In recent months, Indonesia has pushed to ban the export of raw natural resources, one notable resource being rattan. Rattan, a bamboo-like plant is a popular material in furniture products and comprises a large portion of Indonesia’s massive furniture industry. The new rattan regulation and the surrounding issues involving enforcement and infrastructural investment are representative of a larger trend in Indonesia to keep raw materials in the country.
Recently, wood-producers in Indonesia have been exporting one-third of their raw-rattan, leaving a shortage for local rattan furniture manufacturers. New regulation will attempt to change Indonesia from a raw exporter to a finished-product exporter. There is a slight risk of a decline in business as wood-producers are forced to shift their normal practices, but the moratorium on raw exports will likely help the domestic economy in the long-term.
Exports of rattan furniture have slowed since 2008 and exporting raw materials is not helping the domestic rattan industry. Instead of selling raw rattan to Indonesian furniture manufacturers, much of Indonesia’s rattan is sent to furnishing suppliers in other countries like China. Regulation keeping raw materials in the country will inevitably help strengthen the industry as a whole.
Bans on raw exports can be difficult to fully enforce. Smuggling is likely to become more common especially in an archipelago where products are shipped from island to island, leaving many opportunities for materials to change course at sea. Indonesia will have to supplement these export bans with much stronger customs enforcement.
Policies are in the works to stop the export of raw mining commodities as well as crude palm oil. These new regulations will need to be supported by more infrastructural development in the country. Indonesia has given these policies until 2015 to go into full effect. In the preceding years there will likely be a large-scale effort to build out each industry so that the entire process from raw material to finished product can be managed domestically.
Indonesia’s handling of its rattan industry is a micro example of a macro trend. Indonesia and similar emerging economies are trying to keep their natural resources within their borders. Larger economies with more developed industries are importing raw materials from less developed countries and manufacturing finished products. In an effort to grow more comprehensive industries, emerging economies need to invest in creating complete, domestic supply chains.
As emerging economies reduce their raw exports and increase their domestic production capabilities, investment is key. Attracting interest from foreign businesses is necessary to gain capital to build more robust industries. Large-scale growth takes time but reducing and even eliminating exports of raw materials is a step in development taken by many of today’s leading economies.