Furniture exports from Indonesia grew 10.53 percent year-on-year (y/y) to USD $930 million in the second quarter of 2018. Stakeholders aim to see a growth pace of around 9 percent (y/y) in the second half of 2018.
Abdul Sobur, Secretary-General of the Indonesian Furniture and Handicraft Industry Association (Himki), said the increase in furniture exports in Q2-2018 was primarily supported by the participation of Indonesian furniture manufacturers in furniture exhibitions in several countries, including Germany, France and China in the preceding quarter. He detects a strong co-relation between rising demand and the organization of - and participation in - furniture exhibitions.
Later this year more exhibitions are scheduled. Therefore, export growth should remain stable in the remainder of the year. He added that furniture exports are a vital asset for Indonesia, especially because 85-90 percent of materials are domestically-sourced. Meanwhile, around 80 percent of total furniture products in Indonesia are exported abroad (making Indonesia the world's fifth-largest furniture exporter).
Regarding exports in full-year 2018, Himki targets the country's furniture exports to reach the same value as in full-year 2016. Back then, Indonesia exported USD $1.95 billion worth of furniture products. Problematically, however, four big furniture companies moved their business to Vietnam and this led to a USD $300 million drop in furniture exports for Indonesia.
Sobur said the Indonesian government could help to boost the country's furniture exports by removing the mandatory Wood Legality Verification System (SVLK) certification in the downstream furniture industry. The SVLK is an Indonesian system designed to verify the legality of the country's timber products. According to Sobur, it burdens the downstream furniture industry because SVLK certification is expensive. Moreover, considering the certification is also mandatory in the upstream furniture industry, it is unnecessary to have it in the downstream industry as well.
Others argue that the mandatory SVLK certificate (in both the upstream and downstream industry) is believed to have raised Indonesia's competitiveness in international timber trade as it proves the country's commitment to monitor legality in the wood industry. This attracts demand from regions such as the European Union.
Sobur also urges the Indonesian government to offer subsidies to domestic furniture manufacturers. For example, many manufacturers are still using old equipment to produce furniture. If the government would help to finance the purchase of new equipment, then productivity is expected to rise. Indonesia's Industry Ministry is currently studying and preparing such incentives. However, the budget that it prepared is regarded much too small to make a real difference.