The Malaysian Timber Council (MTC) has come a long way since it was launched 10 years ago to combat the anti-tropical timber campaign raging at the time.

It quickly learned that the environment could not be separated from marketing and a new mission statement was born: to ensure the sustainability of the Malaysian timber industry by improving its competitiveness, enhancing market access and creating trade opportunities.

That mantra was much in evidence at the third Malaysian Timber Marketing Convention, held in Kuala Lumpur in late September. The convention, endorsed by the MTC, attracted more than 200 delegates, including those from the UK, the US, Australia, Germany, China and The Netherlands.

Renewed dynamism

After a rousing opening address by the minister for primary industries, the secretary-general of the Ministry of Primary Industries, Dato’ Dr Abdullah Mohd Tahir outlined the Malaysian timber industry’s “renewed dynamism”.

The small size of the country’s population (24 million) and its consequent small domestic market meant that exports of primary commodities and their related downstream industries continued to play a vital role in Malaysia’s economy, said Dr Abdullah. An export high of M$17.7bn in 2000, which represented 5% of the country’s total export revenue, was followed by a 19% fall to M$14.3bn in 2001. The decline was attributed to lower prices and demand.

The success of the country’s wood-based industry to date has been driven by the abundance of raw material, available at competitive prices, low labour costs and good international demand. However, it is held back by the highly fragmented nature of the industry – there are more than 5,500 plants – and its almost total lack of integration.

Log production continues to be an essential to the industry’s development, but has declined in the last decade as Malaysia has continued to beef up its sustainable development policies. However, with the anticipated increase in supply from plantation forest, log production will slowly rise again.

Family-run enterprises

Most sawmills in Peninsular Malaysia are small, family-run enterprises with annual capacities of less than 30,000m3, although mills in Sabah and Sarawak are somewhat larger. Sabah and Sarawak also dominate in the export-oriented production of plywood and veneer. Capacity is in the range of 2 million m3 to 5 million m3, depending on annual log intake.

Total annual MDF production capacity is around 1.2 million m3, while particleboard capacity is around 700,000m3. Both sectors use rubberwood as the main raw material.

Secondary processing – moulding and furniture production – have become important export markets: furniture products worth M$3.8bn were exported in 2001, for example.

Challenges ahead

Dr Abdullah identified several challenges. Increasing globalisation and freer market access would mean the Malaysian timber industry would have to produce output which meets internationally accepted standards. It would also lead, he said, “to subcontracting and offshore processing activities. This will lead to the relocation of manufacturing to countries where costs are more competitive, material sourcing is more efficient and labour is more productive”.

“Markets are going to be open to us, but the competition will be greater,” he continued. “Malaysian manufacturers need to invest in research and development as well as market intelligence to sustain their competitive edge.

“Price cutting is no longer the key to enhancing competitiveness,” he continued. “Quality and service are equally important in ensuring our sustainability. We have to be in sync with what is demanded by the market,” said Dr Abdullah, “so we must have raw material that is sustainably sourced.” However, he said, with the introduction of certification, raw material supply would inevitably decline. “The industry will have to evolve to achieve competitive advantage.”

&#8220Malaysian manufacturers need to invest in research and development as well as market intelligence so as to sustain their competitive edge”

Dato’ Dr Abdullah Mohd Tahir, secretary-general, Ministry of Primary Industries

He said this evolution could be brought about by introducing more training programmes into the industry, by integration of the various sectors, by a greater use of automation and by a more intense focus on downstream processing. And he pledged the necessary government support for creating “a conducive environment for the development of the industry”.

National certification scheme

The sustainability of the raw material was at the forefront of Dato’ Dr Freezailah Che Yom’s presentation which introduced Malaysia’s nascent timber certification scheme to delegates.

One hundred years of forest management had resulted in a country that was still very green, said Dr Freezailah, who is chairman of the Malaysian Timber Certification Council (MTCC). Around 20.2 million ha, or 62% of the total land area, is forested, plus the country has 5.27 million ha of perennial agricultural tree crops. When the latter figure is added to the equation, land under tree cover represents a massive 78% of Malaysia’s total land area.

Of the total forested area, 14.45 million ha are designated by law as the Permanent Forest Estate which is under sustainable management, of which 10.64 million ha are classified as production forest, with the remaining 3.81 million ha being protection forest where the commercial harvesting of timber is prohibited. More than 5.6 million ha or 17% of Malaysia’s land area is designated as protected for the conservation of biological diversity.

The MTCC was created in 1999 and its certification scheme, which uses a phased approach, was officially launched on January 31, 2002.

Better market access

“What was initially suggested as a market-driven tool to encourage sustainable forest management is now perceived by the suppliers of certified timber products as a potentially viable tool to gain better market access,” said Dr Freezailah. Significantly, he added, many European government agencies and local authorities now had procurement policies which stipulated that timber products be certified.

Malaysia’s national standard now applies the Malaysian criteria, indicators, activities and standards of performance for forest management certification (MC&I) which is based on the ITTO‘s criteria and indicators. It contains the key elements for sustainable forest management, covering economic, social, environmental and conservational aspects and incorporates the corresponding standards of performance for Sabah, Sarawak and Peninsular Malaysia.

FSC compatible

The MTCC plans to use a standard which is compatible with the principles and criteria of the Forest Stewardship Council (FSC). In fact, Dr Freezailah said, a multi-stakeholder National Steering Committee has already revised the MC&I to this end and there are plans to form an FSC National Working Group. This will then formulate a standard for submission to the FSC for its endorsement.

At present three forest management units have been awarded the Certificate for Forest Management, while 26 companies (mainly sawn timber exporters) have received the Certificate for Chain of Custody. In July this year, the first shipment of MTCC-certified timber arrived in The Netherlands.

Sustainable forest management must be regarded as an evolving process, said Dr Freezailah, and it was a costly process. “While consumers demand sustainably produced timber through timber certification, the issue of the green premium is far from clear. There needs to be more understanding on this matter for which NGOs could also play an important role.”

Political will

Concluding that there was no recipe for instant sustainable forest management, Dr Freezailah appealed for patience, understanding and co-operation from all stakeholders, including consumers. The most important ingredient, however, was political will and in Malaysia, he said, that was present in abundance.