Rattan deregulation will benefits farmers, consumers

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.