environment magazine

The Malaysian Timber Industry in 2011 and Future Challenges

 By Sheam Satkuru-Granzella, Malaysian Timber Council

Malaysia timber and wood products exports to Europe accounted for approximately 12% of the country’s total production in 2010. Total production in 2010 was worth RM 20.5 billion (approximately £4.45 billion), a recovery following 3 years’ decline. Exports for 2011 are expected to hold up at RM 21 billion.

Whilst demand patterns in the US and Europe continue to be relatively unstable, some slow improvement was noted in the first quarter of 2011, propped mainly by the renovation and refurbishment sectors, reported to have improved compared to demand seen in 2009 and 2010.  Conversely, Asian markets have continued to grow with major demand increases seen in China, India and others prior to the tsunami disaster in Japan.  Whilst economic growth within the EU averaged under 2% in 2010 (although this varied between EU member states), most Asian economies maintained growth at approximately 5%.

The Asian development Bank acknowledged that “Developing Asia was the first region to emerge from the economic turmoil, helped by decisive and large-scale fiscal and monetary policy measures. Domestic demand has been resilient, especially in the region’s larger economies, and the economic cycle clearly suggests that economies have bottomed and begun to recover. A number of Asian economies even posted double-digit gross domestic product (GDP) growth in the first half of 2010  with predictions that recovery has taken firm hold although long-term sustained growth is uncertain. For Malaysia and its timber industry, nestled in between the two Asian giants China and India, the prospects of timber exports increasing in 2011 compared to 2010 is quite likely, although not by a significant volume owing to constraints in supply, primarily regulated by adherence to sustainable forest management (SFM) practices.  The Malaysian industry, similar to other timber industries worldwide, faces the same challenges of sourcing raw materials and increases in energy and labour costs, not to mention fluctuating fuel and freight costs.

The guiding principle would have to be adding value to timber resources through optimal use, minimal waste and product innovation in order to compete with other materials which are not subjected to the stringent controls and scrutiny that timber is exposed to.  Tropical forests, more than any other type of forest, have their own endemic complexities and need to be economically, socially and environmentally viable in facing the challenges of land use in developing countries.

The challenges that lie ahead in the next decade for the timber industry is to instill full confidence in using wood, known for its aesthetic beauty and environmental credentials.

Malaysia is the first country on the Asian continent to be endorsed by the Programme for the Endorsement of Forest Certification Schemes (PEFC) with over 4 million hectares of PEFC-certified forests, producing high quality hardwoods with more than 50 commercially available tropical timber species to suit various applications.  Increasingly, timber industries around the world are committing to trading only in legal and/or sustainably produced timber, reciprocated by consumers who in turn will only consume wood if they are confident of its legal or sustainable status.  This bodes well for countries like Malaysia who have invested tremendous resources in pursuing third-party independent certification of its forests by implementing SFM.

How would the impending EU Timber Regulation, coming into force in March 2013, prohibiting the imports of illegal timber into the EU, impact on a country like Malaysia and other producing countries?  It is widely agreed that illegal logging must stop, and increasing efforts at international level to reduce and eventually eliminate illegal logging, hence reducing deforestation, are ongoing.  Such measures will help ascertain that market players compete on a level playing field, ensuring that revenues as deserved will somehow make its way back as continuing investments in SFM.

The majority of tropical producing countries are of course struggling to find sufficient resources to implement SFM, and due to the absence of market returns, the uptake of SFM in tropical countries has naturally been slow.  It is encouraging to see that changing production and consumption patterns are however having an impact, and forest certification is now on the verge of being accepted as one of the measures that will help ensure the sustainability of the world’s forest resources.  Much like other complementary measures such as legality compliance and legislative measures such as the EU Timber Regulation and the US Lacey Act.

These measures are welcomed by most major timber producing countries with the caveat that such measures are implemented across the EU, are based on fair and transparent measures, do not become an increased burden on suppliers and importers of tropical timber products and do not transform into barriers to trade.  Tropical rainforests cover less than 5% of earth’s land area and houses approximately 40% of the world’s population with the tropics bearing the largest proportion of the world’s poor.  Naturally, there are competing land use challenges.  It is imperative that the forests provide sufficient economic returns against the threat of more viable economic alternatives – all the more forest resources have to be used prudently.

There will be pressure on the industry to ensure that all timber sources are inventoried and accounted for, and most importantly, are from legal, if not sustainable sources.  And what of emerging markets like China and India who are purchasing significant volumes of timber from various sources, including Africa and the US?  Would producing countries not be tempted to sell to these two consumer giants and not bother with proving environmental credentials to environmentally sensitive markets such as the EU?  After all, China and India are paying current market prices for the resource they consume. 

For Malaysia, she has enjoyed well established trade relationships with a number of Western European member states spanning over 50 years with a strong reputation for being reliable and supplying quality materials.  The EU consumes approximately 12% of Malaysia’s total timber production.  This is something the Malaysian industry wishes to retain, hence the financial and human resources being invested in addressing policy changes both here in Europe as well as on the ground in Malaysia.