Rattan industry losing competition to China: Rattan entrepreneur

Nana Rukmana, The Jakarta Post, Cirebon

A major player in the rattan industry has repeated concerns that local businesses are losing the competition with China, as seen in declining export figures for rattan furniture over the last several years.

"Buyers from Europe, Japan and the United States prefer China's rattan products because they are sold at cheaper prices, despite the superior quality of Indonesia's products," said Sumartja, the chairman of the Indonesian Furniture and Handicraft Association (Asmindo).

The difference in price between rattan products from China and Indonesia, said Sumartja, is striking, reaching as high as 60 percent. "Rattan products from China are a lot cheaper because its rattan industry is regulated by the government and is also cost efficient, exempt from illegal fees, unlike what is happening with the rattan industry here," said Sumartja.

Apart from China, Sumartja said that Vietnam and the Philippines had also begun to emerge as threats to Indonesia's rattan industry.

China accounts for almost 60 percent of rattan craft exports to Europe, the U.S. and Japan, while Indonesia has less than 30 percent of the market. "If there is no goodwill on the part of the government, Vietnam and the Philippines could catch us," added Sumartja.

Rattan handicraft export volumes from Indonesia's rattan handicraft center in Tegalwangi, Cirebon regency, is at its lowest points. Export volume in October, 2005, was 600 containers.

"The figure is a sharp decline from the figure in September, 2005, which reached 700 containers. During the golden years of the 1990s, Indonesia's rattan craft exports reached 2,000 containers a month," said Sumartja.

The main reason Indonesia is losing out to China, added Sumartja, is Indonesian trade ministry Decree No. 12/2005, which authorizes exports of unprocessed rattan.

According to Sumartja, this decree benefited rattan industries abroad like in China and Vietnam, which were able to meet demand for raw materials by importing unprocessed rattan from Indonesia.

"The government's policy is like providing the enemy with the ammunition to kill us," said Sumartja.

Indonesia's high-cost economy has also added to the local rattan industry's woes. "Rattan craft producers must now pay 17 kinds of fees imposed by regency and provincial administrations, as well as the central government," said Sumartja.

Also, the increase in fuel prices on Oct. 1 dealt a big blow to the industry. "It has increased production costs by up to 20 percent," said Sumartja.

Given the situation, Sumartja said the national rattan industry would likely go under.

"Of the 127 medium and large companies that used to operate, only about 30 are still in business. More than 90 companies have closed down. Mass firings are imminent because the companies can no longer produce goods," said Sumartja.

Smaller producers have fared even worse. According to Sumartja, the 1,100 small-scale producers can no longer operate because they are totally dependent on larger companies to obtain production orders.

"If the big companies collapse, the small ones will follow and rattan workers will lose their jobs. Each large company employs 500 to 1,500 workers, while a small company usually employs between 25 and 100 workers," he said.

According to Sumartja, about 40,000 rattan workers have already lost their jobs.

Sumartja has urged the government to revoke trade ministry Decree No. 12/2005 to help revive the local rattan industry.