Philippines' furniture capital looks forward to recovery (Feature)

By Girlie Linao Aug 4, 2010, 5:51 GMT

Mandaue City, Philippines - In one of the biggest furniture factories in the central Philippines, the ground floor bustled as workers cut, hammered and soldered aluminum tubes into different shapes.

On the second floor, local weavers entwined special plastic fibre around the aluminum frames to build the award-winning outdoor furniture of German company Dedon GmbH.

People could barely hear each other over the racket, but the noise is music to Vince Lampert's ears.

Lampert, technical director of Dedon's manufacturing arm in Mandaue City in Cebu province, 585 kilometres south of Manila, said orders have picked up after a weak performance last year due to the global financial crisis.

'This year is already better than last year, but recovery is not yet here,' he said. 'We experienced a 30-per-cent drop in orders and production last year due to the crisis.'

Lampert said the decline also forced Dedon to get rid of 300 weaving subcontractors last year.

Dedon, which marks its 10th year of operations in Mandaue City this month, produces about 10,000 pieces of its trademark outdoor furniture every month and ships to customers worldwide.

It was one of hundreds of furniture firms in Cebu province that suffered huge losses in 2009 as key overseas markets contracted due to the financial crunch.

According to the Cebu Furniture Industries Foundation Inc, the industry contracted by almost 50 per cent in 2009, when manufacturers exported just over 8,500 standard shipping containers compared to nearly 15,000 in 2008.

'Last year was really like the end of the world for us manufacturers,' said Angela Paulin, president of the foundation and chief executive of Casa Cebuana Incorporada, one of the oldest furniture companies in Cebu.

'It was like everybody fell off a cliff,' she added, noting that 99 per cent of the industry relies on exports for their sales.

Paulin said manufacturers were forced to lay off tens of thousands of workers and cut working hours for the remaining employees after orders were cancelled. Some companies were even left with unpaid shipments worth millions of dollars.

While sales have picked up by 19 per cent in the first quarter of the year, Paulin said many companies 'still could not plan a good six months ahead' due to the uncertainty.

Cebu's furniture industry accounts for about 60 per cent of the Philippines' total furniture exports and directly employs some 30,000 people, according to the foundation.

The province, also a popular tourist destination, has been dubbed the Milan of the Philippines for its avant-garde furniture designs. The industry is known for its unique use of indigenous materials mixed with such furniture staples as wood, metal and glass.

The industry's biggest market is the United States, getting about 70 per cent of the exports, followed by Europe, Asia and the Middle East. Cebu companies manufacture furniture for such high-end brands as Ethan Allen, Ralph Lauren and Casa Armani.

Ruby Salutan, a consultant with the foundation, said the crisis has forced many companies to re-evaluate their processes, search for newer markets and develop better products to keep up with growing competition from China and Vietnam.

With the goal of bringing down costs, companies are developing cleaner lines and minimalist designs in hopes of attracting more buyers. Manufacturers are also going green to meet growing market demands and get new customers.

'There is a growing demand for eco products,' she said. 'The foundation is now spearheading a programme of positioning Cebu as the destination for sustainably produced furniture, furnishings and other products.'

Salutan said the foundation's programme was being supported by a European Union grant worth 1.22 million euros (1.61 million dollars), which aims to help Cebu exporters produce eco-friendly products such as furniture, toys and fashion accessories.

Dedon is also looking at new collections to boost this year's sales, Lampert said.

'The economy now is much more stable. We can do better,' he said.