In Indonesia’s Jepara District in Java, wood furniture workshops employ around 170,000 people. This is big business, with exports amounting to US$150 million a year. But all is not well. Small-scale producers get a meagre slice of the profits, and many live in poverty. A research project managed by CIFOR is shedding new light on the workings of the furniture industry, and helping to enhance the efficiency, and incomes, of small-scale producers.
‘We began by conducting research on the value chain, from the teak plantations in Java through to furniture retailers in importing countries like Australia, France and the United States,’ explains Herry Purnomo, leader of the five-year furniture value chain project, funded by the Australian Centre for International Agricultural Research (ACIAR). ‘We found that small-scale producers, who play such a central role in the industry in Jepara, take a very small slice of the profits.’
Of the total value added to every cubic metre of teak used to make furniture, overseas importers and retailers take 61.1 per cent, compared to 38.9 per cent shared among teak farmers, log traders, furniture makers and others involved in the Indonesian end of the business. Break the latter figure down further and you will see that furniture exporters take 11.4 per cent of the added value, teak growers 5.6 per cent, and small-scale furniture producers just 3.6 per cent.
In recent years, the value of Indonesia’s furniture exports has declined significantly. Several factors are to blame: competition from China and elsewhere, difficulties in sourcing raw material and rising fuel costs -. Although this has had an impact on the industry as a whole, small-scale producers have been particularly hard hit.
The research project, involving scientists from CIFOR, the Forestry Research Development Agency (FORDA) and the Agricultural University of Bogor (IPB), seeks to strengthen the position of small-scale producers in various ways. They are being encouraged to collaborate more closely with tree farmers; to move up the value chain and act as brokers themselves; to source certified supplies of teak and mahogany; and – crucially – to organise themselves into an association.
The Association of the Jepara Small-scale Furniture Producers (APKJ) was established in 2008, following a series of workshops facilitated by CIFOR. By mid-2009, the association had 95 members, representing many thousands of small-scale producers from every subdistrict in Jepara. The Association seeks to improve small-scale producers’ access to markets, to sources of finance and to a sustainable supply of wood.
"We have been very encouraged by the support the association has received from the district government and, perhaps surprisingly, from large companies operating in the export business," says Purnomo. Instead of viewing small-scale producers as competition, the large companies realise that their survival depends on the survival of smaller companies involved in the design and manufacture of furniture.
Ahmad Zainudin, a small-scale furniture producer who also acts as a field facilitator to the research project, believes that the association is having a significant impact. It has already attracted funds to put on a major exhibition in Jakarta in October 2010, and it has given producers a collective voice they lacked before.
"Without CIFOR’s help, this would never have happened," says Zainudin, whose own business recently suffered when his French buyer decided to stop importing furniture from Indonesia. "In the past, it has been the culture of people in Jepara to work as individuals. Now, we’re being encouraged to co-operate with one another, and that is the only way we will be able to get a larger share of the market profits and improve our bargaining power."
But is this research or development? Both, says Purnomo. The project involves an analysis of the value chain, the preliminary findings of which have been published in the journal Environmental Modelling and Software, as well as an analysis of the ways in which collective action can change the behaviour and fortunes of small-scale producers. At a global scale, the findings will be used as part of a case comparison which will draw on similar CIFOR studies of value chains for honey in Zambia, palm hearts in Brazil and bamboo in China.
