Stuck on an Export Ban?

Just like a number of mining commodities, the government also banned the export of rattan and rubber. However, is the development of the rattan and rubber upstream and downstream industries as serious as the mining downstream program?

The following article was translated using both Microsoft Azure Open AI and Google Translation AI.

KOMPAS/FERGANATA INDRA RIATMOKO

Workers are crafting furniture made of rattan in Luwang Village, Gatak, Sukoharjo, Central Java, on Monday (11/4/2022). The rattan handicraft industry is still a source of livelihood for hundreds of residents in the Transan area. Raw materials for the handicrafts are imported from Kalimantan.

The government has continued the export ban rattan and rubber to secure the raw material needs of the domestic industry. This policy emerged in the midst of a number of problems affecting the national rattan and rubber upstream and downstream industries. Is it enough to just stick to the export ban?

The ban on the export of rattan and rubber is regulated in Minister of Trade Regulation Number 22 of 2023 regarding Goods Prohibited for Export. The regulation signed by Minister of Trade Zulkifli Hasan on July 10, 2023, is effective from July 19, 2023.

In the regulation, the government prohibits the export of rattan that falls within ten classifications of goods codes (HS). These rattans include whole rattan, split cores, split skins, and are not more than 12 millimeters in diameter.

In addition, the government also banned the export of rubber other than in the form of ribbed smoked sheets (RSS) and natural rubber with technical specifications (TSNR) or the Indonesian Rubber Standard (SIR). The rubber banned for export is included in the ten HS codes, including natural rubber in its original form, plates, sheets and strip.

The ban on the export of rattan and rubber is a continuation of Trade Ministry Regulation No. 18/2021 regarding Prohibited Export Goods and Prohibited Import Goods which was replaced by Trade Ministry Regulation No. 22/2023. Regarding the ban on the export of rattan, the government has repeatedly changed the policy since 2004.

The policy changes include a ban on the export of raw and semi-processed rattan of certain diameters, as well as raw rattan. These policy changes were also influenced by certain conditions, such as a shortage of raw materials in the rattan furniture industry, an excess of rattan production, and the influx of foreign rattan furniture made from Indonesian raw materials into the domestic market.

The policy changes range from prohibiting the export of raw and semi-processed rattan with a certain diameter to raw rattan.

Also read: Industry Downstreaming and Development

Until now, the classic issue continues to arise and repeat. The rattan furniture industry often complains about the shortage of raw materials, while rattan producers often echo that rattan absorption in the country is not yet optimal. One party wants the ban on rattan exports to continue, while the other requests the ban to be lifted.

On March 2, 2020, the Minister of Cooperatives and Small and Medium Enterprises, Teten Masduki, stated that there is an anomaly in the national rattan industry. Upstream, rattan production is abundant, while downstream, the rattan furniture industry experiences a shortage of raw materials.

Actually, there is an inappropriate upstream and downstream policy. The industry cannot absorb all the production of semi-finished rattan. When the export ban continues, rattan smuggling occurs, around 10,000 tons per month. Three years later, when visiting Palangkaraya, Central Kalimantan, on July 14, 2023, Teten announced that the potential of rattan in Central Kalimantan is around 10,000 tons per month, but only a maximum of 1,000 tons is absorbed.

Meanwhile, the Central Statistics Agency notes that in 2018-2022, the trend of exporting furniture products made of rattan or bamboo has increased. In 2018, the export value of these products was 115.6 million US dollars. In 2022, this value increased to 186.8 million US dollars, although it is lower than in 2021, which was 191 million US dollars.

It shows that the ban on rattan exports can increase the export of rattan furniture. On the other hand, the export ban also contributes to the low absorption of rattan production upstream.

There is an anomaly in the national rattan industry. Upstream, rattan production is abundant, while downstream, the rattan furniture industry experiences a scarcity of raw materials.

Also read: The Great Potential of Central Kalimantan Rattan for Policy

KOMPAS/IRMA TAMBUNAN

Various types of rubber processing machines and equipment are idle at a tire retread compound factory in Pelawan Village, Singkut District, Sarolangun Regency, Jambi, Wednesday (12/7/2017). Since it was inaugurated in 2015, the processing business has not been running because the managing farmers have been hampered by capital.

Facts and data

The national rubber industry is also facing a similar fate. The ban on the export of certain forms of rubber has been in place since 2021. Not only that, Indonesia, Thailand, and Malaysia, which are members of the International Tripartite Rubber Council (ITRC), also have policies limiting the export quota of rubber to maintain global raw rubber prices.

That was done through the Agreed Export Tonnage Scheme (AETS) or a mechanism to reduce rubber exports based on export allocation. Since 2002, ITRC has implemented AETS six times to overcome the decline in world rubber prices.

Currently, the ban on the export of certain forms of rubber has resumed following the issuance of Ministry of Trade Regulation No. 22/2023. The ITRC is also committed to implementing AETS if the price of raw rubber in the world drops at any time.

Also read: North Sumatra's Rubber Industry Falls from Upstream to Downstream

On the other hand, the condition of the national rubber industry this year is currently in a slump. According to data from the Indonesian Rubber Manufacturers Association (Gapkindo), the number of rubber factories in Indonesia in 2017 was 152. This number continued to decrease to 107 factories in 2022. Of these, 45 closed factories had a total capacity of 1.4 million tons per year, while the rubber factories that are currently operating have a total capacity of 4.2 million tons per year.

Gapkindo said the closure of the crumb rubber factory was due to a shortage of raw material supplies. Industries that still survive are forced to import rubber raw materials. The decline in rubber production occurred due to the conversion of rubber land to oil palm, as well as the low productivity of rubber plantations because they are 20-30 years old (Kompas, 8/7/2023).

Also read: Rubber Factory Closing May Continue

Amid the ongoing ban on rubber exports and supply shortages, BPS noted that the value of rubber exports and the area of rubber plantations in Indonesia have increased, while rubber production has tended to decline. Rubber and related exports, that were valued at 56.6 million US dollars in 2018, have increased to 67.9 million US dollars in 2022.

In the last five years, 2018-2022, the area of rubber plantations in Indonesia has also increased from 3.67 million hectares in 2018 to 3.83 million hectares in 2022. Meanwhile, national rubber production, which was 3.63 million tons in 2018, decreased to 3.14 million tons. In 2020 and 2021, national rubber production plummeted to 2.88 million tons.

Hopefully rattan and rubber, which are also Indonesia's main commodities, are treated with the same seriousness as the government's flagship program, namely mineral downstreaming.

Despite the differences in facts and data, there are issues in the national rubber industry that need to be addressed. The same goes for the rattan industry, where concrete solutions are needed to overcome anomalies in supply and demand.

It is not enough for the government to only stop at export ban policies. Upstream-downstream arrangement of rattan and rubber industries is also necessary. The rattan industry requires strong integration between raw material suppliers and industry actors and expanding the rattan furniture and craft markets both domestically and abroad.

Meanwhile, the rubber industry requires rejuvenation of rubber plants to increase production. The government also needs to address the conversion of rubber lands, as well as grow the market and downstream rubber in the country. This downstream does not only cover the downstream finished product industry, but also the intermediate industry (intermediate).

Hopefully, rattan and rubber, which are also main commodities of Indonesia, will be treated as seriously as the government's pride program, which is the downstreaming of mining. It is not enough to merely ban the export of rattan and rubber without providing a solution to the annual cycle of problems.

Also read: RI is Committed to Maintaining Prices and Initiating Regional Rubber Exchanges