KUCHING: The Indonesian Furniture and Handicraft Industry Association (HIMKI) has drawn up strategic steps to deal with the impact of the 10 per cent-20 per cent additional import tariff policy planned by the incoming US President Donald Trump’s administration.
Trump will take office on January 20, 2025.
The new policy, if implemented, is expected to affect the performance of Indonesia’s furniture and handicraft exports, considering that 52 per cent of Indonesia’s total furniture exports, worth US$1.3 billion per year, are destined for the US market.
The association’s chairman, Abdul Sobur, said the US plan to increase the import tariff will suppress the competitiveness of Indonesian furniture products in the US market.
“This has the potential to reduce demand from US consumers and affect domestic industry players. For this reason, HIMKI has prepared a number of strategic steps to reduce dependence on the US market while strengthening industrial competitiveness,” he was quoted by Indonesian media KONTAN, as reported by the International Tropical Timber Organisation (ITTO) Tropical Timber Market Report (December 1-15, 2024).
In efforts to mitigate the impact of the increase in US import tariffs, HIMKI has established intensive communication with the Indonesian government. Some of the measures proposed include negotiating a trade agreement with the US to obtain preferential tariffs, providing incentives for exporters by reducing import raw material tax rates, and supporting the rejuvenation of production technology.
HIMKI also encourages the strengthening of economic diplomacy through cooperation with the Ministry of Trade and Ministry of Foreign Affairs to open new market access and overcome trade barriers.
Sobur stressed that cooperation between HIMKI, industry players, and the government is urgently needed to minimise the negative impact of the US import tariff policy. With these steps, HIMKI is optimistic that the competitiveness of Indonesian furniture and handicraft products can be maintained in the global market, even though the challenges faced are quite severe.
“With collaboration between HIMKI, industry players, and the government, we hope that the negative impact of the increase in import tariffs in the US can be minimised, and the competitiveness of Indonesian furniture and handicraft products will be maintained in the global market.
“Although it is certainly not easy for us as a labour-intensive industry, the government’s presence is now more significant for export-based industry players,” he added.
Sobur said this is the right time for the government to pay greater attention to labour-intensive sectors, like furniture and handicrafts, which contribute significantly to the Indonesian national economy.
Diversification of export markets is HIMKI’s main focus by expanding the target market to developing countries, such as India, China, and the Middle East region. Over the past two years, HIMKI has held exhibitions and promotions in these regions to open new market access. Sobur said this step is vital to reduce dependency on traditional markets like the US and Europe, which are now facing weak demand.
In addition, HIMKI encourages increased production efficiency through technological rejuvenation and increased productivity. Sobur added that government support, especially subsidies for new technologies, is necessary to ensure Indonesian products remain competitive in the global market.
Not only focusing on exports, HIMKI also strengthens the domestic market through the Domestic Component Level (TKDN) utilisation programmes. The association sees great potential in the domestic market, especially through the use of the government budget to support local products.
Meanwhile, Indonesia and Canada have signed a joint statement on an Indonesia-Canada Comprehensive Partnership Agreement (ICA-CEPA), which will widen market access for Indonesian products in Canada.
According to Indonesian Minister of Trade Budi Santoso and Canadian Minister for Export Promotion, International Trade and Economic Development Mary Ng, the agreement was concluded after more than two and a half years of negotiations between the two countries.
Santoso said that in addition to the trade of goods, the agreement covers preferential treatment for Indonesian service providers in sectors such as telecommunications, construction, tourism, and transportation.
The ICA-CEPA will also facilitate access to investment in the manufacturing, agriculture, fisheries, forestry, mining, quarrying, and energy sectors.
The agreement includes other commitments, such as intellectual property rights, good regulatory practices, electronic commerce (e-commerce), business competition, small and medium enterprises, women’s economic empowerment, the environment, and employment.
In conjunction with the signing of the ICA-CEPA, a Canadian trade mission to Indonesia between December 1 and 3 brought more than 180 Canadian company executives to explore cooperation opportunities with Indonesia in priority sectors such as agriculture, clean technology, information technology, and infrastructure.
Ng was quoted as saying that now is the right time for Canadian businesses and investors to expand into Indonesia, Southeast Asia’s largest economy. On the other hand, it is also the right time for Indonesian businessmen and investors to expand into the North American market.
The value of Indonesia-Canada trade over the last five years (2019-2023) rose by 11.24 per cent, with a trade value of US$3.4 billion in 2023. In the first nine months of 2024, Indonesia-Canada trade stood at US$2.6 billion, reflecting growth of about 4.1 per cent over the same period in 2023.
Indonesia’s leading export products to Canada include telephone sets, waste scrap, natural rubber, and suitcases, while the country imports mainly wheat, mineral and chemical fertilisers, soybeans, chemical pulp, and wood pulp from Canada.
In another development, Indonesia’s Coordinating Economic Affairs Minister Airlangga Hartarto said the country’s strong economic fundamentals make Indonesia an attractive destination for US investments.
At a roundtable hosted by the US-ASEAN Business Council in Washington, Airlangga highlighted Indonesia’s readiness to enhance economic cooperation with the US following leadership transitions in both countries.
He briefed US executives on Indonesian President Prabowo Subianto’s economic agenda and the government’s roadmap for achieving the “Golden Indonesia 2045” vision, which aspires to make Indonesia a developed nation by its centennial anniversary. The new Indonesian administration targets an ambitious eight per cent annual economic growth over the next five years.
The ITTO report stated that the American business community expressed keen interest in Prabowo’s food security and energy transition strategies.
