Heavy taxes an impediment for furniture export growths

Summary:

• Global furniture market size $700b
• Bangladesh's furniture export in FY22 $110.36m
• Local furniture market worth Tk30,000cr
• Domestic players meet 95% of local demand
• 30,000 jobs created

Furniture producers, who meet 95% of the domestic demand, are now eyeing a slice of the $700 billion global market and hoping for policy support from the government.

If the government supports the import of raw materials needed by the industry, then the export income from the sector will grow, while the labour-intensive production methods will also ensure an increase in employment opportunities. 

Bangladesh Furniture Industry Owners Association President Selim H Rahman said local entrepreneurs are now meeting most of the demand of the Tk30,000 crore sector, where previously they used to rely on imports.

Although domestic consumers can look for internal solutions, producers are facing the same old problems.  

"The furniture industry relies on imported raw materials, including hardware, lacquer and fabrics. In many cases, the duty, tax and VAT combined are over 100%. By importing raw material and exporting products,  we are lagging behind," he said. 

Selim also urged for a bonded warehouse facility to boost furniture exports.

He said the global furniture market size was $700 billion in 2022 and it was growing every year. 

"We have a chance to increase the export income in this sector if we get government policy support. There is still no formal education focused on this industry. So the process to get skilled manpower has to be sped up." 

He said 15-20 companies are exporting now, but the news of 20% supplementary duty on several furniture raw materials in June last year was another bad news for the industry.

Rayana Hossain, founder and CEO of Isho, and a staunch nurturer of innovation, in an interview pointed out that one of the pressure points for the company was the furniture coming from China. 

"The government has put in huge taxes for importing furniture, which should be great for local brands and companies to flourish. However, the other thing that the government has done is impose extremely heavy taxes on raw materials for furniture as well. 

"Either you put a heavy tax on the final goods, or you put a heavy tax on the raw materials, but if you're doing both, nobody gets a good product, in this case, affordable good quality furniture. That's something the government should look into," she told FutureStartup.  

According to the Bangladesh Furniture Industry Owners Association, they have more than 3,000 members. Apart from this, many institutions have been established in different regions of the country. 

Furniture worth $110.36 million was exported in the financial year 2021-22, which is 38.87% more than the previous year. 

Currently, Bangladesh exports furniture to India, Nepal, the USA, United Arab Emirates, Bahrain and European Union countries.

The furniture is used in laboratories, spas, offices, restaurants, camping sites, bedrooms, libraries, parks and stores. 

Most of the furniture is manufactured using a variety of materials and is available in different designs. 

Furniture companies in Bangladesh offer movable items such as chairs, beds, cupboards, tables and also decorative furniture and fixtures.

Partex Star Group Chief Operating Officer (COO) Shah Alam Monshi said 70% of the raw material used in the furniture industry has to be imported. "We bring them at a high tax. Now labour and shipping costs have also increased.

"Ten days ago I went to a conference in Vietnam. I saw the production of furniture there. Their backward linkage is strong and we need to build backward linkage here. If our raw material cost decreases, production cost will also fall, increasing our ability to export." 

President of Bangladesh Furniture Exporters Association and Chairman of Akhtar group KM Aktaruzzaman said China, Vietnam, Malaysia and Italy are doing well in the furniture industry. 

"We are now exporting to meet our demand. Our products are of international standard in quality. We need to promote our products."

He said the government has assured of a bonded warehouse depending on exports, but through a 100% bank guarantee. 

"To get it, we need the help of the Bangladesh Trade and Tariff Commission, the Export Promotion Bureau and the FBCCI. Discussions are going on now to take bonded warehouses. We are gearing up to export more products."

17th national furniture fair inaugurated 

The 17th iteration of the national furniture fair started on Thursday.

Federation of Bangladesh Chambers of Commerce & Industries (FBCCI) President Md Jashim Uddin inaugurated the five-day long fair at the International Convention City Bashundhara (ICCB) in the capital. 

Presiding over the event, Bangladesh Furniture Industry Owners Association President Selim H Rahman said, "This fair has been held for the last 16 years. After a two-year hiatus due to Covid, we have organised the fair this year. The purpose of the fair is to develop the domestic furniture industry as well as increase exports outside the country." 

The fair has been organised by the Bangladesh Furniture Industry Owners Association. It will run daily from 10am to 8pm till 10 October.

In addition to Hatil, Akhtar, Navana, Pertex, Regal, Nadia and Brothers furniture companies, a total of 182 stalls of 34 companies will participate in the fair. Each will offer 5%-20% discounts.

Md Jashim Uddin said apart from duty reduction, more importance needs  to be given to product design and innovation. The government should cooperate to increase participation in foreign furniture fairs. If they do so, the export will increase here.