02.02.2016 · Category: SWITCH-Asia Network Facility, Prospect Indonesia Indonesia

Challenges and opportunities for Indonesian SMEs manufacturing eco-friendly rattan products

Business dialogue (Jan 26, 2016) organised by the PROSPECT Indonesia in Cologne, attended by Mr. Patriot Adinarto, the Minister Councillor of the Embassy of Republic of Indonesia, the local media and craft experts.
(Source: SWITCH-Asia Network Facility)

During the IMM Cologne Fair (18-24 January 2016) and a subsequent business dialogue (26 January 2016), the SWITCH-Asia project Prospect Indonesia introduced to European visitors and craft experts five SMEs that are participating in the project, along with their 40 eco-friendly rattan products.

This EU-funded project has been working with rattan farmers and SMEs since 2013, promoting eco-friendly rattan products made in Indonesia. Under the motto "Rattan for Life", PROSPECT Indonesia strengthens the rattan industry by emphasising the eco-friendly nature of rattan, providing technical assistance and trainings to SMEs as well as working with policy-makers.

Challenges faced by the Indonesian rattan industry

As a labour intensive sector, where most of the work is manual and home based, rattan is thus important for the lives of hundreds of thousands of rattan farmers and workers as well as for SMEs in Indonesia. More than 80% of the global rattan supply originates from Indonesia and the export value of rattan products amounts to about EUR 230 million per year.

However, Indonesia's rattan industry is currently struggling within a stagnating market for rattan products and SMEs only rely on existing customers, explained Mr. Azan Tanamas from the Indonesia Furniture and Craft Association (AMKRI), one of PROSPECT Indonesia's project associates.

Mr. Sumartja from the "Tegalwangi Rattan", a member of the Association of Indonesia's Furniture and Craft Industry ASMINDO and one of the SME owners joining the business dialogue, explained that the decreasing trend of rattan demand is due to three factors: the decreasing number of weavers, as the younger generation lack interest working in the traditional rattan industry, the decreasing supply of raw materials caused by illegal trade and the long supply chain from harvesting rattan via local collection, pre-processing, regional transport etc. involving too many middlemen.

Although rattan is produced in many regions of Indonesia, Mr. Sumartja explained that the processing industry is located mainly in West Java, especially in Cirebon. The rattan's supply chain involves harvesters, collectors, relatively small intermediaries and big traders that collect rattans and ship it to Java, where it is processed and turned into rattan products. Not surprisingly, logistical challenges and the long supply chain increase the price of the raw material. Mr. Sumartja hopes that the project's and government's support can shorten the current supply chain and reduce the number of intermediaries and middlemen as these drive up the raw material price, leaving farmers with only a small income, while selling rattan at a substantial higher price to SMEs manufacturing rattan products.

Similarly, Mr. Azan Tanamas listed the five challenges facing the rattan SMEs, which the project has been addressing: unstable supply of raw materials, low level of sales, insufficient number of skilled workers, lack of financing to invest in new design and innovation as well as enabling policies that will reduce the long bureaucracies and stop the illegal trade of raw material.

Production floor of rattan furniture at one of SMEs involved in the project.
(Source: PROSPECT Indonesia)

Eco-design

To help increase the demand for rattan products and furniture, the PROSPECT Indonesia project has been teaming up with product designers from the University of Surabaya (UBAYA) to develop new products and product designs that are modern and more attractive, especially for international buyers like IKEA. The giant furniture company has been one of the main bulk buyers procuring rattan furniture from SMEs in Cirebon, West Java, where SMEs will receive specific requests regarding the designs. With about 40% of its total orders coming from IKEA in Germany, an SME said that the interest for rattan is high in the country.

Ms. Wyna Herdiana, Head of Design and Product Management at UBAYA, said that joining the IMM Cologne Fair was a good opportunity to learn more about the preferences of European consumers and fashionable furniture designs. This in turn will help SMEs produce rattan furniture that are of interest to international buyers and herewith enhance the demand for rattan products.

The importance of new eco-design for rattan furniture and products was also highlighted by Mrs. Early Rahmawati, General Secretary of the Association for Advancement of Small Business (PUPUK) that leads the implementation of PROSPECT Indonesia. To come up with new products that are competitive in the global market, technology development is crucial, she added.

Bringing rattan back to life

Mr. Listoman Tanjung, the Director of PUPUK, pointed out that the project is currently helping 800 SMEs to innovate, offering new eco-friendly rattan products and promoting cleaner production. Concurrently, Prospect Indonesia has established six new collaborations at national as well as regional levels and is also supporting research and development (e.g. for new products and natural dyes derived from rattan). One upcoming result of the new collaborations among rattan actors is the establishment of a rattan eco-tourism village in Cirebon. Although challenges remain, the industry retains a big potential for nature conservation as well as local economy.

Author: Kartika Anggraeni (SWITCH-Asia Network Facility)