L

acking in rattan supply, the nation's furniture and handicraft industry have proposed to the government to take off the 10 percent value-added tax on semi-processed rattan sales in the domestic market.

Ambar Tjahyono, chairman of the Indonesia Furniture Industry and Handicraft Association (Asmindo), said the removal of the tax was needed as producers now prefer selling it to overseas markets.

"We have had discussions with the Trade Ministry and Industry Ministry on the proposal," Ambar told The Jakarta Post on Friday.

Asmindo hopes that the removal of the value-added tax will encourage suppliers to intensify their supply of rattan to local furniture and handicraft companies, which depend largely on the commodity for their raw material.

The removal on the tax will also enable craftsmen to purchase raw material at a cheaper price, so helping to make their final products more competitive.

Higher costs and a lack of rattan supply have been the major problems facing the rattan furniture and craft industries over the years.

Despite Indonesia contributing some 80 percent of the world's rattan supply, local craftsmen have often faced problems when it comes to accessing raw materials.

As well as value-added taxation on the domestic sales of rattan products, better export prices for rattan have also discouraged suppliers from selling to the domestic market.

The commodity's price in the domestic market is around Rp 10,000 (US 80 cents) per kilogram while according to a report on the Industry Ministry website, the export based prices for the commodity are between $0.82 and $1.40 per kilogram.

To ensure rattan availability in the local market, the government has introduced a regulation banning the export of the commodity in 2005. But recently, the government lifted the regulation.

Asmindo discussed with the government how to sustain the availability of rattan domestically after the regulation is lifted, and came out with some other suggestions.

"First, every rattan supplier must fulfill their obligations by supplying 70 percent of their output to the local market and second, Asmindo will hold a monthly audit to ensure implementation of this provision."

Despite the problems however, the country managed to increase its furniture exports to $2.7 billion in 2008, from $1.9 billion recorded in the previous year.

"We try our best to at least retain exports for 2009 at the same level as in 2008, during the global crisis. We will also diversify our market. We will try to penetrate markets in Russia, Latin-America and the Middle-East."