Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
Transcript of Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
1/33
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
2/33
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
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
3/33
Opportunities Assessment Of Wood Furniture Industries In Nepal
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
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
4/33
Opportunities Assessment Of Wood Furniture Industries In Nepal
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
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
5/33
Opportunities Assessment Of Wood Furniture Industries In Nepal
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
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
6/33
Opportunities Assessment Of Wood Furniture Industries In Nepal
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-
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
7/33
Opportunities Assessment Of Wood Furniture Industries In Nepal
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.
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
8/33
Opportunities Assessment Of Wood Furniture Industries In Nepal
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
1
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
9/33
Opportunities Assessment Of Wood Furniture Industries In Nepal
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
2
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
10/33
Opportunities Assessment Of Wood Furniture Industries In Nepal
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.
3
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
11/33
Opportunities Assessment Of Wood Furniture Industries In Nepal
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-
4
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
12/33
Opportunities Assessment Of Wood Furniture Industries In Nepal
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.
5
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
13/33
Opportunities Assessment Of Wood Furniture Industries In Nepal
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 im- portant segments for further analysis.
Figure 3: Market segmentation as per the demand of customers (outcomes of consultation)
6
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
14/33
Opportunities Assessment Of Wood Furniture Industries In Nepal
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 im- porting 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).
7
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
15/33
Opportunities Assessment Of Wood Furniture Industries In Nepal
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
8
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
16/33
Opportunities Assessment Of Wood Furniture Industries In Nepal
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 ta- bles, 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-
9
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
17/33
Opportunities Assessment Of Wood Furniture Industries In Nepal
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.
10
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
18/33
Opportunities Assessment Of Wood Furniture Industries In Nepal
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
11
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
19/33
Opportunities Assessment Of Wood Furniture Industries In Nepal
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.
12
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
20/33
Opportunities Assessment Of Wood Furniture Industries In Nepal
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
13
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
21/33
Opportunities Assessment Of Wood Furniture Industries In Nepal
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 enter- prises.
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 tim- ber 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
14
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
22/33
Opportunities Assessment Of Wood Furniture Industries In Nepal
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
15
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
23/33
Opportunities Assessment Of Wood Furniture Industries In Nepal
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 im- ported 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:
16
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
24/33
Opportunities Assessment Of Wood Furniture Industries In Nepal
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.
17
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
25/33
Opportunities Assessment Of Wood Furniture Industries In Nepal
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
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
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 , 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
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
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
26/33
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
27/33
Opportunities Assessment Of Wood Furniture Industries In Nepal
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,
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
28/33
Opportunities Assessment Of Wood Furniture Industries In Nepal
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
-
8/18/2019 Opportunities Assessment of Wood Furniture Industries in Nepal _20150218065213
29/33
Opportunities Assessment Of Wood Furniture Industries In Nepal
Case study 1: Shaan Furniture
Shaan Furniture, located in Budol, Kavrepalan-
chowk, mostly manufactures frames for doors
and windows, doors, beds, sofas, cupboards,
tables