Innovations in the Forest Products Industry: The Malaysian Experience

Abstract

The forest products industry is an important socioeconomic sector to many developing countries, both in terms of foreign exchange earnings and employment. In the case of Malaysia, the industry has been one of the fastest growing manufacturing sectors in the country, driven primarily by comparative advantages derived from factor inputs. However, with increasing competition from other cheaper producing nations particularly China and Vietnam, the Malaysian forest products industry is forced to transform and move along the value-chain through innovation and value-addition. Although the government has played a pivotal role in providing a broad policy framework to support value-adding and innovative activities, success on the ground has been limited. The creativity environment, which is plagued with by low-wage economy, coupled with limited network between research, market and industrial enterprises have stifled innovation within the industry. The lack of information and the poor quality human capital has also contributed to the limited innovation within the forest products industry in the country. Against this background, most innovation within the industry is confined to the realms of alternative raw materials, with minimal technological and design variations. Although extensive research and development activities are undertaken, the commercialization potential of the research outputs is limited due to being not market-driven. Inevitably, innovation in the forest products sector must be based on market-needs and must be driven through technological and design change in order to ensure long-term competitiveness.

Attributes of Sawn Timber Important for the Manufacturers of Value-Added Wood Products in Malaysia

“…From the 39 manufacturers initially identified, only 30 manufacturers consented to participate in the study. Three types of value-added wood products were chosen for this study, which included door, flooring, and furniture manufacturing industries, as these were among the fastest growing sub-sectors in the wood-based industry in the country and most of the manufacturing outfits were classified as large manufacturers (i.e., employing more than 100 workers and with an annual turnover in excess of US $12.5 million) (Ratnasingam et al 2013). …”

“…This is most likely due to the fact that value-added wood products are purchased on perceived value rather than the actual value (Ratnasingam et al 2013).…”

“…However, it is noticeable that with the drive toward value-added products manufacturing, such as furniture and furniture components, builders, joinery and carpentry (BJC), and moldings, the export revenues from these products have increased significantly over the years (Ratnasingam et al 2013).…”

“…Although sawn timber exports were curbed through the imposition of export quotas and export levies, with the intention to ensure a consistent supply of sawn timber for rapidly expanding value-added wood products industry (Ratnasingam et al 2013), the demand for sawn timber from the booming value-added wood products sector outstripped the available supply. Thus, since the late 2000s, increasing amounts of sawn timber imports have become necessary to cater to the needs of the value-added manufacturing sector.…”

An Analysis of Labor and Capital Productivity in the Malaysian Timber Sector

“…With regards to Malaysia, far too little attention has been given to the productivity performance of the timber sector. Although a study by Ratnasingam et al (2013) on the extent of innovation in the Malaysian furniture industry had shown an indirect link to productivity growth, the literature available on this topic is scarce (Pang et al 2015). Against the background of a huge industry, contributing more than RM 22 billion in export earnings in 2015, and with almost 3,000 manufacturing establishments employing nearly 180,000 workers, the questions of what drives the industry's growth and the relative performance of the various timber sub-sectors has not been well researched.…”