Local furniture industry sees declining market share
Benget Simbolon Tnb., The Jakarta Post
Indonesia's furniture industry is losing its market share to imported products as it faces increasingly tougher competition on the international market due to the influx of products from other Asian countries, particularly China, which has now become the world's largest producer.
Sae Tanangga Karim, executive director of the Indonesian Furniture Industry and Handicraft Association (Asmindo) said that during the last five years imported furniture had jumped from only 10 percent to 20 percent.
Furniture imports, which were only US$6.9 million in 2001, increased to $11.04 million in 2002, to $20.16 million in 2003, to $36.8 million in 2004 and to $45.9 million in 2005.
"And the trend is likely to continue in the coming years," Tanangga told The Jakarta Post
On the other hand, furniture exports shrank from $1.6 billion in 2004 to $1.5 billion last year. Previously, it increased slightly from $1.39 billion in 2001 to $1.47 billion in 2002 and to $1.52 billion in 2003.
Meanwhile, furniture exports from other Asian countries, particularly China and Vietnam, are on the rise. Ten years ago China had no role in the industry, but has now become the largest furniture producer and exporter. Last year, its furniture exports reached a total of $10 billion.
Tanangga said if the government did not take any measures to empower the local furniture industry, which involves more than 3,500 companies (2016 of which are members of Asmindo) with over two million workers across the country, then it would lose more of its share in the local and international markets.
Tanangga said that the government should strictly enforce intellectual property rights, help the industry to diversify away from conventional raw materials and improve the laws, particularly on import and export procedures.
According to Tanangga, the poor enforcement of intellectual property rights, particularly the protection of industrial designs, had reduced the capacity of the local furniture industry to create new designs.
"Can you imagine a company that has already spent a lot of money to research and develop new designs, then other firms copy them at no costs, and without fear of being taken to court for violating property rights.
"I've never heard of a company being taken to court for violating property rights," he noted.
He said that such a situation had turned most of the furniture producers into "tailors", who only followed the designs ordered by buyers.
Only a handful of the association's members could dictate the market in terms of designs, he said.
Tanangga said that the industry was also facing a serious problem in terms of raw materials, which were mostly teak, mahogany and rattan.
The government's step to limit tree cutting from the natural forests from 22 million cubic meters to only 5.7 million cubic meter per year had significantly decreased the supply of raw materials.
Although timber can be procured from other sources other than the natural forests, the industry is still facing a big shortage of timber, causing prices to jump significantly.
On the import side, the government should improve its standardization system. "Currently, the government has only defined 20 standards to apply to the imported end-products," he said.
"If we are talking about the various kinds of furniture end-products and the need to protect our local consumers, it is not enough," he told the Post.
According to him, other Asian countries had applied more than 20 standards. "Malaysia, for example, applied 100 standards to its furniture imports," he said, adding that "The standards were not only necessary to create fair competition in the local market, but they will also protect our consumers."
He said that the furniture imports should be also be checked by customs officers. Imported furniture products could be subject to laboratory checking to guarantee their safety when used by consumers, he said.
He acknowledged that the step could be seen as a kind of barrier. "But it is a technical barrier not a tariff barrier that has been applied by other countries. The U.S., for example, slapped on an import tariff from 40 to more than 300 percent to furniture products imported from China," he said.
Such an exorbitant tariff was approved by the Senate after it received an anti-dumping petition from a group of U.S. businessmen, who decried the flooding of the market with Chinese furniture that was killing the U.S. furniture industry.
Tanangga cited bureaucratic problems in Indonesia that hindered the development of the industry.
"Just one case. Last month, one of our members shipped several containers of furniture for an exhibition abroad. But when they returned, the customs office applied a new regulation requiring all imported goods to have what they called an API (Import identification Number). But when we got all the necessary documents, the containers were still not released from Semarang port, causing costs to increase unnecessarily," he said, adding that the container storage fees at ports are applied progressively.
"We don't ask the government to protect the industry by imposing a high tariff. But at least the government can improve its bureaucracy with a view to strengthen the competitiveness of our furniture industry," he said.