From The Jakarta Post

Furniture industry expects rickety growth this year
The Jakarta Post, Jakarta

In contrast to rising demand on the world market, Indonesian furniture exports will be stagnant this year due to falling competitiveness, an association has predicted.

Indonesian Furniture Industry and Handicrafts Association (Asmindo) executive director Sae Tanangga Karim said that most furniture exporters here were still feeling the pinch from last year's fuel prices hikes and higher minimum wages.

"We will be lucky to be able to match the value of last year's exports," he said last week.

Exports of furniture rose slightly to US$1.6 billion in 2005 from $1.55 billion in 2004. Exports of wooden furniture accounted for about 65 percent of total furniture exports in 2005.

The Ministry of Industry expects the subsector to grow by 3.5 percent this year after growing steadily by 4 percent in each of the last five years.

While demand is on the rise, Indonesia only controls 2 percent of the global furniture market, estimated to be worth $66 billion last year. Demand is expected to grow by between 5 and 7 percent this year.

China and Italy are currently the leading global market suppliers with combined exports of $9.3 billion.

Even in Southeast Asia, Indonesia trails behind neighboring countries Malaysia and Vietnam, Tanangga said.

"Rising operating costs have eroded our competitiveness as compared to other producer countries," he explained.

The last fuel price hikes, which averaged 126 percent, pushed operating costs up 25 percent, with a proposed increase in industrial electricity prices likely to increase costs by another 20 percent, he explained.

"Not to mention the wage demands from workers," Tanangga added.

Combined, the rising costs were pushing up end-product prices, and meant that Indonesia was at risk of losing further global market share.

"... we can only raise prices by 6 percent at the most," Tanangga said.

In 2005 alone, he added, 64 of the 2,016 firms grouped together in Asmindo had closed up shop.

On the domestic front, furniture manufacturers were increasingly losing out to Chinese goods. According to Asmindo figures, total furniture imports increased by 78 percent last year.

Besides increasing costs, the industry had also been badly hit by the lack of timber following the government's decision to lower the logging quota for natural forests from 5.7 million cubic meters in 2004 to 5.4 million cubic meters in 2005.

"We hope that this year we will benefit from a bigger supply as the Ministry of Forestry is proposing an increase in the quota," Tanangga added.

Minister of Forestry Malam Sambat Kaban said last year that he planned to raise the natural forest logging quota to 8.1 million cubic meters this year. The plan has yet to be approved by the House of Representatives, and has come under fire from environmentalists.

Indonesian furniture
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