What areas is the MFPC currently focusing on?
CHAI: Currently, we are trying to focus more on the designing and branding aspects of Malaysian furniture. As a result, we have created a program called Malaysia Pride. We are trying to establish a quality brand mark for the Malaysian furniture industry. We want the industry players to move towards becoming ODMs (Original Design Manufacturer) and transition out of the OEM (Original Equipment Manufacturer) phase. For a long time, the furniture industry in Malaysia has been partaking in the OEM mode of production. At this phase, designs are sold to the furniture industry and than manufactured for those orders that we receive. However, at this juncture, I believe that it is time for the industry to transition into the production of higher value-added furniture products. In order to do this, we must create original and innovative designs that are demanded or needed by our consumers.
What are Malaysia’s competitive advantages with regards to furniture production and manufacturing?
CHAI: Malaysia’s furniture industry has a competitive advantage because the country has a vast amount of natural timber resources. This advantage helps sustain the level of raw materials that are required to make furniture. Furthermore, we also have a strong workforce and a good infrastructure. Our strong workforce can be attributed to the fact that we have people who have been working in the industry for over two decades. They have already acquired the necessary capability and capacity that is needed in order to create quality furniture. Also, the furniture industry in Malaysia has received generous support from the government. The government has put policies into place to help lower the costs of production and increase the availability of natural resources. These policies have also helped create a conducive working environment and a stable infrastructure. As a result, Malaysia has been positioned as one of the largest exporters of furniture in the world.
How large is Malaysia’s furniture production industry?
CHAI: On average, the furniture production industry’s annual exports reach between MYR 7bn-8bn ($2.2bn-$2.5bn). Production for the industry is in the region of roughly MYR 10bn ($3.2bn) per annum. 85% of the products from our furniture industry are exported, which is roughly MYR 8bn ($2.5bn).
What are the industry’s largest export markets? Which non-traditional markets is the industry looking to move into?
CHAI: Malaysia exports to over 160 countries throughout the world. Some of our largest export markets are the United States, the United Kingdom, Germany, France, Italy, and Singapore. These are some of the traditional markets that we export to. However, in view of rising global competitiveness, we realize that we need to diversify our markets by penetrating into more emerging countries. MFPC is trying to help the industry to move into non-traditional markets such as Eastern Europe, the Middle East, and the rest of Asia.
Many reports indicate that the furniture industry in Malaysia is highly dependent on foreign labor. Over the past few years the government has taken measures to decrease reliance on foreign labor and has put a policy into place to reduce the number of foreign workers to 5% of the total workforce by 2015. How will this impact the furniture industry?
CHAI: This is obviously going to be a big challenge. I believe that there will be a turning point and the whole industry will begin to shift. The labor factor plays a huge role in all of Malaysia’s industries because our country is fairly dependent on foreign labor. For the past two decades, we have depended on foreign labor for the production of furniture products. The challenge is to figure out how to transform the industry into being less intensive. This can be done by implementing high technology, increasing the number of local skilled workers, and shifting into a different mode of production. The industry must become more technology based in order to decrease the amount of labor that is required. We are trying to overcome this problem by asking the industry players to become more technology intensive and create higher value-added products. I believe that this labor factor will drive the industry into further consolidation.
On average, the furniture production industry’s annual exports reach between MYR 7bn-8bn ($2.2bn-$2.5bn). Production for the industry is in the region of roughly MYR 10bn ($3.2bn) per annum. 85% of the products from our furniture industry are exported, which is roughly MYR 8bn ($2.5bn).
Rubberwood currently accounts for 85% of total wood furniture exports in Malaysia. Recent reports have indicated that there is an inadequate supply of rubberwood and the industry will experience an increasing shortage of wood as a raw material over the next few years. What is being done to promote the sustainability of the wood materials supply for the furniture industry? How has this shortage affected the production and manufacturing costs?
CHAI: The overall shortage of supply situation is actually fluctuating. At the moment, it may appear that there will be a shortage of supply but you must also take into account seasonal changes and the current surge in demand. There will always be enough raw materials because the government has put programs into place to make sure that certain acreages are maintained. The government realizes that natural timber resources are extremely important assets for the country. In other words, the rubber plantation in Malaysia will not shrink to a level where hardly any wood is produced. There are also other wood materials besides rubberwood that are being used in the furniture industry. This is important because we must diversify our materials. For example, we are using other tropical wood and what is deemed renewable green wood. Malaysia also has large palm oil estates that we can go to as a potential source of supply. We can use the trunk from palm trees to create furniture products. Another material that is being utilized is Acacia. This material is very popular for outdoor furniture. So, I believe that along the way we will be able to reach a strong diversification of materials while sustaining the production of rubberwood. The policies that the government has put into place have been very positive. They ensure that a minimum amount of acreage is maintained, which comes out to a buffer of roughly 880,000 hectares within the country. As a result, there is diversification in terms of utilization of materials throughout the furniture industry. I believe the supply and demand situation will be well managed by agencies like MFPC, MTIB (Malaysian Timber Industry Board) and MTC (Malaysian Timber Council). The government has also adopted a very liberal import policy, so even on days when supply is short we could still procure what we need from overseas markets. In fact, our agency gives incentives for companies to import certain materials that are needed downstream. We have to make sure that the furniture industry will not die out because of a lack of supply. On the other hand, we will be able to reach diversification and start to see more interesting types of furniture products. All of the material that we utilize is environmental friendly. For the future, we would like to see that all furniture products from Malaysia are labeled green.
What is your general outlook for the furniture industry as a whole?
CHAI: Our outlook is very positive. I think that it is going to keep getting better because as the population increases so will the household demand for furniture products. However, the challenge is whether the sales turnover will be fast or slow. Due to the global economy recession, the turnover in the furniture industry has been slower. Form a global perspective, the international trade of furniture usually contributes roughly $100bn-$110bn to the global economy each year. At the moment, Malaysia only contributes about 2%-3% to this amount. We could potentially occupy 10%, but there are certain targets to be met because the international trade platform is very dynamic. There is a challenge of whether or not we can meet the increase of demand from consumers. I believe that Malaysia can address this surge in demand because the industry is resourceful and is now changing its mindset towards producing greener furniture. The furniture industry here in Malaysia is very resilient. We are becoming more innovative with regards to the production of furniture. There should be no reason that the Malaysian furniture industry cannot capitalize on the current state of international trade.