KOTA KINABALU: The Sabah Timber Industries Association (STIA) said the timber industry will continue to face difficulty in doing business in 2014.
With shortage of raw material, performance of the wood-based industry in Sabah is not likely to show great enhancement, said its president, Datuk James Hwong You Chuaang.
There may be improvement in pricing due to the continuous demand for the high quality timber originating from Sabah but volume will not be significantly visible due to shortage and irregular supply of logs and unfavorable weather condition, he said in his new year message yesterday.
According to Hwong, the continuous shortage of raw material supply in view of the implementation of the Sustainable Forest Management policy since the 1990s to conserve and protect the forest resources, is affecting the initiative of the industry to venture into further downstream processing.
With the dwindling supply of logs, it is very hard for the timber players to get sufficient raw material to be processed even for local markets. As for the international market, the industry is faced with having to comply with buyer’s requirement relating to legality of the timber sources. For example for Europe market, exporters will have to comply with the EU Timber Regulation (EUTR) effective since March 2013. The same goes to United States where the exporters are required to adhere to the US Lacey Act.
The impending enforcement of the Australia Illegal Logging Prohibition Act (AILPA) 2012 which will be effective in November 2014 means exporters will have another rule to comply when exporting to Australia. Besides legality issues, timber players are also required to comply with requirements of each importing countries due to the increasing need for ‘green’ supply of timber products.
Hwong pointed out that the industry appreciates the sacrifices made by the state government to achieve good forest governance and sustainable forest management in the shortest time possible, despite the economic, financial and social challenges. However, it was deemed necessary that the government guides, advises and work together with the industry to go through this challenging time to ensure the highest level of success is achieved without sacrificing the downstream industry during the “waiting time”.
He said the government should propose action plans to be put into action to guide and protect the remaining Sabah timber industries. One of the proposed immediate supporting action plans is to reduce the administrative importation fees from the current RM10/per m3 to RM5/per M3 as a symbolic signal of the full support of the government to this industry.
The recent decision by the State Government to increase the local processing logs royalty taking effect on January 1 2014 without prior consultation with the industry players is seen as another heavy financial burden on the shoulder of the industry. The increase in electricity tariff, the minimum wage requirement, high transportation cost due to the increase of diesel and petrol prices, high shipping cost, shortage of local workers and high cost in employing foreign workers are the major factors contributing to the exorbitant cost of doing business in Sabah, he said.
In 2013 logs production from natural forest was estimated to be in the region of 1.5–2.0 million m3 with 0.8–1.0 million m3 for plantation logs. Panel products such as plywood and laminated board recorded to be the highest products exported in terms of volume and value compared to the other major timber product.
The export of sawn timber for Jan-Nov 2013 decreased by 1.7% in terms of volume and 8.8% in terms of value compared to the corresponding period of 2012. The major market for Sabah’s sawn timber comprised of Thailand, China, Taiwan, Japan, South Africa, Philippines, Peninsular Malaysia and Belgium.
Plywood exports for Jan-Nov 2013 increased 1.6% in volume and 2.8% in value compared to corresponding period of 2012. Japan stood as the biggest market destination for Sabah’s plywood followed by Peninsular Malaysia, Middle East, Korea, Mexico, USA and Mexico.
The export of veneer increased by 11.2% in terms of volume and decreased by 2.5% in value. Korea was the biggest buyer followed by Sarawak, Taiwan, Japan, Philippines and Indonesia.
Sabah exports of moulded wood recorded a decrease of 39.6% in terms of volume and 36.4% in terms of value. Japan topped the list followed by Germany, Australia, Maldives, Poland, Korea and Netherlands. The export of laminated board increased by 8.3% in volume and 7% in value compared to corresponding period of 2012. Japan, Taiwan, Singapore, Peninsular Malaysia, Korea, Thailand and Canada were the top buyers of Sabah’s laminated board.
The forestry sector contributed only about 4.05% amounted to RM176.5 million to the state revenue in the year of 2012.
Hwong reiterated that currently the timber sector is mainly depending on availability of plantation logs and imported raw material to survive in business. Therefore, it is hoped that the government will look into how to work with the industry to sustain and support the continuous existence of the wood-based sector in Sabah.
He said STIA would continue to play an active role in the development of the timber industry in Sabah. It is hoped that government can provide the necessary support and back-up plan such as organizing quarterly dialogue/review meeting with industry players to discuss related issues such as industry development program, action plans, etc., to provide guidance to the industry to move forward during this difficult period and remain competitive.