Indonesia's timber wealth fails to close furniture export gap with Vietnam
Vietnam became the world's second-largest furniture exporter in 2025, having ranked below Indonesia in 2000, the Indonesian Ministry of Industry said. Jakarta is pushing machinery modernisation, backed by a reimbursement of up to 35 percent of equipment investment, to convert abundant timber into competitive exports.
Indonesia's furniture industry has ample domestic timber and a solid demand base, yet it continues to trail Vietnam in global export standings, the Indonesian Ministry of Industry said in remarks reported by Liputan6.com on 24 September 2026.
Putu Juli Ardika, Acting Director General of Agro Industry at the ministry, said the sector is expanding but that raw material abundance on its own has not produced competitiveness. "Indonesia has good potential because it has a large availability of wood," he said.
Vietnam moved from behind Indonesia to second place worldwide
Vietnam was recorded as the world's second-largest furniture exporter in 2025, according to the ministry. In 2000, Vietnam ranked below Indonesia. Putu attributed the reversal to Vietnam's build-out of production capacity and industrial technology rather than to any advantage in raw material supply.
Wood remains the dominant input in the sector. In 2026 it accounts for roughly 62 percent of the global furniture market, the ministry said. Liputan6.com, citing Putu, reported the domestic furniture market value at USD 736.21 billion in 2025. "This shows the importance of strengthening technology and modernising production machinery to raise the competitiveness of national industry," he said.
Machinery reimbursement of up to 35 percent
The ministry identifies faster modernisation of machinery and production equipment as the most immediate lever available to Indonesian manufacturers, aimed at lifting both efficiency and installed production capacity.
The government operates a machinery modernisation support programme that reimburses up to 35 percent of a company's investment in machinery and equipment. According to results presented by the ministry, modernisation of machinery and equipment raised efficiency by 10.70 percent, quality by 36.28 percent and productivity by 32.65 percent.
"These results show that modernisation of machinery and equipment is one of the important factors in supporting the competitiveness of the wood processing and furniture industry, through better product quality, operational efficiency and higher production capacity," Putu said.
Four priorities for the wood and furniture chain
Looking ahead, the ministry set out four agendas it considers necessary to make Indonesia's wood processing and furniture industry more competitive:
- Integration of upstream and downstream industry and stronger raw material traceability, so that supply chains are robust, legal and able to meet the demands of global buyers.
- Technology modernisation and higher productivity, on the basis that the industry cannot rely on its raw material advantage alone.
- Transformation of design and sustainability, including research, design development and certification, so that Indonesian products compete on quality and identity rather than price alone.
- Strengthening the domestic market through greater use of locally made products, with the home market treated as the foundation before export expansion.
Alongside equipment, the government is also promoting workforce development, the strengthening of small and medium industry (IKM) centres, adoption of Industry 4.0, design development and improvements to the business climate. "In the end, the direction we are aiming for is to move Indonesia's wood processing and furniture industry up a class, more competitive and still sustainable," Putu said, adding that the effort requires collaboration between government, industry, associations, academics and other partners in the industrial ecosystem.
