MALAYSIA's 2011 furniture exports are likely to improve by 9 per cent to RM8.7 billion, provided the US dollar stabilises at the current level and manufacturers are able to secure enough foreign workers at their factories.
The Malaysian Timber Industry Board estimates that last year's furniture exports may have touched RM8 billion as manufacturers suffered profit erosion from a weakening US dollar and insufficient labourers to work on their clients' orders.
"The government's policy to reduce the country's dependency on foreign workers is having an adverse impact on furniture production and exports," said the Malaysian Furniture Industry Council (MFIC) president Richard Lee.
"Furniture export earings will decline if there aren't enough foreign workers to work on the orders. Many small and medium enterprises will face shutdown prospects," he added.
Lee said there was growing demand for Malaysian-made furniture from the US and Australia, especially now as American consumer spending is showing signs of recovery and Australians need to refurbish their homes after the big flood.
Traditional markets like the US and Europe tend to favour Malaysia over low-cost producers like China and Vietnam due to better quality control and reliable after-sales services.
"If we can secure enough labour to work on the prospective orders, we hope to achieve RM8.7 billion this year," he said.
Lee was speaking to reporters at the Timber Dialogue 2011 organised by the Malaysian Timber Industry Board in Putrajaya yesterday. It was mediated by Plantation Industry and Commodities minister Tan Sri Bernard Dompok. Also present was Malaysian Furniture Entrepreneurs Association deputy president Richard Ko.
Lee highlighted that Malaysia has not benefited from free trade agreements with Asean as well as Australia and New Zealand, which came into effect in January 2010. "Singapore and Thailand are enjoying zero tariff on upholstery and wooden furniture when it is shipped into Australia and New Zealand. Malaysia, however, is not. We hope the government will look into this discrepancy."
Malaysian furniture exporters sell in US dollar. When the ringgit strengthens, their exports become more expensive. This leads to a fall in demand. In the last 12 months, the ringgit has been strengthening against the dollar.
Ko said profit margins in the furniture export industry are between 3 and 15 per cent and the order process takes an average of two months.
"That is 60 days' worth of currency fluctuation and volatility. For example, in December, the fluctuation of the ringgit accounted for some 3 per cent. And that 3 per cent is some companies' total profit margin," Ko added.