Furniture businesses seek new markets

The Jakarta Post,Jakarta

Local furniture firms are seeking new overseas markets to address declining demand in the face of a possible economic meltdown in the United States, the country's largest buyer of wooden furniture.

The gloomy economic forecast could trim furniture exports to the world's largest economy by at least 5 percent, Ambar Tjahyono, chairman of the Association of Indonesian Furniture and Handicraft Manufacturers (Asmindo), said recently.

"For the U.S market, we can only rely on products for the upper class because they still have strong purchasing power. As for the remaining classes, we cannot expect much.

"To make up for the decline in U.S. demand, we are preparing to penetrate other potential markets to maintain our export growth," Ambar said.

U.S. consumers are currently facing a decline in their purchasing power, as indicated by the mortgage crisis where most borrowers can no longer afford to pay their obligations.

On average, the United States imports around 30 percent of the Indonesia's total furniture output annually, according to the National Agency for Export Development (Nafed).

The agency said with a market share of 4.26 percent, Indonesia ranked fourth after Germany, with 5.19 percent, as the top supplier of wooden furniture to the United States.

Ambar said local furniture firms would expand their distribution chains in China and countries in the Middle East and Eastern Europe.

The association, along with the government, will boost promotions and trade exhibitions in these countries to tap more opportunities, he said.

Nafed secretary Dede Hidayat said the agency would support Asmindo's participation in overseas exhibitions in China, Singapore, Dubai, France, Germany and Hungary this year.

While China still controls 21.25 percent of the world's wooden furniture market, the country remains in dire need of furniture from other countries to meet rising demand at home, according to Ambar.

"The high demand in China can be seen easily from our products which are always sold out during Indonesian trade exhibitions there," said Ambar.

The global trade in furniture was estimated to reach $80 billion last year, with China controlling around $17 billion, up from $14 billion in 2006.

According to Asmindo, as of September 2007, the country had exported furniture products valued at US$1.5 billion, up from $1.3 billion a year earlier.

Handicraft exports also increased to $700 million in the first nine months of 2007, from $600 million in the same period of 2006.

Ambar said local furniture businesses were set to grow by 10 percent this year, supported by growing demand for ethnic-style furniture made of used wood.

"My company alone can send 15 to 20 containers of ethnic-designed furniture made of used wood," he said.

He said used wood, which could be retrieved from old houses and wooden containers, was somehow better and cost less than newly cut wood.

Asmindo executive director Sae Tanaga Karim said ethnic furniture accounted for almost 10 percent of the country's total furniture exports.

Furniture firms started to use used wood in 2006 following a shortage in raw materials after the government launched an intense crackdown on illegal logging.

"We managed to bounce back last year as we found new sources and types of raw materials," Ambar said.

As part of the industry's effort to ensure a supply of legally collected wood, Asmindo inked a cooperation deal with PT Setia Mitra and the Indonesian Ecolabeling Institute to plant a special type of teak on 20 hectares of land in Jember, East Java.

The association also planted 17 hectares of similar teak in Bantar Bolang and 15 hectares in Wonosari and Wonogiri, all in Central Java.

"The teak can be harvested in 15 years," he said.

According to Asmindo, the local furniture industry consumes between four and six million cubic meters of wood annually.

International buyers, such as in the U.S. and Europe, prefer furniture using wood certified as legally collected.

Furniture having this certificate will have an additional 30 percent premium price in the market. (ind)