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Foreign direct investment (FDI), added value and environmental-friendly practices in furniture manufacturing: the case of Malaysia and Vietnam

This study stemmed from preliminary work conducted on the Malaysian furniture industry (Ratnasingam, Macpherson, Ioras (2008) An assessment of Malaysian wooden furniture manufacturers readiness to embrace chain of custody certification. In Holz als Roh – und werkstoff. Vol 66, issue 5 pp 339-343. The article examined international investment in furniture design and manufacturing in SE Asia. Two case studies were conducted with manufacturers in Vietnam and Malaysia. Malaysia had low-cost wooden furniture production that attracted substantial foreign direct investment (FDI) over two decades. Globalization of the worldwide furniture industry has increased the competitive pressure from emerging furniture-producing nations. Vietnam epitomised this phenomenon, and was shown to displace Malaysia as the largest exporter of furniture in the region. Further analysis of the FDI trends in the Malaysian industry, used WTO, National Statistics Organisation, The World bank, and questionnaire-based surveys of 60 companies to generate data.

Results compared characteristics of FDI in Vietnam and Malaysia; the latter offered greater political stability, better infrastructure, amenities, industrial-relation practices, a more stable exchange rate and greater adoption of environmental-friendly practices. However the lower production cost and favourable investment policy were strengths of Vietnam furniture manufacturing, thus attracting FDI. Recommendations to Malaysian policy-makers were based on creativity and innovation to pave the way for design and manufacture of value-added products ensuring Malaysia’s continued competitiveness as a furniture FDI destination.

Ioras’s contribution included the design of the questionnaire and direct communication with investment organisations to fine-tune the final evidence gathering. The International Forestry Review is a peer-reviewed scholarly journal that publishes original research and review papers on all aspects of forest policy and science, with an emphasis on issues of transnational significance.