Indonesia - When mortgages in Nevada went sour in 2008, no one expected it to set off a financial downward spiral that would affect industries as far away as Jepara, Central Java. In a recent economic analysis, CIFOR scientists detail just how every level of this export-furniture-making capital adjusted.
One of the authors, Herry Purnomo, is head of CIFOR’s Furniture Value Chain research project. He urges two new strategies for the survival of artisanal industries like Jepara’s. Suppliers need to diversify their markets. And governments should enact and enforce regulations to certify that inputs – in this case teak logs – are legally and sustainably sourced.
Jepara made its name as the go-to source for tropical hardwood furniture in the 19th century when a local noblewoman, Indonesian feminist icon R.A. Kartini, sent Queen Wilhelmina of Holland handcarved furniture as a wedding gift. However, only after the 1998 Asian economic meltdown did Jepara take off as the international source for low-value mahogany and teak furniture.
Yet, just as foreign markets allowed Jepara to soar above Indonesia’s economic depression in the late 1990’s, so its export-dependency exposed it to the 2008 global downturn while the rest of the country remained relatively immune.
CIFOR launched the Furniture Value Chain (FVC) project in Jepara in 2008. The purpose of the project was to help small producers acclimate to international markets that they had entered after the 1998 Asian financial crisis. Illegal logging and a weak rupiah in 1998 had created prime circumstances for an export furniture market, explained Purnomo. Although, in the early 2000’s, Indonesia’s economy stabilised and logging became more controlled, many Jepara carvers had a hard time adjusting. Competition in price, from China, and competition in quality, from furniture manufacturers elsewhere in Java created further hardships.
But no sooner had the FVC project started, then the global context changed. The international market for Jepara carvings slowed as consumers abroad cut back on spending. The incentive to reforest decreased due to the decreased demand for wood from the furniture industry. Yet, CIFOR research continued to work with small-scale producers.
Now, in their latest paper, Purnomo and Fauzen profile large, medium and small furniture producers in the wake of the 2008 crisis. Interviewees ranged from a home-based family of carpenters all the way up to a mechanised factory with a payroll of 150 workers. The family business hand-carved chairs for the domestic market, while the mechanised plant produced “green furniture” for Western markets, as certified by the Forest Stewardship Council (FSC) or the Verified Legal Origin (VLO).
When orders dried up in the economic downturn, Purnomo and Fauzen found women were the first to be booted off the payroll. At every level of industry, businesses were shifting to a domestic market or adjusting to slower and fewer payments from foreign buyers. So producers cut corners, eliminating “value-added” stages, starting with the least skilled and lowest paid, such as sanding – traditionally women’s work.
Hardest hit by the crisis, according to Purnomo, were the largest operations, including those who had “gone green.” Their businesses hinged on just a few big international wholesalers or retailers, he explains, and “in that kind of hierarchical value chain, there is no competition between buyers. They set the price and suppliers just have to take it.”
“The only solution,” Purnomo says, “is for suppliers to diversify their markets.” The domestic market could offer a way out, judging from surveys that Purnomo has led, which showed a sizeable proportion of Indonesian consumers (16% of 408 people interviewed) would be willing to pay nearly 20% higher for green certified furniture – a “green” premium about on a par with English consumers and twice as high as Norway’s, according to recent research.
The problem, though, is that Indonesia lacks a domestic certification mechanism comparable to the USA’s Lacey Act or Europe’s Volunteer Partnership Agreement that have made similar sustainability demands there law.
“Willingness to pay must come with law enforcement,” says Purnomo. “For the domestic market, there is a willingness to pay but there is no rule or law.” He recognises that the case presents a catch-22 dilemma, though: consumers won’t buy “green furniture” unless it’s certified, but the government won’t set up a certifying agency until there’s demonstrated consumer demand.
He’s expects that the dilemma will resolve itself as Jepara’s furniture bounces back – wiser this time, he hopes, after its post-2008 near-death experience.