Financial and Institutional Analysis of the Value Chain of Jepara Teak Furniture in Indonesia By Rachman Effendi 2} 2)

Transcription

1 Financial and Institutional Analysis of the Value Chain of Jepara Teak Furniture in Indonesia By Rachman Effendi 2} 2) Research and Development Center for Climate Change and Policy, Jl. Gunung Batu No.5, Bogor, Indonesia, Tel: , rch_167@yahoo.com 1)The Research conducted with the support of funding from Australian Centre for International Agricultural Research (ACIAR) Project No. FST/2007/119 8/27/2013 (CIFOR Project code: R-LIV ACI16) Mahogany and Clustering teak furniture: Jepara action Furniture research to improve Industry value chain efficiency and enhance livelihood 1 I. Background Activities of tf: Foreign exchange Growth of industry Create jobs -. forest manag, merchant, sawmill, furniture, finishing, and export Roda et al. (2007): 2005 at JFI: units : workers. BPS of Jepara (2007): units exporter, 68 countries. Competition : -. between the companies in the cluster -. Other companies in the different groups Successfull: -. the company itself -. supporting systems (policies) the relationship between the actors in the VC 1

2 Objective : : To identify institutional agencies along VC teak furniture Analyze the financial feasibility of each actor Formulate policies to encourage the teak furniture industry II. Research Methods study approach a principal agent, Financial Analysis: NPV, BCR, IRR (Davis et al. 2001) III. Results and Discussion 3.1. Furniture Industry Value Chain Teak Furniture industry -. foreign exchange earnings -. employment. Continuity : -. price, -. raw material Sources : Perhutani and community forests Sales side : domestic and export Partnerships -. buyers - furniture manufacturers -. log trader farmer -. craftsmen - log trader farmer -. buyers - furniture manufacturers craftsmen Relationship : Principal agent issue of mismatch Number of furniture industry competition 2

3 3.2. Identification of Institutional Value Chain Actors : -. Producers / timber growers -. timber merchants -, Sawmill owners, -. craftsmen, -. Owners finishing services, -. Domestic reatailer, -. exporters, and -. global buyers How Domestic flow, and the power to control : -. Furniture products purchaser (buyer-driven). Divorce chairs -. Buyers determine the design specifications and quality furniture -. Log price price for the craftsmen. Overseas Market Global Buyer Domestic flow, and the power to control Domestic Retailers Finishing Domestic Market Eksportir + Finishing/Mechanized Collector Craftsmen Sawmill Wood Trader Wood Perhutani Forest Production flows Power to drive Community Forest (Farmer) 3

4 3.3. Institutional Analysis and Partnership. a. Farmers and timber merchants Timber sales : tree stand Factors that most influence the level of funding needs of farmers Price (2010): Rp per tree (Ɵ cm, Rp 900,000, -/m3. Timber prices are more determined by the agent b. Merchant supplier and collecting timber merchant in Jepara Timber sales between traders supplier (principal) and middlemen (agents) = Quality and wood Ɵ The average selling price of teak is a merchant supplier of Rp 2,100,000 per m3 Wood sources: community forests (HR) and Perhutani Difference in the selling price of teak fr Perhutani and HR Ɵ cm: Rp /m3. c. Perhutani and wood trader Sales of wood by Perhutani: - Contracts, - Direct sales, - Auction sales - Sales through the wooden stalls Figure 2. Wood Teak Collection Points Average price of teak from Perhutani Ɵ cm: Rp 3.7 juta/m3 4

5 d. Jepara wood traders, craftsmen and sawmill services Price of teak log Ɵ cm: Rp per m3, Figure 3 Teak furniture of craftsman production e. Craftsmen and sawmill industry and finishing services Sawmill services: Rp 100,000 - Rp /m3 Finishing services varies affected: -. the model and size of the furniture -. types of finishing (natural and antique) Figure 4 Various types of teak furniture of craftsman production 5

6 f. Craftsmen and domestic retailers and exporters -. Orders fr overseas buyers usually subcont to the craftsmen. -. Principal-agent relationship occurs at two levels 1 between the buyers and exporters 2 between exporters by craftsmen -. Product specifications: product type, size, model, and quality Figure 5.Teak Chairs of furniture industry production 3.4. Financial Analysis Assumptions : 1) Production period of teak from forest community for 15 years, from Perhutani for 30 years and the other actors for 10 years 2) Interest rates : 12% 3) Cropping pattern of teak from forest community are intercropping system with peanut crops to plant teak 4 years old 4) Timber teak volume from forest community w/ area 2 ha estimated 875 m3, a number of plants is of 1250 and stumpage price of Rp 900,000, - per m3 6

7 Table 2. NPV, BCR and IRR of each actor along the teak furniture value chain No. Actor NPV (x IDR) BCR IRR (%) Remarks 1 Farmer 134, ,5 Area 2 Ha, 15 years 2 Traders Supplier 328, ,4 3 Traders collectors 285, Perhutani 288, Area 2 Ha, 30 years 5 Sawmill industry 38, craftsman Furniture 13, Medium Scale Industries 685, Large Scale Industries 9,317, Retailer 33, all business activities feasible to be developed NPV> 0. BCR> 1 and IRR> 12%. partnership effective BCR Criteria the teak cultivation IRR criteria retailers 7

8 3.5. Policies scenario Further increase in real attention to development of small scale industries (craftsmen) cause furniture industry is buyer driven Promote open new outlets Develop policies to reduce the cost (improved efficiency) Improve synergy build the furniture industry cluster. IV. Conclusions and Recommendations 4.1. Conclusion 1. Actors involved: consists of a few actors who are in or outside Jepara, Patterns of partnership is a principal-agent relationship. 2. Craftsmen (agents) production based on the order the buyer (the principal). Asymetic information between timber merchants and farmers resulted in the position of farmers as price takers 3. All teak furniture business activities along the VC are feaseable to be developed and it has effectively 8

9 4.2. Recommendation Necessary policy 1) Incentives for community forest farmers, 2) Promote craftment teak furniture product, 3) Development of marketing, 4) Capacity building of craftsmen 9