The Furniture Sector in Pakistan: Export performance and ... - TRTA i

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3.4 Trade conditions of the Pakistani furniture sector 3.4.1 General Market access for Pakistan has improved and also for its trading partners. As a result of the WTO agreements, market access for the Pakistani furniture in industrial countries’ market has improved as tariffs have come down. Further, there is now protection available to Pakistan against any discriminatory treatment in our trading partners’ markets. Article XI of the GATT 1994 has also eliminated quantitative restrictions. Pakistan has also opened its market substantially, among others, in respect of furniture including the wooden furniture to foreign suppliers, (albeit on 25% of duty, higher as compared to that of industrial countries). Since 1998 the import regime of Pakistan has been significantly liberalized through reduction in tariffs, rationalization, and removal of import quotas, import surcharges and regulatory duties. The un-weighted (i.e. simple) average statutory tariff has come down from 47.1% in 1997- 98 to 14.4% in 2006- 07. The process in fact started in 1988 after the agreement on Structural Adjustment Programme was concluded with the International Monetary Fund (IMF). Unilateral, liberalization has been in the case of Pakistan the principal avenue of liberalization of trade. Of course, Pakistan has been complying with all its commitments under the WTO. The net actual liberalization on the part of Pakistan has been much more than multilaterally required in our WTO agreements. Some experts are of the view that we should not have unilaterally tariffs reduced such a steep extent. Competition has led to reduction in prices. Increasing competition in the world has also helped in reducing prices and improving quality of inputs i.e. improving import sourcing. This is of special significance because production structure of the furniture industry has undergone a significant change. Factories from dozen of countries now participate in the different stages of global furniture chains, manufacturing components and ready-toassemble (RTA) components for finished furniture for globally outsourcing buyers’ groups and retailer chains. New tougher requirements are being adopted. Pakistani furniture makers have now entered an era of increasing competition, as opening up of trade impacts both exports and imports. New tougher requirements for producing domestic, furniture according to stricter standards and more elaborate designs are being progressively adopted. The WTO system is dynamically evolving. The WTO regime is not static but is dynamically evolving. Currently, MTN are taking place on the Doha Development Agenda (DDA). The way these negotiations proceed and the ultimate agreement reached will influence the landscape of international trade (though at the moment the prospects of a satisfactory outcome are not bright). 70 International Trade Centre
3.4.2 Other countries’ access to Pakistan (Threats) Pakistan exports are higher than its imports at this point in time. Total exports of wooden furniture for the year 2005 amounted to US$12.3 million while imports were US$10.3 million. The MFN duty applied by Pakistan to the imports of different furniture products is 25%. 14 Rapid growth of imports is taking place. A rapid growth of imports under the WTO liberalized import regime has taken place. Market share of main furniture exporting countries in Pakistan’s economy is increasing with a rapid pace. For example the export growth of China in the furniture sector to Pakistan is 278% between 2004 and 2005. According to industries’ sources the arrival of Chinese furniture has hit the local office furniture by 70% and the sales of locally manufactured household furniture have declined by 30%. 15 Though it is not possible to verify the statement but one cay say that the pressure on the domestic industry has considerably increased. Other developing countries like Thailand, Malaysia, and Korea are also exporting more and more to Pakistan. Apparently the reason for this substantial increase in imports from these countries is that these products are found attractive particularly by up market buyers in respect of quality and price. However, questions remain about the attractiveness of the price despite 25% custom’s duty. Some manufacturers attribute the prevalent price level to under-invoicing and misdeclaration of imported products. The menace of valuation fraud indeed poses a serious threat and should be earnestly tackled by the Government of Pakistan. Furniture industry should be associated in this exercise. (Action: Furniture Industry Associations and the Central Board of Revenue-Pakistan) The details of quantum of import growth, share in Pakistan’s market, and imported quantity and the value of furniture products by top ten exporting markets are given below: Table 3.1 Top 10 furniture suppliers to Pakistan Exporters Imported value 2004 (US$ million) Share in Pakistan's imports (%) Growth in value 2003-04 (%) World 5.54 100 41 China 2.15 39 58 United States of America .475 9 41 Taiwan (China) .427 8 -12 United Arab Emirates .382 7 -23 Philippines .332 6 4050* Malaysia .330 6 26 Italy .233 4 41 Germany .218 4 68 14 15 Market Access Map, ITC. However, preferential tariff for Sri Lanka is 16.43%. The Business Recorder, December 7, 2006. International Trade Centre 71
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The Furniture Sector in Pakistan
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Acknowledgements The report was pre
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Abbreviations AFTA AHEC AKTRIN APFE
Page 7 and 8:
Table of contents Acknowledgements
Page 9 and 10:
Box 3.1 Multilateral discipline of
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Executive summary This study sets t
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the extent possible maintain or imp
Page 15 and 16:
1 Background and objectives 1.1 EC
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2 Furniture sector in Pakistan 2.1
Page 19 and 20:
On the buyer’s side, there are gl
Page 21 and 22:
According to the websites of import
Page 23 and 24:
Global demand for furniture in main
Page 25 and 26:
suppliers, both domestic and other
Page 27 and 28:
Table 2.3 Pakistani furniture expor
Page 29 and 30: Figure 2.4 Distribution structure f
Page 31 and 32: freight rates have increased and do
Page 33 and 34: Price The prices of local machinery
Page 35 and 36: Indonesia has also announced a ban
Page 37 and 38: industry itself should support effo
Page 39 and 40: various counterparts, the supplier
Page 41 and 42: Box 2.7 UK Timber Trade Federation
Page 43 and 44: Figure 2.5 Simplified example on ch
Page 45 and 46: At least 70% of the wood used in ma
Page 47 and 48: Scope of joint ventures There exist
Page 49 and 50: • With FAO’s Forest Products an
Page 51 and 52: The contact information of many of
Page 53 and 54: Box 2.10 USAID initiative in the fu
Page 55 and 56: Opportunities Major opportunities m
Page 57 and 58: pressure on the price. There appear
Page 59 and 60: Pakistan does not export this furni
Page 61 and 62: 3.1.3 Functional scope The function
Page 63 and 64: Current status of efforts to libera
Page 65 and 66: 3.2.2 Information flow-upwards, i.e
Page 67 and 68: Commission (EC/EU) has established
Page 69 and 70: Figure 3.3 Relevant intensity of WT
Page 71 and 72: Box 3.2 Regional Trade Agreements (
Page 73 and 74: Trade Related Aspects of Intellectu
Page 75 and 76: Agreement on the application of san
Page 77 and 78: country or materially retards the e
Page 79: Relevance of the furniture sector T
Page 83 and 84: Table 3.2 Top 10 buyers of the Paki
Page 85 and 86: Arabian market. Here again, there i
Page 87 and 88: • Material from China is being us
Page 89 and 90: 4.2 Obstacles and shortcomings - im
Page 91 and 92: Raw material recovery Raw material
Page 93 and 94: • Consistent policy for supportin
Page 95 and 96: A short-term but maybe a costly mea
Page 97 and 98: 5 Export services in Pakistan 5.1 E
Page 99 and 100: 5.1.3 Federation of Pakistan Chambe
Page 101 and 102: • Pakistan International Freight
Page 103 and 104: The lessons learnt here could be re
Page 105 and 106: 6 Conclusion and recommendations 6.
Page 107 and 108: 6.2 Critical success factors • A
Page 109 and 110: 6.4 Global value chains 6.4.1 Poten
Page 111 and 112: Benefits All timber tends to be air
Page 113 and 114: • Optimise cutting; • Calculati
Page 115 and 116: 6.6.5 If we had US$100,000: A techn
Page 117 and 118: • To modernise such a laboratory,
Page 119 and 120: Annexes Annex A — Sources of info
Page 121 and 122: • Federmobili information on the
Page 123 and 124: • National Home Furnishings Assoc
Page 125 and 126: International Trade Centre 115
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