Doing business: Afraid of Chinese timber products

indonesia timber productHere a brief situation of doing business in Indonesia, bear in mind if you interested to start a business in Indonesia: More Indonesians are afraid of chinese product!

Doing business in Indonesia might be better than in Malaysia, or Thailand. Only Vietnam that has similar and comfort environment to start up a new business. The doing business report are very accessible, updated and available online.

More Indonesian businessman are worrying about Chinese products that will flood Indonesia‘s markets because of the FTA agreement. Chinese products are known as cheaper, mimic and some of them are below-average quality.

The ASEAN-China FTA agreement was signed about ten years ago in Cambodia, enabling member countries to make necessary years of preparations. Why businessman still worrying on Chinese product?

New threats named Chinese timber products

According to an association of wood products exporter, furniture producers are not ready to face the competition from Chinese producers. The fear expressed is that furniture imports into ASEAN countries from China could capture a major slice of the domestic market.

The idea: doing business in the wood product sector might be good as the government of Indonesia will maintain its competitiveness in regard to chinese product.

There are 314 tariff items from eight sectors listed under the FTA. Association of Indonesian Furniture and Handicraft Exporters (Asmindo) is said to have been lobbying the Indonesian authorities to modify or suspend at least 5 of the 12 tariff items listed within the furniture sector. Imports currently account for around 30% of the domestic market and this could grow as imports become cheaper as tariffs are removed

The sunset of Indonesia timber industry

Indonesia’s wood products industry seems at the sunset era. As reported by ITTO, exports of Indonesian timber products, especially sawnwood and plywood, have been on a decline since 2003, when exports were over 5 million cubic metre However, exports in the following year fell to 4.5 million cubic metre; to 3.5 million cubic metre in 2005; 3 million cubic metre in 2006; 2.9 million cubic metre in 2007, and 1.68 million m3 in 2008. Total exports for year 2009 only managed to reach 1.2million cubic metres up to November 2009. The decline of Indonesia wood industry challenges the authority to manage its forestry sector as well as combating deforestation issues.

However, there are two keys why Chinese timber products found everywhere, china has diversived its wood industry and has improved its valued added through technology.

Some reactions on the agreement also found here and here.