KUCHING: Malaysia is building on the value of its long-standing timber industry by expanding into new markets, while guaranteeing the sector’s future through better management practices, higher investments and a greater emphasis on sustainable resources.

Independent research firm Oxford Business Group (OBG) stated this in its latest online briefing, adding that the country has a wide range of hardwoods and raw materials that have always been in demand both locally and abroad.

Last year, Malaysia’s timber sector earned US$6.6 billion in exports, second only to palm oil as the country’s key exports. Further, the sector generated US$2.2 billion in the domestic market and provided direct employment to over 300,000 workers.

Nevertheless, OBG noted that although the increased demand for this commodity has been benefiting towards the economy, Malaysia is not immune from claims that it is practising illegal logging that raises serious environmental issues.

In response, the government launched the National Timber Industry Policy (NATIP) last February, the first comprehensive policy plan for the sector that sets out future directions for the industry until 2020.

OBG mentioned that NATIP focuses the need for higher value-added downstream activities, aimed at increasing export earnings to US$15.6 billion in ten years’ time led by increased sales of processed timber products.

Quoting Malaysia Timber Industry Board’s (MTIB) director-general Dr Jalaluddin Harun, OBG said the way forward has to be through adding value to existing raw materials and increasing the supply of resources by using NATIP as a guideline. To note, MTIB is the governmental body tasked with promoting and coordinating the timber sector.

“Our role is to focus, with the government, to push the industry towards value-added products. The supply from natural forests will not be very high, so if we rely just on that we won’t be able to continue for very long. We need to enhance the forest plantation in terms of supply of natural timber as well as develop the downstream industry.”

Dr Jalaluddin added that with the support of state funding, 25,000 hectares (ha) of land will be added to Malaysia’s forest plantation every year up to 2020, expanding existing timber estates by 375,000 ha.

“The focus will be on fast-growing and marketable species. In the future, it is not only about generating raw material but revenue,” he said.

Similarly, Minister of Plantation Industries and Commodities Tan Sri Bernard Dompok said last month that loans worth US$68 million out of a total budget of US$315 million had been allocated for the development of 52,435 ha of forest plantation, cited OBG.

Following the announcement of a US$4 million loan with the Sabah Forestry Development Authority to fund 2,500 ha of forest plantation, Dompok said he hoped more companies would apply for the loan facility to help achieve the country’s target of 375,000 ha in forest plantation by 2020.

Another initiative towards attaining improved forest sustainability and stable revenue is the bilateral Forest Law Enforcement, Governance and Trade Voluntary Partnership Agreement (VPA) with the European Union (EU), observed OBG. With talks have been ongoing since 2007, a final agreement is expected to be closed by early next year in which authorities would guarantee that all timber sold to the EU is legally-sourced and logged. In return, Malaysia will demand for a special priority to enter EU’s timber market and for the bloc to pay a premium for the legal timber.

OBG further pointed out that VPA will be vital to the Malaysian timber industry, which currently exports about US$900 million worth of wood and products to EU members.

Meanwhile, Malaysia also aims towards increasing its presence in regions apart from premium markets like the EU, reported OBG.

Citing Malaysian Timber Council’s chief executive officer Cheah Kam Huan, it said these emerging markets are vital for the country’s timber industry in diversifying its overseas markets.

“We promote our products more actively there to encourage importers in these countries to buy directly from us, so emerging countries are vital in growing the industry.”