S’wak timber industry hit hard by costs Sabah, Sarawak leaders should stay united on MA63 — MBS
KUCHING: Ah Geok (not his real name) washes plates and cups at a coffee shop here for a living – the same shop where he used to grab breakfast before heading to work at a sawmill until he and all his colleagues lost their jobs,
“I was laid off about six months ago,” he told The Borneo Post of his previous employment in the timber industry.
“All of us in the mill were laid off at once. There was no more work to be done there.
“We tried to find other work along the factory line, but there just wasn’t any. The industry as a whole is suffering.”
Ah Geok’s tale of woe is but one of many similar hard luck stories of workers in the timber industry in Sarawak which is in the doldrums with no light at the end of the tunnel.
This plight of timber industry workers was highlighted by Sarawak Timber Association during its Annual General Meeting a few weeks ago as its report painted a bleak future for the industry.
According to STA, some plywood mills currently operate as low as 10 per cent of their installed capacity.
In fact, STA forewarned that for 2019, plywood production will drop by 13.5 per cent to an average of 120,000 cubic metres per year — a marked drop from 138,430 cubic metres in 2018.
Sawn timber mills are also facing similar problems. Right now, about 50 per cent of sawn timber mills are currently not in operation as of February 2019.
STA revealed that sawmills still in operation are only utilising between 30 to 50 per cent of its actual capacity.
Rising costs to blame for demand shift
STA attributed the drop for Sarawak’s plywood and sawn timber productions to a reduction in log supply from natural forests compounded by high operational and production costs.
“Timber premiums of RM55 per cubic metre has forced the costs of logs to increase by an additional RM110 per cubic metre, based on a 50 per cent recovery rate,” it said.
“This is caused by the state government’s policy towards sustainable foreign management which is incurring higher costs for timber firms,” the report said.
Meanwhile, high labour costs is also a factor. The current national minimum wage rise to RM1,100 from RM920 per month for both local and international workers has caused an crease of at least RM40 per cubic metre.
The industry was dealt with further crippling blows as the shift of levy payments from workers to employers also played its part; additional six per cent of service tax on foreign workers recruitment fee; and a 10 per cent withholding tax.
Labour costs are expected to escalate due to government policies to toe the line of International Labour Standard.
Government policies on forest management certification have propelled log production costs by 25 to 30 per cent.
“Inefficient procedures and systems are to blame. We often face unnecessary costs and waiting time for handling foreign worker permits,” STA said.
“Also, exports often have to issue different cheques for each species under e-grading, which is not cost effective.”
Down the line, transportation costs are also to blame for high costs. In other regions, the standard load weight on the road is 42 tonnes. However in Sarawak, the standard load weight allowed is only 22 tonnes.
Industry players also highlight the poor maintenance and lack of facilities in ports around Sarawak, adding that port handling charges are high in inland ports.
“There is also a lack of direct calls from liners/vessels where transits are required through Singapore or Port Klang, which increases costs.
“From Bintulu Port, the charge is between US$ 700 to US$ 800 due to double handling and expensive terminal charges.”
STA also mentioned that a lack of infrastructure such as ports and roads increases operation and logistic costs. Less attractive in global eye All these issues compounded to make Sarawak lose its market competitiveness on the global stage.
This is seen in the downward trend of Sarawak’s plywood and sawn timber exports to its main countries over the past two years.
According to figures of plywood exports from Sarawak in 2017 and 2018, there was a 15 per cent drop in export value to Hong Kong (- 63 per cent), United Arab Emirates (- 46 per cent) and South Korea (- 44 per cent).
STA anticipates to lose two products in the global market — structural panel and floor base — as two Japanese mills will be set up by the middle of 2019 using logs and machinery subsidised by the Japanese government.
Also, the US market is right now overstocked with Indonesian plywood as the latter shifted from the European Union to the US.
“Sarawak’s plywood cannot cannot compete in terms of price with Indonesian plywood,” STA warned.
The drop in the Middle East’s demand was due to Sarawak plywood’s lack of competitiveness against plywood from China, Vietnam and Russia.
Also, plywood from China flooded into traditional export markets following the US’ imposed anti-dumping and countervailing duties, as well as the trade war.
For sawn timber, exports from Sarawak to its main countries of destination also dropped between 2017 and 2018.
Thailand’s demand for Sarawak’s sawn timber led the pack at - 39 per cent, followed by the Philippines (-27 per cent) and Bahrain and Yemen, both dropping by 25 per cent.
“For the Philippines, demand for sawn timber dropped due to Philippine importers buying from West Malaysia as the price is averagely cheaper by RM200 compared to Sarawak,” STA noted.
“West Malaysia has also taken Sarawak’s market share to the Middle East due to the quality of timber, transportation fees and cheaper prices by RM200 per tonne.”
And as long as Malaysia fails to ratify the Comprehensive and Progressive Agreement for TransPacific Partnership (CPTPP), STA forewarns that we will lose out to Vietnam in terms of tariffs.
“Countries such as China, Indonesia and Vietnam have competitive edge over Sarawak because of favourable policies, strong government support and abundant manpower,” STA added.
Call on government to review policies
STA members wasted no time in answering the Sarawak government’s call to realign their forestry activities to those of planted ones with promise of positive results.
However, the initiative is said to have lost its gainful effect as the change has instead plagued the industry with a myriad of other challenges, hindering the ability to meet the supply volume needed for downstream processing,
“Further, the bulk of planted logs are not suitable for utilisation by downstream players as the current machineries cannot effectively process planted logs,” STA underscored.
Thus, STA called on the Sarawak government to address these issues urgently to allow these mills to survive in the current operating environment.
“In order for comprehensive policies to be drawn up for effective development of the timber industry, the review of forestry policies must be grounded on accurate and updated baseline data, reflecting the actual situation of the industry and supported by feasibility studies,” STA added.
“STA urges the Sarawak government to work on advancing the insights obtained from stakeholders, industry players and other forestry agencies — instead of focusing on a major and hasty policy change.” KOTA KINABALU: Sabah Youth Council ( MBS) has urged leaders of Sabah and Sarawak to stick together in the struggle over the Malaysia Agreement 1963 ( MA63) apart from ensuring their stand was in the interest of the people and not solely for their respective political survival.
MBS deputy president, Abqaree Fawwaz Abekan said the failure to obtain the required support in Parliament to pass the amendment on Article 1( 2) of the Federal Constitution recently was very disappointing even though Sabah and Sarawak leaders still have the space to focus on restoring both states as equal partners with the peninsula as contained in MA63.
“Elected representatives of Sabah and Sarawak should be firm in their stand to fight for the rights of the two states regardless of their political stand and block, as each decision made would influence the future of the two states and those affected by the decision would the future generations,” he told Bernama here.
The Bill saw only 138 members of Parliament supporting which was short of the 148 votes required to amend the constitution, while 59 members including those Gabungan Parti Sarawak abstained.
Meanwhile, Tawau Youth Coalition chairman Andy Mohd Suryadi Bandi when contacted by Bernama hoped the rejection of the Bill would not despair the spirit of the state government to fight for the rights of Sabahans after this.
Andy said the issue of MA63 is very close to the heart of the people in Sabah and Sarawak, so the younger generations in Sabah hoped there would be a positive development on the matter and hoped the government would find the middle ground to fulfill the dreams of youths in both states.
Kunak Community Development leader, Bahri Lakile, told Bernama the action of MPs who did not vote was a big loss and disappointing to the people, and these MPs should look at the amendment in a wider context as the government today would follow up on implementing the elements of MA63.
“The move by MPs in taking a neutral stand and did not vote was unreasonable and their approach is outdated and they had betrayed the trust and desire of the people,” he said. — Bernama