NATIONAL INOVATION STUDY IN WOOD BASED INDUSTRY

The wood-based industry has long been an important part of the dynamic of manufacturing sector in Malaysia. Despite being classified as low-tech industry, the industry is one of the main divers of Malaysia’s economic growth particularly in terms of country’s export revenue. 

Also, the low technological entry barrier to the industry is deemed to be beneficial to the local enterprises, as participation in the industry is not limited to a particular or exclusive group of players. In fact, the whole value chain of Malaysia’s wood-based industry is made up of local enterprises. It is among the very few industries in the country that is able to transform the raw materials into the final product, and subsequently to penetrate the global market.

Currently, the development road maps for Malaysia’s wood-based industry are outlined in

the National Timber Industry Policy (NATIP). The NATIP envisions a vibrant wood based

industry that can continue to contribute to national development. NATIP embodies

an aspiration for the industry to produce 60% of high-value downstream products and

40% commodity-based products such as sawn timber. In this regard, the wooden furniture

industry, which is the main segment in the downstream manufacturing activities in the

wood-based industry value chain, is expected to the main anchor of this growth.

However, the vision set by the NATIP is impossible to be realised without an in-depth

study of the innovation patterns of the wood-based industry especially the furniture

manufacturing activities. Thus, this study determines the sectoral innovation patterns of

Malaysia’s wood-based industry and accordingly suggests feasible innovation policy

directions in leveraging the innovation capabilities of the industry.

Profiles of Malaysia’s Wood-based Industry

Background Malaysia is blessed with natural assets. It has 18.21 million hectares of forested land in 2009 of which 5.84 million hectares are located in Peninsular Malaysia. Of this, 82.3% are permanent forest reserves. Sarawak is endowed with 8.07 million hectares of forests where 74.3% represents permanent reserves. Similarly, there are 4.3 million hectares of forest land in Sabah where 83.7% are permanent reserves. In order to ensure a sustainable supply of forest wood for the local wood-based industry,the government must ensure that there continues to be sufficient raw materials to‘maintain and grow’ its wood-based industry. 

Government policies restricting exports of logs and sawn timber as well as incentives to help promote replanting of forests can be utilised instrumentally to assist in the long term orderly growth and development of the wood-based industry. To date, most forests plantations are growing rubber, acacia, laran and khaya. There are seven forest plantations in Peninsular Malaysia, eight in Sarawak and four in Sabah. Apart from that, there are land areas under cash cropping. These include oil palm, rubber, cocoa, and coconut plantations. Raw materials extracted from rubber, oil palm and coconut do provide raw materials to wood-based industry as R&D into the use of such materials have proved successful in their usage in Medium-Density Fiberboard (MDF), plywood and even in furniture manufacturing.

Today, the timber industry has come of age. It has becoming one of the new pillars of the

Malaysian economy contributing RM 22.5 billion or 3.3% of total merchandise exports

valued at RM 674 billion. In 2008, it was the fifth largest contributor in terms of export

earnings after electrical and electronics, palm oil, crude petroleum and liquefied natural

gas. In terms of employment 300, 000 workers are directly involved in the industry. As

one of the world’s largest exporter of tropical timber, it is now also a major producer of

furniture and other value-added downstream products.

The Sub-­‐sectorsnandn Valuen Chain

The wood-based industry in Malaysia comprises four major sub-sectors, namely:

a) Sawntimber veneer and panel products like plywood and other reconstituted panel

products such as particleboard / chipboard / fiberboard;

b) Mouldings and Builders' Joinery and Carpentry (BJC) like doors / windows and its

components, panels and flooring board / parquet;

c) Furniture; and

d) Furniture components

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

the companies are Small and Medium-size Enterprises (SMEs). Table 1 shows the number

of mills in wood-based industry in Malaysia.

Furniture and Fixtures - More than 90% of Malaysia’s furniture production is

exported. Today, Malaysia ranks as the tenth largest exporter of furniture in the

world and second in Asia after the People's Republic of China, with exports to

more than 160 countries. In 2008, exports of wooden furniture amounted to RM

6.8 billion.

 The main export destinations were the USA, Japan and Australia. The

export value of furniture is expected to have reached RM10 billion by 2010.

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

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

rubber wood. Garden and outdoor furniture made from tropical hardwood is mainly

exported to Europe as these wood species have demonstrated 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 Middle East market. Issues and Challenges Malaysia is at the crossroads as far as the speed and direction that it should take. This is particularly significant in the case of traditional industry such as wood-base industry. The industry is now confronting with numerous issues and challenges to sustain their competitive advantage in the current new economy that is extensively drives by innovation and technological capabilities. The major issues which resemble challenges to be overcome by the industry are as follows.