The Project

Value chain analysis has emerged since 1990s as a novel approach to understanding how power and benefits are incorporated in and distributed to various actors along the commodity chains. Furniture is one of Indonesia’s main natural product exports, contributing 2% of the global wood furniture trade in 2007. National exports of wood furniture in 2007 were worth about US$1.5 billion. The value chain connects tree growers in Java and furniture producers based in Jepara, the center of Indonesian furniture, with furniture retailers in Australia, Europe, the United States and Japan.

(Roda et al. 2007)

The Furniture Value Chains project (FVC) has been funded by the Australian Centre for International Agricultural Research (ACIAR) FST/2007/119 project to improve value chain efficiency and enhance livelihoods in the mahogany and teak furniture industry in Jepara, in central Java. This region has a long tradition of high-quality furniture making and with the adoption of improved business practices, Jepara could be a strong competitor in international markets. Currently, inefficiencies and unfairness in the value chain result in over-harvesting of plantations and livelihood insecurity. Specific objectives are:

1) To enhance the structure and function of the furniture industry to benefit small-scale producers

2) To improve marketing by small-scale producers and their organisations.

The project is building on results from the EU-funded project “Levelling the Playing Field” (LPF) which was active between 2003-2007, in which Jepara was one of six project sites in Indonesia, Malaysia and the Philippines. The LPF project developed partnerships amongst different stakeholders, including the Forum Rembug Klaster. In Jepara, the LPF project surveyed furniture producers in 2005 and facilitated the establishment of a common vision amongst furniture stakeholders through the Forum Rembug Klaster. 

The FVC project will work very closely with several ACIAR projects. One of these is the proposed ACIAR project FST/2006/117. This project will focus on furniture design, as design issues are crucial to re-invigorating the industry, and will look for new opportunities to ensure that the two projects complement each other.

The project will also cooperate with the ACIAR project FST/2005/177, which is working on improving economic outcomes for smallholders growing teak in agroforestry systems in Indonesia. To do this, it is focusing on improving teak silvicultural technology for smallholder producers, designing financing schemes for smallholder participation in profitable teak production and enhancing market access. 

The links between FST/2007/119, FST/2006/117 and FST/2005/177 are shown in Figure 1. It shows that the expected outcomes of FST/2005/177 and FST/2006/117 will contribute to improved wood availability, processing efficiency and furniture quality in Jepara and its surrounding. The project FST/2007/119 will combine these improvements with new activities to enhance the structure and function of the Jepara furniture industry.

Figure 1. links between the projects FST/2007/119, FST/2006/117 and FST/2005/177

The Indonesia Competitiveness project (SENADA) is a four-year project financed by USAID that started in late 2005. SENADA’s goal is to enhance Indonesia’s ability to increase productivity to reach higher economic growth and living standards. It has a particualr focus on industry value chain strengthening, which works on auto parts, footwear, furniture, garments and home accessories. On furniture, SENADA works within Java to facilitate meetings and workshops to improve furniture competitiveness. 

The International Finance Corporation Program for Eastern Indonesia Small and Medium Enterprise Assistance (IFC PENSA) was started in late 2003 to improve livelihoods in Indonesia by expanding the range of opportunities and capabilities for small and medium businesses. The programme concentrates on six areas: handicraft export promotion, sustainable supply chain linkages, agribusiness linkages, small and medium enterprise linkages to oil, gas and mining companies, and access to finance for small and medium enterprises, and business enabling environments. In regards to furniture, the programme facilitates seminars and workshops to improve market and finance access and environmentally friendly practices. IFC PENSA is actively encouraging furniture producers to participate in furniture exhibitions at national and international levels. The FVC project could benefit from IFC PENSA reports, its established networks and its promotion of the use of acacia as an alternative wood material source.