Efficiency of Kalimantan’s Rattan Supply Chain Management from Upstream to Downstream

Authors: Gifrina Nyimas R. Abdullah, Diah Ilmi Rizqiana, Muhammad Prayogane, and Ratu Rembulan Ayuningtyas

Reviewer: Farid Al-Firdaus, Nadia Faradiba, Alfi Nabila, Dwi Martutiningrum, Yuni Asnidar and Nur Zahroh Hamidah

Indonesia 2045

The development of creative industry and economics is stated as part of the second pillar in Indonesia Vision 2045 that was released by the Indonesian Ministry of National Development Planning. This second pillar elaborates integration of the supply chain from upstream to downstream by connecting wider human-goods-service movement. This also relates to the third pillar: Equitable Development by building adequate infrastructure. These two pillars of Indonesia’s vision can be implemented by optimizing supply chain management of one of the biggest commodities: rattan.

Rattan in Kalimantan

Indonesia is a country with abundant natural resource commodities. According to the kompas.com article (2022), Indonesia’s primary commodities include shrimp, coffee, palm oil, cocoa, rubber, TPT, footwear, electronics, automotive, and furniture. Moreover, although around 80% of the world’s rattan materials come from Indonesia (Simanjuntak, Hotli. 2022), making Indonesia the biggest rattan producer in the world, Indonesia is still the world’s 21st biggest furniture exporter (Barus, Kormen. 2019). This data shows that by optimizing rattan production, Indonesia can become the largest exporter of rattan-based furniture commodities.

The enactment of the Minister of Trade Regulation 35 of 2011 regulates rattan export provisions in the form of export bans, and the stipulation of a 15% Value Added Tax (VAT) rate on raw rattan, random rattan, W/S (Washed and Sulfurized) rattan and semi-finished rattan. It aims to increase domestic rattan production to add economic value. However, unfortunately, the enactment of this regulation made rattan production in the form of furniture actually ‘sag’ sharply (Article Kalbar.antaranews. 2022). In the same article, rattan entrepreneurs explained that the closure of exports had put pressure on raw and semi-finished rattan prices due to the difficulty of achieving a break-even cost point and the impact on production being hampered because it was no longer profitable. This causes an anomalous condition where there is an oversupply of rattan, otherwise the rattan craftsman industry has difficulty getting the appropriate raw rattan materials in terms of price and quantity.

According to data from the Ministry of Forestry (2012), the Kalimantan Region has the highest rattan population in Indonesia, with a population of ± 75.45% of the total (Grace Hartanti, 2012, p. 496). Meanwhile, according to the Kompas.com article (2021), the majority of rattan craftsmen are located on the island of Java, including Cirebon, Jepara, Sukoharjo, and Yogyakarta. Under these conditions, a policy and innovation are needed that can not only meet the craftsmen’s demands for rattan raw materials but can optimize rattan processing to add economic value to residents in the Kalimantan region.

Current Issue of Rattan’s Supply in Kalimantan

Based on the research “Rattan Trade System in Katingan” by Septi Dhanik Prastiwi (2017), the obstacle in obtaining rattan raw materials is due to the extended scheme in rattan distribution. As described in the following flow.

Rattan distribution scheme in Kalimantan 

(Source: Tata Niaga Rotan di Katingan, Septi Dhanik Prastiwi (2017)

This extended distribution scheme is inefficient. The price of rattan before it reaches the industry has increased significantly due to the profits charged in each distribution chain, and in terms of the taxation aspect in the form of Value Added Tax, which is imposed on each distribution chain at the final VAT rate on plantation goods of 1.1%.

Optimizing the Kalimantan’s rattan supply chain

This research will highlight the anomalous conditions of rattan supply in Kalimantan from the perspective of infrastructure, human resources, and also distribution channels. 

Alternative Policies:

1. Infrastructure Development

Based on (Kereta Api Indonesia’s Journal of Logistics Costs), efforts to reduce logistics costs for goods/commodities are by increasing the efficiency of the transportation system, including roads and bridges. This can run optimally with the adequate quality of transportation infrastructure services, which is measured by Road Stability. Based on National Road Stability Data by D.G of Highways, a Survey of Road Conditions Semester II of 2022 in Central Kalimantan showed 84.22% Steady and 15.78% Not Steady. Furthermore, in Katingan Regency, the largest production of rattan raw materials in South Kalimantan only has road stability of around 36.72%. The data shows that highway and bridge infrastructure as a distribution route for superior commodities in the Central and South Kalimantan region, the center for producing the largest rattan production, has not been utilized optimally. Based on research by Kazunobu Hayakawa and Kenmei Tsubota (2022) argue that shorter travel times and distance to retail location can lower the commodity price by 2%. This research can be used as a benchmark to shows infrastructure improvements in distribution channels, both in terms of quality and quantity, greatly affect the amount of product sold through an innovation scheme, Improvement of Regional Roads (RIPJD) to increase road stability in rattan plantation centers on non-national highways such as in Katingan Regency.

2. Human resources improvement

Conducting training and educating the residents in the center of Kalimantan’s rattan

industry to give knowledge about rattan and how to process rattan into finished goods that can compete on an international scale. In 2011 (kompas.com), The Ministry of Industry built the National Rattan Innovation Center (PIRNas) based in Palu as the second largest area that provides rattan raw material, with a focus on quality improvement programs, training, and research and development of rattan-based furniture products. These are also aligned with the journal “The Influence of Operational Strategy on Power Rattan Competitiveness in the City of Palu” (2021) as benchmark for National Rattan Innovation Center (PIRNas) in Katingan. The decision to develop PIRNas infrastructure in the city of Palu has a significant effect on the competitiveness of the rattan industry. So it can also be implemented in Kalimantan in order to boost Kalimantan’s economy from rattan commodities.

3. Distribution Channel from Kalimantan to craftsmen

Realization of the Rattan Bulog in Kalimantan as planned by Jokowi in 2019 as a raw material center to guarantee the supply of raw materials for the domestic finished goods industry can support PIRNas Kalimantan implementation. Rattan Bulog existence can be the first step in the realization of Minister of Industry Regulation Number 90/M-IND/PER/11/2011 of 2011-2016 concerning a guide map for the development of furniture industry clusters.

Conclusion

So to optimize the supply chain management of rattan products from the Kalimantan Region, a solution is needed from the government, especially from the Ministry for Public Works and Housing, to make improvements in terms of infrastructure both in quality and quantity by RIPJD scheme. In addition, the government is synergizing between ministries to build a center for rattan product innovation, building a rattan vocational school in Kalimantan, providing incentives for the industry, and pushing for policies requiring rattan furniture in government agencies and schools. Meanwhile, rattan industry players can cut the distribution layer by creating a platform that connects the two parties directly (rattan’s farmer to craftsman) to be a cost-be-cost compressor. Eventually, the rattan’s price can compete in the global market. These perspectives will support Indonesia’s 2045 vision in the Sustainable Economic Development sector. These will encourage actors in the Rattan Industry from the upstream side (rattan farmers) to the downstream side (rattan craftsmen industry) and will make the Indonesian rattan industry rise and be able to dominate the world market of rattan.

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