October 6, 2022
MANILA — Local exporters of furniture have received an unprecedented volume of cancellation of orders from abroad due to fears of a recession that altered spending patterns and drove down demand in two of the Philippines’ biggest markets.
Robert Young, president of the Foreign Buyers Association of the Philippines (Fobap), told the Inquirer on Wednesday that they were now expecting orders for furniture from the United States and Europe to slump by 25 percent this year from about $200 million in 2021.
Prior to the pandemic, Philippine exports of furniture, such as wooden tables, chairs, desks and cabinets, amounted to $300 million, according to Young.
“The fears of recession in the US are making our clients order less. People are trying to save now on shopping expenses,” Young said in a mix of English and Filipino.
Fobap is a 44-year-old association whose members represent buyers of furniture, garments and other Philippine-made products for export. Some of their biggest clients include Ikea, a Swedish conglomerate known for its ready-to-assemble furniture with more than 400 stores in some 50 countries, including the Philippines; Crate and Barrel, an Illinois-based international home decor store with about 100 stores in the United States and Canada and franchises in Europe, and Massachusetts-based Crabtree and Evelyn, a former brick-and-mortar retailer of home products that has shifted to an online-only format.
Uncertified wood
Young said one problem limiting the growth of exports was the lack of international certification of the wood being used to make furniture products.
This is done by the Forest Stewardship Council (FSC), a Germany-headquartered nonprofit organization set up in 1993 to promote responsible management and sustainability in the world’s forests through certification that is recognized in many countries as part of their environmental policy. FSC certification ensures that wood products come from responsibly managed forests that provide environmental, social and economic benefits. It has certified more than 80 million hectares of forests in over 100 countries.
Since the majority of local furniture suppliers in the Philippines get wood from sources that are not certified by the FSC, Young said progressive countries such as the United States and those in Europe would not buy furniture made with those materials.
Young lamented that Philippine furniture makers wanting to tap export markets have to buy wood from nearby countries such as Vietnam, Indonesia and Malaysia where FSC certification is available.
“We have no certification to show if we do not import wood. If we don’t have it then our exports will not pass British, US compliance,” he said.
Gov’t intervention
Young urged the government to intervene and help the industry by coordinating with the FSC to set up a local office in the Philippines to ease the regulatory burden on exporters.
The Fobap official said this would help eliminate or at least lessen the need for local furniture makers planning to export their products to import FSC-certified wood from other countries.
“The government must understand that this certification is like a quota. Without it, we cannot sell anything in those markets,” Young said.
He said that the Philippines also continued to struggle to have local furniture makers fully accept this certification requirement, in contrast to those in other Asian countries who have fully embraced this condition of buyers from the United States and Europe.
“We need them to have more exposure to the international market and to have continuing education of its importance,” he said.
“The strategic planning of our government must be long-term and not just every six years only. Look at the Vietnam FSC, it was planned in 2006 and they are now exporting FSC acacia wood,” he added, noting that importation puts an additional 5-percent cost on local furniture makers looking to export.
New market
The European Chamber of Commerce of the Philippines, through its marketing initiative Fairs & More Inc., earlier suggested that local manufacturers also focus on opening China as a destination for Philippine furniture exports.
It said China imports $11 billion of furniture annually and its proximity makes it a very ideal destination for the country’s furniture exports. The United States and Japan account for about 60 percent of total Philippine furniture exports, while shipments to China stood at only 5 percent, it added.
The Philippines has some 15,000 furniture firms, of which more than 80 percent are in the small and medium enterprise (SME) category, employing some 800,000 workers. They are concentrated in the National Capital Region, Cebu and Pampanga.
Industry figures showed that furniture exports from the Philippines peaked in 1999 when local firms shipped more than $381 million to foreign buyers. This went on a downtrend due to a world financial crisis that dampened global demand and stiffer competition from other countries such as China.