Downstream timber firms urged to tap improving demand

KUALA LUMPUR: Companies involved in downstream timber activities are encouraged to explore the opportunities of exporting to emerging markets like India, the Gulf countries and Pakistan while banks have to be more supportive.

Malaysian Timber Council (MTC) chief executive officer Cheah Kam Huan said although the activities worldwide had slowed down due to the recession, certain countries were showing signs of growth and the demand for wooden products had improved. “We are making inroads into countries like Dubai, United Arab Emirates and Oman as there are lots of construction activities going on,” he told StarBizWeek recently. “There are some companies exploring opportunities in these countries currently and MTC will continue to promote downstream as well as upstream products to the emerging markets through the participation of fairs and trade shows.”
However, he pointed out that the United States and European markets would remain the main export markets for Malaysia’s downstream timber products.

Cheah also urged companies to invest in new technology to produce better quality and new products.

According to MTC, Malaysia’s export of timber products in 2008 amounted to RM22.7bil, an increase of 0.1% over the previous year. Downstream activities contributed about 40% of total exports. Downstream products include mouldings, wooden frames, builders’ carpentry and joinery (BCJ) and wooden furniture. BCJ comprises flooring, windows and doors products.

The timber sector contributes about 4.5% to the nation’s gross domestic product annually. The peninsula produces more than 5 million cu m of logs annually, including rubber wood.

Cheah said downstream activities had made a lot of progress over the last 10 years but had been recently affected by the economic crisis globally. He said the industry would not view the current environment as encouraging as improvement in demand for timber products had been very slow, especially in the West. “Manufacturers affected by the export market will have to take a cautious approach to tide over this period,” he said, adding that the export figures for downstream activities this year would hardly match last year’s level.

He said the timber industry’s performance very much depended on the economic situation in the United States and Europe. “The picking up of the property and construction sectors in the West will boost the demand for timber products directly.” He pointed out that the Government’s target was to increase the contribution of downstream activities to 60% of total timber products export from 40% currently.

Financial support was key to the success of both downstream and upstream activities, Cheah said. “Banks have been reluctant to lend to all sectors, including the timber industry, since end of last year, thus the industry is facing problems in expansion,” he added.