Home / Featured / Economic climate casts a pall over sawmill business

Economic climate casts a pall over sawmill business

The housing loan restriction has been lifted but it’s yet to see improvement in business  

Construction: Despite the restriction on housing loan lifted since September last year, sawmill business in Bumthang is yet to pick up.

Following the Rupee crisis in 2012, several loans including the housing loan were suspended to curb Rupee outflow. The housing loan restriction, according to sawmill owners badly affected their business.

Prior to the loan restriction, the sawmills catered to Thimphu, Paro, Trongsa, Trashigang and Pemagtshel supplying prefabricated building components like window frames and flooring board, among others.

“The demand for building components dropped drastically after the suspension of housing loans,” UD wood manufacturing and furniture unit’s Ugyen Dorji said.

Ugyen Dorji said the sale of timber and building components slumped by about 50 percent since 2012. Prior to that, Ugyen Dorji said they used to sell products worth about Nu 30M a year, which dropped to Nu 15M since 2012.

“Even after the housing loan has been lifted, there’s not much demand for timber or building components,” Ugyen Dorji said, adding strict lending conditions by banks impeded people from availing loans.

Some sawmills were even forced to suspend its timber sawing business owing to the lack of market. Yangka sawmill recently re-opened after it was closed in 2012.

“The demand for wood dropped drastically as people had no capital to construct houses without loan,” the owner Yangka said.

Karma sawmill attributes poor business to more buildings but fewer tenants. Karma sawmill’s owner said people are hesitant to construct houses, as there were not many tenants.

“Even if houses are constructed there is no way one can repay the loans without tenants,” Karma said.

Besides sawmill business, Natural Resources Development Corporation Ltd (NRDCL) as parent supplier of timber to sawmills also suffered following the suspension of housing loan.

“The sale of timber dropped drastically since 2012 following the Rupee crisis,” NRDCL’s marketing officer Kuenzang Choden said, adding 2012 and 2013 were the worst years with huge unsold stock.

“We were able to empty the unsold timber stock only in 2014,” Kuenzang Choden said.

Despite a slight increase in demand for timber, NRDCL is still left with 106,000 cft of timber stock from the past three years of the total production of 395,000 cft.

NRDCL regional office’s timber sale stood at about 30,000-40,000 cft a month before 2012 against 3,000 to 4,000 cft a month today.

Though local demand for furniture has been steady, Ugyen Dorji said his furniture business suffered commercially.

“Government agencies and institutions slashing furniture budget amidst budget constraints and austerity measures has affected business,” he said.

Should there be no further improvement in the economy, sawmill owners fear that they might have to close or lay off their employees.

By Tempa Wangdi, Bumthang

Check Also

How Thimphu went the DNT way

Of the 14,406 registered voters in Thimphu, about 4,600 voters did not exercise their franchise …

Leave a Reply