Furniture makers gain $250m orders from China's loss

The Jakarta Post, Jakarta | Mon, 12/15/2008 10:34 AM  

Although many industries are suffering from a drop in orders, furniture producers are enjoying extra orders worth US$250 million until next year, with U.S. customers shifting their orders from China to Indonesia. 

The Indonesian Furniture Entrepreneurs Association (Asmindo) said at the weekend the United States -- one of the world's major furniture buyers -- had decided to relocate orders because of competitiveness. 

"The shift has already commenced this month," Asmindo chairman Ambar Tjahyono said on the sidelines of the association's annual conference in Jakarta. 

"The extra orders worth $250 million may create demand for up to 1 million workers." 

The country's furniture and handicraft industry currently provides around 7 million jobs. 

Many purchasing companies on the international market have lost faith in the quality of Chinese furniture, turning to higher-quality furniture from other countries, including Indonesia, despite higher prices, Ambar said. 

China's furniture price index -- an internationally recognized combination of measures to help gauge the competitiveness of a product -- dropped dramatically in 2007 to 56.6 from 140.1 in 2006, while Indonesia's index fell only slightly to 112 from 116.5. 

China has long been a tough competitor for Indonesia in the furniture exporting business, Ambar said, adding that China sends 80 percent of its furniture to the U.S. furniture market, and Indonesia only 27-30 percent. 

In 2007, Indonesia's share in the global furniture market was around 9 percent, compared with China's 32 percent. Another big exporter, India, was at 1.3 percent. 

Indonesia's furniture and handicraft exports in 2007 were valued at $2.35 billion, with the amount estimated to grow by 6.5 percent to $2.8 billion this year, Ambar added. 

This is roughly the same rate of growth experienced by the industry for the past four years. 

For next year, the extra orders from the United States will help Indonesia's exports grow, he said, but quickly added that the growth might be slower because of the ongoing global economic slowdown. 

"The current situation calls for more support from the government and banks in the form of rescheduling of loan payments," Ambar said in his opening speech. 

"We need to diversify our target market and that will take time." 

Vice President Jusuf Kalla, who also attended the meeting, said the government would do its best to support the labor-intensive sector although he remained upbeat about its prospects. 

"The nation's furniture market still has a lot to offer the world market," he said. 

"The crisis threatens more the high-end furniture producers such as Italy and the U.S. and less the mid-level producers such as Indonesia." 

Kalla said the global and domestic markets would be looking for more affordable products, and companies should seize the opportunity to produce low-priced furniture. (dis)