, a price that cannot meet farmers' operational costs.

The 1996 World Bank report on Indonesia states that most traditional rattan-processing industries in Kalimantan and Sulawesi, which processed mainly semi-finished rattan, went bankrupt. The number of rattan processors in Sulawesi fell nearly 50 percent in the 10 years following the ban.

The Memorandum on Economic and Financial Policies, the economic reforms agreed to with the International Monetary Fund, states that the government will gradually reduce export taxes on rattan to 30 percent by April 22, 20 percent by the end of December, 15 percent by end of December, 1999 and 10 percent by end of December, 2000.

Previously, the government imposed export taxes of US$15 per kilogram for raw rattan and $10 per kilogram for semi-finished rattan. The high export taxes effectively restricted the export of raw and semi-finished rattan in order to promote the development of the country's furniture industry.

In addition to the reduction of the export tax, the deregulation also includes the removal of the export marketing system and quotas for rattan carpets, or lampit, and the removal of formal and informal levies on rattan bound for export.

Director General of Forest Utilization Titus Sarijanto said rattan producers and gatherers should benefit from the current deregulation.

"It is time for rattan farmers to increase their welfare by increasing their production, improving the quality of their products and working their rattan resources in a sustainable manner," he said.

Titus said Indonesia could actually produce up to 696,900 tons of raw rattan annually.

Due to their falling domestic prices, the amount of rattan being processed declined over the past 10 years. The country produced an average of 375,000 tons of raw rattan per year from 1993 to 1998, a sharp drop from an annual average of 511,000 tons between 1988 and 1993.

Various fees and export restrictions also cut rattan exports from year to year. Indonesian rattan export values dropped to $674 million in 1996 from $736 million in 1995, while the export volume in 1996 decreased to 173,658 tons from 207,337 tons in 1995.

Haury said the better prospects for Indonesia's rattan exports, due to the deregulations, was clouded by the country's economic crisis which had resulted in a scarcity of export containers.

The monetary turmoil, he said, had also resulted in a sluggish domestic market for rattan because the property sector, the main user of rattan furniture products, had been severely hit.

Haury also noted that exports would also be dampened by high production costs, caused by high labor costs, low productivity and inefficient processing.

Most rattan companies use outdated technology to dry and process rattan, he said. "This makes production very costly," he said.

Christian Gnner, a SFMP research fellow, said the current forest fires ravaging East Kalimantan had caused great losses for the province's rattan farmers.

"Rattan lands must be protected from land conversion and forest fires wherever possible due to their important role as a source of income for local people," he said.

To boost rattan production, the Ministry of Forestry and Plantations is considering waiving taxes on small-diameter rattan -- mostly cultivated in rattan gardens by local people -- to boost farmer income and encourage them to plant rattan.

Gnner said the government still has to regulate the export of large-diameter rattan, mostly collected from natural forests, because low export taxes could lead to overexploitation.