The Bamboo and Rattan Sectors in Asia: an Analysis of ... - INBAR

Further up the PCS, export regulations (or fiscal mechanisms applying to exports)
have a strong impact on the sector, especially in Indonesia where rattan production
exceeds domestic consumption. In effect, such export barriers serve as a tax on raw
material producers, and a subsidy to manufacturers and exporters of finished products.
In other words, it reinforces an existing imbalance of power in favor of manufacturers
and exporters to the disadvantage of raw material producers.
The main fiscal incentives operating in the rattan sector currently are the taxes
on the export of raw material that replaced the original regulatory export restrictions.
Indonesia and the Philippines have imposed such taxes. The effect is essentially the
same as that of the regulatory mechanisms because the taxes are so high as to be
prohibitive. However, unlike the outright ban, the tax mechanism allows for some
incremental adjustment. That is, the tax could be reduced to encourage some exports
of raw material while still keeping prices down in the producing country. In Indonesia,
for example, small-diameter cane is available in surplus, and prices are so low that
some rattan gardens are being converted to other uses. At the same time, there is a
demand on the international market for small-diameter cane, and for semi-processed
cane products such as core and skin. Indonesian rattan producers and semi-processors
are, however, unable to cash in on this situation as export bans and prohibitive taxes
(and especially mechanisms that restrict the trade of semi-processed material) preclude
selling to this market.
The trade-offs in this are difficult to measure. As the leading producer of rattan,
Indonesia may be in a position to exercise a degree of control over the market. By
preventing raw material from entering the world market, they are able to offer a twofold,
short-run competitive advantage to domestic rattan products manufacturers:
first, foreign competitors have reduced access to raw material and second, domestic
raw material prices are kept relatively low. However, this advantage in the processing
sector is gained at the cost of considerable foregone earnings for unprocessed and
semi-processed rattan to the raw material producers and semi-processors. Moreover,
the long-run effect of this artificial reduction in demand for raw material maybe
reduced production of raw material in the country. A new, lower, supply equilibrium
may be reached within the country as marginal producers switch to other activities.
Additionally, the policy may stimulate a further shift as offshore competitors seek
alternative source of raw material supply from non-traditional suppliers (different
countries, cultivation) and reduce their rattan requirements through substitution. The
study shows that these trends are already well underway.
The main government investment in the bamboo sector has been in direct
management of bamboo resources (especially in India). Research has been limited in
most of the countries studied. Additionally, there are government-supported training
programs for artisans and craft workers in several countries, and some limited
assistance with trade and export promotion. Generally speaking, there has been
relatively little investment in the sector relative to its value ---- another indication that
the sector is undervalued by governments.
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