Growing furniture exports
MALAYSIAN furniture manufacturers have come a long way. The industry started off with catering to the domestic market but has become a strong export product for the country.
According to Malaysian Furniture Council president Chua Chun Chai, local manufacturers started moving into exports in the 1990s. During the 1980s, the entry barrier for such businesses was relatively low. Back then, furniture manufacturers were likely to be those who were previously involved with renovation works using wooden materials.
“From there, many diversified into making furniture such as dining sets and altars,” he notes.
But local entrepreneurs took risks when they moved into manufacturing. They would lease machineries at about 14% interest per year and if they missed a monthly payment, the interest rate could go up to 28%.
“These manufacturers started having excess capacity when factories moved into automation in the 1990s. Because of that, the export market was the only way to go,” Chua says.
Additionally, bigger players such as conglomerates from the palm oil industry and property developers were also investing in furniture manufacturing plants at the time.
Many furniture manufacturers from Taiwan and Singapore were also setting up their plants here, particularly in Klang, Selangor and Muar, Johor, as the local climate is conducive for the timber used in furniture production.
However, the presence of so many players did little to douse the local players as the majority of the manufacturers had set their sights on overseas markets such as the US and Canada.
“But they didn’t do well over the long run. In the mid-1990s when China opened its doors to become the world’s factory, they stopped operating as they were not competitive. Many were run mainly by professionals who were not very hands-on in factory operations,” Chua explains.
But family-owned furniture manufacturers benefited from this as a lot of the professionally-trained talent joined them. Local manufacturers also started looking at other export markets that will offer lower volume but steadier demands, such as Japan, Australia, the UK and the Middle East.
Chua, who is also managing director of furniture manufacturer Hup Chong Furniture Sdn Bhd, also notes that their entrepreneurial spirit and hard work kept the local furniture industry a vibrant one.
Chua opines that demand for Malaysianmade furniture will continue despite growing competition from Vietnam and Indonesia.
Last year, Malaysia’s furniture export for January to November was valued at about RM8.6bil with products produced by over 2,000 local furniture manufacturers. The top export destinations were the US, Singapore, Japan, Australia, the UK and India.
Furniture manufacturers have benefited from the weak ringgit over the past three years. The ringgit has weakened more than 50% since August 2013, trading at the 4.4 to 4.5 range in 2017. As long as the ringgit remains weak, exporters will continue to gain from good profit margins.
However, the ringgit is expected to rebound, especially with Bank Negara’s measures requiring companies to convert at least 75% of export proceeds into the local currency.
Reports also note that there will be compression in prices both from customers and a price war among manufacturers, which may affect the low- to mid-range product segments.
“Local manufacturers need to improve themselves to head off competition, beginning with their manufacturing operations,” Chua says.
Some of the issues surrounding the industry include labour shortage. Hiring of foreign labour has always been a challenge and Chua urges manufacturers to maintain a conducive workplace to attract local labour. This could also involve investments in machines to raise productivity and reduce manual labour.
“Getting the workers properly trained before they handle machines will also help to keep the workplace safe,” he says.
This could also give overseas clients the confidence to deal with local players.
“No matter how much automation we introduce to our factories, we will always require people to grow the company. Hence, keeping the company a conducive place to work will always be important,” he concludes.