An industry with tremendous export potential

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Au Leck Chai, CEO of the Malaysia Furniture Promotion Council

The Malaysian Furniture Promotion Council is a specialised governmental body that promotes and develops the Malaysian furniture industry to establish Malaysia as a globally recognised source of world-class furniture. The Council was launched in 2003 by the Ministry of Plantation Industries and Commodities. Inside Investor talked to Au Leck Chai, CEO of the institution, about the prospects of the Malaysian furniture industry.

Q: What would be the reasons for consumers to choose Malaysian furniture?

A: Basically because of two things: First it is the raw material. Malaysia has a kind of timber which is ideal for making timber products including furniture. Its good, tropical composite wood. Secondly, it’s the value for money because the majority of Malaysian furniture is made of very high quality hard wood for a reasonable price. Even if it is hard wood, consumers get it with a discount, because the high availability of this wood in the country keeps prices low.

Q: What are the current export figures, what is the ratio between domestic sales and exports, and what are the target countries?

A: About 80 per cent of the production is for export, the rest is for local consumption. In terms of value, last year we exported furniture for RM7 billion, this is a consistent figure. We exported to over 160 countries. The top countries are US, Japan, Singapore, and we also have strong sales in UK, Italy, and Germany.

Q: Could you give an overview of the Malaysian furniture industry? Who are the big manufacturers and distributors?

A: The big manufacturers are exporters at the same time. There are a lot of big companies like Poh Huat, Green Continental, Hin Lim, Sern Kou, DPS, and many others.

Q: In terms of pricing, where would you rank Malaysian furniture?

A: As for the prices, in this region we are probably next to China and Vietnam. Maybe China is able to produce in a lower price category, and also to a certain extent Vietnam. So Malaysia will probably be the third in terms of pricing for furniture from the region.

Q; Are there any trade relations to GCC countries?

A: Of course, trade to this region is quite substantial. We export to Dubai, Saudi Arabia, and to a certain extent to Oman. Dubai is number one, the furniture that goes there is mostly office furniture and equipment for hotels, such as fit-in furniture. One of the big exporters to there is LCL Furniture who sell a lot to Saudi Arabia, but, however, they have been affected by the recession in the region lately. Altogether, we have good relations to the GCC countries, because of the similar culture, and also because the distance is not too far. It is a high potential area for furniture sales, also because of the high disposable income in the Gulf states.

Q: What are the different woods the furniture industry is using in Malaysia?

A: We have various kind so tropical hard and soft wood including wood from rubber trees and palm oil trees. We are also using wood biomass as raw material, comprising of different types of wood chips which are meshed up and packed together. It’s a kind of artificial wood, we call it sub-natural or engineered wood. The costs are lower than for pure wood.

Q: Does the industry face shortages of timber?

A: From times to times there can be a shortage due to the weather, when rain affects the supply. Otherwise I would not say that there is a shortage problem. Sometimes demand can exceed supply, but we can help ourselves by importing wood from Thailand and other countries or use more of artificial wood.

Q: There is a lot of talk about adding value to agricultural and forestry products in Malaysia. How can the furniture industry fulfil this mission, and what would added-value furniture be?

A: As far as the timber industry is concerned, furniture is the highest value added product. Furniture comes in various shapes and sizes, and obviously the design part is also very important. The outcome is a tremendous higher value, at more than plus 50 to 70 per cent. A piece of wood is carved out, is sawn, goes through machines and other processes and becomes a piece of furniture. There are a lot of human resources, technology, and facilities involved. This is in line with the policy of the government to have a value addition by using all the national resources that we have.

Q: How about the availability of skilled labourers?

A: This industry is rather labour intensive and it depends very much on foreign labour as it is the case in many other industries in Malaysia. The number of local labourers is not sufficient, and as the standard of living in the country is going up, people are less willing to work in the factories as it is considered dirty and dangerous. So foreign labourers have to fill in that gap, and that’s why there is a dependency on foreign labour in this industry. We have to manage that according to the government’s policy. There are times when we need a lot of labourers against the government’s consideration of reducing the number of foreign workers. We receive a certain allowance for foreign labourers, and at times it can be challenging to manage the supply and demand of workers in the industry. If there is a shortage, we have incentives to encourage the intake of local labourers, but we also have the opportunity for fast-track applications at the government for foreign workers to make sure that the industry is not seriously jeopardised by the lack of labourers in the peak season. At the same time we encourage the manufacturers to adopt more machinery and technology to reduce the requirement for labourers.

Q: Where do you see the future potential of the industry?

A: The future potential is tremendous. Furniture is a consumer product, and as we expect a population increase, and more families being formed and households to be equipped, the demand for furniture products is going to rise. The other thing is property and real estate development: There will be more hotels, more resorts, more commercial buildings being built, and this also requires furniture. On the other hand, furniture is also seen as a decorative item, which means that the interior design industry for residential houses, offices, and commercial building does require furniture. This also creates a lot of demand. Being a consumer product, demands goes in tandem with the population growth and it moves with the dynamics of every country.

Q: How do you deal with issues of deforestation?

A: We have a lot of timber resources in Malaysia, but we are also very mindful about sustainability issues. We are acting according to the environmental rules, and we are also using the waste from the industry such as biomass from the palm and rubber trees. There is a lot of waste that can be turned into new products. We are also promoting to use environmentally friendly components for furniture, for example foam for sofas or matresses made from green raw materials. This is challenging, as we have to deal with the strategy to diversify our products and at the same time have a lot of pressure out of environmental considerations.

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Reading Time: 5 minutes

Au Leck Chai, CEO of the Malaysia Furniture Promotion Council

The Malaysian Furniture Promotion Council is a specialised governmental body that promotes and develops the Malaysian furniture industry to establish Malaysia as a globally recognised source of world-class furniture. The Council was launched in 2003 by the Ministry of Plantation Industries and Commodities. Inside Investor talked to Au Leck Chai, CEO of the institution, about the prospects of the Malaysian furniture industry.

Reading Time: 5 minutes

Au Leck Chai, CEO of the Malaysia Furniture Promotion Council

The Malaysian Furniture Promotion Council is a specialised governmental body that promotes and develops the Malaysian furniture industry to establish Malaysia as a globally recognised source of world-class furniture. The Council was launched in 2003 by the Ministry of Plantation Industries and Commodities. Inside Investor talked to Au Leck Chai, CEO of the institution, about the prospects of the Malaysian furniture industry.

Q: What would be the reasons for consumers to choose Malaysian furniture?

A: Basically because of two things: First it is the raw material. Malaysia has a kind of timber which is ideal for making timber products including furniture. Its good, tropical composite wood. Secondly, it’s the value for money because the majority of Malaysian furniture is made of very high quality hard wood for a reasonable price. Even if it is hard wood, consumers get it with a discount, because the high availability of this wood in the country keeps prices low.

Q: What are the current export figures, what is the ratio between domestic sales and exports, and what are the target countries?

A: About 80 per cent of the production is for export, the rest is for local consumption. In terms of value, last year we exported furniture for RM7 billion, this is a consistent figure. We exported to over 160 countries. The top countries are US, Japan, Singapore, and we also have strong sales in UK, Italy, and Germany.

Q: Could you give an overview of the Malaysian furniture industry? Who are the big manufacturers and distributors?

A: The big manufacturers are exporters at the same time. There are a lot of big companies like Poh Huat, Green Continental, Hin Lim, Sern Kou, DPS, and many others.

Q: In terms of pricing, where would you rank Malaysian furniture?

A: As for the prices, in this region we are probably next to China and Vietnam. Maybe China is able to produce in a lower price category, and also to a certain extent Vietnam. So Malaysia will probably be the third in terms of pricing for furniture from the region.

Q; Are there any trade relations to GCC countries?

A: Of course, trade to this region is quite substantial. We export to Dubai, Saudi Arabia, and to a certain extent to Oman. Dubai is number one, the furniture that goes there is mostly office furniture and equipment for hotels, such as fit-in furniture. One of the big exporters to there is LCL Furniture who sell a lot to Saudi Arabia, but, however, they have been affected by the recession in the region lately. Altogether, we have good relations to the GCC countries, because of the similar culture, and also because the distance is not too far. It is a high potential area for furniture sales, also because of the high disposable income in the Gulf states.

Q: What are the different woods the furniture industry is using in Malaysia?

A: We have various kind so tropical hard and soft wood including wood from rubber trees and palm oil trees. We are also using wood biomass as raw material, comprising of different types of wood chips which are meshed up and packed together. It’s a kind of artificial wood, we call it sub-natural or engineered wood. The costs are lower than for pure wood.

Q: Does the industry face shortages of timber?

A: From times to times there can be a shortage due to the weather, when rain affects the supply. Otherwise I would not say that there is a shortage problem. Sometimes demand can exceed supply, but we can help ourselves by importing wood from Thailand and other countries or use more of artificial wood.

Q: There is a lot of talk about adding value to agricultural and forestry products in Malaysia. How can the furniture industry fulfil this mission, and what would added-value furniture be?

A: As far as the timber industry is concerned, furniture is the highest value added product. Furniture comes in various shapes and sizes, and obviously the design part is also very important. The outcome is a tremendous higher value, at more than plus 50 to 70 per cent. A piece of wood is carved out, is sawn, goes through machines and other processes and becomes a piece of furniture. There are a lot of human resources, technology, and facilities involved. This is in line with the policy of the government to have a value addition by using all the national resources that we have.

Q: How about the availability of skilled labourers?

A: This industry is rather labour intensive and it depends very much on foreign labour as it is the case in many other industries in Malaysia. The number of local labourers is not sufficient, and as the standard of living in the country is going up, people are less willing to work in the factories as it is considered dirty and dangerous. So foreign labourers have to fill in that gap, and that’s why there is a dependency on foreign labour in this industry. We have to manage that according to the government’s policy. There are times when we need a lot of labourers against the government’s consideration of reducing the number of foreign workers. We receive a certain allowance for foreign labourers, and at times it can be challenging to manage the supply and demand of workers in the industry. If there is a shortage, we have incentives to encourage the intake of local labourers, but we also have the opportunity for fast-track applications at the government for foreign workers to make sure that the industry is not seriously jeopardised by the lack of labourers in the peak season. At the same time we encourage the manufacturers to adopt more machinery and technology to reduce the requirement for labourers.

Q: Where do you see the future potential of the industry?

A: The future potential is tremendous. Furniture is a consumer product, and as we expect a population increase, and more families being formed and households to be equipped, the demand for furniture products is going to rise. The other thing is property and real estate development: There will be more hotels, more resorts, more commercial buildings being built, and this also requires furniture. On the other hand, furniture is also seen as a decorative item, which means that the interior design industry for residential houses, offices, and commercial building does require furniture. This also creates a lot of demand. Being a consumer product, demands goes in tandem with the population growth and it moves with the dynamics of every country.

Q: How do you deal with issues of deforestation?

A: We have a lot of timber resources in Malaysia, but we are also very mindful about sustainability issues. We are acting according to the environmental rules, and we are also using the waste from the industry such as biomass from the palm and rubber trees. There is a lot of waste that can be turned into new products. We are also promoting to use environmentally friendly components for furniture, for example foam for sofas or matresses made from green raw materials. This is challenging, as we have to deal with the strategy to diversify our products and at the same time have a lot of pressure out of environmental considerations.

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