Governing the teak furniture business: A global value chain system dynamic modelling approach

Publication Type: 
Published On: 
2008

Indonesian teak forest plantation contributes to more than 35% of world teak forests. Perhutani, a state owned company, manages one million Ha of teak plantation area, while local communities manages teak agro-forests outside the state forest that amounts to 160,000 Ha. Javanese teak provides employments and livelihoods to millions of people. However, teak related income distribution is rarely known as well as future scenarios to make it fairer and sustainable viable to teak growers. This paper describes the use of systems dynamics to mimic value chain of teak from the forest to the final furniture market using phases of conceptual design, model specification, model evaluation and model uses. The model comprises Perhutani plantation teak, community agro-forest, teak log trading, furniture manufacturing and market. From the trends we observe Indonesian furniture role in world market is shrinking. The power asymmetry makes the furniture small-medium enterprises (SMEs) and teak growers get a small share of value added. Scenarios of boosting teak planting, fair trade and upgrading SMEs through vertical integration with lead firms can improve the sustainability of teak furniture business and enhance incomes of the poorest actors within the teak value chain.