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Indonesia aims for domination in the booming ASEAN furniture market

The Indonesian Furniture and Handicraft Association predicts furniture exports will increase to US$5 billion within the next five years with the bustling Indonesia International Furniture Expo 2014 aiming to kick start expansion.

Photo: Top table: can Indonesian furniture makers take a lead?
Top table: can Indonesian furniture makers take a lead?

At this year's Indonesia International Furniture Expo, it was all about bidding for a bigger share of the global furniture market, while maximising the domestic potential of the industry. According to the Chairman of the Indonesian Furniture and Handicraft Association (AMKRI), Mr Soenoto, while the country's income from the furniture sector has steadily increased since 2009, there still remained considerable scope for improvement.

A recent report from the Milan-based Centre for Industrial Studies (CSIL) puts the value of the global furniture trade at US$122 billion, with China taking the lion's share at US$45 billion, while Vietnam weighed in at US$4 billion.

Addressing the need for growth, Chairman Soenoto said: "Our current share is still less than 2% of the global furniture market. This is embarrassing. With our abundance of raw materials and human resources we could do so much more."

This year's Expo aimed to facilitate just that. The first iteration of the IFEX to be held in Jakarta, the country's capital, it attracted more than 1,000 international buyers from 76 countries, as well as some 300 local furniture producers.

Many regions of Indonesia have long had their own specialisations within the furniture sector. Central Java, for example, has traditionally been associated with teak-based furniture and intricate carved products. This year, CV Aulia Jati Indofurni, a teak indoor and outdoor furniture manufacturer, showcased its line of recycled-teak furniture and contemporary designs at the event. The company's founder, Mr Sunarti said: "We believe our products have what it takes to compete in the international market."

Indeed, the country certainly has the natural resources required to see it compete on a global basis. According to Benny Wahyudi, Director General of the Agro Sector of the Ministry of Industry, in terms of material, Indonesia was strong in the export of wood, rattan, and bamboo. He said: "Our advantage actually lies in the abundant availability of raw materials and our unique local designs. Many of these are still under-exploited."

The abundance of raw materials in Indonesia attracted a substantial number of investors and more than 1,000 international buyers to the event, with Germany, Japan, Finland, and Taiwan emerging as the lead purchasers of raw materials, while the Filipino contingent bought up much of the rattan from the coastal town of Cirebon in West Java.

One Central Java company trying to leverage Indonesia's immense natural advantages was Maison Deco. Adopting Chinese-Indonesian designs as the motif for its collection, its booth attracted significant visitor traffic. A spokesman for the company said: "We are not giving ourselves any sales target right now. It is more about introducing our new line of products and seeing how the market responds to it."

Maison Deco is not a new player to the furniture sector but, previously, it had chosen to export its products rather than to target the domestic market. The spokesman said: "A few years ago, the domestic market became inundated with Chinese products, so we focussed more on the export market."

This year, there were many newly-married couples and first time house-owners at IFEX, with environmental sustainability and friendly-pricing proving the key considerations for this younger demographic. Reza Haryati, one such young consumer, said: "We don't have a big budget to furnish our apartment, but we would like to be environmentally-conscious when it comes to choosing our furniture. We don't want to compromise in terms of style though." 

Photo: Chic'n'teak: CV Aulia’s range.
Chic'n'teak: CV Aulia's range.
Photo: Top drawers: Maison Deco.
Top drawers: Maison Deco.

Gusmardi Bustami, Indonesia's Director General for national Export Development, said that that environmental consciousness was a defining aspect of Indonesia's growing middle class. He said: "It is something our producers need to respond to with more innovative and creative products."

According to its organisers, this year's IFEX was expected to generate some US$300 million worth of business. This was set to prove a major boost for the furniture sector, while also encouraging local producers and opening the doors to foreign investment. Chris Eve, Senior Vice President of UBM Asia, the event's organisers, said: "No matter who you are and what your needs are, you should be able to find it at IFEX."

Indonesia's Minister of Industry M.S. Hidayat, too, maintained he was fully behind both the IFEX and other related events. He said: "We are hoping that events like this one can encourage better interactions between buyers and producers and that, in turn, we will be able to increase our furniture sales value."

Through integrated export-import facilities, regulations to ensure consistent raw material supplies, and training to improve the skill set of producers, the ministry hopes to make furniture a strategic industrial sector for the country. Furniture is currently tenth in the list of Indonesia's top exports, after shoes, electronics, coffee, palm oil and a number of other material-intensive manufacturing sectors.

Soenoto acknowledged that, with its 118 million-strong workforce, Indonesia could really benefit from a stronger furniture sector. He said: "This is one of the most labour-intensive sectors in the country. Its expansion could only help reduce unemployment."

According to Bustami, Indonesia's 2013 furniture exports to Europe, the United States, Africa, Middle East and Asia totalled US$1.7 billion. He said: "This year – by establishing ourselves in the Indian and Latin America markets – we are hoping to increase our exports to US$2 billion."

Indonesia is currently home to over 6,000 medium and small enterprises in the furniture sector. Its growing domestic market has also now led Ikea, the Swedish furniture giant, to announce plans to open its first store in the country in 2015.

Yoshua Surjo, a young entrepreneur in Jakarta, said he was looking forward to the arrival of Ikea. Like a number of other style conscious consumers in the country, he said he admired the company for the simplicity of its designs and its competitive prices.

Despite the looming competition, PT. Chitose Indonesia, one of the country's largest office furniture producers, said it was not over-concerned about the arrival of Ikea.  Simply stating its case, Yati Sudati, the company's Overseas Director, said: "We believe we produce better quality products."

Southeast Asia has always been a dynamic area for the furniture sector, with the majority of ASEAN member countries having large and rapidly growing furniture industries. Overall, Indonesia, Malaysia and Thailand lead the growth in the sector, while Vietnam is also beginning to make major inroads.

ASEAN Furniture Industries Council (AFIC) research suggests expansion in the market is largely due to emerging new high-growth markets – notably China, India and the Middle East. The ASEAN Free Trade Agreement (AFTA) has also helped relax trade barriers amongst ASEAN member states and has encouraged the flow of investment. It is believed that full implementation of AFTA in 2015 will further open up the Southeast Asian market, giving access to half a billion consumers.

Indonesia, with its growing domestic market, abundance of raw materials, designers and other human resources, as well as increasing support from the government, believes it is right to be optimistic about its own stake in the sector. Such self-assurance was best summed up by Soenoto, who said: "We believe in five years time, we will be able to lead the ASEAN market."

Photo: IFEX 2014: a springboard for Indonesia’s ambitions in the furniture sector.
IFEX 2014: a springboard for Indonesia's ambitions in the furniture sector.

The first edition of the Indonesia International Furniture Expo, IFEX 2014, organised by UBM Asia, was held at the Jakarta International Exhibition Centre from 11-14 March 2014.

Dian Estey, Special Correspondent, Jakarta

Content provided by Picture: HKTDC Research
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