REPORT ON 17 TH JOINT MEETING OF JLIA / JPMA / APKINDO / STA / MPMA

Transcription

1 REPORT ON 17 TH JOINT MEETING OF JLIA / JPMA / APKINDO / STA / MPMA 1. Introduction The Meeting was held as follows: Date: 19 September 2014 Venue: Shangri-La Hotel Jakarta Indonesia The Joint Meeting, chaired by Mr Handjaja, was hosted by Assosiasi Panel Kayu Indonesia (APKINDO). The names of the thirty Nine (39) participants and their respective Associations who attended the Meeting are listed in Appendix Opening Remarks by Heads of Delegation 2.1 Indonesian Delegation On behalf of the Assosiasi Panel Kayu Indonesia (APKINDO), Mr A. A. Malik, Secretary General of APKINDO welcomed everyone to this meeting. He hoped that everyone has gathered here for an open and friendly discussion. 2.2 Japanese Delegation On behalf of the Japan Lumber Importers Association (JLIA), Mr Masaru Ogawa, JLIA Chairman thanked APKINDO for organising this meeting. Mr Ogawa mentioned that the Japanese trading companies are currently facing tough time due to the shortage of labour, weak Yen, decreasing demand and hike in consumer tax. Distributors are now focusing on the non-housing and non-construction sectors. Meanwhile, on behalf of the Japan Plywood Manufacturers Association (JPMA), Mr Atsuhiro Inoue, JPMA Chairman thanked everyone for the generous financial and inkind contribution to help restore the damages caused by the Tsunami Earth Quake disaster which happened on 11 March JPMA is also one of the members of the Japanese Plywood Market Club. The objective of the Club is to assist in problems solving, platform for discussion and information sharing. He looked forward to a great information exchange this morning. 2.3 Malaysian Delegation On behalf of the Sarawak Timber Association (STA), Mr Patrick Wong thanked APKINDO for hosting this meeting in Jakarta and looked forward to experiences sharing and discussion on current plywood market. Mr Wong explained that the Malaysia timber industry is currently facing many challenging issues including but not limited to changes in human resource and financial/taxation policies, legislative requirements for legal timber by consumer countries and shortage in supply of raw material and manpower. These issues would undoubtedly further increase the cost of production and inevitably would result in an increase in prices of timber products. Mr Wong hoped that through this meeting, a solution on the way forward can be achieved so that the Malaysia s plywood exporters can continue to maintain its market share in the Japan market.

2 3. Market Reports 3.1 Malaysia Ms Annie Ting presented the market report for Malaysia. A copy of the report prepared by STA is attached as Appendix 2. Based on the report, the total log production of Malaysia for the year of 2013 was 15.6 million m 3. Sarawak produced 8.2 million m 3, Peninsular Malaysia 4.1 million m 3 and Sabah at 3.3 million m 3. The Sabah volume included logs from planted forests. The log production for 2014 is expected to be more or less the same as last year. In year 2013, Malaysia exported a total of RM13.09 billion worth of logs and timber products, excluding furniture exports. Sarawak contributed RM7.06 billion or 54% to the total export earnings, followed by Peninsular Malaysia at RM4.24 billion or 32% and Sabah at RM1.79 billion or 14%. Malaysia exported 3,365,386 m 3 of plywood in year From this total, Peninsular Malaysia exported 205,521 m 3 or 6%, Sabah 583,577 m 3 or 17% and Sarawak 2,576,288 m 3 or 77%. For the period of January to May 2014, Malaysia s total plywood export recorded at 1,323,929 m 3, Peninsular Malaysia exported 91,936 m 3, Sabah 209,802 m 3 and Sarawak 1,020,000 m 3. Of the 2,576,288 m 3 exported by Sarawak for year 2013, 1,429,051 m 3 or 55% was exported to Japan. Sarawak s plywood export to Japan has registered a 17% decreased in volume for the period January to July 2014 at 1,353,066 m 3 when compared to the corresponding period in Ms Annie Ting also highlighted the Sarawak State Government s decision to go for Forest Management Certification. The tenure of Timber Licence will be extended to 60 years for committed licensees. More Forest management Units and Licences for Planted forests are expected to be certified by Currently there are 3 licensees in Sarawak that are certified under MTCS-PEFC; one Forest management Unit (Natural forest) and another two Licences for Planted forests. Ms Ting also reiterated the challenges currently faced by the industry as mentioned in Mr Patrick Wong s opening remarks. These will contribute to the increased in production costs and the slowing down of plywood operations. 3.2 Japan Mr Kiyotaka Okada, Executive Director of JLIA presented the detailed information on the Japan s plywood and timber market. A copy of the report prepared by JLIA is attached as Appendix 3. Total plywood imported into Japan for January to July 2014 decreased by 2.2% compared to the same period in Approximately 2.17 million m 3 was imported for the first seven months of 2014 when compared to 2.22 million m 3 of the same period last year. For January to July 2014, Malaysia remained as the largest exporter of plywood registered at 913,724 million m 3, followed by Indonesia at 636,335 m 3 and China at 476,043 m 3. The domestic production of plywood increased by 3.9% at 1.67 million m 3 for January to July Report on 17 th Tri-Nation Meeting, 19 September

3 In 2014, imported logs (ie logs from Southseas, Africa, Russia, America (Softwood) and New Zealand) are estimated to be around 4.10 million m 3, of which 1.06 million m 3 will be supplied for plywood manufacturing. The imported logs for plywood manufacturing showed a drop of 11% compared to 1.20 million m 3 for last year. The domestic logs supply for 2014 is expected to be at million m 3, out of which 62% is for lumber, 22% for wood chip and the remaining 16% or 3.25 million m 3 is for plywood. The new Housing starts in Japan for January to July 2014 was recorded at 508,657 units compared to 535,864 units of the same period last year. From the total units for 2014, 273,880 or 53.8% were wooden houses. The housing starts decreased as the Value- Added Tax (VAT) was increased from 5% to 8% starting this year. VAT rate is expected to increase further next year. 3.3 Indonesia Mr Njoto Suhardjojo of APKINDO shared the Invention and History of Plywood Factory while Mr Budi Hermawan presented the market report for Indonesia A copy of the reports prepared by APKINDO is attached as Appendix 4. Mr Njoto told the story of ancient hardwood plywood which started 4,000 years ago. He also touched on plywood being used in USA and the first rotary plywood in Japan introduced by Mr Asano in Later, Mr Njoto touched on the ranking of the world s tropical forests as well as forest cover. The Indonesian Plywood export statistics was provided by APKINDO for , Indonesian Institute for the Revitalisation of the Timber Industry (BRIK) for years and SVLK Ministry of Forestry for The export volume of Indonesian plywood increased to 3.49 million m 3 when compared to 2.52 million m 3 in year For the first seven (7) months in 2014, the plywood export reached 2.29 million m 3. Mr Budi of APKINDO reported the Indonesian Gross Domestic Product (GDP) trends from 2004 to The GDP for 2014 is expected to be US$868 billion, a decrease of 1% compared to the 2013 s GDP at US$878 billion. The slow down was due to the ban of minerals export. The bank interest rate has been maintained at 7.5% since November The unemployment rate dropped from 8.39% in 2008 to 5.70% in A big hump in 2013 was due to the significant increased in minimum wages. The wage was increased from 9% in 2011 to 17.5% in 2014 and it is forecast to increase further to 20% in Workers in West Java received the highest wage, followed by East Kalimantan and East Java in that order. For January 2013 to August 2014, China has became the biggest importer of Indonesian wood products, recorded a total export value of US$2,980 million followed by Japan with a total export value of US$1,732 million, out of which 75% was for plywood. USA over taken the European Union (EU), to be the third largest Indonesian wood product importer at a total export value of US$772 million. The price of Indonesian plywood is expected to further increase due to the following reasons:- (i) SVLK mandatory for all wood producers with effect from 1 January 2015; (ii) 10% VAT charge on log sales which took effect on 22 July 2014; (iii) Increased of 18%in electricity prices for the year 2013 to 35% in 2014; Report on 17 th Tri-Nation Meeting, 19 September

4 (iv) Increased in fuel price of approximately 40% which is expected to be implemented in January 2015 and this will affect the minimum wages and land transportation cost directly; and (v) Increased in Meranti log prices due to a shortage of supply, caused by severe weather across the country and the new tax regulation of about US$50/ m 3 applied on logs from conversion forests with effect from March Trend on Japan Domestic Production and Related Topics Mr Yoshimasa Hirano of Japan Plywood Manufacturers Association (JPMA) presented the current plywood domestic production in Japan. A copy of the report is attached as Appendix 5. Mr Hirano reported that under the Administration of Prime Minister Abe, the Japanese economy is on a moderate recovery trend and the Government will continue to implement the integrated three-arrows strategy, consisting of aggressive monetary policy, flexible fiscal policy and growth strategy that promotes private investment. Mr Hirano further informed the participants that the consumer price index is projected to be approximately 3.2% (1.2% exclusive of the effects of the consumption tax hike). The real GDP growth rate for 2014 is projected to be approximately 1.2% while the nominal growth rate is at 3.3%. The domestic plywood production in 2013 was 2,811,000 m 3, 10% increased from the previous year. The ratio of softwood to hardwood plywood production was 93% to 7%. In the first half of 2014, the production was 1,444,000 m 3, an increased of 6% from the same corresponding period last year. The production of 12mm or more was 1,225,000 m 3, accounting for 85% of the total production for the first half of Members of JLIA presented the following reports:- 4.1 Report on Japan Housing Starts by Mr Kiyotaka Okada, Executive Director of JLIA 4.1 Report on Japan Usumono & General Plywood by Mr Takahiro Honda of Sojitz Building Materials Corporation 4.2 Report on Japan Floor Base (FB) Market by Mr Ryo Osawa of Sumitomo Forestry Co Ltd 4.3 Report on Japan Concrete Panel (CP), UCP & Structural Panel (SP) Market by Mr Yasuya Isogai of Marubeni Building Materials Co Ltd Report on 17 th Tri-Nation Meeting, 19 September

5 5. General Discussion During the discussion, the following issues were raised and responded by participants from the various Associations:- 5.1 Availability of employment data by Sarawak The meeting was informed that STA does have the general information on employment data from the Labour Department of Sarawak. The shortage of foreign workers, especially from Indonesia was mainly due to the increased in minimum wage in Indonesia and the competition from other sectors, eg oil palm plantation. The State Government is also developing other industries and Sarawakians are not keen to work in the resource-based industry. It was informed that the Malaysian Government s current policy is to reduce the industry s dependence of foreign workers as the country is aiming for high-income economy and through automation. However, automation is very costly for the timber industry. All timber associations in Malaysia are appealing to the Ministry of Human Resources, through the relevant forestry-related ministries to understand that the resource-based industry still requires a lot of foreign workers. 5.2 Minimum Wages The meeting noted that the minimum wages for Peninsular Malaysia is RM900 while Sabah and Sarawak is RM800 per month, excluding overtime. The minimum wages is applicable to all local and foreign workers. It was further added that due to the increased of minimum wages in Indonesia, the plantation industry in Indonesia especially outside Java is also having problems in recruiting workers too. As the minimum wages in Indonesia are more or less the same as the wages in Malaysia, Indonesian workers prefer to stay back to work in Indonesia than coming to Malaysia. 5.3 Japan Housing Starts Japanese are now focussing on short term investment and high income, aided by a stronger Japanese yen against US$ in the past few years, thus hoping Housing Starts would increase. However, the Japanese population is decreasing; a new rate of 1.4 children every year makes it difficult to expect increase in Housing Starts. However, the housing starts is very depending on the geography area, eg the Housing Starts in city areas such as Tokyo and Osaka are increasing as more rural people move into cities. Thus, housing starts in rural areas are decreasing. It was noted that the price of plywood decreased due to poor demand as the Housing Starts slowed down. The building/housing renovation definitely has impacted on the demand for plywood. There are few types of renovation, ie apartments and wooden houses. However, renovation works are only carried out after 20 years and house owners have the choice of using concrete or tiles instead of wood. As most house owners choose the former, trading companies should robustly push the use of wooden products. Report on 17 th Tri-Nation Meeting, 19 September

6 5.4 Japan Domestic Plywood Production The Japan domestic plywood production is increasing over the years. The Japanese Government is pushing the industry to utilise local timber for domestic supply. However, the Japanese producers/manufacturers cannot meet the local demands. Currently the local manufacturers are using 29% of its logs for plywood. The Government is targeting to raise the usage rate to 50%. Japanese still need Malaysian and Indonesian plywood for the country s consumption. Japan has more than 5 billion m 3 of round logs stock in its forest plantation. The meeting was informed that the Japanese has started to mix Japanese cedar with other species eg Indonesian Falcata and Malaysian Meranti to produce products such as Floor Base (FB). However, the quality of the Japanese cedar has limited its utilisation for producing new products and locally produced FB is more costly than imported ones. However, the Japanese Government is encouraging the production of innovative new products, using local timber species and has supported a lot of Research & Development (R&D) works on this. 5.5 Japanese Government Immigration Policy JLIA and JPMA were requested to consult their Government to relax their immigration policy of allowing more migrant workers into Japan so as to stimulate the economy, which in turn, will generate Housing Starts. The demand for new Housing Starts is getting less now since the birth rate is low and the death rate is getting higher. It was noted that currently the Japanese younger generation are still considering to work in the timber/forest industries despite the three (3)K (3K stands for kitsui (difficult), kitanai (dirty) and kiken (dangerous). 5.6 Malaysia GST of 6% STA responded that GST of 6% incurred in the course of business transactions is claimable for standard-rated and zero-rated goods and services. Exports, including the export of logs and timber products, are zero-rated, i.e. international buyers of Malaysian plywood shall not be charged GST. 5.7 Forest Management Certification The meeting was informed that the Sarawak State Government is putting pressure on a few major timber companies to go for certification by This exercise is not mandatory, but the State Government may not renew their licence if they failed to do so. 5.8 Allegations by the International Environmentalists and Non-Governmental Organisations ( NGOs) The allegations by international environmentalists and NGOs have affected the timber business and consumption in Japan. Each timber importer has its own views and approaches to tackle this matter. Generally, JLIA and STA are working together to monitor this issue closely. The environmentalists and NGOs in Japan are not only Report on 17 th Tri-Nation Meeting, 19 September

7 focused on timber products from Malaysia, but are now zooming into timber products imported from China and Russia. The Meeting was further informed that there is no standard definition of legal timber. NGOs are mixing sustainable elements, which are very subjective, into the definition of legal timber and this has created confusion in consumer countries. The NGOs are taking advantage on the deforestation issues and they have put pressure on developing countries unnecessarily. They are looking into land conversion issues without fully understanding that this is in conflict with the policy of the producer government. STA is currently working closely with the State Government on the land use in Sarawak. Such information will ensure that the land use policy is clear and consumer countries can use this information to clear some of the alleged issues. Under the EU FLEGT Action Plan, EU viewed deforestation is caused by illegal logging. Recently they attribute deforestation to land conversation and they fully realised that they cannot involved in country s decision on land use. Currently the EU FLEGT Action Plan is under review. The Meeting noted that a study on Consumer Goods & Deforestation has been completed in September 2014 by Forest Trends and funded by UK Department for International Development. 5.9 Indonesian Timber Legality Verification System (SVLK) The Indonesian Government has been working hard and is persistent on producing legal timber only. The Government is proactive to the requests made by buying countries, such as USA and Europe. When SVLK is made mandatory on 1 January 2015, all timber sources and wood products from Indonesia will be deemed legal. 6. Conclusion All parties agreed that currently the increased in costs of production, wages and taxes have affected all parties. In view of the current economic situation, all parties agreed to cooperate, think positively and move forward. All parties are committed to keep the trading relationship and looking forward to the next meeting. 6. Next meeting The next meeting is proposed to be held in Tokyo Japan next year. 7. Adjournment There being no other business the Meeting adjourned at pm with a word of thanks to all the participants. Prepared by: Annie Ting / Miriam Hong Senior Manager / Administrative Officer Report on 17 th Tri-Nation Meeting, 19 September