SME

Furniture Industry
Empowering Furniture Manufacturing based SMEs in Chiniot will result in
higher volumes of Furniture Exports

Group
Member:

Amjad Nawaz L1S07BBAM0122

Saqib Zahoor Khan L1S07BBAM2044

Zain Bin Gohar L1S07BBAM0080

Ammar Akram Alizai L1S07BBAM0155

Syed Hammad Raza L1S07BBAM2112

Contents

ABSTRACT 3

INTRODUCTION TO FURNITURE INDUSTRY OF PAKISTAN 4

CHINIOT’S FURNITURE INDUSTRY 6

LITERATURE REVIEW 7

ARTICLES 7
PROSPECTS AND FEARS FOR PAKISTAN’S FURNITURE INDUSTRY 7
WHY DO SMALL FIRMS FAILS TO GRADUATE TO MEDIUM AND LARGE FIRMS IN PAKISTAN 7
WOODEN FURNITURE: GREAT EXPORT POTENTIAL 8
DIMENSIONS OF MANUFACTURING STRENGTH IN THE FURNITURE INDUSTRY 8
AGGRESSIVE AND PASSIVE EXPORTERS: A STUDY IN THE FURNITURE INDUSTRY 8
HANDBOOK ON LONG TERM FINANCING SCHEMES  OF STATE BANK OF PAKISTAN 9

HYPOTHESIS 10

“EMPOWERING FURNITURE MANUFACTURING BASED SMES IN CHINIOT WILL RESULT IN HIGHER

VOLUMES OF FURNITURE EXPORTS” 10

QUESTIONNAIRE 10

IDENTIFICATION OF PROBLEM THROUGH RESEARCH 11

EXOGENOUS FACTORS: 11

ENDOGENOUS FACTORS: 12

OTHER OBSTACLES 12

CONCLUSION & RECOMMENDATION 14

REFERENCES 15

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 Abstract
This project was performed to measure the potential of Chiniot made furniture in the foreign
market. We feel that lack of government support to streamline this industry is one of the main reasons
but the report will enlighten the other factors which made the government uninterested in this sector of
industry. A questionnaire was made to test what were some of the reasons this sector of the industry in
not flourishing and what can be done so that this industry to perform to its fullest potential.

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Introduction to Furniture Industry of Pakistan
Pakistan’s share in the international wooden furniture market is insignificant, despite
the fact that the country has a history of craftsmanship and innovation in the field of wooden
furniture.
The wooden furniture industry represents 95 percent of the total market in the country.
The leading furniture making areas of Pakistan are Chiniot, Gujrat, Peshawar, Lahore and
Karachi. In terms of exports, Karachi comes first, followed by Lahore and Peshawar.
But prospects are not rosy. Exporters are suffering manifold problems while local
manufacturers are facing challenges due to heavy imports of furniture. Chinese furniture has
also hit the local industry by 70 percent and the sales of locally manufactured household
furniture have gone down by 30 percent.
Pressure on the domestic industry has immensely increased as other countries like
Thailand and Korea have started exporting extensively to Pakistan.
At the same time, the high cost of the furniture business has threatened the sector as a
whole.  The prices of all raw materials used in making furniture which include chipboard,
timber, foam, polish chemical materials, color paints and hard ware have increased. Timber
production on the other hand has gone down drastically because of unchecked deforestation.
As a result, imported chipboard is used in manufacturing bedroom sets, which sell the most.
About sixty percent raw material used in furniture making is imported from China. Imported
item mostly used in furniture making are chipboard, hardware items and glass.
Pakistan’s major buyers of wooden furniture are the UK, the USA, Sri Lanka and Gulf countries
like the UAE, Saudi Arabia, Oman and Kuwait. The United States buys mostly bedroom
furniture. UK and the Gulf countries import kitchen furniture and office furniture. For example,
the British retail chain Harrods sells some Pakistani furniture at its outlets.
In Pakistan, the wooden furniture industry can be categorized into small scale and cottage.
These units unfortunately use obsolete machinery, inadequate tools and manual labor for
manufacturing wooden furniture. This means high costs and poor output.
There are more than 700 units of wooden furniture in the country. The market is divided into
home use and contract markets. The contract market constitutes those units that deal with
supplies to hotels, restaurants, offices and public facilities.
Chiniot in Pakistan is well known throughout the word for its beautiful wood carvings and brass
inlays. Its furniture is better in quality than that of other areas of the country.

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More than 80 percent of the furniture demand in the country is met by the Chinioti furniture.
This industry, combined with the handicraft industry, is employing about 50,000 people.
The wooden furniture industry in Gujrat is also flourishing and contributing a large amount of
foreign exchange earnings to Pakistan. About 70 to 80 percent furniture is made of sheesham.
Furniture items produced in Sindh and parts of Punjab are more cottage industry based and for
domestic use only.  Most of the furniture produced is simple but heavy in weight and is sold
locally rather than exported.
A number of households in Hala, Kashmore, Khanewal and Dera Ghazi Khan employ traditional
workmanship, despite drastic change in the tastes of customers. Similarly, Swati furniture has
basically broad sets and geometrical floral designs carved in various styles of wood work. It is a
shame that neither has made any markets abroad.
The statistics overall are not encouraging. The export of furniture which was worth US$3.46
million rose to US$6.05 million in 2001-01, thus depicting an increase of 12 percent per annum.
Exports of furniture have gone down since 2007 due to political and economic turmoil coupled
with load shedding.  It is observed that no importer has entered the Pakistani market and no
one is ready to book orders by browsing through designs at company web-sites.
Quality export furniture is being produced at Chiniot, Gujrat, Peshawar, Rawalpindi and Karachi.
The demand for Pakistani furniture has been rising constantly. It has bright prospects to export
more than $1 billion worth of furniture annually in the international furniture market.
For this to happen, the furniture industry in Pakistan must vigorously transform from cottage or
small scale industry to innovative industry through training, upgrading supplies and imports,
establishing a wood work institute and testing laboratories of international standards. Japan is
an important market to tap. Efforts must be made by promoting furniture exports by more
regular participation in international shows.  All this can happen if there is government will and
a vision amongst furniture traders. So far, this remains to be seen.

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Chiniot’s Furniture Industry
Chiniot is world famous for its exotically carved and brightly lacquered furniture.
Chinioti craftsmen and artisans have for centuries carved "beautiful" flowers and geometric
patterns onto cellulose fibers. Masons from Chiniot are thought to have been employed during
the construction of Taj Mahal and Golden Temple, both now in India.
Despite the knowledge and century old traditions employed in Chinioti wood making,
the Pakistani government has made little effort to promote and market its Punjabi furniture
industry. A lack of vocational education and training centers in Chiniot means that modern
working techniques are rarely used. The lack of computer aided design (CAD) also serves as a
hindrance to modern manufacturing.
Furniture making in Chiniot forms a vital part of Pakistan's secondary industry and is also
essential to the Punjab’s regional economy.
The recent trend of furniture suggests that hand craved furniture is in rising demand.
The changing trend of people from contemporary furniture to antique hand carved furniture
shows that the chiniot’s furniture has a high demand in the foreign market.

In total there are more than 175 small and medium furniture manufacturers in Chiniot.
And there are over 2500 home units operating in Chiniot.

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Literature Review
Articles

Prospects and fears for Pakistan’s furniture industry

a. Link: http://tribune.com.pk/story/19304/prospects-and-fears-for-pakistans-furniture-
industry/
i. (Published in the Express Tribune, June 7th, 2010.)

Summary:

Pakistan's wooden furniture industry has a great export potential, and in quality is inferior to
none. The domestic market is very vast and varied. However, Japan's import market has great potential,
too. No tariffs are levied on the furniture or its components. The largest obstacle to imports of furniture
into Japan is size. Western furniture is often rejected because it is too large for the Japanese consumers.

Traditionally, Japan's furniture market has been heavily dependent on the so-called box
furniture. This type of market, however, is gradually fading away. Instead, the focus of home-use
furniture demand is shifting to furniture sets for reception rooms. The increasing adoption of western
housing and interior designs will further accelerate this trend. Many single-family dwellings and
condominiums come with built- in furniture - such as walk-in closets. The Japanese consumers have a
traditional attachment to wood. They dislike the presence of knots in the furniture surface, and expect
manufacturers to perform careful finishing to all parts. Hence, products that emphasize the beauty of
the wood grain will be an important key to success.

The demand for furniture has been rising constantly for the domestic market, as well as for the
export. It has been estimated that it is likely to maintain a growth rate of approximately 10 per cent per
annum by the end of 2005. To meet the growing export demand, the Export Promotion Bureau (EPB)
has been arranging participation of the Pakistani furniture exporters in the leading North Carolina
furniture exhibition, which will be held in the USA in April 2002.

Why do small firms fails to graduate to medium and large firms in Pakistan
b. Link: http://www.pide.org.pk/pdf/PDR/1993/Volume4/1249-1257.pdf
i. (Author: A.R. Kemal - The Pakistan Development Review: December 1993)
Summary:
The article makes an attempt to examine the level and sources of efficiency and examines
constraints on the growth of small firms in Pakistan. Since the relatively higher level of efficiency in
the small-scale manufacturing industries is attributed to lower capital intensity, the article focuses
on the analysis of capital intensity and productivity of capital and labor. The viability of various
economic activities has also been examined by taking into consideration that small enterprises are
exempted from the payment of sales taxes and excise duties and that the labor laws are not
applicable to small producers which tend to reduce the wage costs and allow the producers to
exploit workers in term of work for longer hours.

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Wooden furniture: Great Export Potential
c. Link: http://www.jang.com.pk/thenews/investors/sep2002/if.htm
i. (Published in The New, 21st September, 2002)

Summary:

The article discusses the overall dimension of the furniture trade worldwide along with statistics.
This article then relates the overall impact of Pakistani furniture in the foreign market and it’s potential.
It also mentions the pressures the industry faces and all the worldwide impact other countries put on
our industry’s exports.

Dimensions of manufacturing strength in the furniture industry

d. Link: http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6VB7-3SX1X9H-
5&_user=10&_coverDate=11/30/1997&_rdoc=1&_fmt=high&_orig=search&_origin=sea
rch&_sort=d&_docanchor=&view=c&_acct=C000050221&_version=1&_urlVersion=0&_
userid=10&md5=dcd284c31241b1258d0f5b03e154507f&searchtype=a
i. (Published November 1997, Pages 317 – 330. Author: Shawnee K. Vickery)

Summary:

This paper explores dimensions of manufacturing competitive strength in the furniture industry.
A theoretically relevant set of manufacturing competitive priorities is identified from the operations
literature and factor analyzed to determine the core dimensions of manufacturing performance.
Relationships between these core dimensions of manufacturing strength and overall business
performance are examined. The results identify four dimensions of manufacturing strength in the
furniture industry: innovation, delivery, flexibility, and value, with the latter encompassing the combined
effects of quality and cost. The study supports innovation as a key order winner in the furniture industry.

Aggressive and passive exporters: a study in the furniture industry

e. http://www.emeraldinsight.com/journals.htm?articleid=855195&show=abstract
i. (International Marketing Review, Vol. 7 Iss: 5. Author: Angela da Rocha)

Summary:

The firm and chief executive officer correlates of aggressive export behavior were examined in a
random sample of 45 Brazilian wood-furniture manufacturers. Because of the importance of earning
foreign exchange to make payments on international loans, the Brazilian government has made major
efforts to stimulate firms to export. This study examines whether the characteristics of aggressive
exporters under such stimulation are different from those found in other environments. The results
indicate that governmental intervention does not materially affect the characteristics of aggressive
exporters and that the aggressive-passive dichotomous model is, with a few exceptions, valid under

8
export stimulation programs in Brazil. However, it was not possible to affirm that aggressiveness was
correlated with firm export performance.

Handbook On Long Term Financing Schemes  Of State Bank Of Pakistan

f. Link:http://www.furniturepakistan.org.pk/images/Financin%20Facility%20For
%20Furniture%20Sector.pdf
i. Published March 2010

This handbook focuses on the three long‐term refinancing schemes namely Long Term Financing
Facility (LTFF), Modernization of SMEs and Scheme for Financing

Power Plants Using Renewable Energy, developed for capacity building of industrial units. The
formulation of this handbook was necessitated to facilitate the stakeholder’s by consolidating the
guidelines of each scheme and to ease the dissemination process. To facilitate export led growth
through setting up export oriented projects LTFF was introduced to provide funds on long term (up to 10
years) basis for import of machinery and purchase locally manufactured plants.

Similarly, focusing on development of SME sector, scheme for Modernization of SMEs was
launched to provide funds on medium  and long term (upto 7 years), for procurement of plant and
machinery. Presently Scheme limit to Rice Husking units and Cotton Ginning factories, where as other
clusters are under consideration for which separate announcements will be made.

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 Hypothesis
“Empowering Furniture Manufacturing based SMEs in Chiniot will result in higher volumes
of Furniture Exports”

 Questionnaire
Telephonic Survey conducted by 12 Manufacturer of Chinioti Furniture based in Chiniot.

A) Are you into furniture manufacturing?

B) Are you an exporter of furniture?

i. If yes what is your annual turnover?

ii. Do you export furniture under your own license or use export agent?
iii. Do you feel any difficulties during the export procedures?
iv. What grants and rebates are available for exporting furniture?
v. Do you think that government support to this industry is sufficient?
vi. How can government help to increase the exports of Chiniot’s Furniture?
vii. Have you ever been rejected on the reasons of bad quality?

C) If No,
i. Why don’t you export your manufactured furniture?
ii. Do you sell your furniture to export agents?
iii. Do you attend Export Promotion Bureau Exhibitions?
iv. Do foreign buyers show interest in your furniture?

D) Do buyers try to influence your furniture designs?

E) What export policies do you want government to render to support your business?

F) How can government support R&D in your sector?

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 Identification of problem through research

Exogenous Factors:
Sheesham Wood getting expensive

Chinioti Furniture is known for use of sheesham wood in carving, the

recent increase in its prices has affected the industry in a big way. To cover this huge amount of
sheesham is imported which is 4 times expensive.

Transportation rates are increasing

Where previously a company would have sent 4 containers, it ends up

sending only two. Diesel/petrol rates have also increased.

Raw material is diseased

Raw materials cost is high and it is of sub standard. As a result, low

quality of furniture is produced. Companies have to suffer severe loss.

Customs examination done is very severe

During customs examination furniture is broken / torn for inspection. As

a result all material has to be made again. A huge loss is incurred on the companies. Some companies
give money and get their material cleared from the Customs. In this process, even the poor quality
material reaches foreign buyers and the image of the whole industry is destroyed.

Problem in basic utilities

Load-shedding is a major problem. Furthermore, gas rates are on the rise with increase shortage of
supply too.

Railway Transportation

Pakistan Railway is only used for movement of bonded goods and it is not available for
commercial exporters. Railway is one of the most cheapest means of transportation in country.

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Endogenous Factors:
Lack of space is a problem

Because of small area, less pieces of furniture are produced. There’s

40% loss and as a result all opportunities are lost. If more material is produced, it is wasted because
there is no space for its storage.

Lack of practical implications

SMEs seeking to go international need to learn a lot about external and

internal environment impacting their organizations.

Lack of skilled labor

Since the injunction of contemporary furniture, there is a decline in
overall hand carvers in the market.

No association or chamber to support these SMEs

There is no established association or chamber who help protects the
rights and problems faced by this industry.

Other Obstacles
Access to the international markets tends to be a problem

As producers may be unfavorably located; far from the main consumption centers and
suffer from costly transportation.

Access to raw materials at competitive costs becomes a problem as SMEs

These SMEs are at disadvantage because of their small size. This can become a
hindrance to organizing the flow of raw materials from domestic, non-transparent timber
markets controlled by various intermediaries, and often leads to timber shortages just when
exports are growing.

Access to knowledge and technology is a major problem area.

SMEs tend to fall behind because of their strong reliance on traditions: e.g. they may be
using high-value timber for secondary uses, simply through force of habit and thus gain
revenues far below the timber’s real potential.

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Access to capital is difficult to find at competitive rates
Since domestic bank finance is scarce, interest rates are generally high and collateral
requirements are strict.

Access to designers is limited

The exporters rely on simply selling items “as they are”, copying new models or
producing according to the buyer’s designs.

There are shortages of skilled labor and in-house training

(Apprenticeships, on-the job training, etc.) is usually considered too much of a burden.

Managerial skills are poor

Opportunities to develop them outside the SME companies are rare.

Lack of intellectual rights protection

Intellectual Rights Protection is a vital element in the encouragement of creative design
activities. If authorities fail to put such a protection scheme into a widespread use within the
industry, it hinders the development of original designs within the industry.

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Conclusion & Recommendation
Hand carved furniture is coming back into fashion and Pakistan is one country which still has the
art alive. The only competitive country producing this kind of furniture is India. Recent ban by the Indian
government on export of furniture made through antique wood has left a huge supply gap for Pakistan
to supply to. To make full use of this supply gap the government needs to provide special favors to this
industry. Following are some of the possible solution for the revival of this industry segment.

1. The government should initiate export quality standards in conjunction with PCSIR, through
which substandard and low quality furniture should be discouraged and manufacturers and
suppliers of quality furniture made of quality wood should be issued a certification. This helps
exporters and manufacturer get orders from European and American countries.
2. Government should encourage hand carving art and train workers in this field in the vocational
training institutes so that more carvers graduate with the required skills to support the industry.
3. To help reduce Sheesham Wood prices the government should wave off the duty on import of
this wood. This will help bring down the prices of Sheesham wood in local market and thus
reducing the overall prices of hand carved furniture.
4. Government should subsidies 50% of the total transportation cost of inland goods movement
especially for this industry to encourage furniture exports.
5. Government should allot its own land and warehouses are reduced prices with proper
infrastructure to store furniture and charge a nominal rate. The proposed location of this
warehouse could be near the Chiniot bypass near the motorway.
6. Government should make a new department inside the Export Promotion Bureau, and its sole
purpose should be to promote the furniture industry of Pakistan. It should mediate between
foreign exhibitionists and the exporters so that Furniture manufacturer can participate in such
exhibitions worldwide.
7. Government should subsidize import of latest technology so that manufacturer is encouraged to
use latest technological means of manufacturing.

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References
 http://tribune.com.pk/story/19304/prospects-and-fears-for-pakistans-furniture-industry/

 http://www.pide.org.pk/pdf/PDR/1993/Volume4/1249-1257.pdf

 http://www.jang.com.pk/thenews/investors/sep2002/if.htm

 http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6VB7-3SX1X9H-
5&_user=10&_coverDate=11/30/1997&_rdoc=1&_fmt=high&_orig=search&_origin=search&_sort=
d&_docanchor=&view=c&_acct=C000050221&_version=1&_urlVersion=0&_userid=10&md5=dcd28
4c31241b1258d0f5b03e154507f&searchtype=a

 http://www.emeraldinsight.com/journals.htm?articleid=855195&show=abstract

 http://www.furniturepakistan.org.pk/images/Financin%20Facility%20For%20Furniture
%20Sector.pdf

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