The Wood-Based Industry in Malaysia: The Impact of COVID-19 and the Movement Control Order (MCO)

The world has been astounded by the spread of the COVID-19 virus at the start of the year 2020. The Malaysian economy was also affected, notably smaller businesses and vulnerable groups such as lowerincome individuals, daily wage earners and workers. Proactively, Malaysia implemented the Movement Control Order (MCO) since 18 March 2020 to battle the pandemic. Selected economic sectors were, however allowed to operate subject to strict adherence to the standard operating procedures (SOPs) for the respective sector.

Speaking on the COVID-19 pandemic and MCO, the President of the Muar Furniture Association (MFA) shared that the furniture business and associated players have been affected in the first quarter of 2020. MFA also added that by not being in operation for 28 days, the furniture factories in Muar are expecting losses amounting to RM500 million, in addition to fines due to potential violation of agreements of approximately RM10 million.

Categorised as non-essential, the wood-based industry is among the sectors affected by the MCO. For the past 20 years, Malaysia’s wood-based industry has become one of the major revenue contributors to the country’s economic growth.

Employing approximately 240,000 workers, the industry encompasses the production of sawn timber, veneer, panel products (plywood, particleboard, chipboard, and fibreboard), mouldings, and builder joinery and carpentry (BJC), as well as furniture and furniture components.

In 2019, Malaysia’s exported wood and wood products valued at RM22.5 billion. Of this, 40.6 per cent was from wooden furniture and 15.1 per cent, from plywood. Notably, furniture companies in Muar, Johor play a critical role in contributing to Malaysia’s exports of wood and wood products, accounting for 60 per cent of the export value.

Muar is the furniture hub of Malaysia, housing 700 factories that represent approximately 45 to 50 per cent of the country’s furniture export.

The rapidly growing furniture industry in Muar saw many small scale businesses shifting their operations to industrial estates in Pagoh, Bukit Pasir, Bukit Bakri, Parit Jamil, Tanjong Agas and Gresik, to establish furniture manufacturing clusters with essential supporting industries. In addition to the small and medium-sized factories, many companies have expanded into larger entities. Currently, there are eight furniture companies listed on Bursa Malaysia.

The abundance of subcontractors ensured Muar’s global competitiveness in price and quantity. Muar has also become an internationally renowned Malaysian Furniture City. Since 1982, MFA, which represents all furniture and furniture parts manufacturers in Muar, has been the main driving force to make Malaysia one of the most outstanding furniture manufacturing nations in the world.

Hence, as the wood-based industry is export-oriented, the Government has taken several measures and consideration to assist wood-based industry players during this challenging time. The Ministry of Plantation Industries and Commodities (MPIC) mandated the Malaysian Timber Industry Board (MTIB) to evaluate and approve companies in the wood-based industry to operate during the MCO, particularly to fulfil agreed-upon contracts. This is in line with the stipulated conditions by the Malaysian National Security Council (MKN) and the Ministry of International Trade and Industry (MITI).

The submission of applications to MTIB began on 21 March 2020. The main criterion evaluated by MTIB is the penalty for breaching the export agreement/contract, and for preventing huge losses for exporters. Nevertheless, companies have also been approved on a case by case basis, especially for manufacturers that are suppliers to essential products.

As to date, a total of 421 companies have been approved to operate during the MCO. MKN, The Royal Malaysian Police (PDRM), local authorities (PBT) and State Forestry Department closely monitor these approved companies to ensure their compliance in adhering to all imposed conditions particularly in ascertaining the safety and health of employees. This includes physical distancing, temperature checking, as well as health and hygiene protocols.

At this challenging time, SMEs, including those within the woodbased industry, are strongly encouraged to use technology to create new value in business models, customer experiences and the internal capabilities that support their core operations. This will accelerate the recovery phase and enable the companies to become highly adaptable towards the post-MCO era.

The COVID-19 pandemic is taking a toll on the country’s economy. According to the Prime Minister, YAB Tan Sri Muhyiddin Yassin during the special interview with RTM and Astro Awani on 25 April 2020, Malaysia’s economy is losing RM2.4 billion every day as most businesses are suspended during the MCO. Nonetheless, the MCO is necessary to curb the spread of Covid-19 and save lives.

To stimulate Malaysia’s economy and mitigate any adverse repercussions from the coronavirus outbreak and other external uncertainties, the Government launched the RM260 billion PRIHATIN Economic Stimulus Package 2020 (PRIHATIN). The focus is on preventing job losses and ensuring small companies to continue to be viable. “We need to ensure that our economy continues to thrive. The Government is already taking steps to reopen the economy gradually and is ready to ensure that it recovers to become just as strong or stronger than it was before,” YAB Prime Minister added. April