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18 Feb 2005

Industry

Thai Furniture: Bracing for Thailand-Australia FTA

คะแนนเฉลี่ย

Kasikorn Research Center (KRC) takes the view that Thailand's furniture and parts in Australian market in 2005 is expected to grow at similar rate to that seen last year unless affected by unexpected factors. This is attributed to several supportive factors. One of these is Thailand-Australia Free Trade Agreement (TAFTA) which came into effect on January 1, 2005 whereby Thai furniture and parts (custom tariff No. HS 9401 and HS 9403) are among those goods that will subject to tariff cut to zero rate in 2010. (From January 1, 2005, tariff rates imposed on Thai furniture and parts were slashed to 5 percent from 10 percent.) Another supportive factor is a robust Australian economy, which has resulted in high demand of furniture in the upbeat property sector for residential units and office buildings as well as renovated buildings and homes. Also, the Australian market, where a big portion of population constitutes high purchasing power prefers Thai designs that perfectly blend styles of the East with the West. This is particularly true with Thai furniture that is made of a combination of natural materials aside from parawood. These include bamboo, reeds and hyacinth, which are gaining greater popularity in the Australian market.

Taking into account a market share and Revealed Comparative Advantage (RCA), Thai furniture was put at 1.187 of RCA scale in 2003, meaning that made-in-Thailand products, on the whole, have medium competitive potential though the competitiveness is set to decline in the future.

Therefore, Thai furniture manufacturers and exporters must urgently take the opportunity to expand the Thai furniture and parts market so that it is more widely known in Australian. To do so, significance should be placed on quality improvement to attain the standards stipulated by Australia. In addition, the structure of manufacturing system must be adjusted whereby entrepreneurs may bring in new technology so that it is in line with industrial manufacturing system.



In addition, operators must be equipped with marketing research, so that they have insight to specific demands of each customer group and rivals in the market. This is because apart from the competition that is getting more intense in the international market, China, which is Thailand's important rival in the industry of furniture and parts and has an upper edge over Thailand in terms of low labor cost and fertile domestic raw materials, is now preparing to enter the FTA with Australia. It is expected that the study of China-Australia FTA should be complete around October 2005. If both countries are able to conclude the FTA, Thai furniture and parts exports will definitely be affected by this because the tariff spread between Thailand and China is not so great. Also, Thailand may not eventually stand to benefit fully from tariff reduction under Thailand-Australia FTA although the accord is favorable to Thailand in terms of goods' origin. Meanwhile, although Thailand's production cost is higher than China, Thailand may suffer less from China-Australia FTA if it improves the quality of products to meet the specific needs of customers in Australia.

Industry

Furniture