Indonesia Expands Furniture Export Industry

Indonesia has one of the largest furniture export industries in the world. Based on Indonesian statistics, Maskayu bulletin estimates that the Indonesian furniture sector comprises more than 3,500 companies with over two million workers.

Wooden furniture dominates the furniture sector, accounting for two-thirds of the total furniture exports. The furniture industry is mainly concentrated in Java (notably Jepara, Semarang, Solo and Surabaya), where furniture accounts for about 40% of Java’s total exports.

Jepara is particularly known for its crafted wooden furniture. Small firms market their products through a network of furniture shops that sells locally. Exports are carried out through sub-contracting arrangements and small enterprises play an active role in export.

The Indonesian furniture industry relies heavily on timber as its raw material with an annual requirement of 4.5 million m3. Although Indonesia is the world’s second largest timber producer, the industry faces shortages of raw materials. The main timber species for wood carving are teak, mahogany and sonokeling (Dalbergia latifolia). Almost half of the total national rattan production is based in Cirebon.

Wooden furniture accounts for the bulk of the exports

Indonesia is after Malaysia the world’s second largest tropical exporter of furniture. Indonesia’s furniture exports are expanding, growing from $1.58 billion in 2004 to $1.65 billion in 2005 (Maskayu, 2007). There is an upward trend of Indonesian furniture exports. According to Maskayu, exports are poised to grow 3.5% in 2006 after growing at about 4% a year during the past five years. A higher growth of 5-7 % is expected in the coming years.

Wooden furniture accounts for three-quarters of the total furniture exports, followed by rattan (21%), metal (2%) and bamboo (1%) furniture. The major markets for Indonesian wooden furniture are the USA (24% of total exports), Japan (7%), the Netherlands and France (5% each). The USA is the main export destination for rattan furniture.

Challenges faced by the furniture industry

Indonesia faces several challenges in expanding its furniture exports. Firstly, despite its vast forest resources, illegal timber logging and trade have affected the supply of timber to the furniture sector. This was aggravated by the government’s reduction of the logging quota for natural forests to 5.7 m3 in 2004 and 5.4 million m3 in 2005.

Secondly, China, the world’s largest producer and exporter of furniture, is gaining market share in key export markets. Thirdly, increasing power and fuel costs have also raised operating costs, eroding Indonesia’s competitiveness. Indonesia has sustained its competitiveness by making progress in both quality and design enhancement.

(ITTO’s Tropical Timber Market Report)