What is the timber industry’s contribution to the GDP of Malaysia? Where do you see this figure heading in the future?
HARUN: Timber is a very important commodity to the Malaysian economy. In the year 2011, Malaysia exported about RM23bn ($7.4bn), which contributed close to 2.9% of Malaysia’s total exports, and which is roughly 1 – 2% of the GDP. This is a very significant contribution to the economy and the growing timber sector. We have a National Timber Industry Policy, and we have targeted that, by the year 2020, we will be able to achieve RM53bn ($17bn) of our export from the current RM20bn ($6.4bn), which is where the growth of 6.4% is being targeted every year for the industry.
How much of overall timber production is currently exported? What is your strategy with regards to exports going forward?
HARUN: The National Timber Industry Policy has targets; however, because of export revenue in certain years, these targets are contingent on the world economic situation. With some strategies, we want to export less timber as a commodity, such as plywood and logs. At the moment, 60% of our exports are based in production, but by the year 2020, we expect that value addition of products, such as furniture, carpentry, and even moldings will occupy 60% of that component. This is where our strategies are heading, more toward the value addition, with furniture and end products as a focus.
Exports fell from 2010 to 2011, including plywood and logs, but the value of these exports fell only marginally. Is this an indication that the country is already moving toward the higher value-added side of production?
HARUN: Yes, indeed we are. Most of the current strategy that we have formulated with the government-industry relationship is directed more toward value addition, and this is where we are having more new investment opportunities. We are pouring these investments into our high value-added products. Even for furniture manufacturing, we are not just content with OEM (Original Equipment Manufacturing) or reproduction, but are striving toward the higher end of that design. For that matter, we must have a design, or road map, for furniture and wood products, and this is where there are specific targets and milestones where we will be able to achieve higher value for these value-added products. This is where the government would like to emphasize that the future of the timber industry lies in the export of value-added products. We are still working very hard on this higher end, especially on the ODM (Original Design Manufacturing), which will lead to a branding for Malaysia, which, currently, is not as well-known as we would prefer.
What plans are in place to increase the use of forest plantations as a source of raw material?
HARUN: 56% of Malaysia is covered by natural forests. But in the future, the nation’s supply of timber may not come from these natural forests. A significant amount will be cut from plantation forests, which we will control. MTIB was assigned by the government to aid in the development of forest plantations, and with these plantations we will be able to supply the raw materials to the furniture industry, which includes moldings and carpentry. What we are doing is quite selective in terms of species and we have priority for seven species, including rubber trees and acacia. The target is to produce about five million cubic meters every year by the year 2021. We started a program in 2006, which will contribute significantly to having the material raw supply, as this is a crucial factor for the advancement of our furniture industry.
What are the biggest markets for Malaysia’s timber exports?
HARUN: Traditionally, we have three major areas with which we trade, and these are the United States, Japan, and the European Union. Emerging markets, such as India and Australia, are also becoming quite strong. However, I can divide our market into three different segments. The first being the traditional markets, which, aside from the three major areas previously mentioned, include Thailand and Singapore. The second part consists of emerging markets, such as the Middle East, and Dubai as a conduit. Eastern European countries, such as Poland and Russia, are also part of this emerging market. The third area is the new markets, with African countries. We are exporting to South Africa, but other parts of the African continent have hardly been touched, as is the same with Latin America. Since we hardly have any commerce there, this is where we should be targeting and strategizing methods for export. In some of my discussions with council members from various Latin American embassies in Kuala Lumpur, the members emphasized their interest in having value-added products exported to their countries, so this is something that we should look to in the future.
What are your specific strategies and targets for the three market segments you identified?
HARUN: At the moment, our strategies for the Eurozone are nearly stagnant, but the United States is still a huge market, especially for our furniture. We have to strategize using not just rubber wood as our export material, but also other higher-end species. To add to that, we import a lot of high-quality timber from the United States and Northern Europe, such as oak, cherry, and ash, specifically to suit the demands of the market. Latin America and Africa have huge potential. We will work with a specific target, but we are looking at maybe 10-20% of exports going to these markets, which should be achieved by the year 2020.
Timber is a very important commodity to the Malaysian economy. In the year 2011, Malaysia exported about RM23bn ($7.4bn), which contributed close to 2.9% of Malaysia’s total exports, and which is roughly 1 – 2% of the GDP.
Malaysia’s palm oil industry has come under attack by some NGOs for being unsustainable, even though much work has been done by the industry to increase sustainability. What is being done to ensure that the timber industry remains sustainable?
HARUN: We are moving in the same path, in keeping with the global change towards the environment. Gone are the days where nobody questions the source of timber. Now, the question of legality is extremely important. When a person cuts down a tree, the source and legality of that tree must be transparent. In addition, certain practices require sustainability, such as our operation in the forest. In areas such as the United States and the European Union, any export must have its origins explicitly stated. More recently, Australia’s Illegal Logging Prohibition Bill ensures that products, even just parts of furniture, have a stamp of legality. The MTIB, together with the Ministry, and other related timber councils, are approaching those countries to assure them that Malaysian timber is not acquired via illegal practices. This is something that we must assure the market, as this industry is market-driven. In the year 2013, the European Union is going to pass a law mandating that any product imported from certain countries must be guaranteed to have come from a legal source, and we are addressing this with our continuous negotiations. Once we arrive at a certain agreement with the EU, hopefully we will have continuous market access to the twenty seven countries.
What is your overall outlook for the timber industry in Malaysia? What are the most pressing challenges at the moment?
HARUN: The growth of the timber sector can be confined to two major areas, especially in terms of the end products. Number one is the health of the housing industry, as this correlates to construction. The second part is furniture. Slowed-down construction is a prime problem in the United States and parts of Europe. In Holland, they used to approve 80,000 units of housing, but now they approve between 30,000 – 40,000, and that reduction impacts the production of timber. Once new houses are built, the furniture component will change, as furniture will be necessary for a new house. We are also challenged by competition from several other countries’ furniture production industries, such as those in Vietnam and Indonesia, which have environments and ecosystems more suited to timber than Malaysia. So we as a country must move up a notch in terms of manufacturing and production. We are moving toward designing furniture to suit Italian, German, and French markets, and again, we want to export less timber as a commodity. What we are targeting is exporting less volume, but higher value end products instead. However, to have furniture, we need designers, mechanization, and direction in our production, and we need to have access to other markets.
Where does Malaysia stand relative to other major players in the global timber industry?
HARUN: I feel that Malaysia is a global player in the timber sector. We are the second-largest supplier of tropical plywood in the world, the biggest exporter of balsa timber in the world, and we are now ninth in terms of global furniture export. This is the area where we would like to reduce commodity exportation and increase furniture production. Here, in Malaysia, we take care of our environment. The raw material is still our strength, and of the 56% of our land that is covered with natural forests. We have committed 50% of our forests to remain covered. This is where the plantation sector will be necessary to supply a continuous amount of raw materials. I personally feel that importation of raw materials from Africa, Latin America, the United States, and Europe will increase in the coming years, and will ensure that we will sustain our timber industry.