Thousands of employees in Indonesia’s upstream and downstream forestry industries have been laid off due to sluggish international demand for plywood products.
The Association of Indonesian Forest Concession Holders (APHI) says policy incentives are needed to prevent the current situation from continuing.
According to APHI data, in the first half of 2024, 2,400 employees working in Forest Utilisation Business Permit-Natural Forests (PBPH-HA) companies were laid off, while 125 others were sent home.
Layoffs also occurred in the plywood processing industry. It was reported that 6250 people working in three plywood industry groups were laid off.
An APHI spokesman said the market continued to be slow in the aftermath of the Covid pandemic due to geopolitical conflicts.
“Weakening demand for plywood in the global market impacted the processing industry and PBPH upstream, the suppliers of raw materials,” he said, adding that “due to slow plywood export trade, there was a 913,000 cubic metres stock of natural forest logs from 35 permit holders that the industry has not absorbed.
“Many PBPHs are having difficulty operating because no one in the industry is buying the wood they produce while costs are getting higher due to various factors such as fuel prices,
Currently, only 94 out of 247 PBPH-HA units are in production. Roundwood production is also described as deficient. As of August, it was recorded at only 2.21 million cubic metres, or 39% of the annual production projection of 5.58 million cu m.
APHI has proposed several policy incentives to revive the forestry industry and avoid employee layoffs. One of them is expanding the range of processed wood products that can be exported.
APHI has proposed several policy incentives to revive the forestry industry and avoid employee layoffs. One of them is expanding the range of processed wood products that can be exported. To spur the processing industry and increase the absorption of wood production, APHI says the government should open the door to exporting sawn timber products to exploit marketing opportunities abroad.
“Sawn timber exports will increase demand for wood from PBPH while still providing added value to the processed wood industry,” forest concession holders said.
Meanwhile, Indonesia’s Ministry of Industry reports exports of domestic furniture products at US $1.2 billion from January to July 2024, after achieving export earnings of US $2.11 billion in 2023.
Regarding the figures, Director General of Small, Medium and Multifarious Industries (IKMA) Reni Yanita said the potential of domestic furniture products “was considerable”. She attributed the strong interest of global markets in Indonesian furniture to the fact that small and medium industry players continued to innovate and were able to adjust to market trends and consumer needs.
She said IKMA supported the development of local furniture IKM players so they could be more globally competitive, including through the implementation of production technical guidance, machine and equipment restructuring and development of IKM centres.
- To learn more about the challenges facing the global plywood industry, click here for Wood Central’s special feature.
