Indonesian Furniture Makers Shutting Factories, as Orders Shift to Vietnam

FEBRUARY 23, 2015

Jakarta. Furniture producers in East Java are starting to close down their factories as some $40 million in furniture orders from Europe and United States shift to Vietnam, which sells furniture at cheaper prices.

There were 2,400 employers at risk of being unemployed, as businesses battle with red tape, higher minimum wages and the increase in the electricity tariff, business associations said.

“Vietnam sells the same kind furniture we produce in East Java but at a lower price,” East Java Employers Association Communication Forum vice chairman Peter S. Tjioe said over the weekend.

Peter said that businesses have to cope with the 20 percent rise in workers’ monthly wages to Rp 2.7 million ($210) and the electricity tariff increase of between 39 percent and 65 percent last year ­—  depending on the company’s electricity usage.

Compliance to the timber legality verification system, which involves inter-agencies’ tracking system, also added costs for businesses, he said.

Two furniture export factories in Mojokerto in East Java, each of which has 200 workers, stopped operations in January, after not being able to pay wages, Peter said.

There could be more furniture producers reducing their workforce, said Nur Cahyudi, head of East Java Furniture and Handcrafts Association.

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