Thailand seeks strategy for China
By Gary Evans -- Furniture Today, April 8, 2002
BANGKOK, Thailand — With its two major customers in the tank and its competitors growing, the Thailand furniture industry has been suffering a double whammy.
Its two big sources of business are Japan and the United States, both sufferers in the downturn of the world economy. And the attractiveness of cheap Thai labor is waning in the face of cheaper labor in other nearby countries, notably Malaysia, Indonesia and, of course, China.
Last year, Thailand's exports to Japan, suffering from a longer recession than the United States, were down 15.6%. Exports to American customers were down 5.67%. To make matters worse, all but three of the country's top 10 export markets recorded a significant decrease, with increases from the United Kingdom, Canada and the United Arab Emirates, though powerful, still unable to offset the losses.
"When the economy of Japan and America slow down, we have a problem," said Khomsan Laosillapacharoen, secretary general of the Furniture Industry Club, which represents many of the 2,500 Thai factories.
Laosillapacharoen spoke at a news conference sponsored by the Thailand International Furniture Fair, which recently drew some 15,000 trade visitors to see the introductions from 200 exhibitors, most of them from within Thailand.
Like industries worldwide, Thai furniture makers have seen much of their past business flow into neighboring China, and to a lesser extent, other developing countries with abundant and cheap labor forces. "Not only furniture," said Laosillapacharoen, "but every industry that we have is competing with China."
Nonetheless, since furniture, with exports approaching US$1 billion, plays such an important role in bringing foreign currency into the Thai economy, the government and the industry has been mounting a strategy to boost growth as economies get better.
To do that, Laosillapacharoen said, "I think we have to look at new markets — India, Africa, Latin American, maybe China," where "some people may like the high quality."
Thailand has joined the chorus of Southeast Asian countries saying that, if China can do it cheaper, then they can do it better. Whether that strategy can work is up for conjecture, but Laosillapacharoen and others here are optimistic.
"We think that the 2002 growth rate will be 10% above last year," Laosillapacharoen said, noting that some factories with large export sales are now booking orders well into the year.
Since only 11% of the Thai factories are considered large enough to be significant exporters, officials here are not touting technological advancements, especially since manufacturing investment from foreign sources is heading to China.
So the government is promoting its hand crafting abilities, quality, "exclusive natural materials" and styles influenced by the culture and evident in intricate woven upholstery frames, handcarved scenes in teak and sandstone, and exquisite multi-layered painted scenes on large furniture pieces. That, and "the country's relative political and economic stability compared to competitors in Vietnam, Indonesia, and Malaysia," according to a TIFF news release.
"Our furniture industry has a long history," said Laosillapacharoen. "We did not start 10 years ago like China. We have a long history of making and producing good quality, good design. The other thing is that, in China, you have only the largest factory, and they can only take large orders. We have 2,500 factories, most small and medium, and can (serve) those who cannot import large orders."
Thailand still remains a major exporter of teak furniture, although the country no longer can boast of being the world's premier supplier of the tropical hardwood. Unsustainable logging practices, political corruption and unscrupulous business practices severely eroded Thailand's teak supply, forcing a ban on the commercial logging of teak in 1989. Now manufacturers must go outside the country and import teak from nearby countries.
The replacement species is parawood, processed from old rubber trees that no longer produce sufficient sources of rubber. A high percentage of the case goods at the show here was made of parawood, which the government says is in almost limitless supply.
