Bida identifies factors holding back furniture sector

The furniture sector is considered a promising sector of Bangladesh thanks to the abundance of labourers, the flow of capital, technological facilities, and higher demand in the global market. 

Still, it has not flourished for the failure to export at competitive prices amid a higher tariff on imported raw materials, a dearth of quality raw materials and import dependence, said the Bangladesh Investment Development Authority (Bida) in a report.

“The industry has not grown properly because of the inability to supply quality products in line with demand.”

The report was prepared by a working committee formed by the Bida for the purpose of reviewing the investment potential in the furniture industry and the tariff structure for imported raw materials.

It was also tasked with identifying the problems of the furniture sector and making recommendations to solve them with a view to attracting investment to the industry.

The Bida published the report yesterday and it has been sent to the National Board of Revenue, the central bank, the Export Promotion Bureau and several other government agencies.

In Bangladesh, the furniture sector is the second-largest job provider after the garments and textiles sector, employing about 20 lakh people.

The contribution of the sector to the gross domestic product is about 1.2 per cent.

More than 40,000 small and big companies are involved in the production and marketing of furniture. Most of them are cottage, micro or small industries.

Besides, there are more than 100 brands, including Hatil, Akhtar, Partex, Regal, Otobi, Brothers, Navana and Nadia.

The total size of the furniture market is about Tk 30,000 crore, with 65 per cent controlled by non-brands, according to the Bida report. 

The report points out that it is not possible to make long-lasting and quality furniture just by enhancing the lifespan of low-quality indigenous wood.

In order to boost exports, a 15 per cent cash financial assistance is provided as an alternative to duty drawback, but the support is inadequate given duties and taxes, it added.

The Customs Act of 1969 stipulates providing a bonded warehouse facility to all industrial establishments, but the furniture sector is yet to receive the benefit. As a result, the cost of production is high for the furniture industry.

Similarly, furniture manufacturers can’t borrow from the central bank’s Export Development Fund, which gives cheaper loans to exporters, for the purchase of raw materials like the entrepreneurs in the garment industry do. So, the cost of funds used to import raw materials remains higher.

The report also noted a lack of skilled workforce in the furniture sector, saying institutional mechanism to create skilled workers is also inadequate. There is a lack of research initiatives as well, it said.

A backward linkage industry has not developed in Bangladesh either.

“There is a lack of mechanisation and automation. Lead time is higher while there is a lack of branding,” said the Bida.

Although the design is one of the most important aspects of the furniture sector, existing designs can’t meet the requirements of customers.

The issue of environmental protection is gaining importance worldwide day by day, but the wood and board used to make furniture for the export markets need certification. However, a structure to issue certification has not been developed locally.

Salim H Rahman, chairman and managing director of Hatil Furniture, and a member of the Bida’s working committee that prepared the report, said the government is talking about export diversification.

“This sector can play an important role there.”

In addition to meeting domestic demand, several brands are also exporting furniture.

The shipment has more than doubled in the last six years.

Foreign sales stood at $110.36 million in the last fiscal year of 2021-22, up from $52.53 million in 2016-17.

The Bida report made 19 recommendations to boost exports.

They include lifting or reducing customs, supplementary and regulatory duties on the import of raw materials, providing a bonded warehouse facility, ensuring the supply of certified timber, creating a skilled workforce, and reducing lead time.

The report called for short, medium and long-term steps to attract investment.