A piece of teak furniture in Indonesia contributes one percent of the global furniture trade, which was valued at US$135 billion in 2010. The furniture industry provides employment and livelihood to five million Indonesians. What is interesting to observe is the industry’s long chain of production, from the raw material producers (tree growers) to the semi-finished and finished product producers and retailers to exporters. And they are all connected through intermediaries.
Jepara in Central Java province is the center for wood furniture and woodcarving. Based on a 2010 study by the Center for International Forestry Research (CIFOR), there were 11,981 enterprises involved in the furniture industry, including log traders who supply furniture workshops with the raw material, as well as processing and trading enterprises. Meanwhile, the furniture producers themselves are dominated by informal small and micro scale (maximum 20 workers per unit). Jepara contributes about 10 percent of the total national furniture production. The wooden furniture value chain connects produc- ers from Jepara to retailers in Europe, the USA, Australia and Japan.
So, what’s the problem? It is power imbalance throughout the value chain and an unhealthy competition among producers, which result in small-scale producers to remain poor and an unsustainable furniture industry. The adaptation of small-scale producers to market demand is low. They are price takers rather than price setters, as indicated by their declining bargaining power.
CIFOR and its partners have applied the Action Research of Value Chain Analysis (VCA) to pursue and improve governance and institutional arrangement scenarios towards more equitable power and income to sustain both the forest and the furniture industry.
Researchers and furniture stakeholders have jointly developed plans to strengthen the industry structure, improve value addition and improve livelihoods. To ensure local and national impacts, CIFOR as the leading body on the research, has collaborated with the Jepara Furniture Multi-stakeholder Forum, the Jepara local government, the Forestry Research and Development Agency (Litbanghut) of the Forestry Ministry and the Bogor Institute of Agriculture’s (IPB) Faculty of Forestry. The research was conducted in 2008-2013 and funded by the Australian Center for International Agricultural Research (ACIAR).
Most small and medium scale enterprises (SMEs) are highly dependent on the furniture industry, as it provides better livelihood than agriculture or fisheries. Nevertheless, they get unfair portions of value added compared to furniture brokers, product finishing companies, exporters and other big players in the industry. Furthermore, the 2008 global financial crisis had reduced Indonesia’s furniture export value, which mostly affected the small-scale producers. The value chain analysis was the right approach to analyze the complexity of forest product development, actor networking and value added distribution.
There are four possible scenarios in upgrading SMEs, i.e. collaborating down, moving up, using green products and setting up small-scale associations. The latter has been implemented in Jepara and has successfully strengthened collaboration among producers and is expected to improve their bargaining power against bigger companies. Surprisingly, the major producers associations have committed themselves to collaborate in improving the competency of the furniture producers in Jepara, in facing global competitors from China and Vietnam.
Under this scenario, CIFOR and partners are assisting small scale producers to strengthen their bargaining power by establishing a small scale furniture producers association (APKJ). Through the APKJ, furniture producers have been briefed on how to maintain the sustainability for wooden products industries and to understand the elements of fair trade involving those products. In the process, APKJ members access to source of raw materials as well as access to markets have improved vastly.
Free trade pacts, such as the one between ASEAN and China Free (AFCTA) could impact negatively on small-scale producers if their position is not strengthened. About 60 percent of wood furniture and carving are made of teak. The Jepara furniture industry absorbs 0.8 million cubic meters of wood annually. Furthermore, Indonesian forests comprise more than 35 percent of the world’s planted teak forests. The approach we use, among others, is also aimed at developing policies to improve livelihood of small-scale producers and the value chain governance.
The multi-stakeholder participatory process has successfully produced a roadmap, which is expected to be legal when the Jepara administration issues a regulation (Perda) about it. Developing the roadmap is necessary to ensure activities meet with their expectations. All those involved have benefited from the roadmap, as they learn about the current situation, future indicators, sharing their common vision and how to realize it.
The issue of Green Certification was recently raised in order to expand existing markets. Based on our market survey of 408 furniture consumers, current consumers of green certified furniture comprise about 16 percent of the total number. However, about 43 percent of the respondents are aware of what this green certification means to products.
Producers’ readiness to voluntarily enter the certification scheme still needs to be improved. Based on our 2011 survey, about 64 percent of producers were unaware about forest certification and 57 percent were unaware about the Chain of Custody (CoC) certification. Nevertheless, about 36 percent of furniture producers have been trained on the need for certification.
In addition to the green certification, Timber Legality Verification System (SVLK) has been a concern to some furniture producers, yet a priority to others, especially among producers of furniture for export. The APKJ has been partnering with government as well as donors to improve their readiness to implement SVLK.
Global and national policies will affect furniture producers and those most impacted will be the local, small scale producers. Therefore, the model of collaboration and partnership between local stakeholders in adapting to the national and global environment is very important. The multi-stakeholder process of policy making will enable all parties to make their interests known and contribute based on their niche. The road map on the furniture industry in Jepara and legalize it as a Perda, is an interesting example of how the interests of different stakeholders can be accommodated. This can be a precedent to implementing it at the national level.
* Ramadhani Achdiawan, Center for International Forestry Research and Herry Purnomo, Faculty of Forestry, Bogor Agricultural University (IPB).
Source: Tempo Magazine, April 21, 2013; Page 40 – 41
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