Thursday, 22 January 2009 19:47
CEBU’S export-furniture industry is bracing for its toughest year as its global sales face a possible plunge that could place thousands of workers out of job in the next few months.
A deepening recession in the US and Japan—Philippine exports’ biggest markets—is to blame for the industry’s woes.
“We’ve been through the Asian financial crisis, the China threat and foreign-exchange problems, but even if you combine these three it would be small compared to the magnitude of the problem we are facing now,” Cebu Furniture Industries Foundation (CFIF) president Eric Casas told the BusinessMirror.
Since 2007, 67 companies out of some 200 CFIF members have already closed down, according to CFIF data.
The shutdowns and the layoffs in surviving companies have displaced up to 11,800 regular employees in one-and-a-half years, according to the CFIF data.
The numbers exclude subcontractors and service providers whose services have been discontinued because of plunging and canceled orders by foreign buyers.
According to CFIF executive director Ruby Salutan, the exact number of employees in the industry at present is “fluid” as more companies are in retrenchment mode and some are in the process of closing down.
Data show that container shipments from Cebu dropped by 18 percent to 13,489 in the 11 months to November 2008, compared with 16,367 container vans a year earlier.
As raw-material and labor costs keep rising and competition in the global market gets tougher, the industry said it is facing a situation it has never faced before.
“This is the first of its kind for our industry. It is no longer regions that are affected but everybody. It is global,” said Angela Paulin, CFIF vice president for internal affairs.
“We need to be realistic. We expect the industry to contract by a further 30 percent in 2009,” said Charles Streegan, CFIF vice president for external affairs. “This is reality. The sooner we face reality the sooner we can institute programs to address these realities.”
“We can’t give the exact number of employees of the industry, because every day companies are retrenching and closing,” Salutan said. “At times we have to personally go to the factories and knock on their gates to see if they are still operating.”
Cebu’s furniture sector is perhaps one of the best success stories in Philippine industries as it conquered big- time the global market. The province accounted for nearly half the country’s $275-million exports in 2006.
Many of Cebu’s signature pieces by Filipino designers and craftsmen have landed in high-end retail stores and homes of celebrities and blockbuster Hollywood movie sets, and garnered international acclaim.
According to Casas, companies may be forced to further cut costs and regular jobs and turn to subcontracting.
Other companies have started to cut on working days in a week and some are thinking of temporary closures, Casas said. “We hope the [markets] will recover by the end of 2009. But realistically, it could happen in late 2010,” Streegan added.
The industry’s showcase event, the Cebu International Furniture and Furnishings Show (CebuX) in March, is also bracing for its toughest year.
After close to $30 million in record sales and number of buyers in 2005, the show’s succeeding years saw close to a 50-percent slump in sales.
This year, confirmed exhibitors are down to 56 from 85 last year and more than 100 companies in previous years. But the industry remains optimistic and is banking on some figures that show the light at the end of the tunnel.
Despite the dip in sales in the last few years, CebuX managed to sell $15.4 million in 2008 compared with $14 million in 2007.
The number of registered foreign buyers that visited the show also increased by 5 percent to 1,551, while the number of countries that sent buyers to the show increased to 77, underlining the success of CFIF’s efforts to look for emerging markets outside the US.
“The orders are still coming in by trickles,” Paulin said. “The volume, however, has dipped but there are still buyers out there.”
Despite the closures the past year, eight companies have joined CFIF and are gearing up to make it in the international market, which Paulin said “inspires” the industry and its old players.
Streegan said the domestic market is getting help from real-estate projects and tourism, although the orders are small.
CFIF is also strengthening its marketing efforts in the Middle East, Russia and even the Balkans in an effort to seek emerging markets.
For CebuX, buyers from new markets like the Middle East, Europe, Africa and Russia have increased.
“Cebu has never been known as the source for the cheapest goods,” Casas said. “We are known for our design and innovation.”
Casas said the crisis has, in a way, “screened” the industry. Companies and owners that have the passion for the business are left, and those with best practices and the strongest designs survive.
“We have to survive. We have to focus on our strength in design and innovation so when the market picks up again, we can be more globally competitive,” Casas said.
“When all this is over, what will remain is a few companies, but they will be the strongest; they will surely have the passion for the business. We can watch ourselves go down or we can go out to face the storm,” Casas added.
