The Malaysian Timber Association has issued an urgent warning that the country's wood and furniture sector is facing a "triple burden" of rising taxes, fuel costs and labour shortages, placing significant strain on the industry.
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According to the association, recent policy changes and cost pressures are eroding Malaysia's position as a leading global furniture exporter. The expansion of the Sales and Service Tax (SST) in July 2025, removing exemptions for sawn timber, has introduced a 5% tax on a key raw material. This has triggered an estimated 8–12% increase in downstream production costs due to cascading "tax-on-tax" effects.
At the same time, elevated diesel prices are adding further pressure. The industry remains heavily reliant on fuel for logging, processing and transportation, yet has limited access to subsidy schemes. The association has called for targeted fuel support, including a price cap, to stabilise operating costs.
Labour shortages represent a third major challenge. Delays in foreign worker approvals have left some mills operating at just 60% capacity, while recruitment costs, including levies and compliance requirements, continue to rise. These constraints are also limiting investment in automation and long-term productivity improvements.
The association warned that these combined pressures are no longer cyclical but structural, with potential consequences for exports, employment and supply chains. It has urged the government to reinstate tax exemptions on sawn timber, introduce fuel support measures and streamline labour recruitment processes.
Without intervention, the sector risks losing global market share as cost competitiveness deteriorates in an increasingly challenging international trade environment.
Source: www.theedgemalaysia.com
