Kota Kinabalu: The Malaysian Timber Association (MTA) is calling for immediate Government intervention as the wood-based sector confronts a mounting “triple burden” the expansion of the Sales and Service Tax (SST), surging diesel prices, and critical foreign worker shortages.
Its President Tan Peng Juan said the timber and furniture sector, as one of Malaysia’s key export-driven industries, plays a vital role in the national economy supporting thousands of SMEs, sustaining extensive rural and industrial employment, and generating billions in export earnings annually.
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He said Malaysia remains among the world’s leading furniture exporters, and any prolonged disruption to the sector risks far-reaching economic consequences, including job losses, weakened supply chains, and erosion of global market share.
Together, he added these pressures are driving up costs, constraining production, and steadily eroding Malaysia’s competitiveness in the global timber and furniture market.
“The industry is being squeezed from all sides, taxes at the source, fuel at unsustainable levels, and labour shortages that are crippling production.
“This is not just an industry issue it is an economic one. Without urgent intervention, we risk losing not just margins, but Malaysia’s position as a leading global furniture exporter,” Tan who is also Sabah Timber Industry Association (STIA) President said here, recently.
He said the expansion of SST in July 2025 has removed the long-standing tax exemption for sawn timber (HS Code 4407), triggering cost increases across the entire value chain.
Unlike the previous Good and Services Tax (GST) regime, he said the SST does not allow input tax credits resulting in embedded, compounding taxes at multiple production stages.
He said sawn timber is now subject to a 5% Sales Tax as a “raw material for registered manufacturers,” driving an estimated 8-12% increase in downstream production costs and creating a tax-on-tax effect from mill to finished product.
“Why it matters? Because taxing at the raw material stage locks up cash flow, raises working capital requirements, and inflates the final price of value-added exports such as furniture, placing Malaysian products at a clear disadvantage against regional competitors.
“Hence, we in MTA, a national coalition of timber organisations from the Peninsular, Sabah and Sarawak, urges the Ministry of Finance to reinstate full tax exemption for sawn timber and formally recognise it as a raw material for construction materials, to eliminate cascading costs and restore export competitiveness,” Tan said.
On the volatility of diesel pricing, he said surging industrial diesel prices are pushing the timber supply chain to the brink.
“At RM5.32 per litre in Peninsular Malaysia-and significantly higher in East Malaysia-fuel costs have become unsustainable.
“As of 28 April 2026, depot prices have reached RM5.95/litre in Sandakan and RM5.65/litre in Kapit, Sarawak, excluding delivery, with actual costs rising further due to logistics inefficiencies.
“Diesel is the industry’s lifeline. From forest extraction to long-haul transport, operations are fully fuel-dependent.
“In Sabah and Sarawak, remote, off-grid sites rely on diesel not only for machinery and transport, but also for power generation—magnifying exposure to fuel cost shocks” he said.
With near-total dependence on diesel, Tan said the timber industry has no buffer against price volatility.
“With limited access to subsidised schemes such as the BUDI MADANI fleet card further widens the cost gap, squeezing margins, inflating log prices, and intensifying pressure on upstream operators.
“Therefore, MTA calls for urgent intervention through a targeted fuel support mechanism, including a dedicated subsidy quota or a ‘Timber Transport Rebate.
“Capping diesel at RM5.00 per litre would provide immediate relief and stabilise the supply chain from forest to mill,” he said.
Tan said the industry is also facing a foreign worker crisis that is a costly productivity crunch
“The timber and furniture sector continues to face acute labour shortages that are driving up costs and constraining output. Despite ongoing automation efforts, the industry remains reliant on skilled and semi-skilled foreign workers.
“The challenge we are facing is that escalating recruitment costs-including agent fees, levies, compliance, medical screening, and accommodation-are significantly increasing the cost per worker.
“At the same time, delays in quota approvals have left many mills operating at just 60% capacity, resulting in missed deadlines, idle machinery, and lost export opportunities,” he said.
Tan added the multi-tier levy system is compounding the problem, driving up labour costs and eroding already thin margins-particularly for SMEs.
Furthermore, these cost pressures are also limiting reinvestment in automation and long-term productivity improvements.
Following this, he said MTA urges the Government to implement a fast-tracked, one-stop foreign worker recruitment system to reduce delays and costs.
“A rationalisation and reduction of the levy structure for the manufacturing sector is equally critical to stabilise the workforce and restore global competitiveness,” he said.
According to Tan, the combined impact of tax inefficiencies, fuel cost escalation, and labour constraints is placing the timber industry under severe and unsustainable strain-with direct implications for Malaysia’s export performance, industrial base, and employment ecosystem.
“This is no longer a cyclical challenge”, it is a structural threat to one of Malaysia’s key export industries.
“Decisive policy action now will determine whether Malaysia strengthens or surrenders its position in the global timber and furniture market,” he said.
