High import duties hamper the export of furniture
High import duties on raw materials hamper the price competitiveness of Bangladesh’s furniture industry, a major barrier to accessing international markets.
Although manufacturers have been exporting furniture for a decade, the annual turnover has yet to cross the $100 million mark, a scenario worth considering as the government is already trying to diversify the export basket. .
For all the latest news, follow the Daily Star’s Google News channel.
Bangladesh earned $79.47 million from furniture exports in the previous fiscal year and $90 million in the 2019-20 fiscal year, according to the Export Promotion Bureau (EPB).
According to the EPB, furniture exports from Bangladesh have increased by around 267% over the past decade.
“Import duties are the main impediment to increased furniture exports from Bangladesh, as the sector is highly dependent on imported raw materials,” said Selim H Rahman, President and CEO of Hatil Furniture, one major exporters.
“We furniture makers have to import most raw materials, including wood, lacquer and all hardware,” he said.
“Import duties on raw materials, including value added tax and advance income tax, range between 37 percent and 89.32 percent,” he noted.
According to him, there was no possibility to avail of a bonded warehouse because the sector was not 100% export oriented.
The government offers a 15% cash incentive on the export of furniture, but unless export duty reductions and bonded warehouse facilities are put in place, this may have little effect on increased shipments.
Rahman said Hatil was able to enter the markets of the United States, Canada, Australia, Saudi Arabia, Kuwait, United Arab Emirates, Thailand, Egypt, Russia, from Bhutan and India.
The company has 22 outlets in neighboring India and two in Bhutan.
According to Rahman, the local furniture industry has grown significantly over the past 10 years.
He attributes this to the increasing reliability offered by furniture brands or the organized segment of online manufacturing with the increasing spending capacity of consumers.
Most of the furniture makers in Bangladesh fall into the unorganized category, running small-scale operations and offering skilled craftsmanship of custom designs and fits, he said.
Industry insiders believe that the combined annual sale of home and office furniture by the organized and unorganized sectors currently stood at around Tk 25,000 crore.
In contrast, it was only Tk 6,700 crore in 2012 according to a European Union report.
AHM Ahsan, Vice President and General Manager of EPB, said that according to the export policy, there is no possibility to provide bonded warehouse for the furniture industry as there is no was not an export-oriented industry.
However, he said the government provides cash incentive and holds overseas trade shows to establish brands and build image.
Acknowledging the furniture industry’s challenges in increasing exports, he said manufacturers were also less inclined to do so because the domestic market was huge.
For this reason, manufacturers are focusing on growing their shares in the domestic market rather than the international market.
Kamruzzaman Kamal, Marketing Director of Pran-RFL Group, which exports products under its Regal Furniture brand, said Bangladesh has the potential to increase furniture exports, especially to India, through innovative designs and to product quality.
However, he said, furniture brands in Bangladesh depend on imported raw materials, including wood and all fittings.
According to him, high customs duties drive up the prices of finished products.
For this reason, companies face fierce competition in the export market, Kamal said.
Besides, furniture is a bulk item requiring high transportation costs, which was a hindrance to increasing exports to the global market, he said.
Kamal also said that Bangladeshi brands have not yet become familiar in the global market leading to slow export growth.