Chua said ocean freight for certain destinations have spiked by 300% to more than 500%.
WHILE government policies and laws are key towards facilitating a healthy industry, the role of industry associations are also undeniably important in helping to ensure that regulatory measures support the growth of the industry as well.
For the Timber Exporter’s Association of Malaysia (TEAM), which was established in 1955 with approximately 680 members, it aims to distill the feedback of industry players into a single, concerted voice to liaise with the government on policy and regulatory issues related to timber.
According to its president Chua Song Fong, apart from furniture, most of the other sectors within the timber industry have seen a drop in business since the pandemic’s outbreak.
He acknowledged that the timber industry was still ‘considered lucky’ when compared to other industries, as its players could still operate during the movement control order, thereby reducing the impact caused by Covid-19.
“Timber is mainly export-oriented, so we still have to continue to export to bring in the revenue and contribute to the gross domestic product, ” he said.
That said, the timber industry has had its fair share of challenges, the most notable in recent weeks being logistics cost.
Since November 2020, Chua said, ocean freight for certain destinations have spiked by 300% to more than 500%, impacting timber companies with existing orders they need to fulfill. He expects the real impact of the inflated logistics will be felt in January to March 2021.
“Aside from that, there’s also problems with the lack of containers and shipping space, thus delaying shipment to customers - this is bad for both trade and cash flow, ” he said, adding that most companies have been dealing with tight cash flows since the start of the health crisis.
He further said, “We have a lot of backlog in Port Klang, which will cause a shortage of containers. At the same time, borrowing credit from banks means these companies have a timeline to meet, but are unable to do collection as the goods are stuck here.”
As the cost of logistics concerns any industry that imports or exports goods, the six local timber associations - TEAM, the Malaysian Panel Products Manufacturers’ Association, the Malaysian Wood Industries Association, the Malaysian Wood Moulding and Joinery Council, the Malaysian Furniture Council, as well as the Association of Malaysian Bumiputra Timber and Furniture Entrepreneurs - have engaged with the Federation of Malaysian Manufacturers and the Malaysian National Shippers’ Council to discuss the issue and call for government intervention, such as speeding up the process for the disbursement of the partial logistics cost reimbursement under the Malaysia External Trade Development Corporation’s Market Development Grant.
Another measure the government can take is reinstate the double tax deduction on freight, which had previously been applied more than a decade ago, for the years of 2020 to 2022.
“Every little bit helps. Every cost and freight basis shipment has been bleeding money since November and it’s escalating now, because containers are not being unloaded quickly enough to come back, ” he said.
For example, he pointed to ports such as the Port of Felixstowe, the United Kingdom’s busiest container port, which is badly congested. And with Malaysia exporting a large amount of timber products to the UK, Chua describes it as a perfect storm.
He explained, “Malaysia exports a lot of timber products to the UK. It’s one of our top markets, with Felixstowe Port being the number one port in the UK. Now, a lot of ships may not be able to call on that port to pick up empty containers because of that congestion.”
Aside from that, the timber industry is still grappling with the issue of consistent raw material availability and manpower, which the Malaysian Timber Council (MTC) is looking to address by working hand-in-hand with industry players.
These are persistent challenges for timber, Chua noted, adding that the raw material issue is exacerbated by the monsoon season and Covid-19. Moreover, during the early days of the movement control order, the unprecedented nature of the pandemic meant uncertainty in operating procedures and policy - the same for governments the world over.
However, he lauded MTC’s efforts in preparing seedlings for plantation forests and the Import Assistance Programme (IAP) as initiatives that have partly aided the industry in dealing with the raw material issue. An offshore sourcing programme for timber raw materials, the IAP facilitates local timber manufacturers to import raw materials by defraying part of the freight and handling charges.
Chua also called for the Department of Agriculture (DoA) to review or find solutions to enable the import of timber species not listed on the allowable import list.
“It would solve a lot of the raw material problems once the inbound fumigation part is smoothened out.
“The solution is to allocate a designated area in Port Klang far away from agriculture, a controlled environment where all fumigation will be done properly, rather than depending on the country of origin, ” he said.
He added that a meeting led by MTC chief executive officer Muhtar Suhaili in December 2020 saw the DoA agreeing to form a special task force on inbound fumigation.
Moreover, to resolve the issue of manpower, Chua said that SMEs in the timber industry need help to evolve and transform themselves.
He shared, “While flexibility and smaller volume are our strengths, many of us don’t have the capacity to digitally transform on our own. But it’s very critical.
“It’s a good time for MTC, related agencies and the government to address the needs of digitalising our systems to ensure business continuity in times of crisis, by working with solution providers to customise a system for the industry - which they are doing now.”
