Available online at www.notulaebotanicae.ro Not Bot Horti Agrobo, 2012, 40(2): 317-322 Print ISSN 0255-965X; Electronic 1842-4309 Notulae Botanicae Horti Agrobotanici Cluj-Napoca Production Potential of Rubberwood in Malaysia: Its Economic Challenges Jegatheswaran RATNASINGAM1, Geetha RAMASAMY1, Florin IORAS2, Jake KANER 2, Lu WENMING3 1University Putra Malaysia, Faculty of Forestry, 43400 UPM, Serdang, Selangor, Malaysia; jegaratnasingam@yahoo.com 2Buckinghamshire New University, Queen Alexendra Road, High Wycombe, HP11 2JZ Buckinghamshire, England 3Chinese Academy of Forestry, Wanshoushan Hou, Haidian District, Beijing 100091, P. R. China Abstract Rubberwood (Hevea brasiliensis) has emerged as the most important source of wood raw material in Malaysia. Being a plantation crop, it is regarded as a green and environmental-friendly material that has found applications in almost all sectors of the wood industry. Despite its importance as a socio-economic sector, the future of the rubberwood industry in Malaysia is under scrutiny. e steadily declining rubber cultivation area in the country is raising alarms about the future supply of rubberwood. Although the government provides a replanting subsidy for smallholders, who make up the large proportion of the growers, there is an urgent need to enhance the protability of rubber growing activities. Eorts to enhance the full recovery of wood biomass available and also expanding the use of rubberwood in high value applications must be pursued rigorously, to arrest the declining interests in rubber cultivation. Policy makers must ensure that rubber cultivation remains economical and the net value of rubberwood is further enhanced through application in non-traditional sectors. Keywords: recovery, rubberwood, supply, sustainability, value added Introduction e rubber industry has become one of the most im- portant socio-economic sectors since Malaysia?s indepen- dence in 1957. e industry has featured strongly both in terms of foreign exchange earnings as well as rural eco- nomic development for the country. e success of the Malaysian rubber industry has become the envy of many in the tropical belt throughout the world, as the country is still regarded as the leader in the eld, both in terms of its cultivations as well as its utilization. Despite its success, the rubber industry in Malaysia is losing some of its glit- ter and among the most notable fact is the rapid rise of neighbouring Indonesia and ailand as rubber producers in the world. is revelation has indeed some long term implications, as it will aect the long term development of the rubber industry as a whole (Ratnasingam and Scholz, 2009). e purpose of this paper is therefore to review the development of the rubber industry in the country, and highlight the economic challenges faced by the sector as well as to propose possible remedial actions. Rubberwood supply and processing e history of the rubber industry in Malaysia Sir Henry Wickham is credited as the father of the rubber industry in Malaysia. He brought some seeds to the Kew Garden, United Kingdom from Brazil in 1876. Some of the seedlings were then transported to the Sin- gapore Botanical Garden through Ceylon (now known as Sri Lanka) in the same year. Archive records showed that the initial cultivation of rubber in Malaysia began in Kuala Kangsar in 1879 (Ratnasingam, 2000). A mature rubber tree is usually in the range of 20 to 30 m tall and its diameter can reach up to 30 cm (Balsiger et al., 2000). e trunk is generally free of branches until the height of 3 to 10 m (Lim et al., 2003). With a planting dis- tance of 3 m by 7 m, the stocking density of rubber trees is usually in the range of 300 - 350 trees per hectare. Rubber trees are now widely planted in 20 countries around the world for the production of latex or natural rubber (Teoh et al., 2011). According to Shigematsu et al. (2011), more than 80% of total rubber plantation areas in the world are in Asia, with Malaysia, Indonesia and ailand covering almost 70% of the total rubber cultivation. Malaysia was the largest producer of rubber in the world until the late 1980?s (Balsiger et al., 2000). Indonesia then took over as the biggest rubber cultivator in the world followed by ailand. Malaysia is currently the 3rd most important country in the world for rubber cultivation (Shigematsu et al., 2011). Rubberwood as a raw material Rubberwood, or rather the wood derived from the trunks of the rubber trees (Hevea brasiliensis) aer being felled for replanting, has emerged as the most important Ratnasingam J. et al. / Not Bot Horti Agrobo, 2012, 40(2):317-322 318 are concerned about the declining prot margins for their products, which may have a long term implication on the viability of their business. e major cause of this trend is the steadily declining rubber cultivation area in the country, fuelled by the low price of latex (natural rubber) and the eagerness of the growers to convert to more protable crops, particularly oil palm (Teoh et al., 2011). It has been reported that the area under rubber cultivation has shrunk from 1.93 mil- lion hectares in 1990 to almost 1.0 million hectares in 2010 (Ratnasingam and Jones, 2011). e expected internal rate of return (IRR) of 17% envisaged in rubber cultivation was not realized in most instances, due to uctuating natural rubber prices in the world market and the increasing cost of labour experienced in rubber cultivation. Ratnasingam and Scholz (2009) have shown that rubber cultivation at best would result in returns of approximately 8% per annum, provided a yield of 2400 kg/ha of natural rubber is realized consistently and the prices of natural rubber stays above the par value. Inevitably, interests in rubber growing appear to be weaning in the large estates, while smallholders are the predominant players in this sector, although their yield and management are somewhat below par when compared to the professionally managed estates. Large estates in the country, such as Sime Darby, KL Kepong, IOI, Guthrie and Golden Hope are signicantly reducing their rubber cultivation areas. In the report by Ratnasingam and Scholz (2009), it was suggested that the subsidy (amounting to US$ 2750 per hectare) provided by the government to the smallholders is absolutely crucial in keeping the industry viable, especially when the urge to revert to the more prof- itable oil palm is available as an option. Tab. 1 provides the current industrial demand for rub- berwood among the various sectors in the country. It is apparent that almost 35% of all rubberwood biomass pro- cessed remains as waste, which must be exploited ecient- ly if the industry is to remain competitive in the future. It is apparent that the use of rubberwood in the Malay- sian wood products industry is distorted, and is not close to full and eective utilization of the available biomass. In order to o-set this ?distorted demand?, there is an urgent need to re-examine the policy and legislative instruments that could be put in place to boost better use of all the available wood resource. wood raw material in the country. Initially promoted as an alternative source of wood raw material for the wood industry, when logging activities in the natural forests was restricted by the Malaysian government in the mid-1980s, Malaysia has become the most successful country in using rubberwood throughout the world. e exploitation of rubberwood by the wood industry in Malaysia began with sawn timber processing, mainly for export to India and Sri Lanka, which had a long history in using rubberwood as other timber resources were scarce. In this context, Malaysia became the rst country to suc- cessfully export rubberwood sawn timber in the late 1970s (Hong and Sim, 1994). From being a waste-wood, rubber- wood became an important wood feedstock for the large wood products industry in the country. Although, the potential of rubberwood for applica- tions in the wood industry had been recognized way back in the 1950s, its inherent low durability and the abundant supply of other wood species from the natural forests hin- dered the use of rubberwood on a large scale. If it were not for the eorts of the Forest Research Institute of Ma- laysia (FRIM) and the Malaysian Timber Industry Board (MTIB), rubberwood would not have gained the success it currently commands (Hong and Sim, 1994). Nevertheless, it must be emphasized that the commer- cial success of rubberwood as a raw material of interna- tional repute is due to the intensive eorts by industrial players such as Masco Corporation, Hong Teak Furniture Industry and UMW Furniture Industries, who champi- oned the use of rubberwood in their knock-down furni- ture products exported to the United States of America in 1979 (Ratnasingam and Scholz, 2009). In this context, it is apparent that the public-private partnership in the successful utilization of rubberwood is very evident in the Malaysian context, and is perhaps a feat to be emulated in other rubber growing countries as well. e supply of rubberwood Despite its overwhelming success, the future supply of rubberwood has emerged as a major concern of the wood products industry in the country. In a survey by Ratnasingam and Jalil (2011), 73% of the wood products manufacturers interviewed were gravely concerned about the seasonality in the supply of rubberwood, and the ever increasing price of the material. Inevitably, most of them Tab. 1. Demand for rubberwood in Malaysia (2010) Sub-Sector Annual processing capacity(million m3) Processing eciency (%) Apparent waste produced (m3) Harvesting (i) 5.4 40 3.2 Sawmilling (ii) 2.1 30 1.5 Furniture (iii) 1.9 70 0.5 Builders carpentry and joinery (iv) 0.6 90 0.1 Panel products (v) 1.7 90 0.2 Note: Figures based on study by Ratnasingam and Jones (2011) Ratnasingam J. et al. / Not Bot Horti Agrobo, 2012, 40(2):317-322 319 Sustaining the supply of rubberwood for the future It may be inferred that the sustainable supply of rub- berwood in Malaysia is dependent on the economics of its supply, rather than its overall contribution to the socio- economics of the country. Figure 1 shows the supply situ- ation of rubberwood in the country based on the replant- ing rate of 3%. It seems that there is sucient supply of rubberwood to the wood industry in the country, and the reported short supply is unjustied. However, these calcu- lations are based on several assumptions: (i) the replanting activity is carried out as per schedule, (ii) all above ground biomass up to 10 cm in diameter is extracted from the eld, and (iii) waste and residues from the secondary mill- ing activities are used in the panel products sector. How- ever, it has been found that 35% of the above ground bio- mass from rubber smallholdings is oen le behind due to logistics and transportation reasons (Ratnasingam and Jones, 2011). In a survey reported by Ratnasingam and Scholz (2009), it was found that the average cost of rub- berwood biomass per hectare is US$ 2000, which approxi- mates to about US$ 15 per m3 of wood biomass. Although rubberwood saw logs can fetch up to US$ 60 per m3, the small dimension residues average about US$ 20 per m3. In- evitably, the cost of rubberwood ber is lower than other wood ber from the natural forests, suggesting the need for further government interventions if rubberwood pro- duction is to be expanded. Although the government provides a replanting sub- sidy of US$ 2750 per hectare to the smallholders (Shige- matsu et al., 2011), there is almost no incentive provided to ensure the highest recovery of the rubberwood biomass available on the eld from the replanting activities. Due to the technological constraints associated with the use of mobile sawmills and the higher demand for longer and wider sawn timber, most portable sawmill operators prefer to saw larger diameter logs which provides a better return (Ratnasingam and Jones, 2011). Considering the fact that almost 80% of the rubber cultivation area in Malaysia is under smallholdings, it is imperative to ensure that the highest possible biomass recovery is achieved from these rubber areas during the replanting activities. is is even more pertinent in rubber smallholdings area as the de- cision-making among such growers do not always corre- spond to main stream recommendations, especially when it comes to replanting activities. From an agronomic perspective, the average growth rate of 15 m3/ha/year recorded for rubber areas in the country should be able to sustain the demand for rubber- wood from the wood industry, provided the biomass re- cover is maximized (Shigematsu et al., 2011). Essentially, policy makers should be aware of the shiing interests in rubber cultivation in the country, and implement a frame- work of incentive schemes not only to boost replanting activities but also to ensure that the rubberwood biomass produced is fully recovered. On the other hand, increasing the value of rubberwood by expanding its applications to high value construction materials as well as fashion acces- sories may further boost the future of the material. Fig. 1 provides an analysis of the amount of rubber- wood biomass that becomes available on an annual basis in the country. It is apparent that there is sucient biomass to meet the demand of the various wood product sectors in the country, provided the biomass is fully recovered and utilized eciently. Perhaps, it is the right time for policy makers to pay greater attention to incentive schemes that will ensure the biomass is fully utilized, in order to over- Fig. 1. Rubberwood biomass production and yield status in Malaysia Ratnasingam J. et al. / Not Bot Horti Agrobo, 2012, 40(2):317-322 320 come the short supply situation faced seasonally in the country. Based on the data presented in Tab. 1, it is apparent that if the small diameter wood materials are utilized by the panel products manufacturers, the available supply of rubberwood in the country would be sucient to cope with the needs of the industry. Unfortunately, this is not the case, as many of the panel products manufacturers compete with sawmillers for the saw logs to feed their re- spective mills, inevitably forcing an ever increasing price of the material. A study by Shahwahid and Rahim (2009), however found that the production of medium density breboard from rubberwood has a conicting eect on the furniture industry. e resultant competition and the ensuing price war for rubberwood materials among the mills have nega- tively aected the protability in the industry. Hence, the wood bre cost has increased by almost 30% between 2000 and 2010, and yet, no guarantee is available to the mill- ers ensuring their future supply of the material. Although the Malaysian government has embarked on a large scale compensatory forest plantation program in East Malaysia since 2009, its implementation is mired with uncertainty regarding land issues, quality planting material and incen- tives. Although, rubber cultivation has been identied as one of the core activity in the program, without the nec- essary economic incentives and framework for plantation establishments, the anticipated success of the program remains questionable (Ratnasingam and Jones, 2011). As reported previously by several authors (Attah et al., 2009; Ratnasingam et al., 2008 a; Ratnasingam and Scholz, 2009), without a proper policy framework to guarantee the viability of rubber cultivation in the country, the un- certainty surrounding the sustainable supply of rubber- wood will remain in the country. One possible incentive scheme that could be intro- duced is the ?green technology incentive scheme? that rewards manufacturers who use or recycle waste as the feedstock into their manufacturing lines. Although such eorts are already in place in many developed countries, without nancial incentives such eorts may not materi- alize in the country, where the subsidy mentality is very much prevalent even within the large wood products in- dustry. In a report by Ratnasingam and Jones (2011) it was suggested that providing an extraction incentive between US$ 25 to US$ 40 per m3 of wood extracted from the eld as well as the factory site, would boost the recovery of rub- berwood biomass signicantly. It was further suggested that this incentive would cost up to an additional US$ 250 million per annum on top of the total subsidy provided to the rubber growers, it would serve as a strong impetus to boost the green status and also reduce the carbon foot- print of the rubberwood industry in the country. Is technology application the key to sustaining the rubberwood supply? e rubberwood industry in Malaysia is regarded as highly successful, with export earnings in excess of US$ 3 billion per annum over the last few years, while provid- ing employment for almost 75,000 people in the country (Ratnasingam and Scholz, 2009). Intensive research and development (R&D) carried out by many agencies over the last few decades have expanded the use of rubberwood to almost every sector of the wood products industry, such as saw milling, medium density breboard, particleboard, laminated veneer lumber, ply- wood, glulam, laminated nger-jointed boards, veneer, cement-bonded board, builders carpentry and joinery, ooring, door, pulp, furniture and even as the medium for mushroom cultivation (Ratnasingam and Scholz, 2009). Tab. 2 provides a summary of the technological develop- ments that could further enhance the use of rubberwood biomass in the various sub-sectors of the wood products industry in the country. Based on the available statistics from the Statistics Department of Malaysia (2010 and 2011), the amount of rubberwood available in the country is forecasted to range between 5.3 to 6.1 million m3 per annum over the next decade, which is sucient to full the needs of the wood products manufacturing sector. e forecasted g- ures shows that the supply of rubberwood in the country should be sucient to full the demands from the indus- try, provided wastages are kept under control. It goes to show that the short supply of rubberwood experienced is primarily due to: (i) inecient processing, (ii) logisti- cal short-comings in recovery activities and (iii) the un- Tab. 2. Possible technologies for the rubberwood industry Harvesting e use of on-site chipper canters would signicantly reduce waste and improve the extraction of small diameter wood materials Sawmilling e use of wood-mizer technology and the sawing-drying-ripping technique to boost recovery and minimize defects Furniture e use of optimizers and short-length nger jointer to boost recovery of short length stocks Builders carpentry and joinery e use optimizers and precision moulders to boost recovery Veneer and plywood e application of log steaming techniques and spindle-less chucks to ensure greater recovery from the small dimension logs Panel products Full on-site chipping of all materials up to 10 cm in diameter would reduce logistics cost signicantly and also ensure sustainable supply of feedstock Fuel Saw dust and other non-usable waste to be converted into briquettes and pellets for fuel Source: Ratnasingam and Scholz (2009) Ratnasingam J. et al. / Not Bot Horti Agrobo, 2012, 40(2):317-322 321 e minimum volume of saw logs produced should ? be 45 m3 per hectare; e average cost of saw-logs per m? 3 should be US$ 60; e minimum volume of sawn timber produced ? should be 15 m3 per hectare; e approximate processing cost (excluding preser-? vative treatment and kiln drying costs) should be approximately US$ 60 per m3; e average preservative treatment and kiln drying ? costs should be US 75 per m3, and e minimum sawn timber price should be approx-? imately US$ 380 per m3 or more. It is imperative to also recognize that rubberwood is not widely used as fuel-wood in the country, and hence, all available biomass should be exploited in the industrial sec- tors. Inevitably, the success of rubberwood as a raw materi- al is simply attributed to its competitive pricing compared to other wood resources, even the imported sources, and unless this competitiveness is maintained, the economics of rubberwood processing may be severely aected. Conclusion e availability of Rubberwood has been driving the success of the wood industry in Malaysia over the last three decades, since the reduced production of saw logs from the natural forests. Despite being a green and renewable wood material, its low protability to the growers and the apparently low value fetched by the wood resource in the market, are slowly but denitely eroding the interests in rubber cultivation. Although the government is support- ing the rubber industry through the provision of subsi- dies to encourage replanting, without a long-term policy framework to boost the recovery of all available wood biomass from the eld and also the factory sites, the sus- tainable supply of rubberwood for the future will remain a contentious issue. balanced distribution of the resources throughout the country (Ratnasingam and Scholz 2009; Ratnasingam et al., 2012). In other words, the is a growing necessity to exploit rubberwood to its fullest from every dierent an- gle through the appropriate technology, so much so that, without such measures and initiatives, the concern about rubberwood supply will remain persistent with the indus- try in the country. e status of rubberwood as a raw material e rubberwood industry in Malaysia is almost half a century old, yet questions surrounding the wood resource are very much persistent, especially with regards to its sus- tainable future supply and improving its processing recov- ery. Tab. 3 provides an analysis of the current status of rub- berwood in terms of its strengths and weaknesses, which will pave the way for deliberation on the resource?s future as the most important wood resource in the country. Studies by Ratnasingam et al. (2007, 2008 b) have shown conclusively that wood species is important as a marketing characteristics of value-added wood products, and in the case of rubberwood products its sales is driven primarily by its low cost. Further, the lack of certied rub- berwood resource in the country also aects its credibility as a valuable wood resource for the wood products indus- try. In essence, the future of rubberwood as a raw material for the wood products industry in Malaysia hinges upon the industry?s ability to overcome these hurdles and also exploit the opportunities available in order to change its perceived agging fortunes. Economic viability of rubberwood processing in Malaysia In a recent study by Ratnasingam and Jones (2011) it was shown that rubberwood cultivation and processing is viable and protable under the following conditions: e minimum volume of biomass (up to 10 cm) re-? covered should be above 180 m3 per hectare; Tab. 3. A SWOT analysis of rubberwood STRENGTHS WEAKNESSES most available raw material? good working properties? environmental friendly status? widely accepted? short rotation wood resource compared to trees from natural forest? declining cultivation area? low processing yield, especially in saw milling? not durable, hence necessitates chemical preservative treatment? perceived as a ?low cost waste wood?? no structural applications? no beautiful gures, hence limited high value applications? no new products or designs have been developed with the material? OPPORTUNITIES THREATS technologies can boost recovery and reduce processing waste? utilization can be extended to structural applications through ? stringent quality controls easily cultivated, and hence growing areas can be rapidly expanded ? through high timber yield clones ample breeding know-how available in the country to be tapped? incentives could be provided to boost full exploitation of the ? resource without further value-addition, material will stagnate with its ? commodity status could be easily replaced by other fast growing plantation wood ? resource fundamental chemical understanding of the material will hamper ? its exploitation the application of chemical preservatives increases its toxicity, which ? will impairs its acceptability Source: Ratnasingam and Jones (2011) Ratnasingam J. et al. / Not Bot Horti Agrobo, 2012, 40(2):317-322 322 Ratnasingam J, Ioras F, Macpherson TH (2007). 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