Indonesian Teak furniture Industry

Furniture Industry in Indonesia has boomed since the 1998 Asian crisis. The main reason behind this boom was the weak Rupiah, availability of abundant teak plantations and no or very little competition from outside. Furniture buyers from all over the world took advantage of this cheaper teakwood furniture prices including a lot of big global hypermarkets. The result was the availability of Indonesian teak furniture in almost every part of the world. Plenty of small furniture manufacturing firms start entering this furniture boom to provide cheap teak furniture to the global market, which benefited everybody at that time. There is no denial that the growth in number of enterprises and the number of jobs in furniture sector did rose dramatically but since then other internal and external factors had slowed this Indonesian teak furniture boom.

Indonesian teak furniture industry is suffering from the scarcity and cost of the raw materials. The illegally logged timber is not available the way it used to be few years back. This made the small furniture enterprises, which had benefited earlier with the abundant use of illegal logged wood very difficult to sustain and most of them have even stopped their operations. The prices of teak timber for viable source (PERHUTANI) has almost tripled in last 7- 8 years and the buyers from outside still want to pay the same or even less. They don’t want to increase the prices at which they used to buy as they are selling their goods cheaper in their markets compared to 7 years back. This has forced many small enterprises to lower down the quality of teak timber used in their furniture. This has resulted in the evolution of treated teak furniture in the market. Treated teak timber furniture is made of very low quality timber which is then chemically treated to make sure that furniture has the homogeneous color.

Language barrier and the lack of need to invest in their infrastructure is another major factor which has stopped or hindered the local furniture manufacturers to get the good price for their furniture products. This has benefited a lot of big foreign trading companies. These foreign trading companies represent themselves as furniture manufacturers to the global market but in reality they just buy the furniture from local manufacturers and then export these furniture items under their brand name to the worldwide market. These foreign companies are exerting lot of pressure on local manufacturers and demanding the cheapest price possible. This resulted in local manufacturers paying lower wages to their workers, using lower quality raw materials and do everything they can do keep their business profitable. This vicious circle has a bad effect on all sectors of the industry: labor, investment, social responsibility, quality of products and so forth.

Another challenge to Indonesian teak furniture Industry is the competition from countries like Malaysia, Vietnam and China. Malaysia is one of the major exporter of wood furniture to the global market, though it does not have plantation resources like Indonesia, still very good amount of teak furniture to the global market is exported from Malaysia. It is because of the fact that illegal logged timber from Indonesia still goes to Malaysia. Malaysia, Vietnam, and China export the teak furniture from their countries at cheaper prices than Indonesian though those countries still lack experienced and skilled craftsmen.

In conclusion, the Indonesian teak furniture industry has benefited a lot of people in Indonesia and abroad but the competitive pressures now from inside and as well as outside, are dragging the industry into the race to the bottom.