The Malaysian Timber Association (MTA) has called on the Malaysian government to cap diesel at 5 ringgit per litre (1.26 US dollars) and restore the sales and service tax (SST) exemption on sawn timber, warning that a “triple burden” of fuel cost volatility, expanded SST, and acute labour shortages now threatens one of the country’s primary export industries with structural decline rather than a cyclical setback.
That is according to the MTA, in a statement issued on Wednesday, with the association seeking urgent intervention from the Finance Ministry, the Domestic Trade and Cost of Living Ministry and the Plantation and Commodities Ministry as cumulative cost pressures move beyond the absorption capacity of the country’s plywood, sawn timber and furniture mills.
Wood Central understands Malaysia’s timber and timber-product exports have averaged 21 billion ringgit annually over the past decade and reach more than 160 countries, ranking the country amongst the world’s top ten furniture exporters and anchoring an industry that remains 80 to 90 per cent small and medium enterprises across Peninsular Malaysia, Sabah and Sarawak.
Japan absorbs the bulk of Malaysian plywood and sawn timber exports; the United States anchors demand for wooden furniture; and China, Singapore, India, and Australia together drive volume across construction, interior finishing, and downstream manufacturing.
Diesel sat at over 5.32 ringgit (1.34 US dollars) per litre in Peninsular Malaysia and reached as high as 5.95 ringgit per litre in parts of East Malaysia at the time of the MTA statement, sharply lifting costs across logging, transport and processing. In remote concession areas, diesel also runs power generation, leaving operators directly exposed to weekly retail price movements with limited access to subsidised schemes such as the Budi Madani fleet card.
“With near-total dependence on diesel, the industry has no buffer against price volatility,” the MTA said.
Sales tax expansion since July 2025 has compounded fuel pressure, with the removal of the tax exemption on sawn timber leaving the material subject to a 5 per cent sales tax and triggering a “tax-on-tax” effect because the SST regime does not allow input tax credits. That has lifted downstream production costs by between 8 and 12 per cent from mill gate to finished product, prompting the MTA to ask the Ministry of Finance to reinstate the full exemption and recognise sawn timber as a raw material for building products.
Foreign worker shortages have hit mill output across the sector, with some mills now running at 60 per cent of installed capacity due to elevated recruitment costs and approval delays under the Foreign Workers Transformation Approach (FWTA) introduced in January 2025. The Sarawak Timber Association in March flagged similar pressure, citing the minimum wage rise from 1,500 to 1,700 ringgit, mandatory foreign-worker EPF contributions and operational frictions inside the FWTA system.
The MTA has formally requested three concurrent interventions: a fuel price ceiling at 5 ringgit per litre, with targeted subsidy quota access for the timber supply chain; the reinstatement of the SST exemption on sawn timber; and a streamlined foreign worker approval pathway to lift mill capacity utilisation across the sector.
Those requests come at a time when Malaysia’s wood products policy targets 28 billion ringgit in annual export earnings by 2030 under the National Agricultural Commodities Policy (DAKN), an objective the association argues is incompatible with operating costs running ahead of any plausible offshore price recovery for plywood, sawn timber and furniture.
