Forget the visions of an exotic holiday destination: South East Asia is one of the world areas where encouraging economic signs are coming from today, furniture field included.
In the World Bank Global Competitiveness Report 2014-15, Singapore – already in the topmost places for world economic freedom – occupies a stable first place in ASEAN, and second place globally; while Malaysia has risen towards the leading group, sitting squarely now between the top twenty world countries for competitiveness – one the most important Asian emerging countries, aiming to become one of the top hubs for international finance.
Among the most important markets in the world for furniture trade and manufacturing, Malaysia and Singapore are quite different, but both of interest to the professionals working in the field.
Malaysia: from OEM to ODM and OBM The Malaysian furniture industry is going through a deep transformation. The small companies of the 70s and 80s have grown up, making Malaysia the eight most important furniture exporter in the world. If we take a look at the figures, we can see that between 2004 and 2014 the exports have grown up slowly but constantly – with some temporary decline due to the slowdown of the world economy. The first 9 months of 2014 have seen the export rise +11,9% related to the same period of 2013 – for a grand total of 5.904 million Ringgit (against 5.275 million Ringgit in 2013) – 1 Rm = 0,24 Eur. Even if we take into account the economic slowdowns of 2009 and 2012, from 2003 until today, the global trend puts Malaysia among the first ten exporters of the world.
The most important markets for the Malaysian exports are the United States (a 28,8% share, which is on the rise, for a grand total of 1.700 million Ringgit); followed by Singapore, with a share of 8,1%, growing; Japan, 7,9%; Australia, 7,5%; United Kingdom, 4,4%; and others. Around 80% of the exports is composed by wooden furniture, as the lush rainforests of the country offer an almost endless variety of essences.
Even the imports have shown a positive trend. In the first 9 months of 2014 they have grown by 14,2%, reaching a value of 1.238 million Ringgit. Even if the most important share goes to China, with a growing percentage of 42,5%, it’s interesting to note that Italian exports towards Malaysia have grown strongly in volume: +25,9%.
The weight of the Malaysian furniture industry is steadily increasing: to help its development, the Malaysian Government has committed a vast amount of resources. But it’s quality, more than quantity, what is going to be most important issue in the next few years.
The figures – as a whole – are positive, but the ever-increasing level of quality of the imported goods, and the need to diversify to properly satisfy the different markets abroad, make the transition from OEM (Original Equipment Manufacturer) to ODM (Original Design Manufacturer) and OBM (Original Brand Manufacturer) urgent and necessary. It is not an easy step, and it needs a deep change in the companies management. Malaysian Furniture Promotion Council, the agency in charge of the international development and promotion of the Malaysian furniture in the world, has been long-aware of this problem. To address it, it has created in 2012 Malaysia Pride, a Quality Brand which certifies the quality standards, and encourages companies to invest in values such as original design, respect for the environment, use of certified wood resources, and innovation in production processes. Ms. Sarimah Mohamad Sabudin, MFPC CEO, confirms that: “… As MFPC, we are actively encouraging the companies to invest in original design and sustainability – for example, using essences like acacia and hevea. To implement the design mindset, we are convinced that it is useful to make a thorough research on the materials and cooperate with local and international designers, who could help differentiate the design of the products, using traditional Malaysian techniques and materials like batik, songket and pewter”. Singapore: Improve, Innovate, Integrate
The development of the Singaporean industry and commerce is a striking case history. It is unique, because despite the tiny dimensions of the country, the city-state of the Merlion has become one of the major players of the international manufacturing and trading furniture scene.
The field of furniture comprises 1.921 companies, occupying around 19.700 professionals; from 2006 to 2013, it has seen a tremendous growth, reaching the share of 1% of the world market. With a surface of only 700 km2, and a population of 5 million inhabitants, the Singaporean companies have a natural drive to internationalize, both for the setting of the manufacturing plants – concentrated mainly in Malaysia and China, both for the trading, which sees important figures in the export – even if concentrated mainly in the East and South East Asia.
From a survey conducted by BDO Consultants on behalf of SFIC (Singapore Furniture Industries Council) and Spring (the Government Agency promoting the growth of the Singaporean companies), the 49% of the companies has expansion programs for the next 3 years – which means more focus on the exports, or the opening of commercial agencies abroad.
The Singaporean companies are also suffering because of the massive inflow of more advanced, foreign companies on the local market, which find a good niche mainly because of the lack of branding of the local players – their good job on design implementation and product innovation notwithstanding. These are the motivations why SFIC considers investments in design and branding the key to the development of the furniture market.
Ernie Koh, SFIC Chairman, has very clear ideas about that: “The future of the Singaporean furniture industry has to focus on the achieving of 3 “I”: Improve, Innovate, Integrate. To encourage the best practices; to work in tight contact with the designers and participate in international platforms like IFFS (International Furniture Fair Singapore) and SingaPlural (the design platform event parallel to IFFS); to associate, globalize, create alliances, both here and abroad. These are the strategies which are the key to achieve our industry’s business goals, between which the overcoming of the OEM model, to become fully ODM and OBM, so to broaden our reach in the world and transform Singapore more and more into a furniture business hub”.
Very active scenarios, and economies in decisive development, both countries aim to occupy leading positions in the future global furniture panorama. For the 13% of the Singaporean companies aiming for internationalization, Europe is going to be the preferred choice. For several European companies, internationalization, mainly in the rich markets of Asia, is a main goal. We still have to see how these commercial issues could become a mutual advantage, considering that Singapore is the third richest country in the world, and Malaysia aim to enter the group of “High Income Countries” before 2020. (by Roberta Mutti, printed in World Furniture, edited by CSIL, March 2015, www.worldfurnitureonline.com)