CONTENTS. Editorial Board. Editorial Reminising STIDC s Involvements In Some Important Events In Feature STIDC Achieved 5S Accreditation

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2 CONTENTS Editorial Reminising STIDC s Involvements In Some Important Events In 2008 Feature STIDC Achieved 5S Accreditation Highlight Strategies Towards Sustainable Growth For The Timber Industry In Sarawak By Year 2020 Current Issue Timber Industry Updates PUSAKA SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION (STIDC) Wisma Sumber Alam, Jalan Stadium, Petra Jaya, Kuching, P.O.Box 194, Kuching, Sarawak, Malaysia. Tel: Fax: stidc@pusaka.gov.my Website: Editorial Board ADVISOR Datu Haji Len Talif Salleh General Manager CHIEF EDITOR Hashim Haji Bojet Acting General Manager MEMBERS Dayang Nena Abang Bruce Acting Deputy General Manager (Trade Development) Haluyah Binti Awi Acting Senior Assistant General Manager (Administration) Catherine Sng Bee Seio Assistant General Manager (Finance & Investment) Edmund Daging Mangku Assistant General Manager (Resource Development) Sarawak To Have Flat Royalty Rate For Timber And Timber Products Market Report Market Performance (January - December 2008) Trade Statistics, Sarawak Trade Statistics (January - December 2008 / January - December 2007) PERKASA bi-monthly newsletter is published by Sarawak Timber Industry Development Corporation (STIDC). All rights reserved. No part of this publication may be reproduced in any form without prior consent of the Publisher. The title PERKASA, its logo and contents remain the property of the Publisher. Opinions expressed by advertisers are not necessarily of the Publisher or Editor. Tagat Jimbat Assistant General Manager (Domestic Trade) Mohd. Hinri Abdullah Assistant General Manager (Preventive & Enforcement) Suraya Mohamad Ali Senior Manager (Registration & Licensing) Nicholas Andrew Lissem Acting Senior Manager (Industrial Planning) Hajjah Eda Haji Edan Publications Manager WRITER Norman Botes Noma CONTRIBUTOR Gary Gerisah Bagong 2 PERKASA VOL. 11/12 (Nov.-Dec.2008)

3 SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION (STIDC) Editorial As we ursher the New Year, we would like to take this opportunity to reminisce STIDC s involvements in some important events in Its involvements both in the local or international events reflect its continuous stride in meeting the needs of the timber industry in Sarawak. Among the local events in which STIDC had its direct involvement was the World Forestry Day 2008 which was organised in collaboration with the Forest Department and Sarawak Forestry Corporation Sendirian Berhad. This was in support of the government s passion and commitment in managing and conserving the forests in the most sustainable manner for present and future generations. STIDC also participated in mangrove tree planting awareness programmes in various places in the State. These were in recognition of the important roles of mangrove in ensuring safe coastal areas of Sarawak which acts as buffer zones and natural habitat for marine flora and fauna. Another important event which saw STIDC s direct involvement was the 15th. Malaysian Forestry Conference. Together with the Forestry Departments of the Peninsular Malaysia, Sabah and Sarawak, STIDC used this forum to share the latest information and experiences on matters related to forestry and the timber industry as a whole. Aside from these, STIDC did not miss the two important events which took place in Tanjung Manis New Township namely the launching of Sarawak Corridor of Renewable Resources (SCORE) and the launching of Tanjung Manis Shipbuilding Industrial Complex. These were in tandem with its role as the developer of this township. STIDC also briefed the industry on the New Formaldehyde Emission Regulation. This was in support of the California Air Resources Board (CARB) initiative to regulate the formaldehyde emission levels in composite wood products sold in California market. A series of industry updates were also being conducted in various places in Sarawak to educate the industry on the latest market developments. These were to ensure that the industry move in pace with the current trends in order to stay at the competitive edge. Committed to addressing the international issues and ensuring good governance in the timber industry, STIDC involved actively in the related meetings with its international counterparts. Among others, it involved directly in the International Seminar For Tackling Illegal Logging in Yokohama, Japan, Forest Law Enforcement, Governance and Trade (FLEGT) Voluntary Partnership Agreement Meeting in Brussels and Heart of Borneo Meeting in Pontianak, Indonesia. STIDC also co-ordinated a familiarization visit to the State for the foreign trade representatives. This visit among others aimed to give first hand information on Sarawak s forestry and timber sectors to these visitors. Through these concerted efforts and with the co-operation of the related parties it is hoped that this sector would continue to forge ahead for mutual benefit. STIDC would like to take this opportunity to wish all the readers of PERKASA a happy and prosperous New Year. PERKASA VOL. 11/12 (Nov.-Dec.2008) 3

4 STIDC ACHIEVED 5S ACCREDITATION STIDC one of the earliest recipients of 5S award among the government departments and agencies in Sarawak Files management before 5S implementation. Files are arranged systematically after 5S implementation. Another record was created in STIDC s chronology. This time through its success in 5S accreditation by the Malaysian Productivity Corporation (MPC) on 29th. October This achievement made STIDC one of the earliest recipients of 5S award among the government departments and agencies in Sarawak. 5S are Japanese phases for Seiri (sorting), Seiton (straightening), Seiso (shining), Seiketsu (standardizing) and Shitsuke (sustaining). In the sorting phase, unnecessary clutter is removed from the workplace whereas in the straightening phase, the workplace is organised using technique such as shadow boards and labelling. On the other hand, in the shining phase, the environment is thoroughly cleaned and maintenance tasks are identified. In the standardising phase, methods for maintaining 5S throughout the workplace are identified and documented. This is followed by the sustaining phase in which all employees must work together to continue and maintain 5S improvements. This achievement marked the realization of STIDC 5S policy Committed to acculture 5S practice in STIDC which aims to make 5S practice as working culture, to inculcate the spirit of co-operation and togetherness, to enhance productivity and quality for customers satisfaction and to create conducive working environment. This is also in line with the State Government s aspiration to get all its departments and agencies accredited with 5S by year The achievement also manifests the undivided support and commitment of STIDC management in ensuring continuous improvement for the benefit of the organisation and its clients. 5S helps to enhance efficiency and productivity which ultimately aims to meet customers needs. To the organizations, it promotes healthy competition among the staff and subsequently enhance competency. It also creates a more organized and systematic workplaces besides creating safety awareness among the workers. One example of efficiency enhancement under 5S practice is in terms of the time spent to retrieve a file which is reduced to 30 seconds from between ten to fifteen minutes previously. Hence, an organization could attend to more customers and get more transactions done daily. This contributes to more revenue and enables an organization to stay competitive and withstand any situation in the long run. Undeniably, 5S practice contributes many positive impacts. Guiding by these principles, STIDC plans to extend this practice to all its divisional and liaison offices in the near future. SUMMARY This achievement marked the realization of its 5S policy Committed to acculture 5S practice in STIDC. 5S helps to enhance efficiency and productivity which ultimately aims to meet customers needs. STIDC plans to extend this practice to all its divisional and liaison offices in the near future. 4 PERKASA VOL. 11/12 (Nov.-Dec.2008)

5 SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION (STIDC) STRATEGIES TOWARDS SUSTAINABLE GROWTH FOR THE TIMBER INDUSTRY IN SARAWAK BY YEAR million hectares of planted forests to be established by year 2020 The present economic scenario is becoming more challenging. The global financial and credit markets are in turmoil. A contagion effect is spreading worldwide with the leading governments taking co-ordinated actions to stabilize their financial market and economies. The timber industry is not spared from these global challenges, though Malaysia s timber exports have held up relatively well so far. Malaysia export to more than 160 countries and is making strong progress in the emerging markets of Asia and the Middle East. To address these challenges, the Malaysian Forest Dialogue was held on 1st. 2nd. December 2008 in Kuala Lumpur. The dialogue carried a theme Strategizing Future Directions For The Timber Industry. The dialogue was jointly organized by Business Council for Sustainable Development of Malaysia, HSBC Bank Malaysia Berhad, Malaysian Nature Society, Malaysian Timber Certification Council, Malaysian Timber Council, Malaysia Timber Industry Board, Sabah Timber Industries Association, Sarawak Timber Association, WWF Malaysia and STIDC. In conjunction with this dialogue, Datu Haji Len, General Manager of STIDC and Director of Forest Department, Sarawak presented a paper on Strategies Towards Sustainable Growth For The Timber Industry in Sarawak By Year His paper emphasized on strategic thrust for timber industry such as natural forests, planted forests, industry structure, innovation, technology, human capital development and financial policy. According to him, natural forest which is harvested in accordance with sustainable forest management practices will continue to play integral role for continuous supply of indigenous timber species. This will be complimented by the State Government s aspiration to establish one million hectares of planted forests Acacia mangium is one of the main species for planted forest establishments in Sarawak. by year These planted forest establishments will be continuously innovated through applied research and development in order to cater the demands from the local timber industry. Plans are also in the pipeline to develop related technologies and human capital so as to enhance these planted forest establishments. In addition, the financial institutions will be encouraged to provide friendly policies to promote new investments in planted forest projects. Extensive promotion of planted forests is crucial because these forests yield at least 25 cubic metres per hectare per year compared with between cubic metres per hectare per year from natural forests. These planted forest establishments also help to minimize dependence on log supply from natural forests. Moreover, knowledge and experiences from the successful players could be applied to develop our own planted forest establishments. By year 2020, log production in Sarawak is poised to reach 28.4 million cubic metres in which planted forests contribute 19.2 million cubic metres or 67.6%. The present log production is 12 million cubic meters per year. The significant increment in log production will definitely support the development of pulp and paper industry in the State and subsequently lead to the further expansion of the related industry in terms of scope and scale. At the same time, it will contribute to the promotion of valueadded products using fast growing planted species. In terms of revenue, planted forest establishments could generate RM18 billion including RM3 billion from pulp and paper industry. To ensure the success of planted forest establishments in Sarawak, there is a need to educate the related supporting industries on the importance of these projects to the economy in order to encourage friendly fiscal and non-fiscal incentives. Aggressive market promotion of products from planted forest is also vital to enhance value and market acceptance. Aside from these, human resource development as well as research and development are equally important. SUMMARY Natural forest will continue to play integral role for continuous supply of indigenous timber species from the permanent forest estates. Other plans such as planted forests, industry structure, innovation, technology, human capital development and financial policy will also form the strategic thrust for the local timber industry. Educational programmes, aggressive market promotions, human resource development as well as research and development are equally important to ensure the success of planted forest establishments in Sarawak. PERKASA VOL. 11/12 (Nov.-Dec.2008) 5

6 TIMBER INDUSTRY UPDATES Timber industry urged to pay serious attention to current market requirements Being the leader and catalyst of the timber industry in Sarawak, STIDC plays its proactive role in keeping this industry abreast on the latest developments in the global market. A series of industry updates it organized in various places in the State recently prove just that. These industry updates were in tandem with the latest developments particularly in the EU markets. Mdm. Dayang Nena (right) at one of the industry updates. Among the emphasis of the EU markets presently is the legality of the timber and timber products. Thus, these industry updates aimed to educate the industry players in Sarawak on the current market requirements of the said consuming countries. Under the Forest Law Enforcement, Governance and Trade (FLEGT) Voluntary Partnership Agreement (VPA), only legal timber is allowed to be imported into the EU markets. The global market scenario particularly the EU is now becoming more challenging. Being export oriented, it is therefore vital for the local industry players to be aware and comply with their market requirements in order to remain at the competitive edge. In 2007, Sarawak earned RM170 million from the export of timber and timber products to the EU markets. Although this represented only 2% of the overall export earnings during the said period, Sarawak regards the EU markets as equally important and will continue to comply with their market requirements. The main export items were plywood with small volume of sawn-timber and mouldings. The industry updates, presented by the Acting Deputy General Manager of STIDC, Mdm. Dayang Nena Abang Bruce saw overwhelming response from the local timber industry players. These industry updates also povided question and answer sessions on relevant issues which saw some participants expressed their gratitude for the initiative taken by STIDC in sharing the latest market developments. The events also marked STIDC consistent effort in ensuring legality and good governance in the wood-based sector. One of the participants during question and answer session. It is hoped that the local industry players would pay serious attention to the current market requirements of the said countries in order to forge ahead and remain resilient for mutual benefit. SUMMARY These industry updates aimed to educate the industry players in Sarawak on the current market requirements. Being export oriented, it is therefore vital for the local industry players to be aware and comply with their market requirements in order to remain at the competitive edge. It is hoped that the local industry players would pay serious attention to the current market requirements in order to forge ahead and remain resilient. 6 PERKASA VOL. 11/12 (Nov.-Dec.2008)

7 SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION (STIDC) SARAWAK TO HAVE FLAT ROYALTY RATE FOR TIMBER & TIMBER PRODUCTS A flat royalty rate will be imposed on all types of timber and timber products in Sarawak Come 1st. January 2009, a flat royalty rate of RM50 per cubic metre will be imposed on all types of timber and timber products in Sarawak. Since 1995, royalties on the said commodities were being charged based on the class of timber species. Datuk Amar Awang Tengah Ali Hassan, Minister of Planning and Resource Management, Sarawak emphasized that the State Government decided on this flat rate in order to further enhance the effectiveness of the delivery and collection system for forest resources. The minister disclosed that the imposition of the new royalty rate was in tandem with the significant rise in prices of timber and timber products with an average of 38 percent over the last five years. He also highlighted that from 1998 to 2002, the average export revenue from the timber industry was RM6 billion. However, from 2003 to 2007 this industry experienced steady growth with the average export revenue of RM7.4 billion despite the global pressure and challenges. It also contributed 12 percent of Sarawak s export revenue which was the third largest FIRST SCHEDULE [Section 52(2)] PRODUCE TAKEN UNDER LICENCE RATES OF ROYALTY CLASS I (i) A. Rate of royalty for logs: (a) Single (flat) rate of RM per M 3 in round or RM per M 3 converted for the year (b) Single (flat) rate of RM per M 3 in round or RM per M 3 converted for the year (c) Single (flat) rate of RM per M 3 in round or RM per M 3 converted for the year 2011 onwards. B. Rates of Royalty: RM5.00 per tonne green weight. Rhizophora spp. Bakau Bruguiera spp. Berus (Lenggadai) Excoecaria spp. Buta-Buta Carapa spp. Nyireh Other mangrove species CLASS I (ii) Shingles i) Malagangai (Eusideroxylon malagangai) and Belian (Eusideroxylon zwageri) per 1, RM5.00 (ii) Other timbers, per 1, RM3.00 Bark, Per tonne green weight RM5.00 CLASS I (iii) Poles (i) Less than 10 cm in diameter overbark at bigger end, per piece RM0.50 (ii) 10 cm and less than 20 cm in diameter overbark at bigger end, per piece RM1.00 (iii) 20 cm and less than 30 cm in diameter overbark at bigger end per piece RM10.00 CLASS II Firewood, per tonne RM0.50 Charcoal, per tonne RM5.00 Firewood, partly, converted into charcoal, per tonne green weight RM2.00 Cordwood, other than for use as fuel, per tonne green weight RM1.00 Wood or timber of whatever species, used for the manufacture of pulp, per tonne green weight RM1.00 CLASS III Miscellaneous Jelutong 10% of the current export value Other forest produce not specified above 10% ad valorem after gas and petroleum. The average national revenue from this sector was RM23 billion. Welcoming the new rate, Datu Haji Len, General Manager of STIDC and Director of Forest Department, Sarawak said this exercise helps to simplify the process and procedures for royalty payments. Hence, the Department has more time for other activities. He added that this exercise is in line with the Department s aspiration to become more efficient in its enforcement activities in the near future. He also pointed out that this system helps the State Government and the Forest Department in acquiring prompt and reliable information on revenue earned from the forestry sector. According to him, this revenue is important to finance part of the development expenses in the State. Through this system, the State Government and Forest Department will continue to know the species of timber harvested from a particular area. This is vital for our long term planning for enrichment planting as well as for sustainable forest management Datu Haji Len said. Meanwhile, some industry players also expressed their positive response to this exercise although according to them, everyone including the timber industry players is facing a tough time due to the global economic crisis. They pointed out that this is the time when everyone should support the government in mitigating this global phenomena for mutual benefit. SUMMARY The State Government, Sarawak had decided on this flat rate in order to further enhance the effectiveness of the delivery and collection system for forest resources. This system helps the State Government and the Forest Department in acquiring prompt and reliable information on revenue earned from the forestry sector. This system is vital for our long term planning for enrichment planting as well as for sustainable forest management. PERKASA VOL. 11/12 (Nov.-Dec.2008) 7

8 MARKET PERFORMANCES (JANUARY DECEMBER 2008) The accumulated values of logs and timber products exported in January to December 2008 increased by 3.51% at RM billion against that of RM billion for the corresponding period in However, there were increased in volumes of plywood, veneer and block board between %. Volumes of logs, sawn timber, dowels, mouldings, particle board, MDF, laminated board, woodchips and other timber products exported were decreased between 5-57%. The values of plywood, veneer, MDF and block board exported from January to December, 2008 increased by 9.48%, 8.20%, 10.26%, and % respectively compared to that corresponding period in The export in values of logs, sawn timber, dowels, mouldings, particle board, laminated board, woodchips and other timber products in 2008 decreased 3.18%, 2.48%, 12.21%, 53.42%, 0.84%, 21.46%, 25.02% and 20.79% respectively. Total export values of plywood, logs and sawn timber were RM billion, RM billions and RM billion respectively. This had contributed 55.36%, 21.32%, and 12.53% respectively to the total exported value of logs and timber products from the State since January until December, (Table 1) Logs The volume of logs decreased by 6.95% to 3,496,539m 3 from 3,757,600m 3 and the value decreased by 3.18% to RM billion from RM billion for the year 2008 in comparison with similar period of India remains the number one importer of the State s logs, followed by China, Japan, Taiwan, South Korea and Vietnam. There was an increase by 5.39% in the volume of logs exported to India at 1,674,931 m 3 valued at RM billion contributed 49.77% to the overall value of logs exported from January to December, 2008 against that 1,589,200 m 3 exported for the corresponding period, Volumes of logs exported to South Korea and Vietnam increased by 8.92% and 16.79% respectively from January to December, 2008 against that of the corresponding period last year. However, export of log to China, Japan and Taiwan decreased by 34.97%, 16.46%, and 11.63% respectively from January to December, 2008, compared to similar period in The top four importers were India, Taiwan, Japan and China. They had constituted 88.56% of the total volume and contributed 90.44% to the total exported value of log from January to December 2008 whereas in 2007, these top four importers constituted 90.33% and 92% of the total export volume and value respectively. (Table 2) Sawn Timber The volume of sawn timber exported decreased by 5.18% to 1,061,179m 3 from 1,119,100m 3 and decreased in value by 2.48% to RM billion from RM billion for January to December, 2008 against that of similar period in As usual, Thailand is still the traditional number one market for the State s sawn timber by purchasing 282,567m 3 of the sawn timber with exported value at RM 0.24 billion, followed by Middle East which imported 236,576m 3 valued at billion. Taiwan, Philippines and China imported 122,470m 3, 83,074 m 3 and 77,835m 3 valued at RM billion, RM billion and RM billion, respectively. However, the export volume of the sawn timber to Thailand decreased by 6.9% compared to similar period of the previous year. This was followed by Taiwan and China which decreased by 2.18% and 28.98% respectively. Only Middle East had increased in volume by 24.19% compared to corresponding period, Export of sawn timber to Thailand, Middle East and Taiwan constituted 60% of the overall exported volume for January to December and contributed 58.9% to the overall value of product compared to 55% in terms of volume and 53% in terms of value in (Table 3) Plywood Plywood exported from January to December 2008 was at 3,199,942m 3 that was 14.37% higher than that of 2,798,000m 3 exported during the corresponding period in Plywood sales at RM billion contributed 55.36% to the overall revenue obtained from the total export of logs and timber products for the period, Japan remains the number one importer of the States plywood with purchase of 1,690,790 m 3 or 52.83% of the volume exported with total value of RM billion in There was an increase by 14.62% in the volume of plywood exported to Japan from January to December 2008 compared to that similar period, Other major plywood importers were South Korea, Middle East and Taiwan with a purchase of 13.92% at 445,341m 3, 8.89% at 284,526m 3 and 8% at 257,658m 3 respectively contributing revenue of RM billion at 81.2% of the overall value of plywood exported for the period. Apparently, the volume of plywood exported to major market increased between 5-46% compared to year 2007 except United States market dropped by 38.24% (Table 4) Other Timber Export value of other timber products which included dowels, mouldings, particle board, laminated veneer lumber, veneer, MDF, block board, laminated board, woodchips and other timber product was RM0.864 billion from January to December, 2008, contributed 10.79% of the overall value of logs and timber products. There was a decrease in exported values of these products by 3.42% in comparison with similar period in The value of export of all these products under this category for the period in 2008 except for veneer, MDF and block board, was decreased compared to the previous year. In spite of the decreased in volume of MDF exported for January to December 2008, the value of MDF was increased by 10.26%. However, the volume of veneer and block board exported from January to December 2008 at 362,030m 3 and 16,566m 3 indicating respective increase by 17.28% and 174% compared with corresponding period in Future Outlook By the end of December 2008, the average unit prices of major products such as logs and sawn timber had stabilized whereas those of dowels, moulding, MDF and particle board were quite encouraging. Unit prices for logs, sawn timber, dowels, moulding, particle board, MDF and laminated board by December 2008 were 4.04%, 2.84%, 29.34%, 9.14%, 8.56%, 21.53% and 1.66% higher respectively, compared to that of similar period, In the case of plywood, veneer, block board and woodchips, unit prices by December 2008 were 4.27%, 7.74%, 8.40% and 2.14% lower respectively, compared to that of the corresponding period last year, Traditional importers of the States logs in descending order of value were India, Taiwan, Japan, China and Vietnam which together contributed 96.40% to the overall log export revenue until December, Similarly, Thailand, Middle East, and Taiwan were the top three importers of sawn timber contributing 60.46% to the sawn timber export revenue up to December, Likewise, Japan, South Korea, Middle East and Taiwan were the main consumers of the State s plywood for 2008 which contributed 81% to the overall export value. Export volumes of major products including logs and sawn timber in 2008 were lower compared to that of similar period in There were decreased by 6.95% and 5.18% respectively. In average, export values of timber and timber products were decreasing except for plywood, veneer, MDF and block board as compared to the same period, 2007.The reason was because the global markets were affected by the current global economic slowdown. This effect might be prolonged for sometimes. Global economic slowdown did play a major role in reducing the overall demand for the logs being stocked for export. Our market performances were quiet due to ongoing global economic uncertainties. The majority of countries were facing difficulties in the timber market. Market expectations for the timber market in West Africa, Indonesia, Brazil, Japan, Europe and Malaysia were low, with most expecting slower growth in the fourth quarter and into 2009 (Source: ITTO). Malaysia s Deputy Plantation Industries and Commodities Minister, Senator A. Kohilan Pillay, recently indicated that Malaysia may see declines of timber and timber products in 2008 due to the global economic slowdown. Bernama reported on the minister s statement, which said that the Malaysian industry s outlook would depend on demand from major importers such as Japan, Europe and the United States. He recalled previous statements, which indicated that Malaysia would need to expand into Middle East markets to boost exports of timber and timber products and offset drops in exports to traditional markets (Source: ITTO). The demand for Sarawak s logs for the production of plywood in Japan up to December 2008 remains higher. It is expected, the role as a number one importer of the State s plywood will still be played by Japan in the following months while, we have been facing global economic uncertainties. The Indian market which is the number one taker of Sarawak s logs export had imported 49.77% of the accumulated volume at 3,496,539m 3 which contributed 5.39% higher than the period However, Indian buyers noted exchange rate problems and credit facilities as some of the factors affecting their purchases and shipments. As it has been reported, the negative economic effects of the credit crunch are being felt in India as well (Source: ITTO). It is expected, the demand for Sarawak s logs in India for the year 2009 should be steady if not caused by economic slowdown. In Sarawak, logging operation could not be done smoothly because of the heavy rain especially towards the end of the year 2008 and early part of the year As the weather conditions improve, the logging operation in Sarawak will pick up its momentum and the log production shall increase steadily. The demands for logs and the timber products from the importing countries are predicted to be growing steadily for this year 2009, if not because of global economic slowdown. 8 PERKASA VOL. 11/12 (Nov.-Dec.2008)