Malaysia’s timber industry is being squeezed by rising operational costs and red and green tape, which together are threatening to erode its competitiveness in global markets. It comes as the sector grapples with the impact of an expanded Sales and Service Tax (SST), as well as lingering U.S. tariffs—introduced by Donald Trump—even as exports surged to RM9.03 billion (US$2.13 billion) from January and May this year.
Deputy Minister of Plantation and Commodities, Datuk Chan Foong Hin, said the SST has driven operational expenses up by an estimated 8–12%, inflating costs across the supply chain and placing particular strain on smaller traders: “Although export products aren’t directly taxed, rising production costs are starting to erode Malaysia’s long-standing export strength,” Chan told more than 400 attendees at a Timber Exporters’ Association of Malaysia (TEAM) event last week.
Adding to the uncertainty, Chan warned that U.S. trade tariffs could further dampen export volumes and squeeze profit margins. “US trade tariffs may reduce export volumes and profit margins, although economists believe the overall impact on Malaysia’s 2025 trade balance will be minimal,” he said.
In light of these pressures, TEAM President Chua Song Fong has called on the government to revisit the SST framework, urging policymakers to exempt timber and timber-based products from the expanded tax list, citing similar exemptions for cement and sand. “We urge the government to exempt timber and timber-based products from the expanded SST list, like cement and sand,” Chua said. He also proposed launching a stakeholder dialogue to reassess the tax’s impact and explore alternative models. “We remain committed to working with the government to achieve a balance between fiscal sustainability and industrial viability, and we stand ready to provide data, industry insights, and policy recommendations to support this cause.”
Despite these fiscal and trade headwinds, Malaysia’s timber exports remain relatively resilient. From January to May, the country’s top export categories included wooden furniture (RM3.9 billion), plywood (RM933.8 million), sawn timber (RM797.8 million), builders’ joinery and carpentry (RM560.5 million), and mouldings (RM382 million).
“Nevertheless, the industry continues to strive for better results despite the challenges faced, to maintain the competitiveness of Malaysia’s timber exports,” Chan said. Beyond taxation and tariffs, the industry is also preparing for new compliance demands under the European Union Deforestation Regulation (EUDR). Chan said the ministry is working closely with relevant agencies to ensure full compliance across the timber value chain:
“While this listing poses compliance and operational challenges, it also presents an opportunity for Malaysia to reinforce its position as a leader in sustainable and verified timber production,” he said, referring to the proposed listing of the Shorea species under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). These efforts include gathering industry feedback and supporting businesses in maintaining high standards of quality and sustainability. The ministry encourages unity and innovation among industry players to ensure Malaysian timber products continue to be valued worldwide.”
Looking ahead, Chan emphasised that the future of Malaysia’s timber industry will be shaped by three significant trends: sustainability, digital transformation, and evolving consumer lifestyles. He pointed to the National Agricommodity Policy 2021–2030, which is designed to address these shifts through five strategic thrusts—sustainability, productivity, value creation, market development, and inclusivity. He also highlighted Malaysia’s leadership in sustainable manufacturing, supported by the Malaysian Timber Certification Scheme (MTCS), which is endorsed by PEFC.
“It is important to enhance MTCS in alignment with PEFC further to maintain Malaysia’s global reputation for sustainable and legally sourced timber,” Chan said. “As we move forward, let us continue to strengthen the industry’s credibility through initiatives such as the Malaysian Timber Legality Assurance System, the development of traceability and digital documentation tools, building national capacity to meet EUDR requirements, and adopting a holistic approach to mitigate the potential listing of Shorea under CITES.”
“We must also embrace technology and digital traceability to meet EUDR and other market requirements,” Chua said. “We must work with policymakers to streamline compliance and reduce red tape, and focus on value-added products, sustainable certification, and positioning Malaysia as a responsible, premium timber exporter.”
