Dan apakah mereka tidak memperhatikan bumi, berapakah banyaknya Kami tumbuhkan di bumi itu pelbagai macam tumbuh-tumbuhan yang baik?
(Asy Syu'araa' :7)

Rabu, 04 September 2013

Indonesian Wood Furniture on Intensive Margin: Levels, Growth, and Share

For a country with extensive forestry resources, furniture and wood products have always represented an important craft and manufacturing sector, responsible for large scale employment in many parts of the country. While only 125,000 workers are employed in formal sector firms with greater than 20 staff (half on which are exporters), it is estimated by ASMINDO (Indonesia Furniture Industry and Handicraft Association) that 80% of firms in the sector are micro and small firms, including many individual contractors in the many furniture clusters around Jepara and elsewhere in Central and Eastern Java. Jepara alone is said to be home to some 4,000 firms organized through an extensive network of subcontracting. 

In 1998, furniture was Indonesia’s sixth most important manufacturing export sector, accounting for some 4.6% of manufacturing exports. Despite growing at just below 6% annually over that period (in US$ terms), it has declined significantly in its importance within the manufacturing export basket, now placing only 11th. As shown in figure 2-20, exports grew rapidly from a small base through the 1990s, were erratic base through the crisis years, and returned to a steady but much slower rate of growth from 2001. Exports dropped off substantially in the global economic crisis, dropping over 22% in 2009. Losses have stabilized in 2010, but exports still declined slightly further in the year. And while the domestic market is significant and import penetration has traditionally been much less an issue than in the apparel sector (although it is increasingly becoming one), growth in the formal furniture sector depend much more strongly on export market than in sector like automotive and apparel. Indeed, stagnating export performance is reflected in total output in the sector, which has declined by one-third in real terms since the end of the crisis, after doubling in the five years running up to the crisis. 

Like in the apparel sector, the major shifts in global market share have been away from regional suppliers like Canada, Denmark, and Italy, and dramatically toward Asia. And, even more so than in apparel, Indonesia has failed to benefit. Indonesia’s slow growth in furniture exports is reflected in steadily declining global market share, from 4.9% to 4.4% in 2009. Furniture is one of the few manufacturing sectors in which Indonesia’s growth trailed the global average both in the immediate post-crisis years and the period 2005-2010. At the same time, China’s share in world markets grew from 12% to 29% in one decade, while Vietnam grew from less than 1% in 1999 to 7% by 2009. Figure 2-21 shows that Indonesia lost modest share in all major market over this period. The product-level analysis in Figure 2-22 shows that in the US and EU Indonesia exports have gained share in just under half the product lines. Although relative to China, Indonesia has actually only gained share in two product lines in the US (rattan and wooden bedroom furniture) and Japan (rattan and wooden kitchen furniture), and it has lost share to China in all product lines in the EU.

According to ASMINDO much of the Indonesian furniture sector does not compete head-on with China in export markets, as much of Indonesia’s export sector is the labor-intensive handmade furniture sector, while China specializes in the large volume, mechanized sector. On the other hand, ASMINDO does consider both Vietnam and Malaysia to be important competitors. Vietnam has dramatically outperformed Indonesia in export market. Against Malaysia it has had a mixed performance (gaining share in the US and losing it Japan) in terms of market share but competes poorly on quality.
Leveraging a unique and sustainable resource for competitive exports: rattan seats

HS 940150 – seats of cane, osier, bamboo or similar materials – which in Indonesia’s case is rattan. Rattan furniture is exported to more than 200 markets worldwide, but also its fastest growing. Exports of rattan seats to the US grew by 15% annually between 2000 and 2008. It is one of only two furniture product lines in which Indonesia has actually take share for China in any of its major global markets over the past decade.

The success of Indonesia rattan exports is a good example of the country adding value to a unique natural resource. At least 70% of the world’s rattan – a plant with some similarity to bamboo – grows in Indonesia. Perhaps most critically, the fast-growing nature of rattan makes it a sustainable alternative to topical timber as a source material for furniture, making rattan a particularly valuable asset in an industry struggling with the challenges of remaining competitive while meeting increasingly stringent sustainability requirements.  

Reference: Farole T and Winkler D. 2012. “Export Competitiveness in Indonesia’s Manufacturing Sector: An assessment of export performance and determinants of competitiveness in Indonesia’s manufacturing sector based on an analysis of the apparel, wood furniture, and automotive components sectors” page 22-24.

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