Abdul Sobur, Secretary-General at the Indonesian Rattan Furniture and Craft Association (AMKRI), said Maitland Smith decided to move its factory in Semarang (Central Java) to Vietnam due to the weak business environment in Indonesia. Another example is Taiwan-based Woodworth Wooden Industries Indonesia, the first Taiwanese furniture company that entered Indonesia (with a USD $40 million investment), that decided to exit Indonesia.

In Vietnam, on the other hand, the furniture companies gain competitiveness (particularly on the global market) because workers' wages are lower (while their skills are sufficient), the government facilitates incentives for sustainable development of the furniture industry, the nation has a predictable regulatory environment, there is the availability of well developed export-oriented infrastructure, while the supply-side is still not saturated and therefore there remains ample room for growth (particularly large scale industrialization of furniture manufacturing is a recent phenomenon in Vietnam). One problem in Vietnam, however, is the material supply shortage.

However, Indonesia also faces challenges with regard to the supply of basic materials. Sobur, who emphasized Indonesia's furniture and handicraft industry was rather bleak in 2016, said one key problem in Indonesia's furniture industry is the low quality of domestically-produced rattan, a naturally renewable palm that is the primary material for Indonesia's furniture industry. Therefore, the supply of rattan in Indonesia needs to be sufficient, both in terms of quality and quantity.

Regarding Indonesia's furniture and handicraft exports in 2017, Abdul is optimistic that the performance will improve from last year because the global economy is more stable now.

Earlier AMKRI targeted Indonesia's furniture exports at USD $5 billion by 2019, implying a 20 percent (y/y) growth between the years 2014-2019. However, this target now may need a revision.

Read more: What is Causing Slowing Growth in Indonesia's Furniture Industry?