The Furniture Sector in Pakistan: Export performance and ... - TRTA i
The Furniture Sector in Pakistan: Export performance and ... - TRTA i
The Furniture Sector in Pakistan: Export performance and ... - TRTA i
Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
<strong>The</strong> <strong>Furniture</strong> <strong>Sector</strong> <strong>in</strong> <strong>Pakistan</strong><br />
— <strong>Export</strong> <strong>performance</strong> <strong>and</strong> potential<br />
— Implications of the WTO Agreements<br />
August 2007
This publication has been produced with the assistance of the European Union (EU) as part of an<br />
EU-funded Trade Related Technical Assistance (<strong>TRTA</strong>) programme with the Government of <strong>Pakistan</strong>.<br />
<strong>The</strong> International Trade Centre (ITC) is implement<strong>in</strong>g the programme. <strong>The</strong> content of this publication is<br />
the sole responsibility of the consultants. Facts <strong>and</strong> figures set forth <strong>in</strong> this publication are the<br />
responsibility of the consultants <strong>and</strong> should not be considered as reflect<strong>in</strong>g the views or carry<strong>in</strong>g the<br />
endorsement of the EC, ITC, UNCTAD, or WTO. <strong>The</strong> factual details <strong>and</strong> <strong>in</strong>-country resources <strong>in</strong> the<br />
publication have been researched <strong>and</strong> compiled by the consultants. ITC has not formally edited this<br />
report.<br />
© International Trade Centre (UNCTAD/WTO)<br />
Palais des Nations, 1211 Geneva 10, Switzerl<strong>and</strong><br />
Email: itcreg@<strong>in</strong>tracen.org<br />
http://www.<strong>in</strong>tracen.org<br />
Distribution: UNRESTRICTED<br />
September 2007<br />
ITC: <strong>The</strong> Partner <strong>in</strong> <strong>Export</strong> Development<br />
ITC Mission<br />
ITC enables small bus<strong>in</strong>ess export success <strong>in</strong> develop<strong>in</strong>g countries by provid<strong>in</strong>g, with partners, trade<br />
development solutions to the private sector, trade support <strong>in</strong>stitutions <strong>and</strong> policy-makers.<br />
ITC strategic objectives<br />
Enterprises – Strengthen the <strong>in</strong>ternational competitiveness of enterprises.<br />
Trade support <strong>in</strong>stitutions – Develop the capacity of trade service providers to support bus<strong>in</strong>esses.<br />
Policy-makers – Support policy-makers <strong>in</strong> <strong>in</strong>tegrat<strong>in</strong>g the bus<strong>in</strong>ess sector <strong>in</strong>to the global economy.<br />
2
Acknowledgements<br />
<strong>The</strong> report was prepared by:<br />
• Morten Scholer, Senior Market Development Adviser, International Trade Centre (ITC),<br />
Geneva, Switzerl<strong>and</strong><br />
• Jukka Tissari, Wood <strong>and</strong> <strong>Furniture</strong> Industry Consultant, F<strong>in</strong>l<strong>and</strong><br />
• Bastiaan Bijl, Trade Data Analyst, Independent Consultant, New Delhi, India<br />
• Madiha Butt, Research Executive, Aftab Associates (Pvt) Ltd, Lahore, <strong>Pakistan</strong><br />
• Inaam ul Haque, WTO Adviser, WTO Cell, Plann<strong>in</strong>g <strong>and</strong> Development Department,<br />
Government of the Punjab, <strong>Pakistan</strong><br />
Inputs <strong>and</strong> support by:<br />
• H. Aftab Ahmad, CEO, Aftab Associates (Pvt) Ltd., Lahore, <strong>Pakistan</strong><br />
• Quratula<strong>in</strong> Ibrahim, Executive Director, Aftab Associates (Pvt) Ltd., Karachi, <strong>Pakistan</strong><br />
• Arif Ahmed Khan, ITC National Programme Coord<strong>in</strong>ator, Islamabad, <strong>Pakistan</strong><br />
• Kaneez Fatima, Research Executive, Aftab Associates (Pvt) Ltd., Lahore, <strong>Pakistan</strong><br />
• Saeed Mazhar, Research Executive, Aftab Associates (Pvt) Ltd., Karachi, <strong>Pakistan</strong><br />
• Imran Akram, WTO Cell, Plann<strong>in</strong>g <strong>and</strong> Development Department, Government of the<br />
Punjab, <strong>Pakistan</strong><br />
• Fayyaz Riaz Ahmed, SMEDA, Lahore, <strong>Pakistan</strong><br />
• Zahid Saeed (Vice Chairman PPMA 2005-06), Karachi, <strong>Pakistan</strong><br />
• Turhan Baig, President, APFEA, Karachi, <strong>Pakistan</strong><br />
• Maqbool Illahi, Vice President, APFEA, Lahore, <strong>Pakistan</strong><br />
• Rasheed Ali, Editor, Lahore, <strong>Pakistan</strong><br />
• Muhammad Ali, Co–Editor, Lahore, <strong>Pakistan</strong><br />
• Julie-Anne Lee, Bus<strong>in</strong>ess Advisory Services Consultant, ITC, Geneva, Switzerl<strong>and</strong><br />
• Maryam Yunus, Formatter/Proof Reader, Lahore, <strong>Pakistan</strong><br />
<strong>The</strong> companies that provided <strong>in</strong>put to our queries (In alphabetical order):<br />
• Diamond <strong>Furniture</strong> Centre<br />
• H.R.H. Heritage<br />
• Hakam Furnishers<br />
• International Furnishers (Pvt) Ltd.<br />
• Interwood Mobel (Pvt) Ltd.<br />
• Iqbal <strong>and</strong> Brothers <strong>Furniture</strong> House<br />
• Khalil Wood Tech<br />
• Laiq <strong>and</strong> Co<br />
• Mohkam <strong>Furniture</strong>s<br />
• National Wood <strong>Furniture</strong><br />
• Pak Rosewood <strong>Furniture</strong> Co.<br />
i
• Playfurn<br />
• Rose Wood <strong>Furniture</strong>s<br />
• Salima Marble Works<br />
• Sameena Abbas design studio<br />
• Sam<strong>in</strong>a Khan<br />
• Virsa <strong>Furniture</strong> Interiors<br />
• Wood Pecker Art Furnishers<br />
• Woodco <strong>Furniture</strong><br />
ii<br />
International Trade Centre
Abbreviations<br />
AFTA<br />
AHEC<br />
AKTRIN<br />
APFEA<br />
ASMINDO<br />
CAD<br />
CARB<br />
CBI<br />
CBR<br />
CEN<br />
CFTMCs<br />
CIF<br />
CMI<br />
CoC<br />
CSIL<br />
DDA<br />
DIY<br />
DSU<br />
DTR<br />
ECE<br />
ECG<br />
EDF<br />
EN<br />
EPB<br />
EU<br />
FAO<br />
FCCI<br />
FIRA<br />
FSC<br />
FTA<br />
GATS<br />
GATT<br />
GoP<br />
GSP<br />
GVG<br />
HR<br />
IFRG<br />
ILO<br />
IMF<br />
IPO<br />
IPRs<br />
ISO<br />
ITC<br />
ITTO<br />
KD<br />
LDC<br />
MDF<br />
ASEAN Free Trade Area<br />
American Hardwood <strong>Export</strong> Council<br />
US-based consult<strong>in</strong>g firm<br />
All <strong>Pakistan</strong> <strong>Furniture</strong> <strong>Export</strong>ers Association<br />
Indonesian <strong>Furniture</strong> <strong>and</strong> H<strong>and</strong>icraft Association<br />
Computer Aided Design<br />
California Air Resource Board<br />
Centre for the Promotion of Imports from Develop<strong>in</strong>g Countries (<strong>The</strong> Netherl<strong>and</strong>s)<br />
Central Board of Revenue<br />
Comite européen de Normalisation<br />
Technology Transfer Centres<br />
Cost, Insurance & Freight (<strong>in</strong>cluded)<br />
Census of Manufactur<strong>in</strong>g Industries<br />
Cha<strong>in</strong>-of-custody Certification<br />
Centro Studi Industria Leggera<br />
Doha Development Agenda<br />
Do-It-Yourself<br />
Disputes Settlement Underst<strong>and</strong><strong>in</strong>g<br />
Double Taxation Relief<br />
Economic Commission for Europe<br />
Executive Core Group<br />
<strong>Export</strong> Development Fund<br />
European St<strong>and</strong>ards<br />
<strong>Export</strong> Promotion Bureau (now Trade Development Authority of <strong>Pakistan</strong>)<br />
European Union<br />
Food <strong>and</strong> Agriculture Organisation<br />
Federation of Chambers of Commerce <strong>and</strong> Industries<br />
<strong>Furniture</strong> Industry Research Association<br />
Forest Stewardship Council<br />
Free Trade Agreement<br />
General Agreement on Trade <strong>in</strong> Services<br />
General Agreement on Tariffs <strong>and</strong> Trade<br />
Government of <strong>Pakistan</strong><br />
Generalised System of Preferences<br />
Global Value Cha<strong>in</strong>s<br />
Human Resources<br />
International <strong>Furniture</strong> Research Group<br />
International Labour Organisation<br />
International Monetary Fund<br />
Intellectual Property Organisation<br />
Intellectual Property Rights<br />
International Organisation for St<strong>and</strong>ardisation<br />
International Trade Centre<br />
International Tropical Timber Organisation<br />
Knocked-down<br />
Least Developed Countries<br />
Medium Density Fibreboard<br />
iii
MIS<br />
MNC<br />
MNF<br />
MoC<br />
MTN<br />
NAMA<br />
NF<br />
NGOs<br />
PIDC<br />
PIFFC<br />
PSC<br />
R & D<br />
RFID<br />
RMI<br />
RTA<br />
SAFTA<br />
SMEDA<br />
SMEs<br />
SOP<br />
SP<br />
SPS<br />
SWOG<br />
SWOT<br />
TBT<br />
TDAP<br />
TQM<br />
TRADA<br />
TRIMs<br />
TRIPs<br />
<strong>TRTA</strong><br />
TTF<br />
UAE<br />
UNIDO<br />
USAID<br />
WTO<br />
Market Information System<br />
Multi National Companies<br />
Most Favoured Nation<br />
M<strong>in</strong>istry of Commerce<br />
Multilateral Round of Negotiations<br />
Non-Agriculture Market Access<br />
French St<strong>and</strong>ards Ameublement<br />
Non-Governmental Organisations<br />
<strong>Pakistan</strong> Industrial Development Corporation<br />
<strong>Pakistan</strong> International Freight Forwarders Council<br />
<strong>Pakistan</strong> Shippers Council<br />
Research <strong>and</strong> Development<br />
Radio Frequency Identification Device<br />
Renovation, Ma<strong>in</strong>tenance <strong>and</strong> Improvement<br />
Ready-to-Assemble<br />
South Asian Free Trade Area<br />
Small <strong>and</strong> Medium Enterprise Authority<br />
Small <strong>and</strong> Medium sized Enterprises<br />
St<strong>and</strong>ard Operat<strong>in</strong>g Procedures<br />
Special Products<br />
Sanitary <strong>and</strong> Phytosanitary Measures<br />
Strategy Work<strong>in</strong>g Group<br />
Strength, Weakness, Opportunity <strong>and</strong> Threat<br />
Technical Barriers to Trade<br />
Trade Development Authority of <strong>Pakistan</strong> (previously <strong>Export</strong> Promotion Bureau)<br />
Total Quality Management<br />
Timber Research <strong>and</strong> Development Association, UK<br />
Trade-Related Investment Measures<br />
Trade-Related Aspects of Intellectual Property<br />
Trade-Related Technical Assistance<br />
Timber Trade Federation<br />
United Arab Emirates<br />
United Nations Industrial Development Organisation<br />
United States Agency for International Development<br />
World Trade Organization<br />
iv<br />
International Trade Centre
Table of contents<br />
Acknowledgements<br />
Abbreviations<br />
i<br />
iii<br />
Executive summary 1<br />
F<strong>in</strong>d<strong>in</strong>gs 1<br />
Recommendations 2<br />
Conclusions 4<br />
1 Background <strong>and</strong> objectives 5<br />
1.1 EC <strong>TRTA</strong> Programme for <strong>Pakistan</strong> 5<br />
1.2 Five sector studies 5<br />
1.3 Methodology 6<br />
2 <strong>Furniture</strong> sector <strong>in</strong> <strong>Pakistan</strong> 7<br />
2.1 <strong>The</strong> sector <strong>in</strong> general 7<br />
2.2 An overview of exist<strong>in</strong>g studies, strategies <strong>and</strong> policy papers 37<br />
2.3 SWOT analysis of <strong>Pakistan</strong>i furniture companies 43<br />
2.4 <strong>Furniture</strong> association <strong>and</strong> its role <strong>in</strong> services 45<br />
2.5 Case stories on data collection 46<br />
3 Implications of WTO Agreements 50<br />
3.1 Background 50<br />
3.2 Information on the WTO issues 53<br />
3.3 Implications of the WTO Trade Agreements 58<br />
3.4 Trade conditions of the <strong>Pakistan</strong>i furniture sector 70<br />
4 Obstacles <strong>and</strong> shortcom<strong>in</strong>gs to export 76<br />
4.1 Obstacles <strong>and</strong> shortcom<strong>in</strong>gs – exporters’ op<strong>in</strong>ions 76<br />
4.2 Obstacles <strong>and</strong> shortcom<strong>in</strong>gs – importers’ op<strong>in</strong>ions 79<br />
5 <strong>Export</strong> services <strong>in</strong> <strong>Pakistan</strong> 87<br />
5.1 <strong>Export</strong> service providers 87<br />
5.2 <strong>Export</strong> services as they actually are – expressed views 91<br />
5.3 <strong>Export</strong> services as they should be – expressed views 92<br />
5.4 Other export services – Malaysia as example 92<br />
v
6 Conclusion <strong>and</strong> recommendations 95<br />
6.1 Recommendations for parties <strong>in</strong>volved 95<br />
6.2 Critical success factors 97<br />
6.3 Elements of success 97<br />
6.4 Global value cha<strong>in</strong>s 99<br />
6.5 Recommendations - some details 99<br />
6.6 <strong>The</strong> way forward – if we had a million 100<br />
Annexes 109<br />
Annex A — Sources of <strong>in</strong>formation <strong>and</strong> useful websites 109<br />
References 114<br />
List of Tables<br />
Table 2.1 HS <strong>and</strong> SITC product codes for wooden furniture ............................................. 10<br />
Table 2.2 Orig<strong>in</strong> of wooden furniture imports for 5 top import<strong>in</strong>g countries, 2004-05 (%) . 15<br />
Table 2.3 <strong>Pakistan</strong>i furniture exports 2001-05................................................................... 17<br />
Table 2.4 Comparison of furniture clusters........................................................................ 41<br />
Table 2.5 Middle East furniture imports............................................................................. 48<br />
Table 3.1 Top 10 furniture suppliers to <strong>Pakistan</strong> ............................................................... 71<br />
Table 3.2 Top 10 buyers of the <strong>Pakistan</strong>i furniture - Tariffs <strong>and</strong> share of exports ............. 73<br />
Table 4.1 Market Information System: Basic questions .................................................... 86<br />
List of Figure<br />
Figure 2.1 Raw material <strong>and</strong> product flows <strong>in</strong> forest <strong>in</strong>dustries ........................................... 8<br />
Figure 2.2 Wooden furniture imports by top 5 import<strong>in</strong>g countries, 2001- 05.................... 14<br />
Figure 2.3 Imports of Ch<strong>in</strong>ese furniture by major markets 2005 (US$ mill.)...................... 16<br />
Figure 2.4 Distribution structure for furniture <strong>in</strong> the European Union ................................ 19<br />
Figure 2.5 Simplified example on cha<strong>in</strong> of custody of wood <strong>in</strong> furniture............................ 33<br />
Figure 2.6 Example of FSC label <strong>and</strong> on-product claim .................................................... 34<br />
Figure 3.1 Functional scope of the WTO........................................................................... 51<br />
Figure 3.2 WTO <strong>in</strong>formation flows ..................................................................................... 54<br />
Figure 3.2 Relevant <strong>in</strong>tensity of WTO Agreements ........................................................... 59<br />
List of Boxes<br />
Box 2.1 Technology levels <strong>in</strong> furniture <strong>in</strong>dustries of the develop<strong>in</strong>g countries .................. 11<br />
Box 2.2 Recent changes <strong>in</strong> global furniture trade.............................................................. 13<br />
Box 2.3 Production flow improvements: a practical approach........................................... 20<br />
Box 2.4 Shortage of rosewood (Sheesham) – What are the options?................................ 21<br />
Box 2.5 California formaldehyde emission regulations...................................................... 26<br />
Box 2.6 Exclusive procurement policy of the London Olympics 2012 ............................... 28<br />
Box 2.7 UK Timber Trade Federation announces high-risk sources ................................. 31<br />
Box 2.8 Workshop on certification <strong>and</strong> susta<strong>in</strong>ability for furniture manufacturers ............. 32<br />
Box 2.9 Egyptian furniture screens Las Vegas show ........................................................ 36<br />
Box 2.10 USAID <strong>in</strong>itiative <strong>in</strong> the furniture sector <strong>in</strong> <strong>Pakistan</strong> ............................................. 43<br />
vi<br />
International Trade Centre
Box 3.1 Multilateral discipl<strong>in</strong>e of trade rules – the WTO system.........................................50<br />
Box 3.2 Regional Trade Agreements (RTAs) ....................................................................61<br />
Box 3.3 GATT 1994 <strong>in</strong> a nutshell.......................................................................................69<br />
Box 3.4 At a glance - Impact of the WTO Agreements on the <strong>Pakistan</strong>i furniture sector...75<br />
Box 6.1 Elements of success <strong>in</strong> further process<strong>in</strong>g – Example of Pen<strong>in</strong>sular Malaysia .....98<br />
vii
viii<br />
International Trade Centre
Executive summary<br />
This study sets the wooden furniture <strong>in</strong>dustry of <strong>Pakistan</strong> <strong>in</strong>to a global context. It describes the<br />
implications of the WTO agreements on the sector as well as the key obstacles, shortcom<strong>in</strong>gs<br />
<strong>and</strong> opportunities for the country’s exports.. <strong>The</strong> study also reviews <strong>Pakistan</strong>’s export services<br />
<strong>and</strong> their usefulness to the furniture sector. F<strong>in</strong>ally, conclusions <strong>and</strong> recommendations have<br />
been put together, also <strong>in</strong>tegrat<strong>in</strong>g some very recent developments (<strong>Furniture</strong> village), which<br />
<strong>in</strong>dicate that <strong>Pakistan</strong>’s furniture <strong>in</strong>dustry is tak<strong>in</strong>g its future <strong>in</strong>to its own h<strong>and</strong>s.<br />
F<strong>in</strong>d<strong>in</strong>gs<br />
<strong>Export</strong> drive levels off<br />
<strong>Pakistan</strong>’s furniture <strong>in</strong>dustry is export<strong>in</strong>g annually around US$12 million worth of ma<strong>in</strong>ly<br />
wooden furniture represent<strong>in</strong>g four ma<strong>in</strong> styles, namely antique reproduction, mughal, modern<br />
(Italian), <strong>and</strong> oriental styles. <strong>Pakistan</strong> exports to a large number of countries, of which Italy,<br />
USA, Canada, Japan, Saudi-Arabia, the UAE, Germany <strong>and</strong> Spa<strong>in</strong> are some of the biggest<br />
buyers. <strong>Export</strong>s turned <strong>in</strong>to a decl<strong>in</strong>e <strong>in</strong> 2006 after a steady growth over the past years.<br />
Wood resources are wasted<br />
<strong>Pakistan</strong>’s furniture has been fairly devoted to solid wood composition, <strong>and</strong> is therefore heavily<br />
dependent on native sheesham wood (rosewood). Despite be<strong>in</strong>g a valuable species, sheesham<br />
resource has not been susta<strong>in</strong>ed <strong>in</strong> the country. Industry claims widespread exports of<br />
unprocessed logs <strong>and</strong> sawn timber to the Gulf countries, <strong>and</strong> cl<strong>and</strong>est<strong>in</strong>e trade by opportunistic<br />
players <strong>in</strong> official positions. Inadequate measures have been taken by forest authorities to curb<br />
illegal logg<strong>in</strong>g <strong>and</strong> trade, <strong>and</strong> replenish the timber with proper silviculture <strong>and</strong> forest<br />
management. Scarcity of sheesham <strong>and</strong> other local hardwoods is the most serious threat to<br />
<strong>Pakistan</strong>’s traditional wooden furniture <strong>in</strong>dustry.<br />
International competition puts <strong>Pakistan</strong> under pressure<br />
Even though the supply side constra<strong>in</strong>ts prevail, the <strong>in</strong>dustry has shown resilience <strong>in</strong> carv<strong>in</strong>g its<br />
niche <strong>in</strong> the European <strong>and</strong> North American markets. Majority of the furniture workshops are<br />
small <strong>in</strong> size, <strong>and</strong> use manual-<strong>in</strong>tensive production methods. Competitive edge is derived from<br />
high-skilled carv<strong>in</strong>g of traditional designs. <strong>Pakistan</strong> competes with countries like Ch<strong>in</strong>a, India,<br />
Vietnam <strong>and</strong> Malaysia. Especially Ch<strong>in</strong>a <strong>and</strong> Vietnam are concentrat<strong>in</strong>g their <strong>in</strong>dustries <strong>in</strong>to<br />
larger bases <strong>and</strong> reap the benefits of mass production to the extent possible. If <strong>Pakistan</strong> wants<br />
to move from the small cottage <strong>in</strong>dustry status <strong>in</strong>to SME network<strong>in</strong>g culture, it will be<br />
challenged to adopt novel designs <strong>and</strong> technologies <strong>and</strong> formalize tra<strong>in</strong><strong>in</strong>g of workforce, none<br />
of which is currently the norm. On top of these come production accord<strong>in</strong>g to <strong>in</strong>ternational<br />
st<strong>and</strong>ards <strong>and</strong> new level of quality awareness.<br />
Industry is seek<strong>in</strong>g new avenues<br />
It will be difficult to compete aga<strong>in</strong>st the Asian furniture giants from the small workshop<br />
culture that <strong>Pakistan</strong> is pursu<strong>in</strong>g. Not surpris<strong>in</strong>gly, the <strong>Pakistan</strong> furniture trade <strong>and</strong> <strong>in</strong>dustry has<br />
International Trade Centre 1
advocated the concept of “<strong>Furniture</strong> Village” that resembles such cluster activities <strong>in</strong> Italy,<br />
Malaysia, etc. USAID’s nascent support to the establishment of two <strong>Furniture</strong> Villages will<br />
have to resolve the raw material glut faced by the furniture <strong>in</strong>dustry. US hardwoods are<br />
extensively be<strong>in</strong>g imported <strong>and</strong> remanufactured for exports by, e.g. the Ch<strong>in</strong>ese <strong>and</strong><br />
Vietnamese furniture factories. A similar concept may be adopted <strong>in</strong> <strong>Pakistan</strong>, possibly<br />
complemented with Malaysian tropical hardwood supplies. But embark<strong>in</strong>g on this new strategy<br />
would force the <strong>in</strong>dustry to re<strong>in</strong>vent itself.<br />
Obstacles <strong>in</strong> the value cha<strong>in</strong><br />
<strong>The</strong> <strong>in</strong>dustry acknowledges that its ma<strong>in</strong> obstacles <strong>in</strong> fact range over the whole supply cha<strong>in</strong>.<br />
Unsusta<strong>in</strong>able wood resource h<strong>and</strong>l<strong>in</strong>g, improper wood season<strong>in</strong>g, static design <strong>and</strong> lack<strong>in</strong>g<br />
production <strong>in</strong>novations happen <strong>in</strong> the up-stream of the cha<strong>in</strong>. <strong>The</strong>se contribute to the<br />
downstream problems, such as dra<strong>in</strong> of skilled workforce to other sectors, sub-st<strong>and</strong>ard<br />
technology, f<strong>in</strong>ish<strong>in</strong>g <strong>and</strong> packag<strong>in</strong>g. Further down the l<strong>in</strong>e, this is bound to lead <strong>in</strong>to sales to<br />
sub-optimal markets at discounted prices. It does not help either that the furniture firms<br />
consider the common export services provided by the Trade Development Authority of<br />
<strong>Pakistan</strong> (TDAP) (previously the <strong>Export</strong> Promotion Bureau (EPB)) <strong>and</strong> the Small <strong>and</strong> Medium<br />
Enterprise Development Authority (SMEDA) largely <strong>in</strong>adequate <strong>and</strong> that they are relatively<br />
unknown to most of them.<br />
WTO agreements’ implications on furniture<br />
<strong>The</strong> production structure of the furniture <strong>in</strong>dustry has undergone a significant change. Factories<br />
from dozens of countries now participate <strong>in</strong> the different stages of global furniture value<br />
cha<strong>in</strong>s, manufactur<strong>in</strong>g components <strong>and</strong> ready-to-assemble (RTA) components for f<strong>in</strong>ished<br />
furniture for globally outsourc<strong>in</strong>g buyers’ groups <strong>and</strong> retailer cha<strong>in</strong>s.<br />
<strong>The</strong> agreements of the World Trade Organization (WTO) are about provid<strong>in</strong>g equal<br />
opportunities – they do not provide guarantees nor do they provide all the conditions for<br />
participation <strong>in</strong> the global economy for any sector of <strong>in</strong>dustry. <strong>Pakistan</strong>i furniture makers see<br />
open<strong>in</strong>g up of trade impact<strong>in</strong>g both exports <strong>and</strong> imports. <strong>The</strong> country has rema<strong>in</strong>ed a producer<br />
of f<strong>in</strong>ished furniture of slowly moderniz<strong>in</strong>g traditional designs. As a result of the WTO<br />
agreements, market access for the <strong>Pakistan</strong>i furniture <strong>in</strong> <strong>in</strong>dustrial countries has improved as<br />
tariffs have come down. Furthermore, there is now protection available to <strong>Pakistan</strong> aga<strong>in</strong>st any<br />
discrim<strong>in</strong>atory treatment <strong>in</strong> the trad<strong>in</strong>g partners’ markets. On the other h<strong>and</strong>, new tougher<br />
requirements for produc<strong>in</strong>g domestic furniture accord<strong>in</strong>g to stricter st<strong>and</strong>ards <strong>and</strong> more<br />
elaborate designs are be<strong>in</strong>g progressively adopted.<br />
Recommendations<br />
A brighter future for the furniture <strong>in</strong>dustry would necessitate a holistic approach. Some of the<br />
most important elements of that approach are the follow<strong>in</strong>g:<br />
Susta<strong>in</strong>able raw materials<br />
A determ<strong>in</strong>ed plan is needed to create <strong>and</strong> develop a susta<strong>in</strong>able source of wood raw materials.<br />
Forestry/reforestation programs should ensure a stable source of low cost raw materials, <strong>and</strong> to<br />
2 International Trade Centre
the extent possible ma<strong>in</strong>ta<strong>in</strong> or improve ecological conditions, enhance the community <strong>in</strong>come<br />
<strong>and</strong> employment, etc.<br />
Enforcement of the rule of law <strong>and</strong> good governance on timber cutt<strong>in</strong>g<br />
<strong>and</strong> trade<br />
Eradicate illegal <strong>and</strong> rent-seek<strong>in</strong>g behaviours of Forestry Department officials, if such<br />
misconduct is proven.<br />
Product quality<br />
<strong>The</strong> quality of furniture is determ<strong>in</strong>ed by professionalism <strong>in</strong> the h<strong>and</strong>l<strong>in</strong>g of raw materials,<br />
production techniques <strong>and</strong> manufactur<strong>in</strong>g process. Due to <strong>in</strong>sufficient skills <strong>and</strong> facilities, as<br />
well as the lack of quality st<strong>and</strong>ards <strong>and</strong> agencies conduct<strong>in</strong>g <strong>in</strong>spections, quality is bound to<br />
suffer.<br />
Design<br />
Creation of easily accessible design libraries <strong>in</strong> each major furniture cluster of the country<br />
would dissem<strong>in</strong>ate effectively new designs. <strong>The</strong> items collected could <strong>in</strong>clude trend reports,<br />
contemporary design books, consumer magaz<strong>in</strong>es, mail-order catalogues, trade publications,<br />
raw material samples, etc. Tra<strong>in</strong><strong>in</strong>g programs <strong>and</strong> exchange of foreign designers can be an<br />
<strong>in</strong>tegral part of this design upgrad<strong>in</strong>g.<br />
Human resources<br />
Even if labour force is adequate <strong>in</strong> numbers, lack of technical capabilities can h<strong>in</strong>der<br />
competitiveness. Public support to vocational tra<strong>in</strong><strong>in</strong>g for workers <strong>in</strong> factories is<br />
recommendable, <strong>in</strong> order to reduce direct tra<strong>in</strong><strong>in</strong>g expenses of enterprises, <strong>and</strong> to allow<br />
managers to professionally grow with their bus<strong>in</strong>esses.<br />
Market <strong>in</strong>formation<br />
Access to <strong>in</strong>formation on market characteristics (for example trends <strong>in</strong> distribution, retail<br />
success stories, new furniture market<strong>in</strong>g concepts) <strong>and</strong> market access (tariff <strong>and</strong> non-tariff<br />
barriers) is often too difficult. It would thus be useful to centralize this <strong>in</strong>formation for regular<br />
distribution at the furniture association level.<br />
Market<strong>in</strong>g activities<br />
<strong>The</strong> furniture <strong>in</strong>dustry should focus on market<strong>in</strong>g activities <strong>in</strong> key markets (the United States,<br />
Japan, the European Union, <strong>and</strong> the Gulf). A concerted action should <strong>in</strong>clude exhibitions;<br />
websites; <strong>in</strong>ternational trade fairs; <strong>in</strong>-depth market analyses, etc. Special encouragement may<br />
be warranted for importers <strong>and</strong> retailers groups to visit <strong>Pakistan</strong>i factories or permanent<br />
exhibition halls.<br />
International Trade Centre 3
Conclusions<br />
<strong>Pakistan</strong> will not be competitive <strong>in</strong> mass furniture segments aga<strong>in</strong>st furniture giants like Ch<strong>in</strong>a.<br />
Authenticity <strong>and</strong> master<strong>in</strong>g of raw materials should be made the cornerstones for the<br />
competitiveness of “niche” or “ethnic” furniture at the high-end of the market. High perceived<br />
value for price, timely deliveries <strong>and</strong> proper after-sales service are needed for keep<strong>in</strong>g<br />
<strong>Pakistan</strong>i furniture a w<strong>in</strong>ner. Quality assurance must be improved <strong>and</strong> <strong>Pakistan</strong>i furniture<br />
br<strong>and</strong>s strengthened.<br />
<strong>The</strong> <strong>in</strong>dustry is show<strong>in</strong>g an <strong>in</strong>creas<strong>in</strong>g awareness of its limits <strong>and</strong> works out a broader vision to<br />
re<strong>in</strong>vent its strength <strong>in</strong> global furnish<strong>in</strong>g trade. While the potential ga<strong>in</strong>s tend to be most<br />
attractive to the leaders of the <strong>in</strong>dustry, a susta<strong>in</strong>ed growth requires balanced development<br />
efforts across the supply cha<strong>in</strong>.<br />
Raw material shortage is a very critical factor that cannot be compensated for by any other<br />
means along the process<strong>in</strong>g <strong>and</strong> market<strong>in</strong>g cha<strong>in</strong>. A broad-based political will is necessary to<br />
susta<strong>in</strong> the wooden furniture <strong>in</strong>dustry’s prospects <strong>in</strong> <strong>Pakistan</strong> - from the forest to the markets.<br />
4 International Trade Centre
1 Background <strong>and</strong> objectives<br />
1.1 EC <strong>TRTA</strong> Programme for <strong>Pakistan</strong><br />
<strong>The</strong> International Trade Centre (ITC) is implement<strong>in</strong>g, on behalf of the European Union (EU),<br />
a Trade-related Technical Assistance (<strong>TRTA</strong>) programme <strong>in</strong> <strong>Pakistan</strong>. <strong>The</strong> overall objective of<br />
the programme is to assist <strong>Pakistan</strong> to foster its <strong>in</strong>tegration <strong>in</strong>to the world economy <strong>and</strong>,<br />
ultimately, to contribute to poverty alleviation through the achievement of trade-related<br />
conditions for susta<strong>in</strong>ed <strong>and</strong> stable economic growth.<br />
More specifically, the programme aims to enhance awareness among government officials,<br />
bus<strong>in</strong>ess sector <strong>and</strong> civil society about the implications of the World Trade Organization<br />
(WTO) Agreements on the economy of the country, <strong>and</strong> to assist <strong>Pakistan</strong> <strong>in</strong> build<strong>in</strong>g the<br />
necessary capacity to address issues result<strong>in</strong>g from its participation <strong>in</strong> the WTO.<br />
1.2 Five sector studies<br />
With<strong>in</strong> this framework, the programme has undertaken five studies on sectors selected by the<br />
M<strong>in</strong>istry of Commerce <strong>in</strong> <strong>Pakistan</strong>: automotive parts, footwear, furniture, pharmaceuticals <strong>and</strong><br />
sports goods.<br />
<strong>The</strong> studies have been undertaken by national consultants work<strong>in</strong>g <strong>in</strong> collaboration with the<br />
respective bus<strong>in</strong>ess associations, national <strong>and</strong> <strong>in</strong>ternational experts <strong>and</strong> ITC.<br />
<strong>The</strong> studies identify export opportunities <strong>and</strong> threats <strong>in</strong> each sector <strong>and</strong> exam<strong>in</strong>e the<br />
implications of the WTO Agreements on these sectors. Specifically they <strong>in</strong>clude:<br />
• An overview of the sector <strong>and</strong> its relevance to <strong>Pakistan</strong>, <strong>in</strong>clud<strong>in</strong>g production processes,<br />
pric<strong>in</strong>g <strong>and</strong> turnover <strong>performance</strong>, regulatory environment <strong>and</strong> export <strong>performance</strong>.<br />
• A summary of other studies, reports, policy papers, strategies, etc developed <strong>in</strong> recent<br />
years for the sector.<br />
• An overview of the sector’s trad<strong>in</strong>g <strong>performance</strong> for key products, <strong>in</strong>clud<strong>in</strong>g the sector’s<br />
global trade position, national sector data, imports <strong>and</strong> exports over the last 5 years, <strong>and</strong><br />
the global position of key <strong>Pakistan</strong>i companies.<br />
• Identification of the WTO Agreements relevant to the sector <strong>and</strong> analysis of their<br />
implications for the sector globally <strong>and</strong> <strong>in</strong> <strong>Pakistan</strong>, both currently <strong>and</strong> <strong>in</strong> the future. This<br />
<strong>in</strong>cludes analysis of changed or new market threats or opportunities aris<strong>in</strong>g out of the<br />
emerg<strong>in</strong>g multilateral trad<strong>in</strong>g environment.<br />
• An assessment of the availability <strong>and</strong> accessibility of relevant <strong>in</strong>formation on WTO,<br />
<strong>in</strong>clud<strong>in</strong>g the <strong>in</strong>formation flows between the Government <strong>and</strong> the bus<strong>in</strong>ess community.<br />
• Identification of the key obstacles or shortcom<strong>in</strong>gs for improv<strong>in</strong>g the sector’s export<br />
<strong>performance</strong> <strong>and</strong> provision of proposals for improvement or rectification.<br />
• An assessment of the current export support services provided by the Government <strong>and</strong><br />
suggestions on how these could improve the export <strong>performance</strong> <strong>in</strong> the relevant sector.<br />
International Trade Centre 5
• Recommendations aimed at <strong>in</strong>dividual companies, bus<strong>in</strong>ess associations <strong>and</strong> relevant<br />
government authorities – <strong>in</strong>clud<strong>in</strong>g some h<strong>and</strong>s-on suggestions <strong>in</strong> the form of scenarios<br />
with proposed partners <strong>and</strong> estimates of costs.<br />
1.3 Methodology<br />
As part of the study, Aftab Associates (Pvt.) Ltd (AAL) carried out a series of <strong>in</strong>terviews with<br />
several senior staff members of furniture manufacturers <strong>and</strong> exporters <strong>in</strong> the furniture sector of<br />
<strong>Pakistan</strong>. Six representatives of AAL <strong>in</strong>terviewed five manufacturers <strong>and</strong> 15 manufacturerscum-exporters<br />
between 1 March <strong>and</strong> 19 April 2006. <strong>The</strong> <strong>in</strong>terviews were made at the<br />
companies’ premises <strong>in</strong> Karachi, Gujrat, Gujranwala, Peshawar, Rawalp<strong>in</strong>di, Lahore <strong>and</strong><br />
Ch<strong>in</strong>iot. A 30-po<strong>in</strong>t questionnaire was used <strong>and</strong> the average duration of <strong>in</strong>terviews was an<br />
hour.<br />
Out of 20 companies <strong>in</strong>terviewed, 50% are produc<strong>in</strong>g both office <strong>and</strong> home furniture. 40% of<br />
the companies’ product mix <strong>in</strong>cludes home furniture. <strong>The</strong> rema<strong>in</strong><strong>in</strong>g companies’ product mix<br />
<strong>in</strong>cludes just office furniture. Ten companies had up to 50 employees; eight companies had 50<br />
to 200 employees; <strong>and</strong> two companies had around 1,000 employees. <strong>The</strong> ma<strong>in</strong> export markets<br />
of the manufacturers-cum-exporters are the Gulf States, the Middle East, the United States, the<br />
United K<strong>in</strong>gdom, Germany, Malaysia <strong>and</strong> Japan.<br />
<strong>The</strong> AAL survey also <strong>in</strong>cluded <strong>in</strong>formation gathered at the furniture workshop conducted on 29<br />
June 2006, which was attended by more than 20 of the 45 manufacturers <strong>and</strong> exporters who<br />
had presented their products at the Karachi <strong>Furniture</strong> Exhibition the same month.<br />
<strong>The</strong> consultants <strong>in</strong> <strong>Pakistan</strong>, India <strong>and</strong> Europe carried out thorough literature studies, statistical<br />
analysis <strong>and</strong> other <strong>in</strong>terviews.<br />
6 International Trade Centre
2 <strong>Furniture</strong> sector <strong>in</strong> <strong>Pakistan</strong><br />
2.1 <strong>The</strong> sector <strong>in</strong> general<br />
2.1.1 <strong>Furniture</strong> sector <strong>in</strong> <strong>Pakistan</strong> <strong>and</strong> global furniture <strong>in</strong>dustry<br />
International forest <strong>in</strong>dustry system: Raw material <strong>and</strong> product flows<br />
Conceptually, the <strong>Pakistan</strong>i furniture <strong>in</strong>dustry may want to consider their world competitors<br />
through the follow<strong>in</strong>g position<strong>in</strong>g (Figure 2.1). It summarises on a very broad level the global<br />
flows of wood <strong>and</strong> also non-wood fibres <strong>in</strong> a larger system of forest <strong>in</strong>dustries. It shows, for<br />
example, the relative importance of wood from various sources (types of forests) <strong>and</strong> it shows<br />
where the significant flows on non-wood fibres come <strong>in</strong>to the <strong>in</strong>dustry’s system. It also<br />
attaches the furniture <strong>in</strong>dustry to the downstream process<strong>in</strong>g where close l<strong>in</strong>kages can be made<br />
to the builder’s jo<strong>in</strong>ery, carpentry <strong>and</strong> pre-fabricated houses, etc.<br />
<strong>The</strong> figure shows how the wood product sector consists of a cha<strong>in</strong> of successive manufactur<strong>in</strong>g<br />
activities, each hav<strong>in</strong>g traded outputs. In the process<strong>in</strong>g <strong>and</strong> distribution cha<strong>in</strong>, added value is<br />
multiplied at each phase of further process<strong>in</strong>g. For this reason, the national trade plans <strong>and</strong><br />
strategies of timber-produc<strong>in</strong>g countries tend to put emphasis on the exports of high valueadded<br />
products such as jo<strong>in</strong>ery <strong>and</strong> furniture. (ITTO-ITC (a), 2004).<br />
<strong>The</strong> comparative advantage derived purely from resource endowment decl<strong>in</strong>es as the degree of<br />
process<strong>in</strong>g <strong>in</strong>creases. <strong>The</strong> economies of scale tend to behave similarly, i.e. the higher the<br />
degree of process<strong>in</strong>g, the less there is dependence on plant size as a factor of cost<br />
competitiveness. Typically, the relative importance of small <strong>and</strong> medium-sized enterprises<br />
(SMEs) is high <strong>in</strong> furniture, <strong>and</strong> they play a key role <strong>in</strong> satisfy<strong>in</strong>g domestic dem<strong>and</strong>. Be<strong>in</strong>g<br />
labour-<strong>in</strong>tensive, small-scale enterprises tend to make a positive contribution to the general<br />
socio-economic development. Industrial policies should recognise the strategic importance of<br />
SMEs as a source of employment <strong>and</strong> <strong>in</strong>come.<br />
In conclusion, countries will have to base the competitiveness of their wooden furniture on<br />
either one, or preferably all, of the follow<strong>in</strong>g factors:<br />
• Low-cost local <strong>in</strong>puts (notably wood <strong>and</strong> labour)<br />
• High total productivity (measured over all factors of production i.e. wood, labour,<br />
capital, energy <strong>and</strong> operat<strong>in</strong>g supplies)<br />
• Superior quality of products (<strong>in</strong>clud<strong>in</strong>g design <strong>and</strong> articulate h<strong>and</strong>work)<br />
• Consistent operational efficiency through prompt supply-delivery schedules, <strong>and</strong><br />
• Genu<strong>in</strong>e customer satisfaction through will<strong>in</strong>gness to replace damaged goods <strong>and</strong> other<br />
after-sales service.<br />
International Trade Centre 7
Figure 2.1 Raw material <strong>and</strong> product flows <strong>in</strong> forest <strong>in</strong>dustries<br />
Managed<br />
natural<br />
regeneration<br />
forest<br />
(37%)<br />
Unmanaged<br />
natural<br />
regeneration<br />
forest<br />
(17%)<br />
Orig<strong>in</strong>al<br />
boreal<br />
forests<br />
(15%)<br />
Plantation<br />
forests<br />
(29%)<br />
Tropical<br />
ra<strong>in</strong><br />
forests<br />
(1%)<br />
Roundwood<br />
production<br />
Forest production //// Non-wood fibres from forests<br />
Non-wood fibres<br />
from agriculture<br />
Large-sized logs<br />
Small-sized logs<br />
Bamboo, rattan & agro<br />
fibre plants<br />
Primary<br />
wood<br />
process<strong>in</strong>g<br />
<strong>in</strong>dustries<br />
Sawmills,<br />
veneer <strong>and</strong><br />
plywood mills<br />
Reconstituted<br />
panels plants<br />
73%<br />
Wood pulp<br />
mills<br />
Collectors,<br />
primary<br />
treatment,<br />
middlemen<br />
Non-wood<br />
pulp mills<br />
Industrial wood<br />
residues<br />
27%<br />
Recycl<strong>in</strong>g<br />
Paper mills<br />
Intermediate<br />
<strong>and</strong> f<strong>in</strong>al solid<br />
wood products<br />
F-jo<strong>in</strong>t<strong>in</strong>g,<br />
glue-lam,<br />
mould<strong>in</strong>gs,<br />
eng<strong>in</strong>. wood<br />
veneer<strong>in</strong>g<br />
Components<br />
Particleboard,<br />
fibreboard<br />
Floor<strong>in</strong>g<br />
Jo<strong>in</strong>ery<br />
<strong>Furniture</strong> <strong>and</strong> parts<br />
Further process<strong>in</strong>g <strong>in</strong>dustries<br />
Pre-fab.<br />
houses,<br />
etc.<br />
Non-wood<br />
furniture<br />
Paper <strong>and</strong><br />
paperboard<br />
products<br />
Recycl<strong>in</strong>g<br />
Bamboo panels,<br />
weav<strong>in</strong>g, glu<strong>in</strong>g<br />
Bamboo<br />
parquet, jo<strong>in</strong>ery<br />
Source: ITTO-ITC (a), 2004<br />
Global shift <strong>in</strong> furniture-mak<strong>in</strong>g<br />
Historically, manufactur<strong>in</strong>g furniture for exports had rema<strong>in</strong>ed firmly <strong>in</strong> the h<strong>and</strong>s of the<br />
<strong>in</strong>dustrialised nations. <strong>Furniture</strong>-mak<strong>in</strong>g by nature is one of the very basic <strong>and</strong> labour-<strong>in</strong>tensive<br />
manufactur<strong>in</strong>g segments that have existed <strong>in</strong> all cultures as a domestic <strong>and</strong> household craft.<br />
Consequently, the entry barrier to start this <strong>in</strong>dustry is fairly low. More recently, many<br />
develop<strong>in</strong>g economies have followed the previous paths <strong>and</strong> phases of the more developed<br />
economies <strong>in</strong> develop<strong>in</strong>g their furniture for exports. Countries like Ch<strong>in</strong>a, Indonesia, Vietnam,<br />
Malaysia, Mexico <strong>and</strong> Brazil have gradually <strong>in</strong>dustrialised <strong>and</strong> exp<strong>and</strong>ed their furniture<br />
<strong>in</strong>dustry’s operational scales better suited for the ma<strong>in</strong> markets, i.e. the United States <strong>and</strong> the<br />
European Union.<br />
8 International Trade Centre
On the buyer’s side, there are globally operat<strong>in</strong>g furniture retail cha<strong>in</strong>s <strong>and</strong> buy<strong>in</strong>g groups<br />
represent<strong>in</strong>g the collective <strong>in</strong>terests of nationally important furniture dealers. Both have stayed<br />
<strong>in</strong> the vanguard for changes <strong>in</strong> the <strong>in</strong>ternational market. In fact, these have been important<br />
drivers <strong>in</strong> open<strong>in</strong>g up furniture trade for more trade. <strong>The</strong>y have realised new cost-slash<strong>in</strong>g <strong>and</strong><br />
earn<strong>in</strong>g opportunities <strong>in</strong> outsourc<strong>in</strong>g labour-<strong>in</strong>tensive manufactur<strong>in</strong>g to the develop<strong>in</strong>g<br />
countries. As a response, there is an abundant stock of new manufactur<strong>in</strong>g capacity that has<br />
been established with the help of government support <strong>and</strong> tax breaks. Not all of these are,<br />
however, profitable or competitive today<br />
Dem<strong>and</strong> factors<br />
Wooden household furniture tends to be a durable good that is highly responsive to personal<br />
<strong>in</strong>come expectations. Its purchase often represents a major <strong>in</strong>vestment by consumers <strong>in</strong><br />
household <strong>and</strong> office furniture, for <strong>in</strong>stance. <strong>The</strong>re is a clear tendency to postpone the purchase<br />
when <strong>in</strong>come expectations decl<strong>in</strong>e, <strong>and</strong> vice versa, <strong>in</strong>crease purchase if personal <strong>in</strong>comes<br />
prosper. Consumption is also affected by demographic factors such as birth rates, marriage<br />
rates, life expectancy <strong>and</strong> household size. It is also responsive to the degree of social <strong>and</strong><br />
geographic mobility of the population.<br />
<strong>The</strong> dem<strong>and</strong> for household furniture <strong>and</strong> accessories directly correlate with new residential<br />
construction, <strong>and</strong> office furniture follows trends <strong>in</strong> non-residential construction. A grow<strong>in</strong>g<br />
segment, however, is the renovation, ma<strong>in</strong>tenance <strong>and</strong> improvement (RMI) sector, which<br />
already accounts for 40-50% of total construction <strong>in</strong> Western Europe. Increas<strong>in</strong>g mobility of<br />
the population is also feed<strong>in</strong>g furniture replacement purchases. For example <strong>in</strong> the United<br />
States, about 40 million people move home every year. This often triggers furniture shopp<strong>in</strong>g.<br />
<strong>Furniture</strong> is becom<strong>in</strong>g more a fashion item with shorter change <strong>in</strong>tervals, trend-sett<strong>in</strong>g <strong>and</strong><br />
even seasonal styles. This means that the life cycle of household furniture is becom<strong>in</strong>g shorter,<br />
<strong>and</strong> the collections themselves will have to be renewed more frequently. <strong>The</strong> key to success <strong>in</strong><br />
mass markets is flexible <strong>and</strong> cost-efficient production, with savvy designs.<br />
In summary, the key factors that <strong>in</strong>fluence the dem<strong>and</strong> for household furniture <strong>in</strong>clude:<br />
• Disposable personal <strong>in</strong>come<br />
• Consumer confidence<br />
• New hous<strong>in</strong>g <strong>and</strong> non-residential build<strong>in</strong>g starts<br />
• Increase <strong>in</strong> the average size of new houses<br />
• Increase <strong>in</strong> the number of bedrooms <strong>in</strong> new s<strong>in</strong>gle-family homes.<br />
Consumers <strong>in</strong> the United States <strong>and</strong> the European Union markets have been <strong>in</strong>duced to accept<br />
more eccentric <strong>and</strong> ethnic designs <strong>and</strong> mixed styles from exotic countries. This is an<br />
<strong>in</strong>dispensable opportunity for a “globalised” furniture trader, who sources items from all over<br />
the world. Equally, it is the lifel<strong>in</strong>e for “traditional” furniture-makers <strong>in</strong> the develop<strong>in</strong>g<br />
countries.<br />
Trade nomenclature<br />
For the convenience of def<strong>in</strong><strong>in</strong>g the product coverage (of the trade chapters), reference is made<br />
here to the commonly applied trade nomenclature (Table 2.1).<br />
International Trade Centre 9
Table 2.1 HS <strong>and</strong> SITC product codes for wooden furniture<br />
Product<br />
group<br />
Wooden<br />
furniture<br />
Group breakdown SITC 3 HS<br />
Seats of cane, osier, bamboo<br />
“Other” seats with wooden frames<br />
Office furniture, wood<br />
Kitchen furniture, wood<br />
Bedroom furniture, wood<br />
Other furniture, wood<br />
<strong>Furniture</strong> other than metal, wood or<br />
plastic (cane, osier, bamboo, etc.)<br />
Mattress supports for bed frames<br />
<strong>Furniture</strong> parts, of all materials<br />
821.13<br />
821.16<br />
821.51<br />
821.53<br />
821.55<br />
821.59<br />
821.79<br />
821.21<br />
821.80<br />
9401.50<br />
9401.61/69<br />
9403.30<br />
9403.40<br />
9403.50<br />
9403.60<br />
9403.80<br />
9404.10<br />
9403.90<br />
<strong>The</strong> word <strong>Furniture</strong> refers <strong>in</strong> this report to wooden furniture as described above. Only <strong>in</strong><br />
<strong>Furniture</strong> parts, also other materials are <strong>in</strong>cluded, but wood dom<strong>in</strong>ates also <strong>in</strong> that product<br />
category.<br />
<strong>The</strong> typology of furniture is based on <strong>in</strong>tended end-use or space where the items will be<br />
accommodated. It is not always possible to follow this logic. However “Other furniture (SITC<br />
821.59)” ma<strong>in</strong>ly refers to liv<strong>in</strong>g/d<strong>in</strong><strong>in</strong>g room furniture, bookcases, wall units, mirrors,<br />
hallst<strong>and</strong>s, but also to small <strong>and</strong> occasional furniture (desks, small seats) for various<br />
spaces/end-uses, as well as shop fitt<strong>in</strong>g furniture such as shelves. This furniture group<br />
comprises many items that do not perfectly match to any of the above key categories. It is<br />
usually the largest category <strong>in</strong> <strong>in</strong>ternational trade statistics.<br />
<strong>Pakistan</strong>’s furniture types<br />
A similar categorisation is be<strong>in</strong>g used <strong>in</strong> <strong>Pakistan</strong>. Wood is undoubtedly the ma<strong>in</strong> material <strong>in</strong><br />
<strong>Pakistan</strong>’s exports. But the country also produces some metal (wrought iron rod, steel),<br />
upholstered furniture for offices <strong>and</strong> special medical furniture. Foams are also used for<br />
cushion<strong>in</strong>g <strong>in</strong> upholstered chairs <strong>and</strong> seat<strong>in</strong>g. As ma<strong>in</strong>ly solid wood of hardwood species like<br />
Sheesham (or Indian rosewood), walnut, oak <strong>and</strong> similar is used, the furniture is normally quite<br />
heavy <strong>in</strong> weight.<br />
Also common to most develop<strong>in</strong>g countries is the existence of sub-segments <strong>in</strong> their domestic<br />
furniture market, such as (a) household furniture for domestic <strong>and</strong> export markets, (b)<br />
“<strong>in</strong>stitutional” furniture segment for schools, hospitals <strong>and</strong> other public premises, <strong>and</strong> (c)<br />
contract furniture to private sector clients <strong>in</strong> shops, banks <strong>and</strong> hotels, etc.<br />
<strong>The</strong> four ma<strong>in</strong> styles are antique, mughal, modern (Italian), <strong>and</strong> oriental. Most items fall <strong>in</strong> the<br />
liv<strong>in</strong>g room, d<strong>in</strong><strong>in</strong>g room <strong>and</strong> bedroom categories. “Other” or “accent furniture” falls outside<br />
the basic liv<strong>in</strong>g, d<strong>in</strong><strong>in</strong>g room <strong>and</strong> kitchen furniture ranges. It f<strong>in</strong>ds its role <strong>in</strong> the smaller, casual<br />
<strong>and</strong> miscellaneous items, sometimes referred as “occasional furniture” due to its<br />
complementary role <strong>in</strong> home furnish<strong>in</strong>g. Typical items are side or corner tables, magaz<strong>in</strong>e<br />
tables, st<strong>and</strong><strong>in</strong>g small shelves (etageres), chests, nest<strong>in</strong>g <strong>and</strong> pedestal tables, small chairs <strong>and</strong><br />
home bars, etc. This category is almost without exception the biggest furniture category <strong>in</strong> the<br />
trade statistics of any country.<br />
10 International Trade Centre
Accord<strong>in</strong>g to the websites of importers, <strong>Pakistan</strong> considerably produces these occasional items.<br />
Consumers <strong>in</strong> the ma<strong>in</strong> markets are <strong>in</strong>creas<strong>in</strong>gly liberal <strong>in</strong> mix<strong>in</strong>g different styles <strong>and</strong> ethnic<br />
designs <strong>in</strong> their homes, <strong>and</strong> decorative <strong>Pakistan</strong>i furniture often attracts buyers when they are<br />
shopp<strong>in</strong>g for small accent furniture for tun<strong>in</strong>g a part of their <strong>in</strong>terior decor. Reproduction of<br />
antique furniture is an important niche for <strong>Pakistan</strong>, as it normally fetches good prices <strong>and</strong> is<br />
favoured by consumers with above-average purchas<strong>in</strong>g power.<br />
As an evidence of this favourable trend, a quotation follows from Home Accents Today, e-daily<br />
(14. 07. 2006):<br />
“Traditional tastes take an unexpected journey to exotic parts comb<strong>in</strong><strong>in</strong>g classic styl<strong>in</strong>g<br />
with well-travelled details. While, the look stays grounded with classic accent furniture<br />
<strong>and</strong> an antique-<strong>in</strong>spired rug, splashes of spice colours <strong>and</strong> medallion patterns pull from<br />
Islamic design. Look for warm metals like brass <strong>and</strong> bronze to add a glow<strong>in</strong>g spirit while<br />
cool green <strong>and</strong> blue balance th<strong>in</strong>gs out with a timeless touch.”<br />
Technology levels<br />
<strong>The</strong> above workflow is typically a h<strong>and</strong>-carved furniture system, which seems to be the<br />
dom<strong>in</strong>ant one <strong>in</strong> <strong>Pakistan</strong>. <strong>The</strong>re are a number of different levels of mechanization that can be<br />
identified. In fact, the <strong>Pakistan</strong>i furniture makers could be benchmarked aga<strong>in</strong>st the follow<strong>in</strong>g<br />
categorization of technology levels put <strong>in</strong>to use by furniture makers on average <strong>in</strong> the world.<br />
This has been developed by UNIDO, <strong>and</strong> represented <strong>in</strong> ITTO-ITC’s publication Tropical<br />
Timber Products: Development of Further Process<strong>in</strong>g <strong>in</strong> ITTO Producer Countries (2000).<br />
Box 2.1 Technology levels <strong>in</strong> furniture <strong>in</strong>dustries of the develop<strong>in</strong>g countries<br />
• Facilities that use basic portable tools <strong>and</strong> universal woodwork<strong>in</strong>g mach<strong>in</strong>es<br />
• Facilities that use basic woodwork<strong>in</strong>g mach<strong>in</strong>es (b<strong>and</strong> saw, planer, thicknesser,<br />
sp<strong>in</strong>dle moulder, bor<strong>in</strong>g mach<strong>in</strong>e etc.) to produce <strong>in</strong> small batches<br />
• Facilities same as <strong>in</strong> 2, but produc<strong>in</strong>g larger batches, us<strong>in</strong>g low-cost mechanization<br />
<strong>and</strong> jigs suitable for serial production whenever possible<br />
• Facilities that use special purpose mach<strong>in</strong>es (4-side moulders, copy<strong>in</strong>g lathes, edgebenders,<br />
CNC moulders etc.)<br />
• Facilities with <strong>in</strong>tegrated mach<strong>in</strong><strong>in</strong>g l<strong>in</strong>es (l<strong>in</strong>ked mach<strong>in</strong>es used for production of<br />
panel furniture, doors, surface f<strong>in</strong>ish<strong>in</strong>g, robots used for pa<strong>in</strong>t<strong>in</strong>g, <strong>in</strong>tegrated l<strong>in</strong>es).<br />
Source: ITTO-ITC (b), 2002.<br />
A jig is a self-constructed modell<strong>in</strong>g appliance that facilitates production, lowers labour costs<br />
<strong>and</strong> improves product quality. <strong>The</strong> use of jigs enables the production of <strong>in</strong>terchangeable parts<br />
<strong>and</strong> avoids manual adaptations <strong>in</strong> the assembly of the f<strong>in</strong>al product. Mach<strong>in</strong><strong>in</strong>g <strong>and</strong> assembly<br />
jigs are commonly used <strong>in</strong> furniture factories.<br />
Discussion on technology categories<br />
Categories 1 <strong>and</strong> 2 typify the technological status of furniture process<strong>in</strong>g <strong>in</strong> a large number of<br />
producer countries, consist<strong>in</strong>g of a great number of micro enterprises, usually employ<strong>in</strong>g 20 to<br />
50 persons.<br />
International Trade Centre 11
Category 3 is the first one to which the term <strong>in</strong>dustrial production can really be applied. <strong>The</strong>y<br />
use jigs, higher quality mach<strong>in</strong>es, low-cost mechanization <strong>and</strong> well-ma<strong>in</strong>ta<strong>in</strong>ed, simple<br />
mach<strong>in</strong>es. It is possible to produce <strong>in</strong>terchangeable components at this level. Production units<br />
are <strong>in</strong> a position to enter export markets. Products tend to be st<strong>and</strong>ardised, <strong>and</strong> a series of up to<br />
500 components may be put <strong>in</strong>to production.<br />
This is the category of firms that would be the most receptive to technical assistance by ITC or<br />
by other <strong>in</strong>ternational organisations. Many enterprises <strong>in</strong> this group are prepar<strong>in</strong>g to take the<br />
crucial step from supply<strong>in</strong>g only the domestic market to engag<strong>in</strong>g <strong>in</strong> exports. In addition, there<br />
are particularly good opportunities for network development among these types of companies.<br />
It is still comparatively rare to f<strong>in</strong>d companies that have reached Categories 4 <strong>and</strong> 5 <strong>in</strong> terms<br />
of technological advancement, but there do exist a number of export-oriented large-scale<br />
manufacturers <strong>in</strong> countries like Malaysia that qualify for <strong>in</strong>clusion <strong>in</strong> these groups. Also,<br />
Ch<strong>in</strong>ese firms are upgrad<strong>in</strong>g <strong>in</strong> greater number to these levels of technical sophistication <strong>and</strong><br />
scale.<br />
All categories can be important to their local region as a source of employment <strong>and</strong> <strong>in</strong>come,<br />
<strong>and</strong> <strong>in</strong> some countries all the various categories may be present. Experience shows that the<br />
most endur<strong>in</strong>g <strong>and</strong> successful companies have tended to evolve through all these phases.<br />
Discussion on design<br />
To date, there are a very few develop<strong>in</strong>g countries that really can boast of hav<strong>in</strong>g a dist<strong>in</strong>ctive<br />
design school of their own. <strong>The</strong> Philipp<strong>in</strong>es is often cited as one of the exceptions, which has <strong>in</strong><br />
fact made authentic designs <strong>and</strong> dar<strong>in</strong>g material comb<strong>in</strong>ations, an image that is a promotional<br />
tool <strong>in</strong> their furniture exports.<br />
<strong>Furniture</strong> design education throughout Asia is plagued with both a lack of <strong>in</strong>terest <strong>and</strong> a lack of<br />
dem<strong>and</strong>. <strong>The</strong> fact that the larger Asian furniture <strong>in</strong>dustry is embroiled <strong>in</strong> a low-wage economy<br />
suggests that creative activities such as design <strong>and</strong> new product development, which <strong>in</strong>volves a<br />
long period of time before becom<strong>in</strong>g a success, may not be reward<strong>in</strong>g to most manufacturers.<br />
Hence, there is reluctance among the furniture manufacturers <strong>in</strong> Asia to employ creative design<br />
personnel, <strong>and</strong> there appears to be grow<strong>in</strong>g reluctance among the <strong>in</strong>vest<strong>in</strong>g fraternity to fund<br />
such creative <strong>and</strong> <strong>in</strong>novative works. Rather, there is an apparent need for quick results on large,<br />
<strong>in</strong>dustrially manufactured furniture.<br />
In a survey of design schools throughout the Asian region, it was reported that only 7% of all<br />
<strong>in</strong>dustrial design curricula actually <strong>in</strong>corporated some elements of furniture design <strong>in</strong>to their<br />
programmes. <strong>Furniture</strong> manufacturers should encourage potential furniture designers by<br />
provid<strong>in</strong>g opportunities to take their creative works to the regional furniture exhibitions. A<br />
large domestic market will no doubt spur the development of local design talent, as it serves as<br />
a good platform to experiment with their creative works. It is therefore imperative that the<br />
organisers of the regional furniture fairs pay attention to the upcom<strong>in</strong>g design talent <strong>and</strong> make<br />
avenues for them to exhibit their creative works. This will <strong>in</strong>evitably raise the st<strong>and</strong>ard of<br />
design <strong>and</strong> product development throughout Asia. Another possibility is to <strong>in</strong>corporate<br />
furniture design elements <strong>in</strong>to the exist<strong>in</strong>g <strong>in</strong>dustrial design <strong>and</strong> wood technology curricula.<br />
12 International Trade Centre
Global dem<strong>and</strong> for furniture <strong>in</strong> ma<strong>in</strong> markets<br />
<strong>The</strong> European Union is the world’s largest wooden furniture market. Total furniture<br />
consumption <strong>in</strong> the member countries was estimated at US$77.9 billion <strong>in</strong> 2003. Six lead<strong>in</strong>g<br />
countries accounted for 85% (US$66 billion) of total consumption. <strong>The</strong> United States was the<br />
second largest consumption market (but of course the s<strong>in</strong>gle largest one), with US$55.1 billion.<br />
With<strong>in</strong> the European Union, Germany is the largest consum<strong>in</strong>g country (24% of the total),<br />
followed by Italy, the United K<strong>in</strong>gdom <strong>and</strong> France. <strong>The</strong> size of the furniture market<br />
corresponds quite well with the populations of the European Union countries.<br />
<strong>The</strong> EU-15 group used to be a net exporter of furniture until 1999 (measure is extra-EU trade,<br />
not <strong>in</strong>tra-EU). At the turn of the century, the European Union became a net importer, <strong>and</strong> its<br />
trade deficit has widened ever s<strong>in</strong>ce (US$4.04 billion <strong>in</strong> 2003). Pol<strong>and</strong> (member of the EU<br />
s<strong>in</strong>ce 2005) <strong>and</strong> Ch<strong>in</strong>a have been the pr<strong>in</strong>cipal sources, but also Vietnam, Brazil <strong>and</strong> a few<br />
other countries have recorded impressive growth <strong>in</strong> exports <strong>in</strong>to the European Union. <strong>The</strong><br />
adhesion of the 12 new member states <strong>in</strong>to the European Union moves their deliveries <strong>in</strong>to<br />
<strong>in</strong>tra-EU trade, so that the spread of the deficit eases.<br />
Box 2.2 Recent changes <strong>in</strong> global furniture trade<br />
<strong>The</strong> most evident changes are summarized below:<br />
• Important development of the <strong>in</strong>dustry <strong>in</strong> the emerg<strong>in</strong>g countries - pr<strong>in</strong>cipally Ch<strong>in</strong>a<br />
<strong>and</strong> Southeast-Asia<br />
• Relocation of production capacity <strong>and</strong> <strong>in</strong> the redirection of <strong>in</strong>vestments to countries<br />
with m<strong>in</strong>or production costs<br />
• Private consumption crisis <strong>in</strong> the ma<strong>in</strong> Western European economies<br />
• <strong>The</strong> consequences of globalisation <strong>in</strong> the sector (<strong>in</strong>ternational retail<strong>in</strong>g, diversity of<br />
consumer preferences, spread<strong>in</strong>g competition all over the globe).<br />
Source: <strong>Furniture</strong> Today e-daily (2006 edition).<br />
Major importers<br />
In 2005 the United States wooden furniture imports worldwide were worth US$16 billion. <strong>The</strong><br />
big European Union countries <strong>and</strong> Japan were the other top importers. Japan <strong>and</strong> France had<br />
<strong>in</strong>creased their <strong>in</strong>takes between 2004 <strong>and</strong> 2005, while imports <strong>in</strong> the United K<strong>in</strong>gdom <strong>and</strong><br />
Germany had decl<strong>in</strong>ed.<br />
In the aggregate, the world’s five largest importers (the United States, Germany, France, the<br />
United K<strong>in</strong>gdom <strong>and</strong> Japan) purchased US$31.2 billion wooden furniture <strong>in</strong> 2005. This was<br />
5% more than the previous year. <strong>The</strong> growth trend <strong>in</strong> trade was impressive <strong>in</strong> the United States<br />
market <strong>in</strong> particular.<br />
International Trade Centre 13
Figure 2.2 Wooden furniture imports by top 5 import<strong>in</strong>g countries, 2001- 05<br />
18<br />
16<br />
14<br />
12<br />
Billion US$<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
United<br />
States<br />
Germany France United<br />
K<strong>in</strong>gdom<br />
Japan<br />
2001 2002 2003 2004 2005<br />
<strong>The</strong> United States has cont<strong>in</strong>ued to grow as the world’s largest importer of wooden furniture.<br />
Its imports reached US$16.1 billion <strong>in</strong> 2005, up by 11% from the previous year. This well<br />
reflects the last<strong>in</strong>g consumer confidence <strong>and</strong> hous<strong>in</strong>g sector strength <strong>in</strong> the country as well as<br />
the domestic producers’ loss of market share to Ch<strong>in</strong>ese producers. Hous<strong>in</strong>g boom until 2005<br />
was driven <strong>in</strong> large part by demographics, immigration <strong>and</strong> affordability. <strong>The</strong> most recent<br />
<strong>in</strong>formation shows moderat<strong>in</strong>g hous<strong>in</strong>g starts, however, as <strong>in</strong>terest rates hike upwards.<br />
<strong>The</strong> United K<strong>in</strong>gdom grew up <strong>in</strong>to the second place, before Germany. Both countries imported<br />
around US$4.5 billion <strong>in</strong> 2004. France also steadily <strong>in</strong>creased imports to US$3.7 billion.<br />
Japan’s imports grew slightly to US$2.4 billion <strong>in</strong> 2004 after several years of static trade.<br />
<strong>Pakistan</strong> reportedly exports to about 80 countries, of which Malaysia, Italy, the United States,<br />
S<strong>in</strong>gapore, Japan, Saudi Arabia <strong>and</strong> Spa<strong>in</strong> are the biggest buyers. Such a fragmented structure<br />
<strong>in</strong> exports <strong>in</strong>dicates small deliveries to whatever market opens up to <strong>Pakistan</strong>i firms. <strong>The</strong>re<br />
appears to be very little concentration on develop<strong>in</strong>g a few of the key markets for bigger<br />
volumes while leav<strong>in</strong>g the others unattended for.<br />
Import sources<br />
Over the last year, there have been some significant changes <strong>in</strong> the trade flows of wooden<br />
furniture <strong>and</strong> parts between regions (Table 2.2). Asia’s role grew even stronger as a supplier to<br />
the United States, ma<strong>in</strong>ly at the expense of Canada <strong>and</strong> Europe. Ch<strong>in</strong>a’s currency be<strong>in</strong>g pegged<br />
to the devalu<strong>in</strong>g US dollar helped to ma<strong>in</strong>ta<strong>in</strong> steady trade flows, caus<strong>in</strong>g friction with other<br />
14 International Trade Centre
suppliers, both domestic <strong>and</strong> other import sources. Dur<strong>in</strong>g 2005 - 06, the Ch<strong>in</strong>ese currency had<br />
been carefully allowed to strengthen at a very gradual speed so that Ch<strong>in</strong>a’s exports may not<br />
suffer damage.<br />
In the United K<strong>in</strong>gdom, imports from Asia exp<strong>and</strong>ed rapidly <strong>in</strong> 2005. <strong>The</strong>se are early signs of<br />
the gradual rise of <strong>in</strong>ter-regional furniture trade at the expense of traditional <strong>in</strong>tra-regional<br />
flows <strong>in</strong>side the European Union trade bloc.<br />
Imports from Pol<strong>and</strong>, Ch<strong>in</strong>a, Vietnam, Brazil, Lithuania, Turkey <strong>and</strong> Croatia have cont<strong>in</strong>ued to<br />
<strong>in</strong>crease.<br />
Table 2.2 Orig<strong>in</strong> of wooden furniture imports for 5 top import<strong>in</strong>g countries, 2004-05 (%)<br />
Wooden<br />
furniture<br />
<strong>Export</strong><strong>in</strong>g<br />
region<br />
United States Germany France<br />
United<br />
K<strong>in</strong>gdom<br />
Japan<br />
2004 2005 2004 2005 2004 2005 2004 2005 2004 2005<br />
Asia 57.5 61.7 11.1 12.8 13.5 16.6 28.4 35.1 80.1 82.3<br />
North America 19.4 17.6 0.2 0.1 0.4 0.4 1.5 1.9 2.1 1.7<br />
Europe 14.1 11.8 87.2 85.4 81.4 78.6 66.1 59.7 17.6 15.8<br />
Lat<strong>in</strong> America 8.7 8.5 0.7 0.8 3.8 3.1 2.2 2.1 0.0 0.0<br />
Others 0.3 0.3 0.9 0.9 1.4 1.3 1.9 1.3 0.2 0.1<br />
Total imports,<br />
US$ billion<br />
Incl. furniture<br />
parts,<br />
US$ billion<br />
14.5 16.1 4.7 4.4 3.5 3.7 4.7 4.6 2.2 2.4<br />
1.6 1.9 0.8 0.9 0.5 0.5 0.7 0.7 0.4 0.5<br />
Source: UN/ECE-FAO, 2006<br />
It is good to remember that even though Ch<strong>in</strong>a has the world’s largest number of furniture<br />
enterprises it has no world-famous furniture br<strong>and</strong>s, no master designers, no global sales<br />
network <strong>and</strong> no world-class exhibitions. In conclusion, Ch<strong>in</strong>a rules exports due to its efficient<br />
<strong>and</strong> flexible production at low costs.<br />
Major exporters<br />
<strong>The</strong>re is a h<strong>and</strong>ful of large-scale furniture export<strong>in</strong>g countries <strong>in</strong> the develop<strong>in</strong>g world. Ch<strong>in</strong>a’s<br />
exports have been grow<strong>in</strong>g 20-30% per year <strong>and</strong> it is pass<strong>in</strong>g Italy as the world’s biggest<br />
exporter. Ch<strong>in</strong>a’s export value reached US$12 billion <strong>in</strong> 2005. Ma<strong>in</strong> dest<strong>in</strong>ations are <strong>in</strong> Figure<br />
2.3. <strong>The</strong> largest European countries (Germany, France, Spa<strong>in</strong>) <strong>and</strong> Canada are major exporters<br />
to their neighbour<strong>in</strong>g countries <strong>and</strong> to the United States.<br />
International Trade Centre 15
Figure 2.3 Imports of Ch<strong>in</strong>ese furniture by major markets 2005 (US$ mill.)<br />
USA 6 919<br />
United 924<br />
K<strong>in</strong>gdom<br />
France<br />
260<br />
235<br />
Germany<br />
956<br />
Japan<br />
Ch<strong>in</strong>a: furniture<br />
factory of the World<br />
Source: Tissari, 2006<br />
Other Asian countries like Indonesia (exports US$1.3 billion), Malaysia (US$1.45 billion),<br />
Thail<strong>and</strong> (US$1.0 billion) <strong>and</strong> the Philipp<strong>in</strong>es (US$0.3 billion) have been able to create<br />
significant export <strong>in</strong>dustries, but have more recently become suppressed by Ch<strong>in</strong>a’s dom<strong>in</strong>ant<br />
supply position. Vietnam (US$1.15 billion), on the other h<strong>and</strong>, is <strong>in</strong>creas<strong>in</strong>gly challeng<strong>in</strong>g even<br />
Ch<strong>in</strong>a <strong>in</strong> labour cost comparisons, <strong>and</strong> it has seen its furniture exports surge <strong>in</strong> the past five<br />
years. On the long term, Ch<strong>in</strong>a will champion the mass furniture segment with the help of the<br />
abundant labour reserves. However, the availability of wood poses a major challenge to Ch<strong>in</strong>a.<br />
From Lat<strong>in</strong> America, Brazil is the biggest exporter with US$0.78 billion furniture deliveries.<br />
Mexico was the second supplier with US$0.68 billion. Both countries benefit from proximity<br />
with the United States market. African countries are <strong>in</strong>significant <strong>in</strong> <strong>in</strong>ternational furniture<br />
trade.<br />
<strong>Pakistan</strong> furniture exports<br />
<strong>Pakistan</strong>’s exports of wooden furniture totalled US$12.3m <strong>in</strong> 2005, over double the value<br />
exported five years early. Growth <strong>in</strong> exports of liv<strong>in</strong>g room furniture (not categorized under<br />
office, bedroom or kitchen) was the ma<strong>in</strong> contributor to this change. <strong>Pakistan</strong> has recently<br />
started to export bedroom <strong>and</strong> office furniture. <strong>Export</strong>s of these furniture types are ga<strong>in</strong><strong>in</strong>g<br />
ground very rapidly, although start<strong>in</strong>g from a small base. <strong>The</strong> United States, United K<strong>in</strong>gdom,<br />
UAE, Germany <strong>and</strong> Afghanistan are important dest<strong>in</strong>ations.<br />
16 International Trade Centre
Table 2.3 <strong>Pakistan</strong>i furniture exports 2001-05<br />
Product<br />
2001 2002 2003 2004 2005 Growth<br />
trend<br />
US$<br />
Units<br />
US$<br />
Units<br />
US$<br />
Units<br />
US$<br />
Units<br />
US$<br />
Units<br />
%<br />
’000<br />
‘000<br />
’000<br />
‘000<br />
’000<br />
‘000<br />
’000<br />
‘000<br />
’000<br />
‘000<br />
Mattress<br />
supports<br />
Major<br />
dest<strong>in</strong>ations:<br />
Italy, UK,<br />
Germany<br />
Wooden office<br />
furniture<br />
Major<br />
dest<strong>in</strong>ations:<br />
UK, US,<br />
Afghanistan<br />
Wooden<br />
kitchen<br />
furniture<br />
Major<br />
dest<strong>in</strong>ations:<br />
Afghanistan,<br />
UK, UAE<br />
Wooden<br />
bedroom<br />
furniture<br />
Major<br />
dest<strong>in</strong>ations:<br />
Afghanistan,<br />
UAE, US<br />
Other wooden<br />
furniture<br />
Major<br />
dest<strong>in</strong>ations:<br />
US, UAE, UK<br />
Wooden<br />
furniture parts<br />
Major<br />
dest<strong>in</strong>ations:<br />
Germany, US,<br />
Saudi Arabia<br />
0 0 65 24 140 20 185 20 387 - NA<br />
14 8 148 10 434 24 803 - 394 - 131<br />
466 19 252 27 365 22 380 23 36 - -38<br />
36 - 9 - 192 - 1094 - 996 - 214<br />
4,392 256 6,676 439 8,692 459 7,721 407 10,427 - 21<br />
139 - 105 208 174 73 - -8<br />
Total 5,047 7,246 10,031 9,263 12,313<br />
Source: ITC calculations based on COMTRADE<br />
Market access<br />
<strong>The</strong> major furniture markets are virtually unprotected. <strong>The</strong> United States has 0% MFN tariff<br />
for all wooden furniture categories. <strong>The</strong> same applies for Japan with one exception – mattress<br />
supports, for which it has a 3.2% MFN tariff but GSP tariff of 0%. <strong>The</strong> EU applies an MFN<br />
tariff for wooden furniture rang<strong>in</strong>g from 0-5% <strong>and</strong> a GSP rate of 0% across all products.<br />
<strong>The</strong>refore, one can conclude that <strong>Pakistan</strong> or any other country should not expect much export<br />
International Trade Centre 17
oost from the lower<strong>in</strong>g of tariffs <strong>in</strong> ma<strong>in</strong> markets, as this road has been almost completed. On<br />
the other h<strong>and</strong>, its trade with regional markets may still be hampered by higher furniture import<br />
tariffs of non-members of WTO.<br />
Distribution channels<br />
<strong>The</strong> flock of players <strong>in</strong> the distribution of furniture consists typically of export agents, import<br />
agents, import<strong>in</strong>g companies, buyers’ groups that represent the <strong>in</strong>terests of a larger number of<br />
collective importers, wholesalers, department stores <strong>and</strong> retail outlets of different k<strong>in</strong>ds (Figure<br />
2.4). <strong>The</strong> preferred flow of furniture is however from a manufacturer to importer or directly to<br />
retailer’s warehouse or cha<strong>in</strong> stores because furniture is not well suited to multiple h<strong>and</strong>l<strong>in</strong>g.<br />
Sometimes, it may be possible to sell directly to <strong>in</strong>dustries <strong>and</strong> <strong>in</strong>stitutions, <strong>and</strong> occasionally<br />
through a local manufacturer if the products complement each other. Some manufacturers sell<br />
direct to consumers through br<strong>and</strong> stores or factory outlets. Also, franchised stores by some<br />
major furniture manufacturers have become more common. <strong>The</strong>se are specialized<br />
distributors, whose ma<strong>in</strong> bus<strong>in</strong>ess l<strong>in</strong>e is furniture.<br />
As a contrast, there is also the non-specialist distribution, <strong>in</strong>clud<strong>in</strong>g department stores, Do –<br />
It – Yourself (DIY) stores <strong>and</strong> mail order houses, to which furniture contributes a m<strong>in</strong>or part of<br />
their total merch<strong>and</strong>is<strong>in</strong>g. <strong>The</strong>re are naturally country-specific differences <strong>in</strong> the importance of<br />
distribution channel members.<br />
<strong>The</strong>re is a tendency to shorten the distribution structure by cutt<strong>in</strong>g the middlemen out of the<br />
bus<strong>in</strong>ess. At the same time, the use of out-sourc<strong>in</strong>g <strong>and</strong> contract manufactur<strong>in</strong>g has become the<br />
new st<strong>and</strong>ard operat<strong>in</strong>g mode for the large <strong>in</strong>ternational furniture <strong>in</strong>dustries. Flat-pack or<br />
knock-down (KD) furniture is a key transportation system to allow the expansion of such mass<br />
or middle market furniture bus<strong>in</strong>ess. In general, the transportation of KD items reduces the<br />
damage to furniture <strong>in</strong> comparison with assembled furniture. This has implications to<br />
packag<strong>in</strong>g solutions as well.<br />
18 International Trade Centre
Figure 2.4 Distribution structure for furniture <strong>in</strong> the European Union<br />
Manufacturers<br />
Buy<strong>in</strong>g agents<br />
Domestic<br />
manufacturers<br />
Sell<strong>in</strong>g agents<br />
Importers/Wholesalers<br />
Non-specialist distribution<br />
Specialist distribution<br />
Bedroom Kitchen <strong>Furniture</strong><br />
Organized<br />
Large retailers<br />
Independent<br />
Buy<strong>in</strong>g groups<br />
Hypermarkets<br />
DIY-stores<br />
Mail<br />
order<br />
houses<br />
Department<br />
stores<br />
Contractors<br />
Franchised<br />
stores<br />
Cha<strong>in</strong><br />
stores<br />
Retail shops<br />
Consumers<br />
Ma<strong>in</strong> distribution flow<br />
Secondary distribution flow<br />
Source: CBI, 2001<br />
2.1.2 Manufactur<strong>in</strong>g process<br />
<strong>The</strong> production process of h<strong>and</strong>-carved furniture <strong>in</strong> <strong>Pakistan</strong> is believed not to differ much<br />
from similar products elsewhere. It is a consecutive cha<strong>in</strong> of activities, compris<strong>in</strong>g:<br />
• Raw material <strong>and</strong> operational supplies procurement (domestic or imported)<br />
• Pre-treatment (log grad<strong>in</strong>g, log trimm<strong>in</strong>g, cook<strong>in</strong>g (for plywood <strong>and</strong> veneer peel<strong>in</strong>g)<br />
• Primary process<strong>in</strong>g (<strong>in</strong>to planks, boards, veneer sheets) <strong>and</strong> their grad<strong>in</strong>g <strong>and</strong> dry<strong>in</strong>g<br />
• Dimension<strong>in</strong>g <strong>in</strong>to suitable components<br />
• Transferr<strong>in</strong>g the designs of furniture parts <strong>in</strong>to components, their cutt<strong>in</strong>g <strong>in</strong>to shape<br />
• Preparation of jo<strong>in</strong>ts (tongue <strong>and</strong> groove) <strong>and</strong> other structural design features <strong>in</strong>to<br />
components<br />
• H<strong>and</strong>-carv<strong>in</strong>g of components on visible surfaces<br />
International Trade Centre 19
• Assembly, fabrication, f<strong>in</strong>ish<strong>in</strong>g decoration, <strong>and</strong> application of pa<strong>in</strong>t, lacquer, hardener<br />
<strong>and</strong> polish<br />
• Packag<strong>in</strong>g, warehous<strong>in</strong>g <strong>and</strong> transports.<br />
In <strong>Pakistan</strong>, <strong>in</strong> few cases h<strong>and</strong> carv<strong>in</strong>g is done before assembl<strong>in</strong>g furniture pieces. While <strong>in</strong><br />
other cases, carv<strong>in</strong>g is done after assembl<strong>in</strong>g the pieces. However, the ideal way is to go for<br />
carv<strong>in</strong>g before assembly. <strong>The</strong> process of some furniture types requires carv<strong>in</strong>g to be done<br />
before they are assembled for mak<strong>in</strong>g beds, sofas, chairs, etc. It has also been noted that<br />
detailed master draw<strong>in</strong>gs are used <strong>in</strong> relatively few companies <strong>in</strong> the <strong>Pakistan</strong>i furniture<br />
<strong>in</strong>dustry. This may affect the quality of transferr<strong>in</strong>g designs to the components as well as the<br />
accuracy of component mak<strong>in</strong>g. On the other h<strong>and</strong>, <strong>in</strong> some of the more sophisticated<br />
companies, computerised CAD systems are deployed.<br />
For those companies that have reached a semi-<strong>in</strong>dustrial or <strong>in</strong>dustrial operation, there are<br />
possibilities to enhance the process flows <strong>and</strong> ga<strong>in</strong> better operational efficiencies. One<br />
approach is described below.<br />
Box 2.3 Production flow improvements: a practical approach<br />
Steps to be taken<br />
• Assess the entire production process, from orders through manufactur<strong>in</strong>g, packag<strong>in</strong>g<br />
<strong>and</strong> shipp<strong>in</strong>g.<br />
• Measure the time between an order <strong>and</strong> its shipment.<br />
• Move tasks such as component cutt<strong>in</strong>g <strong>and</strong> glu<strong>in</strong>g, once <strong>in</strong> different parts of the plant,<br />
to activity cells all <strong>in</strong> one area. Along with reduc<strong>in</strong>g the steps <strong>in</strong>volved <strong>in</strong> mov<strong>in</strong>g a<br />
product from one area to another, the cells improve communications among workers.<br />
• Set clearly stated production goals for a cell every day; this lets workers see how well<br />
they are do<strong>in</strong>g.<br />
Expected results<br />
• <strong>The</strong> new approach reduces defects, overproduction, excess <strong>in</strong>ventory, unnecessary<br />
steps, over-process<strong>in</strong>g, material movement <strong>and</strong> wait<strong>in</strong>g times.<br />
• Production cycle times can be reduced by some 50-90% on certa<strong>in</strong> products.<br />
2.1.3 Availability, price <strong>and</strong> quality of raw material<br />
Availability<br />
More than 80% of <strong>Pakistan</strong>’s furniture is dependant on Sheesham, also called rosewood. In the<br />
last five years, the Forestry department has noted that the reserves of Sheesham have decreased<br />
by 50%. Sheesham is gett<strong>in</strong>g ext<strong>in</strong>ct day by day. Due to its shortage <strong>in</strong> the market, its prices<br />
are <strong>in</strong>creas<strong>in</strong>g everyday. Currently, very few exporters are us<strong>in</strong>g other woods as a substitute for<br />
Sheesham, but their use is gradually <strong>in</strong>creas<strong>in</strong>g. Still the use of substitutes is limited because<br />
these woods are also scarcely available. Also, the exporters are not very much aware of their<br />
usage <strong>and</strong> treatment. At the same time, the use of imported woods is <strong>in</strong>creas<strong>in</strong>g. Duty structure<br />
has reduced considerably. However, those companies that are us<strong>in</strong>g imported timber believe<br />
that the reduced duty structure has not affected the price structure a lot. <strong>The</strong> dealers have kept<br />
the same prices, with the justification that the prices have <strong>in</strong>creased <strong>in</strong> the <strong>in</strong>ternational market,<br />
20 International Trade Centre
freight rates have <strong>in</strong>creased <strong>and</strong> dollar value has <strong>in</strong>creased, etc. <strong>The</strong> <strong>in</strong>dustry should assess the<br />
dem<strong>and</strong> <strong>and</strong> import wood <strong>in</strong> bulk.<br />
Box 2.4 Shortage of rosewood (Sheesham) – What are the options?<br />
It goes beyond the scope of this study to look <strong>in</strong>to the shortage of raw materials - rosewood<br />
(Sheesham) <strong>in</strong> particular - for the furniture <strong>in</strong>dustry <strong>in</strong> <strong>Pakistan</strong>. <strong>The</strong> shortage is already very<br />
serious <strong>and</strong> a separate <strong>in</strong>vestigation of options for the <strong>in</strong>dustry is recommended<br />
<strong>The</strong> <strong>in</strong>vestigation should cover the follow<strong>in</strong>g items as a m<strong>in</strong>imum:<br />
• Raw material status<br />
What is the current area (hectares) covered <strong>and</strong> where. F<strong>in</strong>d out its volume, ownership, age<br />
of trees <strong>and</strong> access (<strong>in</strong>ventory/stock tak<strong>in</strong>g). What is the role of rosewood <strong>and</strong> other types of<br />
trees on the environment (soil erosion etc.)? <strong>The</strong> study should also cover non-rosewood<br />
• New plant<strong>in</strong>gs of rosewood<br />
What goes on right now <strong>in</strong> rosewood - of new plant<strong>in</strong>g, if any? Where should it be, who<br />
should own/pay, what are the obstacles, tim<strong>in</strong>g, etc.?<br />
• Other types of wood<br />
What other types of wood are be<strong>in</strong>g planted or could/should be planted? Where, by whom,<br />
cost, tim<strong>in</strong>g, etc.? How do/would they grow <strong>in</strong> <strong>Pakistan</strong> (climate, soil,)? Which types would<br />
fit <strong>in</strong>to the present product mix, the equipment/mach<strong>in</strong>es available, the experience among<br />
producers etc.?<br />
• Import of wood<br />
Which types of wood, from where, cost estimates (raw material price <strong>and</strong> transportation),<br />
logistic issues i.e. harbour, storage, f<strong>in</strong>anc<strong>in</strong>g, etc.)? What is the need for redesign of<br />
products, possible other markets <strong>and</strong> other types of equipment to h<strong>and</strong>le?<br />
• Other end products<br />
What are the options for products that require less rosewood e.g. based on designs that are<br />
th<strong>in</strong>ner/slimmer/smaller or mixed with other types of wood?<br />
• Reduced wastage programme<br />
Wastage is mentioned to be huge. What could be done i.e. change of mach<strong>in</strong>es, tra<strong>in</strong><strong>in</strong>g,<br />
other sizes of lumber, etc. to reduce the waste?<br />
• Better use of wasted wood<br />
How could the wasted wood be used better? Either for other products (h<strong>and</strong>icraft etc.) or for<br />
mak<strong>in</strong>g bigger pieces by pressure techniques or f<strong>in</strong>ger-jo<strong>in</strong>t, etc.<br />
Price<br />
While imported wood is very expensive, the prices of local woods are no exception.<br />
Quality<br />
<strong>The</strong> quality of local Sheesham, which was available a few years back, is not available any<br />
more. <strong>The</strong>re are many reasons for this. <strong>The</strong> use of plywood <strong>and</strong> ply boards has <strong>in</strong>creased a lot.<br />
Most Sheesham wood is taken by this panel board <strong>in</strong>dustry because they require very th<strong>in</strong><br />
slices of wood i.e. veneer. From the same wood they make 10 to 15 sheets to make various tops<br />
of boards. Currently, <strong>Pakistan</strong>’s exports are based on solid wood. Its market will keep on<br />
International Trade Centre 21
shr<strong>in</strong>k<strong>in</strong>g <strong>in</strong>ternationally. <strong>The</strong> second <strong>and</strong> third parts come to furniture manufacturers <strong>and</strong><br />
exporters at high rates. Previously, there was no plywood <strong>in</strong>dustry, thus good quality of<br />
Sheesham was available for manufacturers. Also, there was a launch <strong>in</strong>dustry. In S<strong>in</strong>dh, the<br />
quality of Sheesham is not that good <strong>and</strong> it is available at low-medium prices. <strong>The</strong> quality of<br />
wood is dependant on region, soil <strong>and</strong> availability of water, etc.<br />
Purchased locally/Imported<br />
More than 50% of the companies <strong>in</strong>terviewed purchase raw materials locally. 37% of them use<br />
local as well as imported raw materials. Only 11% of them use imported raw materials. Local<br />
raw materials used are wood (Sheesham, mango wood, acasia <strong>and</strong> walnut), chemicals, boards<br />
(fibreboards, veneer <strong>and</strong> ply boards), pa<strong>in</strong>t <strong>and</strong> polish, hardware (screws, nails <strong>and</strong> h<strong>and</strong>les,<br />
etc.), fabrication <strong>and</strong> other essential material (glue, foam <strong>and</strong> lam<strong>in</strong>ation sheets, etc.). Most of<br />
the imported raw material used is: wood (beech, teak <strong>and</strong> ash), hardware (locks,), boards<br />
(chipboards, ply boards,), polish (lacquer), fabrication <strong>and</strong> other necessary material (glass,<br />
glues, thumb tags, leather, s<strong>and</strong> paper <strong>and</strong> colours) are used.<br />
Import countries<br />
<strong>The</strong> countries from where companies import raw materials are: Ch<strong>in</strong>a, Germany, Holl<strong>and</strong>,<br />
S<strong>in</strong>gapore, Italy, Korea, Malaysia, Japan, Africa, America, Dubai, South Asia, Eastern Europe,<br />
Germany, Korea <strong>and</strong> Australia. Mostly import takes place from Ch<strong>in</strong>a, Italy, America <strong>and</strong><br />
Dubai.<br />
European beach, African timber <strong>and</strong> partal wood are used very frequently. Local ply board is<br />
of very bad quality but the companies have no option, but to use it. A lot of exporters are go<strong>in</strong>g<br />
towards imported lam<strong>in</strong>ated boards of good quality available at a better price. Some exporters<br />
have switched over to the imported ones. Locks, screws, hardware, fitt<strong>in</strong>gs, h<strong>in</strong>ges are though<br />
available locally, but they are not of very good quality. Hardware is imported from Taiwan,<br />
Korea <strong>and</strong> Thail<strong>and</strong>; boards from Malaysia; polish/lacquer from Malaysia <strong>and</strong> Europe; <strong>and</strong><br />
glass is imported from Ch<strong>in</strong>a <strong>and</strong> Saudi Arabia, but it is also available locally. Similarly, foam<br />
is available locally, while s<strong>and</strong> paper is imported.<br />
2.1.4 Other production <strong>in</strong>puts<br />
Local/imported technology<br />
Availability<br />
Mostly traditional methods are used <strong>in</strong> the production process of furniture. Local mach<strong>in</strong>ery is<br />
used by most of the exporters because it is easily available. Imported technology is available<br />
too but with an added cost. In the long run, expensive imported mach<strong>in</strong>ery would tend to be<br />
cheaper as its results would produce much better outputs <strong>and</strong> sav<strong>in</strong>gs.<br />
Quality<br />
<strong>Export</strong>ers are satisfied with the use of local technology. However, they would prefer us<strong>in</strong>g<br />
imported technology, but due to scarce resources, they end up us<strong>in</strong>g traditional methods. A<br />
general perception exporters have of imported mach<strong>in</strong>ery is that it is second h<strong>and</strong>.<br />
22 International Trade Centre
Price<br />
<strong>The</strong> prices of local mach<strong>in</strong>ery are reasonable <strong>in</strong> comparison with imported mach<strong>in</strong>ery’s. But<br />
for small exporters, even the prices of local mach<strong>in</strong>ery are high. <strong>The</strong> f<strong>in</strong>ancial <strong>in</strong>centive<br />
provided by banks is not very easy for exporters to make use of.<br />
<strong>The</strong> available local mach<strong>in</strong>ery is of very basic nature. In other words, no professional<br />
mach<strong>in</strong>ery is available due to lack of resources/f<strong>in</strong>ances. In the given situation, afford<strong>in</strong>g<br />
exporters should visit mach<strong>in</strong>ery shows. To give a comparison of the production output, <strong>in</strong><br />
Italy, for <strong>in</strong>stance, a company produces 40,000 chairs daily due to the use of latest technology.<br />
No labour is <strong>in</strong>volved <strong>in</strong> the process. This should serve as a guidel<strong>in</strong>e for the <strong>Pakistan</strong>i<br />
furniture <strong>in</strong>dustry to set its goals down the road. Ch<strong>in</strong>a <strong>and</strong> Malaysia are liv<strong>in</strong>g examples which<br />
started to improve their <strong>in</strong>dustry with<strong>in</strong> a small span of around 10 years.<br />
Packag<strong>in</strong>g material<br />
Availability<br />
Packag<strong>in</strong>g is a very important element because exporters are more concerned about deliver<strong>in</strong>g<br />
shipments without damag<strong>in</strong>g them. Less attention is paid to presentation. <strong>The</strong> cushion<strong>in</strong>g<br />
material used to avoid breakages is made of blankets, quilt, plastic, shr<strong>in</strong>k wrap, bubble wrap,<br />
hard cardboard <strong>and</strong> rope parts, etc. A lot of work needs to be done to improve packag<strong>in</strong>g<br />
material. Though cartons are used, customised packag<strong>in</strong>g needs to be done. If exporters go for<br />
st<strong>and</strong>ard furniture manufactur<strong>in</strong>g, good packag<strong>in</strong>g is possible. Professional packag<strong>in</strong>g<br />
companies should be set up, with specialisation <strong>in</strong> this field.<br />
All types of packag<strong>in</strong>g material are easily available.<br />
Quality<br />
<strong>The</strong> raw material available is of good quality.<br />
Price<br />
Rates are reasonable.<br />
Skilled labour<br />
Availability<br />
<strong>The</strong> exporters of Ch<strong>in</strong>iot, Gujrat <strong>and</strong> Peshawar say that skilled labour is easily available <strong>in</strong> their<br />
areas. But accord<strong>in</strong>g to the exporters of Rawalp<strong>in</strong>di, Gujranwala, Karachi <strong>and</strong> Lahore, there is<br />
a scarcity of skilled labour <strong>in</strong> their localities.<br />
Quality<br />
<strong>The</strong> quality of labour is good, but it only has the skills passed on generation after generation.<br />
<strong>The</strong>re is no formal tra<strong>in</strong><strong>in</strong>g facility available. Labour is not aware of production techniques,<br />
world requirements <strong>and</strong> ways to improve efficiency, etc. <strong>The</strong>y are not tra<strong>in</strong>ed to use the latest<br />
mach<strong>in</strong>ery. However, there are (a h<strong>and</strong>ful of) people who can produce good quality furniture<br />
by follow<strong>in</strong>g model pictures without any formal tra<strong>in</strong><strong>in</strong>g. Quality controls, checks <strong>and</strong><br />
st<strong>and</strong>ardisation accord<strong>in</strong>g to <strong>in</strong>ternational requirements need to be <strong>in</strong>troduced. Also, there is no<br />
International Trade Centre 23
concept of tra<strong>in</strong><strong>in</strong>g the workforce how to improve their efficiency. Skill development centres<br />
should be set up <strong>in</strong> all regions of the country to counter the situation.<br />
Price<br />
Accord<strong>in</strong>g to the exporters of Ch<strong>in</strong>iot, Gujrat <strong>and</strong> Peshawar, labour rates are reasonable. While<br />
<strong>in</strong> Rawalp<strong>in</strong>di, Gujranwala, Karachi <strong>and</strong> Lahore, the rates are high.<br />
2.1.5 Growth <strong>in</strong> the sector<br />
In 2002-04, exports <strong>in</strong>creased by 30 to 40%, but <strong>in</strong> the follow<strong>in</strong>g years, their growth has<br />
decreased despite an <strong>in</strong>crease <strong>in</strong> the <strong>in</strong>-country dem<strong>and</strong>. While the global furniture <strong>in</strong>dustry has<br />
<strong>in</strong>creased by 10%, the <strong>Pakistan</strong>i <strong>in</strong>dustry’s growth rate is more than 10%.<br />
2.1.6 Reasons for fluctuations <strong>in</strong> imports/exports<br />
Reasons for fluctuations <strong>in</strong> exports<br />
At least 50% of the exporters felt that the exports of furniture have <strong>in</strong>creased <strong>in</strong> the last five<br />
years due to various reasons such as companies mak<strong>in</strong>g efforts on their own, the role of TDAP,<br />
the <strong>in</strong>crease <strong>in</strong> dollar rates <strong>and</strong> the dem<strong>and</strong> of h<strong>and</strong>icrafts <strong>and</strong> traditional furniture <strong>in</strong>creas<strong>in</strong>g <strong>in</strong><br />
other countries. Nonetheless, the rest of exporters th<strong>in</strong>k that exports have decreased because of:<br />
All <strong>Pakistan</strong> <strong>Furniture</strong> <strong>Export</strong>ers Association (APFEA) not be<strong>in</strong>g registered, no association<br />
work<strong>in</strong>g for the promotion of exports, strict customs check<strong>in</strong>g (break<strong>in</strong>g of the <strong>in</strong>spected<br />
furniture), no modern technology be<strong>in</strong>g used, Sheesham gett<strong>in</strong>g expensive <strong>and</strong> ext<strong>in</strong>ct <strong>and</strong> the<br />
ris<strong>in</strong>g transportation rates. In certa<strong>in</strong> situations, transportation rates <strong>in</strong>crease tremendously <strong>in</strong><br />
the presence of a very poor <strong>in</strong>frastructure.<br />
Reasons for fluctuations <strong>in</strong> imports<br />
Imports have <strong>in</strong>creased <strong>in</strong> the last five years, especially from Ch<strong>in</strong>a, due to Sheesham gett<strong>in</strong>g<br />
ext<strong>in</strong>ct locally, import duty decreas<strong>in</strong>g <strong>and</strong> the prices of imported materials decreas<strong>in</strong>g.<br />
Ch<strong>in</strong>ese competition <strong>in</strong> the domestic market is very strong ow<strong>in</strong>g to the much lower prices they<br />
can offer.<br />
2.1.7 Price structure of the <strong>in</strong>dustry<br />
Price structure <strong>in</strong> the last 5 years of local/imported components<br />
Accord<strong>in</strong>g to the exporters, prices have showed an upward trend <strong>in</strong> the last five years. <strong>The</strong><br />
prices of imported components have also showed an <strong>in</strong>crease.<br />
With regard to valuable hardwood timbers that could replace Sheesham, the future prices are<br />
expected to climb <strong>and</strong> availability is not gett<strong>in</strong>g any better. Recent news <strong>in</strong>dicates more<br />
concerns about the tropical timber bus<strong>in</strong>ess <strong>in</strong> Asia.<br />
Prices for Southeast Asian timber products cont<strong>in</strong>ue to soar to new highs driven by acute<br />
shortages, higher power <strong>and</strong> fuel costs <strong>and</strong> dearer <strong>in</strong>terest rates. <strong>The</strong>se are coupled with recent<br />
actions of Malaysia to stop the issuance or renewal of licences for timber concessions.<br />
24 International Trade Centre
Indonesia has also announced a ban on the use of natural trees for wood process<strong>in</strong>g by 2014.<br />
Additionally, the export ban on logs <strong>and</strong> rough sawn wood has brought about an additional<br />
level of bureaucracy that is h<strong>in</strong>der<strong>in</strong>g Indonesian exports.<br />
A stabilis<strong>in</strong>g factor is that buyers are <strong>in</strong>creas<strong>in</strong>gly seek<strong>in</strong>g cheaper alternative supply sources.<br />
(ITTO Market Information Service, 2006)<br />
Price structure <strong>in</strong> the last 5 years of export/local sales<br />
More than 50% of the exporters say that the prices of local sales have <strong>in</strong>creased. While 23%<br />
say they decreased <strong>and</strong> another 23% say they are stable. 43% of exporters say export sales<br />
<strong>in</strong>creased, whereas 36% say they stayed stable.<br />
<strong>Export</strong>s have <strong>in</strong>creased considerably <strong>in</strong> the last five years. <strong>The</strong> higher end products i.e.<br />
products with carv<strong>in</strong>gs, better quality of material used, etc. fetched better prices. Domestic<br />
home furniture is be<strong>in</strong>g exported more than office furniture. It is fetch<strong>in</strong>g better prices for it is<br />
be<strong>in</strong>g made accord<strong>in</strong>g to the requirements of the customer.<br />
2.1.8 Annual turnover<br />
Estimated annual turnover of <strong>in</strong>dustry is US$160 million<br />
Manufacturers account for 95% of the total market, while the rema<strong>in</strong><strong>in</strong>g 5% are manufacturerscum-exporters.<br />
Top 10 to 15 furniture companies account for 80% of exports.<br />
<strong>The</strong> ma<strong>in</strong> furniture regions of <strong>Pakistan</strong> are: Peshawar, Gujrat, Ch<strong>in</strong>iot, Lahore <strong>and</strong> Karachi.<br />
Accord<strong>in</strong>g to the order of exporters’ size, Karachi comes first followed by Lahore <strong>and</strong><br />
Peshawar, while Ch<strong>in</strong>iot <strong>and</strong> Gujrat have good concentration of manufacturers <strong>and</strong> traders.<br />
Large-sized companies are mostly located <strong>in</strong> Lahore <strong>and</strong> Gujrat, while small- to medium-sized<br />
companies are situated <strong>in</strong> Peshawar, Ch<strong>in</strong>iot <strong>and</strong> Gujrat.<br />
2.1.9 Rules <strong>and</strong> regulations affect<strong>in</strong>g the sector<br />
<strong>Furniture</strong> st<strong>and</strong>ards<br />
<strong>The</strong> objective of st<strong>and</strong>ardisation is to ensure that all furniture available <strong>in</strong> the market is safe to<br />
use <strong>and</strong> of solid <strong>and</strong> strong construction. <strong>The</strong>refore, st<strong>and</strong>ardisation is helpful <strong>in</strong> facilitat<strong>in</strong>g<br />
market conformance, <strong>in</strong>clud<strong>in</strong>g from develop<strong>in</strong>g countries. However, there is also a risk that<br />
st<strong>and</strong>ards may become a constra<strong>in</strong>t for market access or put small producers at a disadvantage<br />
when the requirements are particularly difficult to meet. Manufacturers normally use the<br />
st<strong>and</strong>ards voluntarily <strong>in</strong> their product development, process control <strong>and</strong> market<strong>in</strong>g. Hav<strong>in</strong>g a<br />
common language on test methods, dimensions, safety <strong>and</strong> strength characteristics is<br />
considered a major benefit.<br />
<strong>The</strong>re are over 140 furniture-related st<strong>and</strong>ards <strong>and</strong> labell<strong>in</strong>g requirements <strong>in</strong> the United States<br />
<strong>and</strong> Canada alone. Most st<strong>and</strong>ards are voluntary but some are regulated by the state or federal<br />
laws. One example of the toughen<strong>in</strong>g state-level health st<strong>and</strong>ards is <strong>in</strong> the text box below.<br />
International Trade Centre 25
Box 2.5 California formaldehyde emission regulations<br />
<strong>Furniture</strong> makers <strong>and</strong> importers are certa<strong>in</strong> to be affected if the proposed tougher California<br />
formaldehyde emission regulations - now under preparation - will come <strong>in</strong>to effect <strong>in</strong> 2008.<br />
Eng<strong>in</strong>eered wood suppliers (OSB, MDF particleboard, etc.) say the cost per board foot<br />
could double, forc<strong>in</strong>g furniture makers to raise price.<br />
<strong>The</strong> California Air Resources Board, or CARB, is likely to seek tighter restrictions on<br />
formaldehyde emissions from manufactured wood products such as plywood, particleboard<br />
<strong>and</strong> medium-density fibreboard, which are all widely used <strong>in</strong> furniture. A composite wood Air<br />
Toxic Control Measure would apply not only to California-based manufacturers but also to<br />
anyone provid<strong>in</strong>g goods to California retailers<br />
Formaldehyde is an irritant that, <strong>in</strong> strong doses, causes watery eyes, s<strong>in</strong>us irritation,<br />
cough<strong>in</strong>g, wheez<strong>in</strong>g, nausea <strong>and</strong> sk<strong>in</strong> irritation. Concentrations of 10 to 15 parts per million<br />
have been found to cause nasal cancer <strong>in</strong> rats, <strong>and</strong> <strong>in</strong> June 2004 the International Agency<br />
for Research on Cancer reclassified formaldehyde as a known human carc<strong>in</strong>ogen<br />
What other types of wood are be<strong>in</strong>g planted or could/should be planted? Where, by whom,<br />
cost, tim<strong>in</strong>g, etc.? How do/would they grow <strong>in</strong> <strong>Pakistan</strong> (climate, soil,)? Which types would<br />
fit <strong>in</strong>to the present product mix, the equipment/mach<strong>in</strong>es available, the experience among<br />
producers etc.?<br />
S<strong>and</strong>berg <strong>Furniture</strong> Company appeared before CARB <strong>in</strong> June to discuss its concerns. <strong>The</strong><br />
company said they doubted the California state would be able to test adequately the<br />
offshore-made furniture pour<strong>in</strong>g <strong>in</strong>to California for formaldehyde emissions, particularly the<br />
f<strong>in</strong>ished products. CARB was “still develop<strong>in</strong>g a test method for f<strong>in</strong>ished goods us<strong>in</strong>g<br />
compliant boards<br />
Domestic furniture makers <strong>and</strong> eng<strong>in</strong>eered wood suppliers fear importers might be able to<br />
get around any restrictions, while they will have to comply, s<strong>in</strong>ce the state likely would visit<br />
domestic facilities <strong>and</strong> test on-site. That could give imports a further boost s<strong>in</strong>ce they would<br />
cost less, they contend, likely putt<strong>in</strong>g more domestic companies out of bus<strong>in</strong>ess<br />
Currently, the <strong>in</strong>dustry st<strong>and</strong>ard for formaldehyde emissions from particleboard is 0.3 parts<br />
per million. If California’s Phase-I restrictions go <strong>in</strong>to effect <strong>in</strong> July 2008, as has been<br />
discussed, the st<strong>and</strong>ard would be cut <strong>in</strong> half to 0.15 ppm. In July 2010, Phase-II would lower<br />
the amount to 0.05 ppm, 83% less than the current st<strong>and</strong>ard?<br />
For plywood, the Phase-I limit is 0.09 ppm, with Phase-II go<strong>in</strong>g to 0.03 ppm. For MDF,<br />
Phase-I is 0.19 <strong>and</strong> Phase-II is 0.05. <strong>The</strong> proposal allows MDF producers two extra years to<br />
reach the second level, with a start date of July 01, 2012<br />
Other types of bond<strong>in</strong>g res<strong>in</strong>s are available that could help companies meet stricter<br />
requirements, but they cost more, require more work to make <strong>and</strong> might not perform<br />
adequately.<br />
Source: <strong>Furniture</strong> Today, 2006<br />
<strong>The</strong> European Committee for St<strong>and</strong>ardisation (CEN) is responsible for the harmonisation of<br />
st<strong>and</strong>ardisation <strong>in</strong> the European Union. <strong>The</strong>ir EN st<strong>and</strong>ards on furniture are not meant to serve<br />
for protectionist aims. On the contrary, they are proposed as a basis for wider <strong>in</strong>ternational<br />
work on furniture st<strong>and</strong>ards under the ISO/TC 136 “<strong>Furniture</strong>”. (International Organisation for<br />
St<strong>and</strong>ardisation.)<br />
<strong>The</strong> national st<strong>and</strong>ards <strong>in</strong>stitutions <strong>in</strong> the develop<strong>in</strong>g countries are either ISO members, ISO<br />
correspondents or ISO subscribers. <strong>The</strong>ir capabilities to implement ISO are often weak. Only<br />
few countries have certification bodies, which can issue certificates of compliance with ISO<br />
7173 st<strong>and</strong>ards (chair st<strong>and</strong>ards for strength <strong>and</strong> durability), for example. <strong>The</strong> furniture<br />
26 International Trade Centre
<strong>in</strong>dustry itself should support efforts to establish adequate national st<strong>and</strong>ardisation <strong>in</strong>stitutions<br />
<strong>and</strong> certification bodies.<br />
<strong>The</strong> <strong>Pakistan</strong>i <strong>in</strong>dustry <strong>in</strong>dicated that only the holders of ISO 9001 st<strong>and</strong>ard are able to export<br />
furniture. ISO 9001 is a broad quality management st<strong>and</strong>ard, which is not product-specific. <strong>The</strong><br />
SESSI St<strong>and</strong>ard from France is said to be followed by some furniture manufacturers. SESSI is<br />
not issu<strong>in</strong>g st<strong>and</strong>ards, so this is possibly a mis<strong>in</strong>terpretation of the French buyers’<br />
specifications. French <strong>in</strong>dustries are quite strict <strong>in</strong> their requirements as far as st<strong>and</strong>ards are<br />
concerned. Moreover, they often require the respect of “French St<strong>and</strong>ards” (NF<br />
Ameublement), although European st<strong>and</strong>ards (EN) at the moment have substituted almost all<br />
the national st<strong>and</strong>ards.<br />
Many st<strong>and</strong>ards concern the safety of furniture <strong>and</strong> its raw materials (e.g. break<strong>in</strong>g level of<br />
pieces of wood: NF-EN 1727). <strong>The</strong>se can apply to tabletops, doors <strong>and</strong> beds (<strong>in</strong>clud<strong>in</strong>g<br />
children beds). <strong>The</strong>re are also quality st<strong>and</strong>ards, which establish <strong>performance</strong> criteria for the<br />
long-term use of furniture. In this case the st<strong>and</strong>ards are provided after test<strong>in</strong>g based on long<br />
repeated cycles of use.<br />
<strong>Export</strong> quality requirements <strong>and</strong> st<strong>and</strong>ards<br />
Buyers’ requirements on products, legality <strong>and</strong> susta<strong>in</strong>ability<br />
Institutional buyers (the public build<strong>in</strong>g <strong>and</strong> construction segment dem<strong>and</strong><strong>in</strong>g furniture for<br />
public premises, offices, schools etc.) <strong>in</strong> the European Union/North America often have<br />
procurement policies that <strong>in</strong>clude requirements on product quality, which may be specific to<br />
the <strong>in</strong>stitution <strong>in</strong> question. In addition to lay<strong>in</strong>g out the normative bidd<strong>in</strong>g procedures, these<br />
policies may <strong>in</strong>clude special conditions on the:<br />
• Environmental load (<strong>in</strong>clud<strong>in</strong>g materials <strong>and</strong> additives <strong>in</strong> the product as well as energy<br />
used <strong>in</strong> the production, packag<strong>in</strong>g <strong>and</strong> transportation),<br />
• Possibility to repair <strong>and</strong> recycle,<br />
• Volatile compounds (e.g., borax used <strong>in</strong> rubber wood furniture, formaldehyde emissions<br />
from panels, shelv<strong>in</strong>g, furniture <strong>and</strong> other <strong>in</strong>terior products, solvents <strong>in</strong> glues, pa<strong>in</strong>ts <strong>and</strong><br />
varnishes),<br />
• Ergonomics <strong>and</strong> human safety (flame retardancy test<strong>in</strong>g),<br />
• Durability (structural strength <strong>and</strong> load bear<strong>in</strong>g, wear <strong>and</strong> tear, scratch<strong>in</strong>g, etc.)<br />
• Adaptability (modular use), <strong>and</strong><br />
• Availability of additional components, “spares” <strong>and</strong> accessories.<br />
Environmental soundness of furniture is on the rise among their criteria, because they do not<br />
want to be implicated <strong>in</strong> us<strong>in</strong>g endangered, illegally produced or otherwise susceptible<br />
material. A case of the art example is the European Union’s Berlaymont headquarters build<strong>in</strong>g<br />
where the orig<strong>in</strong> of the Indonesian wood was claimed to be illegal <strong>and</strong> unsusta<strong>in</strong>able.<br />
Another example for the future <strong>in</strong> the procurement policy proposed for by the United<br />
K<strong>in</strong>gdom’s Olympic Delivery Authority (see Box 2.6).<br />
International Trade Centre 27
Box 2.6 Exclusive procurement policy of the London Olympics 2012<br />
<strong>The</strong> United K<strong>in</strong>gdom Olympic Delivery Authority (ODA) has published a draft susta<strong>in</strong>ability<br />
pr<strong>in</strong>ciples <strong>and</strong> progress report describ<strong>in</strong>g work progress over ODA’s proposed 12<br />
susta<strong>in</strong>ability objectives, which <strong>in</strong>cludes the sourc<strong>in</strong>g of environmental <strong>and</strong> socially<br />
responsible materials. In wood-based products, this means exclusive use of FSC-certified<br />
products (Forest Stewardship Council, see details later <strong>in</strong> this report)<br />
All contractors <strong>in</strong>volved <strong>in</strong> construction work for the London 2012 Olympics are expected to<br />
show how they meet these objectives. In a statement, the United K<strong>in</strong>gdom Timber Trade<br />
Federation (TTF) fully supported ODA’s susta<strong>in</strong>ability objectives, but voiced concern that<br />
the FSC-only approach might be taken with regard to certification. <strong>The</strong> Mayor of London<br />
recently published a supplementary plann<strong>in</strong>g guidance highlight<strong>in</strong>g FSC as the preferred<br />
st<strong>and</strong>ard for sourc<strong>in</strong>g of wood products <strong>in</strong> all new major developments <strong>in</strong> the capital. It is<br />
feared that with this approach the authorities would not get all the wood needed for the<br />
Olympics<br />
<strong>The</strong> timber <strong>in</strong>dustry’s Olympics strategy group, which comprises TTF, TRADA, British<br />
Woodwork<strong>in</strong>g Federation, UK Timber Frame Association, Wood for Good, ConFor <strong>and</strong> the<br />
Forestry Commission, would be lobby<strong>in</strong>g strongly to communicate timber’s susta<strong>in</strong>ability<br />
credentials to ODA. <strong>The</strong> ODA is expected to produce a detailed susta<strong>in</strong>ability strategy next<br />
year, which would <strong>in</strong>clude more details on its material procurement policy.<br />
Source: ITTO MIS, 2006<br />
Commercial <strong>and</strong> <strong>in</strong>dustrial enterprises (their build<strong>in</strong>g <strong>and</strong> construction projects, hotel, office<br />
<strong>and</strong> shop furniture, etc.) are more likely to put emphasis on the aesthetic appeal, safety, quality,<br />
functionality <strong>and</strong> physical construction of furniture than on environmental or social aspects of<br />
furniture mak<strong>in</strong>g. This is natural, as these organisations are more familiar with such day-to-day<br />
bus<strong>in</strong>ess needs as avoid<strong>in</strong>g product liability suits <strong>and</strong> impress<strong>in</strong>g new clients.<br />
Retailers <strong>in</strong> the consumer market (ma<strong>in</strong>ly sell<strong>in</strong>g household furniture, ready-to-assemble<br />
furniture, small occasional furniture, garden furniture, etc.), on the other h<strong>and</strong>, must be more<br />
sensitive to the “softer” values. In order to ease their customers’ concerns, many furniture<br />
cha<strong>in</strong>s have developed environmental management systems <strong>and</strong>, to a certa<strong>in</strong> extent, monitor<br />
the orig<strong>in</strong> of their products. As for raw materials, some may give preference to products made<br />
of certified wood (legal <strong>and</strong> susta<strong>in</strong>able, see chapters later <strong>in</strong> report).<br />
It is recommended that a potential new furniture exporter from a develop<strong>in</strong>g country should<br />
discuss with the potential buyers (wholesalers, importers, retailers, etc.) what their<br />
requirements are <strong>and</strong> deal with them. <strong>The</strong> more alert – or responsible – companies may be the<br />
ones to reap the greatest benefits of be<strong>in</strong>g “green”, but that is not to say that the <strong>in</strong>different or<br />
just pla<strong>in</strong> irresponsible ones will be forced out of bus<strong>in</strong>ess. <strong>The</strong>y will simply seek less<br />
dem<strong>and</strong><strong>in</strong>g buyers.<br />
Voluntary <strong>and</strong> m<strong>and</strong>atory st<strong>and</strong>ards <strong>in</strong> the European Union <strong>and</strong> USA<br />
General purpose<br />
<strong>The</strong> objective of st<strong>and</strong>ardisation is to ensure that all furniture available <strong>in</strong> the market is safe to<br />
use <strong>and</strong> is of solid construction. <strong>The</strong>refore, st<strong>and</strong>ardisation can hardly be considered harmful to<br />
foreign suppliers such as those from develop<strong>in</strong>g countries. On the contrary, voluntary product<br />
st<strong>and</strong>ards can enable an efficient exchange of <strong>in</strong>formation between the importer <strong>and</strong> the<br />
supplier. Instead of hav<strong>in</strong>g to deal with non-specific <strong>and</strong> constantly chang<strong>in</strong>g requirements of<br />
28 International Trade Centre
various counterparts, the supplier will have the benefit of work<strong>in</strong>g with a stable set of<br />
requirements. As the st<strong>and</strong>ards are voluntary <strong>in</strong> nature, they cannot be regarded as deliberate<br />
barriers to trade.<br />
Manufacturers normally use the st<strong>and</strong>ards <strong>in</strong> their product development <strong>and</strong> process control,<br />
while related statements are publicised <strong>in</strong> market<strong>in</strong>g. Hav<strong>in</strong>g a common language on test<br />
methods, dimensions, safety <strong>and</strong> strength characteristics is considered more important than<br />
giv<strong>in</strong>g explicit criteria on what the piece of furniture should look or feel like. This is left for the<br />
designers to contemplate.<br />
International Organisation for St<strong>and</strong>ardisation (ISO)<br />
At the <strong>in</strong>ternational level, the International Organisation for St<strong>and</strong>ardisation (ISO) is<br />
responsible for the harmonisation of st<strong>and</strong>ards, <strong>in</strong>clud<strong>in</strong>g those on furniture. ISO is a<br />
worldwide federation of national st<strong>and</strong>ard bodies from more than 140 countries. Its mission is<br />
to promote the development of st<strong>and</strong>ardisation <strong>and</strong> related activities <strong>in</strong> order to facilitate<br />
<strong>in</strong>ternational trade <strong>and</strong> cooperation. ISO’s work culm<strong>in</strong>ates <strong>in</strong> <strong>in</strong>ternational agreements<br />
published as <strong>in</strong>ternational st<strong>and</strong>ards. In the furniture sector, ISO has published 24 st<strong>and</strong>ards.<br />
Comité Européen de Normalisation (CEN)<br />
In the European Committee for St<strong>and</strong>ardisation (CEN, see www.cenorm.org), the Technical<br />
Committee 207 “<strong>Furniture</strong>” (CEN/TC207) is <strong>in</strong> charge of the st<strong>and</strong>ardisation of furniture.<br />
TC207 has eight work<strong>in</strong>g groups that deal with different aspects of St<strong>and</strong>ardisation:<br />
• WG1 – Domestic furniture<br />
• WG2 – Kitchen <strong>and</strong> bathroom furniture<br />
• SC3 – Office furniture<br />
• WG4 – Outdoor furniture<br />
• WG5 – Contract <strong>and</strong> educational furniture<br />
• WG6 – Test methods for fire behaviour<br />
• WG7 – Surfaces <strong>and</strong> surface f<strong>in</strong>ishes of furniture<br />
• AH – Glass <strong>in</strong> furniture<br />
<strong>The</strong> major aim of TC207 is to have the EN (European Norm, issued by CEN) st<strong>and</strong>ards on<br />
furniture established at the European level. It was scheduled to f<strong>in</strong>ish its work programme by<br />
2004, <strong>and</strong> after that there would be approximately 90 voluntary EN st<strong>and</strong>ards on furniture,<br />
their f<strong>in</strong>ishes <strong>and</strong> materials.<br />
National quality st<strong>and</strong>ards<br />
<strong>The</strong>re is no official quality st<strong>and</strong>ard for domestic furniture (used <strong>in</strong> homes) laid down by the<br />
European Union law. On the contrary, there are <strong>in</strong>ternational safety <strong>and</strong> environmental<br />
regulations concern<strong>in</strong>g imported office (<strong>in</strong>stitutional) furniture. <strong>The</strong> high quality of European<br />
furniture manufactur<strong>in</strong>g <strong>in</strong> general serves as a benchmark for foreign suppliers, <strong>and</strong> that level is<br />
certa<strong>in</strong>ly not easily achievable for many suppliers from the develop<strong>in</strong>g countries. Despite the<br />
attempts to harmonise the st<strong>and</strong>ards through ISO <strong>and</strong> CEN, there are still national quality<br />
st<strong>and</strong>ards <strong>in</strong>sist<strong>in</strong>g on test<strong>in</strong>g <strong>and</strong> compliance with flame retardancy, etc. For example, these<br />
rema<strong>in</strong> <strong>in</strong> the United K<strong>in</strong>gdom, Irel<strong>and</strong>, France <strong>and</strong> Sweden.<br />
International Trade Centre 29
European Union general safety st<strong>and</strong>ard<br />
<strong>The</strong> directive 92/59/EC lays down the pr<strong>in</strong>ciple of general safety guarantee for all consumer<br />
products. It applies to products manufactured both <strong>in</strong>side <strong>and</strong> outside the European Union.<br />
<strong>The</strong>re are not yet particular directives cover<strong>in</strong>g domestic furniture. A manufacturer or exporter<br />
can be held liable for compensation for damage caused by <strong>in</strong>appropriate furniture. European<br />
importers usually seek to cover their exposure to such risks through contractual terms with an<br />
exporter from a develop<strong>in</strong>g country.<br />
North American st<strong>and</strong>ards<br />
<strong>The</strong>re are over 140 furniture-related st<strong>and</strong>ards <strong>and</strong> labell<strong>in</strong>g requirements <strong>in</strong> the United States<br />
<strong>and</strong> Canada. Most st<strong>and</strong>ards are voluntary, but some are regulated by state or federal laws. In<br />
addition to protect end users, st<strong>and</strong>ards are used to protect manufactures <strong>and</strong> retailers aga<strong>in</strong>st<br />
product liability suits.<br />
Japanese st<strong>and</strong>ards<br />
Japan has three levels of Industrial St<strong>and</strong>ardisation: national level, <strong>in</strong>dustrial sector level <strong>and</strong><br />
company level. Japanese Industrial St<strong>and</strong>ards (JIS) are voluntary national-level st<strong>and</strong>ards that<br />
cover <strong>in</strong>dustrial <strong>and</strong> m<strong>in</strong>eral products. Industry associations <strong>and</strong> companies may also make<br />
their own st<strong>and</strong>ards for their specific needs (e.g. operation manuals, product specifications,<br />
etc.). <strong>The</strong>re are 27 furniture-related national st<strong>and</strong>ards <strong>in</strong> Japan, <strong>and</strong> they deal with safety<br />
aspects, test methods <strong>and</strong> dimensions.<br />
Certification of susta<strong>in</strong>ability <strong>and</strong> legality<br />
<strong>The</strong> certification of susta<strong>in</strong>ability <strong>and</strong> legality of wooden raw material is fast becom<strong>in</strong>g a<br />
ma<strong>in</strong>stream requirement for forest products <strong>in</strong> <strong>in</strong>ternational trade. Forest certification is based<br />
on st<strong>and</strong>ards prepared <strong>in</strong> a country <strong>and</strong> specific criteria aga<strong>in</strong>st which a third-party verification<br />
is arranged. Cha<strong>in</strong>-of-custody certification (CoC) cont<strong>in</strong>ues from here onwards by means of<br />
establish<strong>in</strong>g the ownership of certified wood throughout the supply cha<strong>in</strong> (see later a separate<br />
chapter).<br />
Is certification potentially important for <strong>Pakistan</strong>’s wooden furniture exporters? Yes, <strong>Pakistan</strong><br />
should not overlook forest certification when it prepares to export more wood products <strong>and</strong><br />
furniture made thereof. <strong>The</strong> need to ensure compatibility between export trade expansion <strong>and</strong><br />
susta<strong>in</strong>able forest resource utilisation gives justification to the certification of forest<br />
management, cha<strong>in</strong>-of-custody (CoC) <strong>and</strong> the related labell<strong>in</strong>g of wood products. And that is<br />
no matter if the wood is from domestic or imported natural forests or from planted, man-made<br />
forests. <strong>The</strong> number of <strong>in</strong>ternational markets where “anyth<strong>in</strong>g goes” is narrow<strong>in</strong>g quickly.<br />
Larger purchas<strong>in</strong>g groups <strong>and</strong> public procurement offices impose policies that <strong>in</strong>sist on verified<br />
legal orig<strong>in</strong> <strong>and</strong> susta<strong>in</strong>ability of wood-based products. This holds true <strong>in</strong> the European Union,<br />
the United States <strong>and</strong> more recently <strong>in</strong> Japan. Even Ch<strong>in</strong>a is gradually tighten<strong>in</strong>g its timber<br />
procurement rules because they fear for buyers’ boycotts on Ch<strong>in</strong>ese furniture made of illegal<br />
or unsusta<strong>in</strong>able wood (see below).<br />
30 International Trade Centre
Box 2.7 UK Timber Trade Federation announces high-risk sources<br />
<strong>The</strong> Timber Trade Federation (TTF) has told its members that sourc<strong>in</strong>g wood products<br />
made from timber from Papua New Gu<strong>in</strong>ea (PNG) or the Solomon Isl<strong>and</strong>s was “high risk”.<br />
<strong>The</strong> announcement followed an <strong>in</strong>vestigation by TTF <strong>in</strong>to Greenpeace’s last year<br />
allegations that PNG-sourced b<strong>in</strong>tangor face veneers on Ch<strong>in</strong>ese plywood were illegal.<br />
TTF said that <strong>in</strong> the absence of credible evidence of legality, products made from wood from<br />
these countries had to be considered high risk, <strong>and</strong> advised its members to avoid them. TTF<br />
added that the current situation <strong>in</strong> PNG <strong>and</strong> the Solomon Isl<strong>and</strong>s meant there was very little<br />
or no material meet<strong>in</strong>g the environmental st<strong>and</strong>ards that the UK market requires.<br />
Today certified wood products are clearly on display <strong>in</strong> the lead<strong>in</strong>g European, US DIY (do-ityourself)<br />
outlets <strong>and</strong> builders’ stores. <strong>The</strong>y showcase e.g. certified shelv<strong>in</strong>g, glue-lam<strong>in</strong>ated<br />
boards, garden furniture, deck<strong>in</strong>g, floor<strong>in</strong>g <strong>and</strong> similar products. It has more recently widened<br />
<strong>in</strong>to household furniture, where there are some signs of us<strong>in</strong>g certification (or lack of it) as a<br />
market access criteria <strong>and</strong> barga<strong>in</strong><strong>in</strong>g tool (reported e.g. by Indonesian <strong>Furniture</strong> <strong>and</strong><br />
H<strong>and</strong>icraft Association ASMINDO <strong>in</strong> the French market).<br />
<strong>The</strong> certification procedure of further processed products (furniture) differs from that of<br />
primary products (logs, sawn wood, panels) <strong>in</strong> a sense that the furniture makers seldom possess<br />
forest or carry out forestry activities by themselves (they are not vertically <strong>in</strong>tegrated). <strong>The</strong>y<br />
are normally add<strong>in</strong>g value to the primary processed products or components, which they buy<br />
from timber traders, upstream suppliers or contractors <strong>in</strong> their supplier network. S<strong>in</strong>ce the<br />
primary <strong>and</strong> further process<strong>in</strong>g usually takes place <strong>in</strong> different locations, the physical <strong>and</strong><br />
economic l<strong>in</strong>k between further process<strong>in</strong>g <strong>and</strong> forest management often rema<strong>in</strong>s weaker <strong>and</strong><br />
more <strong>in</strong>direct.<br />
In such a situation, decisions on the quality of forest management do not rest <strong>in</strong> the h<strong>and</strong>s of<br />
furniture-makers directly (as the <strong>Pakistan</strong> <strong>in</strong>dustry voices out). But they can <strong>in</strong>fluence their<br />
contractors to acquire forest management certification <strong>and</strong> supply certified materials through a<br />
verified cha<strong>in</strong>-of-custody (CoC) to their factories. <strong>The</strong> cha<strong>in</strong>-of-custody control ensures that<br />
the wood is genu<strong>in</strong>ely arriv<strong>in</strong>g from the certified forest. It is an essential tool for<br />
communicat<strong>in</strong>g to the market on the producer’s compliance with forest certification st<strong>and</strong>ards.<br />
<strong>The</strong> furniture <strong>in</strong>dustry is <strong>in</strong>creas<strong>in</strong>gly be<strong>in</strong>g targeted by environmental NGOs, which are<br />
promot<strong>in</strong>g certification <strong>and</strong> sell<strong>in</strong>g services for companies who want to reach certification<br />
status. One example is <strong>in</strong> the box below.<br />
International Trade Centre 31
Box 2.8 Workshop on certification <strong>and</strong> susta<strong>in</strong>ability for furniture manufacturers<br />
Global conservation group Ra<strong>in</strong>forest Alliance (www.ra<strong>in</strong>forest-alliance.org) held its second<br />
annual workshop on certification <strong>and</strong> susta<strong>in</strong>ability for furniture manufacturers on<br />
September 21, 2006 at the High Po<strong>in</strong>t fair. Discussions <strong>and</strong> presentations focused on<br />
current <strong>in</strong>itiatives <strong>in</strong> the furniture <strong>in</strong>dustry to promote responsible sourc<strong>in</strong>g <strong>and</strong> procurement,<br />
<strong>and</strong> how furniture makers can achieve Forest Stewardship Council certification through the<br />
Ra<strong>in</strong>forest Alliance’s Smartwood programme. <strong>Furniture</strong> companies can benefit from<br />
participation <strong>in</strong> the follow<strong>in</strong>g ways.<br />
• Presentations regard<strong>in</strong>g current <strong>in</strong>itiatives with<strong>in</strong> the furniture <strong>in</strong>dustry promot<strong>in</strong>g<br />
responsible sourc<strong>in</strong>g <strong>and</strong> procurement<br />
• Discussions on national <strong>and</strong> <strong>in</strong>ternational trends <strong>in</strong> sourc<strong>in</strong>g with<strong>in</strong> the furniture<br />
<strong>in</strong>dustry -- associated risks <strong>and</strong> the role of forest certification<br />
• Forum for furniture manufacturers <strong>and</strong> suppliers to learn more about Forest<br />
Stewardship Council (FSC) certification developments <strong>and</strong> processes<br />
• Opportunity to discuss forest certification <strong>and</strong> trends <strong>in</strong> the certified products market<br />
with a panel of experts with direct experience <strong>in</strong> this subject;<br />
• Participation <strong>in</strong> an important network<strong>in</strong>g forum with a group of key companies <strong>and</strong><br />
organisations.<br />
It should be said here that <strong>Pakistan</strong> is far away from certification <strong>in</strong> view of its current unpreparedness<br />
to tackle rampant forest sector problems. If the very basic pr<strong>in</strong>ciple of susta<strong>in</strong><strong>in</strong>g<br />
the forest stock is not followed, then no <strong>in</strong>ternational certifier can consider <strong>Pakistan</strong> as a<br />
potential country <strong>in</strong> which to operate. <strong>The</strong> development of a national certification system will<br />
take m<strong>in</strong>imum two years. <strong>The</strong> cost<strong>in</strong>g estimates for either of the two options are very r<strong>and</strong>om<br />
unless the area (size of forests), volume of wood harvested, cost of forest operations <strong>and</strong> wood,<br />
<strong>and</strong> the quality of present legislation, forestry practices <strong>and</strong> human skills are known.<br />
Cha<strong>in</strong>-of-Custody (COC) certification<br />
<strong>The</strong> focus of the timber certification debate has been mov<strong>in</strong>g from the forest certification<br />
(susta<strong>in</strong>ability) to the cha<strong>in</strong>-of-custody certification. <strong>The</strong> cha<strong>in</strong> of custody – or wood<br />
track<strong>in</strong>g (1) – is a sequence of ownership or control from one to another along the supply cha<strong>in</strong><br />
(Figure 2.5). It can also be understood as the identification of material throughout all the<br />
process<strong>in</strong>g <strong>and</strong> transportation stages from the <strong>in</strong>itial raw material source to the f<strong>in</strong>al product.<br />
A practical exercise: By fill<strong>in</strong>g out this type of diagram with actual firms <strong>and</strong> traders, the<br />
<strong>Pakistan</strong>i <strong>in</strong>dustry <strong>and</strong> value cha<strong>in</strong>s could be more easily understood. Th<strong>in</strong>gs like how many<br />
cubic metres are <strong>in</strong> each flow, how it changes ownership/for what price mark-up, how many<br />
kilometres of transportation is typically needed, how long time wood is stored, etc. can be<br />
useful questions for a policy-maker. 1<br />
<strong>The</strong> cha<strong>in</strong> of custody is required to be certified <strong>in</strong> connection with the labell<strong>in</strong>g of forest-based<br />
products. A label shows that wood raw material – or a known portion of it – comes from<br />
sources that are acceptable to a particular labell<strong>in</strong>g system. In addition to forest certification,<br />
with which the cha<strong>in</strong>-of-custody certification is usually associated, it could be used for<br />
show<strong>in</strong>g that wood comes from legal sources.<br />
1<br />
To be specific, wood track<strong>in</strong>g is not a synonym for cha<strong>in</strong> of custody rather than an aspect of it, but <strong>in</strong> this<br />
report cha<strong>in</strong> of custody <strong>and</strong> wood track<strong>in</strong>g are used <strong>in</strong>terchangeably.<br />
32 International Trade Centre
Figure 2.5 Simplified example on cha<strong>in</strong> of custody of wood <strong>in</strong> furniture<br />
Each transportation phase may <strong>in</strong>clude one or several <strong>in</strong>termediary phases that might or might not <strong>in</strong>clude<br />
Forest<br />
Logs<br />
Transportation (*)<br />
Sawmill<br />
Panelboard mill<br />
Lumber<br />
Wood-based panels<br />
Transportation (*)<br />
Further process<strong>in</strong>g plant<br />
Components<br />
Transportation (*)<br />
<strong>Furniture</strong> factory<br />
<strong>Furniture</strong><br />
Transportation (*)<br />
Wholesale/retail store<br />
<strong>Furniture</strong><br />
Transportation (*)<br />
process<strong>in</strong>g.<br />
End user<br />
Wood track<strong>in</strong>g can be implemented <strong>in</strong> the follow<strong>in</strong>g two alternative ways:<br />
• As a sequence of separate stages that each consider only what is go<strong>in</strong>g on with<strong>in</strong> that<br />
particular stage, or<br />
• As one comprehensive system that considers all the phases from the forest to the f<strong>in</strong>al<br />
product.<br />
Normally, process<strong>in</strong>g <strong>and</strong> transportation stages are looked at, <strong>and</strong> certified, separately. <strong>The</strong><br />
benefit is that each stage needs to <strong>in</strong>teract only with the directly preced<strong>in</strong>g stage. <strong>The</strong>refore, a<br />
furniture manufacturer that obta<strong>in</strong>s raw material from primary processors, or <strong>in</strong>termediary<br />
component makers, does not have to try to trace backward through several process<strong>in</strong>g <strong>and</strong><br />
transportation stages <strong>in</strong> order to f<strong>in</strong>d out whether the raw material is considered acceptable.<br />
International Trade Centre 33
<strong>The</strong> role of <strong>in</strong>termediaries (sourc<strong>in</strong>g agents, brokers, importers, wholesalers, retailers, etc.)<br />
complicates the controllability of the cha<strong>in</strong>. Even though each actor is responsible for his/her<br />
own part, complication creeps <strong>in</strong> with the <strong>in</strong>creas<strong>in</strong>g number of actors <strong>in</strong> the supply cha<strong>in</strong><br />
because materials get <strong>in</strong>creas<strong>in</strong>gly mixed <strong>and</strong> harder to control <strong>and</strong> track.<br />
Forest Stewardship Council (FSC) certification<br />
FSC has <strong>in</strong>troduced an <strong>in</strong>ternational labell<strong>in</strong>g scheme for forest products made from FSCcertified<br />
raw material (see www.fsc.org). It is widely held as the most environmentally credible<br />
of such schemes, <strong>and</strong> it is strongly supported by the NGO community lead by the World Wide<br />
Fund for Nature (WWF).<br />
Companies wish<strong>in</strong>g to use the FSC product label must have an FSC cha<strong>in</strong>-of-custody<br />
certificate. <strong>The</strong>re were 6,600 FSC-accredited cha<strong>in</strong>-of-custody certificates <strong>in</strong> 83 countries <strong>in</strong><br />
August 2007. This is a relatively small number consider<strong>in</strong>g the size of the forest products<br />
sector <strong>and</strong> the complexity of wood flows. Consumers have been very slow to realise any<br />
benefit from certified products, <strong>and</strong> their will<strong>in</strong>gness to pay a premium has rema<strong>in</strong>ed low. As<br />
more <strong>and</strong> more forests are now be<strong>in</strong>g certified, the supply of certified wood is <strong>in</strong>creas<strong>in</strong>g along<br />
the production cha<strong>in</strong> gradually. Also, the public procurement rules of the major import<strong>in</strong>g<br />
countries <strong>and</strong> of the biggest <strong>in</strong>ternational retailers are stipulat<strong>in</strong>g the use of certified wood. <strong>The</strong><br />
pressures on certification for downstream <strong>in</strong>dustries – such as furniture mak<strong>in</strong>g – will thus<br />
become more evident.<br />
Among the FSC labels, around 500 are awarded to furniture manufacturers, so the FSC has not<br />
yet been widely adopted <strong>in</strong> the sector. This is partly expla<strong>in</strong>ed by the fact that furniture makers<br />
seldom own or manage forests, but rather buy their raw materials as primary processed or<br />
semi-f<strong>in</strong>ished products from other wood processors. <strong>The</strong> numbers of certificates among their<br />
suppliers (producers of sawn wood, panels, wood manufactures) has <strong>in</strong>creased sharply dur<strong>in</strong>g<br />
the past years. Consequently, the number of FSC-labelled products is potentially ris<strong>in</strong>g <strong>in</strong><br />
furniture trade too.<br />
FSC sets m<strong>in</strong>imum requirements for the content of wood <strong>in</strong> labelled products <strong>in</strong> its revised<br />
cha<strong>in</strong>-of-custody st<strong>and</strong>ard dated October 2004 (quote):<br />
“<strong>The</strong> m<strong>in</strong>imum content of wood com<strong>in</strong>g from FSC-certified forests must be “at least 10% of the total material<br />
for the product group” AND the FSC material together with post-consumer material is at least 70% of the<br />
total material.”<br />
<strong>The</strong> FSC recognises the use of claims <strong>and</strong> labels both on- <strong>and</strong> off-product. <strong>The</strong> on-product<br />
labels should show the FSC logo with the actual content of the FSC-certified wood (Figure<br />
2.6). <strong>The</strong> labels must <strong>in</strong>clude descriptive statements to expla<strong>in</strong> the mean<strong>in</strong>g of the FSC logo<br />
<strong>and</strong> to disclaim responsibility for other attributes of the product.<br />
Figure 2.6 Example of FSC label <strong>and</strong> on-product claim<br />
71%<br />
M<strong>in</strong>imum<br />
34 International Trade Centre
At least 70% of the wood used <strong>in</strong> mak<strong>in</strong>g this product l<strong>in</strong>e comes from well-managed forests<br />
<strong>in</strong>dependently certified accord<strong>in</strong>g to the rules of the Forest Stewardship Council.<br />
As additional <strong>in</strong>formation, the labels may also provide a more detailed list of <strong>in</strong>gredients <strong>and</strong><br />
their proportions. In all cases, the labels must state the m<strong>in</strong>imum percentages of FSC-certified<br />
material as a percentage of the total wood used <strong>in</strong> the batch manufactur<strong>in</strong>g process.<br />
Eco-labell<strong>in</strong>g<br />
Eco-labell<strong>in</strong>g is a voluntary method for the certification <strong>and</strong> labell<strong>in</strong>g of environmental<br />
<strong>performance</strong>. It identifies the overall environmental preference of a product on the basis of<br />
lifecycle considerations. An impartial third party awards eco-label after the product has been<br />
determ<strong>in</strong>ed to meet specific environmental criteria. <strong>The</strong>re are many different voluntary (<strong>and</strong><br />
m<strong>and</strong>atory) environmental <strong>performance</strong> labels <strong>and</strong> declarations. <strong>The</strong>se <strong>in</strong>clude those <strong>in</strong>:<br />
• European Union (Flower)<br />
• Nordic countries (Swan)<br />
• Germany (Blue Angel)<br />
• Austria<br />
• Netherl<strong>and</strong>s (Milieukeur)<br />
• Spa<strong>in</strong> (AENOR Medio Ambiente)<br />
• France (NF Environnement)<br />
• United States (Green Seal)<br />
• Canada (Environmental Choice)<br />
• Japan (Eco Mark)<br />
<strong>The</strong> criteria for furniture <strong>in</strong> the various eco-labell<strong>in</strong>g schemes have common elements. Wood<br />
must be either certified or its orig<strong>in</strong> must be <strong>in</strong>dicated otherwise. <strong>The</strong> product must not conta<strong>in</strong><br />
or release more than a specified amount of formaldehyde. <strong>The</strong> manufacturer must guarantee<br />
that functionally compatible replacement for wear<strong>in</strong>g parts is available for five years.<br />
2.1.10 Issues faced by manufacturers/exporters<br />
<strong>The</strong> follow<strong>in</strong>g issues were brought forward <strong>in</strong> the course of the survey:<br />
Sheesham is not easily available<br />
Sheesham (rosewood) is gett<strong>in</strong>g ext<strong>in</strong>ct. It is be<strong>in</strong>g cut <strong>in</strong> a large amount, but on the other h<strong>and</strong><br />
not grown on a large-scale to overcome this scarcity. “<strong>The</strong> goldm<strong>in</strong>e of <strong>Pakistan</strong> is be<strong>in</strong>g<br />
wasted”. Its prices are go<strong>in</strong>g high, have become two to four times expensive. <strong>The</strong>re are people<br />
who are illegally export<strong>in</strong>g wood. Illegal wood import has also started s<strong>in</strong>ce the launch<br />
<strong>in</strong>dustry has shifted to Dubai. However, there is no big issue regard<strong>in</strong>g its import.<br />
Latest technology is not be<strong>in</strong>g used<br />
At least 98% of manufacturers are us<strong>in</strong>g traditional methods. <strong>The</strong> latest technology is not be<strong>in</strong>g<br />
used at all. One manufacturer dem<strong>and</strong>ed that “imported mach<strong>in</strong>ery be made available to us at<br />
the same rates”. <strong>The</strong> factory owner should be given the facility to purchase second-h<strong>and</strong><br />
mach<strong>in</strong>ery. <strong>The</strong> government should come forward, reduce rates <strong>and</strong> make the imported<br />
mach<strong>in</strong>ery easily available for them.<br />
International Trade Centre 35
No tra<strong>in</strong><strong>in</strong>g <strong>in</strong>stitutes <strong>and</strong> centres are set up<br />
All of the manufacturers said that no tra<strong>in</strong><strong>in</strong>g centres were available. One or two centres are<br />
work<strong>in</strong>g, but no effective services are be<strong>in</strong>g offered by them. <strong>The</strong> manufacturers stress the<br />
importance of hav<strong>in</strong>g such <strong>in</strong>stitutes <strong>in</strong> the country. <strong>The</strong> furniture <strong>in</strong>dustry is <strong>in</strong> dire need of<br />
tra<strong>in</strong>ed <strong>and</strong> creative <strong>in</strong>dividuals.<br />
No f<strong>in</strong>ancial <strong>in</strong>centives given by the government<br />
<strong>The</strong> government is provid<strong>in</strong>g no f<strong>in</strong>ance facilities. For the few facilities available, the process<br />
of documentation is discourag<strong>in</strong>gly cumbersome. <strong>The</strong> government should also <strong>in</strong>troduce new<br />
subsidies as the old rebate <strong>and</strong> subsidy facility has ended. <strong>The</strong> MoC freight subsidy is still<br />
there, but it is not generalised – it is only for specific dest<strong>in</strong>ations. <strong>Furniture</strong> is a high-value<br />
item, therefore freight rates are also high. Thus, for an importer it tends to be expensive. A<br />
supportive regulatory subsidy should be <strong>in</strong>troduced. New <strong>in</strong>vestors are not com<strong>in</strong>g <strong>in</strong> because<br />
of the high cost of sett<strong>in</strong>g up bus<strong>in</strong>ess.<br />
Government takes no steps to promote exports of furniture<br />
No longer-term steps are taken by the Government. TDAP <strong>and</strong> SMEDA are work<strong>in</strong>g on it, but<br />
no concrete results have come forward. <strong>The</strong>y gave examples of exhibitions <strong>and</strong> sem<strong>in</strong>ars<br />
organised by TDAP, but they are not at all effective. By comparison, the follow<strong>in</strong>g describes<br />
how the Egyptian furniture <strong>in</strong>dustry delegation takes a long-term view on attend<strong>in</strong>g the Las<br />
Vegas furniture show. (<strong>Furniture</strong> Today e-daily, 27.07.2006.)<br />
Box 2.9 Egyptian furniture screens Las Vegas show<br />
<strong>The</strong> promoter of an Egyptian furniture show brought <strong>in</strong>dustry representatives to the July<br />
show here to assess participation <strong>in</strong> future events. Expol<strong>in</strong>k, which also promotes the<br />
Furnex show <strong>in</strong> Cairo, hosted the visit to the Las Vegas show July 23-27 to help companies<br />
learn more about the event <strong>and</strong> the opportunities to lease space for the July 2007 show.<br />
Expol<strong>in</strong>k said the same group also plans a similar study tour of the High Po<strong>in</strong>t show <strong>in</strong> North<br />
Carol<strong>in</strong>a.<br />
Officials from as many as 25 Egyptian manufacturers came along, <strong>in</strong>clud<strong>in</strong>g manufacturers<br />
of residential case goods <strong>and</strong> upholstery, as well as kitchen, office <strong>and</strong> other contract<br />
furniture. Some of the companies already plan to show <strong>in</strong> Las Vegas <strong>in</strong> 2007, so they took a<br />
preview of the venue<br />
An Egypt-based upholstery <strong>and</strong> case goods manufacturer said the trip helped his company<br />
<strong>and</strong> others learn about the US market <strong>and</strong> how American producers are serv<strong>in</strong>g the needs<br />
of retailers <strong>and</strong> consumers. It distributed CD catalogues to show potential customers the<br />
high quality <strong>and</strong> craftsmanship that the Egyptian companies can produce <strong>in</strong> furniture, gifts<br />
<strong>and</strong> accessories<br />
One Egyptian company already operated a st<strong>and</strong> <strong>in</strong> Las Vegas with upholstery <strong>and</strong><br />
occasional furniture. As a first time exhibitor, they had a l<strong>in</strong>e of mostly traditional sofas,<br />
chairs, consoles <strong>and</strong> chests. <strong>The</strong>y hoped to attract US wholesalers as well as conta<strong>in</strong>erdirect<br />
customers. <strong>The</strong> company now sells about 15% of its l<strong>in</strong>e to the United States but<br />
hopes to grow that bus<strong>in</strong>ess, said the company’s representative<br />
Source: <strong>Furniture</strong> Today e- daily (2006 editions)<br />
36 International Trade Centre
Scope of jo<strong>in</strong>t ventures<br />
<strong>The</strong>re exists a def<strong>in</strong>ite scope for Jo<strong>in</strong>t Ventures. When foreign companies will share their<br />
expertise <strong>and</strong> resources with <strong>Pakistan</strong>i companies, the quality of furniture would improve <strong>and</strong><br />
exports would experience a major boost.<br />
Total export product trend needs to be changed. St<strong>and</strong>ard contract<strong>in</strong>g furniture would need to<br />
be produced. Dubai, Abu Dhabi, Doha, etc. have a billion dollar <strong>in</strong>vestment to build thous<strong>and</strong>s<br />
of villas <strong>and</strong> hous<strong>in</strong>g schemes popp<strong>in</strong>g up. Wood is imported from Ch<strong>in</strong>a, Malaysia <strong>and</strong><br />
Europe. If a conta<strong>in</strong>er goes from Karachi, the shipment would reach <strong>in</strong> two days (US$200<br />
freight). From Ch<strong>in</strong>a shipment reaches <strong>in</strong> twenty days <strong>and</strong> freight is US$1,000-1,200. <strong>Pakistan</strong><br />
has a competitive advantage, but it doesn’t have <strong>in</strong>dustry. To produce st<strong>and</strong>ard furniture,<br />
<strong>Pakistan</strong> can have jo<strong>in</strong>t ventures from the Middle East for home as well as office furniture. <strong>The</strong><br />
government will have to create a favourable environment. <strong>The</strong> concept of “<strong>Furniture</strong> village”<br />
would be a major <strong>in</strong>vestment for foreign <strong>in</strong>vestor to come <strong>in</strong>. <strong>The</strong> labour cost is low. <strong>The</strong><br />
government should give l<strong>and</strong>, utility facility, etc.<br />
Innovation<br />
New designs are be<strong>in</strong>g copied <strong>and</strong> used but the latest technology is not be<strong>in</strong>g used. Others<br />
th<strong>in</strong>k that there is a lot of latent creativity, but due to lack of resources they can’t make use of<br />
it. <strong>The</strong>re is a dire need of new designs <strong>in</strong> order to survive <strong>in</strong> the competitive trad<strong>in</strong>g system.<br />
Government rules <strong>and</strong> regulations<br />
<strong>The</strong> majority th<strong>in</strong>ks that no favourable policies exist for them. <strong>The</strong> severe <strong>in</strong>spection that is<br />
done by the Customs by tear<strong>in</strong>g down <strong>and</strong> break<strong>in</strong>g furniture should be stopped. Designs are<br />
copied; there should be restriction on this as well. Labour law needs to be improved. Different<br />
government departments visit the manufacture to make <strong>in</strong>spections. <strong>The</strong> government should<br />
work under one-w<strong>in</strong>dow operation. Labour rights should be safeguarded. With tra<strong>in</strong><strong>in</strong>g centres,<br />
proper general tra<strong>in</strong><strong>in</strong>g should also be given to them. A lot of <strong>in</strong>ternational donor agencies<br />
would come forward <strong>and</strong> start giv<strong>in</strong>g donations.<br />
2.2 An overview of exist<strong>in</strong>g studies, strategies <strong>and</strong> policy papers<br />
2.2.1 Overview of exist<strong>in</strong>g studies<br />
This section records the experience of ITC <strong>and</strong> sister organisations of the United Nations on<br />
furniture sector development. Among the <strong>in</strong>ternational organisations, the furniture <strong>in</strong>dustry<br />
falls <strong>in</strong>to the agenda of, e.g.:<br />
• UNIDO (United Nations Industrial Development Organisation),<br />
• ILO (International Labour Organisation),<br />
• ITTO (International Tropical Timber Organisation),<br />
• FAO (Food <strong>and</strong> Agricultural Organisation of the United Nations), <strong>and</strong><br />
• Economic Commission for Europe (ECE): Timber Committee.<br />
International Trade Centre 37
ITC has already collaborated with all of them <strong>in</strong> analyz<strong>in</strong>g the global furniture <strong>in</strong>dustries <strong>and</strong><br />
trade. In addition, some of WTO’s agreements are relevant to the sector, <strong>and</strong> deserve attention<br />
<strong>in</strong> the latter parts of this study.<br />
More specifically, the follow<strong>in</strong>g essential references of ITC can be po<strong>in</strong>ted:<br />
• Project Tropical Timber Products: Development of Further Process<strong>in</strong>g <strong>in</strong> ITTO<br />
Producer Countries produced a jo<strong>in</strong>t ITTO-ITC publication on the same title <strong>in</strong> 2002.<br />
This is a global (29 tropical countries) assessment of the current state of the further<br />
processed wood products <strong>in</strong>dustry <strong>and</strong> its export trends <strong>in</strong> 1989-1998.<br />
• Conclusions: <strong>The</strong> study assesses the 29 ITTO producer countries <strong>in</strong> terms of their<br />
participation <strong>in</strong> the <strong>in</strong>ternational trade of value-added wood products, their<br />
competitiveness <strong>in</strong> the marketplace <strong>and</strong> the future opportunities <strong>in</strong> major markets. It<br />
expla<strong>in</strong>s how the countries could f<strong>in</strong>d their competitive advantages <strong>and</strong> pull out the<br />
suitable <strong>in</strong>dustrial manufactur<strong>in</strong>g strategies that match their opportunities. <strong>The</strong> broad<br />
product range covered (furniture, w<strong>in</strong>dows, doors, floor<strong>in</strong>g, other jo<strong>in</strong>ery <strong>and</strong><br />
mould<strong>in</strong>gs), contributes to the widen<strong>in</strong>g of the knowledge of further process<strong>in</strong>g of<br />
tropical wood both <strong>in</strong> the supplier countries <strong>and</strong> consumer countries.<br />
• In 2005, the International Wooden <strong>Furniture</strong> Markets study report was published,<br />
aga<strong>in</strong> as a jo<strong>in</strong>t venture between ITTO <strong>and</strong> ITC. This was a sequel to the 1990<br />
publication Wooden Household <strong>Furniture</strong>: A Study of Major Markets.<br />
• Conclusions: <strong>The</strong> report provides detailed market <strong>in</strong>formation on the world’s eight<br />
lead<strong>in</strong>g furniture markets: the United States, Japan, Germany, the United K<strong>in</strong>gdom,<br />
France, Canada, Ch<strong>in</strong>a <strong>and</strong> Belgium <strong>in</strong> addition to the Netherl<strong>and</strong>s <strong>and</strong> Luxembourg <strong>and</strong><br />
the major furniture markets of Spa<strong>in</strong>, Italy, Denmark, Sweden <strong>and</strong> Egypt.<br />
• This report also outl<strong>in</strong>es a strategy for develop<strong>in</strong>g the wooden furniture sector <strong>in</strong> tropical<br />
countries. It predicts that the overall balance of furniture-mak<strong>in</strong>g will move <strong>in</strong> favour of<br />
the southern hemisphere <strong>and</strong> Ch<strong>in</strong>a, where a green ‘wall of wood’ is matur<strong>in</strong>g <strong>in</strong> the<br />
plantation forests. Rema<strong>in</strong><strong>in</strong>g natural forests will cont<strong>in</strong>ue to provide unique raw<br />
materials for the f<strong>in</strong>er furniture <strong>in</strong>dustry. In order to make full use of the opportunity<br />
created by the com<strong>in</strong>g availability of the plantation resources <strong>and</strong> the high-value niche<br />
markets for natural hardwoods, the report suggests what develop<strong>in</strong>g countries should do<br />
to overcome hurdles such as the chang<strong>in</strong>g economics of logistics, low productivity <strong>and</strong><br />
efficiency, <strong>in</strong>adequate quality control <strong>and</strong> management systems, <strong>and</strong> the often low level<br />
of skills.<br />
• <strong>The</strong> value-added process<strong>in</strong>g of wooden furniture <strong>in</strong> tropical countries will be developed<br />
step-by-step based on local conditions. Manufacturers should move from st<strong>and</strong>ardised,<br />
simple products towards orig<strong>in</strong>ally designed products with higher value, <strong>and</strong> ultimately<br />
to br<strong>and</strong>ed products. It is hoped that this process can be accelerated through concerted<br />
local efforts <strong>and</strong> <strong>in</strong>ternational partnerships.<br />
• With ILO, the ITC collaborated on project development for modernisation of Indonesia’s<br />
traditional furniture cluster, <strong>and</strong> the rubber wood development project. <strong>The</strong> rubber<br />
wood’s prom<strong>in</strong>ent role as a new furniture material was strengthened after the report was<br />
distributed among about ten lead<strong>in</strong>g rubber wood grow<strong>in</strong>g countries of the world.<br />
Malaysia, however, was po<strong>in</strong>ted out to have an advantage over the others due to<br />
consistent support towards rubber wood process<strong>in</strong>g (see later on their success factors).<br />
38 International Trade Centre
• With FAO’s Forest Products <strong>and</strong> Economics Division, ITC collaborated <strong>in</strong> a study titled<br />
Analysis of Important Factors <strong>in</strong> Successful Production <strong>and</strong> Market<strong>in</strong>g of Plantation<br />
Timber Products. It also assessed the furniture <strong>in</strong>dustry’s potential for us<strong>in</strong>g planted<br />
wood species.<br />
• Conclusions: <strong>The</strong> production of large-sized logs from the natural forests of tropical<br />
producer countries will cont<strong>in</strong>ue to decl<strong>in</strong>e, particularly <strong>in</strong> Asia. <strong>The</strong> primary <strong>and</strong> further<br />
process<strong>in</strong>g <strong>in</strong>dustries have already started to adapt their manufactur<strong>in</strong>g methods,<br />
technologies <strong>and</strong> designs accord<strong>in</strong>gly. Smaller-dimension logs will be <strong>in</strong>creas<strong>in</strong>gly used,<br />
based on fast-grow<strong>in</strong>g plantations (rubber wood, gmel<strong>in</strong>a, acacia, eucalyptus, teak, p<strong>in</strong>e,<br />
mahogany) <strong>and</strong> secondary natural forests.<br />
• <strong>The</strong> establishment of plantation has moved more recently away from government-led<br />
programmes <strong>in</strong>to private sector activity. <strong>The</strong> role of <strong>in</strong>centives has generally decl<strong>in</strong>ed,<br />
<strong>and</strong> a healthy macro-economy is thought more frequently to render direct <strong>in</strong>centives<br />
useless after the <strong>in</strong>itial start-up phase. But their role has been crucial <strong>in</strong> most of the<br />
successful plantation programmes up <strong>and</strong> runn<strong>in</strong>g today <strong>and</strong> many countries still apply<br />
them for new plant<strong>in</strong>g. It is more important to re-orientate <strong>in</strong>centives for the benefit of<br />
farmers <strong>and</strong> other smallholders, who almost categorically face problems <strong>in</strong> reach<strong>in</strong>g any<br />
value-addition or f<strong>in</strong>ancial security <strong>in</strong> their plantation <strong>in</strong>vestments.<br />
• Most common fast-grow<strong>in</strong>g plantation species available for <strong>in</strong>dustrial process<strong>in</strong>g suffer<br />
from quality h<strong>and</strong>icaps vis-à-vis competitive natural timbers. <strong>The</strong>se call for immediate<br />
improvements <strong>in</strong> wood dry<strong>in</strong>g, jo<strong>in</strong>t<strong>in</strong>g <strong>and</strong> edge-glu<strong>in</strong>g technologies, <strong>and</strong> wood<br />
preservation <strong>and</strong> f<strong>in</strong>ish<strong>in</strong>g. Product <strong>and</strong> market development needs to be focused at<br />
eng<strong>in</strong>eered <strong>and</strong> value-added wood products <strong>in</strong> order to recover the costs of <strong>in</strong>tense<br />
primary process<strong>in</strong>g.<br />
• When consider<strong>in</strong>g plantation woods for specific applications, some key qualities need to<br />
be assessed <strong>in</strong> terms of appearance (colour, grade quality, surface f<strong>in</strong>ish<strong>in</strong>g), for<br />
eng<strong>in</strong>eer<strong>in</strong>g (density, strength, stiffness, hardness), <strong>and</strong> with regard to dry<strong>in</strong>g <strong>and</strong><br />
mach<strong>in</strong><strong>in</strong>g characteristics (plann<strong>in</strong>g, mould<strong>in</strong>g, CNC rout<strong>in</strong>g, s<strong>and</strong><strong>in</strong>g), to name a few. It<br />
is essential to apply this <strong>in</strong>formation to the whole production process: product design,<br />
selection of appropriate materials <strong>and</strong> tools, selection of most suitable manufactur<strong>in</strong>g<br />
methods, <strong>and</strong> recommendations on <strong>in</strong>tended service (end-uses) <strong>and</strong> environmental<br />
conditions.<br />
• CBI <strong>and</strong> SIPPO are the government import promotion agencies of the Netherl<strong>and</strong>s <strong>and</strong><br />
Switzerl<strong>and</strong>. In the recent years, CBI has ma<strong>in</strong>ta<strong>in</strong>ed programmes for both wood<br />
products <strong>and</strong> furniture. Both programmes have produced annual market reviews <strong>and</strong><br />
market<strong>in</strong>g guides, <strong>and</strong> some countries have also been enrolled to specific export<br />
promotion programmes <strong>in</strong> practice. <strong>The</strong> list of eligible countries <strong>in</strong>cludes all LDCs (least<br />
developed countries) <strong>in</strong> the world. CBI reports are good sources of down-to-earth,<br />
practical tips on how to approach European importers <strong>and</strong> how to do bus<strong>in</strong>ess with them.<br />
<strong>The</strong>y also give well-thought prep-up tasks <strong>and</strong> th<strong>in</strong>gs-to-do lists before enter<strong>in</strong>g <strong>in</strong>to<br />
furniture fairs, sales missions, contract negotiations, etc. This report is a recommended<br />
read<strong>in</strong>g for any prospective furniture exporter <strong>in</strong>to Europe. (Contact <strong>in</strong>fo <strong>in</strong> Annex 1)<br />
• ITC’s Market Briefs have also covered furniture <strong>in</strong> the past. <strong>The</strong>se are usually display<strong>in</strong>g<br />
the market size, characteristics <strong>and</strong> major importers to approach.<br />
International Trade Centre 39
<strong>The</strong>re are some specialised consultancy companies who publish regular market <strong>in</strong>formation on<br />
furniture. Perhaps the best known among them is the Italian CSIL (Centro Studi Industria<br />
Leggera). <strong>The</strong>ir reports are sold on a multi-client basis <strong>and</strong> they are regularly updated. Global,<br />
regional <strong>and</strong> country-specific studies are put for sale. CSIL is Europe’s lead<strong>in</strong>g furniture<br />
research <strong>in</strong>stitute, <strong>and</strong> the Centre produces a free newsletter on the furniture <strong>in</strong>dustry <strong>and</strong><br />
markets worldwide, called “World <strong>Furniture</strong> onl<strong>in</strong>e”. CSIL also produces a wide variety of<br />
furniture <strong>in</strong>dustry market reports that could be useful for the <strong>Pakistan</strong>i furniture <strong>in</strong>dustry. <strong>The</strong><br />
particular strength of CSIL reports is <strong>in</strong> underst<strong>and</strong><strong>in</strong>g the whole furniture trade <strong>and</strong><br />
distribution system <strong>in</strong> each country. <strong>The</strong> most recent report “World <strong>Furniture</strong> Outlook<br />
2006/2007” is out right now. ITC could make it available for the <strong>Pakistan</strong>i furniture <strong>in</strong>dustry to<br />
update the global outlook presented <strong>in</strong> this report.<br />
In the United States, <strong>Furniture</strong> Today publishes periodical market surveys <strong>and</strong> furniture trend<br />
<strong>and</strong> style data on the daily onl<strong>in</strong>e magaz<strong>in</strong>e. <strong>The</strong> contents are rarely conta<strong>in</strong><strong>in</strong>g any detailed<br />
statistics or precise market research data. Ma<strong>in</strong>ly qualitative analysis is available from<br />
<strong>Furniture</strong> Today. It is useful for those who wish to attend <strong>in</strong> the US major furniture fairs,<br />
because the web-magaz<strong>in</strong>e provides useful <strong>in</strong>formation on pre-fair events <strong>and</strong> after-fair followups.<br />
Some useful customer studies <strong>and</strong> supplier list<strong>in</strong>gs are provided on an annual basis (e.g.<br />
top-retailers, top-manufacturers, etc.). Special themes are explored like bedroom, kitchen<br />
furniture, or children’s furniture. Generic consumer behaviour <strong>in</strong>formation <strong>and</strong> surveys on<br />
spend<strong>in</strong>g <strong>in</strong> furniture is also a feature <strong>in</strong> <strong>Furniture</strong> Today. Good retail contact networks can be<br />
established through this channel.<br />
AKTRIN <strong>Furniture</strong> Information Centre is a US-based consult<strong>in</strong>g firm exclusively dedicated<br />
to the forestry, furniture, <strong>and</strong> other secondary processed wood <strong>in</strong>dustries. <strong>The</strong> company<br />
ma<strong>in</strong>ta<strong>in</strong>s offices <strong>in</strong> the USA, Canada, Germany <strong>and</strong> Mexico. <strong>The</strong>ir consult<strong>in</strong>g services are<br />
offered by a subsidiary company: AKTRIN-Dossenbach Associates. Services range from<br />
market research to eng<strong>in</strong>eer<strong>in</strong>g <strong>and</strong> technical advice. Over 100 market research reports have<br />
been published by AKTRIN.<br />
Freedonia Group, Inc. (USA) provides market <strong>and</strong> <strong>in</strong>dustry studies <strong>in</strong>to 18 <strong>in</strong>dustry<br />
segments, <strong>in</strong>clud<strong>in</strong>g furniture <strong>and</strong> fixtures. Freedonia Focus reports are market <strong>and</strong> productoriented<br />
bus<strong>in</strong>ess trend-track<strong>in</strong>g reports, while Freedonia Industry Studies look more broadly at<br />
the <strong>in</strong>dustry outlook.<br />
Datamonitor is a multi-sector supplier of market survey data, also <strong>in</strong>clud<strong>in</strong>g furniture <strong>and</strong><br />
home furnish<strong>in</strong>gs. It is headquartered <strong>in</strong> London, but it operates also <strong>in</strong> New York, Frankfurt<br />
<strong>and</strong> Hong Kong. Industry panels <strong>and</strong> consumer <strong>in</strong>terviews are their primary mechanisms to<br />
collect data. Market segmentation, prices <strong>and</strong> competition aspects are also analysed <strong>in</strong><br />
Datamonitor’s reports.<br />
Some other well-known names <strong>in</strong> the furniture markets research bus<strong>in</strong>ess are:<br />
• <strong>Furniture</strong> Industry Research Association (FIRA) <strong>in</strong> the UK<br />
• International <strong>Furniture</strong> Research Group (IFRG), Malaysia/<strong>in</strong>ternational<br />
• AMA Research <strong>in</strong> the UK<br />
• Schuler <strong>and</strong> Partner (HOMAG) <strong>in</strong> Germany<br />
• Titze Unternehmensberatung GmbH <strong>in</strong> Germany<br />
• URS Forestry, Australia<br />
40 International Trade Centre
<strong>The</strong> contact <strong>in</strong>formation of many of these sources is given <strong>in</strong> Annex 1: Sources of<br />
Information <strong>and</strong> Useful Websites. <strong>The</strong> follow<strong>in</strong>g chapters are drawn from the previous work<br />
undertaken by ITC sector work on Wood Products <strong>and</strong> <strong>Furniture</strong>, <strong>and</strong> from selected literature<br />
<strong>and</strong> studies compiled for this project.<br />
Some selected key issues from reference literature are presented here to support this report:<br />
2.2.2 About cluster<strong>in</strong>g <strong>and</strong> network<strong>in</strong>g<br />
• <strong>The</strong> <strong>in</strong>ternational market outlook studies <strong>in</strong>dicate that wooden household furniture<br />
fashions will rema<strong>in</strong> volatile: what is “<strong>in</strong>” this year may vanish the next year. <strong>The</strong> basic<br />
problem is that while <strong>in</strong>vestments should be planned long-term, furniture markets <strong>and</strong><br />
fashions live on a faster lane. New collections will have to be created at shorter <strong>in</strong>tervals<br />
<strong>in</strong> order to keep pace with the market’s tastes. This essentially calls for the flexibility of<br />
production, which can be best achieved through network<strong>in</strong>g among firms.<br />
• <strong>The</strong> world’s wooden furniture manufactur<strong>in</strong>g can demonstrate many types of successful<br />
networks <strong>and</strong> clusters. Most of the em<strong>in</strong>ent exporter countries to the <strong>in</strong>ternational<br />
markets have undergone an evolution of their own <strong>in</strong> organis<strong>in</strong>g a competitive national<br />
furniture-manufactur<strong>in</strong>g base (e.g. Italy, Germany, Denmark, Brazil, Malaysia, etc.).<br />
• Approaches <strong>and</strong> practical <strong>in</strong>dustrial development patterns are varied, <strong>and</strong> simply<br />
mimick<strong>in</strong>g an exist<strong>in</strong>g structure <strong>in</strong> another place is not enough. This is why some<br />
<strong>in</strong>dustry restructur<strong>in</strong>g <strong>and</strong> relocation <strong>in</strong>to furniture zones <strong>and</strong> “imposed clusters” have<br />
not borne fruit. Organic growth <strong>and</strong> subtle political support mechanisms appear to have<br />
enabled some of the lead<strong>in</strong>g clusters to become susta<strong>in</strong>able <strong>and</strong> truly beneficial to the<br />
<strong>in</strong>dustry as a whole. A dynamic <strong>in</strong>dustry is always required to <strong>in</strong>habit such clusters.<br />
<strong>Furniture</strong> clusters have found widespread acceptance <strong>in</strong> almost every major furniture export<strong>in</strong>g<br />
country. Nevertheless, there is a lot of differentiation <strong>in</strong> their basic philosophy to suit local<br />
conditions. Table 3.3 below illustrates the ma<strong>in</strong> differences between the furniture clusters <strong>in</strong><br />
Italy, Denmark, Taiwan <strong>and</strong> Malaysia.<br />
Table 2.4 Comparison of furniture clusters<br />
Criteria Italy Denmark Taiwan Malaysia<br />
Total employees < 10 < 15 < 30 < 50<br />
Skill level High High Multi-Skilled Medium to Low<br />
Product mix Low Low Low Medium to High<br />
Technology Medium Medium Medium to Low High<br />
Investment Low Low Medium High<br />
Supply flexibility High High High Low<br />
Geographical proximity Good Good Good Good<br />
Support<strong>in</strong>g <strong>in</strong>dustries Good Good Good Poor<br />
Government <strong>in</strong>tervention Low Low Low High<br />
Support<strong>in</strong>g services Good Good Good Medium<br />
Market<strong>in</strong>g expertise Low Low Medium to Low High<br />
International Trade Centre 41
Source: ITTO-ITC, 2006<br />
Inevitably, the success of these four cluster models also varies <strong>and</strong> illustrates their contribution<br />
towards the susta<strong>in</strong>able growth of the furniture <strong>in</strong>dustries as a whole.<br />
It has not become fully clear how the <strong>Pakistan</strong>i firms are network<strong>in</strong>g between them. In other<br />
countries like Egypt, the local furniture showroom owners hold a strong negotiat<strong>in</strong>g power<br />
over the smaller furniture workshops. Showroom owners sub-contract these artisans to<br />
manufacture components or un-f<strong>in</strong>ished furniture on copied designs, <strong>and</strong> then cream up the<br />
profits by assembl<strong>in</strong>g, fabricat<strong>in</strong>g, f<strong>in</strong>ish<strong>in</strong>g <strong>and</strong> market<strong>in</strong>g the ready furniture.<br />
42 International Trade Centre
Box 2.10 USAID <strong>in</strong>itiative <strong>in</strong> the furniture sector <strong>in</strong> <strong>Pakistan</strong><br />
• A Government of <strong>Pakistan</strong> Initiative, funded by United States Agency for International<br />
Development (USAID www.usaid.gov ) <strong>and</strong> implemented by J.E. Aust<strong>in</strong> Associates<br />
Inc. <strong>in</strong> partnership with SMEDA started <strong>in</strong> May, 2006. Its basic objective is to enhance<br />
<strong>in</strong>dustry competitiveness <strong>in</strong> <strong>Pakistan</strong>. It is work<strong>in</strong>g <strong>in</strong> collaboration with private <strong>and</strong><br />
public sector, stakeholders, <strong>in</strong>stitutions, etc.<br />
• Under the Strategic Work<strong>in</strong>g Group (SWOG) process manufacturers, retailers,<br />
importers, exporters, academia, forestry <strong>and</strong> designers have come together <strong>and</strong><br />
started formulat<strong>in</strong>g their strategy. This strategy not only chalks out their <strong>in</strong>tended<br />
<strong>in</strong>itiatives but also prioritizes <strong>and</strong> plans for them.<br />
• <strong>The</strong> n<strong>in</strong>e identified strategic <strong>in</strong>itiatives are: sector management organization, mass<br />
solar kiln <strong>in</strong>stallations, tra<strong>in</strong><strong>in</strong>g centers, CFTMC’s (Technology Transfer Centers), firm<br />
level technology up gradation plans, furniture test<strong>in</strong>g labs, br<strong>and</strong><strong>in</strong>g <strong>and</strong> exhibition<br />
plann<strong>in</strong>g, susta<strong>in</strong>able forestry system <strong>and</strong> wood bank.<br />
• Initial meet<strong>in</strong>gs <strong>and</strong> discussions were held with <strong>in</strong>dustry <strong>in</strong> all furniture produc<strong>in</strong>g<br />
clusters i.e. Ch<strong>in</strong>iot, Peshawar, Gujrat, Karachi <strong>and</strong> Lahore. <strong>The</strong> Strategic Work<strong>in</strong>g<br />
Group (SWOG) was formed. It is composed of 27 members that <strong>in</strong>clude<br />
manufactures, exporters, importers, eng<strong>in</strong>eers, designers <strong>and</strong> the forestry<br />
department.<br />
• <strong>The</strong> SWOG has worked with three consultants: Mr. Peter Rayner, Gary Kennedy <strong>and</strong><br />
Dr. Giuseppe Gregorio who accompanied the SWOG <strong>in</strong> Italy. Two study tours have<br />
taken place so far. <strong>The</strong> first one was to Italy <strong>and</strong> Dubai <strong>in</strong> November 2006 <strong>and</strong> the<br />
second one to Malaysia <strong>in</strong> March 2007.<br />
• USAID funded visits of foreign consultants to <strong>Pakistan</strong> to help <strong>in</strong> identify<strong>in</strong>g major<br />
problems confront<strong>in</strong>g the <strong>in</strong>dustry <strong>and</strong> to suggest short term as well as long-term<br />
remedies.<br />
• M<strong>in</strong>istry of Industries Production <strong>and</strong> Special Initiatives sets SWOG with task of<br />
prepar<strong>in</strong>g <strong>Sector</strong> Development Strategy. Series of meet<strong>in</strong>gs were held <strong>in</strong> Lahore,<br />
Karachi <strong>and</strong> Islamabad.<br />
• Due to the large number of SWOG members, the SWOG elected an Executive Core<br />
Group (ECG) with<strong>in</strong> the SWOG that meets more regularly. It is comprised of one<br />
representative from Karachi, Lahore, Faisalabad, Ch<strong>in</strong>iot, Gujranwala, Gujrat,<br />
Rawalp<strong>in</strong>di, Islamabad <strong>and</strong> Peshawar. It has a monitor<strong>in</strong>g <strong>and</strong> decision mak<strong>in</strong>g role.<br />
ECG reports to the M<strong>in</strong>istry <strong>and</strong> <strong>Pakistan</strong> Industrial Development Corporation (PIDC)<br />
Board as well.<br />
• <strong>The</strong> government approved a f<strong>in</strong>ancial grant of PK RS 590 million (ca. US$10 million)<br />
to the <strong>in</strong>dustry to form the <strong>Sector</strong> Development Company by <strong>in</strong>stall<strong>in</strong>g 75 solar wood<br />
dry<strong>in</strong>g kilns all over the country, establish<strong>in</strong>g common facility tra<strong>in</strong><strong>in</strong>g <strong>and</strong><br />
manufactur<strong>in</strong>g centres (one each at Ch<strong>in</strong>iot <strong>and</strong> Peshawar) <strong>and</strong> organiz<strong>in</strong>g <strong>in</strong>dustry’s<br />
participation at <strong>in</strong>ternational trade shows.<br />
Source: APFEA<br />
2.3 SWOT analysis of <strong>Pakistan</strong>i furniture companies<br />
<strong>The</strong> follow<strong>in</strong>g <strong>in</strong>formation is based on feedback from exporters <strong>and</strong> participants of workshops<br />
as well as the external consultant’s views.<br />
International Trade Centre 43
Strengths<br />
Major strengths are as follows<br />
• Rich cultural, i.e. h<strong>and</strong>work (carv<strong>in</strong>g, cut work, brass <strong>in</strong>lay, etc.) done by labour is<br />
excellent<br />
• Different range of products are produced<br />
• Low-cost labour with high carv<strong>in</strong>g skills<br />
Other strengths mentioned are as follows<br />
• Good quality raw material<br />
• Cheap labour<br />
• Good designs <strong>and</strong> styles<br />
• F<strong>in</strong>est wood craved for <strong>in</strong>ternational markets<br />
• Traditional <strong>and</strong> dist<strong>in</strong>ct designs for the regional Islamic markets<br />
• Association build<strong>in</strong>g <strong>and</strong> clusters: lobby<strong>in</strong>g power<br />
• Realisation of the core of the problem <strong>and</strong> an open m<strong>in</strong>d for new solutions<br />
Weaknesses<br />
Major weaknesses mentioned are as follows<br />
• Latest technology not be<strong>in</strong>g used<br />
• No tra<strong>in</strong><strong>in</strong>g <strong>in</strong>stitutes<br />
• Lack of products/process st<strong>and</strong>ardisation<br />
Other weaknesses mentioned are as follows:<br />
• No government support<br />
• No f<strong>in</strong>ancial <strong>in</strong>centives<br />
• High taxes imposed by the Central Board of Revenue (CBR)<br />
• Sheesham is diseased<br />
• <strong>Export</strong>ers have no <strong>in</strong>ternational market knowledge (no researches are done before<br />
enter<strong>in</strong>g <strong>in</strong>to a new market)<br />
• Image of <strong>Pakistan</strong>i companies is very bad, perception needs to be changed<br />
• Limited access to market <strong>in</strong>formation<br />
• Lack of network<strong>in</strong>g among entrepreneurs<br />
• Lack of domestic production materials (wood) <strong>and</strong> operat<strong>in</strong>g supplies (chemicals, foams,<br />
technology)<br />
• <strong>Export</strong> <strong>in</strong>frastructure <strong>and</strong> location<br />
• Excessive role of middlemen <strong>in</strong> value cha<strong>in</strong><br />
44 International Trade Centre
Opportunities<br />
Major opportunities mentioned are as follows:<br />
• <strong>The</strong> Middle East markets boom<br />
• EU <strong>and</strong> US markets grow steadily, with up-market niche expansion<br />
• <strong>Sector</strong> development policies <strong>and</strong> support<br />
Other opportunities mentioned are as follows:<br />
• <strong>Furniture</strong> dem<strong>and</strong> is <strong>in</strong>creas<strong>in</strong>g with an <strong>in</strong>crease <strong>in</strong> MNCs, banks <strong>and</strong> new houses<br />
• People have more money to spend<br />
• DTR for export<br />
• If skilled labour gets proper tra<strong>in</strong><strong>in</strong>g, the quality of furniture will be enhanced<br />
• Adopt skills to imported wood carv<strong>in</strong>g<br />
• “Modernize” designs <strong>and</strong> trad<strong>in</strong>g channels<br />
• Cluster synergy optimization <strong>and</strong> network<strong>in</strong>g<br />
• <strong>Furniture</strong> awarded with priority sector status<br />
Threats<br />
Major threats mentioned are as follows:<br />
• Skilled labour gett<strong>in</strong>g non-existent<br />
• Material bottlenecks (reliance on dw<strong>in</strong>dl<strong>in</strong>g Sheesham resource, deforestation)<br />
• Inadequate support exporters <strong>and</strong> f<strong>in</strong>ance (<strong>in</strong>centives)<br />
Other threats mentioned are as follows:<br />
• Labour rates go<strong>in</strong>g high<br />
• Competition from <strong>in</strong>ternational companies<br />
• Electricity rates go<strong>in</strong>g up<br />
• Imports from Ch<strong>in</strong>a <strong>and</strong> Malaysia ris<strong>in</strong>g (Low priced <strong>and</strong> good quality)<br />
• Under-<strong>in</strong>voic<strong>in</strong>g<br />
• Sheesham gett<strong>in</strong>g ext<strong>in</strong>ct<br />
• Forest policy weaknesses allow<strong>in</strong>g illegality: smuggl<strong>in</strong>g of unprocessed wood<br />
• Slow change of design orientation<br />
• Red tape <strong>in</strong> customs <strong>and</strong> cargo clearance<br />
• Inactive tra<strong>in</strong><strong>in</strong>g centres for skilled workers<br />
2.4 <strong>Furniture</strong> association <strong>and</strong> its role <strong>in</strong> services<br />
Number of members <strong>in</strong> All <strong>Pakistan</strong> <strong>Furniture</strong> <strong>Export</strong>ers Association: 125<br />
60% of <strong>Pakistan</strong>’s furniture exports are from APFEA’s members<br />
Over half a million people are <strong>in</strong>volved <strong>in</strong> this <strong>in</strong>dustry.<br />
International Trade Centre 45
2.5 Case stories on data collection<br />
A significant part of the trade data of this report is taken from three websites owned <strong>and</strong><br />
operated by the International Trade Centre, ITC, www.<strong>in</strong>tracen.org.<br />
<strong>The</strong>se website are Trade Map, Market Access Map <strong>and</strong> Product Map.<br />
ITC’s Trade Map at www.trademap.org provides import <strong>and</strong> export data for over 200 countries<br />
<strong>and</strong> territories for over 5000 product categories <strong>in</strong> a fully <strong>in</strong>teractive environment. <strong>The</strong> above<br />
<strong>in</strong>sights were straightforwardly acquired from the data the website provides.<br />
ITC’s Market Access Map at www.macmap.org provides <strong>in</strong>formation on tariffs <strong>and</strong> market<br />
access measures for 178 import<strong>in</strong>g countries <strong>and</strong> 200+ export<strong>in</strong>g countries on an easy to use<br />
web platform.<br />
ITC’s Product Map at www.p-maps.org provides extensive market <strong>in</strong>telligence <strong>in</strong> the form of<br />
directly downloadable market studies, a gateway to market <strong>in</strong>formation on the <strong>in</strong>ternet <strong>and</strong><br />
numerous onl<strong>in</strong>e company directories.<br />
<strong>The</strong>se websites have a wide range of users: enterprises, associations, government authorities,<br />
f<strong>in</strong>ancial <strong>in</strong>stitutions, statistical bureaus, researchers, academia, press etc.<br />
Interested users <strong>in</strong> <strong>Pakistan</strong> can request passwords to access these onl<strong>in</strong>e sources from<br />
EPB/TDAP, SMEDA, ITC Islamabad office, LCCI, KCCI or FPCCI.<br />
Below are case stories relevant for the furniture sector <strong>in</strong> <strong>Pakistan</strong>. <strong>The</strong>y are based on data<br />
taken from the three websites -- purely as examples of the waste amount of data available.<br />
Case Story 1: Insight <strong>in</strong> to world markets for bed furniture<br />
World import figures show a total import market size of US$7.8 billion <strong>and</strong> imports of<br />
bedroom furniture (HS940350) have been <strong>in</strong> an upward trend over the last five years, with<br />
world markets grow<strong>in</strong>g at an average annual rate of 17%. Dem<strong>and</strong> is highly concentrated with<br />
the United States buy<strong>in</strong>g almost 50% of all word imports <strong>and</strong> a UK <strong>and</strong> Germany tak<strong>in</strong>g up<br />
another 13%. Beds make up one third of United States total bedroom furniture imports. <strong>The</strong>se<br />
9.46 million beds (2005) are ma<strong>in</strong>ly imported from East <strong>and</strong> South East Asia, led by Ch<strong>in</strong>a <strong>and</strong><br />
Vietnam.<br />
Furnish<strong>in</strong>g bedrooms appears to be very important for the Anglophone world as the United<br />
K<strong>in</strong>gdom follows the United States as the world’s second largest buyer, buy<strong>in</strong>g almost<br />
US$575m worth, equivalent to 250 thous<strong>and</strong> tons of bedroom furniture <strong>The</strong> United K<strong>in</strong>gdom<br />
imports bedroom furniture at an average CIF value of US$2300 per ton (a very rough average<br />
figure for all bedroom furniture items <strong>and</strong> <strong>in</strong> tons, but comparison between countries is<br />
possible). This average price is not dissimilar to imports by other European countries with the<br />
exception of the Austrians <strong>and</strong> the Irish who pay around US$1000 more per ton. <strong>The</strong><br />
significantly lower average amount paid for imports <strong>in</strong> the Middle East (US$1,619 per ton <strong>in</strong><br />
UAE, US$903 per ton <strong>in</strong> Saudi Arabia) suggest a less str<strong>in</strong>gent consumer quality requirement<br />
<strong>in</strong> this region.<br />
<strong>The</strong> United K<strong>in</strong>gdom market has shown very high growth rates over recent years 29% per<br />
annum <strong>in</strong> value <strong>and</strong> a stunn<strong>in</strong>g 40% per annum <strong>in</strong> quantity. Evidently there is downward<br />
46 International Trade Centre
pressure on the price. <strong>The</strong>re appears to be a sudden surge of imports of either cheaper products<br />
or a new preference for a smaller bedroom furniture item <strong>in</strong> the United K<strong>in</strong>gdom. <strong>The</strong> surge<br />
took place between 2002 <strong>and</strong> 2003. This could well be reflect<strong>in</strong>g the establishment of foreign<br />
furniture cha<strong>in</strong> <strong>in</strong> the United K<strong>in</strong>gdom <strong>and</strong> trans-shipment of supplies at a lower rate. Whatever<br />
the f<strong>in</strong>al conclusion turns out to be, s<strong>in</strong>ce <strong>Pakistan</strong> has traditional ties with the United K<strong>in</strong>gdom<br />
<strong>and</strong> already supplies bedroom furniture to the United K<strong>in</strong>gdom, this apparent opportunity may<br />
well be worth further <strong>in</strong>vestigation.<br />
Other fast grow<strong>in</strong>g smaller markets (c. 30% per annum) <strong>in</strong>clude Australia, Republic of Korea,<br />
Spa<strong>in</strong> <strong>and</strong> Eastern Europe <strong>in</strong>clud<strong>in</strong>g the Russian Federation. In the case of the Russian<br />
Federation, though, <strong>in</strong> comparison to most countries where import tariffs are 0% for bedroom<br />
furniture, the Russian Federation applies a 20% tariff for low value bedroom furniture <strong>and</strong> an<br />
even higher specific tariff of 75-euro cents per kg for high value bedroom furniture.<br />
<strong>Pakistan</strong> is currently a small player <strong>in</strong> the world, rank<strong>in</strong>g 72nd exporter of bedroom furniture.<br />
Despite be<strong>in</strong>g a small player, <strong>Pakistan</strong> already has a foot <strong>in</strong> the door of the United States <strong>and</strong><br />
United K<strong>in</strong>gdom markets. Further expansion could be envisaged <strong>in</strong> these major markets as well<br />
as <strong>in</strong>to other fast grow<strong>in</strong>g markets.<br />
Case Story 2: Middle East market for wooden furniture<br />
<strong>The</strong> Middle East import market for furniture is estimated by TradeMap to be worth around one<br />
<strong>and</strong> a half billion dollars. Iran <strong>and</strong> Syria can virtually be considered non-markets as they import<br />
only <strong>in</strong>significant quantities. <strong>The</strong>se two markets also protect their own furniture <strong>in</strong>dustry –<br />
charg<strong>in</strong>g duty up to 50% tariff for wooden furniture <strong>and</strong> components (as can be seen <strong>in</strong> Market<br />
Access Map) whilst the other Middle Eastern markets impose a tariff of up to 5%. Saudi<br />
Arabia, UAE, Israel <strong>and</strong> Kuwait are the largest markets, Turkey, Cyprus <strong>and</strong> Iraq mid-range<br />
markets <strong>and</strong> Qatar, Oman, Lebanon, Jordan <strong>and</strong> Yemen smaller markets.<br />
As can be seen <strong>in</strong> the table below most of the imported furniture is d<strong>in</strong>n<strong>in</strong>g <strong>and</strong> liv<strong>in</strong>g room<br />
furniture (37%). Imports of bedroom furniture (16%), office furniture (11%) <strong>and</strong> upholstered<br />
seats (11%) are also important. <strong>The</strong> fastest import growth rates can be witnessed <strong>in</strong> wooden<br />
kitchen furniture, <strong>in</strong> mattress supports <strong>and</strong> <strong>in</strong> seats with wooden frames. Office furniture<br />
showed the slowest growth rates between 2001 <strong>and</strong> 2005.<br />
Ch<strong>in</strong>a, Italy, Malaysia, United States <strong>in</strong> descend<strong>in</strong>g order <strong>and</strong> are key suppliers of wooden<br />
furniture to the region. <strong>Pakistan</strong> also exports wooden furniture to various Middle Eastern<br />
countries. In general these are rather small quantities. <strong>The</strong> only trade flow of a significant size<br />
is d<strong>in</strong><strong>in</strong>g <strong>and</strong> liv<strong>in</strong>g room furniture (non-bedroom, office or kitchen) to UAE of over<br />
US$1.74m <strong>in</strong> 2005.<br />
Competition from with<strong>in</strong> the region is not strong. <strong>The</strong> only significant exporter of furniture <strong>in</strong><br />
the region is Turkey <strong>and</strong> the only important buyer from Turkey <strong>in</strong> the region is Iraq. Most of<br />
Turkey’s exports are dest<strong>in</strong>ed for Europe.<br />
International Trade Centre 47
Table 2.5 Middle East furniture imports<br />
HS code<br />
Product<br />
Middle East imports<br />
2005<br />
Value<br />
($‘000)<br />
Share<br />
(%)<br />
Annual<br />
growth<br />
2001-05<br />
(%)<br />
Major<br />
importers<br />
940330 Office furniture, wooden 156,685 11 3 Saudi, UAE<br />
940340 Kitchen furniture, wooden 99,551 6 23 Saudi,<br />
Turkey, UAE<br />
940350 Bedroom furniture, wooden 298,924 16 17 Saudi, UAE,<br />
Kuwait<br />
940360 <strong>Furniture</strong>, wooden, nes 472,568 37 17 UAE, Israel,<br />
Saudi<br />
940380 <strong>Furniture</strong> of cane, osier, bamboo 94,438 7 27 UAE, Israel,<br />
Saudi<br />
940390 <strong>Furniture</strong> parts nes 120,134 8 20 UAE,<br />
Turkey,<br />
Saudi<br />
940410 Mattress supports 7,661 0 25 Qatar,<br />
Saudi,<br />
Cyprus<br />
940161 Seats with wooden frames,<br />
upholstered<br />
155,459 11 20 UAE, Saudi,<br />
Turkey<br />
940169 Seats with wooden frames 71,916 4 45 Saudi, UAE,<br />
Turkey<br />
Source: ITC database<br />
Case Story 3: Un-upholstered seats with wooden frame markets<br />
Un-upholstered seats with a wooden frame are classified as a separate category <strong>in</strong> trade<br />
statistics (HS 940169) <strong>and</strong> the total world import figure for this product category is estimated<br />
to be as high as US$2.87 billion. <strong>The</strong> world dem<strong>and</strong> for these seats is also <strong>in</strong>creas<strong>in</strong>g; world<br />
imports grew by 12% per year dur<strong>in</strong>g 2001- 05 <strong>in</strong> value terms. Only a h<strong>and</strong>ful of countries<br />
classify this product category <strong>in</strong> more detail, so we cannot speak for all import<strong>in</strong>g markets, but<br />
we can make the general deduction that the imported seats are ma<strong>in</strong>ly for household chairs <strong>and</strong><br />
not for public seat<strong>in</strong>g such as church pews.<br />
<strong>The</strong> United States is the world’s key import market for this component, buy<strong>in</strong>g 37% of world<br />
imports <strong>in</strong> 2005. Germany, United K<strong>in</strong>gdom, France <strong>and</strong> South Korea are also important<br />
markets. South Korea, Spa<strong>in</strong>, South Africa <strong>and</strong> Saudi Arabia are rapidly grow<strong>in</strong>g markets for<br />
this component whilst Japan is show<strong>in</strong>g a slight decl<strong>in</strong>e. <strong>The</strong> Swiss market is on the upper end<br />
<strong>in</strong> terms of average price averag<strong>in</strong>g CIF US$6,555 per ton, almost double the amount per ton<br />
be<strong>in</strong>g paid by other import<strong>in</strong>g countries <strong>in</strong> Europe <strong>and</strong> Japan.<br />
Though Italy is an important exporter of wooden framed seats, with 10% share of world<br />
exports, the lion’s share of supply comes from Asia – Ch<strong>in</strong>a, Vietnam, Malaysia <strong>and</strong> Thail<strong>and</strong><br />
– together mak<strong>in</strong>g up 49% share of world exports <strong>in</strong> 2004.<br />
48 International Trade Centre
<strong>Pakistan</strong> does not export this furniture component, but there is no reason why it would not have<br />
the capacity to do so. <strong>The</strong> large <strong>and</strong> grow<strong>in</strong>g market should be an important <strong>in</strong>centive to<br />
explore possibilities.<br />
Clearly many niches can be carved out of the market for a component such as the one<br />
described here. Trade data on its own will not provide enough detail, more qualitative<br />
<strong>in</strong>formation would need to be collected to underst<strong>and</strong> the markets better. For starters, much<br />
more <strong>in</strong>formation is required on what the end product will be once the component is fitted.<br />
Market surveys, l<strong>in</strong>ks to market <strong>in</strong>formation web sites <strong>and</strong> l<strong>in</strong>ks to webs sites of furniture<br />
manufacturers would be an important complement to the trade statistics described above. ITC’s<br />
Product Map serves this purpose.<br />
International Trade Centre 49
3 Implications of WTO Agreements<br />
3.1 Background<br />
3.1.1 Multilateral discipl<strong>in</strong>e of trade rules<br />
International trade for nearly six decades has been subject to the discipl<strong>in</strong>e of multilaterally<br />
agreed rules “by which countries are required to abide <strong>in</strong> their trade relations with one<br />
another” 2 . <strong>The</strong> <strong>in</strong>stitution responsible for oversee<strong>in</strong>g this rules-based system is, the World<br />
Trade Organization (WTO, www.wto.org) established on January 01, 1995. <strong>The</strong> WTO is the<br />
successor to the General Agreement on Tariffs <strong>and</strong> Trade (GATT) which had been perform<strong>in</strong>g<br />
a similar role s<strong>in</strong>ce 1 January 1948.<br />
Box 3.1 Multilateral discipl<strong>in</strong>e of trade rules – the WTO system<br />
• International trade is subject to the discipl<strong>in</strong>e of multilaterally agreed rules by which<br />
countries are required to comply with <strong>in</strong> their trade relations with one another.<br />
• <strong>The</strong> World Trade Organization (WTO) oversees this multilateral system. Its<br />
Agreements aim to help <strong>in</strong>ternational trade flow smoothly, freely, fairly <strong>and</strong><br />
predictably.<br />
• Under the WTO trade regime there are both opportunities <strong>and</strong> challenges for<br />
<strong>Pakistan</strong>.<br />
• It is for the bus<strong>in</strong>ess community supported by the Government to convert tariff<br />
reductions <strong>and</strong> liberalization commitments <strong>in</strong>to opportunities for trade.<br />
• Likewise concerted action needs to be taken by both the public <strong>and</strong> private sectors to<br />
adequately meet challenges.<br />
Source: WTO Cell, Plann<strong>in</strong>g & Development Department, Government of the Punjab<br />
This chapter is divided <strong>in</strong>to four ma<strong>in</strong> sections:<br />
• General background<br />
• Information on the WTO issues<br />
• Implications of the WTO Agreements<br />
• Trade conditions as a result of the WTO Agreements<br />
3.1.2 Purview of the WTO<br />
<strong>The</strong> WTO’s purview encompasses three agreements, relat<strong>in</strong>g to trade <strong>in</strong>: (1) Goods; (2)<br />
Services; <strong>and</strong> (3) Trade-Related Intellectual Property Rights. In addition, there are twelve<br />
associate agreements relevant for trade <strong>in</strong> goods.<br />
2<br />
ITC; Bus<strong>in</strong>ess Guide to the World Trad<strong>in</strong>g System (1999), p.3<br />
50 International Trade Centre
3.1.3 Functional scope<br />
<strong>The</strong> functional scope of the WTO is depicted <strong>in</strong> the diagram below:<br />
Figure 3.1 Functional scope of the WTO<br />
WTO<br />
Trade <strong>in</strong> Goods Trade <strong>in</strong> Services Intellectual Property<br />
Rights<br />
General Agreement on<br />
Tariffs <strong>and</strong> Trade (GATT)<br />
1994<br />
General Agreement on<br />
Trade <strong>in</strong> Services<br />
(GATS)<br />
Trade Related Aspects of<br />
Intellectual Property<br />
Rights (TRIPS)<br />
<strong>The</strong>se Agreements seek to establish a trad<strong>in</strong>g system which is: non-discrim<strong>in</strong>atory, freer, predictable,<br />
more competitive <strong>and</strong> arguably more beneficial to develop<strong>in</strong>g countries<br />
Associate Agreements on:<br />
• Agriculture<br />
• Application of Sanitary &<br />
Phytosanitary Measures<br />
(SPS)<br />
• Product st<strong>and</strong>ards (TBT)<br />
• Trade-related <strong>in</strong>vestment<br />
measures (TRIMs)<br />
• Anti-dump<strong>in</strong>g<br />
• Customs valuation<br />
• Pre- shipment <strong>in</strong>spection<br />
• Rules of orig<strong>in</strong><br />
• Import licens<strong>in</strong>g<br />
• Subsidies<br />
• Countervail<strong>in</strong>g measures<br />
• Measures for safeguards<br />
• Bus<strong>in</strong>ess <strong>and</strong> professional<br />
services<br />
• Communication<br />
• Distribution services<br />
• Educational services<br />
• Environmental services<br />
• Construction <strong>and</strong> related<br />
eng<strong>in</strong>eer<strong>in</strong>g services<br />
• F<strong>in</strong>ancial services<br />
• Health services tourism <strong>and</strong><br />
travel-related services<br />
• Recreational, cultural <strong>and</strong><br />
sport<strong>in</strong>g related services<br />
• Transport services<br />
• Other services<br />
• Patents<br />
• Copyrights<br />
• Trademarks<br />
• Industrial designs<br />
• Geographical Indications<br />
• Undisclosed <strong>in</strong>formation<br />
International Trade Centre 51
3.1.4 Dispute resolution<br />
For disputes aris<strong>in</strong>g under GATT 94, GATS <strong>and</strong> TRIPs, there is a common dispute resolution<br />
mechanism embodied <strong>in</strong> the WTO’s Disputes Settlement Underst<strong>and</strong><strong>in</strong>g, (DSU).<br />
3.1.5 Focus on trade <strong>in</strong> goods<br />
In this report focus is on trade <strong>in</strong> goods. Hence, further reference will not be made to the<br />
GATS while the TRIPs will be referred to wherever it is relevant.<br />
3.1.6 Obligation of conformity<br />
Each member country of the WTO is obliged to ensure the conformity of its laws, regulations<br />
<strong>and</strong> adm<strong>in</strong>istrative procedures with the agreement of the Organization (Article XVI (4) of the<br />
Marrakech Agreement Establish<strong>in</strong>g the WTO).<br />
3.1.7 Opportunities <strong>and</strong> challenges under the WTO regime<br />
Overview<br />
<strong>The</strong> central objective of the WTO is to help <strong>in</strong>ternational trade flow smoothly, freely, fairly <strong>and</strong><br />
predictably. <strong>The</strong> WTO’s rules with their trade liberalization orientation, have <strong>in</strong>deed led to a<br />
rapid expansion of the world trade.<br />
In rank<strong>in</strong>g many achievements of the GATT-WTO system, among the most significant, is the<br />
deep reduction <strong>in</strong> developed-country tariffs from high double-digit figures <strong>in</strong> 1947 to low<br />
s<strong>in</strong>gle-digit numbers today 3 . <strong>The</strong>re has been also significant reduction <strong>in</strong> other barriers to<br />
trade.<br />
Under this liberal <strong>in</strong>ternational trade regime there are both opportunities <strong>and</strong> challenges for<br />
<strong>Pakistan</strong>. No doubt <strong>Pakistan</strong> faces many challenges. At the same time, the multilateral trade<br />
dispensation has created many opportunities. If a proper strategy is adopted <strong>and</strong> the<br />
government plays a supportive <strong>and</strong> facilitative role, it can lead to a significant <strong>in</strong>crease <strong>in</strong><br />
<strong>in</strong>ternational trade <strong>and</strong> substantially contribute to the economic growth. Hopefully ongo<strong>in</strong>g<br />
trade negotiations would add to these opportunities. However, “the WTO is about provid<strong>in</strong>g<br />
opportunities – it does not provide guarantees nor does it provide all the conditions for<br />
participation <strong>in</strong> the global economy”. In short, <strong>Pakistan</strong> has to put its act together, for realiz<strong>in</strong>g<br />
the potential that has become available due to the trade liberalization. Action is to be taken by<br />
the Government agencies, trade bodies <strong>and</strong> above all by entrepreneurs themselves. As it has<br />
been aptly observed, “the bus<strong>in</strong>ess community has the primary responsibility for convert<strong>in</strong>g<br />
tariff reductions <strong>and</strong> liberalization commitments <strong>in</strong>to opportunities for trade by adopt<strong>in</strong>g<br />
appropriate export promotion <strong>and</strong> development strategies”<br />
3<br />
See Patrick Macrory, Arthur Appleton <strong>and</strong> Michael Plummer, <strong>The</strong> World Trade Organization: Legal,<br />
Economic <strong>and</strong> Political Analysis, Volume-I (2005) p.109.<br />
52 International Trade Centre
Current status of efforts to liberalize trade<br />
Currently (mid 2007), the n<strong>in</strong>th (<strong>and</strong> the first under the WTO) Multilateral Round of<br />
Negotiations (MTN) called the Doha Development Agenda (DDA) is <strong>in</strong> progress 4 (more<br />
correctly <strong>in</strong> a state of suspended animation). Earlier rounds have given great impetus to the<br />
growth of <strong>in</strong>ternational trade by slash<strong>in</strong>g tariffs mostly <strong>in</strong> <strong>in</strong>dustrial countries as well as<br />
elim<strong>in</strong>ation of non-tariff barriers such as quantitative restrictions. Follow<strong>in</strong>g the Uruguay<br />
Round (the most important MTN held so far), average tariffs rates <strong>in</strong> developed countries on<br />
manufactures st<strong>and</strong> at an average of 3 % on imports down from the 5.5 % pre-Uruguay Round<br />
average, a 45 % reduction. Tariffs, however, on goods of export <strong>in</strong>terest to develop<strong>in</strong>g<br />
countries still rema<strong>in</strong> relatively high 5 e.g. on cloth<strong>in</strong>g <strong>and</strong> footwear. DDA has been launched<br />
to improve the situation of develop<strong>in</strong>g countries <strong>in</strong> the multilateral trad<strong>in</strong>g system through<br />
focus<strong>in</strong>g on issues of pr<strong>in</strong>cipal concern to them. <strong>The</strong> progress of negotiation has been so far<br />
very slow <strong>and</strong> deadl<strong>in</strong>es for reach<strong>in</strong>g agreement have been repeatedly missed. Meet<strong>in</strong>gs to<br />
take forward the DDA process held <strong>in</strong> 2006 <strong>and</strong> 2007 turned out to be <strong>in</strong>conclusive <strong>and</strong><br />
negotiations have been suspended. One comment from an <strong>in</strong>fluential periodical graphically<br />
describes the situation as the Doha round ly<strong>in</strong>g “comatose after five years of fruitless<br />
negotiations” 6 .<br />
Negotiations under the DDA on the Non-Agriculture Market Access (NAMA) cover the sector<br />
under study. Modalities are yet to be f<strong>in</strong>alized on a Swiss formula (i.e. envisag<strong>in</strong>g rate of<br />
reduction for a higher tariff to be greater than that for a lower one. For further details see:<br />
www.wto.org )<br />
3.2 Information on the WTO issues<br />
3.2.1 Information flows (Upwards-downwards)<br />
Information flows, both upwards <strong>and</strong> downwards, on the WTO are depicted below:<br />
4<br />
5<br />
6<br />
See Hong Kong M<strong>in</strong>isterial Declaration, WT/M<strong>in</strong> (05), Dec 22, 2005 <strong>and</strong> for updates on the latest<br />
developments <strong>and</strong> pend<strong>in</strong>g issues visit www.wto.org.<br />
See I. Haque, Doha Development Agenda: Recaptur<strong>in</strong>g the momentum of multilateralism <strong>and</strong><br />
develop<strong>in</strong>g countries, American University International Law Review, Volume 17 Member 5 Footnote<br />
36. Also See Bernard Hoekman, Strengthen<strong>in</strong>g the Global Trade Architecture for Development: <strong>The</strong><br />
Post Doha Agenda, Nov. 2001, at 2.<br />
<strong>The</strong> Economist, November 4, 2006, p.40<br />
International Trade Centre 53
Figure 3.2 WTO <strong>in</strong>formation flows<br />
WTO<br />
WTO Mission of <strong>Pakistan</strong>, Geneva<br />
M<strong>in</strong>istry of Commerce/TDAP*<br />
M<strong>in</strong>istry of Industries<br />
Chambers of Commerce <strong>and</strong> Trade<br />
Associations<br />
Entrepreneurs<br />
* Earlier organization for trade promotion was the <strong>Export</strong> Promotion Bureau (EPB) which was replaced<br />
by a new autonomous organization, i.e. Trade Development Authority of <strong>Pakistan</strong> (TDAP) <strong>in</strong> November,<br />
2006.<br />
Source: WTO Cell, Plann<strong>in</strong>g & Development Department, Government of the Punjab<br />
<strong>The</strong> present arrangements leave a lot to be desired <strong>in</strong> terms of their content, sources,<br />
dest<strong>in</strong>ation, user friendl<strong>in</strong>ess <strong>and</strong> nature of <strong>in</strong>formation i.e. optional or compulsory. <strong>The</strong>re are<br />
markedly divergent perceptions among <strong>Pakistan</strong>i entrepreneurs of furniture about the nature<br />
<strong>and</strong> frequency of such flows. Despite contrary claims made by <strong>in</strong>dividual entrepreneurs, one<br />
cannot help reach<strong>in</strong>g the conclusion that flows are erratic <strong>in</strong> both directions.<br />
54 International Trade Centre
3.2.2 Information flow-upwards, i.e. from companies via government<br />
to WTO<br />
Government driven flows – upwards<br />
<strong>The</strong>re is no problem <strong>in</strong> respect of <strong>in</strong>formation transmitted by the Government of <strong>Pakistan</strong> to the<br />
WTO as an obligation of the membership of the organization. Regularly, the M<strong>in</strong>istry of<br />
Commerce sends necessary <strong>in</strong>formation about notifications to the WTO as agreed <strong>in</strong> the<br />
M<strong>in</strong>isterial Decision on Notification Procedure 7 . Some of the items that are notifiable are:<br />
Tariffs, Generalised System of Preferences (GSP) provisions, Custom valuation, Rules of<br />
orig<strong>in</strong>, Safeguard actions, details regard<strong>in</strong>g exports subsidies <strong>and</strong> concessionary export<br />
f<strong>in</strong>anc<strong>in</strong>g.<br />
Trade statistics<br />
As regards trade statistics, the Government of <strong>Pakistan</strong> is obliged to furnish data for the<br />
<strong>in</strong>tegrated database of the WTO. <strong>The</strong>se figures are based on data of the custom stations <strong>and</strong><br />
are reliable. <strong>The</strong>re has been, however, a lag <strong>in</strong> furnish<strong>in</strong>g these statistics. <strong>The</strong> problem is be<strong>in</strong>g<br />
sorted out.<br />
Another compulsory upward <strong>in</strong>formation flow is generated from the Census of Manufactur<strong>in</strong>g<br />
Industries (CMI) – conducted every five years 8 . Results of CMI suffer from problems of<br />
coverage, research design <strong>and</strong> lack of adequate response from the <strong>in</strong>dustry. Further, these at<br />
best are historical data.<br />
Information through consultative meet<strong>in</strong>gs<br />
<strong>The</strong> Government of <strong>Pakistan</strong> gets itself <strong>in</strong>formed about problems faced by <strong>in</strong>dustry <strong>and</strong><br />
suggestions made by the private sector, <strong>in</strong> meet<strong>in</strong>gs preced<strong>in</strong>g the formulation of each year’s<br />
trade policy. Apart from the Federations of <strong>Pakistan</strong> Chambers of Commerce <strong>and</strong> Industries<br />
(FPCCI), the regional Chambers of Commerce <strong>and</strong> sectoral associations, which are registered<br />
with the Government, are <strong>in</strong>vited. However, as regards associations, some selection is made to<br />
ensure that representation is adequate <strong>in</strong> terms of both sectors <strong>and</strong> regions.<br />
Information flow – upwards: <strong>Export</strong>ers’ op<strong>in</strong>ion<br />
Semi voluntary <strong>and</strong> sporadic<br />
In <strong>in</strong>terviews, the furniture exporters claimed that the upward flow of <strong>in</strong>formation, by<br />
<strong>and</strong> large, was voluntary <strong>and</strong> sporadic. Companies, at times, furnish <strong>in</strong>formation to the<br />
Trade Development Authority of <strong>Pakistan</strong> (TDAP), Small & Medium Enterprises Development<br />
Authority (SMEDA), Chambers of Commerce & Industry <strong>and</strong> the <strong>Furniture</strong> Association. <strong>The</strong><br />
<strong>in</strong>formation is of general nature such as, statistics of sales, production, exports etc. (supplied<br />
7<br />
8<br />
WTO: Decision on Notification Procedures, M<strong>in</strong>isterial Decisions <strong>and</strong> Declaration adopted by the Trade<br />
Negotiations Committee on December 15, 1993.<br />
<strong>The</strong> census is undertaken under the Industrial Statistics Act, 1942 for <strong>in</strong>dustrial units employ<strong>in</strong>g 10 <strong>and</strong><br />
above workers registered or qualify<strong>in</strong>g for registration. Information is treated confidential.<br />
International Trade Centre 55
mostly on dem<strong>and</strong> basis <strong>and</strong> not on regular basis). <strong>The</strong>re are, however, some firms who claim<br />
to have voluntarily provided <strong>in</strong>formation on yearly basis.<br />
Information about the concerned government agencies/departments<br />
A majority of exporters generally had an idea that compla<strong>in</strong>ts/suggestions about the WTO can<br />
be made to M<strong>in</strong>istries of Commerce & Industries or TDAP. <strong>The</strong>y were also aware of websites<br />
of the concerned government organizations. However, accord<strong>in</strong>g to them they had not made<br />
compla<strong>in</strong>ts/suggestions to any body/<strong>in</strong>stitution so far. Few had, however, consulted the<br />
Chamber to f<strong>in</strong>d answers for their queries.<br />
On the other h<strong>and</strong>, some entrepreneurs thought that there was no organization to whom they<br />
can make compla<strong>in</strong>ts nor they were aware of any procedure for mak<strong>in</strong>g their voices heard by<br />
the relevant government authorities. In short, <strong>in</strong>formation about reach<strong>in</strong>g out to the<br />
government authorities or trade bodies is not even. More enlightened entrepreneurs are<br />
aware of what to do while others rema<strong>in</strong> ignorant of avenues of articulation, available to them.<br />
3.2.3 Information flow – downwards – from WTO via government to<br />
companies<br />
Compla<strong>in</strong>ts about the lack of <strong>in</strong>formation about the WTO<br />
All the exporters who were <strong>in</strong>terviewed claimed that no <strong>in</strong>formation related to the WTO issues<br />
was readily available. Few were not even familiar with the term “WTO”. When asked whether<br />
they were aware of the WTO Cells <strong>in</strong> the M<strong>in</strong>istry of Commerce, TDAP, Plann<strong>in</strong>g &<br />
Development Departments of Prov<strong>in</strong>cial Governments, or Chamber of Commerce & Industry’s<br />
WTO Cell, they replied <strong>in</strong> negative.<br />
One of them, however, said that he gets <strong>in</strong>formation on the WTO through newspapers,<br />
association meet<strong>in</strong>gs & websites. He normally checks the websites of the association after two<br />
– three months.<br />
Knowledge about implications of the WTO Agreements<br />
Very few exporters were aware of the specific WTO Trade Agreements <strong>and</strong> their implications<br />
for the <strong>Pakistan</strong>’s furniture <strong>in</strong>dustry. Those who claimed to be knowledgeable of the<br />
agreements said that they were generally aware of decreas<strong>in</strong>g, tariffs <strong>and</strong> <strong>in</strong>creas<strong>in</strong>g prospects<br />
of imports. <strong>The</strong>y recognized that markets under the WTO trad<strong>in</strong>g dispensation would become<br />
even more open <strong>in</strong> days to come.<br />
Downwards flows<br />
With respect to downward flow, the website of M<strong>in</strong>istry of Commerce<br />
(www.commerce.gov.pk) <strong>and</strong> other M<strong>in</strong>istries, TDAP (www.tdap.gov.pk) <strong>and</strong> WTO Cell of<br />
the Government of the Punjab (www.wtopunjab.gov.pk) have been play<strong>in</strong>g a useful role.<br />
However, here aga<strong>in</strong> it was found that various notifications issued by the WTO Secretariat <strong>and</strong><br />
which were regularly sent to the M<strong>in</strong>istry of Commerce were not put on the website. <strong>The</strong> plea<br />
taken <strong>in</strong> this regard was that this <strong>in</strong>formation was available from the WTO website. It is,<br />
however, felt that the Government of <strong>Pakistan</strong> <strong>and</strong> its export/trade development organizations<br />
must play a more proactive role. <strong>The</strong> WTO <strong>in</strong> collaboration with ITC <strong>and</strong> the European<br />
56 International Trade Centre
Commission (EC/EU) has established reference centres <strong>in</strong> the M<strong>in</strong>istry of Commerce, TDAP,<br />
FPCCI, selected Chambers of Commerce & Industries <strong>and</strong> the Plann<strong>in</strong>g & Development<br />
Department of the Government of the Punjab.<br />
Dem<strong>and</strong> for proactive supportive role of the Government<br />
<strong>The</strong> furniture entrepreneurs were of the firm view that the Government should create greater<br />
awareness about the WTO issues by, regularly organiz<strong>in</strong>g focused sem<strong>in</strong>ars, workshops <strong>and</strong><br />
discussions, circulat<strong>in</strong>g newsletters, magaz<strong>in</strong>es <strong>and</strong> creat<strong>in</strong>g websites. TDAP, Chamber Of<br />
Commerce & Industry <strong>and</strong> the Association should also come forward <strong>in</strong> creat<strong>in</strong>g awareness.<br />
<strong>The</strong> Government should compile a mail<strong>in</strong>g list & regularly circulate updates on the WTO<br />
agreements to exporters/manufacturers.<br />
Recommendations<br />
<strong>The</strong> situation as to <strong>in</strong>formation flows is not satisfactory. A proactive role is <strong>in</strong>dicated on the<br />
part of M<strong>in</strong>istry of Commerce <strong>and</strong> the TDAP: This organization should provide leadership <strong>and</strong><br />
collaborate efforts with other relevant agencies e.g. Chambers of Commerce <strong>and</strong> Trade<br />
Associations, SMEDA, Prov<strong>in</strong>cial Government’s WTO Cells <strong>and</strong> Trade Associations. Funds<br />
are not an <strong>in</strong>surmountable problem because the M<strong>in</strong>istry of Commerce <strong>and</strong> TDAP has ample<br />
resources <strong>in</strong> the form of <strong>Export</strong> Development Fund (EDF). <strong>The</strong> real challenge is to organize a<br />
system that is user friendly <strong>and</strong> available <strong>in</strong> virtual real time. Technical Assistance from the<br />
ITC to set up/improve such an <strong>in</strong>formation system should be very much welcome. This should<br />
become one of the important tasks to be assigned to the National WTO Consultant for TDAP<br />
appo<strong>in</strong>ted by ITC.<br />
TDAP should <strong>in</strong>tensify its activities for capacity build<strong>in</strong>g specifically, for better use of<br />
opportunities <strong>and</strong> cop<strong>in</strong>g with challenges emanat<strong>in</strong>g from the WTO system among other<br />
th<strong>in</strong>gs, the follow<strong>in</strong>g measures are recommended:<br />
• <strong>The</strong> present system of generalized <strong>in</strong>formation on the WTO should be changed to a onedissem<strong>in</strong>at<strong>in</strong>g<br />
focused <strong>in</strong>formation regularly on concrete issues.<br />
• A comprehensive plan for dissem<strong>in</strong>ation of sector-specific <strong>in</strong>formation may be prepared<br />
by TDAP <strong>in</strong> consultation with stakeholders.<br />
• A helpl<strong>in</strong>e, professionally manned, should be established <strong>in</strong> TDAP. <strong>Sector</strong> specific<br />
experts should be available to callers.<br />
• Special meet<strong>in</strong>gs/workshops/sem<strong>in</strong>ars for educat<strong>in</strong>g entrepreneurs about the WTO issues<br />
should be organized by the TDAP preferably <strong>in</strong> partnership with concerned trade<br />
associations at least four times a year at different places.<br />
(Action: M<strong>in</strong>istry of Commerce TDAP <strong>and</strong> ITC)<br />
International Trade Centre 57
3.3 Implications of the WTO Trade Agreements<br />
3.3.1 Relevant WTO Agreements for the global & <strong>Pakistan</strong>i furniture<br />
sector<br />
<strong>The</strong> WTO Agreements <strong>in</strong> terms of degree of their relevance for the furniture sector can be<br />
divided <strong>in</strong>to three categories: high <strong>in</strong>tensity relevance, low <strong>in</strong>tensity relevance <strong>and</strong> cont<strong>in</strong>gent<br />
relevance. Agreements possess<strong>in</strong>g cont<strong>in</strong>gent relevance refer to those that come <strong>in</strong>to effect <strong>in</strong><br />
certa<strong>in</strong> situations only.<br />
<strong>The</strong> degree of relevance of these agreements for the furniture sector is the same <strong>in</strong> <strong>Pakistan</strong> <strong>and</strong><br />
elsewhere i.e. <strong>in</strong> other WTO member countries as well.<br />
<strong>The</strong> agreement, of direct relevance to the furniture sector, is GATT 1994. Other agreements<br />
hav<strong>in</strong>g high level of relevance <strong>in</strong>tensity are TRIPs, Technical Barriers to Trade (TBT),<br />
Application of Sanitary <strong>and</strong> Phytosanitary Measures (SPS), Rules of Orig<strong>in</strong> <strong>and</strong> the Customs<br />
Valuation. <strong>The</strong> agreements of lesser relevance are on: Pre-Shipment Inspection <strong>and</strong> Import<br />
Licens<strong>in</strong>g Procedures <strong>and</strong> Trade-relate Investment Measures. In the category of cont<strong>in</strong>gent<br />
relevance, agreements on Anti-Dump<strong>in</strong>g, Subsidies, Countervail<strong>in</strong>g, Safeguards <strong>and</strong> the DSU<br />
fall. <strong>The</strong> WTO Agreements not only <strong>in</strong>fluence the volume of trade but also affect the<br />
operational space of a policy-maker <strong>and</strong> market access of an <strong>in</strong>dividual exporter.<br />
A diagrammatic representation of the degree of relevance of the WTO Agreements for the<br />
furniture sector is given below.<br />
58 International Trade Centre
Figure 3.3 Relevant <strong>in</strong>tensity of WTO Agreements 9<br />
TBT<br />
TRIPS<br />
Rules of<br />
orig<strong>in</strong>*<br />
SPS<br />
<strong>Furniture</strong><br />
Custom<br />
valuation<br />
GATT<br />
1994<br />
Preshipment<br />
<strong>in</strong>spection<br />
DSU**<br />
Agreement<br />
on SCM***<br />
Antidump<strong>in</strong>g<br />
Agreement<br />
on TRIMs<br />
Import<br />
licens<strong>in</strong>g<br />
procedure<br />
High <strong>in</strong>tensity relevance<br />
Low <strong>in</strong>tensity relevance<br />
Cont<strong>in</strong>gent relevance<br />
* Acquires high <strong>in</strong>tensity relevance <strong>in</strong> the context of Regional Trad<strong>in</strong>g Arrangements <strong>and</strong> or where any<br />
scheme of preferential tariffs has been adopted.<br />
** Dispute Settlement Underst<strong>and</strong><strong>in</strong>g<br />
*** Subsidies & Countervail<strong>in</strong>g Measures<br />
Relevance of the specific WTO Agreements for the furniture sector <strong>in</strong><br />
greater detail<br />
General Agreement on Tariffs <strong>and</strong> Trade 1994: (Annex 1A to the Marrakech<br />
Agreement Establish<strong>in</strong>g the WTO)<br />
<strong>The</strong> structure of GATT 1994 that lays down the framework with<strong>in</strong> which the <strong>in</strong>ternational<br />
trade of goods takes place. It rests upon five pillars that constitute the core of the legal<br />
obligations of the member countries.<br />
9<br />
Texts of Agreements are available on the WTO’s website www.wto.org<br />
International Trade Centre 59
Fundamental obligations<br />
<strong>The</strong> unconditional Most-Favoured-Nation (MFN) obligation (Article-l):<br />
Every member of the WTO is required to treat imports from all other members “on an equal,<br />
non-discrim<strong>in</strong>atory basis vis-à-vis all other members imports”. Thus if a country grants another<br />
a special favour (e.g. lower custom’s duty rates) the same treatment has to be extended to all<br />
other WTO member countries.<br />
Implications for the furniture sector<br />
Imports<br />
• <strong>Pakistan</strong> or any other WTO member country while import<strong>in</strong>g furniture has to extend the<br />
same treatment to the same products of all the member countries. <strong>The</strong>y are not allowed<br />
to give a differential treatment to any trad<strong>in</strong>g partner who is member of the WTO.<br />
• This obligation leads to non-discrim<strong>in</strong>atory trade <strong>and</strong> provides level play<strong>in</strong>g field to<br />
every member of the WTO.<br />
<strong>Export</strong>s<br />
• For <strong>Pakistan</strong>i exports non-discrim<strong>in</strong>atory market access to other markets is legally<br />
assured. This does not, however, <strong>in</strong>dicate the rate of tariff which is liveable on furniture<br />
items. Market access will be virtually blocked if tariff rates are excessively high.<br />
Likewise, exports will be adversely affected if non-tariff barriers are be<strong>in</strong>g used by<br />
import<strong>in</strong>g countries.<br />
Exception to the pr<strong>in</strong>ciple<br />
Some exceptions are permitted from this pr<strong>in</strong>ciple such as:<br />
• Preferential tariff rates given to countries who are members of a free trade area/regional<br />
trad<strong>in</strong>g arrangements under Article XXIV of the GATT,<br />
• Preferential tariff rate arrangements among develop<strong>in</strong>g countries permitted under the<br />
Enabl<strong>in</strong>g Clause 10 (See Box 3.2).<br />
• Special access to markets of <strong>in</strong>dustrial countries at lower tariff rates granted to<br />
develop<strong>in</strong>g countries e.g. Generalized System of Preferences (GSP) 11 . Member countries<br />
are allowed to <strong>in</strong>troduce trade restriction <strong>in</strong> case of balance of payment difficulties.<br />
All these exceptions are, however, allowed under strict conditionalities.<br />
10<br />
11<br />
WTO, Guide to the Uruguay Round Agreements 1999, p 40.<br />
<strong>The</strong> GSP was proposed at UNCTAD II <strong>in</strong> 1968. It entered <strong>in</strong>to force <strong>in</strong> 1971 <strong>and</strong> gives develop<strong>in</strong>g<br />
countries a marg<strong>in</strong> of preference <strong>in</strong> the tariff rates their goods face <strong>in</strong> the markets of developed<br />
countries. In this way GSP <strong>in</strong>creases their competitiveness.<br />
60 International Trade Centre
Box 3.2 Regional Trade Agreements (RTAs)<br />
Governments often take action to liberalize trade on a regional level through formation of<br />
free trade areas or preferential trade areas. Under these arrangements, goods can enter<br />
each other’s country market either without payment of any tariff or on some preferential<br />
terms <strong>and</strong> conditions. RTA, which <strong>in</strong>cludes bilateral free trade agreements between<br />
countries that are not <strong>in</strong> the same region, have become so widespread that all but one WTO<br />
member are now parties to one or more of them. It is estimated that more than half of world<br />
trade is now conducted under RTAs. Some 197 such agreements <strong>in</strong> force have been<br />
notified to the GATT/WTO.<br />
Many experts regard these arrangements as build<strong>in</strong>g blocks for a freer non-discrim<strong>in</strong>atory<br />
multilateral trad<strong>in</strong>g system. Many other experts, however, perceive these arrangements to<br />
be obstacles to the growth of multilateral system. Regional arrangements are allowed (as<br />
exception to the Most Favoured Nation pr<strong>in</strong>ciple) under Article XXIV of the GATT 94 as well<br />
as under the Enabl<strong>in</strong>g Clause (trade arrangements between develop<strong>in</strong>g countries).<br />
<strong>Pakistan</strong> is a signatory to an Agreement on South Asian Free Trade Area (SAFTA) which is<br />
transformation of the SAARC Preferential Trad<strong>in</strong>g Arrangement (SAPTA operational albeit<br />
half-heartedly s<strong>in</strong>ce 1995) <strong>in</strong>to a Free Trade Area among the SAARC members<br />
(Bangladesh, Bhutan, India, Nepal, Maldives, <strong>Pakistan</strong> <strong>and</strong> Sri Lanka).<br />
SAFTA’s framework agreement envisages reduction of tariffs to 0-5% level <strong>and</strong> remov<strong>in</strong>g<br />
quantitative barriers to trade (a) with<strong>in</strong> 10 years by its LDCs members—Nepal, Bhutan <strong>and</strong><br />
Maldives <strong>and</strong> (b) between 7 – 8 years <strong>in</strong> case of India, <strong>Pakistan</strong>, Bangladesh <strong>and</strong> Sri Lanka.<br />
In addition to the above, a FTA has been signed with Sri Lanka. Early harvest agreements<br />
have been signed with Ch<strong>in</strong>a <strong>and</strong> Malaysia. Besides this, a FTA agreement has been<br />
signed with Ch<strong>in</strong>a <strong>in</strong> November 2006. Negotiations are ongo<strong>in</strong>g for sign<strong>in</strong>g FTA with<br />
Bangladesh, Turkey <strong>and</strong> Kenya. Discussions are also ongo<strong>in</strong>g with Indonesia, Laos,<br />
S<strong>in</strong>gapore <strong>and</strong> Thail<strong>and</strong> for explor<strong>in</strong>g the possibility of enter<strong>in</strong>g <strong>in</strong>to FTAs.<br />
Source: WTO Cell, Plann<strong>in</strong>g & Development Department, Government of the Punjab<br />
National Treatment Obligation (Article lll)<br />
Once foreign goods have entered a country’s market, these <strong>and</strong> locally produced goods are to<br />
be treated equally (as if foreign goods have acquired import<strong>in</strong>g country’s nationality).<br />
This article embodies the same pr<strong>in</strong>ciple of non-discrim<strong>in</strong>ation as set out <strong>in</strong> the MFN<br />
commitment. It also establishes the pr<strong>in</strong>ciple that no tax will be imposed on imports <strong>in</strong> excess<br />
of the amount of the <strong>in</strong>direct taxes levied on the like domestic products.<br />
Reduction <strong>and</strong> b<strong>in</strong>d<strong>in</strong>gs of National Tariffs (Articles II, XI)<br />
In order to make trade predictable, WTO member countries are generally b<strong>in</strong>d<strong>in</strong>g their<br />
commitments (Article-Xl) i.e. ceil<strong>in</strong>gs are imposed on tariff rates that can be charged by a<br />
country 12 . Under the WTO system tariffs (i.e. custom duties) are the only form of the<br />
permissible measure for trade protection (Article II & Article XI). <strong>The</strong> bound tariffs cannot be<br />
<strong>in</strong>creased above the bound rates unless compensation is paid to the other adversely affected<br />
WTO member.<br />
12<br />
<strong>Pakistan</strong> has bound more than 99% of tariff l<strong>in</strong>es.<br />
International Trade Centre 61
In case of develop<strong>in</strong>g countries, imports often take place on lower than the bound rates these<br />
are called applied rates which can be <strong>in</strong>creased up to bound levels without consultation with<br />
anyone.<br />
Reduction of tariffs is an important aspect of trade liberalization. As a matter of fact rates of<br />
tariffs have been constantly com<strong>in</strong>g down s<strong>in</strong>ce the GATT became operational <strong>in</strong> 1948.<br />
Industrial countries’ tariffs <strong>in</strong> most of the traded items have fallen down to less than 4%. Such<br />
a significant reduction <strong>in</strong> tariff barriers has been very helpful for <strong>in</strong>creas<strong>in</strong>g trade. However, as<br />
stated above on many items of <strong>in</strong>terest to develop<strong>in</strong>g countries, tariff rates rema<strong>in</strong> relatively<br />
high e.g. textiles <strong>and</strong> cloth<strong>in</strong>g.<br />
Elim<strong>in</strong>ation of quantitative restrictions (Article Xl)<br />
Member countries are required to elim<strong>in</strong>ate quantitative restrictions on imports <strong>and</strong> exports.<br />
<strong>The</strong>re are, however, a number of exceptions to this rule. For example export restrictions can<br />
be applied on export of goods to prevent or relieve critical shortages, Article XI-2 (a).<br />
Implications for the furniture sector<br />
<strong>Export</strong>s<br />
<strong>Pakistan</strong>i exports of furniture do not by <strong>and</strong> large, face significant non-tariff barriers <strong>in</strong><br />
<strong>in</strong>dustrial countries’ markets. <strong>The</strong>y ma<strong>in</strong>ly face tariff barriers that have also substantially come<br />
down. In other words, for the furniture sector of <strong>Pakistan</strong> the “market access” is not a problem<br />
as such. This <strong>in</strong>dicates a great scope for <strong>in</strong>creas<strong>in</strong>g export <strong>in</strong> this item provided we have the<br />
right products at right prices.<br />
Imports<br />
• Comb<strong>in</strong>ed effects of Articles II & Xl are that foreign furniture goods enjoy reasonable<br />
access to <strong>Pakistan</strong>’s market though our tariffs are relatively high (25%).<br />
• <strong>Pakistan</strong>’s exports have <strong>in</strong> fact better opportunities <strong>in</strong> markets of <strong>in</strong>dustrial countries on<br />
account of their comparatively lower tariffs.<br />
Transparency of Government regulations affect<strong>in</strong>g trade (Article X)<br />
Members are obliged to publish relevant laws, regulations, adm<strong>in</strong>istrative rul<strong>in</strong>gs of general<br />
application <strong>in</strong>clud<strong>in</strong>g those perta<strong>in</strong><strong>in</strong>g to the classification of the valuation of the products etc.<br />
Governments are also required to disclose their policies <strong>and</strong> practices publically with<strong>in</strong> the<br />
country as well as by notify<strong>in</strong>g the WTO. With a view to ensur<strong>in</strong>g that members adhere to<br />
their obligations, their trade policies are periodically exam<strong>in</strong>ed through a surveillance<br />
mechanism called the “Trade Policy Review Mechanism”. This exam<strong>in</strong>ation of the trade<br />
policy <strong>and</strong> results becom<strong>in</strong>g a part of public doma<strong>in</strong> also contribute to greater transparency.<br />
Implications for the furniture sector<br />
• Transparency <strong>in</strong> government regulations, <strong>in</strong> <strong>Pakistan</strong> <strong>and</strong> abroad, helps <strong>in</strong> smoother flow<br />
of trade. It is “<strong>in</strong> essence due process guarantees <strong>and</strong> a partial shield aga<strong>in</strong>st arbitrary<br />
government action”.<br />
62 International Trade Centre
Trade Related Aspects of Intellectual Property Rights (TRIPS)<br />
Many countries entered <strong>in</strong>to <strong>in</strong>ternational agreements (non WTO) to protect creative ideas <strong>and</strong><br />
new knowledge by giv<strong>in</strong>g the creators of these knowledge based assets (called “<strong>in</strong>tellectual<br />
property rights”):<br />
• <strong>The</strong> right to prevent others from “us<strong>in</strong>g their <strong>in</strong>ventions, designs or other creations 13 <strong>and</strong>,<br />
• To use this right to negotiate payment for their <strong>in</strong>tellectual property (IP) rights.<br />
However, protection given to IPRs (by several <strong>in</strong>ternational agreements) was found to be<br />
<strong>in</strong>adequate. This was particularly true as to the level of protection, implementation <strong>and</strong><br />
enforcement. It was, therefore, agreed to develop new <strong>in</strong>ternationally agreed rules. <strong>The</strong> result<br />
was the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs)<br />
negotiated <strong>in</strong> the Uruguay Round of MTN that sought to reduce distortions <strong>and</strong> impediments to<br />
<strong>in</strong>ternational trade through promot<strong>in</strong>g effective <strong>and</strong> adequate protection of <strong>in</strong>tellectual property<br />
rights.<br />
<strong>The</strong> Agreement spells out the way that basic pr<strong>in</strong>ciples of trad<strong>in</strong>g order <strong>and</strong> other <strong>in</strong>tellectual<br />
property agreements should be applied. <strong>The</strong> “MFN” <strong>and</strong> national treatment requirement have<br />
constituted key elements of the architecture of the agreement on the TRIPs. This Agreement<br />
has also required members to comply with pre-exist<strong>in</strong>g agreements govern<strong>in</strong>g IPRs. It was<br />
explicitly provided that noth<strong>in</strong>g <strong>in</strong> the TRIPs Agreement shall derogate from exist<strong>in</strong>g<br />
obligations as spelled out <strong>in</strong> the Paris Convention, the Berne Convention, the Rome<br />
Convention <strong>and</strong> the Treaty <strong>in</strong> respect of Integrated Circuits.<br />
<strong>The</strong> TRIPs Agreement markedly narrowed the gaps <strong>in</strong> the manner these rights were<br />
recognized, protected <strong>and</strong> enforced among trad<strong>in</strong>g nations. It also provides for settlement of<br />
disputes through the WTO dispute settlement system. <strong>Pakistan</strong>, <strong>in</strong> compliance with the TRIPS<br />
Agreement, has enacted new legislation (IPO law) as well as effected amendments <strong>in</strong> the<br />
exist<strong>in</strong>g laws relat<strong>in</strong>g to patents, copyrights <strong>and</strong> Trademarks.<br />
Relevance for the furniture sector:<br />
<strong>The</strong> TRIPs Agreement is directly relevant for the furniture sector.<br />
Protection of designs <strong>and</strong> trademarks<br />
• <strong>Furniture</strong> designs can now be protected through gett<strong>in</strong>g them registered under the<br />
Industrial Designs Ord<strong>in</strong>ance (2000). <strong>The</strong> furniture <strong>in</strong>dustry should seriously consider<br />
register<strong>in</strong>g any <strong>in</strong>novative <strong>and</strong> special design so these be fully protected.<br />
• <strong>The</strong> well-established companies would be also well advised to get their trade marks<br />
protected.<br />
• <strong>The</strong> quality of protection has significantly improved. By the same token the furniture<br />
<strong>in</strong>dustry <strong>in</strong> <strong>Pakistan</strong> cannot copy some one else’s designs or trade marks. <strong>Pakistan</strong>i<br />
furniture manufactures <strong>and</strong> exporters will be well advised to comply with the provisions<br />
of the TRIPs Agreement.<br />
13<br />
This Agreement fixed m<strong>in</strong>imum levels of protection that each member of the WTO is required to provide<br />
to <strong>in</strong>tellectual property rights of other members.<br />
International Trade Centre 63
• <strong>Export</strong>ers if wrongly accused of violation of some one’s IPRs should take full advantage<br />
of protection provided by this Agreement.<br />
(Action: Entrepreneur/Association)<br />
Agreement on Technical Barriers to Trade (TBT)<br />
Every WTO member, while allow<strong>in</strong>g imports, has the right to adopt st<strong>and</strong>ards considered by it<br />
to be appropriate for human, animal or plant life or health or for the protection of the<br />
environment or for prevention of deceptive practices. <strong>The</strong> TBT seeks to assure that<br />
regulations, st<strong>and</strong>ards, test<strong>in</strong>g <strong>and</strong> certification procedures do not create unnecessary hurdles to<br />
trade. However, with a view to prevent<strong>in</strong>g excessive diversity, TBT encourages member<br />
countries to use <strong>in</strong>ternational st<strong>and</strong>ards where these are appropriate but it does not oblige them<br />
to change their levels of protection <strong>in</strong> the process.<br />
TBT conta<strong>in</strong>s a code of good practice for the preparation, adoption <strong>and</strong> application of<br />
st<strong>and</strong>ards. It lays down that procedures used to determ<strong>in</strong>e whether a product conforms with the<br />
national st<strong>and</strong>ards have to be fair <strong>and</strong> equitable. It does not approve of any methods that would<br />
give domestically produced products an unfair advantage. It also encourages countries to<br />
accord recognition to each other’s test<strong>in</strong>g procedures. To help the stakeholders to know about<br />
the latest st<strong>and</strong>ards <strong>in</strong> the prospective markets, all WTO members are required to establish a<br />
national enquiry po<strong>in</strong>t.<br />
<strong>The</strong> TBT gives decisive advantage to <strong>in</strong>dustrial countries as they have superior technologies<br />
<strong>and</strong> do follow more rigorous <strong>and</strong> higher st<strong>and</strong>ards. On the contrary, <strong>Pakistan</strong> be<strong>in</strong>g a<br />
develop<strong>in</strong>g country has yet to progress to those relatively sophisticated st<strong>and</strong>ards. In<br />
particular, there are not enough laboratories. This puts <strong>Pakistan</strong> at a disadvantage.<br />
Relevance for the furniture sector:<br />
<strong>The</strong>re can be genu<strong>in</strong>e concerns about safety features of the furniture exported form <strong>Pakistan</strong><br />
e.g. it has rough edges that can cause <strong>in</strong>jury, or its design is defective or it has failed to use fire<br />
retardant material as required by the consumers.<br />
<strong>The</strong>re is also the possibility that protectionists <strong>in</strong>terests <strong>in</strong> import<strong>in</strong>g countries may <strong>in</strong>sist on<br />
lay<strong>in</strong>g down unrealistic st<strong>and</strong>ards which might have the effect of obstruct<strong>in</strong>g trade. In such<br />
cases, <strong>Pakistan</strong>i exporters may be well advised to plead that the arbitrary st<strong>and</strong>ards have been<br />
creat<strong>in</strong>g unnecessary hurdles to trade <strong>and</strong> constitute a violation of the TBT Agreement.<br />
<strong>The</strong>re are various government <strong>in</strong>stitutions through which awareness regard<strong>in</strong>g environmental<br />
st<strong>and</strong>ards <strong>and</strong> regulations can be/should be dissem<strong>in</strong>ated regularly to the export sector. <strong>The</strong>se<br />
<strong>in</strong>clude the M<strong>in</strong>istry of Commerce, M<strong>in</strong>istry of Industries <strong>and</strong> M<strong>in</strong>istry of Environment, Trade<br />
Development Authority of <strong>Pakistan</strong> <strong>and</strong> Prov<strong>in</strong>cial Department of Environment Protection. <strong>The</strong><br />
lack of such <strong>in</strong>formation can lead to loss of markets. <strong>The</strong> M<strong>in</strong>istry of Commerce may also<br />
consider <strong>in</strong>clud<strong>in</strong>g a trade <strong>and</strong> environment section <strong>in</strong> the cell that deals with the WTO <strong>and</strong><br />
draw on the relevant expertise from the other m<strong>in</strong>istries.<br />
(Action: Entrepreneurs/Association <strong>and</strong> Government of <strong>Pakistan</strong> (GOP)<br />
64 International Trade Centre
Agreement on the application of sanitary <strong>and</strong> phytosanitary measures<br />
(SPS)<br />
Member countries of the WTO are allowed under Article XX of the GATT 94 to regulate<br />
trade with a view to protect<strong>in</strong>g human, animal or plant life or health. Under the Agreement on<br />
Sanitary <strong>and</strong> Phytosanitary measures (SPS), the WTO has discipl<strong>in</strong>ed the exercise of discretion<br />
by member countries by disallow<strong>in</strong>g them to discrim<strong>in</strong>ate or misuse this authority serv<strong>in</strong>g as a<br />
form of disguised protectionism.<br />
Members of the WTO are allowed to establish their own st<strong>and</strong>ards but it is stipulated that the<br />
relevant regulations must be based on science <strong>and</strong> applied only to the extent necessary to<br />
protect human, animal or plant life or health. <strong>The</strong>y are not allowed to arbitrarily or<br />
unjustifiably discrim<strong>in</strong>ate between countries, where identical or similar conditions prevail.<br />
Member countries are encouraged to use <strong>in</strong>ternational st<strong>and</strong>ards, guidel<strong>in</strong>es <strong>and</strong><br />
recommendations if these are available.<br />
In order to make the process fair from the perspective of exporters, st<strong>and</strong>ards different from<br />
those already prescribed, can be applied. Similarly, different methods of <strong>in</strong>spect<strong>in</strong>g products<br />
can be adopted. In order to make this happen exporters demonstrate that the measures which<br />
export<strong>in</strong>g countries have applied are at the same level of “health protection” as adopted by<br />
import<strong>in</strong>g countries. Once that is done, an import<strong>in</strong>g country is expected to accept the<br />
export<strong>in</strong>g country’s st<strong>and</strong>ards <strong>and</strong> methods. <strong>The</strong> Agreement also lays down that governments<br />
must provide advance notice of new or changed SPS regulations. <strong>The</strong>y are also required to set<br />
a national enquiry po<strong>in</strong>t to provide up-to-date <strong>in</strong>formation.<br />
Relevance for the furniture sector<br />
Apparently, this agreement should not be relevant for the furniture sector. However,<br />
protectionist’s <strong>in</strong>terests can assume any garb <strong>and</strong> come up with objections as to the imported<br />
furniture on the ground of it be<strong>in</strong>g harmful to human, animal or plant health. In particular,<br />
such a st<strong>and</strong> can be taken somewhat easily <strong>in</strong> respect of the components of furniture <strong>and</strong> ready<br />
to assemble parts. It may be argued, for example, that <strong>in</strong>puts or polish on the furniture are<br />
emitt<strong>in</strong>g certa<strong>in</strong> substance or the wood used have been treated with a material (say anti-termite<br />
treatment carried out by the manufacturer) which is harmful to the human, animal <strong>and</strong> plant<br />
life. In such a situation, it would be open for our exporters to approach the Government of<br />
<strong>Pakistan</strong> (GOP) to press <strong>in</strong>to service provisions <strong>in</strong> the agreement aga<strong>in</strong>st untenable st<strong>and</strong>ards.<br />
(Action: <strong>Furniture</strong> Industry <strong>and</strong> GOP)<br />
Customs Valuation under the GATT – Implementation of Article VII of<br />
the GATT<br />
<strong>The</strong> Provisions regard<strong>in</strong>g customs valuation under the GATT seek to establish a fair <strong>and</strong><br />
uniform system for the valuation of goods that provides protection to <strong>in</strong>ternational traders from<br />
fixation of arbitrary values by customs authorities of import<strong>in</strong>g countries. <strong>The</strong> agreement lays<br />
down that the customs value of the imported goods <strong>in</strong> the case of unrelated parties (additional<br />
considerations apply where the importer <strong>and</strong> exporter are related entities) will be the<br />
“transaction value”, which really means the price actually payable for the goods when sold for<br />
exports. Some costs such as: freight, packag<strong>in</strong>g, commissions etc. may be added for the<br />
purpose of work<strong>in</strong>g out customs value. <strong>The</strong> agreement however excludes items that are<br />
regarded irrelevant for fix<strong>in</strong>g custom value, e.g. the price of goods <strong>in</strong> domestic market of the<br />
International Trade Centre 65
export<strong>in</strong>g country. If the custom authorities of a country have doubts about the declared value,<br />
they may determ<strong>in</strong>e the value by sequentially adopt<strong>in</strong>g one of the five options: (a) the value of<br />
identical goods, (b) the value of similar goods, (c) the imported price of identical or similar<br />
goods less applicable deductions for costs, (d) computed value <strong>and</strong> (e) if none of these methods<br />
work, reasonable means may be used for determ<strong>in</strong><strong>in</strong>g value.<br />
Relevance of the furniture sector<br />
Serious problems can arise if custom authorities of a country choose to fix arbitrary values. If<br />
values fixed are excessive, trade liberalization policy can be effectively negated. In case<br />
values are on the low side the tariff protection given to domestic manufactures will cease to be<br />
effective. <strong>Furniture</strong> importers <strong>and</strong> domestic producers if they f<strong>in</strong>d this misuse of custom<br />
processes they can agitate the matter with the relevant revenue authority (Central Board of<br />
Revenue).<br />
Rules of Orig<strong>in</strong><br />
<strong>The</strong> WTO agreement on Rules of Orig<strong>in</strong> conta<strong>in</strong>s a work-programme seek<strong>in</strong>g to br<strong>in</strong>g about <strong>in</strong><br />
the long term harmonization of these rules. <strong>The</strong> issue of “Rules of Orig<strong>in</strong>” does not arise <strong>in</strong><br />
cases where import <strong>and</strong> export take place on the MFN basis. This issue arises <strong>in</strong> cases where a<br />
country is to benefit from the lower tariff available through GSP or under a regional trad<strong>in</strong>g<br />
arrangement. Such concessional arrangement rightly requires scrut<strong>in</strong>y of imported goods to<br />
ensure that they are com<strong>in</strong>g from the eligible sources.<br />
Relevance of the furniture sector<br />
Where furniture exports are dest<strong>in</strong>ed for a country either grant<strong>in</strong>g GSP or, for a member of a<br />
regional arrangement of which <strong>Pakistan</strong> is a member, rules of orig<strong>in</strong> acquire special<br />
importance. <strong>Export</strong>ers will be advised <strong>in</strong> these cases to obta<strong>in</strong> complete documentation,<br />
certify<strong>in</strong>g the <strong>Pakistan</strong>i orig<strong>in</strong> of the concerned articles. Importers should likewise <strong>in</strong> such<br />
cases <strong>in</strong>sist on gett<strong>in</strong>g proper documentation from the import<strong>in</strong>g country.<br />
(Action: <strong>Furniture</strong> Industry <strong>and</strong> GOP)<br />
Agreement on Trade-Related Investment Measures (TRIMs)<br />
At times, local content requirements <strong>and</strong> <strong>performance</strong> requirements have been, <strong>in</strong>ter alia,<br />
employed by host countries as an <strong>in</strong>strument to promote development objectives, such as<br />
<strong>in</strong>dustrialization, import-substitution <strong>and</strong> export growth. Such requirements can affect<br />
<strong>in</strong>ternational trade. For example, a requirement of local content <strong>in</strong> a product may prevent or<br />
limit the use of imported <strong>in</strong>puts. Any <strong>in</strong>vestment related measure of this type has been now<br />
prohibited as a trade distort<strong>in</strong>g measure. This agreement is, as such, not relevant for the<br />
furniture sector.<br />
Antidump<strong>in</strong>g – Agreement on implementation of Article VI of the GATT<br />
1994<br />
Article VI of the GATT 94 f<strong>in</strong>ds the practice, of sale of products of a foreign country at less<br />
than the normal value of the products <strong>in</strong> the export<strong>in</strong>g country (called dump<strong>in</strong>g) objectionable<br />
if the price level causes or threatens material <strong>in</strong>jury to an established <strong>in</strong>dustry <strong>in</strong> the import<strong>in</strong>g<br />
66 International Trade Centre
country or materially retards the establishment of a domestic <strong>in</strong>dustry. Article VI (2) of the<br />
Agreement permits a country to offset or prevent dump<strong>in</strong>g by levy<strong>in</strong>g on the concerned<br />
product antidump<strong>in</strong>g duty not greater <strong>in</strong> amount than the marg<strong>in</strong> of dump<strong>in</strong>g. <strong>The</strong> marg<strong>in</strong> of<br />
the dump<strong>in</strong>g is the price difference determ<strong>in</strong>ed <strong>in</strong> accordance with the Article VI (1).<br />
Under the antidump<strong>in</strong>g agreement, a country is allowed to act <strong>in</strong> a way that would normally<br />
<strong>in</strong>fr<strong>in</strong>ge the GATT pr<strong>in</strong>ciples of b<strong>in</strong>d<strong>in</strong>g a tariff on MFN basis because antidump<strong>in</strong>g actions<br />
means “charg<strong>in</strong>g extra import duty” on a particular product from a particular export<strong>in</strong>g<br />
country. Detailed procedures have been laid down on how antidump<strong>in</strong>g cases are to be<br />
<strong>in</strong>itiated, how their <strong>in</strong>vestigations are to be conducted <strong>and</strong> the conditions for ensur<strong>in</strong>g that all<br />
<strong>in</strong>terested parties get an opportunity to present evidence.<br />
Normally, antidump<strong>in</strong>g measures expire five years after the date of imposition, unless an<br />
<strong>in</strong>vestigation shows that end<strong>in</strong>g the measures would lead to <strong>in</strong>jury. Anti-dump<strong>in</strong>g<br />
<strong>in</strong>vestigations are required to end immediately <strong>in</strong> cases where it is determ<strong>in</strong>ed if the marg<strong>in</strong> of<br />
dump<strong>in</strong>g is <strong>in</strong>significantly small (def<strong>in</strong>ed as less than 2% of the export price of the product).<br />
Likewise, proceed<strong>in</strong>gs must end if the volume of dumped imports is negligible. <strong>The</strong> agreement<br />
lays down that the member countries must <strong>in</strong>form the WTO about all prelim<strong>in</strong>ary <strong>and</strong> f<strong>in</strong>al<br />
antidump<strong>in</strong>g actions promptly as well as report on <strong>in</strong>vestigations twice a year.<br />
Relevance of the furniture sector<br />
This agreement is important both for importers <strong>and</strong> exporters of furniture. If actionable<br />
dump<strong>in</strong>g takes places <strong>in</strong> the <strong>Pakistan</strong>i market, one can have recourse to the National Tariff<br />
Commission (www.ntc.gov.pk) for seek<strong>in</strong>g relief. If necessary the Government of <strong>Pakistan</strong><br />
also can, on the basis of Anti-dump<strong>in</strong>g Agreement, agitate the matter <strong>in</strong> the dispute settlement<br />
system of the WTO. <strong>The</strong> M<strong>in</strong>istry of Commerce, Government of <strong>Pakistan</strong> is the concerned<br />
agency.<br />
(Action: <strong>Furniture</strong> Industry <strong>and</strong> GOP, M<strong>in</strong>istry of Commerce)<br />
In case, export of furniture from <strong>Pakistan</strong> faces anti-dump<strong>in</strong>g proceed<strong>in</strong>g <strong>in</strong> an import<strong>in</strong>g<br />
country or <strong>in</strong> the dispute settlement system of the WTO the GoP has to argue (<strong>and</strong> present<br />
evidence) that dump<strong>in</strong>g has not taken place or the marg<strong>in</strong> of dump<strong>in</strong>g is <strong>in</strong>significantly small.<br />
However, given the extremely small quantum of furniture exports from <strong>Pakistan</strong>, there is little<br />
likelihood of antidump<strong>in</strong>g action aga<strong>in</strong>st us <strong>in</strong> the near future. Action is to be taken at the<br />
<strong>in</strong>stance of the <strong>in</strong>dustry by the M<strong>in</strong>istry of Commerce.<br />
(Action: Industry <strong>and</strong> M<strong>in</strong>istry of Commerce, GOP)<br />
Agreement on subsidies <strong>and</strong> countervail<strong>in</strong>g measures<br />
This agreement discipl<strong>in</strong>es use of subsidies <strong>and</strong> also regulates the actions that can be taken by<br />
the countries to counter effects of subsidies. A country can have recourse to the WTO’s<br />
dispute settlement mechanism <strong>and</strong> seek the withdrawal of the subsidy or the removal of its<br />
adverse effects. Another alternative is to launch its own <strong>in</strong>vestigation <strong>and</strong> charge extra duty<br />
(known as “countervail<strong>in</strong>g duty”) on the goods <strong>in</strong> question to nullify effects of subsidy given<br />
by our trad<strong>in</strong>g partners. <strong>The</strong> agreement def<strong>in</strong>es a subsidy <strong>and</strong> also <strong>in</strong>troduces a concept of a<br />
specific subsidy i.e. a subsidy available only to an enterprise/group of enterprises. <strong>The</strong><br />
discipl<strong>in</strong>e applies only to specific domestic or exports subsidies.<br />
International Trade Centre 67
<strong>The</strong> agreement deals with the follow<strong>in</strong>g two types of subsidies:<br />
• Prohibited subsidies: Requir<strong>in</strong>g recipients of subsidies to achieve certa<strong>in</strong> exports<br />
targets, or to use domestic goods <strong>in</strong>stead of imported goods <strong>in</strong> their manufacture. Such<br />
subsidies (trade distort<strong>in</strong>g) can be challenged <strong>in</strong> the WTO’s dispute settlement<br />
mechanism. In case, it is found that the prohibited subsidies have been given, the<br />
respondent country will be ordered to withdraw those immediately. In case the<br />
respondent fails to comply, the compla<strong>in</strong><strong>in</strong>g country can levy countervail<strong>in</strong>g duty on<br />
such subsidized products after follow<strong>in</strong>g the prescribed procedure.<br />
• Actionable subsidies: This category is less objectionable than “prohibited subsides”.<br />
Here a compla<strong>in</strong><strong>in</strong>g country has to demonstrate that the subsidy has an adverse effect on<br />
its <strong>in</strong>terests. <strong>The</strong> agreement def<strong>in</strong>es three types of damage that can be caused by this<br />
class of subsidies (i) Domestic <strong>in</strong>dustry of the import<strong>in</strong>g country is be<strong>in</strong>g hurt (ii) Rival<br />
exporters from another country may be hurt when the two compete <strong>in</strong> third markets (iii)<br />
Domestic subsidies <strong>in</strong> one country can hurt exporters try<strong>in</strong>g to compete <strong>in</strong> the<br />
subsidiz<strong>in</strong>g countries’ domestic market.<br />
• Exception: Subsidies given by LDCs/develop<strong>in</strong>g countries with GNPs of less than<br />
US$1000 per capita per year are exempted from subsidy regime.<br />
Relevance of the furniture sector<br />
Imports <strong>in</strong>to <strong>Pakistan</strong><br />
In case prohibited <strong>and</strong> actionable subsidies are given to promote export of the furniture,<br />
affected <strong>in</strong>terests <strong>in</strong> <strong>Pakistan</strong> can request the National Tariff Commission to impose<br />
countervail<strong>in</strong>g duties.<br />
<strong>Export</strong>s from <strong>Pakistan</strong><br />
On the other h<strong>and</strong> if allegations are made by import<strong>in</strong>g country about subsidies (trade<br />
distort<strong>in</strong>g) on the part of <strong>Pakistan</strong>, this agreement provides the exporter with wherewithal to<br />
show that countervail<strong>in</strong>g duty should not be imposed. Should the matter require reference to<br />
the WTO, the M<strong>in</strong>istry of Commerce would have to be approached.<br />
(Action: <strong>Furniture</strong> <strong>in</strong>dustry <strong>and</strong> GOP)<br />
Agreement on safeguards<br />
This agreement discipl<strong>in</strong>es <strong>in</strong>itiation of emergency safeguards measures by lay<strong>in</strong>g down<br />
requirements for safeguard <strong>in</strong>vestigations. <strong>The</strong>se have to be transparent as well as oblige the<br />
Member countries to follow established rules <strong>and</strong> practices. <strong>The</strong> criteria for serious <strong>in</strong>jury<br />
caused or threatened to be caused has been also laid down. <strong>The</strong> agreement also sets time limit<br />
on all safeguard actions (4 years) <strong>and</strong> addresses “grey area”, measures by provid<strong>in</strong>g that the<br />
members must not seek/take or ma<strong>in</strong>ta<strong>in</strong> any voluntary export restra<strong>in</strong>ts, orderly market<strong>in</strong>g<br />
arrangements or any other similar measures. An import “surge” that triggers action under this<br />
agreement is def<strong>in</strong>ed it to be a real <strong>in</strong>crease <strong>in</strong> imports i.e. an absolute <strong>in</strong>crease or an <strong>in</strong>crease<br />
<strong>in</strong> the import share of a shr<strong>in</strong>k<strong>in</strong>g market (even if the import quantity has not <strong>in</strong>creased).<br />
68 International Trade Centre
Relevance of the furniture sector<br />
This agreement can be used wherever any import<strong>in</strong>g country f<strong>in</strong>ds that there has been a surge<br />
<strong>in</strong> imports, caus<strong>in</strong>g <strong>in</strong>jury to the domestic <strong>in</strong>dustry. Affected parties are well advised to<br />
approach the Government of <strong>Pakistan</strong> for remedial steps <strong>in</strong> such a case.<br />
By the same token, the export<strong>in</strong>g country can always show that action under safeguards<br />
provisions is not transparent or does not meet the criteria of serious <strong>in</strong>jury or threat of serious<br />
<strong>in</strong>jury.<br />
(Action: <strong>Furniture</strong> Industry <strong>and</strong> GOP)<br />
Box 3.3 GATT 1994 <strong>in</strong> a nutshell<br />
• General Agreement on Tariffs <strong>and</strong> Trade regulates the <strong>in</strong>ternational trade <strong>in</strong> goods<br />
<strong>and</strong> rests on five pillars: Most-Favoured-Nation (MFN) Obligation, National Treatment<br />
Obligation, Elim<strong>in</strong>ation of Quantitative Restrictions, Transparency of Government<br />
Regulations Affect<strong>in</strong>g Trade <strong>and</strong> Tariff B<strong>in</strong>d<strong>in</strong>gs<br />
• Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) seeks<br />
to reduce impediments to <strong>in</strong>ternational trade through promot<strong>in</strong>g adequate protection<br />
of <strong>in</strong>tellectual property rights. TRIPS Agreement is specially relevant for<br />
pharmaceutical <strong>in</strong>dustry.<br />
• Agreement on Technical Barriers to Trade (TBT) conta<strong>in</strong>s a code of good practice for<br />
the preparation, adoption <strong>and</strong> application of st<strong>and</strong>ards.<br />
• Agreement on Sanitary <strong>and</strong> Phytosanitary Measures (SPS) discipl<strong>in</strong>es exercise of<br />
discretion when a country wishes to disallow import of any item on the ground that it<br />
would be hazardous to life or health of human be<strong>in</strong>g or disallow<strong>in</strong>g import to protect<br />
human, animals or plants<br />
• Customs Valuation under GATT – Implementation of Article VII, This agreement<br />
seeks to establish a fair <strong>and</strong> uniform system for the valuation of goods that provides<br />
protection to <strong>in</strong>ternational traders from fixation of arbitrary values by customs<br />
authorities of import<strong>in</strong>g countries<br />
• Agreement on Rules of Orig<strong>in</strong> seeks to clarify <strong>and</strong> harmonize rules of orig<strong>in</strong> <strong>in</strong><br />
member countries <strong>and</strong> <strong>in</strong> particular requires members to ensure that such rules do<br />
not create distort<strong>in</strong>g or disruptive effects on trade. <strong>The</strong> rules of orig<strong>in</strong> are of special<br />
relevance <strong>in</strong> cases where a country is to benefit from the lower tariff available through<br />
GSP or under a regional trad<strong>in</strong>g arrangement.<br />
• Agreement on Trade-Related Investment Measures (TRIMs) seeks to prohibit<br />
<strong>in</strong>vestment related measures which are trade distort<strong>in</strong>g e.g. local content<br />
requirements <strong>and</strong> <strong>performance</strong> requirements. It is of special relevance for automotive<br />
parts sector.<br />
• Agreement on Implementation of Article VI of the GATT 1994 (Antidump<strong>in</strong>g)<br />
regulates the practice of dump<strong>in</strong>g i.e. the sale of products of a foreign country at less<br />
than the normal value of the products <strong>in</strong> the export<strong>in</strong>g country if the price level causes<br />
or threatens to cause material <strong>in</strong>jury to an established <strong>in</strong>dustry <strong>in</strong> the import<strong>in</strong>g<br />
country.<br />
• Agreement on Subsidies <strong>and</strong> Countervail<strong>in</strong>g Measures discipl<strong>in</strong>es use of subsidies<br />
<strong>and</strong> also regulates the actions that can be taken by the countries to counter the<br />
effects of subsidies<br />
• Agreement on Safeguards discipl<strong>in</strong>es <strong>in</strong>itiation of emergency.<br />
International Trade Centre 69
3.4 Trade conditions of the <strong>Pakistan</strong>i furniture sector<br />
3.4.1 General<br />
Market access for <strong>Pakistan</strong> has improved <strong>and</strong> also for its trad<strong>in</strong>g partners. As a result of the<br />
WTO agreements, market access for the <strong>Pakistan</strong>i furniture <strong>in</strong> <strong>in</strong>dustrial countries’ market has<br />
improved as tariffs have come down. Further, there is now protection available to <strong>Pakistan</strong><br />
aga<strong>in</strong>st any discrim<strong>in</strong>atory treatment <strong>in</strong> our trad<strong>in</strong>g partners’ markets. Article XI of the GATT<br />
1994 has also elim<strong>in</strong>ated quantitative restrictions.<br />
<strong>Pakistan</strong> has also opened its market substantially, among others, <strong>in</strong> respect of furniture<br />
<strong>in</strong>clud<strong>in</strong>g the wooden furniture to foreign suppliers, (albeit on 25% of duty, higher as<br />
compared to that of <strong>in</strong>dustrial countries). S<strong>in</strong>ce 1998 the import regime of <strong>Pakistan</strong> has been<br />
significantly liberalized through reduction <strong>in</strong> tariffs, rationalization, <strong>and</strong> removal of import<br />
quotas, import surcharges <strong>and</strong> regulatory duties. <strong>The</strong> un-weighted (i.e. simple) average<br />
statutory tariff has come down from 47.1% <strong>in</strong> 1997- 98 to 14.4% <strong>in</strong> 2006- 07.<br />
<strong>The</strong> process <strong>in</strong> fact started <strong>in</strong> 1988 after the agreement on Structural Adjustment Programme<br />
was concluded with the International Monetary Fund (IMF). Unilateral, liberalization has been<br />
<strong>in</strong> the case of <strong>Pakistan</strong> the pr<strong>in</strong>cipal avenue of liberalization of trade. Of course, <strong>Pakistan</strong> has<br />
been comply<strong>in</strong>g with all its commitments under the WTO. <strong>The</strong> net actual liberalization on<br />
the part of <strong>Pakistan</strong> has been much more than multilaterally required <strong>in</strong> our WTO<br />
agreements. Some experts are of the view that we should not have unilaterally tariffs reduced<br />
such a steep extent.<br />
Competition has led to reduction <strong>in</strong> prices. Increas<strong>in</strong>g competition <strong>in</strong> the world has also<br />
helped <strong>in</strong> reduc<strong>in</strong>g prices <strong>and</strong> improv<strong>in</strong>g quality of <strong>in</strong>puts i.e. improv<strong>in</strong>g import sourc<strong>in</strong>g.<br />
This is of special significance because production structure of the furniture <strong>in</strong>dustry has<br />
undergone a significant change. Factories from dozen of countries now participate <strong>in</strong> the<br />
different stages of global furniture cha<strong>in</strong>s, manufactur<strong>in</strong>g components <strong>and</strong> ready-toassemble<br />
(RTA) components for f<strong>in</strong>ished furniture for globally outsourc<strong>in</strong>g buyers’ groups<br />
<strong>and</strong> retailer cha<strong>in</strong>s.<br />
New tougher requirements are be<strong>in</strong>g adopted. <strong>Pakistan</strong>i furniture makers have now<br />
entered an era of <strong>in</strong>creas<strong>in</strong>g competition, as open<strong>in</strong>g up of trade impacts both exports <strong>and</strong><br />
imports. New tougher requirements for produc<strong>in</strong>g domestic, furniture accord<strong>in</strong>g to stricter<br />
st<strong>and</strong>ards <strong>and</strong> more elaborate designs are be<strong>in</strong>g progressively adopted.<br />
<strong>The</strong> WTO system is dynamically evolv<strong>in</strong>g. <strong>The</strong> WTO regime is not static but is dynamically<br />
evolv<strong>in</strong>g. Currently, MTN are tak<strong>in</strong>g place on the Doha Development Agenda (DDA). <strong>The</strong><br />
way these negotiations proceed <strong>and</strong> the ultimate agreement reached will <strong>in</strong>fluence the<br />
l<strong>and</strong>scape of <strong>in</strong>ternational trade (though at the moment the prospects of a satisfactory outcome<br />
are not bright).<br />
70 International Trade Centre
3.4.2 Other countries’ access to <strong>Pakistan</strong> (Threats)<br />
<strong>Pakistan</strong> exports are higher than its imports at this po<strong>in</strong>t <strong>in</strong> time. Total exports of wooden<br />
furniture for the year 2005 amounted to US$12.3 million while imports were US$10.3 million.<br />
<strong>The</strong> MFN duty applied by <strong>Pakistan</strong> to the imports of different furniture products is 25%. 14<br />
Rapid growth of imports is tak<strong>in</strong>g place. A rapid growth of imports under the WTO<br />
liberalized import regime has taken place. Market share of ma<strong>in</strong> furniture export<strong>in</strong>g countries<br />
<strong>in</strong> <strong>Pakistan</strong>’s economy is <strong>in</strong>creas<strong>in</strong>g with a rapid pace. For example the export growth of Ch<strong>in</strong>a<br />
<strong>in</strong> the furniture sector to <strong>Pakistan</strong> is 278% between 2004 <strong>and</strong> 2005. Accord<strong>in</strong>g to <strong>in</strong>dustries’<br />
sources the arrival of Ch<strong>in</strong>ese furniture has hit the local office furniture by 70% <strong>and</strong> the sales<br />
of locally manufactured household furniture have decl<strong>in</strong>ed by 30%. 15 Though it is not possible<br />
to verify the statement but one cay say that the pressure on the domestic <strong>in</strong>dustry has<br />
considerably <strong>in</strong>creased. Other develop<strong>in</strong>g countries like Thail<strong>and</strong>, Malaysia, <strong>and</strong> Korea are also<br />
export<strong>in</strong>g more <strong>and</strong> more to <strong>Pakistan</strong>. Apparently the reason for this substantial <strong>in</strong>crease <strong>in</strong><br />
imports from these countries is that these products are found attractive particularly by up<br />
market buyers <strong>in</strong> respect of quality <strong>and</strong> price. However, questions rema<strong>in</strong> about the<br />
attractiveness of the price despite 25% custom’s duty. Some manufacturers attribute the<br />
prevalent price level to under-<strong>in</strong>voic<strong>in</strong>g <strong>and</strong> misdeclaration of imported products. <strong>The</strong><br />
menace of valuation fraud <strong>in</strong>deed poses a serious threat <strong>and</strong> should be earnestly tackled by the<br />
Government of <strong>Pakistan</strong>. <strong>Furniture</strong> <strong>in</strong>dustry should be associated <strong>in</strong> this exercise.<br />
(Action: <strong>Furniture</strong> Industry Associations <strong>and</strong> the Central Board of Revenue-<strong>Pakistan</strong>)<br />
<strong>The</strong> details of quantum of import growth, share <strong>in</strong> <strong>Pakistan</strong>’s market, <strong>and</strong> imported quantity<br />
<strong>and</strong> the value of furniture products by top ten export<strong>in</strong>g markets are given below:<br />
Table 3.1 Top 10 furniture suppliers to <strong>Pakistan</strong><br />
<strong>Export</strong>ers<br />
Imported value<br />
2004<br />
(US$ million)<br />
Share <strong>in</strong> <strong>Pakistan</strong>'s<br />
imports (%)<br />
Growth <strong>in</strong> value<br />
2003-04<br />
(%)<br />
World 5.54 100 41<br />
Ch<strong>in</strong>a 2.15 39 58<br />
United States of<br />
America<br />
.475 9 41<br />
Taiwan (Ch<strong>in</strong>a) .427 8 -12<br />
United Arab Emirates .382 7 -23<br />
Philipp<strong>in</strong>es .332 6 4050*<br />
Malaysia .330 6 26<br />
Italy .233 4 41<br />
Germany .218 4 68<br />
14<br />
15<br />
Market Access Map, ITC. However, preferential tariff for Sri Lanka is 16.43%.<br />
<strong>The</strong> Bus<strong>in</strong>ess Recorder, December 7, 2006.<br />
International Trade Centre 71
<strong>Export</strong>ers<br />
Imported value<br />
2004<br />
(US$ million)<br />
Share <strong>in</strong> <strong>Pakistan</strong>'s<br />
imports (%)<br />
Growth <strong>in</strong> value<br />
2003-04<br />
(%)<br />
Thail<strong>and</strong> .177 3 64<br />
Korea, Rep. of Korea .167 3 88<br />
* A freakish figure, record<strong>in</strong>g massive percentage <strong>in</strong>crease but the absolute figure is not much.<br />
Source: ITC calculations based on COMTRADE statistics<br />
<strong>The</strong>re is not much of a threat at present to the furniture <strong>in</strong>dustry. Whether, liberalization<br />
of trade has posed a threat to the furniture <strong>in</strong>dustry of <strong>Pakistan</strong>? <strong>The</strong>re is prima facie not<br />
much of a threat to this <strong>in</strong>dustry at present though the <strong>in</strong>dustry’s sources have a negative<br />
perception of the situation. Our tariff rates are relatively high. Further, <strong>Pakistan</strong>’s bound rates<br />
are much higher than the applied tariff rates. In appropriate cases the affected <strong>in</strong>dustries can<br />
always approach the National Tariff Commission which provides an <strong>in</strong>stitutional mechanism<br />
for trade remedial action. However, these rates are likely to come down after an accord, if any,<br />
on NAMA (Non-Agricultural Market Access) under DDA. <strong>The</strong> malpractice of under <strong>in</strong>voic<strong>in</strong>g<br />
<strong>and</strong> misdecaration have to be, however, checked to ensure such types of imports, hav<strong>in</strong>g unfair<br />
competitive advantage, do not pose a threat to the domestic furniture <strong>in</strong>dustry.<br />
One can not hope for a closed economy <strong>in</strong> a globalized world. In the world of liberalized<br />
trade one can not expect a closed economy <strong>and</strong> should not be upset about the flow of imports.<br />
However, the rate of growth <strong>in</strong> imports should be a matter of some concern as it constitutes a<br />
potential threat <strong>in</strong>dicat<strong>in</strong>g a need for work<strong>in</strong>g on price competitiveness, quality enhancement of<br />
our products <strong>and</strong> stopp<strong>in</strong>g malpractices regard<strong>in</strong>g valuation of imports. <strong>The</strong> Government of<br />
<strong>Pakistan</strong> should also seriously consider the dem<strong>and</strong> of local manufacturers to decrease the<br />
import duties on the raw material <strong>in</strong>clud<strong>in</strong>g chipboard, adhesive, wood, foam <strong>and</strong> other related<br />
items to compete the foreign items at home.<br />
3.4.3 <strong>Pakistan</strong>’s access to other/new markets (Opportunities)<br />
Improved market access<br />
Susta<strong>in</strong>ed growth <strong>in</strong> export earn<strong>in</strong>gs has taken place. In the first year, when the WTO<br />
regime became operational, export earn<strong>in</strong>gs amounted to US$3.142 millions. <strong>The</strong>reafter there<br />
has been a susta<strong>in</strong>ed growth <strong>and</strong> the values of exports for the year 2004-05 are US$12.3<br />
millions. Though, it can not be claimed that WTO is the only factor underly<strong>in</strong>g this growth yet<br />
it can be assumed that the liberalized WTO regime has made a contribution to better export<br />
<strong>performance</strong>. A study of tariff structures <strong>in</strong> various countries have shown that at present a large<br />
number of countries have either lower tariff rates or even zero tariff. <strong>The</strong> WTO regime has<br />
<strong>in</strong>deed improved market access for our furniture <strong>in</strong>dustry.<br />
Information as to tariff rates <strong>in</strong> markets of our ten major buyers would help us to appreciate the<br />
extent of opportunities available to <strong>Pakistan</strong>. A table sett<strong>in</strong>g out relevant details about various<br />
export dest<strong>in</strong>ations of the <strong>Pakistan</strong>’s furniture products is accord<strong>in</strong>gly given below. Countries<br />
<strong>in</strong> the table are shown accord<strong>in</strong>g to their share <strong>in</strong> the <strong>Pakistan</strong>’s furniture export.<br />
72 International Trade Centre
Table 3.2 Top 10 buyers of the <strong>Pakistan</strong>i furniture - Tariffs <strong>and</strong> share of exports<br />
Importers/ buyers<br />
<strong>Export</strong>ed value<br />
2005 (US$ million)<br />
Applied tariff (%)<br />
Share <strong>in</strong> <strong>Pakistan</strong>'s<br />
exports (%)<br />
United States of America 2.0 0% 16%<br />
United K<strong>in</strong>gdom 1.97 0% 16%<br />
UAE 1.86 5% 15%<br />
Afghanistan 1.29 Not available 10%<br />
Italy 1.0 0% 8%<br />
Saudi Arabia .398 5% 3%<br />
South Africa .370 20% 3%<br />
Cyprus .336 0% 3%<br />
Germany .302 0% 2%<br />
Canada .267 0% 2%<br />
Source: ITC calculations based on COMTRADE statistics<br />
Market Access is not a problem for <strong>Pakistan</strong> for furniture products. Statistics <strong>in</strong> the table<br />
above show that the market access is not a problem as such for the <strong>Pakistan</strong>i furniture. <strong>The</strong><br />
ma<strong>in</strong> constra<strong>in</strong>t experienced by <strong>Pakistan</strong> is that of supply side lack of capacity. Under the<br />
WTO liberalized import regime, <strong>Pakistan</strong>i exporters need to concentrate on the markets like<br />
OECD countries particularly the EU, where applied tariff is 0%. Although EU is one of the<br />
largest furniture import<strong>in</strong>g markets <strong>in</strong> the world, yet <strong>Pakistan</strong>’s market share there is less than<br />
1%. Only 30% of the <strong>Pakistan</strong>i exports are dest<strong>in</strong>ed for EU (Source: ITC Product Map). It<br />
would be worthwhile to make efforts to <strong>in</strong>crease flow of exports to the EU. This, of course,<br />
would require a radical change <strong>in</strong> the strategy particularly <strong>in</strong> terms of range of products <strong>and</strong><br />
design that are <strong>in</strong> dem<strong>and</strong> by the EU buyers. We must learn to produce what is liked <strong>and</strong><br />
required abroad <strong>and</strong> at competitive prices.<br />
3.4.4 Third parties’/countries’ access to other markets<br />
(Threats/competition)<br />
Competition/potential<br />
<strong>The</strong>re is great potential for <strong>in</strong>creas<strong>in</strong>g exports. <strong>Pakistan</strong>i furniture exports represent at best<br />
a nom<strong>in</strong>al share <strong>in</strong> the world exports, but there is a great potential to improve. After the<br />
conclusion of Uruguay round <strong>and</strong> consequential enhancement <strong>in</strong> the quantum <strong>and</strong> quality of<br />
liberalization, <strong>Pakistan</strong> has been enjoy<strong>in</strong>g better market access. Elim<strong>in</strong>ation of quantitative<br />
restrictions <strong>and</strong> reduction <strong>in</strong> tariffs should prove exceed<strong>in</strong>gly helpful. Under these<br />
circumstances <strong>Pakistan</strong> should seek the benefits of its cheap production factors e.g. lower<br />
wages, <strong>and</strong> cheaper raw material. If the raw materials or furniture parts are required for a<br />
f<strong>in</strong>ished product, importers <strong>in</strong> <strong>Pakistan</strong> should be facilitated by undertak<strong>in</strong>g greater<br />
promotional <strong>and</strong> facilitation efforts on the part of the TDAP. <strong>The</strong> tariff applied for imports of<br />
furniture parts <strong>and</strong> accessories is comparatively high i.e. 25%. Mechanism should be adopted<br />
International Trade Centre 73
to ensure duty free import of components used <strong>in</strong> the f<strong>in</strong>ished product <strong>in</strong>stead of oblig<strong>in</strong>g<br />
exporters to claim duty drawback that is an <strong>in</strong>efficient way of provid<strong>in</strong>g relief.<br />
Need for greater compliance<br />
<strong>The</strong>re is clear need to improve compliance with the WTO agreements. To compete <strong>in</strong><br />
<strong>in</strong>ternational market <strong>Pakistan</strong>i exporters will have to become more careful about compliance<br />
with SPS <strong>and</strong> TBT. <strong>Pakistan</strong>i furniture products have been reportedly banned by some<br />
countries on the ground that those products were not properly rounded at the edges result<strong>in</strong>g <strong>in</strong><br />
the risk of <strong>in</strong>jury to their users. Our exporters have to be also careful about termite treatment<br />
that uses chlorpysifos. 16 Japan as a matter of fact has banned the import of wooden products<br />
conta<strong>in</strong><strong>in</strong>g chlorpysifos.<br />
Opportunities <strong>and</strong> competition<br />
Many opportunities have become available after the conclusion of the WTO Agreements<br />
<strong>and</strong> consequential trade liberalization. Needless to say, <strong>Pakistan</strong> is not alone <strong>in</strong> the field <strong>and</strong><br />
competition is really <strong>in</strong>tense. We have to adopt a sound strategy <strong>and</strong> vigorously follow up<br />
trade promotion plans. Two factors have been taken <strong>in</strong>to consideration while identify<strong>in</strong>g<br />
opportunity offer<strong>in</strong>g markets: (i) size of the market, <strong>and</strong> (ii) degree of presence of <strong>Pakistan</strong>i<br />
products. <strong>The</strong> size of the market has been given greater weight because we should aim at<br />
substantial <strong>in</strong>crease <strong>in</strong> exports that would be possible only <strong>in</strong> bigger markets.<br />
Follow<strong>in</strong>g is the list of those markets where there seems to be potential for growth of <strong>Pakistan</strong>i<br />
furniture export.<br />
• United States of America: USA, the first export dest<strong>in</strong>ation of <strong>Pakistan</strong>, (16% <strong>in</strong> value)<br />
is among the biggest furniture importers of the world. However, <strong>Pakistan</strong>’s share of<br />
exports is much below than even one percent of the US market. It st<strong>and</strong>s nowhere as<br />
compared to other exporters to the USA. Ch<strong>in</strong>a, Canada, Mexico, Italy <strong>and</strong> Taiwan,<br />
which have more than 76% of the United States market. <strong>The</strong> tariff is zero. <strong>The</strong>re is<br />
def<strong>in</strong>ite potential for growth for <strong>Pakistan</strong>.<br />
• United K<strong>in</strong>gdom: <strong>The</strong> United K<strong>in</strong>gdom is a big import market (applied tariff is 0%).<br />
<strong>The</strong> UK is <strong>Pakistan</strong>’s second major export dest<strong>in</strong>ation (16% <strong>in</strong> value). However, its<br />
market share with us is much less than even 1%. Here aga<strong>in</strong> build<strong>in</strong>g on our presence<br />
(albeit very small) <strong>and</strong> utiliz<strong>in</strong>g our knowledge of this market, there should be good<br />
prospects of <strong>in</strong>creas<strong>in</strong>g our share.<br />
• United Arab Emirates: UAE (applied tariff is 5%) is at present the third largest export<br />
market for <strong>Pakistan</strong>i furniture (15% <strong>in</strong> value). Despite this fact <strong>Pakistan</strong>’s share <strong>in</strong> its<br />
imports is below 1% countries like Italy, Malaysia, Ch<strong>in</strong>a <strong>and</strong> Indonesia have secured<br />
major share <strong>in</strong> UAE’s market with rapid rate of growth of their exports. <strong>Pakistan</strong> should<br />
more <strong>in</strong>tensively focus on prospects <strong>in</strong> this market with which it is well familiar <strong>and</strong><br />
which is <strong>in</strong> the region, offer<strong>in</strong>g the advantage of low transportation cost.<br />
• Saudi Arabia: Saudi Arabia (applied tariff is 5%) is the sixth largest export dest<strong>in</strong>ation<br />
for <strong>Pakistan</strong> (3% <strong>in</strong> value). But <strong>Pakistan</strong>’s share <strong>in</strong> its imports is aga<strong>in</strong> nom<strong>in</strong>al (below<br />
1%). Ch<strong>in</strong>a, Italy, USA, Malaysia <strong>and</strong> France are hav<strong>in</strong>g more than 75% of Saudi<br />
16<br />
International Wood News, American Forest <strong>and</strong> paper Association, Volume2, Issue 9-March 2003<br />
74 International Trade Centre
Arabian market. Here aga<strong>in</strong>, there is potential for growth <strong>and</strong> need for concerted efforts<br />
to optimize the opportunities offered by this market.<br />
• Afghanistan: <strong>Pakistan</strong> is Afghanistan’s top supplier of wooden bedroom <strong>and</strong> lounge<br />
furniture. 26% of Afghanistan imports of wooden furniture are from <strong>Pakistan</strong>. <strong>Pakistan</strong><br />
should not lose a market that is one of the major dest<strong>in</strong>ations of its exports <strong>and</strong> is<br />
geographically so proximate.<br />
Box 3.4 At a glance - Impact of the WTO Agreements on the <strong>Pakistan</strong>i furniture sector<br />
<strong>Export</strong>s<br />
• Better market access for <strong>Pakistan</strong> <strong>in</strong> the <strong>in</strong>dustrial countries markets.<br />
• Tariff rates have been drastically reduced <strong>in</strong> developed countries’ markets (very low<br />
or even zero).<br />
• <strong>The</strong>re has been a susta<strong>in</strong>ed growth of export earn<strong>in</strong>gs from US$3 – 4 million per year<br />
<strong>in</strong> the mid – 1990s to US$10 – 15 million per year today.<br />
• Reduction <strong>in</strong> prices <strong>and</strong> improvement <strong>in</strong> the quality of <strong>in</strong>puts.<br />
• Opportunity to <strong>in</strong>tensify penetration <strong>in</strong> the EU, US, UAE, Saudi Arabia <strong>and</strong><br />
Afghanistan markets.<br />
• Great potential for <strong>in</strong>creas<strong>in</strong>g exports but we have to tackle supply side problems.<br />
• Must learn to produce what is liked <strong>and</strong> required abroad <strong>and</strong> at competitive prices.<br />
• <strong>Pakistan</strong> needs to do <strong>in</strong>tensive research <strong>in</strong>to the need of foreign markets <strong>in</strong>clud<strong>in</strong>g<br />
trends <strong>and</strong> designs<br />
Imports<br />
• Substantial open<strong>in</strong>g of <strong>Pakistan</strong>’s market albeit on relatively higher duty.<br />
• No much of a threat at present (tariff rate at 25% is quite high) but problem is caused<br />
by malpractice of under-<strong>in</strong>voic<strong>in</strong>g <strong>and</strong> misdeclaration <strong>and</strong> smuggl<strong>in</strong>g.<br />
• Trend of <strong>in</strong>creas<strong>in</strong>g import growth– potential threat.<br />
International Trade Centre 75
4 Obstacles <strong>and</strong> shortcom<strong>in</strong>gs to export<br />
4.1 Obstacles <strong>and</strong> shortcom<strong>in</strong>gs – exporters’ op<strong>in</strong>ions<br />
<strong>The</strong> comments presented <strong>in</strong> this part are based on the <strong>in</strong>terviews conducted by AAL of<br />
furniture manufacturer/exporters, participants present <strong>in</strong> the workshop <strong>and</strong> comments of the<br />
President of APFEA.<br />
4.1.1 Obstacles<br />
At company level<br />
• Raw material is diseased; its cost is high <strong>and</strong> it is of sub st<strong>and</strong>ard. As a result, low<br />
quality of furniture is produced. Companies have to suffer severe loss (PKR 2 million<br />
annually).<br />
• Quality of labour is deteriorat<strong>in</strong>g, as they do not get proper tra<strong>in</strong><strong>in</strong>g. Consequently, the<br />
quality of work produced is low. (PKR 1 million loss is <strong>in</strong>curred annually which results<br />
<strong>in</strong> los<strong>in</strong>g customers).<br />
• Sheesham (rosewood) gett<strong>in</strong>g expensive <strong>and</strong> ext<strong>in</strong>ct. This wood is very important,<br />
there’s no replacement. As a result, sales are affected <strong>and</strong> import<strong>in</strong>g is done at a large<br />
scale <strong>in</strong> order to meet this need. It costs four times more.<br />
• Transportation rates are <strong>in</strong>creas<strong>in</strong>g. Where previously a company would have sent 4<br />
conta<strong>in</strong>ers, it ends up send<strong>in</strong>g only two. Diesel/petrol rates have also <strong>in</strong>creased.<br />
• Lack of space is a problem. Because of small area, less pieces of furniture are<br />
produced. <strong>The</strong>re’s 40% loss <strong>and</strong> as a result all opportunities are lost. If more material is<br />
produced, it is wasted because there is no space for its storage<br />
At country level<br />
• Government departments follow red tapism, blackmail<strong>in</strong>g, bribery, corruption,<br />
taxation <strong>and</strong> have lengthy procedures for exporters. Companies as a result are<br />
affected badly. (<strong>The</strong>re is a loss of PKR 5 million)<br />
• No proper guidance is given to companies regard<strong>in</strong>g f<strong>in</strong>ancial <strong>in</strong>centives given by<br />
the government. <strong>The</strong> attitude of banks is very bad <strong>and</strong> they have cumbersome<br />
procedures for loans. As a result, companies have no knowledge <strong>and</strong> they fail to make<br />
use of f<strong>in</strong>ance facilities. In addition, the government is not provid<strong>in</strong>g any subsidy.<br />
• No <strong>in</strong>centives given by the government to make use of the latest technology. As a<br />
result, all companies are us<strong>in</strong>g traditional methods <strong>and</strong> the quality of furniture is much<br />
below the level of global furniture, especially for “Season<strong>in</strong>g” which requires latest<br />
mach<strong>in</strong>ery, but unfortunately the natural method is used, which is very time-consum<strong>in</strong>g.<br />
Some exporters use the wood that has moisture <strong>in</strong> it. This results <strong>in</strong> bad piece of furniture<br />
<strong>in</strong> the end. Sometimes due to moisture, it breaks down even after delivery, which ru<strong>in</strong>s<br />
the image of <strong>Pakistan</strong>i furniture <strong>in</strong>dustry.<br />
76 International Trade Centre
• Material from Ch<strong>in</strong>a is be<strong>in</strong>g used commonly. <strong>The</strong> government itself is promot<strong>in</strong>g this<br />
trend. Local market is decreas<strong>in</strong>g, while no efforts are be<strong>in</strong>g made by the government to<br />
improve this situation.<br />
• Customs exam<strong>in</strong>ation done is very severe, whereby furniture is broken/torn for<br />
<strong>in</strong>spection. As a result all material has to be made aga<strong>in</strong>. A huge loss is <strong>in</strong>curred on the<br />
companies. Some companies give money <strong>and</strong> get their material cleared from the<br />
Customs. In this process, even the poor quality material reaches foreign buyers <strong>and</strong> the<br />
image of the whole <strong>in</strong>dustry is destroyed.<br />
• Image of <strong>Pakistan</strong> is very bad <strong>in</strong> the furniture market. Foreign firms don’t rust<br />
<strong>Pakistan</strong>i companies because the latter use illegal ways. Poor quality of furniture is made<br />
<strong>and</strong> as a result, they end up gett<strong>in</strong>g fewer orders.<br />
• Problem <strong>in</strong> basic utilities. Load-shedd<strong>in</strong>g is a major problem. Furthermore, gas rates<br />
are on the rise.<br />
4.1.2 Shortcom<strong>in</strong>gs<br />
At company level<br />
• Focus on HR tra<strong>in</strong><strong>in</strong>g: Companies have never given attention to this front. Tra<strong>in</strong><strong>in</strong>g HR<br />
would have a very positive impact on not only the quality of product but also each<br />
worker would get paid accord<strong>in</strong>g to his capabilities.<br />
• Work on job security of their workforce. In order to remove discontent of labour<br />
force, companies should give them all possible rights<br />
• Focus on improv<strong>in</strong>g quality of raw material. Currently, the quality of material is not<br />
good. A lot of time <strong>and</strong> efforts are taken to search for good quality wood. In this way,<br />
order does not reach on time <strong>and</strong> the buyer has to face a lot of dissatisfaction even before<br />
receiv<strong>in</strong>g the shipment.<br />
At country level<br />
• Reconciliation of export policies: <strong>The</strong> government has shown no <strong>in</strong>terest <strong>in</strong> this sector.<br />
Every company is suffer<strong>in</strong>g <strong>in</strong> a different manner. End result: loss of million of dollars.<br />
• Qualified <strong>in</strong>dividuals should be given full chance to stay <strong>in</strong> <strong>Pakistan</strong> by open<strong>in</strong>g all<br />
k<strong>in</strong>ds of opportunities rather than creat<strong>in</strong>g an atmosphere for them to shift abroad<br />
• <strong>The</strong>re should be one-w<strong>in</strong>dow operation to reduce the delay <strong>in</strong> the f<strong>in</strong>alisation of<br />
settlements<br />
• <strong>The</strong> government should monitor the market. It should check material <strong>and</strong> give<br />
attention to prices. Raw material (wood, boards, etc.) should be available at reasonable<br />
prices. As a result, good quality <strong>and</strong> cheap material would be available for exporters.<br />
• <strong>The</strong> government should penalise exporters produc<strong>in</strong>g poor quality furniture. This<br />
would help <strong>in</strong> elim<strong>in</strong>at<strong>in</strong>g exporters produc<strong>in</strong>g low quality furniture <strong>and</strong> the image of<br />
<strong>Pakistan</strong>i companies would improve.<br />
International Trade Centre 77
4.1.3 Possible solutions<br />
At company level<br />
In-house tra<strong>in</strong><strong>in</strong>g programmes should be organised. This will create awareness among<br />
the employees <strong>and</strong> equip them with the latest skills <strong>and</strong> techniques. This will improve<br />
the quality of labour <strong>and</strong> as a result, better quality furniture would be produced.<br />
At country level<br />
• EPB/TDAP should give attention to this sector by organis<strong>in</strong>g exhibitions, sem<strong>in</strong>ars,<br />
<strong>in</strong>vit<strong>in</strong>g delegates from abroad for the exchange of knowledge. Until now, the<br />
exhibitions organised have produced no results. <strong>The</strong> participation fee for these<br />
exhibitions should be m<strong>in</strong>imum. More <strong>in</strong>centives should be given for participation.<br />
Proper market<strong>in</strong>g should be done before the exhibition. No fee should be <strong>in</strong>volved <strong>in</strong><br />
putt<strong>in</strong>g up stalls. Without proper plann<strong>in</strong>g by EPB/TDAP, the majority lose great<br />
opportunities. EPB/TDAP should also do market surveys <strong>and</strong> stop the Forest Department<br />
from steal<strong>in</strong>g wood <strong>and</strong> export<strong>in</strong>g it illegally. <strong>The</strong> newsletters <strong>and</strong> other advertis<strong>in</strong>g done<br />
by EPB/TDAP is not enough.<br />
• Labour law should be <strong>in</strong>troduced which would put restriction that no company can<br />
take way other company’s labour by offer<strong>in</strong>g good options. Some of them are also<br />
mov<strong>in</strong>g abroad.<br />
• Re-plantation of forests should take place; this would reduce the cost of production.<br />
• Display houses should be made <strong>in</strong> various export<strong>in</strong>g countries where <strong>Pakistan</strong>i<br />
furniture can be displayed. In this way, the foreign buyers can get a chance to physically<br />
see, feel <strong>and</strong> check the product. In addition, the exporters will not have to make a lot of<br />
effort <strong>in</strong> putt<strong>in</strong>g up shops.<br />
• <strong>The</strong> government should pay attention to potential big empty places ideal for sett<strong>in</strong>g<br />
up workshops such as the B<strong>in</strong> Qasim Industrial Zone. This would def<strong>in</strong>itely solve the<br />
problem of less space for stor<strong>in</strong>g furniture.<br />
• SMEDA, Chamber of Commerce <strong>and</strong> Industries <strong>and</strong> APFEA should pay special<br />
attention.<br />
• Loan facilities should be given. <strong>The</strong> rates of loans should be reduced so that every<br />
exporter can benefit from it <strong>and</strong> have more runn<strong>in</strong>g capital.<br />
• <strong>The</strong> government should import the latest mach<strong>in</strong>ery for furniture exporters. Duties<br />
should be reduced to a m<strong>in</strong>imum. This would greatly help <strong>in</strong> improv<strong>in</strong>g production.<br />
78 International Trade Centre
4.2 Obstacles <strong>and</strong> shortcom<strong>in</strong>gs – importers’ op<strong>in</strong>ions<br />
<strong>The</strong> importers’ views have been collected through the vast network of the <strong>in</strong>ternational<br />
consultant<br />
4.2.1 Obstacles at country level: Global commonalities<br />
In target<strong>in</strong>g development policies at SME furniture companies, certa<strong>in</strong> commonalities can be<br />
found among the majority of develop<strong>in</strong>g countries. <strong>The</strong> ma<strong>in</strong> issues to be addressed are usually<br />
centred on the follow<strong>in</strong>g obstacles:<br />
• Access to the <strong>in</strong>ternational markets tends to be a problem as producers may be<br />
unfavourably located; far from the ma<strong>in</strong> consumption centres <strong>and</strong> suffer from costly<br />
transportation.<br />
• Access to raw materials at competitive costs becomes a problem as SMEs are at a<br />
disadvantage because of their small size. This can become a h<strong>in</strong>drance to organis<strong>in</strong>g the<br />
flow of raw materials from domestic, non-transparent timber markets controlled by<br />
various <strong>in</strong>termediaries, <strong>and</strong> often leads to timber shortages just when exports are<br />
grow<strong>in</strong>g.<br />
• Access to knowledge <strong>and</strong> technology is a major problem area. SMEs tend to fall<br />
beh<strong>in</strong>d because of their strong reliance on traditions: e.g. they may be us<strong>in</strong>g high-value<br />
timber for secondary uses, simply through force of habit <strong>and</strong> thus ga<strong>in</strong> revenues far<br />
below the timber’s real potential.<br />
• Access to capital is difficult to f<strong>in</strong>d at competitive rates because domestic bank<br />
f<strong>in</strong>ance is scarce, <strong>in</strong>terest rates are generally high <strong>and</strong> collateral requirements are strict.<br />
• Access to designers is limited, therefore the exporters rely on simply sell<strong>in</strong>g items “as<br />
they are”, copy<strong>in</strong>g new models or produc<strong>in</strong>g accord<strong>in</strong>g to the buyer’s designs.<br />
• <strong>The</strong>re are shortages of skilled labour <strong>and</strong> <strong>in</strong>-house tra<strong>in</strong><strong>in</strong>g (apprenticeships, on-thejob<br />
tra<strong>in</strong><strong>in</strong>g, etc.) is usually considered too much of a burden.<br />
• Managerial skills are poor <strong>and</strong> opportunities to develop them outside the SME<br />
companies are rare.<br />
• Lack of <strong>in</strong>tellectual rights protection is a vital element <strong>in</strong> the encouragement of<br />
creative design activities. If authorities fail to put such a protection scheme <strong>in</strong>to a<br />
widespread use with<strong>in</strong> the <strong>in</strong>dustry, it h<strong>in</strong>ders the development of orig<strong>in</strong>al designs with<strong>in</strong><br />
the <strong>in</strong>dustry.<br />
A <strong>Pakistan</strong>i view expressed by APFEA, etc. is mirror<strong>in</strong>g the above-mentioned <strong>in</strong>ternational<br />
experience:<br />
• Support to market promotion is <strong>in</strong>consistent. Participation <strong>in</strong> trade fairs tends to be<br />
supported occasionally by the <strong>Export</strong> Promotion Board, but no long-term roadmap for<br />
w<strong>in</strong>n<strong>in</strong>g systematically new markets is developed. This makes the visits to a couple of<br />
fairs just a rout<strong>in</strong>e promotional trip, where only <strong>in</strong>itial contacts are made with<br />
prospective, non-committed buyers. <strong>The</strong> crucial follow-up <strong>in</strong> the form of a proper sales<br />
International Trade Centre 79
mission or attendance <strong>in</strong> the next important venue is usually missed due to lack of funds<br />
<strong>and</strong> commitment to long-term presence.<br />
• Valuable Sheesham wood is becom<strong>in</strong>g scarce <strong>and</strong> difficult to obta<strong>in</strong>. It is much<br />
preferred for its beautiful colour <strong>and</strong> gra<strong>in</strong>, but much sought for by rogue middlemen <strong>and</strong><br />
cut-to-size processors for exports. (But the <strong>Furniture</strong> Survey respondents did not<br />
unanimously share this op<strong>in</strong>ion.) A viral disease <strong>and</strong> over-logg<strong>in</strong>g is decimat<strong>in</strong>g the<br />
resource. Public premises order Sheesham wood for secondary purposes (school desks,<br />
etc.). Optimisation of its true value would be needed.<br />
• Technological level of many furniture workshops is backwards, i.e. on the lowest. 1-<br />
2 technology categories by <strong>in</strong>ternational comparison presented <strong>in</strong> this report.<br />
• Absence of common support services. <strong>The</strong> sector is largely devoid of cost-efficient<br />
provision of common support service (tool ma<strong>in</strong>tenance, tra<strong>in</strong><strong>in</strong>g, etc.). Everyth<strong>in</strong>g is<br />
done at furniture workshop level. This leads to losses <strong>in</strong> skilled furniture maker’s<br />
productivity <strong>and</strong> sub-optimal allocation of scarce human resources. Air-dry<strong>in</strong>g of wood<br />
is still the norm, <strong>and</strong> no bus<strong>in</strong>ess model is developed yet to use contract-kiln operators.<br />
• Extremely tight f<strong>in</strong>ancial situation of furniture companies. <strong>Pakistan</strong>i entrepreneurs<br />
face high utility costs <strong>in</strong> their operations, <strong>and</strong> these are unlikely to level off <strong>in</strong> the current<br />
geo-political conditions. This makes capacity upgrad<strong>in</strong>g costly <strong>and</strong> risky. No really<br />
attractive concessionary loans or other f<strong>in</strong>ancial <strong>in</strong>centives exist to date, except maybe<br />
the Long-Term <strong>Export</strong> F<strong>in</strong>ance l<strong>in</strong>e. SME “soft” credit l<strong>in</strong>es have not been developed by<br />
the banks.<br />
• Design trend is static. Currently <strong>Pakistan</strong>i furniture is rather restricted to traditional,<br />
ethnic <strong>and</strong> mughal styles. Modern <strong>and</strong> contemporary furniture is developed with great<br />
difficulty, if ever. Yet the furniture <strong>in</strong>dustry aims at higher exports, but eccentric designs<br />
probably cannot deliver beyond niche markets.<br />
• Skill development is not formalised. <strong>The</strong> profession is h<strong>and</strong>ed down to the next<br />
generation with only on-the-job tra<strong>in</strong><strong>in</strong>g <strong>in</strong> the family workshop. Modern techniques <strong>and</strong><br />
their cost-sav<strong>in</strong>g potentials are wasted. Skills development <strong>in</strong> collaboration with foreign<br />
furniture <strong>in</strong>dustries is sporadic at best. Differ<strong>in</strong>g views on the availability of skilled<br />
workers between regions was observed <strong>in</strong> the survey. <strong>The</strong> ‘most scarce carvers’ situation<br />
seemed to be <strong>in</strong> Rawalp<strong>in</strong>di, Gujranwala, Karachi <strong>and</strong> Lahore, where the relative cost of<br />
labour was also deemed higher than elsewhere.<br />
• Customs exam<strong>in</strong>ations <strong>and</strong> export procedures are h<strong>and</strong>led with unnecessary difficulty<br />
<strong>and</strong> even animosity to exporters who badly need a basic service from the customs.<br />
• Import duties on foreign consumables <strong>and</strong> equipment. A proper import duty<br />
drawback system would alleviate producers’ problems <strong>in</strong> acquir<strong>in</strong>g proper tools,<br />
equipment <strong>and</strong> operat<strong>in</strong>g supplies. It is unclear how the system works today <strong>in</strong> <strong>Pakistan</strong>.<br />
<strong>The</strong> country is not close to S<strong>in</strong>gapore, which is the regional centre of mach<strong>in</strong>ery <strong>and</strong><br />
fitt<strong>in</strong>g/hardware suppliers.<br />
4.2.2 Shortcom<strong>in</strong>gs at company level<br />
<strong>The</strong>se comments are made on the basis of documentation received from <strong>Pakistan</strong>, <strong>and</strong> from<br />
literature <strong>and</strong> previous studies.<br />
80 International Trade Centre
Raw material recovery<br />
Raw material recovery rate needs to be better monitored. It is not only affected by dry<strong>in</strong>g<br />
defects or fungal diseases of wood, but also if over-sized stock of wood is used, if the log form<br />
is difficult to saw, or if basic mach<strong>in</strong><strong>in</strong>g is of <strong>in</strong>ferior quality.<br />
Kiln-dry<strong>in</strong>g<br />
Air-dry<strong>in</strong>g <strong>in</strong> the open is commonly used <strong>in</strong> dry <strong>and</strong> warm countries. It yields well-seasoned<br />
wood with a relatively long dry<strong>in</strong>g period (easily 6-24 months depend<strong>in</strong>g on<br />
country/condition/type of timber). <strong>The</strong> downside is that it locks up capital idle for that period,<br />
<strong>and</strong> makes it difficult to respond to new market opportunities quickly enough. Production<br />
plann<strong>in</strong>g can be very difficult if dry<strong>in</strong>g periods are lengthy or unpredictable.<br />
It is imperative to use timber that has atta<strong>in</strong>ed the equilibrium po<strong>in</strong>t of moisture content,<br />
preferably below 10%. This will help avoid<strong>in</strong>g structural weaknesses of furniture <strong>and</strong> chairs,<br />
<strong>and</strong> other excessive rejects dur<strong>in</strong>g production. Less customer reclamations will be received as a<br />
consequence.<br />
Tool ma<strong>in</strong>tenance <strong>and</strong> its impact on quality<br />
Tool ma<strong>in</strong>tenance is a crucial part of the wooden craft profession, because it enables efficiency<br />
<strong>and</strong> consistent quality <strong>in</strong> the work. <strong>The</strong>re is reportedly some degree of negligence <strong>in</strong> this aspect<br />
<strong>in</strong> <strong>Pakistan</strong>. Tool ma<strong>in</strong>tenance often seems to be the responsibility of an <strong>in</strong>dividual worker<br />
rather than the company.<br />
It has to be remembered that the raw material characteristics also <strong>in</strong>fluence tool wear. As wood<br />
density <strong>and</strong> extractives content rises, greater amounts of process<strong>in</strong>g time, energy <strong>and</strong> tool wear<br />
are consumed. Tool material, tool design <strong>and</strong> tool geometry are the pr<strong>in</strong>cipal criteria to be<br />
watched. <strong>The</strong>se may have to be changed if the common wood raw material is replaced by<br />
another type of wood.<br />
Design<br />
Much of the value of furniture is made <strong>in</strong> the design phase. Manufactur<strong>in</strong>g or carv<strong>in</strong>g is<br />
supposed to transform a drawn design <strong>in</strong>to a functionally <strong>and</strong>/or aesthetically perform<strong>in</strong>g<br />
product. Proper design tra<strong>in</strong><strong>in</strong>g is non-existent.<br />
Design capacity <strong>in</strong> <strong>Pakistan</strong> is declared as be<strong>in</strong>g very fragile <strong>and</strong> mostly based on ancient<br />
traditional ones (sold “as they are”), or copied designs from buyer’s photographs or magaz<strong>in</strong>es.<br />
Usually detailed design or technical draw<strong>in</strong>gs are not deployed to convey the design onto wood<br />
components.<br />
Clear <strong>and</strong> uncomplicated are the words currently used to describe the wooden household<br />
furniture fashion. Rustic or country designs have fallen out of style <strong>in</strong> the last couple of years.<br />
Asian themes appear to be appreciated, what may be a positive notion for <strong>Pakistan</strong>. But<br />
reddish, sh<strong>in</strong>y lacquer f<strong>in</strong>ishes are a past trend to a large extent. <strong>The</strong> <strong>in</strong>terpretation of such<br />
current design trends should be expedited <strong>in</strong> <strong>Pakistan</strong>, if a modernization of furniture trends is<br />
sought for.<br />
International Trade Centre 81
Function also cont<strong>in</strong>ues to <strong>in</strong>fluence design at market as LCD/plasma TVs are <strong>in</strong>corporated<br />
<strong>in</strong>to home enterta<strong>in</strong>ment <strong>and</strong> bedroom pieces. Taller dressers offer better view<strong>in</strong>g of the TV<br />
from the bed. Home enterta<strong>in</strong>ment centres are made with taller TV carts to raise the unit to a<br />
better view<strong>in</strong>g height <strong>and</strong> allow more storage underneath.<br />
F<strong>in</strong>ish<strong>in</strong>g <strong>and</strong> lacquer<strong>in</strong>g<br />
F<strong>in</strong>ish<strong>in</strong>g tends to be a common bottleneck for furniture com<strong>in</strong>g from develop<strong>in</strong>g countries.<br />
<strong>The</strong> quality of f<strong>in</strong>al polish<strong>in</strong>g of carv<strong>in</strong>gs needs to be improved, as well as the consecutive<br />
pa<strong>in</strong>t<strong>in</strong>g <strong>and</strong> lacquer<strong>in</strong>g. It should be understood that these work processes are none less<br />
important than the actual carv<strong>in</strong>g. On the contrary, a bad f<strong>in</strong>ish can lower the value of the<br />
product, <strong>and</strong> downgrade unnecessarily the carver’s skilled <strong>in</strong>put. Too much variation <strong>in</strong><br />
blend<strong>in</strong>g the colours, pa<strong>in</strong>ts <strong>and</strong> solvents is rout<strong>in</strong>ely observed. <strong>The</strong>se should follow controlled<br />
st<strong>and</strong>ard procedures for uniform quality.<br />
Matte f<strong>in</strong>ishes are currently well accepted <strong>in</strong> decorative small furniture items (so-called<br />
occasional furniture). But <strong>in</strong> larger household furniture items the situation is more mixed.<br />
Antiquated or natural (visible gra<strong>in</strong> patterns) surfaces have been <strong>in</strong> fashion <strong>in</strong> the recent years,<br />
<strong>and</strong> this trend has certa<strong>in</strong>ly not been marked by all producers. <strong>The</strong> sh<strong>in</strong>y or sat<strong>in</strong> lacquered<br />
surfaces are still the common norm <strong>in</strong> many producer countries, but pretty much out-dated <strong>in</strong><br />
the overseas markets.<br />
Closely l<strong>in</strong>ked with the former observation is the technical <strong>in</strong>adequacy of some key equipment.<br />
For <strong>in</strong>stance, if the compressors used for spray<strong>in</strong>g the lacquer is too weak, no proper f<strong>in</strong>ish<strong>in</strong>g<br />
quality can be achieved. Brush-pa<strong>in</strong>t<strong>in</strong>g consumes more lacquer <strong>and</strong> should be avoided.<br />
Human health is a grow<strong>in</strong>g concern <strong>in</strong> wood lacquers, <strong>and</strong> it should be taken seriously <strong>in</strong>to<br />
account by exporters to Europe, for example.<br />
Access to market <strong>in</strong>formation<br />
Broadly speak<strong>in</strong>g, <strong>Pakistan</strong>i furniture firms suffer from a poor access to up-to-date market<br />
<strong>in</strong>formation. Non-systematic gather<strong>in</strong>g of such <strong>in</strong>fo leads easily <strong>in</strong>to <strong>in</strong>ability to assess its<br />
reliability <strong>and</strong> put it <strong>in</strong>to proper use. <strong>The</strong>refore, the importance of a cont<strong>in</strong>uous flow of market<br />
<strong>in</strong>formation flow cannot be emphasized too much. Its collection <strong>and</strong> dissem<strong>in</strong>ation is an<br />
activity of its own, which requires external resources <strong>and</strong> dedicated staff to be beneficial for<br />
the <strong>in</strong>dustry.<br />
4.2.3 Solutions for each obstacle <strong>and</strong> shortcom<strong>in</strong>g with explanations<br />
Solutions needed from policy-makers<br />
<strong>The</strong> follow<strong>in</strong>g checklist conta<strong>in</strong>s action elements for policy-makers who are supposed to<br />
convey government support to furniture sector. <strong>The</strong> recommended policy <strong>in</strong>itiatives need to be<br />
designed to strengthen exports of the furniture <strong>in</strong>dustry by improv<strong>in</strong>g the trade environment,<br />
lower<strong>in</strong>g costs <strong>and</strong> improv<strong>in</strong>g efficiency. To be effective, these <strong>in</strong>itiatives need to be viewed as<br />
an <strong>in</strong>tegral part of the country’s overall economic policies <strong>and</strong> structural reforms.<br />
<strong>The</strong> government policy framework should ideally ensure the follow<strong>in</strong>g:<br />
82 International Trade Centre
• Consistent policy for support<strong>in</strong>g susta<strong>in</strong>able <strong>and</strong> legal raw material procurement.<br />
Planners of forestry should make sure they underst<strong>and</strong> the long-term needs of the<br />
downstream process<strong>in</strong>g enterprises.<br />
• Transparent log market where all the domestic users can access material <strong>in</strong> a fair<br />
competition. To counter the wood mafia, there should be a model scheme. Currently <strong>in</strong><br />
<strong>Pakistan</strong> there are lo of middlemen <strong>in</strong>volved <strong>in</strong> the process. This is a symptom of a badly<br />
work<strong>in</strong>g round wood market. Lumberyards should be built of <strong>in</strong>ternational st<strong>and</strong>ards<br />
which have their own process wood, season it <strong>and</strong> make wood accord<strong>in</strong>g to Industry’s<br />
needs <strong>in</strong>to dry or sawn timber.<br />
• Catalytic tax concessions or similar fiscal <strong>in</strong>centives to facilitate upgrade of the<br />
<strong>in</strong>dustry’s capacity. Now only freight subsidy is sometimes allowed as a weak subsidy.<br />
At the same time, one must remember to keep possible subsidies on WTO acceptance<br />
limits.<br />
• Consistent <strong>and</strong> transparent export regulations (cut down red tape <strong>and</strong> <strong>in</strong>efficiency).<br />
• Rationalisation of import tariffs on raw materials <strong>and</strong> equipment. <strong>Pakistan</strong> badly needs<br />
some operat<strong>in</strong>g supplies from abroad (hardware, fabrication <strong>and</strong> foam, etc.). A duty<br />
drawback system is a common way of encourag<strong>in</strong>g necessary imports. Technology<br />
upgrad<strong>in</strong>g is almost impossible without some form of tax rebate.<br />
• Improvement of transportation, communication <strong>and</strong> <strong>in</strong>formation <strong>in</strong>frastructure. Enabl<strong>in</strong>g<br />
environment is needed to stimulate growth of <strong>in</strong>dustry.<br />
• Strengthen<strong>in</strong>g of <strong>in</strong>stitutional <strong>in</strong>frastructure for support services dem<strong>and</strong>ed by <strong>in</strong>dustries<br />
(associations, research <strong>and</strong> development <strong>in</strong>stitutes, education <strong>and</strong> tra<strong>in</strong><strong>in</strong>g, export<br />
promotion offices, test<strong>in</strong>g <strong>and</strong> St<strong>and</strong>ardisation, certification <strong>and</strong> labell<strong>in</strong>g, verification<br />
body of legality, etc.).<br />
<strong>The</strong> private sector should always assume the primary actor’s role <strong>in</strong> putt<strong>in</strong>g the policies <strong>in</strong>to a<br />
maximal use. <strong>The</strong> government’s role <strong>in</strong> support<strong>in</strong>g export market<strong>in</strong>g tends to be subtler, <strong>and</strong><br />
the private sector cannot be made dependent on it.<br />
Solutions proposed for companies<br />
This part tries to provide guidance for <strong>Pakistan</strong>i companies on very practical level.<br />
Raw material recovery<br />
Improve the current basic process<strong>in</strong>g <strong>and</strong> apply wood-sav<strong>in</strong>g measures. Avoid wast<strong>in</strong>g the true<br />
potential of valuable woods <strong>in</strong> secondary applications. Utility woods serve best the <strong>in</strong>stitutional<br />
public sector market segments. Manufacturers should negotiate with such buyers on a contractto-contract<br />
basis what grade of wood is actually fit for their purpose.<br />
Russia (mostly softwoods, some hardwoods), New Zeal<strong>and</strong> (radiata p<strong>in</strong>e), <strong>and</strong> East Europe<br />
(temperate hardwoods) are not easily tapped by <strong>Pakistan</strong> to supply the deficit of hardwoods.<br />
<strong>The</strong> US’ hardwood export promotion body (American Hardwood <strong>Export</strong> Council, AHEC) is<br />
currently target<strong>in</strong>g Ch<strong>in</strong>a for export<strong>in</strong>g more temperate hardwood sawn timber for furnituremakers.<br />
This could be a potential source also for <strong>Pakistan</strong> <strong>in</strong> the future, particularly because<br />
International Trade Centre 83
high-quality hardwoods like walnut <strong>and</strong> oak are available, fully legal <strong>and</strong> environmentally<br />
susta<strong>in</strong>able (certified wood).<br />
Wood season<strong>in</strong>g<br />
Kiln-dry<strong>in</strong>g should be made the <strong>in</strong>dustry st<strong>and</strong>ard for wood season<strong>in</strong>g. <strong>The</strong> smallest operated<br />
local kilns are 5-10 m 3 chambers built on site with local materials, <strong>and</strong> equipped with<br />
ventilation, control <strong>and</strong> fan equipment from a local manufacturer or from abroad.<br />
A kiln-dry<strong>in</strong>g operation could become a popular bus<strong>in</strong>ess of its own, charg<strong>in</strong>g fees on the basis<br />
of actual dry<strong>in</strong>g time <strong>and</strong> volume plus direct energy costs. Probably this type of concept would<br />
have to be located <strong>in</strong>side exist<strong>in</strong>g furniture clusters <strong>in</strong> order to ensure sufficient client base.<br />
It should also be studied whether Australian-made solar kilns or comb<strong>in</strong>ation kilns (solar plus<br />
mechanised ventilation) could be made available at a reasonable cost. <strong>The</strong>se have been<br />
<strong>in</strong>stalled <strong>in</strong> small-scale wooden crafts communities across South-East Asia.<br />
Tool ma<strong>in</strong>tenance<br />
Dedicated workers for tool-ma<strong>in</strong>tenance with a small separate workshop or room would be<br />
needed to upgrade this activity to a more professional level. High-precision tool doctor<strong>in</strong>g<br />
equipment should take over from traditional self-made ma<strong>in</strong>tenance appliances. <strong>The</strong> need for<br />
mechanical trimmers of saw<strong>in</strong>g <strong>and</strong> planer equipment becomes more crucial when capacities of<br />
such equipment are be<strong>in</strong>g enhanced.<br />
Tra<strong>in</strong><strong>in</strong>g of workforce<br />
A m<strong>and</strong>atory contribution from all employers towards a “Human Resource Development<br />
Fund” would be a commendable means of provid<strong>in</strong>g tra<strong>in</strong><strong>in</strong>g <strong>and</strong> upgrad<strong>in</strong>g for the workforce<br />
<strong>in</strong> the <strong>in</strong>dustry. It would enable the use of foreign experts, <strong>and</strong> complement <strong>in</strong>-house tra<strong>in</strong><strong>in</strong>g<br />
programmes.<br />
<strong>The</strong> use of contract workers from abroad should be limited, because such workforce is highly<br />
mobile <strong>and</strong> retard labour productivity growth. Further, employers will be reluctant to provide<br />
tra<strong>in</strong><strong>in</strong>g as these workers will leave when their tenure expires.<br />
Stable workforce is crucial for greater value addition <strong>in</strong> the furniture <strong>in</strong>dustry. Hence, without<br />
such workforce, the research <strong>and</strong> development (R <strong>and</strong> D) activities, especially those related to<br />
design <strong>and</strong> development is h<strong>in</strong>dered.<br />
Design<br />
Access to foreign designs (if this is desirable) can be improved with distribution of home<br />
decoration magaz<strong>in</strong>es, mail order catalogues, <strong>and</strong> similar media that display a wider range of<br />
products. Internet can be a potentially rich resource of design trends <strong>and</strong> ideas, but it is not<br />
effectively used without some basic tra<strong>in</strong><strong>in</strong>g.<br />
<strong>The</strong> fastest way to improve design awareness is to assign one computer-savvy design student<br />
or young designer to facilitate access to Internet-based designs <strong>in</strong> the furniture exporters<br />
association. This could also happen as the first step of an exchange programme with some<br />
foreign design school. It may be more difficult to attract bus<strong>in</strong>ess-like design tra<strong>in</strong>ers, because<br />
of the small size of the <strong>Pakistan</strong>i <strong>in</strong>dustry.<br />
84 International Trade Centre
A short-term but maybe a costly measure is to br<strong>in</strong>g a foreign designer <strong>in</strong>to <strong>Pakistan</strong>. Visit<strong>in</strong>g<br />
designers can be sought for <strong>in</strong> the exchange programmes of foreign design schools <strong>and</strong><br />
<strong>in</strong>stitutions <strong>in</strong> the ma<strong>in</strong> markets (Europe, USA). Aid to Artisans <strong>and</strong> similar NGOs can<br />
facilitate the tra<strong>in</strong><strong>in</strong>g courses of foreign design teachers <strong>in</strong> furniture clusters. In the long term,<br />
tra<strong>in</strong><strong>in</strong>g of <strong>Pakistan</strong>i designers at foreign art schools <strong>and</strong> universities, etc. should be considered.<br />
From the UN-family, UNIDO has arranged design assistance <strong>in</strong> wood products previously, <strong>and</strong><br />
it could be consulted for the case of <strong>Pakistan</strong>.<br />
F<strong>in</strong>ish<strong>in</strong>g <strong>and</strong> lacquer<strong>in</strong>g<br />
<strong>The</strong>re are some <strong>in</strong>stitutions <strong>in</strong> Europe, like Rosenheim University <strong>in</strong> Germany, who organise<br />
tra<strong>in</strong><strong>in</strong>g courses for furniture makers from all over the world to study <strong>and</strong> practise the most<br />
recent f<strong>in</strong>ish<strong>in</strong>g techniques, s<strong>and</strong><strong>in</strong>g <strong>and</strong> polish<strong>in</strong>g of wood. <strong>Pakistan</strong> could tap this opportunity<br />
to upgrade its furniture f<strong>in</strong>ish<strong>in</strong>g. Moreover, one of Rosenheim scholars is based <strong>in</strong> University<br />
Putra Malaysia (UPM), <strong>and</strong> could be approached for tailor-made courses. He is one of the<br />
founders of the International <strong>Furniture</strong> Research Group (IFRG), earlier mentioned <strong>in</strong> this<br />
report.<br />
If h<strong>and</strong> pa<strong>in</strong>t<strong>in</strong>g <strong>and</strong> lacquer<strong>in</strong>g were still widely applied, <strong>in</strong>vestments <strong>in</strong>to a compressor-based<br />
spray-gun pa<strong>in</strong>t<strong>in</strong>g would be warranted to improve f<strong>in</strong>ish<strong>in</strong>g <strong>and</strong> economise on pa<strong>in</strong>t/lacquer<br />
consumption. Acquisition of a more powerful compressor would further improve surface<br />
f<strong>in</strong>ish<strong>in</strong>g <strong>and</strong> <strong>in</strong>crease the f<strong>in</strong>al value of products. Some clients may <strong>in</strong>sist on environmentally<br />
or health-wise friendly lacquers <strong>and</strong> pa<strong>in</strong>ts, too. Emission safety, as well as food safety for<br />
kitchen/d<strong>in</strong><strong>in</strong>g furniture range, is therefore to be ma<strong>in</strong>ta<strong>in</strong>ed at required st<strong>and</strong>ard levels.<br />
One key requirement would be to <strong>in</strong>stall a clean pa<strong>in</strong>t<strong>in</strong>g/spray<strong>in</strong>g room with recovery of airborne<br />
lacquer remnants. This would not require a big space or <strong>in</strong>vestment. <strong>The</strong> actual space<br />
requirement depends on the size of <strong>in</strong>dividual products, <strong>and</strong> on the numbers of items<br />
manufactured. Usually the typical SME workshops need only 5-10 square meters to start a<br />
spray<strong>in</strong>g room. <strong>The</strong> fan system for recover<strong>in</strong>g the loose sprays of lacquer, <strong>and</strong> cleanl<strong>in</strong>ess of<br />
the f<strong>in</strong>ish<strong>in</strong>g environment, would dramatically lower the chemical consumption <strong>and</strong> improve<br />
f<strong>in</strong>al quality.<br />
Market <strong>in</strong>formation<br />
<strong>The</strong>re are numerous case studies <strong>and</strong> manuals for establish<strong>in</strong>g a specific Market Information<br />
System (MIS) to facilitate small producers’ access to commercial details <strong>and</strong> product<br />
requirements for their products. For example, FAO has produced <strong>and</strong> field-tested a manual for<br />
develop<strong>in</strong>g small-scale community enterprises, <strong>and</strong> supply of market <strong>in</strong>formation was one of<br />
the key components. Although it has been developed for agro <strong>and</strong> forestry products, its<br />
methodology could be adjusted to furniture <strong>and</strong> crafts.<br />
<strong>The</strong> establishment of such a system is not an easy task. And keep<strong>in</strong>g such system operational<br />
on the basis of membership fees or similar f<strong>in</strong>ancial contributions is far from simple. Based on<br />
the past experiences, there are a number of very fundamental decisions to be taken if a market<br />
<strong>in</strong>formation system will be developed. <strong>The</strong>se may <strong>in</strong>clude, but not restrict to, the follow<strong>in</strong>g<br />
(Table 4.1).<br />
International Trade Centre 85
Table 4.1 Market Information System: Basic questions<br />
Questions<br />
What products are to be selected?<br />
What type of <strong>in</strong>fo is collected?<br />
How frequent is collection?<br />
From where to get <strong>in</strong>fo?<br />
Who collects <strong>and</strong> dissem<strong>in</strong>ates it?<br />
What media are used for dissem<strong>in</strong>ation?<br />
Who keeps the master data?<br />
How is the MIS susta<strong>in</strong>ed?<br />
Possible solutions<br />
H<strong>and</strong>-carved Sheesham up-market furniture,<br />
other products<br />
Prices, favoured articles, style <strong>and</strong> f<strong>in</strong>ish,<br />
quality, new designs<br />
Monthly/quarterly/half-a-year<br />
Trade fairs, shopkeepers, retail cha<strong>in</strong>s,<br />
tourists <strong>and</strong> foreign experts, trade <strong>and</strong> home<br />
decoration media, Internet sources<br />
Market Information System developer<br />
(organised by ITC), then a local counterpart<br />
tra<strong>in</strong>ed for the task<br />
Notice boards, newspapers, mass media<br />
(generic articles), telephone (short text<br />
message), e-mail/Internet<br />
Industry Association or representative, helped<br />
by ITC<br />
A user free system established, exchange of<br />
<strong>in</strong>fo with other MISs<br />
86 International Trade Centre
5 <strong>Export</strong> services <strong>in</strong> <strong>Pakistan</strong><br />
5.1 <strong>Export</strong> service providers<br />
5.1.1 Trade Development Authority of <strong>Pakistan</strong> - TDAP<br />
In late 2006 the Trade Development Authority of <strong>Pakistan</strong> (TDAP) (www.tdap.gov.pk)<br />
succeeded the <strong>Export</strong> Promotion Bureau (EPB) as the primary agency engaged <strong>in</strong> the<br />
promotion <strong>and</strong> boost<strong>in</strong>g of export. S<strong>in</strong>ce EPB's <strong>in</strong>ception <strong>in</strong> 1963 as an attached department of<br />
the M<strong>in</strong>istry of Commerce, it has cont<strong>in</strong>ued to facilitate exporters <strong>in</strong> overcom<strong>in</strong>g difficulties<br />
faced by them on the supply <strong>and</strong> dem<strong>and</strong> side of exports.<br />
On the dem<strong>and</strong> side, TDAP helps exporters to participate <strong>in</strong> exhibitions abroad <strong>and</strong> sends<br />
delegations to export markets with a view to explor<strong>in</strong>g new markets <strong>and</strong> develop<strong>in</strong>g the<br />
traditional markets. On the supply side, TDAP has established over 32 tra<strong>in</strong><strong>in</strong>g <strong>in</strong>stitutes <strong>and</strong><br />
projects <strong>in</strong> various export sectors to tra<strong>in</strong> necessary manpower that can manage the export trade<br />
<strong>and</strong> <strong>in</strong>dustry professionally, meet<strong>in</strong>g the requirements of the export markets. <strong>Export</strong><br />
promotional activities are carried out <strong>in</strong> co-ord<strong>in</strong>ation with trade bodies at home <strong>and</strong> <strong>Pakistan</strong>'s<br />
trade missions abroad. TDAP has its head office <strong>in</strong> Karachi, the city which is also a ma<strong>in</strong><br />
<strong>in</strong>dustrial <strong>and</strong> commercial centre <strong>and</strong> a major export outlet of the country. TDAP has a staff of<br />
around 800 of which close to 600 are permanent.<br />
Services provided by TDAP are as follows<br />
• <strong>Export</strong> facilitation committee<br />
• Resolv<strong>in</strong>g problems <strong>in</strong> exports<br />
• Simplification of procedures<br />
• <strong>Export</strong> procedures h<strong>and</strong>book<br />
• Establish<strong>in</strong>g buyer-seller contacts<br />
• Fax on dem<strong>and</strong> <strong>and</strong> the website<br />
• Interface with chambers/trade associations<br />
• Settlements of trade disputes<br />
Regulatory services <strong>in</strong>clude the follow<strong>in</strong>g<br />
• Formulation of proposals for the trade policy<br />
• Implementation of the trade policy<br />
• Textile quota management<br />
• Registration of importers/exporters<br />
• Registration of export contracts<br />
• Determ<strong>in</strong>ation of m<strong>in</strong>imum export prices<br />
• Issuance of GSP certificates<br />
Functions of TDAP are listed below<br />
• Market<strong>in</strong>g<br />
- Market Research<br />
- Fairs <strong>and</strong> Exhibitions - local <strong>and</strong> <strong>in</strong>ternational<br />
- Trade delegations<br />
International Trade Centre 87
- Overseas <strong>and</strong> local publicity<br />
- Participation <strong>in</strong> trade-related events<br />
- Expo Centre - hold<strong>in</strong>g of exhibitions<br />
- Facilitation through trade officers abroad<br />
- Sem<strong>in</strong>ars/conferences/workshops<br />
• Communication<br />
- Publication of trade <strong>in</strong>quiries/opportunities<br />
- Library<br />
- <strong>Export</strong> <strong>in</strong>telligence bullet<strong>in</strong><br />
- Counsell<strong>in</strong>g<br />
- Year Book - statistics<br />
• Human resource development<br />
- Tra<strong>in</strong><strong>in</strong>g <strong>in</strong>stitutes<br />
- Sem<strong>in</strong>ars on ISO 9000 <strong>and</strong> 14000<br />
- TQM<br />
- Social sector concerns<br />
- Environmental concerns<br />
5.1.2 Small <strong>and</strong> Medium Enterprise Development Authority - SMEDA<br />
<strong>The</strong> premier <strong>in</strong>stitution of the government of <strong>Pakistan</strong> under the M<strong>in</strong>istry of Industries,<br />
Production <strong>and</strong> Special <strong>in</strong>itiative, SMEDA (www.smeda.org.pk) was established <strong>in</strong> October<br />
1998 to take on the challenge of develop<strong>in</strong>g small <strong>and</strong> medium enterprises (SMEs). With a<br />
futuristic approach <strong>and</strong> professional management structure it has its focus on provid<strong>in</strong>g an<br />
enabl<strong>in</strong>g environment <strong>and</strong> bus<strong>in</strong>ess development services to small <strong>and</strong> medium enterprises.<br />
SMEDA is not only an SME policy-advisory body for the government of <strong>Pakistan</strong>, but also<br />
facilitates other stakeholders <strong>in</strong> address<strong>in</strong>g their SME development agendas.<br />
SMEDA’s head office is <strong>in</strong> Lahore. <strong>The</strong>re are regional offices <strong>in</strong> Lahore, Karachi, Peshawar<br />
<strong>and</strong> Quetta.<br />
SMEDA offers the follow<strong>in</strong>g services:<br />
• Assistance <strong>in</strong> rais<strong>in</strong>g f<strong>in</strong>ance<br />
• F<strong>in</strong>ancial advice<br />
• Project identification<br />
• Bus<strong>in</strong>ess plan development<br />
• Technical advice<br />
• Market<strong>in</strong>g advice (br<strong>and</strong><strong>in</strong>g, labell<strong>in</strong>g, packag<strong>in</strong>g, distribution, promotion, etc)<br />
• Company <strong>in</strong>corporation, export registration <strong>and</strong> regulatory advice<br />
• Sales tax, custom duty, excise duty, etc<br />
• Tra<strong>in</strong><strong>in</strong>g <strong>and</strong> development<br />
• Information services (library, databases, project briefs, pre-feasibilities)<br />
• Bus<strong>in</strong>ess matchmak<strong>in</strong>g<br />
88 International Trade Centre
5.1.3 Federation of <strong>Pakistan</strong> Chambers of Commerce & Industry -<br />
FPCCI<br />
<strong>The</strong> Federation of <strong>Pakistan</strong> Chambers of Commerce & Industry (FPCCI) (www.fpcci.com.pk)<br />
was orig<strong>in</strong>ally formed <strong>in</strong> 1949 by Mr G Allana, with headquarters <strong>in</strong> Karachi but its<br />
membership then was conf<strong>in</strong>ed to a limited number of bodies. <strong>The</strong> Federation of <strong>Pakistan</strong><br />
Chambers of Commerce & Industry (FPCCI) is the supreme among all trade <strong>and</strong> <strong>in</strong>dustrial<br />
bodies <strong>in</strong> the country. It enfolds all chambers <strong>and</strong> all country-wide associations represent<strong>in</strong>g<br />
specific trades <strong>and</strong>/or <strong>in</strong>dustries. Indeed, it is compulsory for all chambers <strong>and</strong> associations of<br />
commerce <strong>and</strong> <strong>in</strong>dustry to become members of the federation.<br />
Be<strong>in</strong>g federal <strong>in</strong> its constitution, the federation takes up only such issues <strong>and</strong> matters as<br />
concern the country's trade <strong>and</strong> <strong>in</strong>dustry as a whole; <strong>in</strong> other words, the <strong>in</strong>terests of all<br />
chambers <strong>and</strong> associations put together, e.g. economic plann<strong>in</strong>g, <strong>in</strong>vestment schedules, tax<br />
policy, money <strong>and</strong> credit transport <strong>and</strong> communication, export promotion, organisation of<br />
general trade missions to foreign countries, receiv<strong>in</strong>g general trade missions form abroad etc.<br />
Matters concern<strong>in</strong>g specific trades <strong>and</strong>/or <strong>in</strong>dustries (e.g. cotton or steel) or <strong>in</strong>dividual firms<br />
<strong>and</strong> companies are left to associations <strong>and</strong> local <strong>and</strong> regional chambers.<br />
<strong>The</strong> head office of FPCCI is based <strong>in</strong> its own build<strong>in</strong>g, the Federation House, spread over an<br />
area of 11,666 sq. yards <strong>in</strong> a posh locality of Karachi, Clifton, over-look<strong>in</strong>g the Arabian Sea.<br />
FPCCI has zonal offices <strong>in</strong> Lahore <strong>and</strong> Peshawar, which ma<strong>in</strong>ly deal with the prov<strong>in</strong>cial<br />
governments. FPCCI has a branch office <strong>in</strong> Islamabad to liaise with the federal government.<br />
FPCCI offers the follow<strong>in</strong>g services:<br />
• Trade promotion<br />
FPCCI acts as a forward post of <strong>Pakistan</strong>'s private sector abroad. In the first place, it<br />
ma<strong>in</strong>ta<strong>in</strong>s constant liaison with the diplomatic <strong>and</strong> commercial missions abroad <strong>and</strong><br />
takes special care to develop, promote <strong>and</strong> strengthen cooperation <strong>and</strong> contacts with its<br />
counterpart bodies abroad through exchange of delegations, literature, directory(ies),<br />
bus<strong>in</strong>ess <strong>in</strong>formation, etc<br />
• Cooperation agreements<br />
FPCCI has signed cooperation agreements with a number of foreign counterpart<br />
chambers of commerce <strong>in</strong>clud<strong>in</strong>g those of Japan, South Korea, France, Netherl<strong>and</strong>s,<br />
Germany, Turkey, Bangladesh, Hungary, Romania, Malaysia, Philipp<strong>in</strong>es, S<strong>in</strong>gapore,<br />
Oman, Australia, Brunei Darussalam, Indonesia <strong>and</strong> Syria. <strong>The</strong>se agreements envisage a<br />
regular exchange of data <strong>and</strong> <strong>in</strong>formation on trade <strong>and</strong> <strong>in</strong>vestment opportunities, visits of<br />
trade <strong>and</strong> <strong>in</strong>vestment delegations <strong>and</strong> participation <strong>in</strong> trade fairs <strong>and</strong> exhibitions.<br />
With the sign<strong>in</strong>g of cooperation agreements, jo<strong>in</strong>t bus<strong>in</strong>ess councils/economic<br />
cooperation committees have been set up <strong>in</strong> FPCCI <strong>and</strong> its counterpart chambers, which<br />
keep constant liaison with each other throughout the year. <strong>The</strong>y have obligation to meet<br />
alternately once a year to dispose of agreed agenda, which pre-dom<strong>in</strong>antly relates to the<br />
promotion of two-way trade, narrow<strong>in</strong>g down trade gaps, identification of new<br />
commodities for mutual exchange, etc. Investment affairs, transfer of technology <strong>and</strong><br />
tra<strong>in</strong><strong>in</strong>g of personnel are the other areas normally deliberated on.<br />
International Trade Centre 89
• Bilateral trade committees<br />
A large number of bilateral trade <strong>and</strong> <strong>in</strong>dustry committees have been set up with several<br />
countries of the world for the promotion of trade, jo<strong>in</strong>t ventures <strong>and</strong> economic ties. <strong>The</strong>se<br />
committees <strong>in</strong>vite trade missions, trade officials <strong>and</strong> diplomats of the countries<br />
concerned for exchange of views <strong>and</strong> review of difficulties <strong>in</strong> the fields of trade, jo<strong>in</strong>t<br />
venture, <strong>in</strong>vestment, etc.<br />
• St<strong>and</strong><strong>in</strong>g committees<br />
FPCCI has constituted a number of st<strong>and</strong><strong>in</strong>g committees, which deliberate <strong>in</strong>tensively on<br />
different problems <strong>and</strong> issues be<strong>in</strong>g confronted by the trade <strong>and</strong> <strong>in</strong>dustry <strong>in</strong> the country;<br />
prepare suitable pragmatic recommendations for their resolution <strong>and</strong> submit the same to<br />
the government for consideration. <strong>The</strong>se st<strong>and</strong><strong>in</strong>g committees have been established on<br />
the important subjects of bank<strong>in</strong>g, taxation, exports, imports, <strong>in</strong>dustry, <strong>in</strong>vestment,<br />
agriculture, plann<strong>in</strong>g <strong>and</strong> economic affairs, privatisation, research <strong>and</strong> development,<br />
ports <strong>and</strong> shipp<strong>in</strong>g, environment, health, transport, labour, tourism <strong>and</strong> many others.<br />
• Exhibitions<br />
FPCCI also undertakes the responsibility to organise, <strong>in</strong> consultation with <strong>Export</strong><br />
Promotion Bureau, <strong>Pakistan</strong>'s participation <strong>in</strong> <strong>in</strong>ternational trade fairs <strong>and</strong> holds s<strong>in</strong>gle<br />
country exhibitions of <strong>Pakistan</strong>i goods <strong>and</strong> services <strong>in</strong> selected countries. At home, it<br />
also organises <strong>in</strong>ternational trade fairs (such as PITF-84) <strong>and</strong> national <strong>in</strong>dustrial<br />
exhibitions <strong>and</strong> fairs of specialised s<strong>in</strong>gle commodities.<br />
• <strong>Export</strong> trophy awards<br />
To encourage the export of <strong>Pakistan</strong>'s goods <strong>and</strong> technical/ consultative services, FPCCI<br />
<strong>in</strong>stituted export trophy awards <strong>in</strong> 1976-77. <strong>The</strong> awards are given every year to those<br />
who excel <strong>in</strong> promot<strong>in</strong>g the export of goods <strong>and</strong> services both <strong>in</strong> quantum, value <strong>and</strong> to<br />
new directions. In addition, the federation has <strong>in</strong>stituted a 'Bus<strong>in</strong>essman of <strong>The</strong> Year’<br />
award, which is conferred on a bus<strong>in</strong>essman/<strong>in</strong>dustrialist who, <strong>in</strong> the judgment of<br />
FPCCI, has made an outst<strong>and</strong><strong>in</strong>g contribution to the growth of national economy. A<br />
'President of <strong>Pakistan</strong>' trophy is also conferred on a bus<strong>in</strong>ess house has made the overall<br />
best <strong>and</strong> highest <strong>performance</strong> <strong>in</strong> exports. FPCCI has also <strong>in</strong>stituted a ‘Best Lady<br />
<strong>Export</strong>er’ gold medal, which is conferred on a lady who, <strong>in</strong> the judgment of FPCCI, has<br />
made the best export <strong>performance</strong> dur<strong>in</strong>g the year.<br />
• Arbitration<br />
FPCCI has set up arbitration mach<strong>in</strong>ery under Section 12 of the Trade Organisations<br />
Ord<strong>in</strong>ance, 1961, to arbitrate <strong>in</strong> matters of disputes aris<strong>in</strong>g between member bodies of<br />
FPCCI <strong>and</strong> its members.<br />
• <strong>Pakistan</strong> Shippers’ Council (PSC)<br />
<strong>The</strong> <strong>Pakistan</strong> Shippers’ Council, hav<strong>in</strong>g the status of a St<strong>and</strong><strong>in</strong>g Committee of FPCCI,<br />
works for the protection <strong>and</strong> furtherance of the <strong>in</strong>terests of exporters <strong>and</strong> importers <strong>in</strong><br />
<strong>Pakistan</strong> <strong>in</strong> relation to the transportation of goods by sea, l<strong>and</strong> <strong>and</strong> air, <strong>and</strong> undertakes<br />
studies on problems affect<strong>in</strong>g shippers <strong>in</strong> <strong>Pakistan</strong>.<br />
PSC is affiliated to the Association of Shippers’ Councils of Bangladesh, India, <strong>Pakistan</strong><br />
<strong>and</strong> Sri Lanka (ASCOBIPS), as a member.<br />
90 International Trade Centre
• <strong>Pakistan</strong> International Freight Forwarders’ Council (PIFFC)<br />
PIFFC is another specialised agency of FPCCI function<strong>in</strong>g to safeguard the <strong>in</strong>terests of<br />
freight forwarders who facilitate the transportation of import <strong>and</strong> export cargo of<br />
<strong>Pakistan</strong>. PIFFC is affiliated with the International Federation of Freight Forwarders<br />
Association (FIATA).<br />
• Trade delegations<br />
FPCCI sponsors general <strong>and</strong> specialised trade delegations to various dest<strong>in</strong>ations <strong>in</strong> the<br />
world to promote export of goods <strong>and</strong> services <strong>and</strong> to locate most competitive sources of<br />
imports to save foreign exchange. Public sector <strong>in</strong>dustries <strong>and</strong> bus<strong>in</strong>ess houses’<br />
representatives are also associated with such missions. Similarly, buyers <strong>and</strong> sellers<br />
missions from abroad are <strong>in</strong>vited by FPCCI besides <strong>in</strong>vestment <strong>and</strong> jo<strong>in</strong>t venture<br />
delegations.<br />
• <strong>Pakistan</strong>'s trade missions abroad<br />
Brief<strong>in</strong>g of <strong>Pakistan</strong>'s trade officials abroad <strong>and</strong> an exchange of <strong>in</strong>formation, country<br />
profiles with them is the hallmark of FPCCI on this front. S<strong>in</strong>ce economic considerations<br />
have overtaken political considerations <strong>in</strong> the present world environment, even<br />
ambassadors/high commissioners <strong>and</strong> commercial counsellors of <strong>Pakistan</strong> posted abroad<br />
visit FPCCI for <strong>in</strong>dividual or collective brief<strong>in</strong>g on economic <strong>and</strong> trade ties/issues before<br />
tak<strong>in</strong>g up assignment <strong>and</strong> dur<strong>in</strong>g the course of assignment.<br />
• International symposia/sem<strong>in</strong>ars/workshops<br />
Hold<strong>in</strong>g of <strong>in</strong>ternational sem<strong>in</strong>ars/workshops/symposia <strong>in</strong> cooperation with <strong>in</strong>ternational<br />
agencies <strong>in</strong> the fields of trade, <strong>in</strong>dustry, jo<strong>in</strong>t venture, tra<strong>in</strong><strong>in</strong>g of manpower, etc is a<br />
regular feature of FPCCI. <strong>The</strong> programmes familiarise participants from bus<strong>in</strong>ess <strong>and</strong><br />
<strong>in</strong>dustry with the latest market trends, the state of competitiveness, trade regulations,<br />
customs procedure, duty structure, port facilities, conta<strong>in</strong>erisation system, <strong>in</strong>centives<br />
offered by competitors, etc.<br />
5.2 <strong>Export</strong> services as they actually are – expressed views<br />
Most of the <strong>in</strong>terviewees were of the view that TDAP/SMEDA are offer<strong>in</strong>g no export services.<br />
Few of them recalled some of trade fairs held <strong>in</strong> 2003 <strong>and</strong> 2004 <strong>in</strong> Italy, Malaysia <strong>and</strong> Spa<strong>in</strong>.<br />
Only one of them said that the sem<strong>in</strong>ars be<strong>in</strong>g conducted are effective, as they get an<br />
opportunity to discuss the problems faced by exporters, a lot of <strong>in</strong>formation is ga<strong>in</strong>ed related to<br />
local <strong>and</strong> global <strong>in</strong>dustry <strong>and</strong> as a result exports <strong>in</strong>crease. <strong>The</strong>y also help <strong>in</strong> impart<strong>in</strong>g<br />
knowledge on rates of raw material. Others feel that TDAP <strong>and</strong> SMEDA just organise<br />
conferences <strong>and</strong> sem<strong>in</strong>ars but they produce no concrete results. Recommendations are made<br />
<strong>and</strong> <strong>in</strong> the end it is ensured that these recommendations would be given to the government. But<br />
no follow-ups are made. TDAP exhibitions are not at all effective. <strong>The</strong>y are mostly set <strong>in</strong> very<br />
far away countries. Companies <strong>in</strong>cur lot of transportation expense <strong>in</strong>curred by companies. In<br />
Dubai an exhibition was organised, where products were taken on subsidy <strong>and</strong> then dumped.<br />
Others recalled festivals like Expo, which were aga<strong>in</strong> not effective. At exhibitions, rates are too<br />
high for sett<strong>in</strong>g up stalls <strong>and</strong> space provided for sett<strong>in</strong>g up stalls is very limited. SMEDA is<br />
mak<strong>in</strong>g efforts but only big companies are tak<strong>in</strong>g advantage of them.<br />
International Trade Centre 91
5.3 <strong>Export</strong> services as they should be – expressed views<br />
• <strong>The</strong>y should voice their follow<strong>in</strong>g <strong>in</strong>terests to the government<br />
- Reduce loan rates<br />
- Control quality of raw material, so that no diseased wood is used<br />
- New trees to be planted<br />
- Transportation rates issue solved<br />
- Government to give <strong>in</strong>centives to exporters to reduce the trend of us<strong>in</strong>g Ch<strong>in</strong>ese<br />
material which is sell<strong>in</strong>g at cheaper price <strong>and</strong> better quality<br />
- Tax rebates <strong>and</strong> <strong>in</strong>centives<br />
- Recognition as an <strong>in</strong>dustry<br />
- Use of latest technology<br />
• <strong>Furniture</strong> exhibitions <strong>and</strong> fairs to be organised at <strong>in</strong>ternational <strong>and</strong> local levels on<br />
regular basis <strong>in</strong> America, UK, Germany <strong>and</strong> Dubai. Every exporter should take part <strong>in</strong> it.<br />
<strong>The</strong> government should make a committee. In 3–4 months make all necessary<br />
arrangements. Book<strong>in</strong>g should be done before time. <strong>The</strong>se exhibitions should be<br />
organised every year. Warehouses should be built <strong>in</strong> these countries. It will cost PKR 4 –<br />
5 million. Funds required <strong>in</strong> total would be PKR 10 million. In Exhibitions space for<br />
sett<strong>in</strong>g up stall should be <strong>in</strong>creased. Transportation charges of the furniture to the country<br />
where exhibition is to be held should be taken care by EPB/TDAP.<br />
• Make efforts for promotion of companies, so that companies are identified at<br />
<strong>in</strong>ternational level <strong>and</strong> the perception of foreign buyers of <strong>Pakistan</strong>i furniture is changed.<br />
• Foreign delegates should be <strong>in</strong>vited to <strong>Pakistan</strong> to share their knowledge with local<br />
people.<br />
• Set up tra<strong>in</strong><strong>in</strong>g <strong>in</strong>stitutes where knowledge on latest skills is imparted with the help of<br />
the government, Chamber of Commerce <strong>and</strong> Industries <strong>and</strong> APFEA. Duration of the plan<br />
would be one year. Cost of this proposal would be approximately PKR 2 billion <strong>and</strong> total<br />
funds required would be PKR 5 billion.<br />
• An implementation cell should be set up, which should make efforts to get contacts<br />
numbers <strong>and</strong> address of foreign importers <strong>and</strong> then they should be passed on to the<br />
exporters to promote trade.<br />
• Consultancy on modernis<strong>in</strong>g techniques. EPB/TDAP <strong>and</strong> M<strong>in</strong>istry of Production<br />
should come forward. <strong>The</strong>se services should be provided two days <strong>in</strong> a week.<br />
• Lectures on world competition <strong>and</strong> market status<br />
5.4 Other export services – Malaysia as example<br />
<strong>Export</strong> services be<strong>in</strong>g put <strong>in</strong>to offer for Malaysia’s furniture sector deserve to be presented<br />
here. <strong>Pakistan</strong> can draw conclusions about which similar services would assist its furniture<br />
exports <strong>in</strong> a maximal way.<br />
92 International Trade Centre
<strong>The</strong> lessons learnt here could be repeated elsewhere <strong>in</strong> other develop<strong>in</strong>g nations where the<br />
furniture <strong>in</strong>dustry has good growth potential. Major drawback is usually the susta<strong>in</strong>ed flow of<br />
wood raw material.<br />
Industrial master plans<br />
In the early 1980’s, Malaysia was a large exporter of commodities, primarily sawn timber <strong>and</strong><br />
plywood. In realis<strong>in</strong>g the potential earn<strong>in</strong>gs of the wood-based sector, the government<br />
embarked on an <strong>in</strong>dustrialisation strategy, which focused on the export trade <strong>and</strong> later on<br />
value-added products.<br />
<strong>The</strong> 1 st <strong>in</strong>dustrial master plan (1986 – 95)<br />
<strong>The</strong> First Industrial Master Plan (1986 – 1995) was aimed at enhanc<strong>in</strong>g down-stream wood<br />
process<strong>in</strong>g activities. <strong>The</strong> government provided numerous fiscal <strong>in</strong>centives <strong>and</strong> policy<br />
<strong>in</strong>struments aimed at spurr<strong>in</strong>g such activities, particularly amongst upstream activity players.<br />
Annual growth rate was <strong>in</strong> the range of 40%.<br />
<strong>The</strong> 2 nd . <strong>in</strong>dustrial master plan (1996 – 2005)<br />
<strong>The</strong> export oriented growth cont<strong>in</strong>ued <strong>in</strong>to the Second Industrial Master Plan, but the focus had<br />
shifted towards manufactur<strong>in</strong>g of greater value added furniture.<br />
<strong>The</strong> third <strong>in</strong>dustrial master plan is currently <strong>in</strong> the mak<strong>in</strong>g<br />
Aga<strong>in</strong>st the need to create a skilled local workforce, the government established the Human<br />
Resource Development Fund (HRDF) <strong>in</strong> 1993 <strong>and</strong> subsequently the Human Resource<br />
Development Council (HRDC). Both these <strong>in</strong>itiatives were aimed at produc<strong>in</strong>g skilful local<br />
workforce for the furniture <strong>in</strong>dustry. Employers were required to make a m<strong>and</strong>atory<br />
contribution of 1% from the payroll to the fund, which is then used for tra<strong>in</strong><strong>in</strong>g of the<br />
workforce. Nevertheless, the effectiveness of the development programme has not been up to<br />
the mark: Reasons are the reluctance of employers to send their workers for tra<strong>in</strong><strong>in</strong>g due to<br />
limited contractual obligation <strong>and</strong> the non-relevance of the tra<strong>in</strong><strong>in</strong>g programmes offered.<br />
<strong>Export</strong> restrictions on sawn wood<br />
<strong>The</strong> government policies, such as imposition of export levies on rubber wood sawn timber <strong>and</strong><br />
the limited export volume quota imposed, forced many upstream players to move <strong>in</strong>to<br />
downstream process<strong>in</strong>g. Further, f<strong>in</strong>ancial resources were made available to new entrants to<br />
encourage the expansion of the <strong>in</strong>dustry. It must be noted that <strong>in</strong> Malaysia, the bank<strong>in</strong>g sector<br />
was imposed a m<strong>in</strong>imum lend<strong>in</strong>g quota by the Central Bank, which should be made available<br />
to the furniture <strong>in</strong>dustry on an annual basis.<br />
Government policies<br />
<strong>The</strong> role of the government <strong>in</strong> the development of the Malaysian furniture <strong>in</strong>dustry is very<br />
significant <strong>and</strong> cannot be downplayed. Conducive political climate is a boost for <strong>in</strong>vestors <strong>and</strong><br />
the manufactur<strong>in</strong>g sector as a whole.<br />
International Trade Centre 93
Tariff protection<br />
Imported furniture were subjected to an import duty of 28% <strong>in</strong> mid 1990s but gradually this<br />
has been reduced to less than 5% to meet the impend<strong>in</strong>g AFTA (ASEAN Free Trade Area).<br />
F<strong>in</strong>ancial <strong>in</strong>centives<br />
<strong>The</strong> f<strong>in</strong>ancial <strong>in</strong>centives provided to the furniture <strong>in</strong>dustry are very good <strong>and</strong> have been cited as<br />
one of the ma<strong>in</strong> reasons for the rapid expansion of the furniture <strong>in</strong>dustry <strong>in</strong> Malaysia. Schemes<br />
such as the pioneer status, re<strong>in</strong>vestment allowance, <strong>in</strong>frastructure <strong>and</strong> tra<strong>in</strong><strong>in</strong>g allowance, etc.<br />
have been fully exploited by the furniture manufacturers, especially by the foreign <strong>in</strong>vestors<br />
like Taiwan, S<strong>in</strong>gapore, etc. However, the <strong>in</strong>centives for research <strong>and</strong> development (R <strong>and</strong> D)<br />
<strong>and</strong> design activities are still <strong>in</strong>significant, which expla<strong>in</strong>s the lack of such activities with<strong>in</strong> the<br />
<strong>in</strong>dustry.<br />
Common service facilities<br />
Common service facilities such as kiln-dry<strong>in</strong>g capacity, f<strong>in</strong>ish<strong>in</strong>g <strong>and</strong> design centres, etc. have<br />
been established <strong>in</strong> furniture villages to encourage the growth of the furniture <strong>in</strong>dustry is this<br />
vic<strong>in</strong>ity.<br />
Network<strong>in</strong>g<br />
<strong>The</strong> rapid expansion of the manufactur<strong>in</strong>g base has been attributed to the extensive network<strong>in</strong>g<br />
or sub-contract<strong>in</strong>g activities prevail<strong>in</strong>g <strong>in</strong> the <strong>in</strong>dustry. Such a practice enables economies of<br />
scale <strong>and</strong> spread of overhead, which provides cost competitiveness.<br />
<strong>Export</strong> promotion<br />
Due to dependence on rubber wood, the foreign perception of the Malaysian <strong>in</strong>dustry has<br />
persistently been that of low-end products. Experience has shown that export promotion<br />
support has to be specifically targeted at furniture, not to be comb<strong>in</strong>ed with other products. <strong>The</strong><br />
<strong>in</strong>ternational furniture fairs organised <strong>in</strong> Malaysia have been highly useful for gett<strong>in</strong>g foreign<br />
orders. <strong>The</strong> size of the <strong>in</strong>dustry <strong>and</strong> the quality of its products are sufficient to attract foreign<br />
buyers or sourc<strong>in</strong>g agents to come to the country. A critical mass is needed.<br />
94 International Trade Centre
6 Conclusion <strong>and</strong> recommendations<br />
6.1 Recommendations for parties <strong>in</strong>volved<br />
6.1.1 Individual companies<br />
While tra<strong>in</strong><strong>in</strong>g certa<strong>in</strong>ly is a crucial effort that improves the companies’ abilities on a wide<br />
range of bus<strong>in</strong>ess fundamentals, it cannot be recommended <strong>in</strong> isolation from other<br />
development steps. Typically, additional tra<strong>in</strong><strong>in</strong>g is expected to be f<strong>in</strong>anced form the outside,<br />
i.e. government funds or technical assistance from ITC, UNIDO, ILO or similar <strong>in</strong>ternational<br />
bodies. No public fund<strong>in</strong>g for tra<strong>in</strong><strong>in</strong>g has been promised for furniture <strong>in</strong>dustry as it lacks a<br />
priority status <strong>in</strong> <strong>Pakistan</strong>.<br />
Repetition with “Solutions” chapter earlier <strong>in</strong> this report cannot be avoided. <strong>The</strong> reader is<br />
suggested to reflect on the solutions on company level given <strong>in</strong> the previous chapters. A brief<br />
checklist of ma<strong>in</strong> po<strong>in</strong>ts is repeated here:<br />
• Optimise the use of the highest-valued raw material <strong>and</strong> <strong>in</strong>troduce new wood species<br />
(imported) to fill the shorten<strong>in</strong>g supply of traditional species.<br />
• Start a kiln-dry<strong>in</strong>g side bus<strong>in</strong>ess on jo<strong>in</strong>t venture or a contract-kiln operator basis. This<br />
helps avoid<strong>in</strong>g crack<strong>in</strong>g of furniture <strong>in</strong> the f<strong>in</strong>al dest<strong>in</strong>ations, which causes irrevocable<br />
damage to the reputation of <strong>Pakistan</strong>i furniture.<br />
• Establish a “Human Resource Development Fund”, cater<strong>in</strong>g for the collective tra<strong>in</strong><strong>in</strong>g<br />
needs across <strong>in</strong>dustry clusters. Invite foreign tra<strong>in</strong><strong>in</strong>g staff <strong>and</strong> designers through this<br />
fund<strong>in</strong>g mechanism.<br />
• Develop the traditional designs <strong>and</strong> allow the <strong>in</strong>fluences of foreign designs more freely.<br />
Fuse <strong>Pakistan</strong> <strong>and</strong> foreign best design details <strong>in</strong>to a new flavour.<br />
• Prepare for <strong>in</strong>vest<strong>in</strong>g <strong>in</strong> compressor-spray<strong>in</strong>g gun based pa<strong>in</strong>t<strong>in</strong>g <strong>and</strong> lacquer<strong>in</strong>g to<br />
improve f<strong>in</strong>al quality.<br />
• Seek participation <strong>in</strong> tra<strong>in</strong><strong>in</strong>g courses abroad e.g. on f<strong>in</strong>ish<strong>in</strong>g, s<strong>and</strong><strong>in</strong>g techniques.<br />
• Propose <strong>in</strong> unison the establishment of a <strong>Furniture</strong> Market Information System, with the<br />
purpose of permanent provision of commercial <strong>in</strong>formation to the furniture firms.<br />
• Dem<strong>and</strong> vocally for better <strong>Export</strong> Promotion Services. Examples can be found from<br />
more successful furniture export<strong>in</strong>g countries. For example, Malaysia’s experiences have<br />
been transferred to other countries already.<br />
6.1.2 Relevant associations<br />
• Lobby for the potential benefits of wooden furniture <strong>in</strong>dustry cluster<strong>in</strong>g, supplier<br />
network<strong>in</strong>g <strong>and</strong> component outsourc<strong>in</strong>g as build<strong>in</strong>g blocks for competitiveness.<br />
• Develop <strong>and</strong> raise funds for implement<strong>in</strong>g <strong>in</strong>dustry-wide tra<strong>in</strong><strong>in</strong>g programmes on<br />
furniture manufactur<strong>in</strong>g processes, management skills, design <strong>and</strong> skilled worker<br />
tra<strong>in</strong><strong>in</strong>g programs, etc. through human resource development funds <strong>and</strong> other resources.<br />
International Trade Centre 95
• Create <strong>and</strong> ma<strong>in</strong>ta<strong>in</strong> a roster of specialised consultants on wooden furniture<br />
manufactur<strong>in</strong>g, trade <strong>and</strong> design available for the <strong>in</strong>dustry from abroad.<br />
• Widen the exist<strong>in</strong>g design <strong>in</strong>stitute network out of Gujrat, Peshawar <strong>and</strong> Karachi.<br />
• Arrange direct technical assistance to enterprises to capture the emerg<strong>in</strong>g export<br />
opportunities. This could <strong>in</strong>clude market orientation tours, design networks, workshops,<br />
development of bus<strong>in</strong>ess skills (<strong>in</strong>clud<strong>in</strong>g negotiation skills with big buyers), etc.<br />
• Facilitate systematically efforts by the <strong>in</strong>dustry to know its customers <strong>and</strong> have direct<br />
access to them rather than cont<strong>in</strong>u<strong>in</strong>g reliance on (too many) <strong>in</strong>termediaries. An<br />
<strong>in</strong>ternationally targeted furniture exhibition <strong>and</strong> jo<strong>in</strong>t export campaigns could be part of<br />
such an effort if the country has a critical mass of suppliers.<br />
• Initiate the build<strong>in</strong>g of Permanent Exhibition Halls to key furniture clusters <strong>in</strong>side<br />
<strong>Pakistan</strong> or <strong>in</strong> big markets like the UAE for more efficient showcas<strong>in</strong>g for visit<strong>in</strong>g<br />
buyers. <strong>The</strong> concept should comb<strong>in</strong>e furniture with match<strong>in</strong>g accessories from <strong>Pakistan</strong><br />
(exhibit an <strong>in</strong>terior style, rather than just furniture).<br />
6.1.3 Relevant government authorities<br />
• Stem the widely suspected “<strong>in</strong>sider” wood exports of forestry officials.<br />
• Award furniture <strong>in</strong>dustry with policy priority because of multiple economic, social <strong>and</strong><br />
resource valuation benefits (high value added, high employment, <strong>and</strong> potential location<br />
<strong>in</strong> disadvantaged areas).<br />
• Improve the exist<strong>in</strong>g public doma<strong>in</strong> databases related to furniture <strong>in</strong>dustry (on markets,<br />
products, st<strong>and</strong>ards).<br />
• Help furniture <strong>in</strong>dustries to respond to emerg<strong>in</strong>g issues, such as changes <strong>in</strong> wood<br />
sources, certification <strong>and</strong> labell<strong>in</strong>g requirements for exports, <strong>and</strong> non-tariff barriers to<br />
trade (overcome trade impediments).<br />
• Provide support for the sector by means of an enabl<strong>in</strong>g policy environment, i.e.<br />
<strong>in</strong>vestment <strong>in</strong>centives, trade promotion activities, freight subsidy, <strong>and</strong> temporary export<br />
restriction of raw materials (logs, sawn timber), which can spur the growth of an export<br />
oriented furniture <strong>in</strong>dustry.<br />
• Create an export levy collection system on logs <strong>and</strong> sawn timber, use funds for f<strong>in</strong>anc<strong>in</strong>g<br />
value-added process<strong>in</strong>g <strong>in</strong>vestments by furniture <strong>in</strong>dustry, or improve wood plant<strong>in</strong>g <strong>and</strong><br />
forest management.<br />
• Channel public fund<strong>in</strong>g <strong>in</strong>to common support services (tra<strong>in</strong><strong>in</strong>g, design, <strong>in</strong>vestment<br />
support, tool ma<strong>in</strong>tenance, etc.), with the aim of rationalis<strong>in</strong>g the manufactur<strong>in</strong>g base <strong>and</strong><br />
mak<strong>in</strong>g it competitive <strong>in</strong> the long run.<br />
• Promote foreign <strong>in</strong>vestment as means to boost technology transfer <strong>and</strong> export capability.<br />
• Allocate <strong>in</strong>dustrial zones or premises that have been left idle to the furniture <strong>in</strong>dustry.<br />
<strong>The</strong>se recommendations have not yet been taken to the level where responsibilities, actors,<br />
costs <strong>and</strong> tim<strong>in</strong>g would be explicit. This needs more analysis still.<br />
96 International Trade Centre
6.2 Critical success factors<br />
• A focused furniture sector strategy would help <strong>in</strong> allocat<strong>in</strong>g resources to where success<br />
can be reached.<br />
• <strong>Pakistan</strong> will not be competitive <strong>in</strong> mass furniture segments. Authenticity <strong>and</strong> material<br />
knowledge should be made to work for the competitiveness of “niche” or “ethnic”<br />
furniture for the higher end of the market. Good example: the Philipp<strong>in</strong>es.<br />
• Good value for price, timely deliveries <strong>and</strong> proper after-sales service are needed for<br />
keep<strong>in</strong>g competitive at the special niches like antique/traditional ethnic furniture<br />
markets.<br />
• New furniture collections will have to be created at shorter <strong>in</strong>tervals <strong>in</strong> order to keep<br />
pace with market opportunities.<br />
• Creat<strong>in</strong>g orig<strong>in</strong>al designs <strong>and</strong> attractive br<strong>and</strong><strong>in</strong>g are necessary for mov<strong>in</strong>g to higher<br />
price po<strong>in</strong>ts. Design should provide real added value to the product. Br<strong>and</strong> should be the<br />
flag to catch the attention of buyers.<br />
• Avoid us<strong>in</strong>g wood raw material that comes from illegal or unsusta<strong>in</strong>able sources, as<br />
products thereof are subject to trade barriers <strong>and</strong> retailer resistance.<br />
<strong>The</strong> follow<strong>in</strong>g social safeguards can be added here<br />
• Avoid the reputation of <strong>in</strong>ferior social conditions <strong>and</strong> child labour (not really an issue<br />
due to strictly regulated labour rules <strong>in</strong> <strong>Pakistan</strong>).<br />
• Refer to the ILO basic work<strong>in</strong>g condition convention on occupational health <strong>and</strong> safety<br />
measures as a guidel<strong>in</strong>e.<br />
As far as the social or labour conditions are concerned, no buyer’s local code of conduct can be<br />
imposed on a develop<strong>in</strong>g country producer as a m<strong>and</strong>atory measure. No such mechanism exists<br />
by <strong>in</strong>ternational law. On the other h<strong>and</strong>, many of buyers’ groups <strong>and</strong> large retailers set similar<br />
“voluntary” agreements on a bilateral basis: their ma<strong>in</strong> <strong>in</strong>terest is, however, not to become<br />
under the stigma of retail<strong>in</strong>g “sweat-shop” products.<br />
6.3 Elements of success<br />
<strong>Pakistan</strong> should look at other successful role models when figur<strong>in</strong>g out a certa<strong>in</strong> set of success<br />
elements for develop<strong>in</strong>g the furniture <strong>in</strong>dustry <strong>and</strong> trade. Pen<strong>in</strong>sular Malaysia is one of the<br />
world’s lead<strong>in</strong>g exporters of furniture from the tropical region, greatly thanks to its success <strong>in</strong><br />
rubber wood development. Important lessons could be learned from the Malaysian experience,<br />
even though success factors cannot be repeated as such. Even <strong>in</strong> Malaysia this has not been the<br />
case <strong>in</strong> Sarawak <strong>and</strong> Sabah, which have not yet jo<strong>in</strong>ed the Pen<strong>in</strong>sula’s success story <strong>in</strong> add<strong>in</strong>g<br />
value to their timber.<br />
One disclaimer is, however, that even Malaysia has been over-us<strong>in</strong>g its domestic wood<br />
resources <strong>in</strong> the past. Easy money was made by export<strong>in</strong>g logs <strong>and</strong> sawn wood to the big Asian<br />
markets. Only the last ten years have raised the country to the ma<strong>in</strong> league of furniture<br />
exporters.<br />
International Trade Centre 97
Box 6.1 Elements of success <strong>in</strong> further process<strong>in</strong>g – Example of Pen<strong>in</strong>sular Malaysia<br />
• Holistic approach<br />
<strong>The</strong> government prepared a master plan for the <strong>in</strong>dustry development <strong>in</strong> 1986-1995, which<br />
was revised for the period of 1996-2005. <strong>The</strong> master plan provided a clear policy framework<br />
for all operators <strong>in</strong> terms of product orientation, location of the plants, etc., <strong>and</strong> it ensured<br />
the establishment of necessary <strong>in</strong>frastructure.<br />
• Research & Development<br />
A concerted research effort was made by the Forest Research Institute of Malaysia, to<br />
<strong>in</strong>troduce new species (<strong>in</strong>clud<strong>in</strong>g rubber wood, the backbone of the current production) <strong>and</strong><br />
to help <strong>in</strong>dustry to solve operational problems. This was coupled with effective<br />
dissem<strong>in</strong>ation.<br />
• Focus<strong>in</strong>g on medium <strong>and</strong> large enterprises<br />
Companies with more than 100 employees account for about 80% of the total employment.<br />
Support was channelled to those who could make effective use of it <strong>in</strong> order to become<br />
capable for export<strong>in</strong>g.<br />
• Development of the resource base<br />
Due to the limited potential of the natural forests, a strong plantation development program<br />
targeted at smallholders was implemented.<br />
• Specialisation <strong>and</strong> transfer of knowledge<br />
About 64% of the manufacturers produce only 1-3 types of furniture <strong>in</strong> their plants allow<strong>in</strong>g<br />
<strong>in</strong>vestment <strong>in</strong> specialised equipment, efficient production <strong>and</strong> utilization of economies of<br />
scale. This means dependence on one or a few products <strong>in</strong>creas<strong>in</strong>g vulnerability. Strong<br />
geographic concentration allows specialization also at component level but requires<br />
effective network<strong>in</strong>g, which contributes to fast transfer of technology. Sub-contract<strong>in</strong>g is an<br />
essential element of bus<strong>in</strong>ess <strong>in</strong> Malaysia (about 40% of manufacturers are <strong>in</strong>volved).<br />
• Human resource development<br />
Extensive tra<strong>in</strong><strong>in</strong>g programs were arranged with government support. <strong>The</strong> costs of further<br />
tra<strong>in</strong><strong>in</strong>g are <strong>in</strong>creas<strong>in</strong>gly shared by the private sector. Labour shortage has led to <strong>in</strong>creas<strong>in</strong>g<br />
use of foreign labour <strong>in</strong> logg<strong>in</strong>g <strong>and</strong> process<strong>in</strong>g.<br />
• Management<br />
In management, traditional entrepreneurial approach still dom<strong>in</strong>ates but professional<br />
management teams are <strong>in</strong>creas<strong>in</strong>gly <strong>in</strong> place <strong>in</strong> large companies. <strong>The</strong>re is still a great<br />
disparity between well-organized <strong>and</strong> backyard type operations.<br />
• Design, f<strong>in</strong>ish<strong>in</strong>g <strong>and</strong> technology<br />
Foreign designs have been extensively used either through provision by buyers, by copy<strong>in</strong>g,<br />
or by contract<strong>in</strong>g qualified designers who know the taste of <strong>in</strong>dividual export markets.<br />
F<strong>in</strong>ish<strong>in</strong>g <strong>and</strong> control of raw material quality (particularly dry<strong>in</strong>g) have been major problems,<br />
which were systematically solved to have access to quality conscious Japanese <strong>and</strong><br />
European markets. <strong>The</strong> use of CNC, automated <strong>and</strong> semi-automated mach<strong>in</strong>ery has spread<br />
to about half of the medium-scale establishments. <strong>The</strong> <strong>in</strong>troductory process has been a<br />
gradual process, leapfrogg<strong>in</strong>g frequently leads to failures.<br />
• F<strong>in</strong>anc<strong>in</strong>g <strong>and</strong> other support<br />
Several credit l<strong>in</strong>es <strong>and</strong> grant schemes qualify for furniture <strong>in</strong>dustry, which is a priority<br />
sector for some <strong>in</strong>struments. Fund<strong>in</strong>g has been available for obta<strong>in</strong><strong>in</strong>g technical assistance,<br />
<strong>in</strong>vestment <strong>in</strong>centives, tra<strong>in</strong><strong>in</strong>g, R & D, exports <strong>and</strong> export promotion, furniture villages, etc.<br />
<strong>The</strong> experience of the effectiveness of various <strong>in</strong>struments varies. Ma<strong>in</strong> beneficiaries have<br />
been large <strong>and</strong> advanced medium-sized companies. <strong>The</strong> support has, <strong>in</strong> general, been<br />
essential for the successful development of the sector.<br />
98 International Trade Centre
6.4 Global value cha<strong>in</strong>s<br />
6.4.1 Potential benefits of global value cha<strong>in</strong>s for the develop<strong>in</strong>g<br />
countries<br />
<strong>Furniture</strong> firms across Asia are becom<strong>in</strong>g partners <strong>in</strong> global value cha<strong>in</strong>s (GVC). It can be an<br />
important catalyst <strong>in</strong> learn<strong>in</strong>g <strong>and</strong> adapt<strong>in</strong>g more advanced technologies. It can also enhance<br />
the managerial <strong>and</strong> bus<strong>in</strong>ess development processes. <strong>The</strong> benefits of trade liberalisation that are<br />
accompanied by the establishment of <strong>in</strong>ternational supplier cha<strong>in</strong> arrangements between firms<br />
<strong>in</strong> the <strong>in</strong>dustrial <strong>and</strong> less developed countries are estimated 10-20 times larger than those<br />
without such networks.<br />
<strong>The</strong>re are at least the follow<strong>in</strong>g mechanisms on how furniture <strong>in</strong>dustry <strong>in</strong> develop<strong>in</strong>g countries<br />
can improve their position by engag<strong>in</strong>g <strong>in</strong> GVCs:<br />
• Adherence to “just <strong>in</strong> time” global networks requires the improvement of efficiency <strong>in</strong><br />
transports <strong>and</strong> communication <strong>in</strong>frastructure <strong>and</strong> for a stable bus<strong>in</strong>ess environment.<br />
• GVCs can enable firms to enter global production networks more easily, allow<strong>in</strong>g them<br />
to benefit from globalization, climb the technology ladder, <strong>and</strong> ga<strong>in</strong> wider access to<br />
<strong>in</strong>ternational markets.<br />
• GVCs provide firms with a wide spectrum of options to operate <strong>in</strong> global markets with a<br />
view to stay<strong>in</strong>g competitive.<br />
• GVCs offer a way for local enterprises <strong>in</strong> develop<strong>in</strong>g countries to engage <strong>in</strong> <strong>in</strong>ternational<br />
markets at their own level of capability.<br />
6.5 Recommendations - some details<br />
• Enforcement of the rule of law <strong>and</strong> good governance on timber cutt<strong>in</strong>g <strong>and</strong> trade.<br />
Eradicate illegal <strong>and</strong> rent-seek<strong>in</strong>g behaviours of Forestry Department officials, if such<br />
misconduct is proven.<br />
• Susta<strong>in</strong>able raw materials. A plan is needed to create <strong>and</strong> develop a susta<strong>in</strong>able source<br />
of wood raw materials. Forestry/reforestation programs should ensure a stable source of<br />
low cost raw materials, <strong>and</strong> to the extent possible ma<strong>in</strong>ta<strong>in</strong> or improve ecological<br />
conditions, enhance the community <strong>in</strong>come <strong>and</strong> employment, etc.<br />
• Product quality. <strong>The</strong> quality of furniture is determ<strong>in</strong>ed by professionalism <strong>in</strong> the<br />
h<strong>and</strong>l<strong>in</strong>g of raw materials, production techniques <strong>and</strong> manufactur<strong>in</strong>g process. Due to<br />
<strong>in</strong>sufficient skills <strong>and</strong> facilities, as well as the lack of quality st<strong>and</strong>ards <strong>and</strong> agencies<br />
conduct<strong>in</strong>g <strong>in</strong>spections, quality is bound to suffer. Quality enhancement <strong>and</strong><br />
St<strong>and</strong>ardisation is thus needed, <strong>and</strong> all furniture manufacturers should preferably adhere<br />
to the quality management system (ISO).<br />
• Design. Creation of easily accessible design libraries <strong>in</strong> each major furniture cluster of<br />
the country would dissem<strong>in</strong>ate effectively new designs. <strong>The</strong> items collected could<br />
<strong>in</strong>clude trend reports, contemporary design books, consumer magaz<strong>in</strong>es, mail-order<br />
catalogues, trade publications, raw material samples, etc. Tra<strong>in</strong><strong>in</strong>g programs <strong>and</strong><br />
exchange of foreign designers can be an <strong>in</strong>tegral part of this design upgrad<strong>in</strong>g.<br />
International Trade Centre 99
• Human resources. Even if labour force is abundant, lack of technical capabilities can<br />
h<strong>in</strong>der competitiveness. Public support to vocational tra<strong>in</strong><strong>in</strong>g for workers <strong>in</strong> factories is<br />
recommendable, <strong>in</strong> order to reduce direct tra<strong>in</strong><strong>in</strong>g expenses of enterprises, <strong>and</strong> for<br />
managers to allow them to professionally grow with their bus<strong>in</strong>esses.<br />
• Market <strong>in</strong>formation. Access to <strong>in</strong>formation on market characteristics (for example<br />
trends <strong>in</strong> distribution, retail success stories, new furniture market<strong>in</strong>g concepts) <strong>and</strong><br />
market access (tariff <strong>and</strong> non-tariff barriers) is often very difficult. It would thus be<br />
useful to centralize this <strong>in</strong>formation (<strong>in</strong>to <strong>Furniture</strong> <strong>Export</strong>ers’ Association level) for<br />
regular distribution.<br />
• Market<strong>in</strong>g activities. <strong>The</strong> furniture <strong>in</strong>dustry should focus on market<strong>in</strong>g activities <strong>in</strong> key<br />
markets (the United States, Japan, the European Union, <strong>and</strong> the Gulf). A concerted<br />
action should <strong>in</strong>clude exhibitions; websites; <strong>in</strong>ternational trade fairs; <strong>in</strong>-depth market<br />
analyses, etc. Special encouragement may be warranted for importers <strong>and</strong> retailers’<br />
buyer’s groups to visit <strong>Pakistan</strong>i factories or Permanent Exhibition Halls. Market<strong>in</strong>g<br />
efforts <strong>in</strong> the boom<strong>in</strong>g Gulf markets should be <strong>in</strong>tensified.<br />
6.6 <strong>The</strong> way forward – if we had a million<br />
Here is a list of h<strong>and</strong>s-on projects that could improve the conditions for production <strong>and</strong> trade <strong>in</strong><br />
the sector. It is a wish list based on meet<strong>in</strong>gs with parties who assisted <strong>in</strong> the preparation of the<br />
study. Most of the project proposals are related to some of the conclusions <strong>and</strong> suggestions <strong>in</strong><br />
the study.<br />
All costs are early-stage estimates <strong>in</strong>serted as magnitudes for the ease of discussion of followup<br />
from the study. <strong>The</strong> project proposals are <strong>in</strong>dependent of each other (unless otherwise<br />
<strong>in</strong>dicated) <strong>and</strong> are listed <strong>in</strong> no order of priority.<br />
<strong>The</strong> study does not speculate on possible fund<strong>in</strong>g for implementation of the projects proposed.<br />
Fund<strong>in</strong>g could be from the government of <strong>Pakistan</strong>, a trade promotion organisation, the sector<br />
associations <strong>and</strong> their members, an external donor <strong>and</strong> <strong>in</strong> some cases from self-generated funds<br />
(sell<strong>in</strong>g services).<br />
6.6.1 If we had US$10,000 or 20,000:<br />
A small wood season<strong>in</strong>g plant<br />
A pilot plant for test<strong>in</strong>g, demonstration <strong>and</strong> susta<strong>in</strong>able production of kiln-dried sawn timber<br />
for the furniture <strong>in</strong>dustry.<br />
Objective<br />
<strong>The</strong> plant would improve the quality <strong>and</strong> shorten the production cycle of sawn timber for<br />
furniture manufactur<strong>in</strong>g. It would serve as a demonstration plant for potential <strong>in</strong>vestors <strong>in</strong><br />
similar facilities <strong>and</strong> as a test<strong>in</strong>g plant for the benefit of a number of furniture producers <strong>in</strong><br />
<strong>Pakistan</strong>.<br />
100 International Trade Centre
Benefits<br />
All timber tends to be air-dried <strong>in</strong> <strong>Pakistan</strong>, as kiln-dry<strong>in</strong>g (KD) is a rare profession <strong>in</strong> the<br />
country. Air-dry<strong>in</strong>g is sufficient to come up with a workable quality for furniture, but at the<br />
cost of a long dry<strong>in</strong>g time (6-12 months). <strong>The</strong> process locks up capital for long time <strong>and</strong> delays<br />
production plann<strong>in</strong>g cycles <strong>and</strong> delivery times substantially. Kiln-dry<strong>in</strong>g’s ma<strong>in</strong> benefit would<br />
thus come from improved quality (less crack-related reclamations), sav<strong>in</strong>gs <strong>and</strong> shorter wood<br />
purchase-process<strong>in</strong>g-delivery cycles.<br />
Very few <strong>in</strong>dependent contract-kiln operators can be presently found. Modest price <strong>in</strong>creases<br />
could also be obta<strong>in</strong>ed for KD planks, what would justify kiln-dry<strong>in</strong>g upon order as a new<br />
entrepreneurship. <strong>The</strong>se would sell dry<strong>in</strong>g services to sawn-wood producers or end-users upon<br />
need, <strong>and</strong> would charge a remunerative kiln operation fee per volume of timber <strong>and</strong> energy<br />
costs. <strong>Furniture</strong> makers would encourage such entrepreneur by plac<strong>in</strong>g fixed orders on annual<br />
basis to help the start-up of bus<strong>in</strong>ess.<br />
Parties<br />
Parties to be <strong>in</strong>volved, ownership, responsibilities <strong>and</strong> location(s) are to be decided <strong>in</strong> a<br />
dialogue between the All <strong>Pakistan</strong> <strong>Furniture</strong> Association, local authorities, the sponsor <strong>and</strong><br />
possibly other parties.<br />
Investments<br />
<strong>The</strong> <strong>in</strong>stalment of a few small 5-10 m 3 chambers or a larger 30-60 m 3 chamber depends on the<br />
wood consumption volumes <strong>and</strong> client base. <strong>The</strong> ma<strong>in</strong> part of the <strong>in</strong>vestment would come from<br />
heat source (optional), ventilation <strong>and</strong> control equipment from a local manufacturer or abroad.<br />
Also, proper chamber door mechanisms <strong>and</strong> moisture measur<strong>in</strong>g devices are required. <strong>The</strong><br />
actual chambers can be built with local bricks at a reasonable cost.<br />
It should be also studied whether Australian-made solar kilns or comb<strong>in</strong>ation kilns (solar +<br />
mechanised ventilation) could be made available at reasonable cost. <strong>The</strong>se are known to have<br />
been <strong>in</strong>stalled <strong>in</strong> small-scale wooden crafts communities across South-East Asia <strong>and</strong> the<br />
Pacific.<br />
6.6.2 If we had US$25,000:<br />
A research <strong>and</strong> <strong>in</strong>formation cell <strong>in</strong> APFEA<br />
Aim will be to provide the <strong>in</strong>dustry with all required <strong>in</strong>formation like updates, global<br />
developments, quality st<strong>and</strong>ard requirements, market assessment, technology news, data on<br />
world furniture trade, the latest on timber situations, etc. APFEA members will be able to<br />
approach the R&I Cell with their queries which will be answered after thorough research <strong>and</strong><br />
<strong>in</strong>vestigation by APFEA’s full time Research Officer who will directly be report<strong>in</strong>g to<br />
APFEA’s Executive R&I, Director (an APFEA EC member). All <strong>in</strong>formation on furniture<br />
trade gathered by APFEA’s research team will be regularly posted on the website, periodically<br />
dissem<strong>in</strong>ated among APFEA’s members <strong>and</strong> also reported from time to time <strong>in</strong> APFEA’s<br />
Newsletter.<br />
International Trade Centre 101
6.6.3 If we had US$25,000 or 50,000:<br />
De-bottleneck<strong>in</strong>g of process flow (consultant <strong>and</strong> software)<br />
Objective<br />
Assist the companies <strong>in</strong> carry<strong>in</strong>g out a factory floor-level improvement process, where better<br />
production plann<strong>in</strong>g <strong>and</strong> control systems are <strong>in</strong>stalled, productivity of exist<strong>in</strong>g labour <strong>and</strong><br />
equipment is improved, <strong>and</strong> the utilization of raw materials is optimised.<br />
Step 1 - De-bottleneck<strong>in</strong>g (consultant)<br />
Activities – by one or several consultants<br />
• Assess the entire production process, from orders through manufactur<strong>in</strong>g, packag<strong>in</strong>g <strong>and</strong><br />
shipp<strong>in</strong>g.<br />
• Measure the time between an order <strong>and</strong> its shipment.<br />
• Move tasks such as component cutt<strong>in</strong>g <strong>and</strong> glu<strong>in</strong>g, once <strong>in</strong> different parts of the plant, to<br />
activity cells all <strong>in</strong> one area. Along with reduc<strong>in</strong>g the steps <strong>in</strong>volved <strong>in</strong> mov<strong>in</strong>g product<br />
from one area to another, the cells improve communications among workers.<br />
• Set clearly stated production goals for a cell every day, what lets workers see how well<br />
they are do<strong>in</strong>g.<br />
Results – expected to be<br />
• Reduction of defects, overproduction, excess <strong>in</strong>ventory, unnecessary steps, overprocess<strong>in</strong>g,<br />
waste, material movement <strong>and</strong> wait<strong>in</strong>g times.<br />
• Production cycle times can be reduced by some 50-90% on certa<strong>in</strong> products.<br />
US$25,000 would allow for four or six such de-bottleneck<strong>in</strong>g assignments of around one-two<br />
weeks each. Selection of the factories would have to be made <strong>in</strong> a dialogue with APFEA, the<br />
sponsor <strong>and</strong> other parties to secure optimal use of the funds, geographical spread <strong>in</strong> <strong>Pakistan</strong>,<br />
demonstration effect for others, etc.<br />
Consultants with the right profile can probably only be found outside <strong>Pakistan</strong>, e.g. <strong>in</strong><br />
Malaysia.<br />
Step 2 - Production data management (software)<br />
An additional US$25,000 would be used for software that can systematise the management<br />
process <strong>in</strong> factories. <strong>The</strong> software deals with orders, sales, <strong>in</strong>ventories <strong>and</strong> resources<br />
(manpower, mach<strong>in</strong>ery tools, etc).<br />
<strong>The</strong> software must address the follow<strong>in</strong>g needs:<br />
• Product group<strong>in</strong>g by collection <strong>and</strong> fabrication/f<strong>in</strong>ish<strong>in</strong>g type<br />
• Management of raw material consumption, <strong>in</strong>clud<strong>in</strong>g management of wood wastes;<br />
• Design the manufactur<strong>in</strong>g scheme for each part of the collection;<br />
102 International Trade Centre
• Optimise cutt<strong>in</strong>g;<br />
• Calculation of production costs, <strong>in</strong>clud<strong>in</strong>g the time needed for complet<strong>in</strong>g an order;<br />
• Tools control;<br />
• Controll<strong>in</strong>g the manufactur<strong>in</strong>g periods of time <strong>and</strong> costs, accord<strong>in</strong>g to job description by<br />
employee;<br />
• Calculation of optimal production quantities;<br />
• Manag<strong>in</strong>g production plann<strong>in</strong>g <strong>and</strong> delivery;<br />
• Proper calculation of quantities for the different production stages, calculation of <strong>in</strong>puts<br />
accord<strong>in</strong>g to the level of orders <strong>and</strong> forecasts;<br />
• Calculation <strong>and</strong> control of the <strong>in</strong>ventory level;<br />
• Manag<strong>in</strong>g orders <strong>and</strong> sales, automatic records of <strong>in</strong>voices <strong>and</strong> technical order process<strong>in</strong>g.<br />
6.6.4 If we had US$40,000 – 80,000:<br />
A CAD-programme for furniture design<br />
Objective<br />
Software for CAD unit, used for 3D solid design for furniture <strong>in</strong>dustry would make it possible<br />
for producers to extend the product/design range <strong>and</strong> to better comply with dem<strong>and</strong>s. <strong>The</strong><br />
software would also ensure that the supplier’s <strong>in</strong>stallation, tra<strong>in</strong><strong>in</strong>g, system support <strong>and</strong> other<br />
after-sales services are effectively employed.<br />
Properties<br />
<strong>The</strong> software must be developed on the basis of the latest AutoCAD version <strong>and</strong> must<br />
provide the most advanced features <strong>in</strong> order to design furniture projects; it must also be<br />
provided with an <strong>in</strong>side CAD module to support the customers orders. This means that it<br />
will enable - while be<strong>in</strong>g at a customer, <strong>in</strong> his presentation room - sketches of various<br />
views of it to create an optimal furniture arrangement.<br />
Parties<br />
<strong>Furniture</strong> City concept or a test<strong>in</strong>g laboratory can accommodate a pilot unit for demonstration<br />
<strong>and</strong> tra<strong>in</strong><strong>in</strong>g purposes, <strong>and</strong> charge users a fee for actual design work.<br />
Features<br />
Features expected from the CAD unit are:<br />
• To design different types of furniture: cab<strong>in</strong>et furniture, kitchen furniture, office<br />
furniture, etc.<br />
• To design a piece of furniture fast <strong>in</strong> 3D, <strong>and</strong> cross sections, elevations, bird’s eye view,<br />
needed for manufactur<strong>in</strong>g, <strong>in</strong> 2D<br />
International Trade Centre 103
• It must have the capacity to provide various alternatives of a project <strong>in</strong> order to create the<br />
product precisely from the very beg<strong>in</strong>n<strong>in</strong>g<br />
• <strong>The</strong> software will have the possibility to <strong>in</strong>tegrate the new products <strong>in</strong> the production<br />
control system<br />
• <strong>The</strong> software must have <strong>in</strong>cluded libraries for furniture tools <strong>and</strong> files <strong>in</strong> order to enable<br />
draw<strong>in</strong>g a piece of furniture on the screen, by us<strong>in</strong>g the same tools <strong>and</strong> processes as <strong>in</strong> a<br />
factory<br />
• <strong>The</strong> software has to be adapted to comply with woodwork<strong>in</strong>g processes, as well as with<br />
assembl<strong>in</strong>g <strong>and</strong> mach<strong>in</strong><strong>in</strong>g constra<strong>in</strong>ts<br />
• <strong>The</strong> dimensions of each component from the layout drawn – length, width, height – must<br />
be automatically transferred to the parts dimension list<br />
• <strong>The</strong> part list must take <strong>in</strong>to account the raw materials – wood species; components, subsets<br />
<strong>and</strong> sets<br />
- Ma<strong>in</strong> needed utilities<br />
- generat<strong>in</strong>g material <strong>and</strong> cutt<strong>in</strong>g lists;<br />
- generat<strong>in</strong>g price lists;<br />
- chang<strong>in</strong>g components <strong>in</strong> one step;<br />
- presentation <strong>in</strong> several colours, wood gra<strong>in</strong> structures <strong>and</strong> materials;<br />
- alternatives for calculation <strong>and</strong> manufactur<strong>in</strong>g;<br />
- f<strong>in</strong>ished draw<strong>in</strong>g must be adapted automatically to a size-oriented sheet by check<strong>in</strong>g<br />
the scale;<br />
- update module for exist<strong>in</strong>g draw<strong>in</strong>gs;<br />
- automatic design of box-structure frames <strong>and</strong> drawers;<br />
- blow-ups;<br />
- position<strong>in</strong>g hardware along with automatic drill<strong>in</strong>g <strong>and</strong> mach<strong>in</strong><strong>in</strong>g relative to<br />
hardware;<br />
- 2D <strong>and</strong> 3D page sett<strong>in</strong>g tools;<br />
- management of multilevel parts list<br />
Usually this advanced system is recommended to a furniture factory with at least 100 to 200<br />
workers, with certa<strong>in</strong> pre-conditions <strong>in</strong> place:<br />
• <strong>The</strong> companies should have an exist<strong>in</strong>g manual or computer-based production control<br />
system to operate <strong>in</strong> parallel with the new software dur<strong>in</strong>g its <strong>in</strong>stallation thereby act<strong>in</strong>g<br />
as a check <strong>and</strong> backup dur<strong>in</strong>g the one to two years of the systems <strong>in</strong>stallation,<br />
• <strong>The</strong> system should have been <strong>in</strong> operation for a long enough period that its accuracy<br />
(with<strong>in</strong> its own limitations) could be relied upon,<br />
• <strong>The</strong> person nom<strong>in</strong>ated by the company should have a background <strong>in</strong> furniture rather than<br />
<strong>in</strong> computers.<br />
104 International Trade Centre
6.6.5 If we had US$100,000:<br />
A technical tra<strong>in</strong><strong>in</strong>g centre<br />
(Courses <strong>and</strong> translated material, but not <strong>in</strong>clud<strong>in</strong>g mach<strong>in</strong>ery teach<strong>in</strong>g material, build<strong>in</strong>g costs<br />
etc.)<br />
Objective<br />
<strong>The</strong> idea is to provide tra<strong>in</strong><strong>in</strong>g for new production concepts <strong>in</strong> furniture. Induce change among<br />
the <strong>Pakistan</strong>i furniture companies to better meet the future challenges from shorten<strong>in</strong>g supplies<br />
of lower-quality timber, as well as higher dem<strong>and</strong>s set by foreign buyers on product<br />
st<strong>and</strong>ardisation.<br />
Rationale<br />
• Focus of technical tra<strong>in</strong><strong>in</strong>g centre: With the dw<strong>in</strong>dl<strong>in</strong>g wood resources worldwide,<br />
new technologies have been developed to <strong>in</strong>crease the process<strong>in</strong>g yield, either through<br />
<strong>in</strong>creased precision dur<strong>in</strong>g mach<strong>in</strong><strong>in</strong>g or better use of off-cuts or rejects. Technologies<br />
have also been developed to h<strong>and</strong>le smaller diameter or lower quality logs, through<br />
f<strong>in</strong>ger-jo<strong>in</strong>t<strong>in</strong>g, edge-glu<strong>in</strong>g, or overlay<strong>in</strong>g. <strong>The</strong> advent of CNC mach<strong>in</strong>ery has reduced<br />
shop-floor downtime <strong>and</strong> allows faster tool change to m<strong>in</strong>imize idle time. Further, CNC<br />
mach<strong>in</strong>es are flexible work stations capable of accommodat<strong>in</strong>g a wide range of productmix.<br />
S<strong>and</strong><strong>in</strong>g <strong>and</strong> f<strong>in</strong>ish<strong>in</strong>g technologies have also improved to m<strong>in</strong>imize human error,<br />
result<strong>in</strong>g <strong>in</strong> an overall improvement <strong>in</strong> f<strong>in</strong>al quality. Obviously, the craft-based furniture<br />
manufactur<strong>in</strong>g <strong>in</strong>dustry is slowly be<strong>in</strong>g converted <strong>in</strong>to a highly mechanized<br />
manufactur<strong>in</strong>g <strong>in</strong>dustry <strong>in</strong> many countries. <strong>Pakistan</strong> should not be an exception.<br />
• Curricula <strong>and</strong> teach<strong>in</strong>g materials: Whenever the relevant national or regional<br />
authorities have the opportunity, they should st<strong>and</strong>ardise the tra<strong>in</strong><strong>in</strong>g curricula <strong>and</strong><br />
materials used, so as to ensure that end-of-tra<strong>in</strong><strong>in</strong>g certificates guarantee the same level<br />
of competence <strong>and</strong> are universally accepted. One problem that arises is that<br />
woodwork<strong>in</strong>g may be perceived as an unglamorous sector, with poor work<strong>in</strong>g<br />
conditions, low promotion prospects, etc. For this reason, the tra<strong>in</strong>ees <strong>in</strong> this sector tend<br />
to be less knowledgeable, have lower basic education, <strong>and</strong> even read<strong>in</strong>g skills. All these<br />
set high dem<strong>and</strong>s for the teach<strong>in</strong>g materials <strong>and</strong> methods.<br />
• Beneficiaries: Tra<strong>in</strong><strong>in</strong>g is focus<strong>in</strong>g on mach<strong>in</strong>e operators for factories that produce <strong>in</strong><br />
long series. Mach<strong>in</strong>e wood-workers are the top-notch blue-collar workers <strong>in</strong> a modern<br />
furniture factory. This requires courses with much more emphasis on diagnos<strong>in</strong>g<br />
mach<strong>in</strong><strong>in</strong>g faults, safety <strong>in</strong> mach<strong>in</strong><strong>in</strong>g, mach<strong>in</strong>e sett<strong>in</strong>g, selection of tools, mach<strong>in</strong>e<br />
ma<strong>in</strong>tenance, design <strong>and</strong> use of jigs, etc. <strong>The</strong> students produce items <strong>in</strong> short series, <strong>and</strong><br />
are thus tra<strong>in</strong>ed <strong>in</strong> work<strong>in</strong>g on a repetitive basis. <strong>The</strong> emphasis is on tra<strong>in</strong><strong>in</strong>g mach<strong>in</strong>e<br />
operators for the <strong>in</strong>dustry, who realize the importance of mach<strong>in</strong>e-sett<strong>in</strong>g to produce<br />
<strong>in</strong>terchangeable components that do not need h<strong>and</strong>-f<strong>in</strong>ish<strong>in</strong>g.<br />
Another slow<strong>in</strong>g factor of “<strong>in</strong>dustrialisation” of the furniture mak<strong>in</strong>g can be tackled: the severe<br />
shortage of qualified middle management <strong>and</strong> technical specialists (supervisors, quality control<br />
specialists, time <strong>and</strong> motion specialists, etc.). A technical tra<strong>in</strong><strong>in</strong>g centre could also run<br />
managerial courses to upgrade skills on white-collar level.<br />
International Trade Centre 105
Parties<br />
• Lead<strong>in</strong>g role: This <strong>in</strong>itiative should be launched by APFEA or SMEDA. Government<br />
<strong>and</strong> <strong>in</strong>dustry should jo<strong>in</strong>tly provide seed money or some k<strong>in</strong>d of co-f<strong>in</strong>anc<strong>in</strong>g for the<br />
sett<strong>in</strong>g-up of the centre. Dur<strong>in</strong>g operation, tra<strong>in</strong><strong>in</strong>g courses would be offered on feebasis.<br />
• Support<strong>in</strong>g role: One of the idle furniture tra<strong>in</strong><strong>in</strong>g centres (e.g. Sweden-<strong>Pakistan</strong> centre)<br />
should be revitalised <strong>and</strong> its lessons learnt <strong>in</strong>corporated to avoid failure.<br />
6.6.6 If we had US$250,000:<br />
A furniture quality control <strong>and</strong> test<strong>in</strong>g laboratory<br />
(<strong>in</strong>cludes basic test<strong>in</strong>g equipment, promotion <strong>and</strong> staff support for one year, but not build<strong>in</strong>g<br />
costs)<br />
Objective<br />
To raise the st<strong>and</strong>ards of furniture-mak<strong>in</strong>g by br<strong>in</strong>g<strong>in</strong>g a furniture test<strong>in</strong>g facility <strong>in</strong> place.<br />
Make test<strong>in</strong>g a rout<strong>in</strong>e matter for the lead<strong>in</strong>g producers when they launch new design series.<br />
In-put<br />
Equipment for a modern test<strong>in</strong>g laboratory for meet<strong>in</strong>g the basic ISO-related quality<br />
requirements of wooden furniture. Manpower for the first year is <strong>in</strong>cluded. A portion of the<br />
time would be spent on tra<strong>in</strong><strong>in</strong>g, promotion etc.<br />
<strong>The</strong> laboratory should have the accreditation of either a National Network of test<strong>in</strong>g<br />
laboratories, or - more realistically - from a foreign accredited <strong>in</strong>stitution. From ISO, it should<br />
seek to have the right to issue test<strong>in</strong>g bullet<strong>in</strong>s, <strong>in</strong> compliance with ISO 9002, EN 45001 or<br />
similar.<br />
Properties<br />
<strong>The</strong> pr<strong>in</strong>cipal equipment should <strong>in</strong>clude:<br />
• Mach<strong>in</strong>e for mechanical test<strong>in</strong>g of the cab<strong>in</strong>et furniture (repeated door clos<strong>in</strong>g <strong>and</strong><br />
open<strong>in</strong>g side wall stress, shelv<strong>in</strong>g stress strength, etc.) accord<strong>in</strong>g to ISO 7170, 7171, EN<br />
1153.<br />
• Mach<strong>in</strong>e for mechanical test<strong>in</strong>g of the chairs (seat stress, rock<strong>in</strong>g, etc) accord<strong>in</strong>g to ISO<br />
7170, 7171.<br />
• Mach<strong>in</strong>e for upholstered furniture test<strong>in</strong>g (compression stress, structure strength)<br />
accord<strong>in</strong>g to EN 716, etc.<br />
• Mach<strong>in</strong>e for mattresses test<strong>in</strong>g (compress<strong>in</strong>g stress, roll<strong>in</strong>g, reliability) accord<strong>in</strong>g to EN<br />
1334.<br />
• Mach<strong>in</strong>e for h<strong>in</strong>ges etc. (repeated clos<strong>in</strong>g <strong>and</strong> open<strong>in</strong>g, reliability, etc.) accord<strong>in</strong>g to ISO<br />
6891, etc<br />
106 International Trade Centre
• To modernise such a laboratory, it may be necessary to digitalise the data transfers on a<br />
process computer equipped with<br />
Synergies<br />
- process <strong>in</strong>terface module for data<br />
- software for data process<strong>in</strong>g<br />
- length transducers<br />
- stra<strong>in</strong> – gauge transmitters<br />
<strong>The</strong> laboratory should preferably be hosted by the <strong>Furniture</strong> City (<strong>in</strong> the mak<strong>in</strong>g). This would<br />
ensure an efficient turnover of its services among the furniture companies. It would also offer<br />
an attractive location for smaller firms to come <strong>and</strong> arrange the test<strong>in</strong>g of their samples or<br />
prototypes before launch. At the same time, they could pay a visit to other common services<br />
facilities of the <strong>Furniture</strong> City - to learn more about e.g. better f<strong>in</strong>ish<strong>in</strong>g, tool ma<strong>in</strong>tenance,<br />
latest operat<strong>in</strong>g supplies available (fitt<strong>in</strong>gs <strong>and</strong> chemicals).<br />
Parties<br />
APFEA, whose members have the greatest potential to benefit from it on <strong>in</strong>ternational markets.<br />
6.6.7 If we had US$500,000:<br />
<strong>Export</strong> / import warehouse facilities<br />
(At domestic port <strong>and</strong> abroad <strong>in</strong> the buy<strong>in</strong>g market)<br />
Objective<br />
Make the <strong>Pakistan</strong>i furniture exporters more efficient <strong>and</strong> less prone to damage <strong>and</strong> delays <strong>in</strong><br />
their deliveries to key export markets. In practice, there is a two-way problem among the<br />
exporters:<br />
• St<strong>and</strong>ard h<strong>and</strong>l<strong>in</strong>g <strong>and</strong> warehous<strong>in</strong>g of exported goods at <strong>Pakistan</strong>i ports is not suited for<br />
furniture, caus<strong>in</strong>g multiple damages <strong>and</strong> unnecessary loss of time.<br />
• On the other way around, the lack<strong>in</strong>g warehouse facility on l<strong>and</strong><strong>in</strong>g the goods for<br />
showcas<strong>in</strong>g <strong>and</strong> distribut<strong>in</strong>g furniture e.g. at High Po<strong>in</strong>t Fair <strong>in</strong> the USA, poses a<br />
problem <strong>in</strong> the market.<br />
In-put<br />
• In <strong>Pakistan</strong>: Establish a common export warehouse next to the <strong>Furniture</strong> City or a<br />
domestic seaport. This would be dedicated to serv<strong>in</strong>g furniture exporters, with support<br />
services like packag<strong>in</strong>g, labell<strong>in</strong>g, <strong>and</strong> careful h<strong>and</strong>l<strong>in</strong>g of parcels while load<strong>in</strong>g the<br />
pallets <strong>and</strong> conta<strong>in</strong>ers. Stock<strong>in</strong>g is based on advanced software, RFID identification <strong>and</strong><br />
parcel position<strong>in</strong>g system. Efficient conta<strong>in</strong>er load<strong>in</strong>g <strong>and</strong> stevedor<strong>in</strong>g is applied.<br />
• Abroad: Rent a warehouse space from some of the exist<strong>in</strong>g premises adjacent to e.g. the<br />
High Po<strong>in</strong>t or some other globally important <strong>Furniture</strong> Fair area. Make sure that the most<br />
compatible way of load<strong>in</strong>g-unload<strong>in</strong>g <strong>and</strong> packag<strong>in</strong>g-un-packag<strong>in</strong>g be applied.<br />
International Trade Centre 107
Electronic data transfer between the two warehouses is used to coord<strong>in</strong>ate the goods<br />
movement at both ends. Systematise the data read<strong>in</strong>g <strong>and</strong> stor<strong>in</strong>g by adopt<strong>in</strong>g RFID tags<br />
<strong>and</strong> readers on both ends.<br />
Beneficiaries<br />
<strong>Pakistan</strong>i exporters <strong>and</strong> Customs offices would benefit from a stricter control <strong>and</strong> more<br />
efficient service of both. Foreign buyers <strong>and</strong> retailers would receive undamaged goods at<br />
experience predictable delivery times.<br />
Parties<br />
<strong>The</strong> purchase of equipment <strong>and</strong> rents rests with the export<strong>in</strong>g furniture companies. <strong>The</strong><br />
<strong>Furniture</strong> City concept can accommodate the domestic export warehouse as a common service<br />
unit. Actual <strong>in</strong>vestment depends on the locations, the size of the warehouse’s build<strong>in</strong>gs <strong>and</strong><br />
rent<strong>in</strong>g costs.<br />
108 International Trade Centre
Annexes<br />
Annex A — Sources of <strong>in</strong>formation <strong>and</strong> useful websites<br />
<strong>The</strong> European Union<br />
• Union Europeénne de Ameublement (UEA): European <strong>Furniture</strong> Manufacturers’<br />
Federation<br />
Rue Royale 109-111<br />
1000 Brussels, Belgium<br />
Tel: +32-(0) 2 218 1889<br />
Fax: +32-(0) 2 219 2701<br />
E-mail: uea@<strong>in</strong>foboard.be<br />
www.ueanet.com/cen.html<br />
• Eurostat – EU Statistical Office<br />
Rue Alcide de Gasperi<br />
L-2920 Luxembourg, Luxembourg<br />
Tel: +352-(0) 4301 34567<br />
Fax: +352-(0) 4301 3015<br />
www.eurostat.eu.<strong>in</strong>t/eurostat.html<br />
• International Tropical Timber Organisation (ITTO)<br />
International Organisations Centre, 5 th floor<br />
Pacifico Yokohama, 1-1-1, M<strong>in</strong>ato Mirai<br />
Nishi-ku, Yokohama 220, Japan<br />
Tel: +81-(0) 45 223 1110<br />
Fax: +81-(0) 45 223 1111<br />
www.itto.or.jp<br />
Germany<br />
• Association of the German woodwork<strong>in</strong>g <strong>and</strong> plastic <strong>in</strong>dustries: Hauptverb<strong>and</strong> der<br />
Holz und Kunststoffe verarbeitenden Industrie (HDH)<br />
www.hdh-ev.de/english/<strong>in</strong>dex.html<br />
• German <strong>Furniture</strong> Industry Association: Verb<strong>and</strong> der Deutschen Möbel<strong>in</strong>dustrie<br />
(VDM)<br />
Flutgraben 2<br />
53604 Bad Honnef<br />
Tel: +49 (0) 22 24 / 93 77 0, Fax: +49 (0) 22 24 / 93 77 77<br />
www.hdh-ev.de/english/<strong>in</strong>dex.html<br />
• Bundesverb<strong>and</strong> des Deutschen Mobelh<strong>and</strong>els e.V.<br />
Frangenheimstrasse 6, D-5093 Koln, (L<strong>in</strong>denthal) Germany<br />
Tel.: +49 (0) 221 / 403 142<br />
Fax: +49 (0) 221 / 400 93 96<br />
International Trade Centre 109
• Verb<strong>and</strong> Büro-, Sitz- und Objektmöbel e.V. (BSO)<br />
Kaiserswerther Straße 137, 40474 Düsseldorf<br />
Tel.: +49 (0) 2 11 / 6 02 53 43 – 0<br />
Fax: +49 (0) 2 11 / 6 02 53 43 – 15<br />
Email: s.mieth@bso-ev.de<br />
www.buero-forum.de<br />
• Verb<strong>and</strong> der Deutschen Polstermöbel<strong>in</strong>dustrie e.V.<br />
Engerstraße 4b, 32051 Herford<br />
Tel.: +49 (0) 52 21 / 12 65 – 0, Fax: +49 (0) 52 21 / 12 65 - 65<br />
• Fachverb<strong>and</strong> Serienmöbelbetriebe des H<strong>and</strong>werks e.V.<br />
Engerstraße 4b, 32051 Herford<br />
Tel.: +49 (0) 52 21 / 12 65 – 0, Fax: +49 (0) 52 21 / 12 65 - 65<br />
• Möbelonl<strong>in</strong>e<br />
Vere<strong>in</strong> zur Koord<strong>in</strong>ation von Multimedia und Electronic Commerce der Möbelbranche<br />
• Wolf-Hirth-Straße 10, 71034 Böbl<strong>in</strong>gen<br />
Tel.: +49 (0) 79 31/46 17 30, Fax: +49 (0) 79 31/46 17 50<br />
• Deutsches Institut für Möbeltechnik e.V.<br />
Frankfurter R<strong>in</strong>g 243, 89897 München<br />
Tel.: +49 (0) 89/32 46 53-0, Fax: +49 (0) 89/32 46 53-13<br />
Italy<br />
• ISTAT – Compendio Statistico Italiano various years<br />
• ISTAT – on-l<strong>in</strong>e data bank: www.istat.it/<strong>in</strong>dex.htm<br />
• Federlegno – publications, <strong>in</strong>clud<strong>in</strong>g: Sistema legno arredo Italiano, consuntivo<br />
economico 2000 <strong>and</strong> 2001<br />
• Federlegno – Evoluzione Congiunturale, various issues from 2000 to 2002<br />
• Federlegno – on-l<strong>in</strong>e data bank: www.federlegno.it<br />
• Federlegno – Evoluzione del mobile domestico, del mobile da ufficio, delle cuc<strong>in</strong>e,<br />
editions 2001 <strong>and</strong> 2002<br />
• Cosmit Press releases – Schede economiche del settore mobile 2002<br />
• Cosmit Press releases – Risultati positivi nel 2001<br />
• Il Sole 24 Ore – Supplement 10/4/2002<br />
• Centro Studi Industria Leggera (CSIL)<br />
15, Corso Monforte<br />
20122 Milano, Italy<br />
Tel: +39 (0) 02 796 630<br />
Fax: +39 (0) 02 780 703<br />
E-mail: csil@csilmilano.com<br />
www.csilmilano.com<br />
110 International Trade Centre
• Federmobili <strong>in</strong>formation on the sales network at the Federmobili web-site:<br />
www.webmobili.it<br />
• Pambianco Strategie di Impresa: web-site: www.pambianconews.com<br />
France<br />
• SESSI – Le Bois en chiffres – Edition 2002<br />
• SESSI – France Meubles 1999<br />
• SESSI - Enquête annuelle d'entreprise 2000 <strong>and</strong> 2001 etc.<br />
• SESSI – Conjoncture 2001<br />
• SESSI – Les 4 pages N. 155-2001: Les entreprises <strong>in</strong>dustrielles et la publicité<br />
• SESSI – on-l<strong>in</strong>e data bank: www.evariste.org/sessi<br />
• PME – Gouvernement Français – <strong>in</strong>formation sur la distribution: www.pme-commerceartisanat.gouv.fr/economie/onc/chap13.htm<br />
• Industries Françaises de l'Ameublement: Economie et marchés 2002<br />
• BMSI – French furniture production – February 2002 N. 322<br />
• CTBA – Info various issues, <strong>in</strong>clud<strong>in</strong>g N. 88/2001<br />
• Insée statistical data base: www.<strong>in</strong>see.fr/fr/home/home_page.asp<br />
• Direction des entreprises commerciales artisanales et de services (decas). Information on<br />
distribution system: www.decas.f<strong>in</strong>ances.gouv.fr<br />
Belgium<br />
• Nationale Beroepsverenig<strong>in</strong>g van Meubelh<strong>and</strong>elaars<br />
Brussels International Trade Mart<br />
P.O. Box 613, B-1020 Brussels, Belgium<br />
Tel: 00-32 (0) 247 084 758<br />
Fax: 00-32 (0) 247 837 66<br />
<strong>The</strong> Netherl<strong>and</strong>s<br />
• Association of <strong>Furniture</strong> Manufacturers<br />
P.O.Box 100, 2100 AC Heemstede, <strong>The</strong> Netherl<strong>and</strong>s<br />
Tel: 00-31 (0) 23 515 8800<br />
Fax:00-31 (0) 23 531 5538<br />
E-mail: <strong>in</strong>fo@cbm.nl<br />
www.cbm.nl<br />
International Trade Centre 111
• Central Association for <strong>Furniture</strong> Retailers<br />
Bovenweg 100, 3708AG Zeist, <strong>The</strong> Netherl<strong>and</strong>s<br />
Tel: 00-31 (0) 30 697 3100<br />
Fax:00-31 (0) 30 691 9751<br />
E-mail: <strong>in</strong>fo@cbw.org<br />
www.cbw.org<br />
• Centre for the Promotion of Imports from Develop<strong>in</strong>g Countries (CBI)<br />
P.O.Box 30009, 3001 DA Rotterdam, <strong>The</strong> Netherl<strong>and</strong>s<br />
Tel: 00-31 (0) 10 201 3434<br />
Fax: 00-31 (0) 10 411 4081<br />
E-mail: cbi@cbi.nl<br />
www.cbi.nl<br />
USA<br />
• AKTRIN <strong>Furniture</strong> Information Center<br />
164 S. Ma<strong>in</strong> Street<br />
P.O. Box 898, High Po<strong>in</strong>t<br />
North Carol<strong>in</strong>a 27261, USA<br />
Tel: +1 (0) 336 841 8535<br />
Fax: +1 (0) 336 841 5435<br />
www.aktr<strong>in</strong>.com<br />
• <strong>The</strong> Office of Consumer Goods<br />
US Department of Commerce<br />
Wash<strong>in</strong>gton DC<br />
Tel: 202 482 5783<br />
Fax: 202 482 3981<br />
www.ita.doc.gov/org<br />
• Annual Survey of Manufacturers<br />
www.ita.doc.gov/td/ocg/furniture.html#manufactur<strong>in</strong>g<br />
• US Industry <strong>and</strong> Trade Outlook<br />
www.yntis.gov/product/<strong>in</strong>dustry-trade.html<br />
• Census of manufacturers<br />
www.census.gov/epcd/www/97EC31.html, www.census.gov/ epcd/www/naics.html<br />
• Industry trade surveys<br />
www.usitc.gov/webpubs.htm<br />
• US imports <strong>and</strong> exports (of household <strong>and</strong> office furniture)<br />
www.export.gov/ocg/ furniture.htm<br />
• American <strong>Furniture</strong> Manufacturers Association (AFMA)<br />
Tel: 336 884 5000<br />
Fax: 336 884 5303<br />
www.afma4u.org<br />
112 International Trade Centre
• National Home Furnish<strong>in</strong>gs Association (NHFA)<br />
Tel: 336 801 6100<br />
Fax: 336 883 1195<br />
www.nhfa.org<br />
• International Wholesale <strong>Furniture</strong> Association (IWFA)<br />
Tel: 336 884 1566<br />
Fax: 336 884 1350<br />
<strong>in</strong>wfa@nothstate.net<br />
• Association of Progressive Rental Organisations (APRO)<br />
Tel: 512 794 0095<br />
Fax: 512 794 0097<br />
www.apro-rto.com<br />
• BIFMA Gr<strong>and</strong> Rapids: Office <strong>Furniture</strong> Manufacturers Association<br />
Tel: 616 285 3963<br />
Fax: 616 285 3765<br />
www.bifma.org<br />
International Trade Centre 113
References<br />
ITTO Market Information Service (MIS). Several 2005-2006 issues. Yokohama, Japan.<br />
ITTO-ITC (a). Review of International Wooden <strong>Furniture</strong> Markets. Jo<strong>in</strong>t publication.<br />
December 2004 Geneva, Switzerl<strong>and</strong> / Yokohama, Japan.<br />
ITTO-ITC (b). Tropical Timber Products: Development of Further Process<strong>in</strong>g <strong>in</strong> ITTO<br />
Producer Countries. Jo<strong>in</strong>t publication. May 2002 Geneva, Switzerl<strong>and</strong> / Yokohama, Japan.<br />
UN/ECE-FAO Timber Committee Forest Products Annual Market Review 2003-2004. Chapter<br />
on Value Added Wood Products. June 2004, Geneva, Switzerl<strong>and</strong>.<br />
114 International Trade Centre
International Trade Centre 115
116 International Trade Centre