Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213

8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213

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Opportunities Assessment Of Wood Furniture Industries In Nepal

Published by:

Multi Stakeholder Forestry Programme (MSFP)

Services Support Unit (SSU)

Forestry Complex, Babarmahal, Kathmandu, Nepal

Tel:977-1-4229669-70

Email:[email protected]

www.msfp.org.np

©2013Multi Stakeholder Forestry Programme (MSFP)

The MSFP aims to improve livelihoods and resilience of poor men and women and disadvantaged

people in Nepal. It will also strengthen the contribution of Nepal’s forestry sector to inclusive eco-

nomic growth, poverty reduction and tackling climate change.

Disclaimer

Tis report is an outcome of an independent study commissioned by Multi Stakeholder Forestry Programme (MSFP) to Biodiversity Associates for Research Development and Action Nepal(BARDAN). Views and opinion expressed here- in are those of the consultant authors and do not nec-essarily state or reflect those of MSFP. Further, MSFP does not assume any legal liability orresponsibility for the accuracy, completeness of any information, data, methodologies, analysis andconclusions.

Authors: Dipesh Pyakurel and Suhrid Chapagain


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ACRONYMS AND ABBREVIATIONS

BDS Business Development Services

CF Community Forests

CFUGs Community Forest User Groups

CIAA Commission for the Investigation of Abuse of Authority

CSIDB Cottage and Small Industries Development Board

DCSI District Cottage and Small Industries

DDC District Development Committee

DFO District Forest Ofce

DoF Department of Forests

DoInd Department of Industries

FECOFUN Federation of Community Forest Users Nepal

FENFIT Federation of Forest Based Industry and Trade, Nepal

FNCCI Federation of Nepalese Chamber of Commerce and Industries

FS Financial Services

GFs Government Forests

GoN Government of Nepal

IRD Internal Revenue Department

IRO Internal Revenue Ofce

MoCS Ministry of Commerce and Supplies

MoFALD Ministry of Federal Affairs and Local Development

MoFSC Ministry of Forest and Soil Conservation

MoHA Ministry of Home Affairs

MoI Ministry of Industry

MSFP-SSU Multi Stakeholder Forestry Programme- Services Support Unit

NFFA Nepal Furniture and Furnishing Association

NGOs Non Governmental Organisations

PFs Private Forests

TCN Timber Corporation of Nepal

VDC Village Development Committee


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Table of Contents

ACRONYMS AND ABBREVIATIONS

EXECUTIVE SUMMARY .............................................................................................................IV

PART ONE: INTRODUCTION....................................................................................................... 1

1.1 Background.............................................................................................................................. 1

1.2 Objectives............................................................................................................................... 1

1.3 Study area................................................................................................................................. 2

1.4 Limitations............................................................................................................................... 3

PART TWO: METHODOLOGY...................................................................................................... 4

2.1 Study Outline........................................................................................................................... 4

2.2 Identifying market segment...................................................................................................... 4

2.3 Preparing value chain map....................................................................................................... 52.4 To identify major policy constraints ........................................................................................ 5

2.5 End Market Analysis................................................................................................................ 5

2.6 Value Chain Governance ..........................................................................................................5

2.7 To identify major Business Development Services and Financial Services ............,,..............5

PART THREE: FINDINGS.................................................................................................................6

3.1 Segmentation ...........................................................................................................................6

3.1.1 Product Segmentation............................................................................................................. 6

3.1.2 Price Segmentation within Product........................................................................................ 6

3.2 Value Chain Map ..................................................................................................................... 7

3.2.1 Role and Function of Actors and their Relationship ..............................................................7

3.2.2 Input Suppliers .......................................................................................................................9

3.2.3 Enablers .................................................................................................................................9

3.3 SWOT Analysis .....................................................................................................................10

3.4 Issues, Gaps and Constraints ..................................................................................................11

3.5 End market analysis through Spiderogram ............................................................................13

3.6 Value Chain Governance in wood furniture........................................................................... 14

3.7 Six Cs analysis .......................................................................................................................15

3.8 Gender Status......................................................................................................................... 16

3.9 Actor’s performance indicators in seven years ..................................................................... 17

3.10 Business Development Services and Financial Services........................................................ 18

PART FOUR: STRATEGIC INTERVENTIONS .........................................................................20

CASE STUDIES............................................................................................................................... 22

ANNEXES..........................................................................................................................................24


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Furniture industries are an important sub-sec-

tor of the forestry sector, providing income andemployment to rural community members, and

skilled and unskilled labourers in rural as well

as urban areas. Apart from registered ones, there

are a signicant number of unregistered furnitureindustries in rural areas. Nevertheless, they are

providing income and employment opportunities

to rural community members.

Given the importance of wood industries, the

Multi Stakeholder Forestry Program-Services

Support Unit (MSFP-SSU) commissioned thisopportunities assessment of furniture industries

in Nepal. In assessing furniture as a commodity,

the study focused on: the status of domestic pro-

duction; needed technological skills to become

competitive in the market; identifying the issues,

challenges, gaps and opportunities; and the need

to integrate these industries in the mainstream

market. The study assessed whether domestic

furniture industries need to be upgraded/main-

streamed to become competitive in the market,

or left as is, given most of the customers still pre-fer conventional domestic furniture and the do-

mestic industries are fullling this local demand.

A total of 59 furniture industries of all scales

were consulted during the study. Product seg-

mentation analysis showed that frames of doors

and windows comprise more than 50% of the

products of consulted furniture industries. Door

and window frames are providing substantial em-

ployment opportunities, especially for rural en-

trepreneurs. Bedroom and living room furnitureconstitute 22% of furniture products, followed by

ofce furniture. Likewise, the price segmentationduring furniture production showed that plywood

and labour cost shares a higher percentage of the

production cost, followed by timber. Except for

the cost of paint, all other input costs are retained

in Nepal in case of the furniture industries.

A value chain map has been prepared and the role

and function of various actors are identied. The

raw materials are supplied from community for-ests (CFs), private lands and government forests

(GFs). They are either purchased by saw mills or

by log traders. The furniture industries purchasesawn timber from the saw mill to manufacture

their furniture. There are four types of furniture

industries, based on their scale of operation and

types of furniture being manufactured. They are

(a) industries that focus their products for rural

communities, (b) industries that focus their prod-

ucts for district headquarters and nearby areas,

(c) large scale industries, and (d) individuals who

construct the furniture onsite. The value chain

also consists of furniture importers who import

from Thailand, USA, India, Malaysia, Finland,Indonesia, UK and Turkey and sell via their sales

outlets. Chinese furniture has the highest share

of the imported furniture market (75%). Demand

for Chinese furniture was high ve years ago but

emerging issues of durability has caused its mar-

ket to shrink. However, the demand for import-

ed furniture still exists for ofces and corporatehouses that need bulk furniture on time.

One of the major ndings is that traders are im-

porting sawn timber from Burma, Indonesia andMalaysia due to inadequate and untimely supply

of timber in Nepal and the relatively easy process

for procurement of imported timber. A procedure

to import sawn timber from South Africa is in its

nal stage of approval.

SWOT analysis revealed that the strength of Ne-

pali furniture industries are its high quality, the

potential for domestic supply of timber, adapta-

tion of designs from imported furniture, and the

fact that these industries can be operated with asmall capital. The major weaknesses are hurdles

in registration of rural industries, and inadequate

supply of timber despite large stock in forests.

Likewise, the identied threats are lack of sus-tainability of enterprises due to unavailability of

timber, unregistered manpower, and import of

timber from abroad.

The study team also analyzed the issues and gaps

in the furniture industry. The major issues and

gaps were:

EXECUTIVE SUMMARY

IV


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Difculties during registration of enter - prises.

A rule for forest based enterprises to be

situated at a certain distance from forests.

Higher price of domestic timber.

Multiple taxation, unseen costs, and hur-

dles during transportation.

Reluctance in adopting scientic forestmanagement.

Operational plan of CFUGs that do not al-

low them to supply timber to forest based

enterprises.

Inadequate technology to process timber

with minimum loss, and inadequate tech-

nology to optimize the use of sawn timber

for furniture industries, thus reducing the

loss.

Inadequate nancial services.

Inadequate roadmap for banks and nan-cial institutions to invest in the forestry

sector.

The major constraint is the unavailability of

skilled and unskilled manpower to manufacture

furniture, both in rural and urban areas.

End market analysis was carried out via spidero-

gram which identied design, price, raw materialsupply, and technology as major bottlenecks. The

outcomes of market gaps were further analyzed

using 6Cs tools. Following are the outcomes of

6Cs analysis:

Competition for each of enterprises varies

and enterprises that are facing less com-

petition are rural enterprises and free-

lance carpenters who manufacture onsite. Ofce furniture is the major segment of

imported furniture whereas door and win-

dow frames are the major segment of the

domestic enterprises.

All the enterprises have different chan-

nels for reaching the consumer but their

supply chain for timber and accessories is

similar, except for the supply of timber in

the case of rural enterprises.)

The pattern of consumer demand has been

changing in recent years; initially demand

for imported furniture was increasing in

both household and ofce segments.

However, now demand for imported fur-

niture is decreasing in the household seg-

ment and remaining the same in ofcefurniture segment.

Freelance carpenters are posing a threat to oth-

er enterprises because it is easier and cheaper for

household consumers to manufacture wood fur-

niture onsite. The furniture value chain employs

a large number of people but there has been a

notable absence of women because the furniture

enterprise is labour intensive and entrepreneurs

rarely employ women. Women involvement is

only seen in large enterprises such as Shaan Fur-

niture, especially in the work of sanding, stain-

ing, colouring, and nishing, and in sales outlets.

Based on the analysis, the following major strate-

gic interventions have been proposed:

i. Ensure supply of timber from CF at

low price for rural furniture industries

by amending the operational plan of

CFUGs.

ii. Ensure the continuous supply of sawn

timber for furniture industries by lob-

bying, and simplifying the auction process through e-bidding.

iii. The registration process for furni-

ture industries needs to be simplied.Strong lobby from commodity associ-

ations, NFFA, FENFIT, NGOs, donor

agencies is needed to achieve this.

iv. Lobby to allocate separate area for

timber based enterprises.

v. Lobby to abolish or simplify the gov-ernment rule that prescribes a mini-

mum distance from the forest for for-

est based enterprises.

vi. Lobby for the optimized use of old,

dead and fallen trees of government

forests, adopting scientic manage-ment practices.

vii. Enhance use of modern machinery

and technology (compressor, com-

puter based designer, nger joint ma-


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chine etc) to lower the manufacturing

time and reduce waste.

viii. Engage in mass production, which is

being carried out by furniture indus-

tries like Shaan Furniture

ix. Involve women in less labour inten-

sive activities like sanding, colouring,staining, and nish.

x. Developing women friendly environ-

ment in furniture industries.

xi. Arrange exposure visits to large scale

industries like Shaan furniture.

xii. Adopt new and improved technology

for nishing touches such as lamina-tion, polishing, and carving.

xiii. Train existing workers in the use of

modern technology.

xiv. Create an environment favourable to

investment by insuring the industries

and machineries, ensuring security of

investment.

In conclusion, rural furniture enterprises are oper-

ating independently in their niche markets. There

are no linkages between these entrepreneurs and

large scale industries in Nepal. In developed

countries, different small industries manufacture

different parts of the nal product, which are pur -chased by the big industries, which is not the case

in Nepal. Instead of mainstreaming, followinghas to be done to ensure the sustainability of rural

enterprises:

i. Registering the existing rural furni-

ture industries

ii. Providing timber on subsidized cost

(for eg. NRs 800 per cu. ft. for Sal)

from community forests.

iii. Skill advancement training to diversi-

fy their product range.


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1.1 Background

According to the Nepal Furniture and Furnish-

ing Association (NFFA), the country’s furniture

market is estimated to be growing at an annual

rate of 25%. Furniture industries in the country

are diverse in size, with their total capital rang-

ing from as low as NRs 30,000 to as high as NRs

250 million. These industries are fullling thedemand of both rural communities and urban

dwellers. Customers prefer domestic furniture

for its durability and quality of wood. However,

inadequate technology to create a superior nishand to manufacture knock down furniture (piec-

es that can be assembled later) limits the scope

of furniture industries in Nepal. It is perceived

that the inux of imported furniture has not af -fected the demand of rural furniture industries.

The scenario is quite similar for furniture indus-

tries situated in urban areas and their periphery,

that have targeted their products for city dwellers

with limited resources.

With increasing purchasing power, most con-sumers in big cities are demanding designer and

imported furniture, and the demand for these

high-end products has been rising signicantly.This shift in preference can be attributed to the

fact that imported furniture is elegant, has a su-

perior nish and the product offerings match thedemand of urban dwellers. The total value of im-

port of wood and wood based products (rough

wood, swan wood, veneer, play wood, particle

boards etc) by Nepal was about NRs 859.62 mil-

lion (US$ 9,048,682) in the scal year 2012/13(Department of Customs). The total value of im-

port of wood furniture in scal year 2012/013was NRs 185.566 million (www.tepc.gov.np).

Most of this imported furniture comes from Chi-

na because of its reasonable price and exible

design. Demand for furniture imported from Chi-

na has been growing in the past ve years, and presently it accounts for more than 75% (NRs.

139.62 million) of the imported furniture market.

Furniture from Thailand, USA, India, Malaysia,Finland, Indonesia, UK and Turkey are also pop-

ular in the domestic market (www.tepc.gov.np).

While the import of furniture has adversely af-

fected domestic furniture industries, it has also

created opportunities for domestic manufacturers

to upgrade their skills to remain competitive in

the market. Sensing the potential for high-end

furniture, a number of domestic furniture in-

dustries in urban areas have started focusing on

developing durable designer products. But the

technology being used by these industries is ex-

pensive and it is difcult for other small and me-

dium sized industries to afford this technology.This study was carried out to assess furniture as

a commodity in Nepal and focused on: import

versus domestic production; needed technolog-

ical skills for competitive market; identifying

the issues, challenges, gaps and opportunities;

and the need to integrate these industries in the

mainstream market. The study assessed whether

domestic industries need to be upgraded/main-

streamed to become competitive in the market,

or left as is, given that most customers still prefer

conventional domestic furniture, and existing do-

mestic industries are fullling this local demand.

1.2 Objectives

The major objective of this study was to map

out and analyze the furniture value chain; ana-

lyze risks, issues, challenges and opportunities at

different levels of value chain; and recommend

intervention strategies for MSFP to make the fur-

niture value chain more competitive, inclusive

and sustainable. Specic objectives were:a. To dene the structure of the furniture

market in selected areas: industry size,

number of enterprises (producers, whole-

salers and retailers), key drivers/actors,

variety of products/goods and services,

employment generated and growth

trends.

b. To identify policies/regulations that cre-

ate conducive environment and reduce

obstacles/ issues/challenges being faced by the wood furniture industry.

PART ONE: INTRODUCTION

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c. To map and analyze furniture value

chains; to identify main actors, sources

of raw materials and products, volumes,

relationship between actors and value

chain governance, functions of actors,

returns, benet-sharing mechanism, and

end-market study (depending on which

market is served).d. To identify ways to improve the capacity

of small-scale furniture producers to in-

tegrate in the market value chain with in-

creased prot-sharing at the different lev-

els: especially Local Forest Users Groups

(LFUGs), tree growers, labourers, associ-

ated with the sector, as well as the entre-

preneurs (e.g. through market linkages,

certication, collective marketing etc.).

Also forecast trends for the furniture in-dustry both for the input suppliers at the

community level and for the end-users.

e. To develop understanding of the position

of women, disadvantaged, and poor in

the value chain and identify specic ar -eas where they can be integrated into the

furniture value-chain.

f. To recommend market-based solutions

and specic intervention strategies for

MSFP to integrate rural entrepreneurs

into the furniture value chain. Recom-

mend steps to attract and retain future in-

vestment in the local furniture industry.

1.3 Study area

The study was focused on programme as well as

non-programme districts (gure 1). The non-pro-gramme districts were selected because produc-

tion, inux of imported furniture, and consump-tion is high in these districts and the study would

be incomplete if these districts had been over-

looked. It is anticipated that the selected districts

will give a comprehensive picture of the Nepali

furniture industry, its competition and domesticuse. The study focused on following districts:

Dang district which is an MSFP pro-

gramme district, with furnituresupplied

from other programme districts such as

Pyuthan and Salyan.

Pokhara, which is not a programme dis-

trict, but the demand for furniture is high

and can be supplied from programme

districts such as Myagdi and Parbat, andalso from non-programme districts such

as Tanahun.

Kathmandu valley, with huge market

demand, and supplied from non-pro-

gramme districts (Kavrepalanchowk,

Sindhupalchowk, Dhading etc). It is

important to assess the demand and sce-

nario of Kathmandu because it is one of

the end markets with high competition of

imported furniture.

Biratnagar, which represents the Terai

market with high inux of Indian furni-ture and supplied both from programme

districts like Dhankuta and non-pro-

gramme districts like Sunsari and Jhapa.

Figure 1: Studied districts

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1.4 Limitations

Furniture industries are very diverse with regard

to their size, production capacity, and range and

design of products. Further, the number of unreg-

istered furniture industries is higher than regis-

tered ones in each of the studied districts. Consul-

tations with furniture entrepreneurs, government

ofcials and representatives of commodity asso-ciations and federations indicates that 55-60%

of furniture industries are unregistered, most of

them located in the villages. The remaining 40-

45% registered industries are located mostly in

urban areas. Statistical verication of this data

was not possible, therefore, the perception of re-

spondents has been used in this paper.

Further, all registered furniture industries in the

district are not operational but because the data

on this is missing, the registration informationcollected from District Cottage and Small Indus-

tries (DCSI) and Cottage and Small Industries

Development Board (CSIDB) has been used.

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PART TWO: METHODOLOGY

2.1 Study Outline

The study outline can be presented as follows:

Figure 2: Study outline

To elaborate the above study outline and to

achieve the outputs, following steps were carried

out:

2.2 Identifying market segment

Literature review and consultations with stake-

holders were the bases for identifying market

segments. Interactions with more than 59 busi-

ness personnel and stakeholders informed the

identication process. The list of persons metis given in Annex 1. The key questions asked to

identify the market segment were:

a. What is the demand of wood furniture in

the market?

b. What are the different segments of wood

furniture and which segment is your busi-

nessinvolved in?

c. If your business is involved in more than

one segment, what proportion of your

annual business do each of the segments

comprise of?

d. How do you analyze the market demand

of each segment and how is the market

being changed in the previous 3-5 years?

Based on the above questions, three market seg-

ments were identied for further analysis. Thestudy team initially planned to carry out Pareto

analysis but there were only four major markets

identied during the study, as a result of which

entrepreneurs’ perception was taken into consid-

eration. Other indicators such as the price of raw

materials and nished products, purchasing ca-

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pacity of customers and so on were also consid-

ered to nalize the subsets of customers in eachof the identied segments.

2.3 Preparing value chain map

Value chain maps were prepared for the identiedthree market segments. The roles and functions

of actors, their relationship and enablers and gov-

ernance between the actors were identied in thevalue chain map. The conventional value chain

framework compiled by the United Nations In-

dustrial Development Organization (UNIDO)

was localized to prepare the value chain maps.

The existing gaps in the value chain were also

identied. The value chain map was thus devel-

oped for each segment by discussing with key

informants (Government, Non Government and

private sectors). The key questions to preparevalue chain map were as follows:

a. Who are the actors involved in this par-

ticular value chain segment? How many

actors are involved?

b. What is the function of each of these ac-

tors?

c. What is vision of each of these actors to

compete or collaborate in value chain?

d. Who has the most power, knowledge,

and decision making ability in the valuechain?

e. What are the production and transaction

costs for each actors in the segment?

f. What is the quantity of product being

traded in this market segment?

g. What is the competition and comparative

advantage of products compared to inter-

national products as per 6 Cs?

2.4 To identify major policy constraints

Policy documents (acts, rules and regulations,

circulars of MoCS, MoI, MoFSC, CIAA, IRD

were reviewed to identify the major policy con-

straints that hinder the promotion of furniture in-

dustries in Nepal. Along with these national doc-

uments, provisions of Community Forests (CF)

were also reviewed.

2.5 End Market Analysis

End market analysis was carried out by using

two specic tools: Spiderogram and Six Cs anal-

ysis. Spiderogram was used to analyze the vari-

ous market parameters by comparing the present

status with the desired status in the market. Six

Cs tool was used to assess each of the important

value chain actors identied by the value chainmapping exercise. These actors were assessed

in terms of Context, Channel, Customer, Choice

and Communication. Both tools were used to

elaborate on the issues identied in gap identi-cation.

2.6 Value Chain Governance

In assessing value chain governance issues, the

study focused on: (a) who is the most powerful

actor in the value chain, (b) what is the relation

between each actors, and (c) what is the learning

platform available to each of the actors. It is very

important to understand these three domains of

governance for value chain upgrading.

2.7 To identify major Business Develop-ment Services and Financial Services

The major Business Development Services

(BDS) and Financial Services (FS) were iden-

tied based on the gaps identied during value

chain mapping. The existing situation of the mar-

ket and manufacturers was considered in iden-

tifying the BDS and FS. The gaps that were re-

vealed by the spiderogram were considered, andappropriate BDS and FS were sought to fulllthe identied gaps.

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PART THREE: FINDINGS

3.1.2 Price Segmentation within Product

The price segmentation within product has been

analyzed using the breakdown of costs in manu-

facturing that particular product. We have com-

pared manufacturing costs of low beds and cup-

boards. The price segmentation is almost similar

in both the cases. Plywood and labour costs share

the highest percentage of cost (23% each), fol-

3.1 Segmentation

3.1.1 Product Segmentation

Furniture as a whole is assigned the code HS9403

furniture (HS: Harmonized System), which in-

cludes wood furniture, metal furniture, plastic

furniture, and furniture made from other materi-

als including cane, osier, and bamboo.(UNIDO).

Wood furniture products (WFPs) are further seg-

mented into ofce furniture, kitchen furniture,

bedroom furniture, and dining/living and shop

furniture with separate HS codes.

Along with the segments mentioned above, the

study team nds door and window frames asanother important segment. Almost all rural en-

trepreneurs, furniture industries situated in and

around district headquarters and market cen-

tres, and even saw mills are manufacturing these

frames.

A total of 59 furniture industries of all scales (as

per the capital invested) were consulted during

the study. The frames comprise more than 51%

of the products of consulted furniture industries

(gure 3). Moreover, rural furniture industries

mostly manufacture the frames as a service,withcustomers bringing their own wood and the en-

trepreneurs manufacturing the frames. Door and

window frames are the major segment of rural

furniture industries, and are providing substan-

tial employment opportunities forrural entrepre-

neurs, and therefore they are included in the study.

Bedroom and living room furniture (low beds,

conventional beds, cupboards, box beds, and ta-

bles) constitute 22% of the products, followed

by kitchen furniture (kitchen cupboard, simpledining tables), shops (partition, shop rack) and

wood carvings. Furniture industries rarely manu-

facture ofce furniture because ofces generallydemand high volumes and industries nd it hardto meet this demand on time with their existing

capacity and human resources.. However, ofce

furniture will be a major segment in the coming

years therefore frames, bedroom and living room

furniture and ofce furniture are selected as important segments for further analysis.

Figure 3: Market segmentation as per the demand of customers (outcomes of consultation)

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Figure 4: Price segmentation as per the cost of production

3.2 Value Chain Map

The value chain map was focused on selected

three market segments/products (frames, bed-

room and living room furniture, and ofce furni-ture). Figure 5 presents the comprehensive map

of furniture industries of Nepal (next page).

3.2.1 Role and Function of Actors andtheir Relationship

Raw Material Suppliers

CFUGs and private forest owners are the prima-

ry suppliers of raw materials, mostly supplying

wooden logs. There is a specic mechanism to provide the wooden logs in case of CF, and the

process is governed by District Forest Ofce(DFO). CFUGs can allocate a specied quantityof wood/logs to its users as per their operational

plan. Private forest owners have to get permis-sion from DFO to cut their standing trees and sell

to processors (saw mills) or log traders.

Another source of raw material is the govern-

ment forest. DFO and the Timber Corporation of

Nepal (TCN) are involved in the collection and

sale of timber from government managed for-

ests. However, in the recent years, the supply of

timber is hindered by a circular from the Com-

mission for Investigation of Abuse of Authority

(CIAA), policy maker’s conservative approachwhich eschews scientic forest management,

discretion of DFO ofcials, and so on. The Dis-trict Development Committee (DDC) is involved

in selling the seized timber via auction.

** Importers of designer furniture

Figure 5: Furniture Value Chain

The current annual demand for wood is about 80

million cu. ft. but only 25 million cu. ft is sup-

plied from Nepal. This shortage is fullled by importing about 50 million cu. ft of material in the

lowed by timber (22%). Except for paint, all the

other costs are retained in Nepal in case of the

furniture industries (gure 4).

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form of wood, aluminium, steel, UPVC, rounded

wood, readymade doors and furniture. About 5

million cu. ft. of wood is supplied through illegal

practices and smuggling (Source: FENFIT).

Today, Nepal imports timber from Burma, Indo-

nesia and Malaysia. According to Mr Anil Suwal,

Programme Coordinator at FENFIT, a procedureto import sawn timber from South Africa is in

its nal stage of approval, and timber will also

be imported from South Africa in the near future.

Importing sawn timber results in lower prices

for timber, as well as relatively simple legal pro-

cedures. These imported timber are semi hard-

wood (inferior to Sal, similar in quality to Asna,

and superior to Salla).

The selling price of timber varies according to

the type of timber. For instance, a cu. ft. of Salcosts around NRs 4500, a cu ft of Sissoo costs

NRs 2200-Rs 2700, Salla costs NRs 1200-Rs

1500 and so on.

Saw Mills

Wooden logs for saw mills within the country

are mostly sourced from the Terai and mid hills.

Wood of varying quality (Sal, Sissoo, Saj, Kad-

am, Utis, Salla etc) is collected from GFs, CFs,

and private lands. Saw mills then process theselogs into timber of different sizes, and sell the

timber to furniture industries. The price of the

timber is determined by the type of the timber,

with Sal, wild Sissoo and Satisal being the most

valuable.

In some cases, saw mills themselves manufacture

the furniture: mostly door and window frames to

diversify their product, and to generate addition-

al income.

Log Traders

In some cases, log traders purchase logs via auc-

tion mostly from CFs, GFs and TCN and sell

them to saw mills. Anyone who is PAN and VAT

registered as dealers in forest-based products (in-

cluding Kattha) can be a log trader.

Furniture Industries

At present, about 5000 industries and trade busi-

nesses dependent on forestry have invested about

NRs. 20,000 million (20 arba) and about 200

thousand people (mostly skilled and unskilled

labourers) are employed. In furniture industries,

the skilled labour or contractors often hire the

semi-skilled or unskilled labour. This sector has

been contributing about NRs 5,000 million (5

arba) annually to the government (Source: FEN-

FIT). The furniture industries can be categorizedinto four types depending upon their scale and

area of operation. They may be categorized into:

Industries that focus their products for ru-

ral communities/ villagers.

Industries that focus their products for

villages and district headquarters.

Industries that focus their products for

commercial customers such as ofces,

banks, and restaurants.

Individuals who constructfurniture on-

site.

Industries that focus their products for rural

communities: Different organizations have pro-

vided basic furniture-making training to rural

community members. These trained individu-

als are operating wood furniture enterprises to

meet the basic demand of community forest user

groups of rural areas. Generally, CFUG members

bring the raw material (wooden logs) to the en-

terprise and the entrepreneur manufacture furni-

ture on demand. Mostly, they manufacture door

and window frames, doors, and conventional

beds and the entrepreneurs charge a nominal fee

for the service (for eg: NRs 300 to make a door

frame, NRs 500-600 to make a window frame,

NRs 700-1000 to make a simple bed etc). Their

services rarely reach the urban areas.

Most of these rural enterprises are not registered

with DCSI or CSIDB and therefore mainstream-

ing them is an urgent need. Their registration is

primarily hindered by the government policy of

not allowing any forest based industries within 3

km of the forest in the hills and 5 km in the Terai,

and secondly by the lengthy and tedious registra-

tion process even for industries that are located

further away from the forest.

Industries that focus their products for village

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and district headquarters: These entrepreneurs

reside at or near the district headquarters and

meet the demand of neighbouring customers.

They either purchase the logs/timber and manu-

facture the furniture on demand, or the customer

brings logs or sawn timber from which they pro-

duce the requested furniture and charge for the

service. They have a variety of sources of wood,including saw mills, private lands, and communi-

ty forests. They also sell furniture manufactured

in other districts. About 70% of the industries

situated in the municipalities are registered and

those situated outside the municipalities are still

unregistered.

Urban Industries: These are generally large scale

industries, and some of them have their own saw

mills. They are well organized, have their own

sales outlet, and provide permanent employment

to skilled and unskilled manpower. Almost all of

these industries are registered because most of

the ofces demand a VAT invoice. Their regu-lar customers are banks, ofces, corporate hous-es, business complexes, employees, teachers or

small scale businessmen. These industries manu-

facture furniture of all types, quality and design.

Their market is expanding due to the increasing

purchasing power of urban dwellers. The price is

generally high due to the quality of timber usedand the superior nishes.

Onsite manufacturers: The fourth group are those

furniture entrepreneurs who provide their ser-

vices by visiting the customer’s house and man-

ufacturing the requested products onsite. They

generally offer low service charges as they do not

have to pay rent and bear other additional costs.

None of them are registered to DCSI, CSIDB or

the Internal Revenue Ofce (IRO), causing loss

of government revenue. They are also posinga threat to the existing furniture industries that

have sales outlets in the cities. More than 70% of

such manpower come from India.

Furniture Importers

Chinese furniture was rst imported in Kathman-du about seven years ago. Its elegant look and

superb nish attracted a lot of customers. Theirability to fulll supply orders of large quantities

attracted most ofces and corporate houses. Atthat time, they posed a serious threat to the do-

mestic furniture industry.

However, after two-three years of introduction,

the drawbacks of this imported Chinese furniture

became obvious. The furniture was made from

compressed wood and was “very fragile,” result-

ing in a very low life span (about two years for

chairs). Thus, the demand again shifted to do-

mestic furniture. Today, there are a number ofChinese furniture importers, but the demand for

it is denitely lower than it was ve years ago.

Furniture from Malaysia, Turkey, Indonesia and

Central Europe are imported into Nepal, but in

fewer quantities.

Consumers

The purchasing capacity of consumers and avail-

ability of furniture in their proximity determines

the type of furniture used. Consumers in ruralcommunities mostly demand door and window

frames, and simple beds. Consumers on the high-

ways, and near headquarters demand frames,

cupboards, kitchen cupboards, beds etc. Urban

dwellers demand all types of products offered.

Ofces and corporate houses mostly demand tables, chairs, and designer products.

3.2.2 Input Suppliers

Input suppliers supply the accessories needed

to manufacture furniture. These include: paint

stores, hardware shops (nails, screws, teak, den-

drites, glues, ply wood, sun-mica), machinery

suppliers etc. They are again organised in their

respective commodity associations and work

closely with actors in the furniture value chain.

3.2.3 Enablers

The Ministry of Industry, Commerce and Sup-

plies (MoICS), Ministry of Information (MoI),

DCSI, CSIDB, CFUGs, IRO, Ministry of Forestsand Soil Conservation (MoFSC), Department of

Forests (DoF), and DFO are among the policy

level enablers. DCSI and CSIDB are both in-

volved in registration of furniture industries and

providing training to individuals on demand. IRO

issues PAN and VAT number, collects revenue

and VAT amount and is responsible for checking

and verifying accounting matters and malpractic-

es like underbilling.

DFO is involved in policy implementation, reg-istration of forest-based industries, sale of for-

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est-based products and approving the operational

plan of CFUGs. Even private land owners have

to receive permission from the DFO to cut trees

in their private lands. The DFO is guided by the

ve year district forestry plan which needs to be

approved by DoF.

MoICS and MoFSC prepare and promulgate the policy, rules, regulations and circulars. The TCN

is a semi-autonomous government body that has

the authority to sell timber throughout Nepal, in

coordination with DFO.

CIAA regulates the harvesting, sale, and auction

of timber by publishing circulars.

The commodity associations facilitate the busi-

ness by addressing policy issues. NFFA at the

central level, and its district ofces are the com-modity associations. However, the district com-

modity associations are not active in raising their

voice against trade barriers.

FENFIT is the umbrella organization of for-est-based industries.

3.3 SWOT Analysis

Based on the ndings of value map, the SWOT

analysis has been carried out and given in table 1.

Table 1: Swot Analysis Of Wood Furniture Industries In Nepal

Strengths Weaknesses

Nepali furniture is considered to be of higher qual-

ity than imported furniture in the same price range.

The timber supply chain in Nepal is adequate for

the country, with CFUGs, national forests and pri-

vate land.

Nepali enterprises are learning new designs from

various sources, especially from Chinese furniture.

New technologies have been introduced in wood

furniture from learning and exposure to Chinese

and Indian furniture networks.

Furniture businesses in at rural areas are low in-

vestment (starting from NRs 30,000 initial cost).

Community Forestry has strong documentation of

timber sale within community and outside, well

mentioned in their operational plan.

Less than half of the enterprises are registered.

A large number of people in rural areas engaged

in furniture product development without regis-

tration.

Inadequate supply of timber for saw mills has

made this business vulnerable, and enterprises

are not able to cater to increasing market de-

mand of frames, house furniture etc.

Nepali enterprises cannot deliver products on

time and this has increased the sale of Chinese

furniture, especially in ofce furniture marketsegment.

Mainstreaming of different enterprises (includ-

ing subcontracting) is difcult as every enter -

prise is dealing directly with customers.

Opportunities Threats

Adopting scientic forest management activities

will ensure a continuous supply of timber.

Customers are increasingly attracted to Nepali

furniture for door and window frames, and living

and kitchen furniture due to its durability.

Decreasing trend in purchase of Chinese furniture

due to its low durability.

Furniture industries are not getting wood

regularly and this has decreased their ability

to plan ahead, thus hindering their ability to

move towards sustainability.

Individuals who work onsite, especially for business houses, are a big threat because they

are mostly unregistered and are affecting the

market of furniture industries.

Enterprises have already started buying timber

imported from Burma, Indonesia and Malaysia

as the procurement cost of timber is increas-

ing in Nepal and the supply of timber is not

timely.

Inadequate and inconsistent supply of timber

has kept the furniture industries from increas-

ing investment.

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3.4 Issues, Gaps and Constraints

A large numbers of stakeholders are involved in the furniture value chain and gaps exist at each level

of involvement. The identied gaps and constraints are presented in the table below:

Table 2: Identied issues and gaps hindering the furniture industries

SN Issues and Gaps Who should address

Legislative1. Registration

1.1 Requirement of a consensus of DFO, Land Survey, DCSI/CSIDB and

VDC/municipality for forest based enterprise registration.

(Outcome) Most of the enterprises are operating without registration,

both in villages and municipalities.

MoCS, MoFSC, DCSI,

DoF, Dept. of survey,

DDC

1.2 Forest based enterprises should be located at least 3 km away from the

nearest forest in the hills, and 5 km away in the Terai region.

(Elaboration) Hilly regions have fragmented forests and it is extremely

difcult to nd a site that is at least 3 km from the nearest forest.

(Outcome) The rule also affects furniture entrepreneurs near the Terai

forests and enterprises are operating without registration.

MoCS, MoFSC, DoF,

DoInd

2. Price and supply of timber

2.1 CIAA circular to maintain a uniform price in timber

(Elaboration) According to this circular, districts will not sell timber at

a lower price than in adjoining districts.

(Outcome) E ventually increase the price of timber throughout Nepal.

MoFSC, DoF, CIAA

2.2 Price of timber during auction

(Elaboration)The government rate of Sal is NRs 853 per cu. ft. but

TCN x the minimum rate of NRs 1397.5 per cu. ft. Supreme court (on

November 2012) decide to maintain the government rate of 853 per cu.

ft. but it is still not in practice.(Outcome) It is the main bottleneck for timber and furniture entrepre-

neurs.

MoFSC, DoF, TCN

2.4 Multiple taxation, hurdles and unseen costs.

(Outcome) Forest based entrepreneurs have to pay multiple taxes (e.g.

at DoF, VDC, DDC, local bodies etc).

MoFSC, MoFALD,

MoHA

2.3 Conservation based approach rather than adopting scientic forest manage-

ment.

(Elaboration)The new format to prepare district forestry ve year plan

urges scientic forest management (use of old, dead and fallen trees) but

its implementation is at the discretion of District Forest Ofcers, and the

format is not in practice in most of the districts.(Outcome)This limits thesupply of timber, which in recent years is being compensated by import-

ing sawn timber from Burma, Indonesia and Malaysia.

MoFSC, DoF, DFO

3. Enterprise growth

3.1 Operational Plan of CFUGs

(Elaboration) CF provides timber to its users (limited quantity) but there

is no provision to provide timber for community-based micro enterpris-

es. Rural furniture entrepreneurs cannot purchase timber from outside

because of its high price.

(Outcome) Future of these rural furniture industries is uncertain.

MoFSC, DoF, DFO,

FECOFUN

3.2 Registration of skilled labourers who work on site DCSI, CSIDB, IRO,

DFO

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3.3 Government should allocate separate zones for timber processing enterpris-

es in urban areas.

Municipalities

3.4 During procurement, contracts have to be awarded to saw mills or furniture

manufacturers that are registered, renewed, and paying regular tax to the

government.

DFO, IRO, DCSI,

CSIDB

Technology and Knowledge

4 Business management and marketing skills of rural entrepreneurs and

competitiveness of Micro, Small and Medium Scale Enterprises (MSMEs).

FNCCI, FENFIT,

NFFA

5 Inadequate technology to process timber with minimum loss and inade-

quate technology to optimize the use of sawn timber for furniture industries

to reduce loss.

Private Sectors, Bilat-

eral aid agencies

Financial

6 High costs of timber

(Elaboration)Timber becomes very expensive by the time it reaches the

consumer. The government rate of sal is NRs 853 per cft for logs, TCN

sells it at a minimum rate of NRs 1397.5 per cft. There are other hidden

costs and by the time the logs reach the saw mill, the price is around3000 per cu. ft. The yield of sawn timber from these logs is around

65%, and customers have to pay NRs 4500 to NRs 5300 per cu. ft. of

sawn timber.

(Outcome) A major bottleneck for the growth of enterprises, making

the future of Nepali furniture industry uncertain.

MoFSC, DoF, DFO,

TCN, FENFIT

7 Most forest based entrepreneurs do not have adequate nancial capital for

industry establishment.

(Activity) Need to link the furniture industries with resourceful CFUGs,

cooperatives, banks etc and facilitate provision of collateral free loans.

FIs, Projects

8 Inadequate roadmap for banks and nancial institutions to invest in the

forestry sector.(Activity) Create a lobby with banks and nancial institutions to ask for

such a roadmap.

FIs, Projects

Apart from these gaps, there are also some constraints in the value chain of furniture industries (given

in table 3).

Table 3: Constraints

SN Constraints

1 Geographical setting

(Elaboration) Nepal is situated between two economic giants of Asia, China and India. Both

countries are engaged in mass production that results in low production costs. Furthermore, Ne-

pal does not have a production friendly policy or subsidy policy. Therefore, it is hard for Nepali

furniture industries to remain competitive.

2 Access to transportation

(Elaboration) It is almost impossible for forest based entrepreneurs (furniture industries and

saw mills) to introduce sophisticated equipment in remote areas of Nepal.

3 Labour issue

(Elaboration) Unavailability of skilled and unskilled manpower within the country because of

labour migration to Malaysia and Gulf countries.

(Elaboration) Skilled labour from Bihar (India) is the major source of manpower for Nepali

furniture industries but the Bihar government has xed a minimum daily wage of IRs 300 for

unskilled labourers and IRs 500 for skilled labourers. Consequently, there are very few Indian

skilled labourers working in Nepal.

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3.5 End market analysis through Spiderogram

An end market strategy is prepared to analyze the

gap between market requirements and present of-

ferings. A total of seven parameters focused on

the market were used to analyze the gaps and the

spiderogram below is based on the views of 59

respondents.

Table 4: Parameters for end market strategy

Parameters 1 2 3 4 5

Quality and

durability

Inferior Low Moderate Good Excellent

Design and

elegance

Inferior Low Moderate Good Excellent

Price Very high price High price Moderate price Good price Reasonable price

ProductDiversication

Single ProductLine

More than two product lines

More than ve product lines

More than ve product lines with

minimization of

wastage

More than ve product lines with

superb quality, du-

rability, and design

Raw material

supply

Untimely and

very limited

supply

Untimely and

limited supply

Timely but

limited supply

Timely and mod-

erate supply

Very good supply

on time

Demand of

furniture

Very low

demand

Low demand Moderate

demand

Good demand Very good

demand that almost

meets production

capacity

Technologytransfer

Traditionaltechnlogy with

very limited

equipment

Traditionaltechnology

with limited

equipment

Relatively newtechnology

with moderate

equipment

supply

Newtechnology with

modern equipment

Latest technology, with modern so-

phisticated equip-

ment

The spiderogram shows that the strategy of MS-

FP-SSU has to be focused on reducing the gaps,

mainly in terms of:

a. Gap in Quality and Durability

There is least concern in the durability of the lo-cally made furnitures but the quality is not as per

the demand. The labourers have to be trained,

and entrepreneurs need exposure visits to in-

crease the quality.

b. Gap in Design and Elegance

Design and elegance is still not a big concern forrural communities but urban dwellers who have

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purchasing capacity, access to information, and

exposure look for designer products. This can

be achieved by introducing new equipment (like

sprayer machine for paint, lamination machine,

compressors etc), which are already introduced

in Kathmandu, Pokhara and Nepalgunj. Training

and exposure visits are the effective method to

fulll this gap.

c. Gap in Price Sensitivity

The price of furniture is high because of the high

price of timber. A strong lobby is required from

NGOs, bilateral aid agencies, and programmes

for the optimum and sustainable use of timber

and lowering the price of timber through mecha-

nisms such as e-bidding. Adoption of silvicultur-

al practices by the Government of Nepal (GoN)

is needed.

d. Gap in Raw Material Supply

A joint lobby of commodity associations, private

sector, NGOs and bilateral agencies is required

to achieve timely and adequate supply of timber.

e. Gap in Technology Transfer

Almost all furniture industries are using conven-

tional equipment to manufacture their furniture.

There are a few industries who are using newwood (compressed wood made from ne dust

particles, good to make designs), such technol-

ogy needs to be transferred to rural areas also.

Shaan furniture industry is using modern ma-

chineries and equipment to manufacture designer

products. Such technologies need to be replicat-

ed by other entrepreneurs.

3.6 Value Chain Governance in wood furniture

Value Chain Governance analyzes the power, re-lations and learning amongst actors in the value

chain. Wide discussion with furniture enterprises

all over Nepal has shown the following results.

i. Timber traders are the most powerful in this

value chain as all wood furniture enterprises

have an inadequate supply of timber. This

has led the private sector to search for tim-

ber from new markets like Burma, Indone-

sia, and Malaysia. The private sector is -

nalizing timber procurement from as far asSouth Africa. This is due to the high cost

of timber procurement from Nepali CFUGs

and national forests.

ii. Rural furniture enterprises are escaping

the registration process. The concerned or-

ganizations (CSIDB/DCSI) are not able to

enforce registration strictly due to existing

laws that prescribe a distance rule from for-

est areas for establishing forest based enterprises.

iii. Imported furniture has prices similar to that

of urban industries. Discussion with import-

ed furniture showrooms revealed that there

is a higher margin for importers whereas

the showroom has to sell it at a competitive

price. The research team was not able to nddirect importers in urban areas, except for

Kathmandu.

iv. Rural enterprises are not able to get timber from CFUGs at the low rates provided

to CFUG members. Rural enterprises were

uniformly in favor of procuring timber from

their CFUGs at minimum prices so that they

can become more established and manufac-

ture a wider variety of products. Presently

rural enterprises are mostly manufacturing

furniture products after getting timber from

the customers (CFUG members).

v. At present various private, non governmentand government organization ask for the

VAT invoice for furniture products. There

have been abundant examples of underbill-

ing of furniture products as procurement of

raw materials for furniture making, espe-

cially timber purchase, do not always fetch

bills.

vi. Freelance carpenters are providing competi-

tion to other value chain actors but their lack

of registration has hindered revenue genera-

tion by the government.

vii. The research team looked closely at the pos-

sibility of mainstreaming each of the value

chain actors, but found that all value chain

actors are dealing with consumers directly,

thus there is an absence of a potential system

for subcontracting etc.

viii. The price of furniture products varies for

same product. Due to competition, furniture

enterprises are providing consumers with

lower prices than the competition, but are

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also compromising on quality, using thinner

wood or plywood etc.

The important aspects in value chain governance

of wood furniture are:

3.7 Six Cs analysis

There are various market analysis tools used in

this report. All these tools verify the information

collected and gaps identied. Another important

tool to assess value chain actors individually incourse of the chain is through Six Cs. This as-

sessment provides context, channel, customer,

competition, choice and communication for each

of the major value chain actors. The initial four

Cs focus on assessing the present status and an-

other C (Choice) provides guidance on the direc-

tion to be taken by these value chain actors. The

last C (Communication) provides guidance for

effective communication among the major actorsto attain the strategic choice. A detailed descrip-

tion of the six Cs is given in annex 2.

Figure 6 : Six Cs analysis

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Table 5: Actors, strategic choices and actors for communication

Actors Strategic Choice Main actors for coordination

Rural Enterprise

Registration DFO, CSIDB/DCSI, VDC, Municipality

Growth orientation CFUG for timber supply for micro enter-

prise in minimum cost

Increase quality and nishing Urban Industries and highway enterprises

to provide on-the-job training

Highway Enterprises

Registration DFO, CSIDB/DCSI, VDC, Municipality

Increase quality and nish Urban Industries to provide on-the-job

training

Freelance Carpenters Registration DFO, CSIDB/DCSI, VDC, Municipality

Urban Industries

Decreasing cost of production

- Decrease price of timber

- Optimize use of timber through

appropriate technology

Decrease price of timber: DoF, DFO, TCN

Optimize Use: Knowledge Sharing,

SHAAN Furniture, FENFIT, NFFA

Increase quality and nish Knowledge sharing, Exposure, FENFIT,

NFFA, TEPC

Importers

Increase import of durable furniture Knowledge sharing, Importers, exporters

from China, Burma, Indonesia, and Malay-

sia

The following points can be articulated from this

analysis

a. Competition for each of the enterprises var-

ies and enterprises that are facing less com-

petition are rural enterprises and freelance

carpenters who manufacture onsite.

b. Ofce furniture is a major segment of imported furniture whereas door and window

frames are a major segment for the rest of

the enterprises.

c. All the enterprises have different channels

for reaching the consumer but have similar

supply chain channel for timber and acces-

sories. (except for rural enterprises in case

of timber)

d. The pattern of consumer demand has been

changing in recent years; initially the de-

mand for imported furniture was increasing

for both household and ofce segments butnow demand for imported furniture is de-

creasing in household segment and remain-

ing the same in ofce furniture segment.

e. Freelance carpenters are posing a threat to

other enterprises because it is easier and

cheaper for household consumers to man-

ufacture wood furniture onsite.

The strategic choice for each of the value chain

actors and the main actors for coordination are:

3.8 Gender Status

It was hard for the research team to nd women

in the furniture value chain. The furniture value

chain employs a large number of people but there

has been a notable absence of women. Women’s

involvement is only seen in large enterprises,

especially in the work of sanding, staining, co-

louring and nishing, and in sales outlets. Theinvolvement of women in the different enterpris-

es that comprise the furniture value chain is pre-

sented below:

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Table 6 : Gender involvement matirx

Actors Owned

and

operated

by

Supporting

function of

women

Main factor for

absence/ presence

of women

Potential

women in-

volvement

Strategic options

Rural Enter-

prises

Male None directly

in enterprises

Labour intensive Sanding, stain-

ing, colouring,nishing

Awareness and exposure

to women in enterpriseswhere women involve-

ment is being practiced

Market Centre

Manufacturers

Male Presence of

women in

outlets

Labour intensive,

not women friend-

ly environment

Sanding, stain-

ing, colouring,

nishing

Awareness and exposure

to women in enterprises

where women involve-

ment is practiced

Sales outlets Male/

Female

Presence of

women in

outlets, also in

marketing in

big outlets

N.A. Ownership,

marketing,

sales, account

N.A.

Freelance

Carpenters

Male None Carpentry work

alone or with

an assistant, not

women friendly

environment

N.A. N.A.

Urban Indus-

tries

Male Presence

of women

in employ-ment in large

industries

like SHAAN

but absence

in small and

medium in-

dustries

Labour intensive,

Presence of a large

number of malesdo not make a

women friendly

environment (espe-

cially in the Terai

region)

Sanding, stain-

ing, colouring,

nishing, joining nger

joints, com-

pressing

Creating a women

friendly environment

Importers Male Presence of

women in

sales outlets

Good marketing,

trust

N.A. N.A.

3.9 Value chain actors’ performance indicators

in seven years

This table has been produced after wide discus-

sion with all the actors on their important mile-

stones, given the changing market dynamics. The

furniture value chain and market system has been

changing every year. It has gotten into difcultieswhen imported furniture rst came to the Nepalimarket. Today, it is slowly regaining momentum

as it learns new designs and better nishes fromimported furniture. In the coming years, the ma-

jor challenge will be competing with imported

timber which is becoming popular because it is

cheaper, and easier to procure. This might not be

a challenge for furniture enterprises but will be

challenge for the supply chain, especially saw

mills, CFUGs, and other domestic timber suppli-

ers.

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T a b l e 7 : A c t

o r s ’ p e r f o r m a n c e i n d i c a t o r s

3 y e a r s a g o

1 y

e a r a g o

T h i s y e a r

1 y e a r l a t e r

3 y e a r s l a t e r

R e m a r k s

R u r

a l E n t e r -

p r i s

e s

F u r n i t u r e m a n u -

f a c t u r e f o r C F U G

m e m b e r s

F u r n i t u r e m a n u f a c t u r e

f o r

C F U G m e m b e r s

F u r n i t u r e m

a n u f a c t u r e

f o r C F U G m e m b e r s

F u r n i t u r e m a n u f a c t u r e f o r

C F U G m e m b e r s

E n t e r p r i s e G r o w t h , s e l l -

i n g t o M a r k e t C e n t e r s

P r o j e c t i n t e r v e n t i o n

r e q u i r e d f o r u p g r a d -

i n g

H i g

h w a y

E n t e r p r i s e s

F u r n i t u r e m a n u -

f a c t u r e f o r m a r k e t

c e n t e r s


a n d f u r n i t u r e t r a d e f r o m

o t h

e r d i s t r i c t s

F u r n i t u r e m

a n u f a c t u r e

a n d f u r n i t u

r e t r a d e

f r o m o t h e r

d i s t r i c t s

F u r n i t u r e m a n u f a c t u r e a n d

f u r n i t u r e t r a d e f r o m o

t h e r

d i s t r i c t s


a n d f u r n i t u r e t r a d e f r o m

o t h e r d i s t r i c t s , i m p o r t e d

f u r n i t u r e

M a r k e t s y s t e m i s

l o o k i n g a t a n i n c r e a s e

i n i m p o r t e d f u r n i t u r e

s a l e s a t m a r k e t c e n t e r

l e v e l

F r e e l a n c e

C a r p e n t e r s

M a n u f a c t u r e r s o n

s i t e

M a n u f a c t u r e r s o n s i t e



R e g i s t e r e d e n t e r p r i s e

F r e e l a n c e c a r p e n t e r s

h a v e b e e n s c r u t i n i z e d

b y C S I D B / D C S I a s

i n f o r m a l b u s i n e s s e s

a n d t h e y a r e w o r k i n g

o n f o r m a l i z i n g t h e s e

i n f o r m a l b u s i n e s s e s

U r b

a n

I n d u s t r y

C o n v e n t i o n a l , d e -

c r e a s i n g d e m a n d

F o c u s o n d e s i g n , q u a l i t y

a n d n i s h , d e m a n d i n -

c r e

a s i n g

F o c u s o n d e s i g n ,

q u a l i t y a n d

n i s h , i n -

t r o d u c t i o n o f i m p o r t e d

t i m b e r

U s a g e o f i m p o r t e d t i m

b e r

H i g h u s a g e o f i m p o r t e d

t i m b e r a n d a c c e s s o r i e s

U r b a n i n d u s t r i e s w i l l

b e c o m p e t i n g o n

q u a l i t y , d e s i g n a n d

n i s h a n d w i l l b e

u s i n g m o r e i m p o r t e d

t i m b e r

I m p

o r t e d

f u r n

i t u r e

H i g h d e m a n d

D e

c r e a s i n g d e m a n d

D e c r e a s i n g

d e m a n d ,

s u i t a b l e o n l y f o r o f c e

f u r n i t u r e

I n c r e a s i n g d e m a n d o f

i m p o r t e d t i m b e r r a t h e

r t h a n

i m p o r t e d f u r n i t u r e

I n c r e a s i n g d e m a n d o f

i m p o r t e d t i m b e r a n d

i n c r e a s i n g i m p o r t o f d u -

r a b l e f u r n i t u r e p r o d u c t s

I m p o r t e r s m a y f o c u s

o n i m p o r t i n g t i m b e r

a n d i m p o r t i n g d u r a b l e

f u r n i t u r e p r o d u c t s i n

t h e c o m i n g y e a r s

3 . 1 0

B u s i n e s s D e v e l o p m e n t S e r v i c

e s a n d F i n a n c i a l S e r v i c e s

T h e

m a j o r B u s i n e s s D e v e l o p m e n t S e r v i c e s ( B D S ) a n d F i n a n c i a l S e r v i c e s ( F S ) w e r e i d e n t i e d b a s e d o n t h e g a p s i d e n t i e d d u r i n g v a l u e c h a i n m a p -

p i n g

. T h e m a j o r B D S a n d F S s e r v i c e s r e q u i r e d a r e :

18


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Currently, Nepal has an annual demand of about 80 million cu. ft. of wood but only 25 million cu. ft.

is supplied from the country. This shortfall is fullled by importing about 50 million cu. ft. of mate-rials in the form of wood, aluminium, steel, UPVC, rounded wood, readymade doors, and furniture.

In addition, about 5 million cu. ft. of wood is supplied through smuggling and other illegal practices.

This fact, and other information gathered during the eld assessment show that the wood furnituremarket is growing. Currently, the wood furniture value chain in Nepal has re-emerged after facing

stiff competition from imported furniture only a few years ago. However, this value chain has new

competition in the business especially from imported timber. All the analysis tools used in this study,

and detailed above, have led the research team to prioritize the most important strategic options for

developing interventions. They are:

Table 9: Listing major strategic options

Strategic option Analysis tools Priority

Focus on door and window frames Market Segmentation, Six Cs Analysis High

Focus on formalization of furniture enterprises Gaps Identication, Six Cs Analysis High

Favourable price sensitiveness for wood furniture Gap Identication, Spiderogram High

Increase women involvement in wood furniture Six Cs analysis, Gender Mapping High

Increase quality, nishing and design Gap Identication, Spiderogram, Six Cs

Analysis

High

Increase investment Gap Identication Moderate

Mainstream small scale entrepreneurs Gap Identication, Six Cs Analysis Moderate

20

PART FOUR: STRATEGIC INTERVENTIONS

Focus on frames, followed by home furniture:

Ensure regular supply of timber from CF

at a low price for rural furniture indus-

tries by amending the operational plan of

CFUGs and simplifying the rules for DFO

to amend the CFUGs operational plans.

Ensure a continuous supply of sawn tim-

ber for furniture industries by lobbying,

simplifying the auction process through

e-bidding and optimising use of old, dead

and fallen trees in government forests.

Focus on formalization of furniture enterprise

Currently, enterprises have to register at

DCSI/CSIDB, get permission from DFO

and VDC or municipalities and then fromIRD. This registration process needs to be

simplied, and a strong lobby is neededto achieve this. Allocating separate zones

for timber processing enterprises in urban

areas is an option for increasing formal-

ization.

Abolish or simplify the government rulethat prescribes a minimum distance be-

tween forests and forest based enterprises.

Price sensitivity of furniture

Lower the price of timber by simplifying

the bidding process.

Optimize use of old, dead, and fallen trees

in government forests.

Use modern machinery and technology(compressor, computer based designer,


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nger joint machine etc) that will lowermanufacturing time and reduce timber

waste.

Mass production, which is being carried

out by furniture industries like SHAAN

Furniture.

Women’s involvement

Involve women in less labour intensive

activities like sanding, colouring, stain-

ing, and nishing.

Train women for the aforementioned spe-

cic tasks.

Develop women friendly environment in

the workplace.

Increase quality, nishing and design

Exposure visits to large scale industries

like SHAAN furniture

Adopt new and improved technology for

laminating, polishing, carving and so on.

Training to ensure existing workers have

the skills to use the modern technology

Increase investment

Creating an environment favourable to

investment by insuring the industries and

machineries, ensuring security of invest-

ment.

Take action against underbilling

Mainstreaming small scale entrepreneurs

Rural furniture enterprises are operating inde-

pendently in their niche markets. There are no

linkages between these entrepreneurs and large

scale industries in Nepal. In developed countries,

different small industries manufacture different

parts of the nal products, which are purchased by the big industries, which is not the case in Ne-

pal. Instead of mainstreaming, following has to

be done to ensure their sustainability:

Registering the existing rural furniture

industries

Providing timber on subsidized cost (for

eg. NRs 800 per cu. ft. for Sal) from com-

munity forests.

Skill advancement training to diversify

the product range.

21


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Case study 1: Shaan Furniture

Shaan Furniture, located in Budol, Kavrepalan-

chowk, mostly manufactures frames for doors

and windows, doors, beds, sofas, cupboards,

tables

Documents

Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213