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 everyone 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 do not 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 claimed in the evolution of furnished 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.

There has been no government initiative to support this industry. Furthermore, low investment in machinery and training from small manufacturers has rendered such companies very stagnant. Most of the local manufacturers neither have marketing knowledge nor top management will to present their products directly to offshore customers. The big foreign trading companies are exploiting this situation. They are using local manufacturers to produce goods for them and market them at premium prices into their markets. 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 to keep their businesses 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, although 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 although those countries still lack experienced and skilled craftsmen.

In nutshell, 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 from outside, are dragging the industry into the race to the bottom.

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