The Furniture Sector in Pakistan

Transcription

The Furniture Sector in Pakistan
— Export performance and potential
— Implications of the WTO Agreements
August 2007
This publication has been produced with the assistance of the European Union (EU) as part of an
EU-funded Trade Related Technical Assistance (TRTA) programme with the Government of Pakistan.
The International Trade Centre (ITC) is implementing the programme. The content of this publication is
the sole responsibility of the consultants. Facts and figures set forth in this publication are the
responsibility of the consultants and should not be considered as reflecting the views or carrying the
endorsement of the EC, ITC, UNCTAD, or WTO. The factual details and in-country resources in the
publication have been researched and compiled by the consultants. ITC has not formally edited this
report.
© International Trade Centre (UNCTAD/WTO)
Palais des Nations, 1211 Geneva 10, Switzerland
Email: [email protected]
http://www.intracen.org
Distribution: UNRESTRICTED
September 2007
ITC: The Partner in Export Development
ITC Mission
ITC enables small business export success in developing countries by providing, with partners, trade
development solutions to the private sector, trade support institutions and policy-makers.
ITC strategic objectives
f
Enterprises – Strengthen the international competitiveness of enterprises.
f
Trade support institutions – Develop the capacity of trade service providers to support businesses.
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Policy-makers – Support policy-makers in integrating the business sector into the global economy.
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Acknowledgements
The report was prepared by:
•
Morten Scholer, Senior Market Development Adviser, International Trade Centre (ITC),
Geneva, Switzerland
•
Jukka Tissari, Wood and Furniture Industry Consultant, Finland
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Bastiaan Bijl, Trade Data Analyst, Independent Consultant, New Delhi, India
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Madiha Butt, Research Executive, Aftab Associates (Pvt) Ltd, Lahore, Pakistan
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Inaam ul Haque, WTO Adviser, WTO Cell, Planning and Development Department,
Government of the Punjab, Pakistan
Inputs and support by:
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H. Aftab Ahmad, CEO, Aftab Associates (Pvt) Ltd., Lahore, Pakistan
•
Quratulain Ibrahim, Executive Director, Aftab Associates (Pvt) Ltd., Karachi, Pakistan
•
Arif Ahmed Khan, ITC National Programme Coordinator, Islamabad, Pakistan
•
Kaneez Fatima, Research Executive, Aftab Associates (Pvt) Ltd., Lahore, Pakistan
•
Saeed Mazhar, Research Executive, Aftab Associates (Pvt) Ltd., Karachi, Pakistan
•
Imran Akram, WTO Cell, Planning and Development Department, Government of the
Punjab, Pakistan
•
Fayyaz Riaz Ahmed, SMEDA, Lahore, Pakistan
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Zahid Saeed (Vice Chairman PPMA 2005-06), Karachi, Pakistan
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Turhan Baig, President, APFEA, Karachi, Pakistan
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Maqbool Illahi, Vice President, APFEA, Lahore, Pakistan
•
Rasheed Ali, Editor, Lahore, Pakistan
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Muhammad Ali, Co–Editor, Lahore, Pakistan
•
Julie-Anne Lee, Business Advisory Services Consultant, ITC, Geneva, Switzerland
•
Maryam Yunus, Formatter/Proof Reader, Lahore, Pakistan
The companies that provided input to our queries (In alphabetical order):
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Diamond Furniture Centre
H.R.H. Heritage
Hakam Furnishers
International Furnishers (Pvt) Ltd.
Interwood Mobel (Pvt) Ltd.
Iqbal and Brothers Furniture House
Khalil Wood Tech
Laiq and Co
Mohkam Furnitures
National Wood Furniture
Pak Rosewood Furniture Co.
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•
•
•
•
•
•
•
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Playfurn
Rose Wood Furnitures
Salima Marble Works
Sameena Abbas design studio
Samina Khan
Virsa Furniture Interiors
Wood Pecker Art Furnishers
Woodco Furniture
International Trade Centre
Abbreviations
AFTA
AHEC
AKTRIN
APFEA
ASMINDO
CAD
CARB
CBI
CBR
CEN
CFTMCs
CIF
CMI
CoC
CSIL
DDA
DIY
DSU
DTR
ECE
ECG
EDF
EN
EPB
EU
FAO
FCCI
FIRA
FSC
FTA
GATS
GATT
GoP
GSP
GVG
HR
IFRG
ILO
IMF
IPO
IPRs
ISO
ITC
ITTO
KD
LDC
MDF
ASEAN Free Trade Area
American Hardwood Export Council
US-based consulting firm
All Pakistan Furniture Exporters Association
Indonesian Furniture and Handicraft Association
Computer Aided Design
California Air Resource Board
Centre for the Promotion of Imports from Developing Countries (The Netherlands)
Central Board of Revenue
Comite européen de Normalisation
Technology Transfer Centres
Cost, Insurance & Freight (included)
Census of Manufacturing Industries
Chain-of-custody Certification
Centro Studi Industria Leggera
Doha Development Agenda
Do-It-Yourself
Disputes Settlement Understanding
Double Taxation Relief
Economic Commission for Europe
Executive Core Group
Export Development Fund
European Standards
Export Promotion Bureau (now Trade Development Authority of Pakistan)
European Union
Food and Agriculture Organisation
Federation of Chambers of Commerce and Industries
Furniture Industry Research Association
Forest Stewardship Council
Free Trade Agreement
General Agreement on Trade in Services
General Agreement on Tariffs and Trade
Government of Pakistan
Generalised System of Preferences
Global Value Chains
Human Resources
International Furniture Research Group
International Labour Organisation
International Monetary Fund
Intellectual Property Organisation
Intellectual Property Rights
International Organisation for Standardisation
International Tropical Timber Organisation
Knocked-down
Least Developed Countries
Medium Density Fibreboard
iii
MIS
MNC
MNF
MoC
MTN
NAMA
NF
NGOs
PIDC
PIFFC
PSC
R&D
RFID
RMI
RTA
SAFTA
SMEDA
SMEs
SOP
SP
SPS
SWOG
SWOT
TBT
TDAP
TQM
TRADA
TRIMs
TRIPs
TRTA
TTF
UAE
UNIDO
USAID
WTO
iv
Market Information System
Multi National Companies
Most Favoured Nation
Ministry of Commerce
Multilateral Round of Negotiations
Non-Agriculture Market Access
French Standards Ameublement
Non-Governmental Organisations
Pakistan Industrial Development Corporation
Pakistan International Freight Forwarders Council
Pakistan Shippers Council
Research and Development
Radio Frequency Identification Device
Renovation, Maintenance and Improvement
Ready-to-Assemble
South Asian Free Trade Area
Small and Medium Enterprise Authority
Small and Medium sized Enterprises
Standard Operating Procedures
Special Products
Sanitary and Phytosanitary Measures
Strategy Working Group
Strength, Weakness, Opportunity and Threat
Technical Barriers to Trade
Trade Development Authority of Pakistan (previously Export Promotion Bureau)
Total Quality Management
Timber Research and Development Association, UK
Trade-Related Investment Measures
Trade-Related Aspects of Intellectual Property
Trade-Related Technical Assistance
Timber Trade Federation
United Arab Emirates
United Nations Industrial Development Organisation
United States Agency for International Development
World Trade Organization
Table of contents
Acknowledgements
i
Abbreviations
iii
Executive summary
1
Findings
1
Recommendations
2
Conclusions
4
1 Background and objectives
5
1.1 EC TRTA Programme for Pakistan
5
1.2 Five sector studies
5
1.3 Methodology
6
2 Furniture sector in Pakistan
2.1 The sector in general
7
7
2.2 An overview of existing studies, strategies and policy papers
37
2.3 SWOT analysis of Pakistani furniture companies
43
2.4 Furniture association and its role in services
45
2.5 Case stories on data collection
46
3 Implications of WTO Agreements
50
3.1 Background
50
3.2 Information on the WTO issues
53
3.3 Implications of the WTO Trade Agreements
58
3.4 Trade conditions of the Pakistani furniture sector
70
4 Obstacles and shortcomings to export
76
4.1 Obstacles and shortcomings – exporters’ opinions
76
4.2 Obstacles and shortcomings – importers’ opinions
79
5 Export services in Pakistan
87
5.1 Export service providers
87
5.2 Export services as they actually are – expressed views
91
5.3 Export services as they should be – expressed views
92
5.4 Other export services – Malaysia as example
92
v
6 Conclusion and recommendations
95
6.1 Recommendations for parties involved
95
6.2 Critical success factors
97
6.3 Elements of success
97
6.4 Global value chains
99
6.5 Recommendations - some details
99
6.6 The way forward – if we had a million
Annexes
Annex A — Sources of information and useful websites
References
100
109
109
114
List of Tables
Table 2.1 HS and SITC product codes for wooden furniture ............................................. 10
Table 2.2 Origin of wooden furniture imports for 5 top importing countries, 2004-05 (%) . 15
Table 2.3 Pakistani furniture exports 2001-05................................................................... 17
Table 2.4 Comparison of furniture clusters........................................................................ 41
Table 2.5 Middle East furniture imports............................................................................. 48
Table 3.1 Top 10 furniture suppliers to Pakistan ............................................................... 71
Table 3.2 Top 10 buyers of the Pakistani furniture - Tariffs and share of exports ............. 73
Table 4.1 Market Information System: Basic questions .................................................... 86
List of Figure
Figure 2.1 Raw material and product flows in forest industries ........................................... 8
Figure 2.2 Wooden furniture imports by top 5 importing countries, 2001- 05 .................... 14
Figure 2.3 Imports of Chinese furniture by major markets 2005 (US$ mill.) ...................... 16
Figure 2.4 Distribution structure for furniture in the European Union ................................ 19
Figure 2.5 Simplified example on chain of custody of wood in furniture ............................ 33
Figure 2.6 Example of FSC label and on-product claim .................................................... 34
Figure 3.1 Functional scope of the WTO ........................................................................... 51
Figure 3.2 WTO information flows ..................................................................................... 54
Figure 3.2 Relevant intensity of WTO Agreements ........................................................... 59
List of Boxes
Box 2.1 Technology levels in furniture industries of the developing countries .................. 11
Box 2.2 Recent changes in global furniture trade.............................................................. 13
Box 2.3 Production flow improvements: a practical approach ........................................... 20
Box 2.4 Shortage of rosewood (Sheesham) – What are the options?................................ 21
Box 2.5 California formaldehyde emission regulations...................................................... 26
Box 2.6 Exclusive procurement policy of the London Olympics 2012 ............................... 28
Box 2.7 UK Timber Trade Federation announces high-risk sources ................................. 31
Box 2.8 Workshop on certification and sustainability for furniture manufacturers ............. 32
Box 2.9 Egyptian furniture screens Las Vegas show ........................................................ 36
Box 2.10 USAID initiative in the furniture sector in Pakistan ............................................. 43
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Box 3.1 Multilateral discipline of trade rules – the WTO system......................................... 50
Box 3.2 Regional Trade Agreements (RTAs) .................................................................... 61
Box 3.3 GATT 1994 in a nutshell ....................................................................................... 69
Box 3.4 At a glance - Impact of the WTO Agreements on the Pakistani furniture sector... 75
Box 6.1 Elements of success in further processing – Example of Peninsular Malaysia ..... 98
vii
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Executive summary
This study sets the wooden furniture industry of Pakistan into a global context. It describes the
implications of the WTO agreements on the sector as well as the key obstacles, shortcomings
and opportunities for the country’s exports.. The study also reviews Pakistan’s export services
and their usefulness to the furniture sector. Finally, conclusions and recommendations have
been put together, also integrating some very recent developments (Furniture village), which
indicate that Pakistan’s furniture industry is taking its future into its own hands.
Findings
Export drive levels off
Pakistan’s furniture industry is exporting annually around US$12 million worth of mainly
wooden furniture representing four main styles, namely antique reproduction, mughal, modern
(Italian), and oriental styles. Pakistan exports to a large number of countries, of which Italy,
USA, Canada, Japan, Saudi-Arabia, the UAE, Germany and Spain are some of the biggest
buyers. Exports turned into a decline in 2006 after a steady growth over the past years.
Wood resources are wasted
Pakistan’s furniture has been fairly devoted to solid wood composition, and is therefore heavily
dependent on native sheesham wood (rosewood). Despite being a valuable species, sheesham
resource has not been sustained in the country. Industry claims widespread exports of
unprocessed logs and sawn timber to the Gulf countries, and clandestine trade by opportunistic
players in official positions. Inadequate measures have been taken by forest authorities to curb
illegal logging and trade, and replenish the timber with proper silviculture and forest
management. Scarcity of sheesham and other local hardwoods is the most serious threat to
Pakistan’s traditional wooden furniture industry.
International competition puts Pakistan under pressure
Even though the supply side constraints prevail, the industry has shown resilience in carving its
niche in the European and North American markets. Majority of the furniture workshops are
small in size, and use manual-intensive production methods. Competitive edge is derived from
high-skilled carving of traditional designs. Pakistan competes with countries like China, India,
Vietnam and Malaysia. Especially China and Vietnam are concentrating their industries into
larger bases and reap the benefits of mass production to the extent possible. If Pakistan wants
to move from the small cottage industry status into SME networking culture, it will be
challenged to adopt novel designs and technologies and formalize training of workforce, none
of which is currently the norm. On top of these come production according to international
standards and new level of quality awareness.
Industry is seeking new avenues
It will be difficult to compete against the Asian furniture giants from the small workshop
culture that Pakistan is pursuing. Not surprisingly, the Pakistan furniture trade and industry has
1
advocated the concept of “Furniture Village” that resembles such cluster activities in Italy,
Malaysia, etc. USAID’s nascent support to the establishment of two Furniture Villages will
have to resolve the raw material glut faced by the furniture industry. US hardwoods are
extensively being imported and remanufactured for exports by, e.g. the Chinese and
Vietnamese furniture factories. A similar concept may be adopted in Pakistan, possibly
complemented with Malaysian tropical hardwood supplies. But embarking on this new strategy
would force the industry to reinvent itself.
Obstacles in the value chain
The industry acknowledges that its main obstacles in fact range over the whole supply chain.
Unsustainable wood resource handling, improper wood seasoning, static design and lacking
production innovations happen in the up-stream of the chain. These contribute to the
downstream problems, such as drain of skilled workforce to other sectors, sub-standard
technology, finishing and packaging. Further down the line, this is bound to lead into sales to
sub-optimal markets at discounted prices. It does not help either that the furniture firms
consider the common export services provided by the Trade Development Authority of
Pakistan (TDAP) (previously the Export Promotion Bureau (EPB)) and the Small and Medium
Enterprise Development Authority (SMEDA) largely inadequate and that they are relatively
unknown to most of them.
WTO agreements’ implications on furniture
The production structure of the furniture industry has undergone a significant change. Factories
from dozens of countries now participate in the different stages of global furniture value
chains, manufacturing components and ready-to-assemble (RTA) components for finished
furniture for globally outsourcing buyers’ groups and retailer chains.
The agreements of the World Trade Organization (WTO) are about providing equal
opportunities – they do not provide guarantees nor do they provide all the conditions for
participation in the global economy for any sector of industry. Pakistani furniture makers see
opening up of trade impacting both exports and imports. The country has remained a producer
of finished furniture of slowly modernizing traditional designs. As a result of the WTO
agreements, market access for the Pakistani furniture in industrial countries has improved as
tariffs have come down. Furthermore, there is now protection available to Pakistan against any
discriminatory treatment in the trading partners’ markets. On the other hand, new tougher
requirements for producing domestic furniture according to stricter standards and more
elaborate designs are being progressively adopted.
Recommendations
A brighter future for the furniture industry would necessitate a holistic approach. Some of the
most important elements of that approach are the following:
Sustainable raw materials
A determined plan is needed to create and develop a sustainable source of wood raw materials.
Forestry/reforestation programs should ensure a stable source of low cost raw materials, and to
2
the extent possible maintain or improve ecological conditions, enhance the community income
and employment, etc.
Enforcement of the rule of law and good governance on timber cutting
and trade
Eradicate illegal and rent-seeking behaviours of Forestry Department officials, if such
misconduct is proven.
Product quality
The quality of furniture is determined by professionalism in the handling of raw materials,
production techniques and manufacturing process. Due to insufficient skills and facilities, as
well as the lack of quality standards and agencies conducting inspections, quality is bound to
suffer.
Design
Creation of easily accessible design libraries in each major furniture cluster of the country
would disseminate effectively new designs. The items collected could include trend reports,
contemporary design books, consumer magazines, mail-order catalogues, trade publications,
raw material samples, etc. Training programs and exchange of foreign designers can be an
integral part of this design upgrading.
Human resources
Even if labour force is adequate in numbers, lack of technical capabilities can hinder
competitiveness. Public support to vocational training for workers in factories is
recommendable, in order to reduce direct training expenses of enterprises, and to allow
managers to professionally grow with their businesses.
Market information
Access to information on market characteristics (for example trends in distribution, retail
success stories, new furniture marketing concepts) and market access (tariff and non-tariff
barriers) is often too difficult. It would thus be useful to centralize this information for regular
distribution at the furniture association level.
Marketing activities
The furniture industry should focus on marketing activities in key markets (the United States,
Japan, the European Union, and the Gulf). A concerted action should include exhibitions;
websites; international trade fairs; in-depth market analyses, etc. Special encouragement may
be warranted for importers and retailers groups to visit Pakistani factories or permanent
exhibition halls.
3
Conclusions
Pakistan will not be competitive in mass furniture segments against furniture giants like China.
Authenticity and mastering of raw materials should be made the cornerstones for the
competitiveness of “niche” or “ethnic” furniture at the high-end of the market. High perceived
value for price, timely deliveries and proper after-sales service are needed for keeping
Pakistani furniture a winner. Quality assurance must be improved and Pakistani furniture
brands strengthened.
The industry is showing an increasing awareness of its limits and works out a broader vision to
reinvent its strength in global furnishing trade. While the potential gains tend to be most
attractive to the leaders of the industry, a sustained growth requires balanced development
efforts across the supply chain.
Raw material shortage is a very critical factor that cannot be compensated for by any other
means along the processing and marketing chain. A broad-based political will is necessary to
sustain the wooden furniture industry’s prospects in Pakistan - from the forest to the markets.
4
1 Background and objectives
1.1 EC TRTA Programme for Pakistan
The International Trade Centre (ITC) is implementing, on behalf of the European Union (EU),
a Trade-related Technical Assistance (TRTA) programme in Pakistan. The overall objective of
the programme is to assist Pakistan to foster its integration into the world economy and,
ultimately, to contribute to poverty alleviation through the achievement of trade-related
conditions for sustained and stable economic growth.
More specifically, the programme aims to enhance awareness among government officials,
business sector and civil society about the implications of the World Trade Organization
(WTO) Agreements on the economy of the country, and to assist Pakistan in building the
necessary capacity to address issues resulting from its participation in the WTO.
1.2 Five sector studies
Within this framework, the programme has undertaken five studies on sectors selected by the
Ministry of Commerce in Pakistan: automotive parts, footwear, furniture, pharmaceuticals and
sports goods.
The studies have been undertaken by national consultants working in collaboration with the
respective business associations, national and international experts and ITC.
The studies identify export opportunities and threats in each sector and examine the
implications of the WTO Agreements on these sectors. Specifically they include:
•
An overview of the sector and its relevance to Pakistan, including production processes,
pricing and turnover performance, regulatory environment and export performance.
•
A summary of other studies, reports, policy papers, strategies, etc developed in recent
years for the sector.
•
An overview of the sector’s trading performance for key products, including the sector’s
global trade position, national sector data, imports and exports over the last 5 years, and
the global position of key Pakistani companies.
•
Identification of the WTO Agreements relevant to the sector and analysis of their
implications for the sector globally and in Pakistan, both currently and in the future. This
includes analysis of changed or new market threats or opportunities arising out of the
emerging multilateral trading environment.
•
An assessment of the availability and accessibility of relevant information on WTO,
including the information flows between the Government and the business community.
•
Identification of the key obstacles or shortcomings for improving the sector’s export
performance and provision of proposals for improvement or rectification.
•
An assessment of the current export support services provided by the Government and
suggestions on how these could improve the export performance in the relevant sector.
5
•
Recommendations aimed at individual companies, business associations and relevant
government authorities – including some hands-on suggestions in the form of scenarios
with proposed partners and estimates of costs.
1.3 Methodology
As part of the study, Aftab Associates (Pvt.) Ltd (AAL) carried out a series of interviews with
several senior staff members of furniture manufacturers and exporters in the furniture sector of
Pakistan. Six representatives of AAL interviewed five manufacturers and 15 manufacturerscum-exporters between 1 March and 19 April 2006. The interviews were made at the
companies’ premises in Karachi, Gujrat, Gujranwala, Peshawar, Rawalpindi, Lahore and
Chiniot. A 30-point questionnaire was used and the average duration of interviews was an
hour.
Out of 20 companies interviewed, 50% are producing both office and home furniture. 40% of
the companies’ product mix includes home furniture. The remaining companies’ product mix
includes just office furniture. Ten companies had up to 50 employees; eight companies had 50
to 200 employees; and two companies had around 1,000 employees. The main export markets
of the manufacturers-cum-exporters are the Gulf States, the Middle East, the United States, the
United Kingdom, Germany, Malaysia and Japan.
The AAL survey also included information gathered at the furniture workshop conducted on 29
June 2006, which was attended by more than 20 of the 45 manufacturers and exporters who
had presented their products at the Karachi Furniture Exhibition the same month.
The consultants in Pakistan, India and Europe carried out thorough literature studies, statistical
analysis and other interviews.
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2 Furniture sector in Pakistan
2.1 The sector in general
2.1.1 Furniture sector in Pakistan and global furniture industry
International forest industry system: Raw material and product flows
Conceptually, the Pakistani furniture industry may want to consider their world competitors
through the following positioning (Figure 2.1). It summarises on a very broad level the global
flows of wood and also non-wood fibres in a larger system of forest industries. It shows, for
example, the relative importance of wood from various sources (types of forests) and it shows
where the significant flows on non-wood fibres come into the industry’s system. It also
attaches the furniture industry to the downstream processing where close linkages can be made
to the builder’s joinery, carpentry and pre-fabricated houses, etc.
The figure shows how the wood product sector consists of a chain of successive manufacturing
activities, each having traded outputs. In the processing and distribution chain, added value is
multiplied at each phase of further processing. For this reason, the national trade plans and
strategies of timber-producing countries tend to put emphasis on the exports of high valueadded products such as joinery and furniture. (ITTO-ITC (a), 2004).
The comparative advantage derived purely from resource endowment declines as the degree of
processing increases. The economies of scale tend to behave similarly, i.e. the higher the
degree of processing, the less there is dependence on plant size as a factor of cost
competitiveness. Typically, the relative importance of small and medium-sized enterprises
(SMEs) is high in furniture, and they play a key role in satisfying domestic demand. Being
labour-intensive, small-scale enterprises tend to make a positive contribution to the general
socio-economic development. Industrial policies should recognise the strategic importance of
SMEs as a source of employment and income.
In conclusion, countries will have to base the competitiveness of their wooden furniture on
either one, or preferably all, of the following factors:
•
Low-cost local inputs (notably wood and labour)
•
High total productivity (measured over all factors of production i.e. wood, labour,
capital, energy and operating supplies)
•
Superior quality of products (including design and articulate handwork)
•
Consistent operational efficiency through prompt supply-delivery schedules, and
•
Genuine customer satisfaction through willingness to replace damaged goods and other
after-sales service.
7
Figure 2.1 Raw material and product flows in forest industries
Managed
natural
regeneration
forest
(37%)
Roundwood
production
Unmanaged
natural
regeneration
forest
(17%)
Forest production
Original
boreal
forests
Plantation
forests
Tropical
rain
forests
(15%)
(29%)
(1%)
////
Large-sized logs
Non-wood fibres
from agriculture
Non-wood fibres from forests
Small-sized logs
Bamboo, rattan & agro
fibre plants
73%
Primary
wood
processing
industries
Sawmills,
veneer and
plywood mills
Reconstituted
panels plants
Wood pulp
mills
Collectors,
primary
treatment,
middlemen
Non-wood
pulp mills
27%
Industrial wood
residues
Paper mills
Recycling
Recycling
Intermediate
and final solid
wood products
F-jointing,
glue-lam,
mouldings,
engin. wood
veneering
Further processing industries
Bamboo panels,
weaving, gluing
Flooring
Joinery
Components
Paper and
paperboard
products
Particleboard,
fibreboard
Furniture and parts
Pre-fab.
houses,
etc.
Bamboo
parquet, joinery
Non-wood
furniture
Source: ITTO-ITC (a), 2004
Global shift in furniture-making
Historically, manufacturing furniture for exports had remained firmly in the hands of the
industrialised nations. Furniture-making by nature is one of the very basic and labour-intensive
manufacturing segments that have existed in all cultures as a domestic and household craft.
Consequently, the entry barrier to start this industry is fairly low. More recently, many
developing economies have followed the previous paths and phases of the more developed
economies in developing their furniture for exports. Countries like China, Indonesia, Vietnam,
Malaysia, Mexico and Brazil have gradually industrialised and expanded their furniture
industry’s operational scales better suited for the main markets, i.e. the United States and the
European Union.
8
On the buyer’s side, there are globally operating furniture retail chains and buying groups
representing the collective interests of nationally important furniture dealers. Both have stayed
in the vanguard for changes in the international market. In fact, these have been important
drivers in opening up furniture trade for more trade. They have realised new cost-slashing and
earning opportunities in outsourcing labour-intensive manufacturing to the developing
countries. As a response, there is an abundant stock of new manufacturing capacity that has
been established with the help of government support and tax breaks. Not all of these are,
however, profitable or competitive today
Demand factors
Wooden household furniture tends to be a durable good that is highly responsive to personal
income expectations. Its purchase often represents a major investment by consumers in
household and office furniture, for instance. There is a clear tendency to postpone the purchase
when income expectations decline, and vice versa, increase purchase if personal incomes
prosper. Consumption is also affected by demographic factors such as birth rates, marriage
rates, life expectancy and household size. It is also responsive to the degree of social and
geographic mobility of the population.
The demand for household furniture and accessories directly correlate with new residential
construction, and office furniture follows trends in non-residential construction. A growing
segment, however, is the renovation, maintenance and improvement (RMI) sector, which
already accounts for 40-50% of total construction in Western Europe. Increasing mobility of
the population is also feeding furniture replacement purchases. For example in the United
States, about 40 million people move home every year. This often triggers furniture shopping.
Furniture is becoming more a fashion item with shorter change intervals, trend-setting and
even seasonal styles. This means that the life cycle of household furniture is becoming shorter,
and the collections themselves will have to be renewed more frequently. The key to success in
mass markets is flexible and cost-efficient production, with savvy designs.
In summary, the key factors that influence the demand for household furniture include:
•
Disposable personal income
•
Consumer confidence
•
New housing and non-residential building starts
•
Increase in the average size of new houses
•
Increase in the number of bedrooms in new single-family homes.
Consumers in the United States and the European Union markets have been induced to accept
more eccentric and ethnic designs and mixed styles from exotic countries. This is an
indispensable opportunity for a “globalised” furniture trader, who sources items from all over
the world. Equally, it is the lifeline for “traditional” furniture-makers in the developing
countries.
Trade nomenclature
For the convenience of defining the product coverage (of the trade chapters), reference is made
here to the commonly applied trade nomenclature (Table 2.1).
9
Table 2.1 HS and SITC product codes for wooden furniture
Product
group
Wooden
furniture
Group breakdown
Seats of cane, osier, bamboo
“Other” seats with wooden frames
Office furniture, wood
Kitchen furniture, wood
Bedroom furniture, wood
Other furniture, wood
Furniture other than metal, wood or
plastic (cane, osier, bamboo, etc.)
Mattress supports for bed frames
Furniture parts, of all materials
SITC 3
HS
821.13
821.16
821.51
821.53
821.55
821.59
821.79
9401.50
9401.61/69
9403.30
9403.40
9403.50
9403.60
9403.80
821.21
821.80
9404.10
9403.90
The word Furniture refers in this report to wooden furniture as described above. Only in
Furniture parts, also other materials are included, but wood dominates also in that product
category.
The typology of furniture is based on intended end-use or space where the items will be
accommodated. It is not always possible to follow this logic. However “Other furniture (SITC
821.59)” mainly refers to living/dining room furniture, bookcases, wall units, mirrors,
hallstands, but also to small and occasional furniture (desks, small seats) for various
spaces/end-uses, as well as shop fitting furniture such as shelves. This furniture group
comprises many items that do not perfectly match to any of the above key categories. It is
usually the largest category in international trade statistics.
Pakistan’s furniture types
A similar categorisation is being used in Pakistan. Wood is undoubtedly the main material in
Pakistan’s exports. But the country also produces some metal (wrought iron rod, steel),
upholstered furniture for offices and special medical furniture. Foams are also used for
cushioning in upholstered chairs and seating. As mainly solid wood of hardwood species like
Sheesham (or Indian rosewood), walnut, oak and similar is used, the furniture is normally quite
heavy in weight.
Also common to most developing countries is the existence of sub-segments in their domestic
furniture market, such as (a) household furniture for domestic and export markets, (b)
“institutional” furniture segment for schools, hospitals and other public premises, and (c)
contract furniture to private sector clients in shops, banks and hotels, etc.
The four main styles are antique, mughal, modern (Italian), and oriental. Most items fall in the
living room, dining room and bedroom categories. “Other” or “accent furniture” falls outside
the basic living, dining room and kitchen furniture ranges. It finds its role in the smaller, casual
and miscellaneous items, sometimes referred as “occasional furniture” due to its
complementary role in home furnishing. Typical items are side or corner tables, magazine
tables, standing small shelves (etageres), chests, nesting and pedestal tables, small chairs and
home bars, etc. This category is almost without exception the biggest furniture category in the
trade statistics of any country.
10
According to the websites of importers, Pakistan considerably produces these occasional items.
Consumers in the main markets are increasingly liberal in mixing different styles and ethnic
designs in their homes, and decorative Pakistani furniture often attracts buyers when they are
shopping for small accent furniture for tuning a part of their interior decor. Reproduction of
antique furniture is an important niche for Pakistan, as it normally fetches good prices and is
favoured by consumers with above-average purchasing power.
As an evidence of this favourable trend, a quotation follows from Home Accents Today, e-daily
(14. 07. 2006):
“Traditional tastes take an unexpected journey to exotic parts combining classic styling
with well-travelled details. While, the look stays grounded with classic accent furniture
and an antique-inspired rug, splashes of spice colours and medallion patterns pull from
Islamic design. Look for warm metals like brass and bronze to add a glowing spirit while
cool green and blue balance things out with a timeless touch.”
Technology levels
The above workflow is typically a hand-carved furniture system, which seems to be the
dominant one in Pakistan. There are a number of different levels of mechanization that can be
identified. In fact, the Pakistani furniture makers could be benchmarked against the following
categorization of technology levels put into use by furniture makers on average in the world.
This has been developed by UNIDO, and represented in ITTO-ITC’s publication Tropical
Timber Products: Development of Further Processing in ITTO Producer Countries (2000).
Box 2.1 Technology levels in furniture industries of the developing countries
•
Facilities that use basic portable tools and universal woodworking machines
•
Facilities that use basic woodworking machines (band saw, planer, thicknesser,
spindle moulder, boring machine etc.) to produce in small batches
•
Facilities same as in 2, but producing larger batches, using low-cost mechanization
and jigs suitable for serial production whenever possible
•
Facilities that use special purpose machines (4-side moulders, copying lathes, edgebenders, CNC moulders etc.)
•
Facilities with integrated machining lines (linked machines used for production of
panel furniture, doors, surface finishing, robots used for painting, integrated lines).
Source: ITTO-ITC (b), 2002.
A jig is a self-constructed modelling appliance that facilitates production, lowers labour costs
and improves product quality. The use of jigs enables the production of interchangeable parts
and avoids manual adaptations in the assembly of the final product. Machining and assembly
jigs are commonly used in furniture factories.
Discussion on technology categories
Categories 1 and 2 typify the technological status of furniture processing in a large number of
producer countries, consisting of a great number of micro enterprises, usually employing 20 to
50 persons.
11
Category 3 is the first one to which the term industrial production can really be applied. They
use jigs, higher quality machines, low-cost mechanization and well-maintained, simple
machines. It is possible to produce interchangeable components at this level. Production units
are in a position to enter export markets. Products tend to be standardised, and a series of up to
500 components may be put into production.
This is the category of firms that would be the most receptive to technical assistance by ITC or
by other international organisations. Many enterprises in this group are preparing to take the
crucial step from supplying only the domestic market to engaging in exports. In addition, there
are particularly good opportunities for network development among these types of companies.
It is still comparatively rare to find companies that have reached Categories 4 and 5 in terms
of technological advancement, but there do exist a number of export-oriented large-scale
manufacturers in countries like Malaysia that qualify for inclusion in these groups. Also,
Chinese firms are upgrading in greater number to these levels of technical sophistication and
scale.
All categories can be important to their local region as a source of employment and income,
and in some countries all the various categories may be present. Experience shows that the
most enduring and successful companies have tended to evolve through all these phases.
Discussion on design
To date, there are a very few developing countries that really can boast of having a distinctive
design school of their own. The Philippines is often cited as one of the exceptions, which has in
fact made authentic designs and daring material combinations, an image that is a promotional
tool in their furniture exports.
Furniture design education throughout Asia is plagued with both a lack of interest and a lack of
demand. The fact that the larger Asian furniture industry is embroiled in a low-wage economy
suggests that creative activities such as design and new product development, which involves a
long period of time before becoming a success, may not be rewarding to most manufacturers.
Hence, there is reluctance among the furniture manufacturers in Asia to employ creative design
personnel, and there appears to be growing reluctance among the investing fraternity to fund
such creative and innovative works. Rather, there is an apparent need for quick results on large,
industrially manufactured furniture.
In a survey of design schools throughout the Asian region, it was reported that only 7% of all
industrial design curricula actually incorporated some elements of furniture design into their
programmes. Furniture manufacturers should encourage potential furniture designers by
providing opportunities to take their creative works to the regional furniture exhibitions. A
large domestic market will no doubt spur the development of local design talent, as it serves as
a good platform to experiment with their creative works. It is therefore imperative that the
organisers of the regional furniture fairs pay attention to the upcoming design talent and make
avenues for them to exhibit their creative works. This will inevitably raise the standard of
design and product development throughout Asia. Another possibility is to incorporate
furniture design elements into the existing industrial design and wood technology curricula.
12
Global demand for furniture in main markets
The European Union is the world’s largest wooden furniture market. Total furniture
consumption in the member countries was estimated at US$77.9 billion in 2003. Six leading
countries accounted for 85% (US$66 billion) of total consumption. The United States was the
second largest consumption market (but of course the single largest one), with US$55.1 billion.
Within the European Union, Germany is the largest consuming country (24% of the total),
followed by Italy, the United Kingdom and France. The size of the furniture market
corresponds quite well with the populations of the European Union countries.
The EU-15 group used to be a net exporter of furniture until 1999 (measure is extra-EU trade,
not intra-EU). At the turn of the century, the European Union became a net importer, and its
trade deficit has widened ever since (US$4.04 billion in 2003). Poland (member of the EU
since 2005) and China have been the principal sources, but also Vietnam, Brazil and a few
other countries have recorded impressive growth in exports into the European Union. The
adhesion of the 12 new member states into the European Union moves their deliveries into
intra-EU trade, so that the spread of the deficit eases.
Box 2.2 Recent changes in global furniture trade
The most evident changes are summarized below:
•
Important development of the industry in the emerging countries - principally China
and Southeast-Asia
•
Relocation of production capacity and in the redirection of investments to countries
with minor production costs
•
Private consumption crisis in the main Western European economies
•
The consequences of globalisation in the sector (international retailing, diversity of
consumer preferences, spreading competition all over the globe).
Source: Furniture Today e-daily (2006 edition).
Major importers
In 2005 the United States wooden furniture imports worldwide were worth US$16 billion. The
big European Union countries and Japan were the other top importers. Japan and France had
increased their intakes between 2004 and 2005, while imports in the United Kingdom and
Germany had declined.
In the aggregate, the world’s five largest importers (the United States, Germany, France, the
United Kingdom and Japan) purchased US$31.2 billion wooden furniture in 2005. This was
5% more than the previous year. The growth trend in trade was impressive in the United States
market in particular.
13
Figure 2.2 Wooden furniture imports by top 5 importing countries, 2001- 05
18
16
14
12
Billion US$ 10
8
6
4
2
0
United
Germany
France
States
2001
United
Japan
Kingdom
2002
2003
2004
2005
The United States has continued to grow as the world’s largest importer of wooden furniture.
Its imports reached US$16.1 billion in 2005, up by 11% from the previous year. This well
reflects the lasting consumer confidence and housing sector strength in the country as well as
the domestic producers’ loss of market share to Chinese producers. Housing boom until 2005
was driven in large part by demographics, immigration and affordability. The most recent
information shows moderating housing starts, however, as interest rates hike upwards.
The United Kingdom grew up into the second place, before Germany. Both countries imported
around US$4.5 billion in 2004. France also steadily increased imports to US$3.7 billion.
Japan’s imports grew slightly to US$2.4 billion in 2004 after several years of static trade.
Pakistan reportedly exports to about 80 countries, of which Malaysia, Italy, the United States,
Singapore, Japan, Saudi Arabia and Spain are the biggest buyers. Such a fragmented structure
in exports indicates small deliveries to whatever market opens up to Pakistani firms. There
appears to be very little concentration on developing a few of the key markets for bigger
volumes while leaving the others unattended for.
Import sources
Over the last year, there have been some significant changes in the trade flows of wooden
furniture and parts between regions (Table 2.2). Asia’s role grew even stronger as a supplier to
the United States, mainly at the expense of Canada and Europe. China’s currency being pegged
to the devaluing US dollar helped to maintain steady trade flows, causing friction with other
14
suppliers, both domestic and other import sources. During 2005 - 06, the Chinese currency had
been carefully allowed to strengthen at a very gradual speed so that China’s exports may not
suffer damage.
In the United Kingdom, imports from Asia expanded rapidly in 2005. These are early signs of
the gradual rise of inter-regional furniture trade at the expense of traditional intra-regional
flows inside the European Union trade bloc.
Imports from Poland, China, Vietnam, Brazil, Lithuania, Turkey and Croatia have continued to
increase.
Table 2.2 Origin of wooden furniture imports for 5 top importing countries, 2004-05 (%)
Wooden
furniture
United States
Germany
France
United
Kingdom
Japan
Exporting
region
2004
2005
2004
2005
2004
2005
2004
2005
2004
2005
Asia
57.5
61.7
11.1
12.8
13.5
16.6
28.4
35.1
80.1
82.3
North America
19.4
17.6
0.2
0.1
0.4
0.4
1.5
1.9
2.1
1.7
Europe
14.1
11.8
87.2
85.4
81.4
78.6
66.1
59.7
17.6
15.8
Latin America
8.7
8.5
0.7
0.8
3.8
3.1
2.2
2.1
0.0
0.0
Others
0.3
0.3
0.9
0.9
1.4
1.3
1.9
1.3
0.2
0.1
Total imports,
US$ billion
14.5
16.1
4.7
4.4
3.5
3.7
4.7
4.6
2.2
2.4
Incl. furniture
parts,
US$ billion
1.6
1.9
0.8
0.9
0.5
0.5
0.7
0.7
0.4
0.5
Source: UN/ECE-FAO, 2006
It is good to remember that even though China has the world’s largest number of furniture
enterprises it has no world-famous furniture brands, no master designers, no global sales
network and no world-class exhibitions. In conclusion, China rules exports due to its efficient
and flexible production at low costs.
Major exporters
There is a handful of large-scale furniture exporting countries in the developing world. China’s
exports have been growing 20-30% per year and it is passing Italy as the world’s biggest
exporter. China’s export value reached US$12 billion in 2005. Main destinations are in Figure
2.3. The largest European countries (Germany, France, Spain) and Canada are major exporters
to their neighbouring countries and to the United States.
15
Figure 2.3 Imports of Chinese furniture by major markets 2005 (US$ mill.)
USA 6919
United 924
Kingdom
235
France
Germany
260
956
Japan
China: furniture
factoryof theWorld
Source: Tissari, 2006
Other Asian countries like Indonesia (exports US$1.3 billion), Malaysia (US$1.45 billion),
Thailand (US$1.0 billion) and the Philippines (US$0.3 billion) have been able to create
significant export industries, but have more recently become suppressed by China’s dominant
supply position. Vietnam (US$1.15 billion), on the other hand, is increasingly challenging even
China in labour cost comparisons, and it has seen its furniture exports surge in the past five
years. On the long term, China will champion the mass furniture segment with the help of the
abundant labour reserves. However, the availability of wood poses a major challenge to China.
From Latin America, Brazil is the biggest exporter with US$0.78 billion furniture deliveries.
Mexico was the second supplier with US$0.68 billion. Both countries benefit from proximity
with the United States market. African countries are insignificant in international furniture
trade.
Pakistan furniture exports
Pakistan’s exports of wooden furniture totalled US$12.3m in 2005, over double the value
exported five years early. Growth in exports of living room furniture (not categorized under
office, bedroom or kitchen) was the main contributor to this change. Pakistan has recently
started to export bedroom and office furniture. Exports of these furniture types are gaining
ground very rapidly, although starting from a small base. The United States, United Kingdom,
UAE, Germany and Afghanistan are important destinations.
16
Table 2.3 Pakistani furniture exports 2001-05
Product
2001
US$
’000
Mattress
supports
Major
destinations:
Italy, UK,
Germany
2002
Units
‘000
US$
’000
2003
Units
‘000
US$
’000
2004
Units
‘000
US$
’000
2005
Units
‘000
US$
’000
Growth
trend
Units
‘000
%
0
0
65
24
140
20
185
20
387
-
NA
14
8
148
10
434
24
803
-
394
-
131
Wooden
kitchen
furniture
Major
destinations:
Afghanistan,
UK, UAE
466
19
252
27
365
22
380
23
36
-
-38
Wooden
bedroom
furniture
Major
destinations:
Afghanistan,
UAE, US
36
-
9
-
192
-
1094
-
996
-
214
Other wooden
furniture
Major
destinations:
US, UAE, UK
4,392
256
6,676
439
8,692
459
7,721
407 10,427
-
21
Wooden
furniture parts
Major
destinations:
Germany, US,
Saudi Arabia
139
-
105
208
174
73
-
-8
7,246
10,031
9,263
12,313
Wooden office
furniture
Major
destinations:
UK, US,
Afghanistan
Total
5,047
Source: ITC calculations based on COMTRADE
Market access
The major furniture markets are virtually unprotected. The United States has 0% MFN tariff
for all wooden furniture categories. The same applies for Japan with one exception – mattress
supports, for which it has a 3.2% MFN tariff but GSP tariff of 0%. The EU applies an MFN
tariff for wooden furniture ranging from 0-5% and a GSP rate of 0% across all products.
Therefore, one can conclude that Pakistan or any other country should not expect much export
17
boost from the lowering of tariffs in main markets, as this road has been almost completed. On
the other hand, its trade with regional markets may still be hampered by higher furniture import
tariffs of non-members of WTO.
Distribution channels
The flock of players in the distribution of furniture consists typically of export agents, import
agents, importing companies, buyers’ groups that represent the interests of a larger number of
collective importers, wholesalers, department stores and retail outlets of different kinds (Figure
2.4). The preferred flow of furniture is however from a manufacturer to importer or directly to
retailer’s warehouse or chain stores because furniture is not well suited to multiple handling.
Sometimes, it may be possible to sell directly to industries and institutions, and occasionally
through a local manufacturer if the products complement each other. Some manufacturers sell
direct to consumers through brand stores or factory outlets. Also, franchised stores by some
major furniture manufacturers have become more common. These are specialized
distributors, whose main business line is furniture.
As a contrast, there is also the non-specialist distribution, including department stores, Do –
It – Yourself (DIY) stores and mail order houses, to which furniture contributes a minor part of
their total merchandising. There are naturally country-specific differences in the importance of
distribution channel members.
There is a tendency to shorten the distribution structure by cutting the middlemen out of the
business. At the same time, the use of out-sourcing and contract manufacturing has become the
new standard operating mode for the large international furniture industries. Flat-pack or
knock-down (KD) furniture is a key transportation system to allow the expansion of such mass
or middle market furniture business. In general, the transportation of KD items reduces the
damage to furniture in comparison with assembled furniture. This has implications to
packaging solutions as well.
18
Figure 2.4 Distribution structure for furniture in the European Union
Manufacturers
Buying agents
Domestic
manufacturers
Selling agents
Importers/Wholesalers
Non-specialist distribution
Specialist distribution
Bedroom
Hypermarkets
DIY-stores
Mail
order
houses
Department
stores
Kitchen
Furniture
Organized
Independent
Large retailers
Buying groups
Franchised
stores
Chain
stores
Retail shops
Contractors
Consumers
Main distribution flow
Secondary distribution flow
Source: CBI, 2001
2.1.2 Manufacturing process
The production process of hand-carved furniture in Pakistan is believed not to differ much
from similar products elsewhere. It is a consecutive chain of activities, comprising:
•
Raw material and operational supplies procurement (domestic or imported)
•
Pre-treatment (log grading, log trimming, cooking (for plywood and veneer peeling)
•
Primary processing (into planks, boards, veneer sheets) and their grading and drying
•
Dimensioning into suitable components
•
Transferring the designs of furniture parts into components, their cutting into shape
•
Preparation of joints (tongue and groove) and other structural design features into
components
•
Hand-carving of components on visible surfaces
19
•
Assembly, fabrication, finishing decoration, and application of paint, lacquer, hardener
and polish
•
Packaging, warehousing and transports.
In Pakistan, in few cases hand carving is done before assembling furniture pieces. While in
other cases, carving is done after assembling the pieces. However, the ideal way is to go for
carving before assembly. The process of some furniture types requires carving to be done
before they are assembled for making beds, sofas, chairs, etc. It has also been noted that
detailed master drawings are used in relatively few companies in the Pakistani furniture
industry. This may affect the quality of transferring designs to the components as well as the
accuracy of component making. On the other hand, in some of the more sophisticated
companies, computerised CAD systems are deployed.
For those companies that have reached a semi-industrial or industrial operation, there are
possibilities to enhance the process flows and gain better operational efficiencies. One
approach is described below.
Box 2.3 Production flow improvements: a practical approach
Steps to be taken
•
Assess the entire production process, from orders through manufacturing, packaging
and shipping.
•
Measure the time between an order and its shipment.
•
Move tasks such as component cutting and gluing, once in different parts of the plant,
to activity cells all in one area. Along with reducing the steps involved in moving a
product from one area to another, the cells improve communications among workers.
Set clearly stated production goals for a cell every day; this lets workers see how well
they are doing.
Expected results
•
•
The new approach reduces defects, overproduction, excess inventory, unnecessary
steps, over-processing, material movement and waiting times.
•
Production cycle times can be reduced by some 50-90% on certain products.
2.1.3 Availability, price and quality of raw material
Availability
More than 80% of Pakistan’s furniture is dependant on Sheesham, also called rosewood. In the
last five years, the Forestry department has noted that the reserves of Sheesham have decreased
by 50%. Sheesham is getting extinct day by day. Due to its shortage in the market, its prices
are increasing everyday. Currently, very few exporters are using other woods as a substitute for
Sheesham, but their use is gradually increasing. Still the use of substitutes is limited because
these woods are also scarcely available. Also, the exporters are not very much aware of their
usage and treatment. At the same time, the use of imported woods is increasing. Duty structure
has reduced considerably. However, those companies that are using imported timber believe
that the reduced duty structure has not affected the price structure a lot. The dealers have kept
the same prices, with the justification that the prices have increased in the international market,
20
freight rates have increased and dollar value has increased, etc. The industry should assess the
demand and import wood in bulk.
Box 2.4 Shortage of rosewood (Sheesham) – What are the options?
It goes beyond the scope of this study to look into the shortage of raw materials - rosewood
(Sheesham) in particular - for the furniture industry in Pakistan. The shortage is already very
serious and a separate investigation of options for the industry is recommended
The investigation should cover the following items as a minimum:
•
Raw material status
What is the current area (hectares) covered and where. Find out its volume, ownership, age
of trees and access (inventory/stock taking). What is the role of rosewood and other types of
trees on the environment (soil erosion etc.)? The study should also cover non-rosewood
•
New plantings of rosewood
What goes on right now in rosewood - of new planting, if any? Where should it be, who
should own/pay, what are the obstacles, timing, etc.?
•
Other types of wood
What other types of wood are being planted or could/should be planted? Where, by whom,
cost, timing, etc.? How do/would they grow in Pakistan (climate, soil,)? Which types would
fit into the present product mix, the equipment/machines available, the experience among
producers etc.?
•
Import of wood
Which types of wood, from where, cost estimates (raw material price and transportation),
logistic issues i.e. harbour, storage, financing, etc.)? What is the need for redesign of
products, possible other markets and other types of equipment to handle?
•
Other end products
What are the options for products that require less rosewood e.g. based on designs that are
thinner/slimmer/smaller or mixed with other types of wood?
•
Reduced wastage programme
Wastage is mentioned to be huge. What could be done i.e. change of machines, training,
other sizes of lumber, etc. to reduce the waste?
•
Better use of wasted wood
How could the wasted wood be used better? Either for other products (handicraft etc.) or for
making bigger pieces by pressure techniques or finger-joint, etc.
Price
While imported wood is very expensive, the prices of local woods are no exception.
Quality
The quality of local Sheesham, which was available a few years back, is not available any
more. There are many reasons for this. The use of plywood and ply boards has increased a lot.
Most Sheesham wood is taken by this panel board industry because they require very thin
slices of wood i.e. veneer. From the same wood they make 10 to 15 sheets to make various tops
of boards. Currently, Pakistan’s exports are based on solid wood. Its market will keep on
21
shrinking internationally. The second and third parts come to furniture manufacturers and
exporters at high rates. Previously, there was no plywood industry, thus good quality of
Sheesham was available for manufacturers. Also, there was a launch industry. In Sindh, the
quality of Sheesham is not that good and it is available at low-medium prices. The quality of
wood is dependant on region, soil and availability of water, etc.
Purchased locally/Imported
More than 50% of the companies interviewed purchase raw materials locally. 37% of them use
local as well as imported raw materials. Only 11% of them use imported raw materials. Local
raw materials used are wood (Sheesham, mango wood, acasia and walnut), chemicals, boards
(fibreboards, veneer and ply boards), paint and polish, hardware (screws, nails and handles,
etc.), fabrication and other essential material (glue, foam and lamination sheets, etc.). Most of
the imported raw material used is: wood (beech, teak and ash), hardware (locks,), boards
(chipboards, ply boards,), polish (lacquer), fabrication and other necessary material (glass,
glues, thumb tags, leather, sand paper and colours) are used.
Import countries
The countries from where companies import raw materials are: China, Germany, Holland,
Singapore, Italy, Korea, Malaysia, Japan, Africa, America, Dubai, South Asia, Eastern Europe,
Germany, Korea and Australia. Mostly import takes place from China, Italy, America and
Dubai.
European beach, African timber and partal wood are used very frequently. Local ply board is
of very bad quality but the companies have no option, but to use it. A lot of exporters are going
towards imported laminated boards of good quality available at a better price. Some exporters
have switched over to the imported ones. Locks, screws, hardware, fittings, hinges are though
available locally, but they are not of very good quality. Hardware is imported from Taiwan,
Korea and Thailand; boards from Malaysia; polish/lacquer from Malaysia and Europe; and
glass is imported from China and Saudi Arabia, but it is also available locally. Similarly, foam
is available locally, while sand paper is imported.
2.1.4 Other production inputs
Local/imported technology
A v a i la b il it y
Mostly traditional methods are used in the production process of furniture. Local machinery is
used by most of the exporters because it is easily available. Imported technology is available
too but with an added cost. In the long run, expensive imported machinery would tend to be
cheaper as its results would produce much better outputs and savings.
Q ua l ity
Exporters are satisfied with the use of local technology. However, they would prefer using
imported technology, but due to scarce resources, they end up using traditional methods. A
general perception exporters have of imported machinery is that it is second hand.
22
Price
The prices of local machinery are reasonable in comparison with imported machinery’s. But
for small exporters, even the prices of local machinery are high. The financial incentive
provided by banks is not very easy for exporters to make use of.
The available local machinery is of very basic nature. In other words, no professional
machinery is available due to lack of resources/finances. In the given situation, affording
exporters should visit machinery shows. To give a comparison of the production output, in
Italy, for instance, a company produces 40,000 chairs daily due to the use of latest technology.
No labour is involved in the process. This should serve as a guideline for the Pakistani
furniture industry to set its goals down the road. China and Malaysia are living examples which
started to improve their industry within a small span of around 10 years.
Packaging material
Packaging is a very important element because exporters are more concerned about delivering
shipments without damaging them. Less attention is paid to presentation. The cushioning
material used to avoid breakages is made of blankets, quilt, plastic, shrink wrap, bubble wrap,
hard cardboard and rope parts, etc. A lot of work needs to be done to improve packaging
material. Though cartons are used, customised packaging needs to be done. If exporters go for
standard furniture manufacturing, good packaging is possible. Professional packaging
companies should be set up, with specialisation in this field.
All types of packaging material are easily available.
Q ua l ity
The raw material available is of good quality.
Price
Rates are reasonable.
Skilled labour
The exporters of Chiniot, Gujrat and Peshawar say that skilled labour is easily available in their
areas. But according to the exporters of Rawalpindi, Gujranwala, Karachi and Lahore, there is
a scarcity of skilled labour in their localities.
Q ua l ity
The quality of labour is good, but it only has the skills passed on generation after generation.
There is no formal training facility available. Labour is not aware of production techniques,
world requirements and ways to improve efficiency, etc. They are not trained to use the latest
machinery. However, there are (a handful of) people who can produce good quality furniture
by following model pictures without any formal training. Quality controls, checks and
standardisation according to international requirements need to be introduced. Also, there is no
23
concept of training the workforce how to improve their efficiency. Skill development centres
should be set up in all regions of the country to counter the situation.
Price
According to the exporters of Chiniot, Gujrat and Peshawar, labour rates are reasonable. While
in Rawalpindi, Gujranwala, Karachi and Lahore, the rates are high.
2.1.5 Growth in the sector
In 2002-04, exports increased by 30 to 40%, but in the following years, their growth has
decreased despite an increase in the in-country demand. While the global furniture industry has
increased by 10%, the Pakistani industry’s growth rate is more than 10%.
2.1.6 Reasons for fluctuations in imports/exports
Reasons for fluctuations in exports
At least 50% of the exporters felt that the exports of furniture have increased in the last five
years due to various reasons such as companies making efforts on their own, the role of TDAP,
the increase in dollar rates and the demand of handicrafts and traditional furniture increasing in
other countries. Nonetheless, the rest of exporters think that exports have decreased because of:
All Pakistan Furniture Exporters Association (APFEA) not being registered, no association
working for the promotion of exports, strict customs checking (breaking of the inspected
furniture), no modern technology being used, Sheesham getting expensive and extinct and the
rising transportation rates. In certain situations, transportation rates increase tremendously in
the presence of a very poor infrastructure.
Reasons for fluctuations in imports
Imports have increased in the last five years, especially from China, due to Sheesham getting
extinct locally, import duty decreasing and the prices of imported materials decreasing.
Chinese competition in the domestic market is very strong owing to the much lower prices they
can offer.
2.1.7 Price structure of the industry
Price structure in the last 5 years of local/imported components
According to the exporters, prices have showed an upward trend in the last five years. The
prices of imported components have also showed an increase.
With regard to valuable hardwood timbers that could replace Sheesham, the future prices are
expected to climb and availability is not getting any better. Recent news indicates more
concerns about the tropical timber business in Asia.
Prices for Southeast Asian timber products continue to soar to new highs driven by acute
shortages, higher power and fuel costs and dearer interest rates. These are coupled with recent
actions of Malaysia to stop the issuance or renewal of licences for timber concessions.
24
Indonesia has also announced a ban on the use of natural trees for wood processing by 2014.
Additionally, the export ban on logs and rough sawn wood has brought about an additional
level of bureaucracy that is hindering Indonesian exports.
A stabilising factor is that buyers are increasingly seeking cheaper alternative supply sources.
(ITTO Market Information Service, 2006)
Price structure in the last 5 years of export/local sales
More than 50% of the exporters say that the prices of local sales have increased. While 23%
say they decreased and another 23% say they are stable. 43% of exporters say export sales
increased, whereas 36% say they stayed stable.
Exports have increased considerably in the last five years. The higher end products i.e.
products with carvings, better quality of material used, etc. fetched better prices. Domestic
home furniture is being exported more than office furniture. It is fetching better prices for it is
being made according to the requirements of the customer.
2.1.8 Annual turnover
Estimated annual turnover of industry is US$160 million
Manufacturers account for 95% of the total market, while the remaining 5% are manufacturerscum-exporters. Top 10 to 15 furniture companies account for 80% of exports.
The main furniture regions of Pakistan are: Peshawar, Gujrat, Chiniot, Lahore and Karachi.
According to the order of exporters’ size, Karachi comes first followed by Lahore and
Peshawar, while Chiniot and Gujrat have good concentration of manufacturers and traders.
Large-sized companies are mostly located in Lahore and Gujrat, while small- to medium-sized
companies are situated in Peshawar, Chiniot and Gujrat.
2.1.9 Rules and regulations affecting the sector
Furniture standards
The objective of standardisation is to ensure that all furniture available in the market is safe to
use and of solid and strong construction. Therefore, standardisation is helpful in facilitating
market conformance, including from developing countries. However, there is also a risk that
standards may become a constraint for market access or put small producers at a disadvantage
when the requirements are particularly difficult to meet. Manufacturers normally use the
standards voluntarily in their product development, process control and marketing. Having a
common language on test methods, dimensions, safety and strength characteristics is
considered a major benefit.
There are over 140 furniture-related standards and labelling requirements in the United States
and Canada alone. Most standards are voluntary but some are regulated by the state or federal
laws. One example of the toughening state-level health standards is in the text box below.
25
Box 2.5 California formaldehyde emission regulations
Furniture makers and importers are certain to be affected if the proposed tougher California
formaldehyde emission regulations - now under preparation - will come into effect in 2008.
Engineered wood suppliers (OSB, MDF particleboard, etc.) say the cost per board foot
could double, forcing furniture makers to raise price.
The California Air Resources Board, or CARB, is likely to seek tighter restrictions on
formaldehyde emissions from manufactured wood products such as plywood, particleboard
and medium-density fibreboard, which are all widely used in furniture. A composite wood Air
Toxic Control Measure would apply not only to California-based manufacturers but also to
anyone providing goods to California retailers
Formaldehyde is an irritant that, in strong doses, causes watery eyes, sinus irritation,
coughing, wheezing, nausea and skin irritation. Concentrations of 10 to 15 parts per million
have been found to cause nasal cancer in rats, and in June 2004 the International Agency
for Research on Cancer reclassified formaldehyde as a known human carcinogen
What other types of wood are being planted or could/should be planted? Where, by whom,
cost, timing, etc.? How do/would they grow in Pakistan (climate, soil,)? Which types would
fit into the present product mix, the equipment/machines available, the experience among
producers etc.?
Sandberg Furniture Company appeared before CARB in June to discuss its concerns. The
company said they doubted the California state would be able to test adequately the
offshore-made furniture pouring into California for formaldehyde emissions, particularly the
finished products. CARB was “still developing a test method for finished goods using
compliant boards
Domestic furniture makers and engineered wood suppliers fear importers might be able to
get around any restrictions, while they will have to comply, since the state likely would visit
domestic facilities and test on-site. That could give imports a further boost since they would
cost less, they contend, likely putting more domestic companies out of business
Currently, the industry standard for formaldehyde emissions from particleboard is 0.3 parts
per million. If California’s Phase-I restrictions go into effect in July 2008, as has been
discussed, the standard would be cut in half to 0.15 ppm. In July 2010, Phase-II would lower
the amount to 0.05 ppm, 83% less than the current standard?
For plywood, the Phase-I limit is 0.09 ppm, with Phase-II going to 0.03 ppm. For MDF,
Phase-I is 0.19 and Phase-II is 0.05. The proposal allows MDF producers two extra years to
reach the second level, with a start date of July 01, 2012
Other types of bonding resins are available that could help companies meet stricter
requirements, but they cost more, require more work to make and might not perform
adequately.
Source: Furniture Today, 2006
The European Committee for Standardisation (CEN) is responsible for the harmonisation of
standardisation in the European Union. Their EN standards on furniture are not meant to serve
for protectionist aims. On the contrary, they are proposed as a basis for wider international
work on furniture standards under the ISO/TC 136 “Furniture”. (International Organisation for
Standardisation.)
The national standards institutions in the developing countries are either ISO members, ISO
correspondents or ISO subscribers. Their capabilities to implement ISO are often weak. Only
few countries have certification bodies, which can issue certificates of compliance with ISO
7173 standards (chair standards for strength and durability), for example. The furniture
26
industry itself should support efforts to establish adequate national standardisation institutions
and certification bodies.
The Pakistani industry indicated that only the holders of ISO 9001 standard are able to export
furniture. ISO 9001 is a broad quality management standard, which is not product-specific. The
SESSI Standard from France is said to be followed by some furniture manufacturers. SESSI is
not issuing standards, so this is possibly a misinterpretation of the French buyers’
specifications. French industries are quite strict in their requirements as far as standards are
concerned. Moreover, they often require the respect of “French Standards” (NF
Ameublement), although European standards (EN) at the moment have substituted almost all
the national standards.
Many standards concern the safety of furniture and its raw materials (e.g. breaking level of
pieces of wood: NF-EN 1727). These can apply to tabletops, doors and beds (including
children beds). There are also quality standards, which establish performance criteria for the
long-term use of furniture. In this case the standards are provided after testing based on long
repeated cycles of use.
Export quality requirements and standards
B uy er s ’ r eq u ir e me n ts o n p r od uc ts , le ga l it y a nd s us ta in ab i l it y
Institutional buyers (the public building and construction segment demanding furniture for
public premises, offices, schools etc.) in the European Union/North America often have
procurement policies that include requirements on product quality, which may be specific to
the institution in question. In addition to laying out the normative bidding procedures, these
policies may include special conditions on the:
•
Environmental load (including materials and additives in the product as well as energy
used in the production, packaging and transportation),
•
Possibility to repair and recycle,
•
Volatile compounds (e.g., borax used in rubber wood furniture, formaldehyde emissions
from panels, shelving, furniture and other interior products, solvents in glues, paints and
varnishes),
•
Ergonomics and human safety (flame retardancy testing),
•
Durability (structural strength and load bearing, wear and tear, scratching, etc.)
•
Adaptability (modular use), and
•
Availability of additional components, “spares” and accessories.
Environmental soundness of furniture is on the rise among their criteria, because they do not
want to be implicated in using endangered, illegally produced or otherwise susceptible
material. A case of the art example is the European Union’s Berlaymont headquarters building
where the origin of the Indonesian wood was claimed to be illegal and unsustainable.
Another example for the future in the procurement policy proposed for by the United
Kingdom’s Olympic Delivery Authority (see Box 2.6).
27
Box 2.6 Exclusive procurement policy of the London Olympics 2012
The United Kingdom Olympic Delivery Authority (ODA) has published a draft sustainability
principles and progress report describing work progress over ODA’s proposed 12
sustainability objectives, which includes the sourcing of environmental and socially
responsible materials. In wood-based products, this means exclusive use of FSC-certified
products (Forest Stewardship Council, see details later in this report)
All contractors involved in construction work for the London 2012 Olympics are expected to
show how they meet these objectives. In a statement, the United Kingdom Timber Trade
Federation (TTF) fully supported ODA’s sustainability objectives, but voiced concern that
the FSC-only approach might be taken with regard to certification. The Mayor of London
recently published a supplementary planning guidance highlighting FSC as the preferred
standard for sourcing of wood products in all new major developments in the capital. It is
feared that with this approach the authorities would not get all the wood needed for the
Olympics
The timber industry’s Olympics strategy group, which comprises TTF, TRADA, British
Woodworking Federation, UK Timber Frame Association, Wood for Good, ConFor and the
Forestry Commission, would be lobbying strongly to communicate timber’s sustainability
credentials to ODA. The ODA is expected to produce a detailed sustainability strategy next
year, which would include more details on its material procurement policy.
Source: ITTO MIS, 2006
Commercial and industrial enterprises (their building and construction projects, hotel, office
and shop furniture, etc.) are more likely to put emphasis on the aesthetic appeal, safety, quality,
functionality and physical construction of furniture than on environmental or social aspects of
furniture making. This is natural, as these organisations are more familiar with such day-to-day
business needs as avoiding product liability suits and impressing new clients.
Retailers in the consumer market (mainly selling household furniture, ready-to-assemble
furniture, small occasional furniture, garden furniture, etc.), on the other hand, must be more
sensitive to the “softer” values. In order to ease their customers’ concerns, many furniture
chains have developed environmental management systems and, to a certain extent, monitor
the origin of their products. As for raw materials, some may give preference to products made
of certified wood (legal and sustainable, see chapters later in report).
It is recommended that a potential new furniture exporter from a developing country should
discuss with the potential buyers (wholesalers, importers, retailers, etc.) what their
requirements are and deal with them. The more alert – or responsible – companies may be the
ones to reap the greatest benefits of being “green”, but that is not to say that the indifferent or
just plain irresponsible ones will be forced out of business. They will simply seek less
demanding buyers.
Voluntary and mandatory standards in the European Union and USA
G en er a l p ur pos e
The objective of standardisation is to ensure that all furniture available in the market is safe to
use and is of solid construction. Therefore, standardisation can hardly be considered harmful to
foreign suppliers such as those from developing countries. On the contrary, voluntary product
standards can enable an efficient exchange of information between the importer and the
supplier. Instead of having to deal with non-specific and constantly changing requirements of
28
various counterparts, the supplier will have the benefit of working with a stable set of
requirements. As the standards are voluntary in nature, they cannot be regarded as deliberate
barriers to trade.
Manufacturers normally use the standards in their product development and process control,
while related statements are publicised in marketing. Having a common language on test
methods, dimensions, safety and strength characteristics is considered more important than
giving explicit criteria on what the piece of furniture should look or feel like. This is left for the
designers to contemplate.
I n t er na t io na l O r g an is a t io n f or S ta nd ar d is a t io n ( I SO )
At the international level, the International Organisation for Standardisation (ISO) is
responsible for the harmonisation of standards, including those on furniture. ISO is a
worldwide federation of national standard bodies from more than 140 countries. Its mission is
to promote the development of standardisation and related activities in order to facilitate
international trade and cooperation. ISO’s work culminates in international agreements
published as international standards. In the furniture sector, ISO has published 24 standards.
C omité Euro pé en de N orma lis a tio n (C EN)
In the European Committee for Standardisation (CEN, see www.cenorm.org), the Technical
Committee 207 “Furniture” (CEN/TC207) is in charge of the standardisation of furniture.
TC207 has eight working groups that deal with different aspects of Standardisation:
•
•
•
•
•
•
•
•
WG1 – Domestic furniture
WG2 – Kitchen and bathroom furniture
SC3 – Office furniture
WG4 – Outdoor furniture
WG5 – Contract and educational furniture
WG6 – Test methods for fire behaviour
WG7 – Surfaces and surface finishes of furniture
AH – Glass in furniture
The major aim of TC207 is to have the EN (European Norm, issued by CEN) standards on
furniture established at the European level. It was scheduled to finish its work programme by
2004, and after that there would be approximately 90 voluntary EN standards on furniture,
their finishes and materials.
N a t ion a l qu a lity s ta nd ar ds
There is no official quality standard for domestic furniture (used in homes) laid down by the
European Union law. On the contrary, there are international safety and environmental
regulations concerning imported office (institutional) furniture. The high quality of European
furniture manufacturing in general serves as a benchmark for foreign suppliers, and that level is
certainly not easily achievable for many suppliers from the developing countries. Despite the
attempts to harmonise the standards through ISO and CEN, there are still national quality
standards insisting on testing and compliance with flame retardancy, etc. For example, these
remain in the United Kingdom, Ireland, France and Sweden.
29
E u r op ea n U n ion gen er a l s a fe t y s t a nd ar d
The directive 92/59/EC lays down the principle of general safety guarantee for all consumer
products. It applies to products manufactured both inside and outside the European Union.
There are not yet particular directives covering domestic furniture. A manufacturer or exporter
can be held liable for compensation for damage caused by inappropriate furniture. European
importers usually seek to cover their exposure to such risks through contractual terms with an
exporter from a developing country.
N or th A meric a n s ta nda r ds
There are over 140 furniture-related standards and labelling requirements in the United States
and Canada. Most standards are voluntary, but some are regulated by state or federal laws. In
addition to protect end users, standards are used to protect manufactures and retailers against
product liability suits.
J apa nes e sta nd ard s
Japan has three levels of Industrial Standardisation: national level, industrial sector level and
company level. Japanese Industrial Standards (JIS) are voluntary national-level standards that
cover industrial and mineral products. Industry associations and companies may also make
their own standards for their specific needs (e.g. operation manuals, product specifications,
etc.). There are 27 furniture-related national standards in Japan, and they deal with safety
aspects, test methods and dimensions.
Certification of sustainability and legality
The certification of sustainability and legality of wooden raw material is fast becoming a
mainstream requirement for forest products in international trade. Forest certification is based
on standards prepared in a country and specific criteria against which a third-party verification
is arranged. Chain-of-custody certification (CoC) continues from here onwards by means of
establishing the ownership of certified wood throughout the supply chain (see later a separate
chapter).
Is certification potentially important for Pakistan’s wooden furniture exporters? Yes, Pakistan
should not overlook forest certification when it prepares to export more wood products and
furniture made thereof. The need to ensure compatibility between export trade expansion and
sustainable forest resource utilisation gives justification to the certification of forest
management, chain-of-custody (CoC) and the related labelling of wood products. And that is
no matter if the wood is from domestic or imported natural forests or from planted, man-made
forests. The number of international markets where “anything goes” is narrowing quickly.
Larger purchasing groups and public procurement offices impose policies that insist on verified
legal origin and sustainability of wood-based products. This holds true in the European Union,
the United States and more recently in Japan. Even China is gradually tightening its timber
procurement rules because they fear for buyers’ boycotts on Chinese furniture made of illegal
or unsustainable wood (see below).
30
Box 2.7 UK Timber Trade Federation announces high-risk sources
The Timber Trade Federation (TTF) has told its members that sourcing wood products
made from timber from Papua New Guinea (PNG) or the Solomon Islands was “high risk”.
The announcement followed an investigation by TTF into Greenpeace’s last year
allegations that PNG-sourced bintangor face veneers on Chinese plywood were illegal.
TTF said that in the absence of credible evidence of legality, products made from wood from
these countries had to be considered high risk, and advised its members to avoid them. TTF
added that the current situation in PNG and the Solomon Islands meant there was very little
or no material meeting the environmental standards that the UK market requires.
Today certified wood products are clearly on display in the leading European, US DIY (do-ityourself) outlets and builders’ stores. They showcase e.g. certified shelving, glue-laminated
boards, garden furniture, decking, flooring and similar products. It has more recently widened
into household furniture, where there are some signs of using certification (or lack of it) as a
market access criteria and bargaining tool (reported e.g. by Indonesian Furniture and
Handicraft Association ASMINDO in the French market).
The certification procedure of further processed products (furniture) differs from that of
primary products (logs, sawn wood, panels) in a sense that the furniture makers seldom possess
forest or carry out forestry activities by themselves (they are not vertically integrated). They
are normally adding value to the primary processed products or components, which they buy
from timber traders, upstream suppliers or contractors in their supplier network. Since the
primary and further processing usually takes place in different locations, the physical and
economic link between further processing and forest management often remains weaker and
more indirect.
In such a situation, decisions on the quality of forest management do not rest in the hands of
furniture-makers directly (as the Pakistan industry voices out). But they can influence their
contractors to acquire forest management certification and supply certified materials through a
verified chain-of-custody (CoC) to their factories. The chain-of-custody control ensures that
the wood is genuinely arriving from the certified forest. It is an essential tool for
communicating to the market on the producer’s compliance with forest certification standards.
The furniture industry is increasingly being targeted by environmental NGOs, which are
promoting certification and selling services for companies who want to reach certification
status. One example is in the box below.
31
Box 2.8 Workshop on certification and sustainability for furniture manufacturers
Global conservation group Rainforest Alliance (www.rainforest-alliance.org) held its second
annual workshop on certification and sustainability for furniture manufacturers on
September 21, 2006 at the High Point fair. Discussions and presentations focused on
current initiatives in the furniture industry to promote responsible sourcing and procurement,
and how furniture makers can achieve Forest Stewardship Council certification through the
Rainforest Alliance’s Smartwood programme. Furniture companies can benefit from
participation in the following ways.
•
Presentations regarding current initiatives within the furniture industry promoting
responsible sourcing and procurement
•
Discussions on national and international trends in sourcing within the furniture
industry -- associated risks and the role of forest certification
•
Forum for furniture manufacturers and suppliers to learn more about Forest
Stewardship Council (FSC) certification developments and processes
•
Opportunity to discuss forest certification and trends in the certified products market
with a panel of experts with direct experience in this subject;
•
Participation in an important networking forum with a group of key companies and
organisations.
It should be said here that Pakistan is far away from certification in view of its current unpreparedness to tackle rampant forest sector problems. If the very basic principle of sustaining
the forest stock is not followed, then no international certifier can consider Pakistan as a
potential country in which to operate. The development of a national certification system will
take minimum two years. The costing estimates for either of the two options are very random
unless the area (size of forests), volume of wood harvested, cost of forest operations and wood,
and the quality of present legislation, forestry practices and human skills are known.
Chain-of-Custody (COC) certification
The focus of the timber certification debate has been moving from the forest certification
(sustainability) to the chain-of-custody certification. The chain of custody – or wood
tracking (1) – is a sequence of ownership or control from one to another along the supply chain
(Figure 2.5). It can also be understood as the identification of material throughout all the
processing and transportation stages from the initial raw material source to the final product.
A practical exercise: By filling out this type of diagram with actual firms and traders, the
Pakistani industry and value chains could be more easily understood. Things like how many
cubic metres are in each flow, how it changes ownership/for what price mark-up, how many
kilometres of transportation is typically needed, how long time wood is stored, etc. can be
useful questions for a policy-maker. 1
The chain of custody is required to be certified in connection with the labelling of forest-based
products. A label shows that wood raw material – or a known portion of it – comes from
sources that are acceptable to a particular labelling system. In addition to forest certification,
with which the chain-of-custody certification is usually associated, it could be used for
showing that wood comes from legal sources.
1
32
To be specific, wood tracking is not a synonym for chain of custody rather than an aspect of it, but in this
report chain of custody and wood tracking are used interchangeably.
Figure 2.5 Simplified example on chain of custody of wood in furniture
Each transportation phase may include one or several intermediary phases that might or might not include
Forest
Transportation (*)
Logs
Sawmill
Panelboard mill
Lumber
Wood-based panels
Transportation (*)
Further processing plant
Components
Transportation (*)
Furniture factory
Furniture
Transportation (*)
Wholesale/retail store
Furniture
Transportation (*)
End user
processing.
Wood tracking can be implemented in the following two alternative ways:
•
As a sequence of separate stages that each consider only what is going on within that
particular stage, or
•
As one comprehensive system that considers all the phases from the forest to the final
product.
Normally, processing and transportation stages are looked at, and certified, separately. The
benefit is that each stage needs to interact only with the directly preceding stage. Therefore, a
furniture manufacturer that obtains raw material from primary processors, or intermediary
component makers, does not have to try to trace backward through several processing and
transportation stages in order to find out whether the raw material is considered acceptable.
33
The role of intermediaries (sourcing agents, brokers, importers, wholesalers, retailers, etc.)
complicates the controllability of the chain. Even though each actor is responsible for his/her
own part, complication creeps in with the increasing number of actors in the supply chain
because materials get increasingly mixed and harder to control and track.
Forest Stewardship Council (FSC) certification
FSC has introduced an international labelling scheme for forest products made from FSCcertified raw material (see www.fsc.org). It is widely held as the most environmentally credible
of such schemes, and it is strongly supported by the NGO community lead by the World Wide
Fund for Nature (WWF).
Companies wishing to use the FSC product label must have an FSC chain-of-custody
certificate. There were 6,600 FSC-accredited chain-of-custody certificates in 83 countries in
August 2007. This is a relatively small number considering the size of the forest products
sector and the complexity of wood flows. Consumers have been very slow to realise any
benefit from certified products, and their willingness to pay a premium has remained low. As
more and more forests are now being certified, the supply of certified wood is increasing along
the production chain gradually. Also, the public procurement rules of the major importing
countries and of the biggest international retailers are stipulating the use of certified wood. The
pressures on certification for downstream industries – such as furniture making – will thus
become more evident.
Among the FSC labels, around 500 are awarded to furniture manufacturers, so the FSC has not
yet been widely adopted in the sector. This is partly explained by the fact that furniture makers
seldom own or manage forests, but rather buy their raw materials as primary processed or
semi-finished products from other wood processors. The numbers of certificates among their
suppliers (producers of sawn wood, panels, wood manufactures) has increased sharply during
the past years. Consequently, the number of FSC-labelled products is potentially rising in
furniture trade too.
FSC sets minimum requirements for the content of wood in labelled products in its revised
chain-of-custody standard dated October 2004 (quote):
“The minimum content of wood coming from FSC-certified forests must be “at least 10% of the total material
for the product group” AND the FSC material together with post-consumer material is at least 70% of the
total material.”
The FSC recognises the use of claims and labels both on- and off-product. The on-product
labels should show the FSC logo with the actual content of the FSC-certified wood (Figure
2.6). The labels must include descriptive statements to explain the meaning of the FSC logo
and to disclaim responsibility for other attributes of the product.
Figure 2.6 Example of FSC label and on-product claim
71%
Minimum
34
At least 70% of the wood used in making this product line comes from well-managed forests
independently certified according to the rules of the Forest Stewardship Council.
As additional information, the labels may also provide a more detailed list of ingredients and
their proportions. In all cases, the labels must state the minimum percentages of FSC-certified
material as a percentage of the total wood used in the batch manufacturing process.
Eco-labelling
Eco-labelling is a voluntary method for the certification and labelling of environmental
performance. It identifies the overall environmental preference of a product on the basis of
lifecycle considerations. An impartial third party awards eco-label after the product has been
determined to meet specific environmental criteria. There are many different voluntary (and
mandatory) environmental performance labels and declarations. These include those in:
•
•
•
•
•
•
•
•
•
•
European Union (Flower)
Nordic countries (Swan)
Germany (Blue Angel)
Austria
Netherlands (Milieukeur)
Spain (AENOR Medio Ambiente)
France (NF Environnement)
United States (Green Seal)
Canada (Environmental Choice)
Japan (Eco Mark)
The criteria for furniture in the various eco-labelling schemes have common elements. Wood
must be either certified or its origin must be indicated otherwise. The product must not contain
or release more than a specified amount of formaldehyde. The manufacturer must guarantee
that functionally compatible replacement for wearing parts is available for five years.
2.1.10 Issues faced by manufacturers/exporters
The following issues were brought forward in the course of the survey:
Sheesham is not easily available
Sheesham (rosewood) is getting extinct. It is being cut in a large amount, but on the other hand
not grown on a large-scale to overcome this scarcity. “The goldmine of Pakistan is being
wasted”. Its prices are going high, have become two to four times expensive. There are people
who are illegally exporting wood. Illegal wood import has also started since the launch
industry has shifted to Dubai. However, there is no big issue regarding its import.
Latest technology is not being used
At least 98% of manufacturers are using traditional methods. The latest technology is not being
used at all. One manufacturer demanded that “imported machinery be made available to us at
the same rates”. The factory owner should be given the facility to purchase second-hand
machinery. The government should come forward, reduce rates and make the imported
machinery easily available for them.
35
No training institutes and centres are set up
All of the manufacturers said that no training centres were available. One or two centres are
working, but no effective services are being offered by them. The manufacturers stress the
importance of having such institutes in the country. The furniture industry is in dire need of
trained and creative individuals.
No financial incentives given by the government
The government is providing no finance facilities. For the few facilities available, the process
of documentation is discouragingly cumbersome. The government should also introduce new
subsidies as the old rebate and subsidy facility has ended. The MoC freight subsidy is still
there, but it is not generalised – it is only for specific destinations. Furniture is a high-value
item, therefore freight rates are also high. Thus, for an importer it tends to be expensive. A
supportive regulatory subsidy should be introduced. New investors are not coming in because
of the high cost of setting up business.
Government takes no steps to promote exports of furniture
No longer-term steps are taken by the Government. TDAP and SMEDA are working on it, but
no concrete results have come forward. They gave examples of exhibitions and seminars
organised by TDAP, but they are not at all effective. By comparison, the following describes
how the Egyptian furniture industry delegation takes a long-term view on attending the Las
Vegas furniture show. (Furniture Today e-daily, 27.07.2006.)
Box 2.9 Egyptian furniture screens Las Vegas show
The promoter of an Egyptian furniture show brought industry representatives to the July
show here to assess participation in future events. Expolink, which also promotes the
Furnex show in Cairo, hosted the visit to the Las Vegas show July 23-27 to help companies
learn more about the event and the opportunities to lease space for the July 2007 show.
Expolink said the same group also plans a similar study tour of the High Point show in North
Carolina.
Officials from as many as 25 Egyptian manufacturers came along, including manufacturers
of residential case goods and upholstery, as well as kitchen, office and other contract
furniture. Some of the companies already plan to show in Las Vegas in 2007, so they took a
preview of the venue
An Egypt-based upholstery and case goods manufacturer said the trip helped his company
and others learn about the US market and how American producers are serving the needs
of retailers and consumers. It distributed CD catalogues to show potential customers the
high quality and craftsmanship that the Egyptian companies can produce in furniture, gifts
and accessories
One Egyptian company already operated a stand in Las Vegas with upholstery and
occasional furniture. As a first time exhibitor, they had a line of mostly traditional sofas,
chairs, consoles and chests. They hoped to attract US wholesalers as well as containerdirect customers. The company now sells about 15% of its line to the United States but
hopes to grow that business, said the company’s representative
Source: Furniture Today e- daily (2006 editions)
36
Scope of joint ventures
There exists a definite scope for Joint Ventures. When foreign companies will share their
expertise and resources with Pakistani companies, the quality of furniture would improve and
exports would experience a major boost.
Total export product trend needs to be changed. Standard contracting furniture would need to
be produced. Dubai, Abu Dhabi, Doha, etc. have a billion dollar investment to build thousands
of villas and housing schemes popping up. Wood is imported from China, Malaysia and
Europe. If a container goes from Karachi, the shipment would reach in two days (US$200
freight). From China shipment reaches in twenty days and freight is US$1,000-1,200. Pakistan
has a competitive advantage, but it doesn’t have industry. To produce standard furniture,
Pakistan can have joint ventures from the Middle East for home as well as office furniture. The
government will have to create a favourable environment. The concept of “Furniture village”
would be a major investment for foreign investor to come in. The labour cost is low. The
government should give land, utility facility, etc.
Innovation
New designs are being copied and used but the latest technology is not being used. Others
think that there is a lot of latent creativity, but due to lack of resources they can’t make use of
it. There is a dire need of new designs in order to survive in the competitive trading system.
Government rules and regulations
The majority thinks that no favourable policies exist for them. The severe inspection that is
done by the Customs by tearing down and breaking furniture should be stopped. Designs are
copied; there should be restriction on this as well. Labour law needs to be improved. Different
government departments visit the manufacture to make inspections. The government should
work under one-window operation. Labour rights should be safeguarded. With training centres,
proper general training should also be given to them. A lot of international donor agencies
would come forward and start giving donations.
2.2 An overview of existing studies, strategies and policy papers
2.2.1 Overview of existing studies
This section records the experience of ITC and sister organisations of the United Nations on
furniture sector development. Among the international organisations, the furniture industry
falls into the agenda of, e.g.:
•
•
•
•
•
UNIDO (United Nations Industrial Development Organisation),
ILO (International Labour Organisation),
ITTO (International Tropical Timber Organisation),
FAO (Food and Agricultural Organisation of the United Nations), and
Economic Commission for Europe (ECE): Timber Committee.
37
ITC has already collaborated with all of them in analyzing the global furniture industries and
trade. In addition, some of WTO’s agreements are relevant to the sector, and deserve attention
in the latter parts of this study.
More specifically, the following essential references of ITC can be pointed:
•
Project Tropical Timber Products: Development of Further Processing in ITTO
Producer Countries produced a joint ITTO-ITC publication on the same title in 2002.
This is a global (29 tropical countries) assessment of the current state of the further
processed wood products industry and its export trends in 1989-1998.
•
Conclusions: The study assesses the 29 ITTO producer countries in terms of their
participation in the international trade of value-added wood products, their
competitiveness in the marketplace and the future opportunities in major markets. It
explains how the countries could find their competitive advantages and pull out the
suitable industrial manufacturing strategies that match their opportunities. The broad
product range covered (furniture, windows, doors, flooring, other joinery and
mouldings), contributes to the widening of the knowledge of further processing of
tropical wood both in the supplier countries and consumer countries.
•
In 2005, the International Wooden Furniture Markets study report was published,
again as a joint venture between ITTO and ITC. This was a sequel to the 1990
publication Wooden Household Furniture: A Study of Major Markets.
•
Conclusions: The report provides detailed market information on the world’s eight
leading furniture markets: the United States, Japan, Germany, the United Kingdom,
France, Canada, China and Belgium in addition to the Netherlands and Luxembourg and
the major furniture markets of Spain, Italy, Denmark, Sweden and Egypt.
•
This report also outlines a strategy for developing the wooden furniture sector in tropical
countries. It predicts that the overall balance of furniture-making will move in favour of
the southern hemisphere and China, where a green ‘wall of wood’ is maturing in the
plantation forests. Remaining natural forests will continue to provide unique raw
materials for the finer furniture industry. In order to make full use of the opportunity
created by the coming availability of the plantation resources and the high-value niche
markets for natural hardwoods, the report suggests what developing countries should do
to overcome hurdles such as the changing economics of logistics, low productivity and
efficiency, inadequate quality control and management systems, and the often low level
of skills.
•
The value-added processing of wooden furniture in tropical countries will be developed
step-by-step based on local conditions. Manufacturers should move from standardised,
simple products towards originally designed products with higher value, and ultimately
to branded products. It is hoped that this process can be accelerated through concerted
local efforts and international partnerships.
•
With ILO, the ITC collaborated on project development for modernisation of Indonesia’s
traditional furniture cluster, and the rubber wood development project. The rubber
wood’s prominent role as a new furniture material was strengthened after the report was
distributed among about ten leading rubber wood growing countries of the world.
Malaysia, however, was pointed out to have an advantage over the others due to
consistent support towards rubber wood processing (see later on their success factors).
38
•
With FAO’s Forest Products and Economics Division, ITC collaborated in a study titled
Analysis of Important Factors in Successful Production and Marketing of Plantation
Timber Products. It also assessed the furniture industry’s potential for using planted
wood species.
•
Conclusions: The production of large-sized logs from the natural forests of tropical
producer countries will continue to decline, particularly in Asia. The primary and further
processing industries have already started to adapt their manufacturing methods,
technologies and designs accordingly. Smaller-dimension logs will be increasingly used,
based on fast-growing plantations (rubber wood, gmelina, acacia, eucalyptus, teak, pine,
mahogany) and secondary natural forests.
•
The establishment of plantation has moved more recently away from government-led
programmes into private sector activity. The role of incentives has generally declined,
and a healthy macro-economy is thought more frequently to render direct incentives
useless after the initial start-up phase. But their role has been crucial in most of the
successful plantation programmes up and running today and many countries still apply
them for new planting. It is more important to re-orientate incentives for the benefit of
farmers and other smallholders, who almost categorically face problems in reaching any
value-addition or financial security in their plantation investments.
•
Most common fast-growing plantation species available for industrial processing suffer
from quality handicaps vis-à-vis competitive natural timbers. These call for immediate
improvements in wood drying, jointing and edge-gluing technologies, and wood
preservation and finishing. Product and market development needs to be focused at
engineered and value-added wood products in order to recover the costs of intense
primary processing.
•
When considering plantation woods for specific applications, some key qualities need to
be assessed in terms of appearance (colour, grade quality, surface finishing), for
engineering (density, strength, stiffness, hardness), and with regard to drying and
machining characteristics (planning, moulding, CNC routing, sanding), to name a few. It
is essential to apply this information to the whole production process: product design,
selection of appropriate materials and tools, selection of most suitable manufacturing
methods, and recommendations on intended service (end-uses) and environmental
conditions.
•
CBI and SIPPO are the government import promotion agencies of the Netherlands and
Switzerland. In the recent years, CBI has maintained programmes for both wood
products and furniture. Both programmes have produced annual market reviews and
marketing guides, and some countries have also been enrolled to specific export
promotion programmes in practice. The list of eligible countries includes all LDCs (least
developed countries) in the world. CBI reports are good sources of down-to-earth,
practical tips on how to approach European importers and how to do business with them.
They also give well-thought prep-up tasks and things-to-do lists before entering into
furniture fairs, sales missions, contract negotiations, etc. This report is a recommended
reading for any prospective furniture exporter into Europe. (Contact info in Annex 1)
•
ITC’s Market Briefs have also covered furniture in the past. These are usually displaying
the market size, characteristics and major importers to approach.
39
There are some specialised consultancy companies who publish regular market information on
furniture. Perhaps the best known among them is the Italian CSIL (Centro Studi Industria
Leggera). Their reports are sold on a multi-client basis and they are regularly updated. Global,
regional and country-specific studies are put for sale. CSIL is Europe’s leading furniture
research institute, and the Centre produces a free newsletter on the furniture industry and
markets worldwide, called “World Furniture online”. CSIL also produces a wide variety of
furniture industry market reports that could be useful for the Pakistani furniture industry. The
particular strength of CSIL reports is in understanding the whole furniture trade and
distribution system in each country. The most recent report “World Furniture Outlook
2006/2007” is out right now. ITC could make it available for the Pakistani furniture industry to
update the global outlook presented in this report.
In the United States, Furniture Today publishes periodical market surveys and furniture trend
and style data on the daily online magazine. The contents are rarely containing any detailed
statistics or precise market research data. Mainly qualitative analysis is available from
Furniture Today. It is useful for those who wish to attend in the US major furniture fairs,
because the web-magazine provides useful information on pre-fair events and after-fair followups. Some useful customer studies and supplier listings are provided on an annual basis (e.g.
top-retailers, top-manufacturers, etc.). Special themes are explored like bedroom, kitchen
furniture, or children’s furniture. Generic consumer behaviour information and surveys on
spending in furniture is also a feature in Furniture Today. Good retail contact networks can be
established through this channel.
AKTRIN Furniture Information Centre is a US-based consulting firm exclusively dedicated
to the forestry, furniture, and other secondary processed wood industries. The company
maintains offices in the USA, Canada, Germany and Mexico. Their consulting services are
offered by a subsidiary company: AKTRIN-Dossenbach Associates. Services range from
market research to engineering and technical advice. Over 100 market research reports have
been published by AKTRIN.
Freedonia Group, Inc. (USA) provides market and industry studies into 18 industry
segments, including furniture and fixtures. Freedonia Focus reports are market and productoriented business trend-tracking reports, while Freedonia Industry Studies look more broadly at
the industry outlook.
Datamonitor is a multi-sector supplier of market survey data, also including furniture and
home furnishings. It is headquartered in London, but it operates also in New York, Frankfurt
and Hong Kong. Industry panels and consumer interviews are their primary mechanisms to
collect data. Market segmentation, prices and competition aspects are also analysed in
Datamonitor’s reports.
Some other well-known names in the furniture markets research business are:
•
•
•
•
•
•
40
Furniture Industry Research Association (FIRA) in the UK
International Furniture Research Group (IFRG), Malaysia/international
AMA Research in the UK
Schuler and Partner (HOMAG) in Germany
Titze Unternehmensberatung GmbH in Germany
URS Forestry, Australia
The contact information of many of these sources is given in Annex 1: Sources of
Information and Useful Websites. The following chapters are drawn from the previous work
undertaken by ITC sector work on Wood Products and Furniture, and from selected literature
and studies compiled for this project.
Some selected key issues from reference literature are presented here to support this report:
2.2.2 About clustering and networking
•
The international market outlook studies indicate that wooden household furniture
fashions will remain volatile: what is “in” this year may vanish the next year. The basic
problem is that while investments should be planned long-term, furniture markets and
fashions live on a faster lane. New collections will have to be created at shorter intervals
in order to keep pace with the market’s tastes. This essentially calls for the flexibility of
production, which can be best achieved through networking among firms.
•
The world’s wooden furniture manufacturing can demonstrate many types of successful
networks and clusters. Most of the eminent exporter countries to the international
markets have undergone an evolution of their own in organising a competitive national
furniture-manufacturing base (e.g. Italy, Germany, Denmark, Brazil, Malaysia, etc.).
•
Approaches and practical industrial development patterns are varied, and simply
mimicking an existing structure in another place is not enough. This is why some
industry restructuring and relocation into furniture zones and “imposed clusters” have
not borne fruit. Organic growth and subtle political support mechanisms appear to have
enabled some of the leading clusters to become sustainable and truly beneficial to the
industry as a whole. A dynamic industry is always required to inhabit such clusters.
Furniture clusters have found widespread acceptance in almost every major furniture exporting
country. Nevertheless, there is a lot of differentiation in their basic philosophy to suit local
conditions. Table 3.3 below illustrates the main differences between the furniture clusters in
Italy, Denmark, Taiwan and Malaysia.
Table 2.4 Comparison of furniture clusters
Criteria
Italy
Denmark
Taiwan
Malaysia
Total employees
< 10
< 15
< 30
< 50
Skill level
High
High
Multi-Skilled
Medium to Low
Product mix
Low
Low
Low
Medium to High
Technology
Medium
Medium
Medium to Low
High
Investment
Low
Low
Medium
High
Supply flexibility
High
High
High
Low
Geographical proximity
Good
Good
Good
Good
Supporting industries
Good
Good
Good
Poor
Low
Low
Low
High
Supporting services
Good
Good
Good
Medium
Marketing expertise
Low
Low
Medium to Low
High
Government intervention
41
Source: ITTO-ITC, 2006
Inevitably, the success of these four cluster models also varies and illustrates their contribution
towards the sustainable growth of the furniture industries as a whole.
It has not become fully clear how the Pakistani firms are networking between them. In other
countries like Egypt, the local furniture showroom owners hold a strong negotiating power
over the smaller furniture workshops. Showroom owners sub-contract these artisans to
manufacture components or un-finished furniture on copied designs, and then cream up the
profits by assembling, fabricating, finishing and marketing the ready furniture.
42
Box 2.10 USAID initiative in the furniture sector in Pakistan
•
A Government of Pakistan Initiative, funded by United States Agency for International
Development (USAID www.usaid.gov ) and implemented by J.E. Austin Associates
Inc. in partnership with SMEDA started in May, 2006. Its basic objective is to enhance
industry competitiveness in Pakistan. It is working in collaboration with private and
public sector, stakeholders, institutions, etc.
•
Under the Strategic Working Group (SWOG) process manufacturers, retailers,
importers, exporters, academia, forestry and designers have come together and
started formulating their strategy. This strategy not only chalks out their intended
initiatives but also prioritizes and plans for them.
•
The nine identified strategic initiatives are: sector management organization, mass
solar kiln installations, training centers, CFTMC’s (Technology Transfer Centers), firm
level technology up gradation plans, furniture testing labs, branding and exhibition
planning, sustainable forestry system and wood bank.
•
Initial meetings and discussions were held with industry in all furniture producing
clusters i.e. Chiniot, Peshawar, Gujrat, Karachi and Lahore. The Strategic Working
Group (SWOG) was formed. It is composed of 27 members that include
manufactures, exporters, importers, engineers, designers and the forestry
department.
•
The SWOG has worked with three consultants: Mr. Peter Rayner, Gary Kennedy and
Dr. Giuseppe Gregorio who accompanied the SWOG in Italy. Two study tours have
taken place so far. The first one was to Italy and Dubai in November 2006 and the
second one to Malaysia in March 2007.
•
USAID funded visits of foreign consultants to Pakistan to help in identifying major
problems confronting the industry and to suggest short term as well as long-term
remedies.
•
Ministry of Industries Production and Special Initiatives sets SWOG with task of
preparing Sector Development Strategy. Series of meetings were held in Lahore,
Karachi and Islamabad.
•
Due to the large number of SWOG members, the SWOG elected an Executive Core
Group (ECG) within the SWOG that meets more regularly. It is comprised of one
representative from Karachi, Lahore, Faisalabad, Chiniot, Gujranwala, Gujrat,
Rawalpindi, Islamabad and Peshawar. It has a monitoring and decision making role.
ECG reports to the Ministry and Pakistan Industrial Development Corporation (PIDC)
Board as well.
•
The government approved a financial grant of PK RS 590 million (ca. US$10 million)
to the industry to form the Sector Development Company by installing 75 solar wood
drying kilns all over the country, establishing common facility training and
manufacturing centres (one each at Chiniot and Peshawar) and organizing industry’s
participation at international trade shows.
Source: APFEA
2.3 SWOT analysis of Pakistani furniture companies
The following information is based on feedback from exporters and participants of workshops
as well as the external consultant’s views.
43
Strengths
Major strengths are as follows
•
Rich cultural, i.e. handwork (carving, cut work, brass inlay, etc.) done by labour is
excellent
•
Different range of products are produced
•
Low-cost labour with high carving skills
Other strengths mentioned are as follows
•
•
•
•
•
•
•
Good quality raw material
Cheap labour
Good designs and styles
Finest wood craved for international markets
Traditional and distinct designs for the regional Islamic markets
Association building and clusters: lobbying power
Realisation of the core of the problem and an open mind for new solutions
Weaknesses
Major weaknesses mentioned are as follows
•
•
•
Latest technology not being used
No training institutes
Lack of products/process standardisation
Other weaknesses mentioned are as follows:
•
No government support
•
No financial incentives
•
High taxes imposed by the Central Board of Revenue (CBR)
•
Sheesham is diseased
•
Exporters have no international market knowledge (no researches are done before
entering into a new market)
•
Image of Pakistani companies is very bad, perception needs to be changed
•
Limited access to market information
•
Lack of networking among entrepreneurs
•
Lack of domestic production materials (wood) and operating supplies (chemicals, foams,
technology)
•
Export infrastructure and location
•
Excessive role of middlemen in value chain
44
Opportunities
Major opportunities mentioned are as follows:
•
•
•
The Middle East markets boom
EU and US markets grow steadily, with up-market niche expansion
Sector development policies and support
Other opportunities mentioned are as follows:
•
•
•
•
•
•
•
•
Furniture demand is increasing with an increase in MNCs, banks and new houses
People have more money to spend
DTR for export
If skilled labour gets proper training, the quality of furniture will be enhanced
Adopt skills to imported wood carving
“Modernize” designs and trading channels
Cluster synergy optimization and networking
Furniture awarded with priority sector status
Threats
Major threats mentioned are as follows:
•
•
•
Skilled labour getting non-existent
Material bottlenecks (reliance on dwindling Sheesham resource, deforestation)
Inadequate support exporters and finance (incentives)
Other threats mentioned are as follows:
•
•
•
•
•
•
•
•
•
•
Labour rates going high
Competition from international companies
Electricity rates going up
Imports from China and Malaysia rising (Low priced and good quality)
Under-invoicing
Sheesham getting extinct
Forest policy weaknesses allowing illegality: smuggling of unprocessed wood
Slow change of design orientation
Red tape in customs and cargo clearance
Inactive training centres for skilled workers
2.4 Furniture association and its role in services
Number of members in All Pakistan Furniture Exporters Association: 125
60% of Pakistan’s furniture exports are from APFEA’s members
Over half a million people are involved in this industry.
45
2.5 Case stories on data collection
A significant part of the trade data of this report is taken from three websites owned and
operated by the International Trade Centre, ITC, www.intracen.org.
These website are Trade Map, Market Access Map and Product Map.
ITC’s Trade Map at www.trademap.org provides import and export data for over 200 countries
and territories for over 5000 product categories in a fully interactive environment. The above
insights were straightforwardly acquired from the data the website provides.
ITC’s Market Access Map at www.macmap.org provides information on tariffs and market
access measures for 178 importing countries and 200+ exporting countries on an easy to use
web platform.
ITC’s Product Map at www.p-maps.org provides extensive market intelligence in the form of
directly downloadable market studies, a gateway to market information on the internet and
numerous online company directories.
These websites have a wide range of users: enterprises, associations, government authorities,
financial institutions, statistical bureaus, researchers, academia, press etc.
Interested users in Pakistan can request passwords to access these online sources from
EPB/TDAP, SMEDA, ITC Islamabad office, LCCI, KCCI or FPCCI.
Below are case stories relevant for the furniture sector in Pakistan. They are based on data
taken from the three websites -- purely as examples of the waste amount of data available.
Case Story 1: Insight in to world markets for bed furniture
World import figures show a total import market size of US$7.8 billion and imports of
bedroom furniture (HS940350) have been in an upward trend over the last five years, with
world markets growing at an average annual rate of 17%. Demand is highly concentrated with
the United States buying almost 50% of all word imports and a UK and Germany taking up
another 13%. Beds make up one third of United States total bedroom furniture imports. These
9.46 million beds (2005) are mainly imported from East and South East Asia, led by China and
Vietnam.
Furnishing bedrooms appears to be very important for the Anglophone world as the United
Kingdom follows the United States as the world’s second largest buyer, buying almost
US$575m worth, equivalent to 250 thousand tons of bedroom furniture The United Kingdom
imports bedroom furniture at an average CIF value of US$2300 per ton (a very rough average
figure for all bedroom furniture items and in tons, but comparison between countries is
possible). This average price is not dissimilar to imports by other European countries with the
exception of the Austrians and the Irish who pay around US$1000 more per ton. The
significantly lower average amount paid for imports in the Middle East (US$1,619 per ton in
UAE, US$903 per ton in Saudi Arabia) suggest a less stringent consumer quality requirement
in this region.
The United Kingdom market has shown very high growth rates over recent years 29% per
annum in value and a stunning 40% per annum in quantity. Evidently there is downward
46
pressure on the price. There appears to be a sudden surge of imports of either cheaper products
or a new preference for a smaller bedroom furniture item in the United Kingdom. The surge
took place between 2002 and 2003. This could well be reflecting the establishment of foreign
furniture chain in the United Kingdom and trans-shipment of supplies at a lower rate. Whatever
the final conclusion turns out to be, since Pakistan has traditional ties with the United Kingdom
and already supplies bedroom furniture to the United Kingdom, this apparent opportunity may
well be worth further investigation.
Other fast growing smaller markets (c. 30% per annum) include Australia, Republic of Korea,
Spain and Eastern Europe including the Russian Federation. In the case of the Russian
Federation, though, in comparison to most countries where import tariffs are 0% for bedroom
furniture, the Russian Federation applies a 20% tariff for low value bedroom furniture and an
even higher specific tariff of 75-euro cents per kg for high value bedroom furniture.
Pakistan is currently a small player in the world, ranking 72nd exporter of bedroom furniture.
Despite being a small player, Pakistan already has a foot in the door of the United States and
United Kingdom markets. Further expansion could be envisaged in these major markets as well
as into other fast growing markets.
Case Story 2: Middle East market for wooden furniture
The Middle East import market for furniture is estimated by TradeMap to be worth around one
and a half billion dollars. Iran and Syria can virtually be considered non-markets as they import
only insignificant quantities. These two markets also protect their own furniture industry –
charging duty up to 50% tariff for wooden furniture and components (as can be seen in Market
Access Map) whilst the other Middle Eastern markets impose a tariff of up to 5%. Saudi
Arabia, UAE, Israel and Kuwait are the largest markets, Turkey, Cyprus and Iraq mid-range
markets and Qatar, Oman, Lebanon, Jordan and Yemen smaller markets.
As can be seen in the table below most of the imported furniture is dinning and living room
furniture (37%). Imports of bedroom furniture (16%), office furniture (11%) and upholstered
seats (11%) are also important. The fastest import growth rates can be witnessed in wooden
kitchen furniture, in mattress supports and in seats with wooden frames. Office furniture
showed the slowest growth rates between 2001 and 2005.
China, Italy, Malaysia, United States in descending order and are key suppliers of wooden
furniture to the region. Pakistan also exports wooden furniture to various Middle Eastern
countries. In general these are rather small quantities. The only trade flow of a significant size
is dining and living room furniture (non-bedroom, office or kitchen) to UAE of over
US$1.74m in 2005.
Competition from within the region is not strong. The only significant exporter of furniture in
the region is Turkey and the only important buyer from Turkey in the region is Iraq. Most of
Turkey’s exports are destined for Europe.
47
Table 2.5 Middle East furniture imports
HS code
Product
940330
Office furniture, wooden
940340
Kitchen furniture, wooden
940350
Middle East imports
2005
Value
($‘000)
Annual
growth
2001-05
(%)
Share
(%)
Major
importers
156,685
11
3
Saudi, UAE
99,551
6
23
Saudi,
Turkey, UAE
Bedroom furniture, wooden
298,924
16
17
Saudi, UAE,
Kuwait
940360
Furniture, wooden, nes
472,568
37
17
UAE, Israel,
Saudi
940380
Furniture of cane, osier, bamboo
94,438
7
27
UAE, Israel,
Saudi
940390
Furniture parts nes
120,134
8
20
UAE,
Turkey,
Saudi
940410
Mattress supports
7,661
0
25
Qatar,
Saudi,
Cyprus
940161
Seats with wooden frames,
upholstered
155,459
11
20
UAE, Saudi,
Turkey
940169
Seats with wooden frames
71,916
4
45
Saudi, UAE,
Turkey
Source: ITC database
Case Story 3: Un-upholstered seats with wooden frame markets
Un-upholstered seats with a wooden frame are classified as a separate category in trade
statistics (HS 940169) and the total world import figure for this product category is estimated
to be as high as US$2.87 billion. The world demand for these seats is also increasing; world
imports grew by 12% per year during 2001- 05 in value terms. Only a handful of countries
classify this product category in more detail, so we cannot speak for all importing markets, but
we can make the general deduction that the imported seats are mainly for household chairs and
not for public seating such as church pews.
The United States is the world’s key import market for this component, buying 37% of world
imports in 2005. Germany, United Kingdom, France and South Korea are also important
markets. South Korea, Spain, South Africa and Saudi Arabia are rapidly growing markets for
this component whilst Japan is showing a slight decline. The Swiss market is on the upper end
in terms of average price averaging CIF US$6,555 per ton, almost double the amount per ton
being paid by other importing countries in Europe and Japan.
Though Italy is an important exporter of wooden framed seats, with 10% share of world
exports, the lion’s share of supply comes from Asia – China, Vietnam, Malaysia and Thailand
– together making up 49% share of world exports in 2004.
48
Pakistan does not export this furniture component, but there is no reason why it would not have
the capacity to do so. The large and growing market should be an important incentive to
explore possibilities.
Clearly many niches can be carved out of the market for a component such as the one
described here. Trade data on its own will not provide enough detail, more qualitative
information would need to be collected to understand the markets better. For starters, much
more information is required on what the end product will be once the component is fitted.
Market surveys, links to market information web sites and links to webs sites of furniture
manufacturers would be an important complement to the trade statistics described above. ITC’s
Product Map serves this purpose.
49
3 Implications of WTO Agreements
3.1 Background
3.1.1 Multilateral discipline of trade rules
International trade for nearly six decades has been subject to the discipline of multilaterally
agreed rules “by which countries are required to abide in their trade relations with one
another” 2 . The institution responsible for overseeing this rules-based system is, the World
Trade Organization (WTO, www.wto.org) established on January 01, 1995. The WTO is the
successor to the General Agreement on Tariffs and Trade (GATT) which had been performing
a similar role since 1 January 1948.
Box 3.1 Multilateral discipline of trade rules – the WTO system
•
International trade is subject to the discipline of multilaterally agreed rules by which
countries are required to comply with in their trade relations with one another.
•
The World Trade Organization (WTO) oversees this multilateral system. Its
Agreements aim to help international trade flow smoothly, freely, fairly and
predictably.
•
Under the WTO trade regime there are both opportunities and challenges for
Pakistan.
•
It is for the business community supported by the Government to convert tariff
reductions and liberalization commitments into opportunities for trade.
•
Likewise concerted action needs to be taken by both the public and private sectors to
adequately meet challenges.
Source: WTO Cell, Planning & Development Department, Government of the Punjab
This chapter is divided into four main sections:
•
General background
•
Information on the WTO issues
•
Implications of the WTO Agreements
•
Trade conditions as a result of the WTO Agreements
3.1.2 Purview of the WTO
The WTO’s purview encompasses three agreements, relating to trade in: (1) Goods; (2)
Services; and (3) Trade-Related Intellectual Property Rights. In addition, there are twelve
associate agreements relevant for trade in goods.
2
50
ITC; Business Guide to the World Trading System (1999), p.3
3.1.3 Functional scope
The functional scope of the WTO is depicted in the diagram below:
Figure 3.1 Functional scope of the WTO
WTO
Trade in Goods
Trade in Services
General Agreement on
Trade in Services
(GATS)
General Agreement on
Tariffs and Trade (GATT)
1994
Intellectual Property
Rights
Trade Related Aspects of
Intellectual Property
Rights (TRIPS)
These Agreements seek to establish a trading system which is: non-discriminatory, freer, predictable,
more competitive and arguably more beneficial to developing countries
Associate Agreements on:
•
Agriculture
•
Application of Sanitary &
Phytosanitary Measures
(SPS)
•
Business and professional
services
•
Communication
•
Distribution services
•
Educational services
•
Product standards (TBT)
•
Environmental services
•
Trade-related investment
measures (TRIMs)
•
Construction and related
engineering services
•
Anti-dumping
•
Financial services
•
Customs valuation
•
•
Pre- shipment inspection
Health services tourism and
travel-related services
•
Rules of origin
•
•
Import licensing
Recreational, cultural and
sporting related services
•
Subsidies
•
Transport services
•
Countervailing measures
•
Other services
•
Measures for safeguards
•
Patents
•
Copyrights
•
Trademarks
•
Industrial designs
•
Geographical Indications
•
Undisclosed information
51
3.1.4 Dispute resolution
For disputes arising under GATT 94, GATS and TRIPs, there is a common dispute resolution
mechanism embodied in the WTO’s Disputes Settlement Understanding, (DSU).
3.1.5 Focus on trade in goods
In this report focus is on trade in goods. Hence, further reference will not be made to the
GATS while the TRIPs will be referred to wherever it is relevant.
3.1.6 Obligation of conformity
Each member country of the WTO is obliged to ensure the conformity of its laws, regulations
and administrative procedures with the agreement of the Organization (Article XVI (4) of the
Marrakech Agreement Establishing the WTO).
3.1.7 Opportunities and challenges under the WTO regime
Overview
The central objective of the WTO is to help international trade flow smoothly, freely, fairly and
predictably. The WTO’s rules with their trade liberalization orientation, have indeed led to a
rapid expansion of the world trade.
In ranking many achievements of the GATT-WTO system, among the most significant, is the
deep reduction in developed-country tariffs from high double-digit figures in 1947 to low
single-digit numbers today 3 . There has been also significant reduction in other barriers to
trade.
Under this liberal international trade regime there are both opportunities and challenges for
Pakistan. No doubt Pakistan faces many challenges. At the same time, the multilateral trade
dispensation has created many opportunities. If a proper strategy is adopted and the
government plays a supportive and facilitative role, it can lead to a significant increase in
international trade and substantially contribute to the economic growth. Hopefully ongoing
trade negotiations would add to these opportunities. However, “the WTO is about providing
opportunities – it does not provide guarantees nor does it provide all the conditions for
participation in the global economy”. In short, Pakistan has to put its act together, for realizing
the potential that has become available due to the trade liberalization. Action is to be taken by
the Government agencies, trade bodies and above all by entrepreneurs themselves. As it has
been aptly observed, “the business community has the primary responsibility for converting
tariff reductions and liberalization commitments into opportunities for trade by adopting
appropriate export promotion and development strategies”
3
52
See Patrick Macrory, Arthur Appleton and Michael Plummer, The World Trade Organization: Legal,
Economic and Political Analysis, Volume-I (2005) p.109.
Current status of efforts to liberalize trade
Currently (mid 2007), the ninth (and the first under the WTO) Multilateral Round of
Negotiations (MTN) called the Doha Development Agenda (DDA) is in progress 4 (more
correctly in a state of suspended animation). Earlier rounds have given great impetus to the
growth of international trade by slashing tariffs mostly in industrial countries as well as
elimination of non-tariff barriers such as quantitative restrictions. Following the Uruguay
Round (the most important MTN held so far), average tariffs rates in developed countries on
manufactures stand at an average of 3 % on imports down from the 5.5 % pre-Uruguay Round
average, a 45 % reduction. Tariffs, however, on goods of export interest to developing
countries still remain relatively high 5 e.g. on clothing and footwear. DDA has been launched
to improve the situation of developing countries in the multilateral trading system through
focusing on issues of principal concern to them. The progress of negotiation has been so far
very slow and deadlines for reaching agreement have been repeatedly missed. Meetings to
take forward the DDA process held in 2006 and 2007 turned out to be inconclusive and
negotiations have been suspended. One comment from an influential periodical graphically
describes the situation as the Doha round lying “comatose after five years of fruitless
negotiations” 6 .
Negotiations under the DDA on the Non-Agriculture Market Access (NAMA) cover the sector
under study. Modalities are yet to be finalized on a Swiss formula (i.e. envisaging rate of
reduction for a higher tariff to be greater than that for a lower one. For further details see:
www.wto.org )
3.2 Information on the WTO issues
3.2.1 Information flows (Upwards-downwards)
Information flows, both upwards and downwards, on the WTO are depicted below:
4
See Hong Kong Ministerial Declaration, WT/Min (05), Dec 22, 2005 and for updates on the latest
developments and pending issues visit www.wto.org.
5
See I. Haque, Doha Development Agenda: Recapturing the momentum of multilateralism and
developing countries, American University International Law Review, Volume 17 Member 5 Footnote
36. Also See Bernard Hoekman, Strengthening the Global Trade Architecture for Development: The
Post Doha Agenda, Nov. 2001, at 2.
6
The Economist, November 4, 2006, p.40
53
Figure 3.2 WTO information flows
WTO
WTO Mission of Pakistan, Geneva
Ministry of Commerce/TDAP*
Ministry of Industries
Chambers of Commerce and Trade
Associations
Entrepreneurs
* Earlier organization for trade promotion was the Export Promotion Bureau (EPB) which was replaced
by a new autonomous organization, i.e. Trade Development Authority of Pakistan (TDAP) in November,
2006.
The present arrangements leave a lot to be desired in terms of their content, sources,
destination, user friendliness and nature of information i.e. optional or compulsory. There are
markedly divergent perceptions among Pakistani entrepreneurs of furniture about the nature
and frequency of such flows. Despite contrary claims made by individual entrepreneurs, one
cannot help reaching the conclusion that flows are erratic in both directions.
54
3.2.2 Information flow-upwards, i.e. from companies via government
to WTO
Government driven flows – upwards
There is no problem in respect of information transmitted by the Government of Pakistan to the
WTO as an obligation of the membership of the organization. Regularly, the Ministry of
Commerce sends necessary information about notifications to the WTO as agreed in the
Ministerial Decision on Notification Procedure 7 . Some of the items that are notifiable are:
Tariffs, Generalised System of Preferences (GSP) provisions, Custom valuation, Rules of
origin, Safeguard actions, details regarding exports subsidies and concessionary export
financing.
T r a de s t a t is t ic s
As regards trade statistics, the Government of Pakistan is obliged to furnish data for the
integrated database of the WTO. These figures are based on data of the custom stations and
are reliable. There has been, however, a lag in furnishing these statistics. The problem is being
sorted out.
Another compulsory upward information flow is generated from the Census of Manufacturing
Industries (CMI) – conducted every five years 8 . Results of CMI suffer from problems of
coverage, research design and lack of adequate response from the industry. Further, these at
best are historical data.
Information through co n s u lt a t iv e m ee t in gs
The Government of Pakistan gets itself informed about problems faced by industry and
suggestions made by the private sector, in meetings preceding the formulation of each year’s
trade policy. Apart from the Federations of Pakistan Chambers of Commerce and Industries
(FPCCI), the regional Chambers of Commerce and sectoral associations, which are registered
with the Government, are invited. However, as regards associations, some selection is made to
ensure that representation is adequate in terms of both sectors and regions.
Information flow – upwards: Exporters’ opinion
S e m i v o lu nta r y a nd s po r a d ic
In interviews, the furniture exporters claimed that the upward flow of information, by
and large, was voluntary and sporadic. Companies, at times, furnish information to the
Trade Development Authority of Pakistan (TDAP), Small & Medium Enterprises Development
Authority (SMEDA), Chambers of Commerce & Industry and the Furniture Association. The
information is of general nature such as, statistics of sales, production, exports etc. (supplied
7
WTO: Decision on Notification Procedures, Ministerial Decisions and Declaration adopted by the Trade
Negotiations Committee on December 15, 1993.
8
The census is undertaken under the Industrial Statistics Act, 1942 for industrial units employing 10 and
above workers registered or qualifying for registration. Information is treated confidential.
55
mostly on demand basis and not on regular basis). There are, however, some firms who claim
to have voluntarily provided information on yearly basis.
I n f or ma t io n a bo u t th e c once r n ed g ov e r n me nt a ge nc ies /d ep ar t men t s
A majority of exporters generally had an idea that complaints/suggestions about the WTO can
be made to Ministries of Commerce & Industries or TDAP. They were also aware of websites
of the concerned government organizations. However, according to them they had not made
complaints/suggestions to any body/institution so far. Few had, however, consulted the
Chamber to find answers for their queries.
On the other hand, some entrepreneurs thought that there was no organization to whom they
can make complaints nor they were aware of any procedure for making their voices heard by
the relevant government authorities. In short, information about reaching out to the
government authorities or trade bodies is not even. More enlightened entrepreneurs are
aware of what to do while others remain ignorant of avenues of articulation, available to them.
3.2.3 Information flow – downwards – from WTO via government to
companies
Complaints about the lack of information about the WTO
All the exporters who were interviewed claimed that no information related to the WTO issues
was readily available. Few were not even familiar with the term “WTO”. When asked whether
they were aware of the WTO Cells in the Ministry of Commerce, TDAP, Planning &
Development Departments of Provincial Governments, or Chamber of Commerce & Industry’s
WTO Cell, they replied in negative.
One of them, however, said that he gets information on the WTO through newspapers,
association meetings & websites. He normally checks the websites of the association after two
– three months.
Kn ow le dge a bo u t imp lic a tio ns o f th e W TO Ag re emen ts
Very few exporters were aware of the specific WTO Trade Agreements and their implications
for the Pakistan’s furniture industry. Those who claimed to be knowledgeable of the
agreements said that they were generally aware of decreasing, tariffs and increasing prospects
of imports. They recognized that markets under the WTO trading dispensation would become
even more open in days to come.
Downwards flows
With respect to downward flow, the website of Ministry of Commerce
(www.commerce.gov.pk) and other Ministries, TDAP (www.tdap.gov.pk) and WTO Cell of
the Government of the Punjab (www.wtopunjab.gov.pk) have been playing a useful role.
However, here again it was found that various notifications issued by the WTO Secretariat and
which were regularly sent to the Ministry of Commerce were not put on the website. The plea
taken in this regard was that this information was available from the WTO website. It is,
however, felt that the Government of Pakistan and its export/trade development organizations
must play a more proactive role. The WTO in collaboration with ITC and the European
56
Commission (EC/EU) has established reference centres in the Ministry of Commerce, TDAP,
FPCCI, selected Chambers of Commerce & Industries and the Planning & Development
Department of the Government of the Punjab.
D emand for pro ac tive s upp or tive r o le o f the G ove rn ment
The furniture entrepreneurs were of the firm view that the Government should create greater
awareness about the WTO issues by, regularly organizing focused seminars, workshops and
discussions, circulating newsletters, magazines and creating websites. TDAP, Chamber Of
Commerce & Industry and the Association should also come forward in creating awareness.
The Government should compile a mailing list & regularly circulate updates on the WTO
agreements to exporters/manufacturers.
Recommendations
The situation as to information flows is not satisfactory. A proactive role is indicated on the
part of Ministry of Commerce and the TDAP: This organization should provide leadership and
collaborate efforts with other relevant agencies e.g. Chambers of Commerce and Trade
Associations, SMEDA, Provincial Government’s WTO Cells and Trade Associations. Funds
are not an insurmountable problem because the Ministry of Commerce and TDAP has ample
resources in the form of Export Development Fund (EDF). The real challenge is to organize a
system that is user friendly and available in virtual real time. Technical Assistance from the
ITC to set up/improve such an information system should be very much welcome. This should
become one of the important tasks to be assigned to the National WTO Consultant for TDAP
appointed by ITC.
TDAP should intensify its activities for capacity building specifically, for better use of
opportunities and coping with challenges emanating from the WTO system among other
things, the following measures are recommended:
•
The present system of generalized information on the WTO should be changed to a onedisseminating focused information regularly on concrete issues.
•
A comprehensive plan for dissemination of sector-specific information may be prepared
by TDAP in consultation with stakeholders.
•
A helpline, professionally manned, should be established in TDAP. Sector specific
experts should be available to callers.
•
Special meetings/workshops/seminars for educating entrepreneurs about the WTO issues
should be organized by the TDAP preferably in partnership with concerned trade
associations at least four times a year at different places.
(Action: Ministry of Commerce TDAP and ITC)
57
3.3 Implications of the WTO Trade Agreements
3.3.1 Relevant WTO Agreements for the global & Pakistani furniture
sector
The WTO Agreements in terms of degree of their relevance for the furniture sector can be
divided into three categories: high intensity relevance, low intensity relevance and contingent
relevance. Agreements possessing contingent relevance refer to those that come into effect in
certain situations only.
The degree of relevance of these agreements for the furniture sector is the same in Pakistan and
elsewhere i.e. in other WTO member countries as well.
The agreement, of direct relevance to the furniture sector, is GATT 1994. Other agreements
having high level of relevance intensity are TRIPs, Technical Barriers to Trade (TBT),
Application of Sanitary and Phytosanitary Measures (SPS), Rules of Origin and the Customs
Valuation. The agreements of lesser relevance are on: Pre-Shipment Inspection and Import
Licensing Procedures and Trade-relate Investment Measures. In the category of contingent
relevance, agreements on Anti-Dumping, Subsidies, Countervailing, Safeguards and the DSU
fall. The WTO Agreements not only influence the volume of trade but also affect the
operational space of a policy-maker and market access of an individual exporter.
A diagrammatic representation of the degree of relevance of the WTO Agreements for the
furniture sector is given below.
58
Figure 3.3 Relevant intensity of WTO Agreements
TBT
9
TRIPS
Rules of
origin*
SPS
Custom
valuation
Furniture
GATT
1994
Preshipment
inspection
DSU**
Import
licensing
procedure
Agreement
on SCM***
Antidumping
Agreement
on TRIMs
High intensity relevance
Low intensity relevance
Contingent relevance
Acquires high intensity relevance in the context of Regional Trading Arrangements and or where any
scheme of preferential tariffs has been adopted.
** Dispute Settlement Understanding
*** Subsidies & Countervailing Measures
*
Relevance of the specific WTO Agreements for the furniture sector in
greater detail
G en era l Agr ee me n t o n T ar iffs and Tr ad e 199 4 : ( Annex 1 A to th e Mar rake ch
A g r ee me n t E s ta b lis h in g th e W TO )
The structure of GATT 1994 that lays down the framework within which the international
trade of goods takes place. It rests upon five pillars that constitute the core of the legal
obligations of the member countries.
9
Texts of Agreements are available on the WTO’s website www.wto.org
59
F un da me n ta l o b l iga t io n s
T he unc ond it io na l Mos t- Fav ou red -Na tio n (MFN) ob liga tio n ( Ar ticle - l) :
Every member of the WTO is required to treat imports from all other members “on an equal,
non-discriminatory basis vis-à-vis all other members imports”. Thus if a country grants another
a special favour (e.g. lower custom’s duty rates) the same treatment has to be extended to all
other WTO member countries.
Implications for the furniture sector
Imports
•
Pakistan or any other WTO member country while importing furniture has to extend the
same treatment to the same products of all the member countries. They are not allowed
to give a differential treatment to any trading partner who is member of the WTO.
•
This obligation leads to non-discriminatory trade and provides level playing field to
every member of the WTO.
Exports
•
For Pakistani exports non-discriminatory market access to other markets is legally
assured. This does not, however, indicate the rate of tariff which is liveable on furniture
items. Market access will be virtually blocked if tariff rates are excessively high.
Likewise, exports will be adversely affected if non-tariff barriers are being used by
importing countries.
E x c e p t io n to t he pr inc ip le
Some exceptions are permitted from this principle such as:
•
Preferential tariff rates given to countries who are members of a free trade area/regional
trading arrangements under Article XXIV of the GATT,
•
Preferential tariff rate arrangements among developing countries permitted under the
Enabling Clause 10 (See Box 3.2).
•
Special access to markets of industrial countries at lower tariff rates granted to
developing countries e.g. Generalized System of Preferences (GSP) 11 . Member countries
are allowed to introduce trade restriction in case of balance of payment difficulties.
All these exceptions are, however, allowed under strict conditionalities.
10
WTO, Guide to the Uruguay Round Agreements 1999, p 40.
11
The GSP was proposed at UNCTAD II in 1968. It entered into force in 1971 and gives developing
countries a margin of preference in the tariff rates their goods face in the markets of developed
countries. In this way GSP increases their competitiveness.
60
Box 3.2 Regional Trade Agreements (RTAs)
Governments often take action to liberalize trade on a regional level through formation of
free trade areas or preferential trade areas. Under these arrangements, goods can enter
each other’s country market either without payment of any tariff or on some preferential
terms and conditions. RTA, which includes bilateral free trade agreements between
countries that are not in the same region, have become so widespread that all but one WTO
member are now parties to one or more of them. It is estimated that more than half of world
trade is now conducted under RTAs. Some 197 such agreements in force have been
notified to the GATT/WTO.
Many experts regard these arrangements as building blocks for a freer non-discriminatory
multilateral trading system. Many other experts, however, perceive these arrangements to
be obstacles to the growth of multilateral system. Regional arrangements are allowed (as
exception to the Most Favoured Nation principle) under Article XXIV of the GATT 94 as well
as under the Enabling Clause (trade arrangements between developing countries).
Pakistan is a signatory to an Agreement on South Asian Free Trade Area (SAFTA) which is
transformation of the SAARC Preferential Trading Arrangement (SAPTA operational albeit
half-heartedly since 1995) into a Free Trade Area among the SAARC members
(Bangladesh, Bhutan, India, Nepal, Maldives, Pakistan and Sri Lanka).
SAFTA’s framework agreement envisages reduction of tariffs to 0-5% level and removing
quantitative barriers to trade (a) within 10 years by its LDCs members—Nepal, Bhutan and
Maldives and (b) between 7 – 8 years in case of India, Pakistan, Bangladesh and Sri Lanka.
In addition to the above, a FTA has been signed with Sri Lanka. Early harvest agreements
have been signed with China and Malaysia. Besides this, a FTA agreement has been
signed with China in November 2006. Negotiations are ongoing for signing FTA with
Bangladesh, Turkey and Kenya. Discussions are also ongoing with Indonesia, Laos,
Singapore and Thailand for exploring the possibility of entering into FTAs.
N a t ion a l Tre a tm en t Ob l ig a t ion ( A r t ic le l ll)
Once foreign goods have entered a country’s market, these and locally produced goods are to
be treated equally (as if foreign goods have acquired importing country’s nationality).
This article embodies the same principle of non-discrimination as set out in the MFN
commitment. It also establishes the principle that no tax will be imposed on imports in excess
of the amount of the indirect taxes levied on the like domestic products.
R educ tio n a nd b ind in g s o f N a tion a l T ar iffs ( Ar tic le s II, XI)
In order to make trade predictable, WTO member countries are generally binding their
commitments (Article-Xl) i.e. ceilings are imposed on tariff rates that can be charged by a
country 12 . Under the WTO system tariffs (i.e. custom duties) are the only form of the
permissible measure for trade protection (Article II & Article XI). The bound tariffs cannot be
increased above the bound rates unless compensation is paid to the other adversely affected
WTO member.
12
Pakistan has bound more than 99% of tariff lines.
61
In case of developing countries, imports often take place on lower than the bound rates these
are called applied rates which can be increased up to bound levels without consultation with
anyone.
Reduction of tariffs is an important aspect of trade liberalization. As a matter of fact rates of
tariffs have been constantly coming down since the GATT became operational in 1948.
Industrial countries’ tariffs in most of the traded items have fallen down to less than 4%. Such
a significant reduction in tariff barriers has been very helpful for increasing trade. However, as
stated above on many items of interest to developing countries, tariff rates remain relatively
high e.g. textiles and clothing.
E lim in a tion o f qu an tita t ive res tr ic tio n s ( Ar tic le Xl)
Member countries are required to eliminate quantitative restrictions on imports and exports.
There are, however, a number of exceptions to this rule. For example export restrictions can
be applied on export of goods to prevent or relieve critical shortages, Article XI-2 (a).
I m p l ica t io ns f or th e fur n itur e s ec t o r
Exports
Pakistani exports of furniture do not by and large, face significant non-tariff barriers in
industrial countries’ markets. They mainly face tariff barriers that have also substantially come
down. In other words, for the furniture sector of Pakistan the “market access” is not a problem
as such. This indicates a great scope for increasing export in this item provided we have the
right products at right prices.
Imports
•
Combined effects of Articles II & Xl are that foreign furniture goods enjoy reasonable
access to Pakistan’s market though our tariffs are relatively high (25%).
•
Pakistan’s exports have in fact better opportunities in markets of industrial countries on
account of their comparatively lower tariffs.
Transparency of Government regulations affecting trade (Article X)
Members are obliged to publish relevant laws, regulations, administrative rulings of general
application including those pertaining to the classification of the valuation of the products etc.
Governments are also required to disclose their policies and practices publically within the
country as well as by notifying the WTO. With a view to ensuring that members adhere to
their obligations, their trade policies are periodically examined through a surveillance
mechanism called the “Trade Policy Review Mechanism”. This examination of the trade
policy and results becoming a part of public domain also contribute to greater transparency.
I m p l ica t io ns f or th e fur n itur e s ec t o r
•
62
Transparency in government regulations, in Pakistan and abroad, helps in smoother flow
of trade. It is “in essence due process guarantees and a partial shield against arbitrary
government action”.
Trade Related Aspects of Intellectual Property Rights (TRIPS)
Many countries entered into international agreements (non WTO) to protect creative ideas and
new knowledge by giving the creators of these knowledge based assets (called “intellectual
property rights”):
•
The right to prevent others from “using their inventions, designs or other creations 13 and,
•
To use this right to negotiate payment for their intellectual property (IP) rights.
However, protection given to IPRs (by several international agreements) was found to be
inadequate. This was particularly true as to the level of protection, implementation and
enforcement. It was, therefore, agreed to develop new internationally agreed rules. The result
was the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs)
negotiated in the Uruguay Round of MTN that sought to reduce distortions and impediments to
international trade through promoting effective and adequate protection of intellectual property
rights.
The Agreement spells out the way that basic principles of trading order and other intellectual
property agreements should be applied. The “MFN” and national treatment requirement have
constituted key elements of the architecture of the agreement on the TRIPs. This Agreement
has also required members to comply with pre-existing agreements governing IPRs. It was
explicitly provided that nothing in the TRIPs Agreement shall derogate from existing
obligations as spelled out in the Paris Convention, the Berne Convention, the Rome
Convention and the Treaty in respect of Integrated Circuits.
The TRIPs Agreement markedly narrowed the gaps in the manner these rights were
recognized, protected and enforced among trading nations. It also provides for settlement of
disputes through the WTO dispute settlement system. Pakistan, in compliance with the TRIPS
Agreement, has enacted new legislation (IPO law) as well as effected amendments in the
existing laws relating to patents, copyrights and Trademarks.
R e lev a nce f o r th e fur ni t ur e s e c tor :
The TRIPs Agreement is directly relevant for the furniture sector.
Protection of designs and trademarks
•
Furniture designs can now be protected through getting them registered under the
Industrial Designs Ordinance (2000). The furniture industry should seriously consider
registering any innovative and special design so these be fully protected.
•
The well-established companies would be also well advised to get their trade marks
protected.
•
The quality of protection has significantly improved. By the same token the furniture
industry in Pakistan cannot copy some one else’s designs or trade marks. Pakistani
furniture manufactures and exporters will be well advised to comply with the provisions
of the TRIPs Agreement.
13
This Agreement fixed minimum levels of protection that each member of the WTO is required to provide
to intellectual property rights of other members.
63
•
Exporters if wrongly accused of violation of some one’s IPRs should take full advantage
of protection provided by this Agreement.
(Action: Entrepreneur/Association)
Agreement on Technical Barriers to Trade (TBT)
Every WTO member, while allowing imports, has the right to adopt standards considered by it
to be appropriate for human, animal or plant life or health or for the protection of the
environment or for prevention of deceptive practices. The TBT seeks to assure that
regulations, standards, testing and certification procedures do not create unnecessary hurdles to
trade. However, with a view to preventing excessive diversity, TBT encourages member
countries to use international standards where these are appropriate but it does not oblige them
to change their levels of protection in the process.
TBT contains a code of good practice for the preparation, adoption and application of
standards. It lays down that procedures used to determine whether a product conforms with the
national standards have to be fair and equitable. It does not approve of any methods that would
give domestically produced products an unfair advantage. It also encourages countries to
accord recognition to each other’s testing procedures. To help the stakeholders to know about
the latest standards in the prospective markets, all WTO members are required to establish a
national enquiry point.
The TBT gives decisive advantage to industrial countries as they have superior technologies
and do follow more rigorous and higher standards. On the contrary, Pakistan being a
developing country has yet to progress to those relatively sophisticated standards. In
particular, there are not enough laboratories. This puts Pakistan at a disadvantage.
R e lev a nce f o r th e fur ni t ur e s e c tor :
There can be genuine concerns about safety features of the furniture exported form Pakistan
e.g. it has rough edges that can cause injury, or its design is defective or it has failed to use fire
retardant material as required by the consumers.
There is also the possibility that protectionists interests in importing countries may insist on
laying down unrealistic standards which might have the effect of obstructing trade. In such
cases, Pakistani exporters may be well advised to plead that the arbitrary standards have been
creating unnecessary hurdles to trade and constitute a violation of the TBT Agreement.
There are various government institutions through which awareness regarding environmental
standards and regulations can be/should be disseminated regularly to the export sector. These
include the Ministry of Commerce, Ministry of Industries and Ministry of Environment, Trade
Development Authority of Pakistan and Provincial Department of Environment Protection. The
lack of such information can lead to loss of markets. The Ministry of Commerce may also
consider including a trade and environment section in the cell that deals with the WTO and
draw on the relevant expertise from the other ministries.
(Action: Entrepreneurs/Association and Government of Pakistan (GOP)
64
Agreement on the application of sanitary and phytosanitary measures
(SPS)
Member countries of the WTO are allowed under Article XX of the
GATT 94 to regulate
trade with a view to protecting human, animal or plant life or health. Under the Agreement on
Sanitary and Phytosanitary measures (SPS), the WTO has disciplined the exercise of discretion
by member countries by disallowing them to discriminate or misuse this authority serving as a
form of disguised protectionism.
Members of the WTO are allowed to establish their own standards but it is stipulated that the
relevant regulations must be based on science and applied only to the extent necessary to
protect human, animal or plant life or health. They are not allowed to arbitrarily or
unjustifiably discriminate between countries, where identical or similar conditions prevail.
Member countries are encouraged to use international standards, guidelines and
recommendations if these are available.
In order to make the process fair from the perspective of exporters, standards different from
those already prescribed, can be applied. Similarly, different methods of inspecting products
can be adopted. In order to make this happen exporters demonstrate that the measures which
exporting countries have applied are at the same level of “health protection” as adopted by
importing countries. Once that is done, an importing country is expected to accept the
exporting country’s standards and methods. The Agreement also lays down that governments
must provide advance notice of new or changed SPS regulations. They are also required to set
a national enquiry point to provide up-to-date information.
R e lev a nce f o r th e fur ni t ur e s e c tor
Apparently, this agreement should not be relevant for the furniture sector. However,
protectionist’s interests can assume any garb and come up with objections as to the imported
furniture on the ground of it being harmful to human, animal or plant health. In particular,
such a stand can be taken somewhat easily in respect of the components of furniture and ready
to assemble parts. It may be argued, for example, that inputs or polish on the furniture are
emitting certain substance or the wood used have been treated with a material (say anti-termite
treatment carried out by the manufacturer) which is harmful to the human, animal and plant
life. In such a situation, it would be open for our exporters to approach the Government of
Pakistan (GOP) to press into service provisions in the agreement against untenable standards.
(Action: Furniture Industry and GOP)
Customs Valuation under the GATT – Implementation of Article VII of
the GATT
The Provisions regarding customs valuation under the GATT seek to establish a fair and
uniform system for the valuation of goods that provides protection to international traders from
fixation of arbitrary values by customs authorities of importing countries. The agreement lays
down that the customs value of the imported goods in the case of unrelated parties (additional
considerations apply where the importer and exporter are related entities) will be the
“transaction value”, which really means the price actually payable for the goods when sold for
exports. Some costs such as: freight, packaging, commissions etc. may be added for the
purpose of working out customs value. The agreement however excludes items that are
regarded irrelevant for fixing custom value, e.g. the price of goods in domestic market of the
65
exporting country. If the custom authorities of a country have doubts about the declared value,
they may determine the value by sequentially adopting one of the five options: (a) the value of
identical goods, (b) the value of similar goods, (c) the imported price of identical or similar
goods less applicable deductions for costs, (d) computed value and (e) if none of these methods
work, reasonable means may be used for determining value.
R e lev a nce o f t he f ur n itu r e s ec to r
Serious problems can arise if custom authorities of a country choose to fix arbitrary values. If
values fixed are excessive, trade liberalization policy can be effectively negated. In case
values are on the low side the tariff protection given to domestic manufactures will cease to be
effective. Furniture importers and domestic producers if they find this misuse of custom
processes they can agitate the matter with the relevant revenue authority (Central Board of
Revenue).
Rules of Origin
The WTO agreement on Rules of Origin contains a work-programme seeking to bring about in
the long term harmonization of these rules. The issue of “Rules of Origin” does not arise in
cases where import and export take place on the MFN basis. This issue arises in cases where a
country is to benefit from the lower tariff available through GSP or under a regional trading
arrangement. Such concessional arrangement rightly requires scrutiny of imported goods to
ensure that they are coming from the eligible sources.
Where furniture exports are destined for a country either granting GSP or, for a member of a
regional arrangement of which Pakistan is a member, rules of origin acquire special
importance. Exporters will be advised in these cases to obtain complete documentation,
certifying the Pakistani origin of the concerned articles. Importers should likewise in such
cases insist on getting proper documentation from the importing country.
Agreement on Trade-Related Investment Measures (TRIMs)
At times, local content requirements and performance requirements have been, inter alia,
employed by host countries as an instrument to promote development objectives, such as
industrialization, import-substitution and export growth. Such requirements can affect
international trade. For example, a requirement of local content in a product may prevent or
limit the use of imported inputs. Any investment related measure of this type has been now
prohibited as a trade distorting measure. This agreement is, as such, not relevant for the
furniture sector.
Antidumping – Agreement on implementation of Article VI of the GATT
1994
Article VI of the GATT 94 finds the practice, of sale of products of a foreign country at less
than the normal value of the products in the exporting country (called dumping) objectionable
if the price level causes or threatens material injury to an established industry in the importing
66
country or materially retards the establishment of a domestic industry. Article VI (2) of the
Agreement permits a country to offset or prevent dumping by levying on the concerned
product antidumping duty not greater in amount than the margin of dumping. The margin of
the dumping is the price difference determined in accordance with the Article VI (1).
Under the antidumping agreement, a country is allowed to act in a way that would normally
infringe the GATT principles of binding a tariff on MFN basis because antidumping actions
means “charging extra import duty” on a particular product from a particular exporting
country. Detailed procedures have been laid down on how antidumping cases are to be
initiated, how their investigations are to be conducted and the conditions for ensuring that all
interested parties get an opportunity to present evidence.
Normally, antidumping measures expire five years after the date of imposition, unless an
investigation shows that ending the measures would lead to injury. Anti-dumping
investigations are required to end immediately in cases where it is determined if the margin of
dumping is insignificantly small (defined as less than 2% of the export price of the product).
Likewise, proceedings must end if the volume of dumped imports is negligible. The agreement
lays down that the member countries must inform the WTO about all preliminary and final
antidumping actions promptly as well as report on investigations twice a year.
This agreement is important both for importers and exporters of furniture. If actionable
dumping takes places in the Pakistani market, one can have recourse to the National Tariff
Commission (www.ntc.gov.pk) for seeking relief. If necessary the Government of Pakistan
also can, on the basis of Anti-dumping Agreement, agitate the matter in the dispute settlement
system of the WTO. The Ministry of Commerce, Government of Pakistan is the concerned
agency.
(Action: Furniture Industry and GOP, Ministry of Commerce)
In case, export of furniture from Pakistan faces anti-dumping proceeding in an importing
country or in the dispute settlement system of the WTO the GoP has to argue (and present
evidence) that dumping has not taken place or the margin of dumping is insignificantly small.
However, given the extremely small quantum of furniture exports from Pakistan, there is little
likelihood of antidumping action against us in the near future. Action is to be taken at the
instance of the industry by the Ministry of Commerce.
(Action: Industry and Ministry of Commerce, GOP)
Agreement on subsidies and countervailing measures
This agreement disciplines use of subsidies and also regulates the actions that can be taken by
the countries to counter effects of subsidies. A country can have recourse to the WTO’s
dispute settlement mechanism and seek the withdrawal of the subsidy or the removal of its
adverse effects. Another alternative is to launch its own investigation and charge extra duty
(known as “countervailing duty”) on the goods in question to nullify effects of subsidy given
by our trading partners. The agreement defines a subsidy and also introduces a concept of a
specific subsidy i.e. a subsidy available only to an enterprise/group of enterprises. The
discipline applies only to specific domestic or exports subsidies.
67
The agreement deals with the following two types of subsidies:
•
Prohibited subsidies: Requiring recipients of subsidies to achieve certain exports
targets, or to use domestic goods instead of imported goods in their manufacture. Such
subsidies (trade distorting) can be challenged in the WTO’s dispute settlement
mechanism. In case, it is found that the prohibited subsidies have been given, the
respondent country will be ordered to withdraw those immediately. In case the
respondent fails to comply, the complaining country can levy countervailing duty on
such subsidized products after following the prescribed procedure.
•
Actionable subsidies: This category is less objectionable than “prohibited subsides”.
Here a complaining country has to demonstrate that the subsidy has an adverse effect on
its interests. The agreement defines three types of damage that can be caused by this
class of subsidies (i) Domestic industry of the importing country is being hurt (ii) Rival
exporters from another country may be hurt when the two compete in third markets (iii)
Domestic subsidies in one country can hurt exporters trying to compete in the
subsidizing countries’ domestic market.
•
Exception: Subsidies given by LDCs/developing countries with GNPs of less than
US$1000 per capita per year are exempted from subsidy regime.
Im po r ts in to Pak is ta n
In case prohibited and actionable subsidies are given to promote export of the furniture,
affected interests in Pakistan can request the National Tariff Commission to impose
countervailing duties.
Exp or ts from Pak is ta n
On the other hand if allegations are made by importing country about subsidies (trade
distorting) on the part of Pakistan, this agreement provides the exporter with wherewithal to
show that countervailing duty should not be imposed. Should the matter require reference to
the WTO, the Ministry of Commerce would have to be approached.
(Action: Furniture industry and GOP)
Agreement on safeguards
This agreement disciplines initiation of emergency safeguards measures by laying down
requirements for safeguard investigations. These have to be transparent as well as oblige the
Member countries to follow established rules and practices. The criteria for serious injury
caused or threatened to be caused has been also laid down. The agreement also sets time limit
on all safeguard actions (4 years) and addresses “grey area”, measures by providing that the
members must not seek/take or maintain any voluntary export restraints, orderly marketing
arrangements or any other similar measures. An import “surge” that triggers action under this
agreement is defined it to be a real increase in imports i.e. an absolute increase or an increase
in the import share of a shrinking market (even if the import quantity has not increased).
68
This agreement can be used wherever any importing country finds that there has been a surge
in imports, causing injury to the domestic industry. Affected parties are well advised to
approach the Government of Pakistan for remedial steps in such a case.
By the same token, the exporting country can always show that action under safeguards
provisions is not transparent or does not meet the criteria of serious injury or threat of serious
injury.
Box 3.3 GATT 1994 in a nutshell
•
General Agreement on Tariffs and Trade regulates the international trade in goods
and rests on five pillars: Most-Favoured-Nation (MFN) Obligation, National Treatment
Obligation, Elimination of Quantitative Restrictions, Transparency of Government
Regulations Affecting Trade and Tariff Bindings
•
Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) seeks
to reduce impediments to international trade through promoting adequate protection
of intellectual property rights. TRIPS Agreement is specially relevant for
pharmaceutical industry.
•
Agreement on Technical Barriers to Trade (TBT) contains a code of good practice for
the preparation, adoption and application of standards.
•
Agreement on Sanitary and Phytosanitary Measures (SPS) disciplines exercise of
discretion when a country wishes to disallow import of any item on the ground that it
would be hazardous to life or health of human being or disallowing import to protect
human, animals or plants
•
Customs Valuation under GATT – Implementation of Article VII, This agreement
seeks to establish a fair and uniform system for the valuation of goods that provides
protection to international traders from fixation of arbitrary values by customs
authorities of importing countries
•
Agreement on Rules of Origin seeks to clarify and harmonize rules of origin in
member countries and in particular requires members to ensure that such rules do
not create distorting or disruptive effects on trade. The rules of origin are of special
relevance in cases where a country is to benefit from the lower tariff available through
GSP or under a regional trading arrangement.
•
Agreement on Trade-Related Investment Measures (TRIMs) seeks to prohibit
investment related measures which are trade distorting e.g. local content
requirements and performance requirements. It is of special relevance for automotive
parts sector.
•
Agreement on Implementation of Article VI of the GATT 1994 (Antidumping)
regulates the practice of dumping i.e. the sale of products of a foreign country at less
than the normal value of the products in the exporting country if the price level causes
or threatens to cause material injury to an established industry in the importing
country.
•
Agreement on Subsidies and Countervailing Measures disciplines use of subsidies
and also regulates the actions that can be taken by the countries to counter the
effects of subsidies
•
Agreement on Safeguards disciplines initiation of emergency.
69
3.4 Trade conditions of the Pakistani furniture sector
3.4.1 General
Market access for Pakistan has improved and also for its trading partners. As a result of the
WTO agreements, market access for the Pakistani furniture in industrial countries’ market has
improved as tariffs have come down. Further, there is now protection available to Pakistan
against any discriminatory treatment in our trading partners’ markets. Article XI of the GATT
1994 has also eliminated quantitative restrictions.
Pakistan has also opened its market substantially, among others, in respect of furniture
including the wooden furniture to foreign suppliers, (albeit on 25% of duty, higher as
compared to that of industrial countries). Since 1998 the import regime of Pakistan has been
significantly liberalized through reduction in tariffs, rationalization, and removal of import
quotas, import surcharges and regulatory duties. The un-weighted (i.e. simple) average
statutory tariff has come down from 47.1% in 1997- 98 to 14.4% in 2006- 07.
The process in fact started in 1988 after the agreement on Structural Adjustment Programme
was concluded with the International Monetary Fund (IMF). Unilateral, liberalization has been
in the case of Pakistan the principal avenue of liberalization of trade. Of course, Pakistan has
been complying with all its commitments under the WTO. The net actual liberalization on
the part of Pakistan has been much more than multilaterally required in our WTO
agreements. Some experts are of the view that we should not have unilaterally tariffs reduced
such a steep extent.
Competition has led to reduction in prices. Increasing competition in the world has also
helped in reducing prices and improving quality of inputs i.e. improving import sourcing.
This is of special significance because production structure of the furniture industry has
undergone a significant change. Factories from dozen of countries now participate in the
different stages of global furniture chains, manufacturing components and ready-toassemble (RTA) components for finished furniture for globally outsourcing buyers’ groups
and retailer chains.
New tougher requirements are being adopted. Pakistani furniture makers have now
entered an era of increasing competition, as opening up of trade impacts both exports and
imports. New tougher requirements for producing domestic, furniture according to stricter
standards and more elaborate designs are being progressively adopted.
The WTO system is dynamically evolving. The WTO regime is not static but is dynamically
evolving. Currently, MTN are taking place on the Doha Development Agenda (DDA). The
way these negotiations proceed and the ultimate agreement reached will influence the
landscape of international trade (though at the moment the prospects of a satisfactory outcome
are not bright).
70
3.4.2 Other countries’ access to Pakistan (Threats)
Pakistan exports are higher than its imports at this point in time. Total exports of wooden
furniture for the year 2005 amounted to US$12.3 million while imports were US$10.3 million.
The MFN duty applied by Pakistan to the imports of different furniture products is 25%. 14
Rapid growth of imports is taking place. A rapid growth of imports under the WTO
liberalized import regime has taken place. Market share of main furniture exporting countries
in Pakistan’s economy is increasing with a rapid pace. For example the export growth of China
in the furniture sector to Pakistan is 278% between 2004 and 2005. According to industries’
sources the arrival of Chinese furniture has hit the local office furniture by 70% and the sales
of locally manufactured household furniture have declined by 30%. 15 Though it is not possible
to verify the statement but one cay say that the pressure on the domestic industry has
considerably increased. Other developing countries like Thailand, Malaysia, and Korea are also
exporting more and more to Pakistan. Apparently the reason for this substantial increase in
imports from these countries is that these products are found attractive particularly by up
market buyers in respect of quality and price. However, questions remain about the
attractiveness of the price despite 25% custom’s duty. Some manufacturers attribute the
prevalent price level to under-invoicing and misdeclaration of imported products. The
menace of valuation fraud indeed poses a serious threat and should be earnestly tackled by the
Government of Pakistan. Furniture industry should be associated in this exercise.
(Action: Furniture Industry Associations and the Central Board of Revenue-Pakistan)
The details of quantum of import growth, share in Pakistan’s market, and imported quantity
and the value of furniture products by top ten exporting markets are given below:
Table 3.1 Top 10 furniture suppliers to Pakistan
Imported value
2004
(US$ million)
Share in Pakistan's
imports (%)
Growth in value
2003-04
(%)
World
5.54
100
41
China
2.15
39
58
United States of
America
.475
9
41
Taiwan (China)
.427
8
-12
United Arab Emirates
.382
7
-23
Philippines
.332
6
4050*
Malaysia
.330
6
26
Italy
.233
4
41
Germany
.218
4
68
Exporters
14
Market Access Map, ITC. However, preferential tariff for Sri Lanka is 16.43%.
15
The Business Recorder, December 7, 2006.
71
Imported value
2004
(US$ million)
Share in Pakistan's
imports (%)
Growth in value
2003-04
(%)
Thailand
.177
3
64
Korea, Rep. of Korea
.167
3
88
Exporters
* A freakish figure, recording massive percentage increase but the absolute figure is not much.
Source: ITC calculations based on COMTRADE statistics
There is not much of a threat at present to the furniture industry. Whether, liberalization
of trade has posed a threat to the furniture industry of Pakistan? There is prima facie not
much of a threat to this industry at present though the industry’s sources have a negative
perception of the situation. Our tariff rates are relatively high. Further, Pakistan’s bound rates
are much higher than the applied tariff rates. In appropriate cases the affected industries can
always approach the National Tariff Commission which provides an institutional mechanism
for trade remedial action. However, these rates are likely to come down after an accord, if any,
on NAMA (Non-Agricultural Market Access) under DDA. The malpractice of under invoicing
and misdecaration have to be, however, checked to ensure such types of imports, having unfair
competitive advantage, do not pose a threat to the domestic furniture industry.
One can not hope for a closed economy in a globalized world. In the world of liberalized
trade one can not expect a closed economy and should not be upset about the flow of imports.
However, the rate of growth in imports should be a matter of some concern as it constitutes a
potential threat indicating a need for working on price competitiveness, quality enhancement of
our products and stopping malpractices regarding valuation of imports. The Government of
Pakistan should also seriously consider the demand of local manufacturers to decrease the
import duties on the raw material including chipboard, adhesive, wood, foam and other related
items to compete the foreign items at home.
3.4.3 Pakistan’s access to other/new markets (Opportunities)
Improved market access
Sustained growth in export earnings has taken place. In the first year, when the WTO
regime became operational, export earnings amounted to US$3.142 millions. Thereafter there
has been a sustained growth and the values of exports for the year 2004-05 are US$12.3
millions. Though, it can not be claimed that WTO is the only factor underlying this growth yet
it can be assumed that the liberalized WTO regime has made a contribution to better export
performance. A study of tariff structures in various countries have shown that at present a large
number of countries have either lower tariff rates or even zero tariff. The WTO regime has
indeed improved market access for our furniture industry.
Information as to tariff rates in markets of our ten major buyers would help us to appreciate the
extent of opportunities available to Pakistan. A table setting out relevant details about various
export destinations of the Pakistan’s furniture products is accordingly given below. Countries
in the table are shown according to their share in the Pakistan’s furniture export.
72
Table 3.2 Top 10 buyers of the Pakistani furniture - Tariffs and share of exports
Exported value
2005 (US$ million)
Applied tariff (%)
Share in Pakistan's
exports (%)
United States of America
2.0
0%
16%
United Kingdom
1.97
0%
16%
UAE
1.86
5%
15%
Afghanistan
1.29
Not available
10%
Italy
1.0
0%
8%
Saudi Arabia
.398
5%
3%
South Africa
.370
20%
3%
Cyprus
.336
0%
3%
Germany
.302
0%
2%
Canada
.267
0%
2%
Importers/ buyers
Source: ITC calculations based on COMTRADE statistics
Market Access is not a problem for Pakistan for furniture products. Statistics in the table
above show that the market access is not a problem as such for the Pakistani furniture. The
main constraint experienced by Pakistan is that of supply side lack of capacity. Under the
WTO liberalized import regime, Pakistani exporters need to concentrate on the markets like
OECD countries particularly the EU, where applied tariff is 0%. Although EU is one of the
largest furniture importing markets in the world, yet Pakistan’s market share there is less than
1%. Only 30% of the Pakistani exports are destined for EU (Source: ITC Product Map). It
would be worthwhile to make efforts to increase flow of exports to the EU. This, of course,
would require a radical change in the strategy particularly in terms of range of products and
design that are in demand by the EU buyers. We must learn to produce what is liked and
required abroad and at competitive prices.
3.4.4 Third parties’/countries’ access to other markets
(Threats/competition)
C om pe tit ion /po ten tia l
There is great potential for increasing exports. Pakistani furniture exports represent at best
a nominal share in the world exports, but there is a great potential to improve. After the
conclusion of Uruguay round and consequential enhancement in the quantum and quality of
liberalization, Pakistan has been enjoying better market access. Elimination of quantitative
restrictions and reduction in tariffs should prove exceedingly helpful. Under these
circumstances Pakistan should seek the benefits of its cheap production factors e.g. lower
wages, and cheaper raw material. If the raw materials or furniture parts are required for a
finished product, importers in Pakistan should be facilitated by undertaking greater
promotional and facilitation efforts on the part of the TDAP. The tariff applied for imports of
furniture parts and accessories is comparatively high i.e. 25%. Mechanism should be adopted
73
to ensure duty free import of components used in the finished product instead of obliging
exporters to claim duty drawback that is an inefficient way of providing relief.
N eed f or gre a te r c o mpl ia nc e
There is clear need to improve compliance with the WTO agreements. To compete in
international market Pakistani exporters will have to become more careful about compliance
with SPS and TBT. Pakistani furniture products have been reportedly banned by some
countries on the ground that those products were not properly rounded at the edges resulting in
the risk of injury to their users. Our exporters have to be also careful about termite treatment
that uses chlorpysifos. 16 Japan as a matter of fact has banned the import of wooden products
containing chlorpysifos.
O pp or tu n it ie s an d c om pe t it io n
Many opportunities have become available after the conclusion of the WTO Agreements
and consequential trade liberalization. Needless to say, Pakistan is not alone in the field and
competition is really intense. We have to adopt a sound strategy and vigorously follow up
trade promotion plans. Two factors have been taken into consideration while identifying
opportunity offering markets: (i) size of the market, and (ii) degree of presence of Pakistani
products. The size of the market has been given greater weight because we should aim at
substantial increase in exports that would be possible only in bigger markets.
Following is the list of those markets where there seems to be potential for growth of Pakistani
furniture export.
•
United States of America: USA, the first export destination of Pakistan, (16% in value)
is among the biggest furniture importers of the world. However, Pakistan’s share of
exports is much below than even one percent of the US market. It stands nowhere as
compared to other exporters to the USA. China, Canada, Mexico, Italy and Taiwan,
which have more than 76% of the United States market. The tariff is zero. There is
definite potential for growth for Pakistan.
•
United Kingdom: The United Kingdom is a big import market (applied tariff is 0%).
The UK is Pakistan’s second major export destination (16% in value). However, its
market share with us is much less than even 1%. Here again building on our presence
(albeit very small) and utilizing our knowledge of this market, there should be good
prospects of increasing our share.
•
United Arab Emirates: UAE (applied tariff is 5%) is at present the third largest export
market for Pakistani furniture (15% in value). Despite this fact Pakistan’s share in its
imports is below 1% countries like Italy, Malaysia, China and Indonesia have secured
major share in UAE’s market with rapid rate of growth of their exports. Pakistan should
more intensively focus on prospects in this market with which it is well familiar and
which is in the region, offering the advantage of low transportation cost.
•
Saudi Arabia: Saudi Arabia (applied tariff is 5%) is the sixth largest export destination
for Pakistan (3% in value). But Pakistan’s share in its imports is again nominal (below
1%). China, Italy, USA, Malaysia and France are having more than 75% of Saudi
16
International Wood News, American Forest and paper Association, Volume2, Issue 9-March 2003
74
Arabian market. Here again, there is potential for growth and need for concerted efforts
to optimize the opportunities offered by this market.
•
Afghanistan: Pakistan is Afghanistan’s top supplier of wooden bedroom and lounge
furniture. 26% of Afghanistan imports of wooden furniture are from Pakistan. Pakistan
should not lose a market that is one of the major destinations of its exports and is
geographically so proximate.
Box 3.4 At a glance - Impact of the WTO Agreements on the Pakistani furniture sector
Exports
•
Better market access for Pakistan in the industrial countries markets.
•
Tariff rates have been drastically reduced in developed countries’ markets (very low
or even zero).
•
There has been a sustained growth of export earnings from US$3 – 4 million per year
in the mid – 1990s to US$10 – 15 million per year today.
•
Reduction in prices and improvement in the quality of inputs.
•
Opportunity to intensify penetration in the EU, US, UAE, Saudi Arabia and
Afghanistan markets.
•
Great potential for increasing exports but we have to tackle supply side problems.
•
Must learn to produce what is liked and required abroad and at competitive prices.
•
Pakistan needs to do intensive research into the need of foreign markets including
trends and designs
Imports
•
Substantial opening of Pakistan’s market albeit on relatively higher duty.
•
No much of a threat at present (tariff rate at 25% is quite high) but problem is caused
by malpractice of under-invoicing and misdeclaration and smuggling.
•
Trend of increasing import growth– potential threat.
75
4 Obstacles and shortcomings to export
4.1 Obstacles and shortcomings – exporters’ opinions
The comments presented in this part are based on the interviews conducted by AAL of
furniture manufacturer/exporters, participants present in the workshop and comments of the
President of APFEA.
4.1.1 Obstacles
At company level
•
Raw material is diseased; its cost is high and it is of sub standard. As a result, low
quality of furniture is produced. Companies have to suffer severe loss (PKR 2 million
annually).
•
Quality of labour is deteriorating, as they do not get proper training. Consequently, the
quality of work produced is low. (PKR 1 million loss is incurred annually which results
in losing customers).
•
Sheesham (rosewood) getting expensive and extinct. This wood is very important,
there’s no replacement. As a result, sales are affected and importing is done at a large
scale in order to meet this need. It costs four times more.
•
Transportation rates are increasing. Where previously a company would have sent 4
containers, it ends up sending only two. Diesel/petrol rates have also increased.
•
Lack of space is a problem. Because of small area, less pieces of furniture are
produced. There’s 40% loss and as a result all opportunities are lost. If more material is
produced, it is wasted because there is no space for its storage
At country level
•
Government departments follow red tapism, blackmailing, bribery, corruption,
taxation and have lengthy procedures for exporters. Companies as a result are
affected badly. (There is a loss of PKR 5 million)
•
No proper guidance is given to companies regarding financial incentives given by
the government. The attitude of banks is very bad and they have cumbersome
procedures for loans. As a result, companies have no knowledge and they fail to make
use of finance facilities. In addition, the government is not providing any subsidy.
•
No incentives given by the government to make use of the latest technology. As a
result, all companies are using traditional methods and the quality of furniture is much
below the level of global furniture, especially for “Seasoning” which requires latest
machinery, but unfortunately the natural method is used, which is very time-consuming.
Some exporters use the wood that has moisture in it. This results in bad piece of furniture
in the end. Sometimes due to moisture, it breaks down even after delivery, which ruins
the image of Pakistani furniture industry.
76
•
Material from China is being used commonly. The government itself is promoting this
trend. Local market is decreasing, while no efforts are being made by the government to
improve this situation.
•
Customs examination done is very severe, whereby furniture is broken/torn for
inspection. As a result all material has to be made again. A huge loss is incurred on the
companies. Some companies give money and get their material cleared from the
Customs. In this process, even the poor quality material reaches foreign buyers and the
image of the whole industry is destroyed.
•
Image of Pakistan is very bad in the furniture market. Foreign firms don’t rust
Pakistani companies because the latter use illegal ways. Poor quality of furniture is made
and as a result, they end up getting fewer orders.
•
Problem in basic utilities. Load-shedding is a major problem. Furthermore, gas rates
are on the rise.
4.1.2 Shortcomings
At company level
•
Focus on HR training: Companies have never given attention to this front. Training HR
would have a very positive impact on not only the quality of product but also each
worker would get paid according to his capabilities.
•
Work on job security of their workforce. In order to remove discontent of labour
force, companies should give them all possible rights
•
Focus on improving quality of raw material. Currently, the quality of material is not
good. A lot of time and efforts are taken to search for good quality wood. In this way,
order does not reach on time and the buyer has to face a lot of dissatisfaction even before
receiving the shipment.
At country level
•
Reconciliation of export policies: The government has shown no interest in this sector.
Every company is suffering in a different manner. End result: loss of million of dollars.
•
Qualified individuals should be given full chance to stay in Pakistan by opening all
kinds of opportunities rather than creating an atmosphere for them to shift abroad
•
There should be one-window operation to reduce the delay in the finalisation of
settlements
•
The government should monitor the market. It should check material and give
attention to prices. Raw material (wood, boards, etc.) should be available at reasonable
prices. As a result, good quality and cheap material would be available for exporters.
•
The government should penalise exporters producing poor quality furniture. This
would help in eliminating exporters producing low quality furniture and the image of
Pakistani companies would improve.
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4.1.3 Possible solutions
At company level
In-house training programmes should be organised. This will create awareness among
the employees and equip them with the latest skills and techniques. This will improve
the quality of labour and as a result, better quality furniture would be produced.
At country level
•
EPB/TDAP should give attention to this sector by organising exhibitions, seminars,
inviting delegates from abroad for the exchange of knowledge. Until now, the
exhibitions organised have produced no results. The participation fee for these
exhibitions should be minimum. More incentives should be given for participation.
Proper marketing should be done before the exhibition. No fee should be involved in
putting up stalls. Without proper planning by EPB/TDAP, the majority lose great
opportunities. EPB/TDAP should also do market surveys and stop the Forest Department
from stealing wood and exporting it illegally. The newsletters and other advertising done
by EPB/TDAP is not enough.
•
Labour law should be introduced which would put restriction that no company can
take way other company’s labour by offering good options. Some of them are also
moving abroad.
•
Re-plantation of forests should take place; this would reduce the cost of production.
•
Display houses should be made in various exporting countries where Pakistani
furniture can be displayed. In this way, the foreign buyers can get a chance to physically
see, feel and check the product. In addition, the exporters will not have to make a lot of
effort in putting up shops.
•
The government should pay attention to potential big empty places ideal for setting
up workshops such as the Bin Qasim Industrial Zone. This would definitely solve the
problem of less space for storing furniture.
•
SMEDA, Chamber of Commerce and Industries and APFEA should pay special
attention.
•
Loan facilities should be given. The rates of loans should be reduced so that every
exporter can benefit from it and have more running capital.
•
The government should import the latest machinery for furniture exporters. Duties
should be reduced to a minimum. This would greatly help in improving production.
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4.2 Obstacles and shortcomings – importers’ opinions
The importers’ views have been collected through the vast network of the international
consultant
4.2.1 Obstacles at country level: Global commonalities
In targeting development policies at SME furniture companies, certain commonalities can be
found among the majority of developing countries. The main issues to be addressed are usually
centred on the following obstacles:
•
Access to the international markets tends to be a problem as producers may be
unfavourably located; far from the main consumption centres and suffer from costly
transportation.
•
Access to raw materials at competitive costs becomes a problem as SMEs are at a
disadvantage because of their small size. This can become a hindrance to organising the
flow of raw materials from domestic, non-transparent timber markets controlled by
various intermediaries, and often leads to timber shortages just when exports are
growing.
•
Access to knowledge and technology is a major problem area. SMEs tend to fall
behind because of their strong reliance on traditions: e.g. they may be using high-value
timber for secondary uses, simply through force of habit and thus gain revenues far
below the timber’s real potential.
•
Access to capital is difficult to find at competitive rates because domestic bank
finance is scarce, interest rates are generally high and collateral requirements are strict.
•
Access to designers is limited, therefore the exporters rely on simply selling items “as
they are”, copying new models or producing according to the buyer’s designs.
•
There are shortages of skilled labour and in-house training (apprenticeships, on-thejob training, etc.) is usually considered too much of a burden.
•
Managerial skills are poor and opportunities to develop them outside the SME
companies are rare.
•
Lack of intellectual rights protection is a vital element in the encouragement of
creative design activities. If authorities fail to put such a protection scheme into a
widespread use within the industry, it hinders the development of original designs within
the industry.
A Pakistani view expressed by APFEA, etc. is mirroring the above-mentioned international
experience:
•
Support to market promotion is inconsistent. Participation in trade fairs tends to be
supported occasionally by the Export Promotion Board, but no long-term roadmap for
winning systematically new markets is developed. This makes the visits to a couple of
fairs just a routine promotional trip, where only initial contacts are made with
prospective, non-committed buyers. The crucial follow-up in the form of a proper sales
79
mission or attendance in the next important venue is usually missed due to lack of funds
and commitment to long-term presence.
•
Valuable Sheesham wood is becoming scarce and difficult to obtain. It is much
preferred for its beautiful colour and grain, but much sought for by rogue middlemen and
cut-to-size processors for exports. (But the Furniture Survey respondents did not
unanimously share this opinion.) A viral disease and over-logging is decimating the
resource. Public premises order Sheesham wood for secondary purposes (school desks,
etc.). Optimisation of its true value would be needed.
•
Technological level of many furniture workshops is backwards, i.e. on the lowest. 12 technology categories by international comparison presented in this report.
•
Absence of common support services. The sector is largely devoid of cost-efficient
provision of common support service (tool maintenance, training, etc.). Everything is
done at furniture workshop level. This leads to losses in skilled furniture maker’s
productivity and sub-optimal allocation of scarce human resources. Air-drying of wood
is still the norm, and no business model is developed yet to use contract-kiln operators.
•
Extremely tight financial situation of furniture companies. Pakistani entrepreneurs
face high utility costs in their operations, and these are unlikely to level off in the current
geo-political conditions. This makes capacity upgrading costly and risky. No really
attractive concessionary loans or other financial incentives exist to date, except maybe
the Long-Term Export Finance line. SME “soft” credit lines have not been developed by
the banks.
•
Design trend is static. Currently Pakistani furniture is rather restricted to traditional,
ethnic and mughal styles. Modern and contemporary furniture is developed with great
difficulty, if ever. Yet the furniture industry aims at higher exports, but eccentric designs
probably cannot deliver beyond niche markets.
•
Skill development is not formalised. The profession is handed down to the next
generation with only on-the-job training in the family workshop. Modern techniques and
their cost-saving potentials are wasted. Skills development in collaboration with foreign
furniture industries is sporadic at best. Differing views on the availability of skilled
workers between regions was observed in the survey. The ‘most scarce carvers’ situation
seemed to be in Rawalpindi, Gujranwala, Karachi and Lahore, where the relative cost of
labour was also deemed higher than elsewhere.
•
Customs examinations and export procedures are handled with unnecessary difficulty
and even animosity to exporters who badly need a basic service from the customs.
•
Import duties on foreign consumables and equipment. A proper import duty
drawback system would alleviate producers’ problems in acquiring proper tools,
equipment and operating supplies. It is unclear how the system works today in Pakistan.
The country is not close to Singapore, which is the regional centre of machinery and
fitting/hardware suppliers.
4.2.2 Shortcomings at company level
These comments are made on the basis of documentation received from Pakistan, and from
literature and previous studies.
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Raw material recovery
Raw material recovery rate needs to be better monitored. It is not only affected by drying
defects or fungal diseases of wood, but also if over-sized stock of wood is used, if the log form
is difficult to saw, or if basic machining is of inferior quality.
Kiln-drying
Air-drying in the open is commonly used in dry and warm countries. It yields well-seasoned
wood with a relatively long drying period (easily 6-24 months depending on
country/condition/type of timber). The downside is that it locks up capital idle for that period,
and makes it difficult to respond to new market opportunities quickly enough. Production
planning can be very difficult if drying periods are lengthy or unpredictable.
It is imperative to use timber that has attained the equilibrium point of moisture content,
preferably below 10%. This will help avoiding structural weaknesses of furniture and chairs,
and other excessive rejects during production. Less customer reclamations will be received as a
consequence.
Tool maintenance and its impact on quality
Tool maintenance is a crucial part of the wooden craft profession, because it enables efficiency
and consistent quality in the work. There is reportedly some degree of negligence in this aspect
in Pakistan. Tool maintenance often seems to be the responsibility of an individual worker
rather than the company.
It has to be remembered that the raw material characteristics also influence tool wear. As wood
density and extractives content rises, greater amounts of processing time, energy and tool wear
are consumed. Tool material, tool design and tool geometry are the principal criteria to be
watched. These may have to be changed if the common wood raw material is replaced by
another type of wood.
Design
Much of the value of furniture is made in the design phase. Manufacturing or carving is
supposed to transform a drawn design into a functionally and/or aesthetically performing
product. Proper design training is non-existent.
Design capacity in Pakistan is declared as being very fragile and mostly based on ancient
traditional ones (sold “as they are”), or copied designs from buyer’s photographs or magazines.
Usually detailed design or technical drawings are not deployed to convey the design onto wood
components.
Clear and uncomplicated are the words currently used to describe the wooden household
furniture fashion. Rustic or country designs have fallen out of style in the last couple of years.
Asian themes appear to be appreciated, what may be a positive notion for Pakistan. But
reddish, shiny lacquer finishes are a past trend to a large extent. The interpretation of such
current design trends should be expedited in Pakistan, if a modernization of furniture trends is
sought for.
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Function also continues to influence design at market as LCD/plasma TVs are incorporated
into home entertainment and bedroom pieces. Taller dressers offer better viewing of the TV
from the bed. Home entertainment centres are made with taller TV carts to raise the unit to a
better viewing height and allow more storage underneath.
Finishing and lacquering
Finishing tends to be a common bottleneck for furniture coming from developing countries.
The quality of final polishing of carvings needs to be improved, as well as the consecutive
painting and lacquering. It should be understood that these work processes are none less
important than the actual carving. On the contrary, a bad finish can lower the value of the
product, and downgrade unnecessarily the carver’s skilled input. Too much variation in
blending the colours, paints and solvents is routinely observed. These should follow controlled
standard procedures for uniform quality.
Matte finishes are currently well accepted in decorative small furniture items (so-called
occasional furniture). But in larger household furniture items the situation is more mixed.
Antiquated or natural (visible grain patterns) surfaces have been in fashion in the recent years,
and this trend has certainly not been marked by all producers. The shiny or satin lacquered
surfaces are still the common norm in many producer countries, but pretty much out-dated in
the overseas markets.
Closely linked with the former observation is the technical inadequacy of some key equipment.
For instance, if the compressors used for spraying the lacquer is too weak, no proper finishing
quality can be achieved. Brush-painting consumes more lacquer and should be avoided.
Human health is a growing concern in wood lacquers, and it should be taken seriously into
account by exporters to Europe, for example.
Access to market information
Broadly speaking, Pakistani furniture firms suffer from a poor access to up-to-date market
information. Non-systematic gathering of such info leads easily into inability to assess its
reliability and put it into proper use. Therefore, the importance of a continuous flow of market
information flow cannot be emphasized too much. Its collection and dissemination is an
activity of its own, which requires external resources and dedicated staff to be beneficial for
the industry.
4.2.3 Solutions for each obstacle and shortcoming with explanations
Solutions needed from policy-makers
The following checklist contains action elements for policy-makers who are supposed to
convey government support to furniture sector. The recommended policy initiatives need to be
designed to strengthen exports of the furniture industry by improving the trade environment,
lowering costs and improving efficiency. To be effective, these initiatives need to be viewed as
an integral part of the country’s overall economic policies and structural reforms.
The government policy framework should ideally ensure the following:
82
•
Consistent policy for supporting sustainable and legal raw material procurement.
Planners of forestry should make sure they understand the long-term needs of the
downstream processing enterprises.
•
Transparent log market where all the domestic users can access material in a fair
competition. To counter the wood mafia, there should be a model scheme. Currently in
Pakistan there are lo of middlemen involved in the process. This is a symptom of a badly
working round wood market. Lumberyards should be built of international standards
which have their own process wood, season it and make wood according to Industry’s
needs into dry or sawn timber.
•
Catalytic tax concessions or similar fiscal incentives to facilitate upgrade of the
industry’s capacity. Now only freight subsidy is sometimes allowed as a weak subsidy.
At the same time, one must remember to keep possible subsidies on WTO acceptance
limits.
•
Consistent and transparent export regulations (cut down red tape and inefficiency).
•
Rationalisation of import tariffs on raw materials and equipment. Pakistan badly needs
some operating supplies from abroad (hardware, fabrication and foam, etc.). A duty
drawback system is a common way of encouraging necessary imports. Technology
upgrading is almost impossible without some form of tax rebate.
•
Improvement of transportation, communication and information infrastructure. Enabling
environment is needed to stimulate growth of industry.
•
Strengthening of institutional infrastructure for support services demanded by industries
(associations, research and development institutes, education and training, export
promotion offices, testing and Standardisation, certification and labelling, verification
body of legality, etc.).
The private sector should always assume the primary actor’s role in putting the policies into a
maximal use. The government’s role in supporting export marketing tends to be subtler, and
the private sector cannot be made dependent on it.
Solutions proposed for companies
This part tries to provide guidance for Pakistani companies on very practical level.
R aw m a ter ia l r ecov ery
Improve the current basic processing and apply wood-saving measures. Avoid wasting the true
potential of valuable woods in secondary applications. Utility woods serve best the institutional
public sector market segments. Manufacturers should negotiate with such buyers on a contractto-contract basis what grade of wood is actually fit for their purpose.
Russia (mostly softwoods, some hardwoods), New Zealand (radiata pine), and East Europe
(temperate hardwoods) are not easily tapped by Pakistan to supply the deficit of hardwoods.
The US’ hardwood export promotion body (American Hardwood Export Council, AHEC) is
currently targeting China for exporting more temperate hardwood sawn timber for furnituremakers. This could be a potential source also for Pakistan in the future, particularly because
83
high-quality hardwoods like walnut and oak are available, fully legal and environmentally
sustainable (certified wood).
Wo od s easo n ing
Kiln-drying should be made the industry standard for wood seasoning. The smallest operated
local kilns are 5-10 m3 chambers built on site with local materials, and equipped with
ventilation, control and fan equipment from a local manufacturer or from abroad.
A kiln-drying operation could become a popular business of its own, charging fees on the basis
of actual drying time and volume plus direct energy costs. Probably this type of concept would
have to be located inside existing furniture clusters in order to ensure sufficient client base.
It should also be studied whether Australian-made solar kilns or combination kilns (solar plus
mechanised ventilation) could be made available at a reasonable cost. These have been
installed in small-scale wooden crafts communities across South-East Asia.
T oo l ma in te na nce
Dedicated workers for tool-maintenance with a small separate workshop or room would be
needed to upgrade this activity to a more professional level. High-precision tool doctoring
equipment should take over from traditional self-made maintenance appliances. The need for
mechanical trimmers of sawing and planer equipment becomes more crucial when capacities of
such equipment are being enhanced.
T r a in in g o f w or k fo r c e
A mandatory contribution from all employers towards a “Human Resource Development
Fund” would be a commendable means of providing training and upgrading for the workforce
in the industry. It would enable the use of foreign experts, and complement in-house training
programmes.
The use of contract workers from abroad should be limited, because such workforce is highly
mobile and retard labour productivity growth. Further, employers will be reluctant to provide
training as these workers will leave when their tenure expires.
Stable workforce is crucial for greater value addition in the furniture industry. Hence, without
such workforce, the research and development (R and D) activities, especially those related to
design and development is hindered.
D es ign
Access to foreign designs (if this is desirable) can be improved with distribution of home
decoration magazines, mail order catalogues, and similar media that display a wider range of
products. Internet can be a potentially rich resource of design trends and ideas, but it is not
effectively used without some basic training.
The fastest way to improve design awareness is to assign one computer-savvy design student
or young designer to facilitate access to Internet-based designs in the furniture exporters
association. This could also happen as the first step of an exchange programme with some
foreign design school. It may be more difficult to attract business-like design trainers, because
of the small size of the Pakistani industry.
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A short-term but maybe a costly measure is to bring a foreign designer into Pakistan. Visiting
designers can be sought for in the exchange programmes of foreign design schools and
institutions in the main markets (Europe, USA). Aid to Artisans and similar NGOs can
facilitate the training courses of foreign design teachers in furniture clusters. In the long term,
training of Pakistani designers at foreign art schools and universities, etc. should be considered.
From the UN-family, UNIDO has arranged design assistance in wood products previously, and
it could be consulted for the case of Pakistan.
F in is h in g an d lac que r in g
There are some institutions in Europe, like Rosenheim University in Germany, who organise
training courses for furniture makers from all over the world to study and practise the most
recent finishing techniques, sanding and polishing of wood. Pakistan could tap this opportunity
to upgrade its furniture finishing. Moreover, one of Rosenheim scholars is based in University
Putra Malaysia (UPM), and could be approached for tailor-made courses. He is one of the
founders of the International Furniture Research Group (IFRG), earlier mentioned in this
report.
If hand painting and lacquering were still widely applied, investments into a compressor-based
spray-gun painting would be warranted to improve finishing and economise on paint/lacquer
consumption. Acquisition of a more powerful compressor would further improve surface
finishing and increase the final value of products. Some clients may insist on environmentally
or health-wise friendly lacquers and paints, too. Emission safety, as well as food safety for
kitchen/dining furniture range, is therefore to be maintained at required standard levels.
One key requirement would be to install a clean painting/spraying room with recovery of airborne lacquer remnants. This would not require a big space or investment. The actual space
requirement depends on the size of individual products, and on the numbers of items
manufactured. Usually the typical SME workshops need only 5-10 square meters to start a
spraying room. The fan system for recovering the loose sprays of lacquer, and cleanliness of
the finishing environment, would dramatically lower the chemical consumption and improve
final quality.
M ar k e t in f or ma t io n
There are numerous case studies and manuals for establishing a specific Market Information
System (MIS) to facilitate small producers’ access to commercial details and product
requirements for their products. For example, FAO has produced and field-tested a manual for
developing small-scale community enterprises, and supply of market information was one of
the key components. Although it has been developed for agro and forestry products, its
methodology could be adjusted to furniture and crafts.
The establishment of such a system is not an easy task. And keeping such system operational
on the basis of membership fees or similar financial contributions is far from simple. Based on
the past experiences, there are a number of very fundamental decisions to be taken if a market
information system will be developed. These may include, but not restrict to, the following
(Table 4.1).
85
Table 4.1 Market Information System: Basic questions
Questions
86
Possible solutions
What products are to be selected?
Hand-carved Sheesham up-market furniture,
other products
What type of info is collected?
Prices, favoured articles, style and finish,
quality, new designs
How frequent is collection?
Monthly/quarterly/half-a-year
From where to get info?
Trade fairs, shopkeepers, retail chains,
tourists and foreign experts, trade and home
decoration media, Internet sources
Who collects and disseminates it?
Market Information System developer
(organised by ITC), then a local counterpart
trained for the task
What media are used for dissemination?
Notice boards, newspapers, mass media
(generic articles), telephone (short text
message), e-mail/Internet
Who keeps the master data?
Industry Association or representative, helped
by ITC
How is the MIS sustained?
A user free system established, exchange of
info with other MISs
5 Export services in Pakistan
5.1 Export service providers
5.1.1 Trade Development Authority of Pakistan - TDAP
In late 2006 the Trade Development Authority of Pakistan (TDAP) (www.tdap.gov.pk)
succeeded the Export Promotion Bureau (EPB) as the primary agency engaged in the
promotion and boosting of export. Since EPB's inception in 1963 as an attached department of
the Ministry of Commerce, it has continued to facilitate exporters in overcoming difficulties
faced by them on the supply and demand side of exports.
On the demand side, TDAP helps exporters to participate in exhibitions abroad and sends
delegations to export markets with a view to exploring new markets and developing the
traditional markets. On the supply side, TDAP has established over 32 training institutes and
projects in various export sectors to train necessary manpower that can manage the export trade
and industry professionally, meeting the requirements of the export markets. Export
promotional activities are carried out in co-ordination with trade bodies at home and Pakistan's
trade missions abroad. TDAP has its head office in Karachi, the city which is also a main
industrial and commercial centre and a major export outlet of the country. TDAP has a staff of
around 800 of which close to 600 are permanent.
Services provided by TDAP are as follows
•
•
•
•
•
•
•
•
Export facilitation committee
Resolving problems in exports
Simplification of procedures
Export procedures handbook
Establishing buyer-seller contacts
Fax on demand and the website
Interface with chambers/trade associations
Settlements of trade disputes
Regulatory services include the following
•
•
•
•
•
•
•
Formulation of proposals for the trade policy
Implementation of the trade policy
Textile quota management
Registration of importers/exporters
Registration of export contracts
Determination of minimum export prices
Issuance of GSP certificates
Functions of TDAP are listed below
•
Marketing
-
Market Research
Fairs and Exhibitions - local and international
Trade delegations
87
•
Communication
-
•
Overseas and local publicity
Participation in trade-related events
Expo Centre - holding of exhibitions
Facilitation through trade officers abroad
Seminars/conferences/workshops
Publication of trade inquiries/opportunities
Library
Export intelligence bulletin
Counselling
Year Book - statistics
Human resource development
-
Training institutes
Seminars on ISO 9000 and 14000
TQM
Social sector concerns
Environmental concerns
5.1.2 Small and Medium Enterprise Development Authority - SMEDA
The premier institution of the government of Pakistan under the Ministry of Industries,
Production and Special initiative, SMEDA (www.smeda.org.pk) was established in October
1998 to take on the challenge of developing small and medium enterprises (SMEs). With a
futuristic approach and professional management structure it has its focus on providing an
enabling environment and business development services to small and medium enterprises.
SMEDA is not only an SME policy-advisory body for the government of Pakistan, but also
facilitates other stakeholders in addressing their SME development agendas.
SMEDA’s head office is in Lahore. There are regional offices in Lahore, Karachi, Peshawar
and Quetta.
SMEDA offers the following services:
•
•
•
•
•
•
•
•
•
•
•
88
Assistance in raising finance
Financial advice
Project identification
Business plan development
Technical advice
Marketing advice (branding, labelling, packaging, distribution, promotion, etc)
Company incorporation, export registration and regulatory advice
Sales tax, custom duty, excise duty, etc
Training and development
Information services (library, databases, project briefs, pre-feasibilities)
Business matchmaking
5.1.3 Federation of Pakistan Chambers of Commerce & Industry FPCCI
The Federation of Pakistan Chambers of Commerce & Industry (FPCCI) (www.fpcci.com.pk)
was originally formed in 1949 by Mr G Allana, with headquarters in Karachi but its
membership then was confined to a limited number of bodies. The Federation of Pakistan
Chambers of Commerce & Industry (FPCCI) is the supreme among all trade and industrial
bodies in the country. It enfolds all chambers and all country-wide associations representing
specific trades and/or industries. Indeed, it is compulsory for all chambers and associations of
commerce and industry to become members of the federation.
Being federal in its constitution, the federation takes up only such issues and matters as
concern the country's trade and industry as a whole; in other words, the interests of all
chambers and associations put together, e.g. economic planning, investment schedules, tax
policy, money and credit transport and communication, export promotion, organisation of
general trade missions to foreign countries, receiving general trade missions form abroad etc.
Matters concerning specific trades and/or industries (e.g. cotton or steel) or individual firms
and companies are left to associations and local and regional chambers.
The head office of FPCCI is based in its own building, the Federation House, spread over an
area of 11,666 sq. yards in a posh locality of Karachi, Clifton, over-looking the Arabian Sea.
FPCCI has zonal offices in Lahore and Peshawar, which mainly deal with the provincial
governments. FPCCI has a branch office in Islamabad to liaise with the federal government.
FPCCI offers the following services:
•
Trade promotion
FPCCI acts as a forward post of Pakistan's private sector abroad. In the first place, it
maintains constant liaison with the diplomatic and commercial missions abroad and
takes special care to develop, promote and strengthen cooperation and contacts with its
counterpart bodies abroad through exchange of delegations, literature, directory(ies),
business information, etc
•
Cooperation agreements
FPCCI has signed cooperation agreements with a number of foreign counterpart
chambers of commerce including those of Japan, South Korea, France, Netherlands,
Germany, Turkey, Bangladesh, Hungary, Romania, Malaysia, Philippines, Singapore,
Oman, Australia, Brunei Darussalam, Indonesia and Syria. These agreements envisage a
regular exchange of data and information on trade and investment opportunities, visits of
trade and investment delegations and participation in trade fairs and exhibitions.
With the signing of cooperation agreements, joint business councils/economic
cooperation committees have been set up in FPCCI and its counterpart chambers, which
keep constant liaison with each other throughout the year. They have obligation to meet
alternately once a year to dispose of agreed agenda, which pre-dominantly relates to the
promotion of two-way trade, narrowing down trade gaps, identification of new
commodities for mutual exchange, etc. Investment affairs, transfer of technology and
training of personnel are the other areas normally deliberated on.
89
•
Bilateral trade committees
A large number of bilateral trade and industry committees have been set up with several
countries of the world for the promotion of trade, joint ventures and economic ties. These
committees invite trade missions, trade officials and diplomats of the countries
concerned for exchange of views and review of difficulties in the fields of trade, joint
venture, investment, etc.
•
Standing committees
FPCCI has constituted a number of standing committees, which deliberate intensively on
different problems and issues being confronted by the trade and industry in the country;
prepare suitable pragmatic recommendations for their resolution and submit the same to
the government for consideration. These standing committees have been established on
the important subjects of banking, taxation, exports, imports, industry, investment,
agriculture, planning and economic affairs, privatisation, research and development,
ports and shipping, environment, health, transport, labour, tourism and many others.
•
Exhibitions
FPCCI also undertakes the responsibility to organise, in consultation with Export
Promotion Bureau, Pakistan's participation in international trade fairs and holds single
country exhibitions of Pakistani goods and services in selected countries. At home, it
also organises international trade fairs (such as PITF-84) and national industrial
exhibitions and fairs of specialised single commodities.
•
Export trophy awards
To encourage the export of Pakistan's goods and technical/ consultative services, FPCCI
instituted export trophy awards in 1976-77. The awards are given every year to those
who excel in promoting the export of goods and services both in quantum, value and to
new directions. In addition, the federation has instituted a 'Businessman of The Year’
award, which is conferred on a businessman/industrialist who, in the judgment of
FPCCI, has made an outstanding contribution to the growth of national economy. A
'President of Pakistan' trophy is also conferred on a business house has made the overall
best and highest performance in exports. FPCCI has also instituted a ‘Best Lady
Exporter’ gold medal, which is conferred on a lady who, in the judgment of FPCCI, has
made the best export performance during the year.
•
Arbitration
FPCCI has set up arbitration machinery under Section 12 of the Trade Organisations
Ordinance, 1961, to arbitrate in matters of disputes arising between member bodies of
FPCCI and its members.
•
Pakistan Shippers’ Council (PSC)
The Pakistan Shippers’ Council, having the status of a Standing Committee of FPCCI,
works for the protection and furtherance of the interests of exporters and importers in
Pakistan in relation to the transportation of goods by sea, land and air, and undertakes
studies on problems affecting shippers in Pakistan.
PSC is affiliated to the Association of Shippers’ Councils of Bangladesh, India, Pakistan
and Sri Lanka (ASCOBIPS), as a member.
90
•
Pakistan International Freight Forwarders’ Council (PIFFC)
PIFFC is another specialised agency of FPCCI functioning to safeguard the interests of
freight forwarders who facilitate the transportation of import and export cargo of
Pakistan. PIFFC is affiliated with the International Federation of Freight Forwarders
Association (FIATA).
•
Trade delegations
FPCCI sponsors general and specialised trade delegations to various destinations in the
world to promote export of goods and services and to locate most competitive sources of
imports to save foreign exchange. Public sector industries and business houses’
representatives are also associated with such missions. Similarly, buyers and sellers
missions from abroad are invited by FPCCI besides investment and joint venture
delegations.
•
Pakistan's trade missions abroad
Briefing of Pakistan's trade officials abroad and an exchange of information, country
profiles with them is the hallmark of FPCCI on this front. Since economic considerations
have overtaken political considerations in the present world environment, even
ambassadors/high commissioners and commercial counsellors of Pakistan posted abroad
visit FPCCI for individual or collective briefing on economic and trade ties/issues before
taking up assignment and during the course of assignment.
•
International symposia/seminars/workshops
Holding of international seminars/workshops/symposia in cooperation with international
agencies in the fields of trade, industry, joint venture, training of manpower, etc is a
regular feature of FPCCI. The programmes familiarise participants from business and
industry with the latest market trends, the state of competitiveness, trade regulations,
customs procedure, duty structure, port facilities, containerisation system, incentives
offered by competitors, etc.
5.2 Export services as they actually are – expressed views
Most of the interviewees were of the view that TDAP/SMEDA are offering no export services.
Few of them recalled some of trade fairs held in 2003 and 2004 in Italy, Malaysia and Spain.
Only one of them said that the seminars being conducted are effective, as they get an
opportunity to discuss the problems faced by exporters, a lot of information is gained related to
local and global industry and as a result exports increase. They also help in imparting
knowledge on rates of raw material. Others feel that TDAP and SMEDA just organise
conferences and seminars but they produce no concrete results. Recommendations are made
and in the end it is ensured that these recommendations would be given to the government. But
no follow-ups are made. TDAP exhibitions are not at all effective. They are mostly set in very
far away countries. Companies incur lot of transportation expense incurred by companies. In
Dubai an exhibition was organised, where products were taken on subsidy and then dumped.
Others recalled festivals like Expo, which were again not effective. At exhibitions, rates are too
high for setting up stalls and space provided for setting up stalls is very limited. SMEDA is
making efforts but only big companies are taking advantage of them.
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5.3 Export services as they should be – expressed views
•
They should voice their following interests to the government
-
Reduce loan rates
-
Control quality of raw material, so that no diseased wood is used
-
New trees to be planted
-
Transportation rates issue solved
-
Government to give incentives to exporters to reduce the trend of using Chinese
material which is selling at cheaper price and better quality
-
Tax rebates and incentives
-
Recognition as an industry
-
Use of latest technology
•
Furniture exhibitions and fairs to be organised at international and local levels on
regular basis in America, UK, Germany and Dubai. Every exporter should take part in it.
The government should make a committee. In 3–4 months make all necessary
arrangements. Booking should be done before time. These exhibitions should be
organised every year. Warehouses should be built in these countries. It will cost PKR 4 –
5 million. Funds required in total would be PKR 10 million. In Exhibitions space for
setting up stall should be increased. Transportation charges of the furniture to the country
where exhibition is to be held should be taken care by EPB/TDAP.
•
Make efforts for promotion of companies, so that companies are identified at
international level and the perception of foreign buyers of Pakistani furniture is changed.
•
Foreign delegates should be invited to Pakistan to share their knowledge with local
people.
•
Set up training institutes where knowledge on latest skills is imparted with the help of
the government, Chamber of Commerce and Industries and APFEA. Duration of the plan
would be one year. Cost of this proposal would be approximately PKR 2 billion and total
funds required would be PKR 5 billion.
•
An implementation cell should be set up, which should make efforts to get contacts
numbers and address of foreign importers and then they should be passed on to the
exporters to promote trade.
•
Consultancy on modernising techniques. EPB/TDAP and Ministry of Production
should come forward. These services should be provided two days in a week.
•
Lectures on world competition and market status
5.4 Other export services – Malaysia as example
Export services being put into offer for Malaysia’s furniture sector deserve to be presented
here. Pakistan can draw conclusions about which similar services would assist its furniture
exports in a maximal way.
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The lessons learnt here could be repeated elsewhere in other developing nations where the
furniture industry has good growth potential. Major drawback is usually the sustained flow of
wood raw material.
Industrial master plans
In the early 1980’s, Malaysia was a large exporter of commodities, primarily sawn timber and
plywood. In realising the potential earnings of the wood-based sector, the government
embarked on an industrialisation strategy, which focused on the export trade and later on
value-added products.
T he 1 s t indu s tr ia l m as t e r p la n ( 19 86 – 9 5)
The First Industrial Master Plan (1986 – 1995) was aimed at enhancing down-stream wood
processing activities. The government provided numerous fiscal incentives and policy
instruments aimed at spurring such activities, particularly amongst upstream activity players.
Annual growth rate was in the range of 40%.
T he 2 n d . ind us tr ia l m as t er p la n ( 1 99 6 – 20 05 )
The export oriented growth continued into the Second Industrial Master Plan, but the focus had
shifted towards manufacturing of greater value added furniture.
T he th ird in dus tr ia l ma s ter p lan is c urr en tly in th e mak in g
Against the need to create a skilled local workforce, the government established the Human
Resource Development Fund (HRDF) in 1993 and subsequently the Human Resource
Development Council (HRDC). Both these initiatives were aimed at producing skilful local
workforce for the furniture industry. Employers were required to make a mandatory
contribution of 1% from the payroll to the fund, which is then used for training of the
workforce. Nevertheless, the effectiveness of the development programme has not been up to
the mark: Reasons are the reluctance of employers to send their workers for training due to
limited contractual obligation and the non-relevance of the training programmes offered.
Exp or t r es tr ic tio ns o n s awn w ood
The government policies, such as imposition of export levies on rubber wood sawn timber and
the limited export volume quota imposed, forced many upstream players to move into
downstream processing. Further, financial resources were made available to new entrants to
encourage the expansion of the industry. It must be noted that in Malaysia, the banking sector
was imposed a minimum lending quota by the Central Bank, which should be made available
to the furniture industry on an annual basis.
G ove rn ment p o lic ie s
The role of the government in the development of the Malaysian furniture industry is very
significant and cannot be downplayed. Conducive political climate is a boost for investors and
the manufacturing sector as a whole.
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T ar if f p r o t ec t io n
Imported furniture were subjected to an import duty of 28% in mid 1990s but gradually this
has been reduced to less than 5% to meet the impending AFTA (ASEAN Free Trade Area).
F in a nc ia l in c en t iv es
The financial incentives provided to the furniture industry are very good and have been cited as
one of the main reasons for the rapid expansion of the furniture industry in Malaysia. Schemes
such as the pioneer status, reinvestment allowance, infrastructure and training allowance, etc.
have been fully exploited by the furniture manufacturers, especially by the foreign investors
like Taiwan, Singapore, etc. However, the incentives for research and development (R and D)
and design activities are still insignificant, which explains the lack of such activities within the
industry.
C om mo n s e r v ice f ac ili t ies
Common service facilities such as kiln-drying capacity, finishing and design centres, etc. have
been established in furniture villages to encourage the growth of the furniture industry is this
vicinity.
N e twork in g
The rapid expansion of the manufacturing base has been attributed to the extensive networking
or sub-contracting activities prevailing in the industry. Such a practice enables economies of
scale and spread of overhead, which provides cost competitiveness.
E x p or t prom o t io n
Due to dependence on rubber wood, the foreign perception of the Malaysian industry has
persistently been that of low-end products. Experience has shown that export promotion
support has to be specifically targeted at furniture, not to be combined with other products. The
international furniture fairs organised in Malaysia have been highly useful for getting foreign
orders. The size of the industry and the quality of its products are sufficient to attract foreign
buyers or sourcing agents to come to the country. A critical mass is needed.
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6 Conclusion and recommendations
6.1 Recommendations for parties involved
6.1.1 Individual companies
While training certainly is a crucial effort that improves the companies’ abilities on a wide
range of business fundamentals, it cannot be recommended in isolation from other
development steps. Typically, additional training is expected to be financed form the outside,
i.e. government funds or technical assistance from ITC, UNIDO, ILO or similar international
bodies. No public funding for training has been promised for furniture industry as it lacks a
priority status in Pakistan.
Repetition with “Solutions” chapter earlier in this report cannot be avoided. The reader is
suggested to reflect on the solutions on company level given in the previous chapters. A brief
checklist of main points is repeated here:
•
Optimise the use of the highest-valued raw material and introduce new wood species
(imported) to fill the shortening supply of traditional species.
•
Start a kiln-drying side business on joint venture or a contract-kiln operator basis. This
helps avoiding cracking of furniture in the final destinations, which causes irrevocable
damage to the reputation of Pakistani furniture.
•
Establish a “Human Resource Development Fund”, catering for the collective training
needs across industry clusters. Invite foreign training staff and designers through this
funding mechanism.
•
Develop the traditional designs and allow the influences of foreign designs more freely.
Fuse Pakistan and foreign best design details into a new flavour.
•
Prepare for investing in compressor-spraying gun based painting and lacquering to
improve final quality.
•
Seek participation in training courses abroad e.g. on finishing, sanding techniques.
•
Propose in unison the establishment of a Furniture Market Information System, with the
purpose of permanent provision of commercial information to the furniture firms.
•
Demand vocally for better Export Promotion Services. Examples can be found from
more successful furniture exporting countries. For example, Malaysia’s experiences have
been transferred to other countries already.
6.1.2 Relevant associations
•
Lobby for the potential benefits of wooden furniture industry clustering, supplier
networking and component outsourcing as building blocks for competitiveness.
•
Develop and raise funds for implementing industry-wide training programmes on
furniture manufacturing processes, management skills, design and skilled worker
training programs, etc. through human resource development funds and other resources.
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•
Create and maintain a roster of specialised consultants on wooden furniture
manufacturing, trade and design available for the industry from abroad.
•
Widen the existing design institute network out of Gujrat, Peshawar and Karachi.
•
Arrange direct technical assistance to enterprises to capture the emerging export
opportunities. This could include market orientation tours, design networks, workshops,
development of business skills (including negotiation skills with big buyers), etc.
•
Facilitate systematically efforts by the industry to know its customers and have direct
access to them rather than continuing reliance on (too many) intermediaries. An
internationally targeted furniture exhibition and joint export campaigns could be part of
such an effort if the country has a critical mass of suppliers.
•
Initiate the building of Permanent Exhibition Halls to key furniture clusters inside
Pakistan or in big markets like the UAE for more efficient showcasing for visiting
buyers. The concept should combine furniture with matching accessories from Pakistan
(exhibit an interior style, rather than just furniture).
6.1.3 Relevant government authorities
•
Stem the widely suspected “insider” wood exports of forestry officials.
•
Award furniture industry with policy priority because of multiple economic, social and
resource valuation benefits (high value added, high employment, and potential location
in disadvantaged areas).
•
Improve the existing public domain databases related to furniture industry (on markets,
products, standards).
•
Help furniture industries to respond to emerging issues, such as changes in wood
sources, certification and labelling requirements for exports, and non-tariff barriers to
trade (overcome trade impediments).
•
Provide support for the sector by means of an enabling policy environment, i.e.
investment incentives, trade promotion activities, freight subsidy, and temporary export
restriction of raw materials (logs, sawn timber), which can spur the growth of an export
oriented furniture industry.
•
Create an export levy collection system on logs and sawn timber, use funds for financing
value-added processing investments by furniture industry, or improve wood planting and
forest management.
•
Channel public funding into common support services (training, design, investment
support, tool maintenance, etc.), with the aim of rationalising the manufacturing base and
making it competitive in the long run.
•
Promote foreign investment as means to boost technology transfer and export capability.
•
Allocate industrial zones or premises that have been left idle to the furniture industry.
These recommendations have not yet been taken to the level where responsibilities, actors,
costs and timing would be explicit. This needs more analysis still.
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6.2 Critical success factors
•
A focused furniture sector strategy would help in allocating resources to where success
can be reached.
•
Pakistan will not be competitive in mass furniture segments. Authenticity and material
knowledge should be made to work for the competitiveness of “niche” or “ethnic”
furniture for the higher end of the market. Good example: the Philippines.
•
Good value for price, timely deliveries and proper after-sales service are needed for
keeping competitive at the special niches like antique/traditional ethnic furniture
markets.
•
New furniture collections will have to be created at shorter intervals in order to keep
pace with market opportunities.
•
Creating original designs and attractive branding are necessary for moving to higher
price points. Design should provide real added value to the product. Brand should be the
flag to catch the attention of buyers.
•
Avoid using wood raw material that comes from illegal or unsustainable sources, as
products thereof are subject to trade barriers and retailer resistance.
The following social safeguards can be added here
•
Avoid the reputation of inferior social conditions and child labour (not really an issue
due to strictly regulated labour rules in Pakistan).
•
Refer to the ILO basic working condition convention on occupational health and safety
measures as a guideline.
As far as the social or labour conditions are concerned, no buyer’s local code of conduct can be
imposed on a developing country producer as a mandatory measure. No such mechanism exists
by international law. On the other hand, many of buyers’ groups and large retailers set similar
“voluntary” agreements on a bilateral basis: their main interest is, however, not to become
under the stigma of retailing “sweat-shop” products.
6.3 Elements of success
Pakistan should look at other successful role models when figuring out a certain set of success
elements for developing the furniture industry and trade. Peninsular Malaysia is one of the
world’s leading exporters of furniture from the tropical region, greatly thanks to its success in
rubber wood development. Important lessons could be learned from the Malaysian experience,
even though success factors cannot be repeated as such. Even in Malaysia this has not been the
case in Sarawak and Sabah, which have not yet joined the Peninsula’s success story in adding
value to their timber.
One disclaimer is, however, that even Malaysia has been over-using its domestic wood
resources in the past. Easy money was made by exporting logs and sawn wood to the big Asian
markets. Only the last ten years have raised the country to the main league of furniture
exporters.
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Box 6.1 Elements of success in further processing – Example of Peninsular Malaysia
•
Holistic approach
The government prepared a master plan for the industry development in 1986-1995, which
was revised for the period of 1996-2005. The master plan provided a clear policy framework
for all operators in terms of product orientation, location of the plants, etc., and it ensured
the establishment of necessary infrastructure.
•
Research & Development
A concerted research effort was made by the Forest Research Institute of Malaysia, to
introduce new species (including rubber wood, the backbone of the current production) and
to help industry to solve operational problems. This was coupled with effective
dissemination.
•
Focusing on medium and large enterprises
Companies with more than 100 employees account for about 80% of the total employment.
Support was channelled to those who could make effective use of it in order to become
capable for exporting.
•
Development of the resource base
Due to the limited potential of the natural forests, a strong plantation development program
targeted at smallholders was implemented.
•
Specialisation and transfer of knowledge
About 64% of the manufacturers produce only 1-3 types of furniture in their plants allowing
investment in specialised equipment, efficient production and utilization of economies of
scale. This means dependence on one or a few products increasing vulnerability. Strong
geographic concentration allows specialization also at component level but requires
effective networking, which contributes to fast transfer of technology. Sub-contracting is an
essential element of business in Malaysia (about 40% of manufacturers are involved).
•
Human resource development
Extensive training programs were arranged with government support. The costs of further
training are increasingly shared by the private sector. Labour shortage has led to increasing
use of foreign labour in logging and processing.
•
Management
In management, traditional entrepreneurial approach still dominates but professional
management teams are increasingly in place in large companies. There is still a great
disparity between well-organized and backyard type operations.
•
Design, finishing and technology
Foreign designs have been extensively used either through provision by buyers, by copying,
or by contracting qualified designers who know the taste of individual export markets.
Finishing and control of raw material quality (particularly drying) have been major problems,
which were systematically solved to have access to quality conscious Japanese and
European markets. The use of CNC, automated and semi-automated machinery has spread
to about half of the medium-scale establishments. The introductory process has been a
gradual process, leapfrogging frequently leads to failures.
•
Financing and other support
Several credit lines and grant schemes qualify for furniture industry, which is a priority
sector for some instruments. Funding has been available for obtaining technical assistance,
investment incentives, training, R & D, exports and export promotion, furniture villages, etc.
The experience of the effectiveness of various instruments varies. Main beneficiaries have
been large and advanced medium-sized companies. The support has, in general, been
essential for the successful development of the sector.
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6.4 Global value chains
6.4.1 Potential benefits of global value chains for the developing
countries
Furniture firms across Asia are becoming partners in global value chains (GVC). It can be an
important catalyst in learning and adapting more advanced technologies. It can also enhance
the managerial and business development processes. The benefits of trade liberalisation that are
accompanied by the establishment of international supplier chain arrangements between firms
in the industrial and less developed countries are estimated 10-20 times larger than those
without such networks.
There are at least the following mechanisms on how furniture industry in developing countries
can improve their position by engaging in GVCs:
•
Adherence to “just in time” global networks requires the improvement of efficiency in
transports and communication infrastructure and for a stable business environment.
•
GVCs can enable firms to enter global production networks more easily, allowing them
to benefit from globalization, climb the technology ladder, and gain wider access to
international markets.
•
GVCs provide firms with a wide spectrum of options to operate in global markets with a
view to staying competitive.
•
GVCs offer a way for local enterprises in developing countries to engage in international
markets at their own level of capability.
6.5 Recommendations - some details
•
Enforcement of the rule of law and good governance on timber cutting and trade.
Eradicate illegal and rent-seeking behaviours of Forestry Department officials, if such
misconduct is proven.
•
Sustainable raw materials. A plan is needed to create and develop a sustainable source
of wood raw materials. Forestry/reforestation programs should ensure a stable source of
low cost raw materials, and to the extent possible maintain or improve ecological
conditions, enhance the community income and employment, etc.
•
Product quality. The quality of furniture is determined by professionalism in the
handling of raw materials, production techniques and manufacturing process. Due to
insufficient skills and facilities, as well as the lack of quality standards and agencies
conducting inspections, quality is bound to suffer. Quality enhancement and
Standardisation is thus needed, and all furniture manufacturers should preferably adhere
to the quality management system (ISO).
•
Design. Creation of easily accessible design libraries in each major furniture cluster of
the country would disseminate effectively new designs. The items collected could
include trend reports, contemporary design books, consumer magazines, mail-order
catalogues, trade publications, raw material samples, etc. Training programs and
exchange of foreign designers can be an integral part of this design upgrading.
99
•
Human resources. Even if labour force is abundant, lack of technical capabilities can
hinder competitiveness. Public support to vocational training for workers in factories is
recommendable, in order to reduce direct training expenses of enterprises, and for
managers to allow them to professionally grow with their businesses.
•
Market information. Access to information on market characteristics (for example
trends in distribution, retail success stories, new furniture marketing concepts) and
market access (tariff and non-tariff barriers) is often very difficult. It would thus be
useful to centralize this information (into Furniture Exporters’ Association level) for
regular distribution.
•
Marketing activities. The furniture industry should focus on marketing activities in key
markets (the United States, Japan, the European Union, and the Gulf). A concerted
action should include exhibitions; websites; international trade fairs; in-depth market
analyses, etc. Special encouragement may be warranted for importers and retailers’
buyer’s groups to visit Pakistani factories or Permanent Exhibition Halls. Marketing
efforts in the booming Gulf markets should be intensified.
6.6 The way forward – if we had a million
Here is a list of hands-on projects that could improve the conditions for production and trade in
the sector. It is a wish list based on meetings with parties who assisted in the preparation of the
study. Most of the project proposals are related to some of the conclusions and suggestions in
the study.
All costs are early-stage estimates inserted as magnitudes for the ease of discussion of followup from the study. The project proposals are independent of each other (unless otherwise
indicated) and are listed in no order of priority.
The study does not speculate on possible funding for implementation of the projects proposed.
Funding could be from the government of Pakistan, a trade promotion organisation, the sector
associations and their members, an external donor and in some cases from self-generated funds
(selling services).
6.6.1 If we had US$10,000 or 20,000:
A small wood seasoning plant
A pilot plant for testing, demonstration and sustainable production of kiln-dried sawn timber
for the furniture industry.
O b jec tive
The plant would improve the quality and shorten the production cycle of sawn timber for
furniture manufacturing. It would serve as a demonstration plant for potential investors in
similar facilities and as a testing plant for the benefit of a number of furniture producers in
Pakistan.
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Benefits
All timber tends to be air-dried in Pakistan, as kiln-drying (KD) is a rare profession in the
country. Air-drying is sufficient to come up with a workable quality for furniture, but at the
cost of a long drying time (6-12 months). The process locks up capital for long time and delays
production planning cycles and delivery times substantially. Kiln-drying’s main benefit would
thus come from improved quality (less crack-related reclamations), savings and shorter wood
purchase-processing-delivery cycles.
Very few independent contract-kiln operators can be presently found. Modest price increases
could also be obtained for KD planks, what would justify kiln-drying upon order as a new
entrepreneurship. These would sell drying services to sawn-wood producers or end-users upon
need, and would charge a remunerative kiln operation fee per volume of timber and energy
costs. Furniture makers would encourage such entrepreneur by placing fixed orders on annual
basis to help the start-up of business.
Parties
Parties to be involved, ownership, responsibilities and location(s) are to be decided in a
dialogue between the All Pakistan Furniture Association, local authorities, the sponsor and
possibly other parties.
In ves tme n ts
The instalment of a few small 5-10 m3 chambers or a larger 30-60 m3 chamber depends on the
wood consumption volumes and client base. The main part of the investment would come from
heat source (optional), ventilation and control equipment from a local manufacturer or abroad.
Also, proper chamber door mechanisms and moisture measuring devices are required. The
actual chambers can be built with local bricks at a reasonable cost.
It should be also studied whether Australian-made solar kilns or combination kilns (solar +
mechanised ventilation) could be made available at reasonable cost. These are known to have
been installed in small-scale wooden crafts communities across South-East Asia and the
Pacific.
6.6.2 If we had US$25,000:
A research and information cell in APFEA
Aim will be to provide the industry with all required information like updates, global
developments, quality standard requirements, market assessment, technology news, data on
world furniture trade, the latest on timber situations, etc. APFEA members will be able to
approach the R&I Cell with their queries which will be answered after thorough research and
investigation by APFEA’s full time Research Officer who will directly be reporting to
APFEA’s Executive R&I, Director (an APFEA EC member). All information on furniture
trade gathered by APFEA’s research team will be regularly posted on the website, periodically
disseminated among APFEA’s members and also reported from time to time in APFEA’s
Newsletter.
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6.6.3 If we had US$25,000 or 50,000:
De-bottlenecking of process flow (consultant and software)
O b jec tive
Assist the companies in carrying out a factory floor-level improvement process, where better
production planning and control systems are installed, productivity of existing labour and
equipment is improved, and the utilization of raw materials is optimised.
S t e p 1 - D e- bo t t le nec k in g ( c o ns u lta n t)
Activities – by one or several consultants
•
Assess the entire production process, from orders through manufacturing, packaging and
shipping.
•
Measure the time between an order and its shipment.
•
Move tasks such as component cutting and gluing, once in different parts of the plant, to
activity cells all in one area. Along with reducing the steps involved in moving product
from one area to another, the cells improve communications among workers.
•
Set clearly stated production goals for a cell every day, what lets workers see how well
they are doing.
Results – expected to be
•
Reduction of defects, overproduction, excess inventory, unnecessary steps, overprocessing, waste, material movement and waiting times.
•
Production cycle times can be reduced by some 50-90% on certain products.
US$25,000 would allow for four or six such de-bottlenecking assignments of around one-two
weeks each. Selection of the factories would have to be made in a dialogue with APFEA, the
sponsor and other parties to secure optimal use of the funds, geographical spread in Pakistan,
demonstration effect for others, etc.
Consultants with the right profile can probably only be found outside Pakistan, e.g. in
Malaysia.
S t e p 2 - P r o duc t io n da t a man age me n t ( s o f tw are)
An additional US$25,000 would be used for software that can systematise the management
process in factories. The software deals with orders, sales, inventories and resources
(manpower, machinery tools, etc).
The software must address the following needs:
•
Product grouping by collection and fabrication/finishing type
•
Management of raw material consumption, including management of wood wastes;
•
Design the manufacturing scheme for each part of the collection;
102
•
Optimise cutting;
•
Calculation of production costs, including the time needed for completing an order;
•
Tools control;
•
Controlling the manufacturing periods of time and costs, according to job description by
employee;
•
Calculation of optimal production quantities;
•
Managing production planning and delivery;
•
Proper calculation of quantities for the different production stages, calculation of inputs
according to the level of orders and forecasts;
•
Calculation and control of the inventory level;
•
Managing orders and sales, automatic records of invoices and technical order processing.
6.6.4 If we had US$40,000 – 80,000:
A CAD-programme for furniture design
O b jec tive
Software for CAD unit, used for 3D solid design for furniture industry would make it possible
for producers to extend the product/design range and to better comply with demands. The
software would also ensure that the supplier’s installation, training, system support and other
after-sales services are effectively employed.
Pr ope r ties
The software must be developed on the basis of the latest AutoCAD version and must
provide the most advanced features in order to design furniture projects; it must also be
provided with an inside CAD module to support the customers orders. This means that it
will enable - while being at a customer, in his presentation room - sketches of various
views of it to create an optimal furniture arrangement.
Parties
Furniture City concept or a testing laboratory can accommodate a pilot unit for demonstration
and training purposes, and charge users a fee for actual design work.
F ea tur es
Features expected from the CAD unit are:
•
To design different types of furniture: cabinet furniture, kitchen furniture, office
furniture, etc.
•
To design a piece of furniture fast in 3D, and cross sections, elevations, bird’s eye view,
needed for manufacturing, in 2D
103
•
It must have the capacity to provide various alternatives of a project in order to create the
product precisely from the very beginning
•
The software will have the possibility to integrate the new products in the production
control system
•
The software must have included libraries for furniture tools and files in order to enable
drawing a piece of furniture on the screen, by using the same tools and processes as in a
factory
•
The software has to be adapted to comply with woodworking processes, as well as with
assembling and machining constraints
•
The dimensions of each component from the layout drawn – length, width, height – must
be automatically transferred to the parts dimension list
•
The part list must take into account the raw materials – wood species; components, subsets and sets
-
Main needed utilities
-
generating material and cutting lists;
-
generating price lists;
-
changing components in one step;
-
presentation in several colours, wood grain structures and materials;
-
alternatives for calculation and manufacturing;
-
finished drawing must be adapted automatically to a size-oriented sheet by checking
the scale;
-
update module for existing drawings;
-
automatic design of box-structure frames and drawers;
-
blow-ups;
-
positioning hardware along with automatic drilling and machining relative to
hardware;
-
2D and 3D page setting tools;
-
management of multilevel parts list
Usually this advanced system is recommended to a furniture factory with at least 100 to 200
workers, with certain pre-conditions in place:
•
The companies should have an existing manual or computer-based production control
system to operate in parallel with the new software during its installation thereby acting
as a check and backup during the one to two years of the systems installation,
•
The system should have been in operation for a long enough period that its accuracy
(within its own limitations) could be relied upon,
•
The person nominated by the company should have a background in furniture rather than
in computers.
104
6.6.5 If we had US$100,000:
A technical training centre
(Courses and translated material, but not including machinery teaching material, building costs
etc.)
O b jec tive
The idea is to provide training for new production concepts in furniture. Induce change among
the Pakistani furniture companies to better meet the future challenges from shortening supplies
of lower-quality timber, as well as higher demands set by foreign buyers on product
standardisation.
R a t ion a le
•
Focus of technical training centre: With the dwindling wood resources worldwide,
new technologies have been developed to increase the processing yield, either through
increased precision during machining or better use of off-cuts or rejects. Technologies
have also been developed to handle smaller diameter or lower quality logs, through
finger-jointing, edge-gluing, or overlaying. The advent of CNC machinery has reduced
shop-floor downtime and allows faster tool change to minimize idle time. Further, CNC
machines are flexible work stations capable of accommodating a wide range of productmix. Sanding and finishing technologies have also improved to minimize human error,
resulting in an overall improvement in final quality. Obviously, the craft-based furniture
manufacturing industry is slowly being converted into a highly mechanized
manufacturing industry in many countries. Pakistan should not be an exception.
•
Curricula and teaching materials: Whenever the relevant national or regional
authorities have the opportunity, they should standardise the training curricula and
materials used, so as to ensure that end-of-training certificates guarantee the same level
of competence and are universally accepted. One problem that arises is that
woodworking may be perceived as an unglamorous sector, with poor working
conditions, low promotion prospects, etc. For this reason, the trainees in this sector tend
to be less knowledgeable, have lower basic education, and even reading skills. All these
set high demands for the teaching materials and methods.
•
Beneficiaries: Training is focusing on machine operators for factories that produce in
long series. Machine wood-workers are the top-notch blue-collar workers in a modern
furniture factory. This requires courses with much more emphasis on diagnosing
machining faults, safety in machining, machine setting, selection of tools, machine
maintenance, design and use of jigs, etc. The students produce items in short series, and
are thus trained in working on a repetitive basis. The emphasis is on training machine
operators for the industry, who realize the importance of machine-setting to produce
interchangeable components that do not need hand-finishing.
Another slowing factor of “industrialisation” of the furniture making can be tackled: the severe
shortage of qualified middle management and technical specialists (supervisors, quality control
specialists, time and motion specialists, etc.). A technical training centre could also run
managerial courses to upgrade skills on white-collar level.
105
Parties
•
Leading role: This initiative should be launched by APFEA or SMEDA. Government
and industry should jointly provide seed money or some kind of co-financing for the
setting-up of the centre. During operation, training courses would be offered on feebasis.
•
Supporting role: One of the idle furniture training centres (e.g. Sweden-Pakistan centre)
should be revitalised and its lessons learnt incorporated to avoid failure.
6.6.6 If we had US$250,000:
A furniture quality control and testing laboratory
(includes basic testing equipment, promotion and staff support for one year, but not building
costs)
O b jec tive
To raise the standards of furniture-making by bringing a furniture testing facility in place.
Make testing a routine matter for the leading producers when they launch new design series.
In-put
Equipment for a modern testing laboratory for meeting the basic ISO-related quality
requirements of wooden furniture. Manpower for the first year is included. A portion of the
time would be spent on training, promotion etc.
The laboratory should have the accreditation of either a National Network of testing
laboratories, or - more realistically - from a foreign accredited institution. From ISO, it should
seek to have the right to issue testing bulletins, in compliance with ISO 9002, EN 45001 or
similar.
Pr ope r ties
The principal equipment should include:
•
Machine for mechanical testing of the cabinet furniture (repeated door closing and
opening side wall stress, shelving stress strength, etc.) according to ISO 7170, 7171, EN
1153.
•
Machine for mechanical testing of the chairs (seat stress, rocking, etc) according to ISO
7170, 7171.
•
Machine for upholstered furniture testing (compression stress, structure strength)
according to EN 716, etc.
•
Machine for mattresses testing (compressing stress, rolling, reliability) according to EN
1334.
•
Machine for hinges etc. (repeated closing and opening, reliability, etc.) according to ISO
6891, etc
106
•
To modernise such a laboratory, it may be necessary to digitalise the data transfers on a
process computer equipped with
-
process interface module for data
-
software for data processing
-
length transducers
-
strain – gauge transmitters
Synergies
The laboratory should preferably be hosted by the Furniture City (in the making). This would
ensure an efficient turnover of its services among the furniture companies. It would also offer
an attractive location for smaller firms to come and arrange the testing of their samples or
prototypes before launch. At the same time, they could pay a visit to other common services
facilities of the Furniture City - to learn more about e.g. better finishing, tool maintenance,
latest operating supplies available (fittings and chemicals).
Parties
APFEA, whose members have the greatest potential to benefit from it on international markets.
6.6.7 If we had US$500,000:
Export / import warehouse facilities
(At domestic port and abroad in the buying market)
O b jec tive
Make the Pakistani furniture exporters more efficient and less prone to damage and delays in
their deliveries to key export markets. In practice, there is a two-way problem among the
exporters:
•
Standard handling and warehousing of exported goods at Pakistani ports is not suited for
furniture, causing multiple damages and unnecessary loss of time.
•
On the other way around, the lacking warehouse facility on landing the goods for
showcasing and distributing furniture e.g. at High Point Fair in the USA, poses a
problem in the market.
In-put
•
In Pakistan: Establish a common export warehouse next to the Furniture City or a
domestic seaport. This would be dedicated to serving furniture exporters, with support
services like packaging, labelling, and careful handling of parcels while loading the
pallets and containers. Stocking is based on advanced software, RFID identification and
parcel positioning system. Efficient container loading and stevedoring is applied.
•
Abroad: Rent a warehouse space from some of the existing premises adjacent to e.g. the
High Point or some other globally important Furniture Fair area. Make sure that the most
compatible way of loading-unloading and packaging-un-packaging be applied.
107
Electronic data transfer between the two warehouses is used to coordinate the goods
movement at both ends. Systematise the data reading and storing by adopting RFID tags
and readers on both ends.
Be ne fic ia r ie s
Pakistani exporters and Customs offices would benefit from a stricter control and more
efficient service of both. Foreign buyers and retailers would receive undamaged goods at
experience predictable delivery times.
Parties
The purchase of equipment and rents rests with the exporting furniture companies. The
Furniture City concept can accommodate the domestic export warehouse as a common service
unit. Actual investment depends on the locations, the size of the warehouse’s buildings and
renting costs.
108
Annexes
Annex A — Sources of information and useful websites
The European Union
•
Union Europeénne de Ameublement (UEA): European Furniture Manufacturers’
Federation
Rue Royale 109-111
1000 Brussels, Belgium
Tel: +32-(0) 2 218 1889
Fax: +32-(0) 2 219 2701
E-mail: [email protected]
www.ueanet.com/cen.html
•
Eurostat – EU Statistical Office
Rue Alcide de Gasperi
L-2920 Luxembourg, Luxembourg
Tel: +352-(0) 4301 34567
Fax: +352-(0) 4301 3015
www.eurostat.eu.int/eurostat.html
•
International Tropical Timber Organisation (ITTO)
International Organisations Centre, 5th floor
Pacifico Yokohama, 1-1-1, Minato Mirai
Nishi-ku, Yokohama 220, Japan
Tel: +81-(0) 45 223 1110
Fax: +81-(0) 45 223 1111
www.itto.or.jp
Germany
•
Association of the German woodworking and plastic industries: Hauptverband der
Holz und Kunststoffe verarbeitenden Industrie (HDH)
www.hdh-ev.de/english/index.html
•
German Furniture Industry Association: Verband der Deutschen Möbelindustrie
(VDM)
Flutgraben 2
53604 Bad Honnef
Tel: +49 (0) 22 24 / 93 77 0, Fax: +49 (0) 22 24 / 93 77 77
www.hdh-ev.de/english/index.html
•
Bundesverband des Deutschen Mobelhandels e.V.
Frangenheimstrasse 6, D-5093 Koln, (Lindenthal) Germany
Tel.: +49 (0) 221 / 403 142
Fax: +49 (0) 221 / 400 93 96
109
•
Verband Büro-, Sitz- und Objektmöbel e.V. (BSO)
Kaiserswerther Straße 137, 40474 Düsseldorf
Tel.: +49 (0) 2 11 / 6 02 53 43 – 0
Fax: +49 (0) 2 11 / 6 02 53 43 – 15
Email: [email protected]
www.buero-forum.de
•
Verband der Deutschen Polstermöbelindustrie e.V.
Engerstraße 4b, 32051 Herford
Tel.: +49 (0) 52 21 / 12 65 – 0, Fax: +49 (0) 52 21 / 12 65 - 65
•
Fachverband Serienmöbelbetriebe des Handwerks e.V.
Engerstraße 4b, 32051 Herford
Tel.: +49 (0) 52 21 / 12 65 – 0, Fax: +49 (0) 52 21 / 12 65 - 65
•
Möbelonline
Verein zur Koordination von Multimedia und Electronic Commerce der Möbelbranche
•
Wolf-Hirth-Straße 10, 71034 Böblingen
Tel.: +49 (0) 79 31/46 17 30, Fax: +49 (0) 79 31/46 17 50
•
Deutsches Institut für Möbeltechnik e.V.
Frankfurter Ring 243, 89897 München
Tel.: +49 (0) 89/32 46 53-0, Fax: +49 (0) 89/32 46 53-13
Italy
•
ISTAT – Compendio Statistico Italiano various years
•
ISTAT – on-line data bank: www.istat.it/index.htm
•
Federlegno – publications, including: Sistema legno arredo Italiano, consuntivo
economico 2000 and 2001
•
Federlegno – Evoluzione Congiunturale, various issues from 2000 to 2002
•
Federlegno – on-line data bank: www.federlegno.it
•
Federlegno – Evoluzione del mobile domestico, del mobile da ufficio, delle cucine,
editions 2001 and 2002
•
Cosmit Press releases – Schede economiche del settore mobile 2002
•
Cosmit Press releases – Risultati positivi nel 2001
•
Il Sole 24 Ore – Supplement 10/4/2002
•
Centro Studi Industria Leggera (CSIL)
15, Corso Monforte
20122 Milano, Italy
Tel: +39 (0) 02 796 630
Fax: +39 (0) 02 780 703
www.csilmilano.com
110
•
Federmobili information on the sales network at the Federmobili web-site:
www.webmobili.it
•
Pambianco Strategie di Impresa: web-site: www.pambianconews.com
France
•
SESSI – Le Bois en chiffres – Edition 2002
•
SESSI – France Meubles 1999
•
SESSI - Enquête annuelle d'entreprise 2000 and 2001 etc.
•
SESSI – Conjoncture 2001
•
SESSI – Les 4 pages N. 155-2001: Les entreprises industrielles et la publicité
•
SESSI – on-line data bank: www.evariste.org/sessi
•
PME – Gouvernement Français – information sur la distribution: www.pme-commerceartisanat.gouv.fr/economie/onc/chap13.htm
•
Industries Françaises de l'Ameublement: Economie et marchés 2002
•
BMSI – French furniture production – February 2002 N. 322
•
CTBA – Info various issues, including N. 88/2001
•
Insée statistical data base: www.insee.fr/fr/home/home_page.asp
•
Direction des entreprises commerciales artisanales et de services (decas). Information on
distribution system: www.decas.finances.gouv.fr
Belgium
•
Nationale Beroepsvereniging van Meubelhandelaars
Brussels International Trade Mart
P.O. Box 613, B-1020 Brussels, Belgium
Tel: 00-32 (0) 247 084 758
Fax: 00-32 (0) 247 837 66
The Netherlands
•
Association of Furniture Manufacturers
P.O.Box 100, 2100 AC Heemstede, The Netherlands
Tel: 00-31 (0) 23 515 8800
Fax:00-31 (0) 23 531 5538
www.cbm.nl
111
•
Central Association for Furniture Retailers
Bovenweg 100, 3708AG Zeist, The Netherlands
Tel: 00-31 (0) 30 697 3100
Fax:00-31 (0) 30 691 9751
www.cbw.org
•
Centre for the Promotion of Imports from Developing Countries (CBI)
P.O.Box 30009, 3001 DA Rotterdam, The Netherlands
Tel: 00-31 (0) 10 201 3434
Fax: 00-31 (0) 10 411 4081
www.cbi.nl
USA
•
AKTRIN Furniture Information Center
164 S. Main Street
P.O. Box 898, High Point
North Carolina 27261, USA
Tel: +1 (0) 336 841 8535
Fax: +1 (0) 336 841 5435
www.aktrin.com
•
The Office of Consumer Goods
US Department of Commerce
Washington DC
Tel: 202 482 5783
Fax: 202 482 3981
www.ita.doc.gov/org
•
Annual Survey of Manufacturers
www.ita.doc.gov/td/ocg/furniture.html#manufacturing
•
US Industry and Trade Outlook
www.yntis.gov/product/industry-trade.html
•
Census of manufacturers
www.census.gov/epcd/www/97EC31.html, www.census.gov/ epcd/www/naics.html
•
Industry trade surveys
www.usitc.gov/webpubs.htm
•
US imports and exports (of household and office furniture)
www.export.gov/ocg/ furniture.htm
•
American Furniture Manufacturers Association (AFMA)
Tel: 336 884 5000
Fax: 336 884 5303
www.afma4u.org
112
•
National Home Furnishings Association (NHFA)
Tel: 336 801 6100
Fax: 336 883 1195
www.nhfa.org
•
International Wholesale Furniture Association (IWFA)
Tel: 336 884 1566
Fax: 336 884 1350
[email protected]
•
Association of Progressive Rental Organisations (APRO)
Tel: 512 794 0095
Fax: 512 794 0097
www.apro-rto.com
•
BIFMA Grand Rapids: Office Furniture Manufacturers Association
Tel: 616 285 3963
Fax: 616 285 3765
www.bifma.org
113
References
ITTO Market Information Service (MIS). Several 2005-2006 issues. Yokohama, Japan.
ITTO-ITC (a). Review of International Wooden Furniture Markets. Joint publication.
December 2004 Geneva, Switzerland / Yokohama, Japan.
ITTO-ITC (b). Tropical Timber Products: Development of Further Processing in ITTO
Producer Countries. Joint publication. May 2002 Geneva, Switzerland / Yokohama, Japan.
UN/ECE-FAO Timber Committee Forest Products Annual Market Review 2003-2004. Chapter
on Value Added Wood Products. June 2004, Geneva, Switzerland.
114
115
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The Furniture Sector in Pakistan

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