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The MalaysiaÕs wood-based industry is expected to contribute substantially to national income earning through value-added products such as furniture, mouldings, panel products as well as buildersÕ joinery and carpentry. During the Second Industrial Master Plan (IMP2, 1996Ð2005), it was recorded that the total export value of wood-based products increased by an average annual rate of 5.7% from RM12.8 billion (1996) to RM 21 billion (2006) with the significant increase evidenced in panel products. Based on that remarkable growth, Third Industrial Master Plan (2006Ð2020) outlined that exports of wood-based industry are targeted to rise at an annual rate of 6.4% to reach RM53 billion by 2020.

Reducing Emissions from Deforestation and Forest Degradation (REDD) is a mechanism which aims to mitigate the negative effects of climate change, by reducing or avoiding carbon emissions. It is a market tool sourcing money from the international community in order to prevent deforestation or degradation.

Since many decades, Malaysia has been recognized as a major supplier of tropical wood products in the world. Malaysia has exported wood products to all the regions in the world mainly to Asia, Europe, Middle East, Oceania (New Zealand and Australia), America and Africa. Traditionally, Europe has been the favorite market for Malaysia after Asia. In 2008, Asia market (about 54%) constitutes the highest percentage of the Malaysia total wood export value and followed by Europe (12%). Among the European market, Western Europe received the highest exports of wood product value from Malaysia (47% of the total European market). The biggest export markets are Netherlands, Belgium, France, United Kingdom and Germany. In 2008, the export value to Europe was USD 586,925,586. Despite that, in 2013 we expected that it will decline to 503,000,000 USD. The total trade value of Malaysian wood products in the European region is expected to decline about 14% compared to 2008.

Europe has been in prolonged debt crisis and the markets including timber products were badly affected. Since the 1970?s, European market has been one of the traditional markets for Malaysian timber products, particularly sawntimber. Currently, Malaysia is facing many competitors (especially Brazil and China) in the export of timber products to the European market. To what extent is Malaysia affected by the increasing international competition and what are the steps necessary to remain competitive?

Since the formation of Malaysia in 1963, there was an obvious reduction in the forested area of Peninsular Malaysia. Statistical data from the Forestry Department Peninsular Malaysia showed that the forested area in 1970 decreased sharply from 8,012,600 ha to 6,361,400 ha in 1980 and finally declined to 5,788,523 ha in 2012. The major cause of forest area decline in Peninsular Malaysia was forest conversion to commercial agricultural crops, particularly oil palm and rubber, as well as other crops such as paddy, coconut, pineapple and cocoa. Oil palm plantation area in particular, increased from 99,580 ha in 1966 to 2,524,672 ha in 2010.

The acronym of BRIC is becoming widely-known as its use by the media increases. BRIC stands for Brazil, Russia, India, China and it is the acronym that captures the new importance and effect of these new big engines of globalisation. These giant countries with their dynamics, thirst of resources and industrial development are now reshaping the international trade. The BRIC dynamics now creates major ripple effects in all economic sectors. The exponential growth of BRIC economic activities have been recorded and commented since the mid-nineties, but what about BRIC issues in the timber sector and its effect on Malaysia?.

At a global level, forest products consumption appears to follow one of the most general empirical rules whereby the richest consumes the most. When applied to countries, the rule changes into the wealthier the nation, the higher the timber consumption. The macroeconomic data confirms such trend, where the volume of timber consumption of a given country is noticeably related to its Gross Domestic Product. Figure 1 illustrates this trend, with some dispersion explained by different cultures, habits of using wood, marketing, tastes and history in the various countries. Such observation, which matches the intuition, may be related to the common myth that economic development automatically comes from selling products with the highest added value; earning the highest income from exporting the most advanced or expensive products; or being the most competitive by producing the highest quality goods. This article discusses a more nuance approach, taking into account the different realities regarding tropical and temperate forest products.

Informal and regional timber trades are commonly understood and primarily viewed as domestic trade. The development of these informal and regional trades is not only fueled by factors such as the dynamics of economic growth and local livelihoods, and the globalisation and increasing interdependence of economies, but also the weakening of the states, and institutions in the less developed countries. There are increasing indications and analyses, showing the growth and the extent of the informal trades beyond national borders, either for chainsaw milled (primary) or processed timbers. Regional informal timber trades in Asia (Indonesia, Philippines, Vietnam and South China) and in Africa (Cameroon, Nigeria, Niger, Chad, Sudan and Ghana) are becoming abundant reflecting similar developments as in agricultural products.

The increase in global attention on climate change, also heightens pressure on the implementation of certification on rubberwood plantation. Certification ensures that resources are managed sustainably for economic, environmental and societal benefits. The international push for rubberwood certification is an urgent issue as MalaysiaÕs furniture exporters are facing great pressure from the American and European markets. Some furniture buyers from Europe and America require certification especially from the Forest Stewardship Council (FSC) and Programme for the Endorsement of Forest Certification Schemes (PEFC).

An important indicator of the dynamics of the economy and its day to day evolutions is the performance of stock exchanges market. In the case of Malaysia, the KL Composite Index shows that since the world economic downturn in early 2008, the Malaysian economy started to recover in March 2009 (Fig. 1), while most of the developed countries are now still struggling with their sluggish economies.