FUR 406_Contribution of Wood Based in. Toward Malaysia's Economy

8/2/2019 FUR 406_Contribution of Wood Based in. Toward Malaysia's Economy

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Contents

Introduction........................................................................................................................................ 2

1.1 Domestic Market & Industry Culture....................................................................................... 5

1.2 International Furniture Market & Its Industry Culture. .......................................................... 8

1.3: Export Value and Economy Reputation. ............................................................................. 10

1.4: Technology and Innovation................................................................................................... 13

1.5: Supporting Industries Development .................................................................................... 14

Conclusions ..................................................................................................................................... 17

References...................................................................................................................................... 19


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Introduction

The objective of this discussion is to know more about wood-based industry and its

supporting industries. Other than that, is to discuss, and understand the contributionof the wood-based industry toward Malaysian economy.

First of all, let us know about this industry. The wood-based industry is one of the

major resource-based industries and one of the most important sectors contributing

to Malaysias economy. The wood-based industry can be divided into two

subcategories, namely primary and secondary wood processing.

Primary wood processing mills process logs to produce sawn timber and veneer.

Secondary processing turns primary product and other solid waste such as small

branches, off-cuts, edging or slabs, chipping and sawdust into downstream value

added products.

Through its primary and value-added processing activities, the wood-based industry

has assumed a significant role in Malaysia's industrialization programme. Conscious

of the contribution of the industry, the government has identified it as a priority

industry, targeted for further development.

Malaysian Timber Industry Board (MTIB) is a government agency which is very

synonyms to this industry. MTIB is a statutory body accredited to the Ministry of

Plantation Industries and Commodities, Malaysia. Established on 1st June 1973 by

an Act of Parliament (Act 105), Malaysian Timber Industry Board (Incorporation) Act,

1973, it has been accorded as the lead agency to enhance the development of the

Malaysian timber industry. It has ten divisions namely the Trade Development,

Industry Development & Research, Licensing & Enforcement, Bumiputra

Entrepreneur Development, Strategic Planning, Administration & Finance, Human

Resource Management, Forest Plantation, Information & Communication

Technology and Public Relations and Corporate Communication.

MTIB's objectives are as follows:

a) To further enhance the industrialisation and up-grading of the timber industry with

emphasis on value-added processing;


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b) To promote and improve the markets and marketing of timber products;

c) To facilitate development of SMEs;

d) To develop and promote standards for the manufacture of quality timber

products;

e) To foster orderliness in the timber trade.


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Contribution of Wood-Based Industries towards Malaysias

Economy

Wood-based industries play a crucial role in Malaysias economy. Wood-basedindustries contributes several major part of Malaysian economy balance. This

phenomenon can be simplified as shown on chart 1.1, below.

Chart 1.1: Contribution of Wood-based industries towards Malaysias economy.

Contribution of Wood-based Industries

toward Malaysia'sEconomy

Domestis furnitureIndusrty

Internationalfurnitureindustry

Export Income &marketing

Technology &Innovation

SupportingIndustries

development


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1.1 Domestic Market & Industry Culture

The industry is predominantly owned by Malaysian and it is estimated that 80 - 90

per cent of the companies comprise small and medium-size (SME) establishments.

Currently, there are more than 5,000 manufacturers involved in the production of

wood products, and it is estimated than 80% of these companies are small and

medium sized industries (SMI).

The industry develops a wide range of downstream product such as panel-based

products, mouldings, builders carpentry and joinery as well as furniture and furniture

components. The wood-based industry in Malaysia comprises four major sub-

sectors:-

1. Sawn timber,

2. veneer and panel products which include plywood and other reconstituted

panel products such as particleboard/chipboard/fibreboard,

3. mouldings and builders' joinery and carpentry (BJC) such as doors/windows

and its components panels and flooring board/parquet, and

4. furniture and furniture components.

Most of the larger sawmills, veneer and plywood mills are located in Sabah and

Sarawak, while down-stream processing mills such as mouldings, fibreboard, BCJ

products and furniture and furniture components are located in Peninsular Malaysia.

These mills mainly utilize rubber wood, which are sourced from sustainable

plantations. Mills in Sabah and Sarawak utilise tropical wood species for the

production of sawn timber, veneer, plywood and other veneered panel products.

More than 45 per cent of the plywood mills and 60 per cent of the mouldings mills

are located in Sabah and Sarawak.

Sabah and Sarawak attract most of the projects that utilize tropical hardwood for the

production of sawn timber, veneer, plywood and other veneered panel products.

More than 70% of the 174 plywood mills are located in Sabah and Sarawak, while for

mouldings, out of the 352 mills in operation, 157 are located in Sabah and 28 inSarawak.


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Malaysian furniture manufacturers produce a wide range of furniture from office,

kitchen, bedroom, dining room, and occasional, living room, and upholstered

furniture/sofa, outdoor and garden furniture. Furniture is made from not only wood,

but also all types of materials such as rattan, metal, fabrics, plastic, glass, marble

and other composite materials. The furniture manufacturers are located mainly in

Johor, Selangor, Sarawak, Perak and Melaka.

Malaysian furniture companies numbering about 1,900 are mainly located in

Peninsular Malaysia. A high concentration of furniture establishments are in Johor

(Muar and Kluang), Selangor (Klang and Sungai Buloh) and Melaka (Bukit Rambai).

A high concentration of furniture establishments are in Johor (Muar and Kluang),

Selangor (Klang and Sungai Buloh) and Melaka (Bukit Rambai).

Malaysian furniture manufacturers have given greater emphasis on the finishing,

design and production of higher quality products with own-brand mostly for the

export market. Some of these companies have moved from supplying ready-to-

assemble furniture towards manufacturing own-designed furniture.

And these developments, from small-sized production to large scale production are

discussed on next page.

Industry Total No. of Mills

Sawmill 1132

Kiln drying plant 244

Plywood/veneer mills 178

Wood preservationsplants

158

Woodchip mills 10

Parquet factory 26

Moulding plants 341

Prefabricated house 10

Chipboard 10

MDF plants 11

Furniture, joinery &other wood workingplants

2084

Source: Malaysian Timber Industry Board (MTIB)

Table 1.1: Wood Processing Mills in Malaysia


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The market values in performances of sector are as shown below;

Table 1.2: The market value in its performances of sector.

Sawn timber

An established industry with 1,202 sawmills in operations(Peninsular Malaysia (667), Sabah (175) and Sarawak

(180). Exports of saw logs and sawn timber in 2010 amounted toRM5.4 billion with exports mainly to Thailand, theNetherlands, peoples Republic of China, Japan andRepublic of Singapore.

Medium Density Fibreboard (MDF)

The MDF industry currently has 14 plants with a total annualinstalled capacity of 2.9 million.

In 2010, exports of MDF amounted to RM1.2 billion.

The industry has started utilising acacia mangium and

mixed hardwood to produce MDF as alternatives to rubberwood.

Currently, Malaysia is the world's third largest exporter ofMDF, after Germany and France.

MDF for Malaysia has attained international standards suchas BS, Asia-Pacific: Japan Australia and New Zealand(JANS), and EN standards.

A number of companies have also ventured into the productionof laminated / printed MDF.

Mouldings and Builders', Joinery & Carpentry (BJC)

. BJC products include architectural mouldings (panelling, skirting,crowns, and chair rails), doors/windows and accessories, wooden

flooring and wooden railings.. Exports of mouldings and BJC are mostly to the USA, UK,Australia, Singapore and Denmark. In 2010, exports of mouldingsamounted to RM715.9 million while exports of BJC valued at

RM955.3 million. The major products exported were woodenfloorings and wooden doors. To date, there are 344 mouldings and

joinery plants in Malaysia.

BJC products include architectural mouldings (panelling, skirting,crowns, and chair rails), doors/windows and accessories, woodenflooring and wooden railings.

Exports of mouldings and BJC are mostly to the USA, UK,Australia, Singapore and Denmark. In 2010, exports of mouldingsamounted to RM715.9 million while exports of BJC valued at

RM955.3 million. The major products exported were woodenfloorings and wooden doors. To date, there are 344 mouldingsand joinery plants in doors. To date, there are 344 mouldings and

joinery plants in Malaysia.


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1.2 International Furniture Market & Its Industry Culture.

Malaysia enjoys the recognition as a major supplier of wood-based panels as well as

furniture products. Especially the wood & rattanfurniture continue to perform well inthe timber sector.

ThroughMalaysias top five trading partners were the United States of America, the

Republic of Singapore, the European Union, the Peoples Republic of China and

Japan. Malaysian FDI reached RM 48 billion in 2008, but in first half of 2009 the FDI

has dropped to RM4.2 billion. Sources of foreign investments mainly lie in Japan,

Germany, the USA andSingapore.

Through its primary and value-added processing activities, the wood-based industry

has assumed a significant role in Malaysia's industrialization programme. Conscious

of the contribution of the industry, the government has identified it as a priority

industry, targeted for further development.

The main development objectives of the Industrial Master Plan (IMP) are to

transform the wood-based industry into a major resource-based industry, maximise

value-added products from forest resources as well as make Malaysia are put able

centre for high-quality wood products such as furniture, joinery and mouldings.

To date, Malaysia has signed Free Trade Agreements (FTA) with a few major trading

partners like Japan, China and Korea and tariffs for most products will be reduced or

eliminated gradually following the schedule agreed by both parties.

Besides MDF, the industry has continued to develop engineered products from

veneer such as laminated veneer lumber (LVL), laminated veneer cross-band (LVB)

and laminated veneer sandwich (LVS) to meet the demand for structural and

industrial applications.

The industry combines modern technology with the efficient use of natural resources

to produce these products for the export market. Besides being environmentally


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friendly, these products, with enhanced structural quality to meet different climatic

conditions, are increasingly being used in the construction industry.

In addition, the market value of several stage of wood-based industry is as shown in

table 1.1, on page 7.

Furthermore, Malaysian furniture industry is highly export-oriented with over 90% of

its production exported. Malaysia was the ninth largest exporter of furniture in the

world in 2010 exporting to more than 160 countries. In 2010, exports of wooden

furniture amounted to RM6.5 billion and the main export destinations were the USA,

Japan and Australia.

Among the furniture exported are kitchen furniture, bedroom furniture, upholstered

with wooden frame and office furniture of which over 80 per cent are made from

rubber wood, a light coloured, medium hardwood popularly called Malaysian oak' .

The export of garden/outdoor furniture from tropical hardwood is mainly for the

European market. The solid tropical wood species used are known for their durability

under different climatic conditions. Besides these traditional markets, Malaysian

furniture has gained access to the markets in New Zealand, South America, Middle

East, Africa and Russia. Malaysia is a major supplier of office furniture to the MiddleEast market.


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1.3: Export Value and Economy Reputation.

In 2010, exports of wooden furniture amounted to RM6.5 billion and the main export

destinations were the USA, Japan and Australia.

Malaysia was the ninth largest exporter of furniture in the world in 2010 exporting to

more than 160 countries.

Malaysia has signed Free Trade Agreements (FTA) with a few major trading partners

like Japan, China and Korea and tariffs for most products will be reduced or

eliminated gradually following the schedule agreed by both parties.

ThroughMalaysias top five trading partners were the United States of America, the

Republic of Singapore, the European Union, the Peoples Republic of China and

Japan. Malaysian FDI reached RM 48 billion in 2008 Through Malaysias top five

trading partners were the United States of America, the Republic ofSingapore, the

European Union, the Peoples Republic ofChina and Japan. Malaysian FDI reached

RM 48 billion in 2008.

The MDF industry currently has 14 plants with a total annual installed capacity of 2.9

million. In 2010, exports of MDF amounted to RM1.2 billion. The industry has started

utilising acacia mangium and mixed hardwood to produce MDF as alternatives to

rubber wood.

Currently, Malaysia is the world's third largest exporter of MDF, after Germany and

France. MDF for Malaysia has attained international standards such as BS, Asia-

Pacific: Japan Australia and New Zealand (JANS), and EN standards. A number of

companies have also ventured into the production of laminated / printed MDF.

In 2010, exports of mouldings amounted to RM715.9 million while exports of BJC

valued at RM955.3 million. In 2010, exports of plywood amounted to RM5.2 billion.

Malaysian plywood has achieved international standards such as Japan Agricultural

Standards (JAS), British Standards (BS) and International Hardwood Products

Association Standards (IHPA) for the US market and Harmonised European


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Exports of saw logs and sawn timber in 2010 amounted to RM5.4 billion with exports

mainly to Thailand, the Netherlands, People's Republic of China, Japan and

Republic of Singapore.

The paper and paper products industry comprise pulp, paper and paperboards,

corrugated paper and containers of paper. In 2008, production of containers and

boxes of paper and paperboard rebounded to higher demand for packaging

materials, especially from the export-oriented industries. Sales of paper products

increased by 9.2% to RM6.7 billion in 2008 from RM6.1 billion in 2007.

Figure 1.1: Export Value and Economy Reputation.

-Malaysian FDI reached RM 48 billion in 2008Through Malaysias top five trading partnerswere the United States of America, the Republic

of Singapore, the European Union, the PeoplesRepublic of China and Japan. Malaysian FDIreached RM 48 billion in 2008.

-Malaysias total trade in 2008 amounted to RM1,185 trillion, which depicts an increase of 6,8%compared to 2007 trade balance; exports evenrose 9,6%, while total imports grew by 4.9% toRM 504.57 billion.

-Malaysia is one of the 20largest export nationsworldwide and is ranked28th out of 121 countries

-Malaysian plywood has achievedinternational standards such as

Japan Agricultural Standards (JAS),British Standards (BS) andInternational Hardwood ProductsAssociation Standards (IHPA) forthe US market and HarmonisedEuropean

-Malaysia was the ninth largestexporter of furniture in the world in

2010 exporting to more than 160countries.

-MDF for Malaysia has attainedinternational standards such as BS,Asia-Pacific: Japan Australia and NewZealand (JANS), and EN standards.

-In 2010, exports of wooden furniture amounted to RM6.5 billion and the main exportdestinations were the USA, Japan and Australia.

-Exports of saw logs and sawn timber in 2010 amounted to RM5.4 billion with exports mainlyto Thailand, the Netherlands, People's Republic of China, Japan and Republic of Singapore.

-In 2010, exports of mouldings amounted to RM715.9 million while exports of BJC valued atRM955.3 million.

-In 2010, exports of MDF amounted to RM1.2 billion. Currently, Malaysia is the world's thirdlargest exporter of MDF, after Germany and France.

-In 2010, exports of plywood amounted to RM5.2 billion.


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Product Destination

Sawn timber Thailand, Netherlands, Japan and

Taiwan

Veneer South Korea, Japan, Taiwan and ChinaMoulding/BCJ USA, Japan, UK, Australia, Denmark,

Singapore

MDF China, Japan, UAE, Taiwan, Vietnam

and Pakistan

Particleboard China, Vietnam, South Korea and

Taiwan

Furniture USA, Japan, UK, Australia and

Singapore

Plywood USA, Japan, Taiwan and UK

Source: Malaysian Timber Industry Board (MTIB)

Table 1.3: The product and their respect export destination

Furniture is expected to remain a major contributor to export earnings, with a

projected growth of 9% per year in world furniture trade. In order to achieve higher

export earnings, furniture manufacturers have to shift away from supplying the mass-

market segment and concentrate on developing their own designs, supported by

branding and more effective marketing efforts.

Malaysia has made tremendous progress in utilizing rubberwood since the late

seventies. The export value of wooden furniture increased from a mere RM 120

million in 1988 to more than RM4 billion in 2002. It has been Estimate d that 80 per

cent of the wooden furniture exported from Malaysia is made of rubberwood.


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1.4: Technology and Innovation

Malaysias focus in the development of the wood-based industry is in value added

downstream products. This should be further supported through the development ofthe industry in an integrated manner, combining both manufacturing activities and

research and development including product design and market promotion. This is

important in the development of the wood-based industry as increasing competition

from low-cost and resource-rich countries would inevitably force Malaysia out of the

low-end markets.

The industry has moved into the production of engineered wood products from other

materials such as bamboo, rattan and fibres such as palm biomass (oil palm trunks,

empty fruit bunches, kernels), kenaf and other agricultural materials (saw dust, rice

husks and coconut trunk fibres) for the production of particleboard, fibreboard

pellets, briquettes and other composite products. The reconstituted panel products

industry has also diversified into the manufacture of high value-added reconstituted

composite products such as fibre-reinforced polymer composites (FRPC). The

products can be in the form of board/profile, and suitable for use in industrial,

construction, automotive and furniture industries.

Recognizing the need to move from designing manually to the use of Computer

Aided Design (CAD), AutoCAD is one of the popular software system used by

Malaysian furniture manufacturers today. In order to produce designs which are both

functional and aesthetic, Malaysian furniture companies have ventured to utilise a

wide range of other materials such as metal, glass, plastic and other composite

materials in combination with rubber wood or other wood species for the increasingly

sophisticated market.

Technology improvement and innovation in this industries increase the other

supporting industries. Professionals need in this field, also contributes to further

empowering the economy. The strong the power of our professionals, the strong will

be our wood-based industry.

In addition, Malaysia has vast amounts of untapped natural fibre materials available

from the agricultural sector. These fibre and biomass materials range from rice


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husks, coconut trunk fibres, kenaf to oil palm biomass in the form of oil palm trunks

(OPT), oil palm fronds (OPF) and empty fruit bunches (EFB). These alternative raw

materials offer vast potentials for development. The Government encourages

industry players to undertake more R&D to ensure the reliability of these alternative

materials.

With this innovation and technology, Malaysian reputation is increased through

worlds eye. Then, the investment chance and opportunity also will enhance the field

to be more valuable, compete with other exporter country. Power of technology is

one greater power nowadays. Whatever fields or profession, technology touch, is

need, make faster productivity and catalyse the economy.

Technology and innovation in wood based industry is very successful. Thanks to our

researcher and developer, who very committed to develop the invention and criticize

positively, and also to lecturer who is presenting the way to our young.


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1.5: Supporting Industries Development

Supporting industries is also important. They support the wood-based industries

either, in such way of directly or indirect connected to the wood-based industry. Kiln

drying, finishing, preservation and also transportation are the supporting industries.

Most of the time, the kiln drying and preservation treatment plant facilities are within

sawmills. Finishing facilities are within a furniture manufacturing plant.

Currently, the following products are promoted:-

Reconstituted wood-based panel boards or products

Wooden solid or other specialised function doors orwooden solid windows

Design, development and production of wooden

furniture Design, development and production of woodenfurniture

Multi-ply parquet

Insulation for cryogenic vessels

All wooden products except sawn timber, veneer andplain plywood


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Photo 1.1: Kiln Drying and finishing.

Photo 1.2: Transportation and preservation.


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Conclusions

As the conclusion, let us remind back, the focuses and the success story of wood-

based industry.

First, the wood-based industry will need to continue to focus on downstream value-

added processing to remain viable. This should be further supported through the

development of the industry in an integrated manner, combining both manufacturing

activities, R&D including product design and market promotion. Hence, this will

enhance the productivity, then contributing concrete the economy.

Second, the strengthening of industrial linkages is crucial in light of the increasing

competition from low-cost and resource-rich countries would inevitably force

Malaysia out of the low-end markets. The export performance of the industry is

expected to improve with the growth in the global construction industry.

Third, furniture is expected to remain a major contributor to export earnings, with a

projected growth of 9% per year in world furniture trade. In order to achieve higher

export earnings, furniture manufacturers have to shift away from supplying the mass-

market segment and concentrate on developing their own designs, supported by

branding and more effective marketing efforts.

Fourth, the Malaysian furniture industry needs to move away from the low-end

markets and penetrate into the medium and high-end markets. One of the most

important elements for future excellence is the enhancement of Malaysian furniture

designs as well as the enhancement of the countrys market presence while being

sensitive to the markets movements and trends.

Fifth, embracing new technologies and best practices is an effective means for a

player to tackle the ever-changing market. It is important to be aware of the latest

developments and technologies, employing successfully new applications.

Focussing on new technology and innovation will ensure continuous industries


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performances. This will result in economy development to be competitive and stable

when international economy is down.

Wood-based industry is among higher export sector of Malaysia. The new directions

for the Malaysian timber industry are to remain sustainable, competitive in the

challenging global environment and to meet the target of RM53 billion in annual

export earnings by 2020.

As discussed before, there is several contribution of wood-based industry on

Malaysia economy;

1. widening domestic furniture Industry,

2. exploring further international furniture industry and be competitive among

exporter country,

3. enhance the export income and increase Malaysia reputation,

4. increase development of technology and innovation,

5. develop other supporting industries.


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References1. http://www.mida.gov.my/ wood-based-industry 23/10/11

2. Malaysian-German Chamber of Commerce & Industry, Market Watch 2010

The Timber Sector,http://www.google.com/advanced search 23/10/11

3. http://www.mtib.gov.my/Frequently Asked Questions 1/11/114. http://www.mtib.gov.my/home 1/11/11

5. Furniture Industry in General, Prof. Madya Dr. Mohd Ariff

Jamaludin.9/30/2009, Wood-based Industry (FUR 406) lecture note 1/11/11

Documents

FUR 406_Contribution of Wood Based in. Toward Malaysia's Economy