Some aspects of forestry and economic development in Malaysia: past and present

Professor Yeah Kim Leng, Professor and Senior Fellow at the Jeffrey Cheah Institute on Southeast Asia, Sunway University, Malaysia

The importance of forest resources in Malaysia is shaped by markets and influences related to institutions, policies, and practices, as well as the interactions between people and the environment. The evolution of forest management over more than a century provides rich insights into these dynamics, and how they have shaped the country's economy. This article provides a broad-brush narrative on four key themes of these evolving relations. The first focuses on approaches to colonial forest management and its legacy for Malaysia's forest sector. The second briefly examines the vital role that permanent reserved forests have had in ensuring economic sustainability. The third deals with the contribution of forest resources to the country's economy, especially for industrialization’s take-off. The final theme looks at broader development issues related to the ‘resource curse’ and sustainable forest management.

Development of Forestry During British Colonial Administration

British scientific forest management in pursuit of maximum sustainable yield was built on practices which began in continental Europe in the early 19th century, and experiences in India.

Authorities in British India recruited Dr. Dietrich Brandis, a German–British forester, to address the large-scale deforestation and unsustainable exploitation of timber resources arising from the high demand for timber and from the rapid expansion of India’s railway networks since 1850.¹ Eight years after Sir Dietrich Brandis, the 'father of Indian forestry', introduced scientific forestry practices to India, the Indian Forestry Service was established in 1864.

The Malayan colonial foresters made their own major modifications and indigenous adaptations appropriate to highly complex, heterogeneous, and little-known tropical rainforests―subtropical forests in India and temperate forests in Europe that evolved more than 65 million years ago during the global cooling were not as complex (Poore, 1990).

In Malaya, the first known forestry record was an 1879 report by a colonial engineer of the Straits Settlements, Major McNair, who travelled extensively and wrote about the commercial potential of timber trees and recommended the establishment of a forest department. Among the motivating factors to manage the forests was the shortage of railway sleepers and forest overexploitation, particularly that of gutta-percha (Palaquim gutta),² and the need to ban the use of certain woods in tin smelting furnaces which destroyed valuable forest resources.

A forest department for the Straits Settlements was created in the botanic gardens in Singapore in 1883, and it was the second director, H. N. Ridley, who in 1896 suggested that a centralized forest department be formed to manage the forests—then administered by district officers—in both the Federated Malay States and the Straits Settlements. While forest officers were appointed to work with district officers to perform separate protective and administrative roles, respectively, it was in 1900 that H. C. Hill, from the Indian Forestry Service, was commissioned to study how the Malayan forests were being administered and should be managed. In the following year, reflecting Hill’s recommendation (Hill, 1900), the Forestry Department of the Straits Settlements and Federated Malay States was established, and A. M. Burn-Murdoch, a fully trained forest officer, was appointed as the Chief Forest Officer of the Straits Settlements and Federated Malay States.

Among the documents that laid the foundation of Malaysia's tropical forest management were Malayan Forest Record No. 1 and No. 2 on commercial timber species and minor forest produce in 1921 and 1922 by Forest Research Officer Dr. F.W. Foxworthy, followed by his magnum opus, the Dipterocarpaceae of the Malay Peninsula, published as Malayan Forest Record No. 10 in in 1932.³ Another seminal publication, the ‘Forester’s Manual of Dipterocarps’ by C.F. Symington, was published by the Japanese during the occupation (The Malayan Forester, 1947, p. 47).

Some other key institutions established were the Forest Research Institute in 1926, a Timber Research Laboratory in 1929, and the Forest Training School in 1927—all of which function to the present.

Professional forestry became firmly entrenched in the country along with the rising exploitation of the lowland forests for timber production. After independence, professional foresters—British expatriates and Malaysians—were instrumental in the institutional building, scientific research, and training needed to manage state forests. They researched into tropical ecology, botany, dendrology, and various forestry disciplines to identify and classify tree species and to ascertain the wood-working properties of commercial timber species; undertook surveys and mapping of the forest types; and established research plots to understand the dynamics of how tropical forests develop. The management of tropical rainforests required in situ research and local knowledge to tackle challenges such as difficult terrain, inaccessibility, tough living conditions in the ‘jungle’, and, later, security threats during the country’s battle against communist insurgency in 1948–1960.

The country's advances in tropical forest management earned international accolades. The cadre of professional foresters, forest rangers, and field staff were vital to establishing an influential role and contribution to the ‘empire of forestry'—networks of knowledge, practices, and institutions that were exchanged between the British colonies, and more recently facilitated by the Food and Agriculture Organization (FAO) established in 1945, and by the International Tropical Timber Organization (ITTO) established in 1986 to regulate the tropical timber trade.⁴ The early introduction and legitimization of the forestry profession alongside systematic development of forest management practices enabled state ownership of forest resources to be expanded and perpetuated as a bulwark against tropical deforestation.

Recognizing the Importance of Permanent Reserved Forests for Economic Sustainability

Even in the colonial era, forestry practices evolved in part owing to British foresters’ concerns over the destruction and overexploitation of tropical forests, while still cognizant of Britain’s needs to ‘become more or less self-sufficient in timber supplies and developing larger export markets for her tropical timbers’. ⁵

An enduring colonial legacy that created a necessary condition for sustainable forest management was the establishment of forest reserves where property rights of forest lands and control over its use are vested with the state, essentially turning natural forests into a ‘public good’. The forest laws modelled on the 1878 Indian Forest Act and the 1881 Burma Forest Act were promulgated in the Federated Malay States around 1907 and revised into a federal enactment in 1918, followed by the Unfederated Malay States (Cubitt, 1920, p. 10; Vandergeest and Peluso, 2006). These enactments legalized the demarcation and reservation of the natural forests, which covered more than 70 per cent of the country’s land area. By 1929, 22 per cent of the forests in the Federated Malay States had been designated permanent reserved forests (Federated Malay States, 1930).

The essence of forest reservation is captured by a forester’s remarks that ‘By forest reservation is meant the setting aside of areas for permanent maintenance under forest. Nothing short of permanency of tenure will secure the necessary continuity of management over long periods of time or justify expenditure on the demarcation, protection, and management of a forest’ (Troup, 1940, p. 117; Peluso and Vandergeest, 2001, pp. 780–781).

In exercising sovereignty and territorial control over the natural forests, the pioneering colonial foresters recognized that ‘producing a sustained yield of all classes of timber, of encouraging the most economical utilization of timber and other forest products, and of maintaining and improving climatic conditions in the interests of agriculture and water supply’ require proper policy, legislative, and administrative frameworks. These requirements were articulated in the First British Empire Forestry Conference held in Great Britain in 1920 and reiterated in subsequent conferences (The Malayan Forester, 1932, p. 225).

In the early 1900s, timber supplies were largely used to meet domestic needs such as railway sleepers, fuelwood, and timber for buildings and infrastructure in tin mines and on rubber estates. Large-scale timber extraction and exports were confined to only a few species such as ramin from Peninsular Malaysia and Sarawak, and ironwood (Eusideroxylon zwagerii) from Sabah. The bulk of the timber species, especially from the Dipterocarpeae (meranti) family, were commercialized and traded internationally only after the Second World War.

The extensive reservation of the natural forests led to a chief forest officer’s observation that ‘Thanks to a sound policy of forest reservation and conservation built up over the past half century Malaya now finds herself one of the few timber exporting countries in the world, and one of perhaps two British Colonial territories (the other being British North Borneo) capable of really significant expansion of timber production…. We were accused of grabbing all the best land in the country and constituting reserved forests far in excess of the area necessary to ensure an adequate supply of timber for local consumption’ (Edwards, 1947, p. 75).

Forests in North Borneo, 1932
Source: National Archives Malaysia

After independence, the need for sustained yield management and for land to be kept under forest in perpetuity remained a primary focus of foresters. Yet Malaysian states had other priorities. Conversion of forest lands to plantation crops, particularly rubber and oil palm, coupled with booming global timber demand in the 1970s and 1980s led to the disappearance of lowland dipterocarp forests, except for those preserved in national parks, in virgin jungle reserves, and in other conservation areas.

In the face of these political and market pressures, the permanent reserved forests earmarked for timber production were subjected to excessive logging and shorter cutting cycles that threatened the regenerative ability and therefore the long-term sustainability of timber supplies. To overcome the constitutional and legal constraints of forests managed under different state administrations, which led to uncoordinated forest harvesting, a National Forestry Policy was introduced in 1978. This policy, updated in 1984 and amended in 1993, sought to commit state administrations to adopt the prescribed annual coupes, in theory based on the remaining areas of unlogged forests and their regenerative capacity (but see below).

Today, the country’s area under forest cover is estimated at 19.1 million hectares, or 58.2 per cent of total land area, as stated in the Global Forest Resources Assessment 2020 report for Malaysia (FAO, 2020). Of the total land area, 33.7 per cent is earmarked as permanent reserved forests for timber production, 12.2 per cent state forest lands, 9.1 per cent totally protected areas and national parks, and, included as forest lands in the global assessment, 3.2 per cent plantation rubber trees. The reservation of 11.3 million hectares of permanent reserved forests for timber production is a major accomplishment, exceeding the 3.3 million hectares, or 25 per cent of total land area, envisaged in 1952 in the Interim Forest Policy statement (Wyatt-Smith and Vincent, 1962, p. 206). The country’s success in forest reservation can be benchmarked globally, as there are eight high-income countries with forest areas of over 60 per cent of total land area and 31 high- and upper-middle-income countries, including Malaysia, with forest areas above 50 per cent.

Yet except for the areas covered by national parks, the lowland dipterocarp forests had largely disappeared by the mid-1970s. In the remaining unlogged permanent reserved forests, the market and political pressure to raise annual allowable cuts is still felt, subjecting the forests to cutting cycles that are shorter than their regenerative capacity. With the remaining forests largely in hilly and inaccessible terrain, maintaining the targeted timber production level while minimizing the impact on the natural habitat for other ecosystem services is a huge challenge.

Forests’ Contribution to Malaysia's Economic Growth, Capital Accumulation, and Early Industrialization

Malaya's economic development in the first half of the 20th century was closely tied to its natural resources, especially rubber and tin. Logging, sawn timber production, and wood-based processing industries expanded rapidly in the 1960s and 1970s to become the third-largest source of export earnings by the early 1980s. In 1960, the agricultural, fisheries, and forestry sector accounted for 44 per cent of gross domestic product (GDP), hovered at above 30 per cent up to 1970, and stayed above 20 per cent until 1986, before declining to just 7.3 per cent in 2019 as the economy was transformed by industrialization, led by manufacturing and services. However, the relatively small forestry component—averaging 4.2 per cent of GDP in 1966–1972—masked its important contribution to capital accumulation, export earnings, and early-stage industrialization via manufacturing.

Saw logs and sawn timber⁶ exports were among the top commodity exports in the 1960s and 1970s, helping to turn the country’s current account deficit of the early 1960s into a narrow surplus averaging 2 per cent of GDP in 1965–1973. Similarly, forestry export growth averaged 16.6 per cent a year in 1961–1970, contributing to offsetting the concurrent slowdown in rubber production and exports. Although the share of rubber exports fell by 21.6 percentage points from 48.4 per cent of total exports in 1960 to 26.8 per cent in 1970, the share of forest products rose from 4.5 per cent to 13.1 per cent over this period.

Timber, with other commodities, especially palm oil and petroleum, loomed large in the country’s rising export earnings in the decades before manufacturing exports took off in the 1970s: their share of total exports surged from zero in 1965 to 21.7 per cent in 1980 (Table 1). Manufacturing growth was also driven by wood products such as plywood, particleboard, fibreboard, paper, and furniture.

Table 1: Composition of exports during Malaysia's early industrialization, 1960–1980

Note: na = not available.
Sources of data: Economic Planning Unit–Malaysia, Malaysia Plans, First (1961–1965), Second (1966–1970), Third (1971–1975), and Fourth (1976–1980).

Likewise, the agriculture, forestry, and fisheries sector played a significant role in capital accumulation in the first decade of industrial development. Its share of gross capital stock is estimated at 28.1 per cent in 1960, falling to 16.7 per cent in 1970 (Table 2), mirroring its declining role and one of the key stylized facts of development.

Table 2: Malaysia's gross capital stock estimates by sector

Source of data: Department of Statistics–Malaysia, National Accounts, Capital Stock Statistics 1955–2009.

One sometimes overlooked facet of the country’s capital accumulation (including outflows) is the resource rent accruing to state governments in the form of royalties, premium and cess, and windfall profits to forest concessionaires and timber producers. Forest revenue collected by state governments between 1966 and 1985 amounted to 2.5 per cent of GDP in 1980 prices, and the ‘windfall profits’ reaped by timber producers were nearly double that proportion at 4.9 per cent of GDP.⁷ Earlier, at independence, Malaya’s gross national income per capita had been only RM788, which falls under the World Bank’s low-income category. With tin and other agricultural commodity sectors, the income generated and capital accumulated through forestry export surpluses contributed solidly to the country’s transition from low- to lower-middle-income status around the mid-1960s. The subsequent shift to export-oriented manufacturing and the growth of services since the 1980s helped propel the country from lower-middle- to upper-middle-income status in 1992.

Sustainable Forest Management and New Spheres of Influence

The preceding analysis suggests that forest resources have been a blessing rather than a curse—the notorious ‘resource curse’ that afflicts many resource-rich developing economies and for which multiple causes have been ascribed. Widely cited ones include corruption and rent seeking spawned by resource exploitation, overvalued exchange rates, and resource misallocation. There are natural-resource depletion and environmental costs to logging of the natural forests and conversion to other uses, particularly to rubber and oil palm, and to a lesser extent to food agriculture. A cursory view suggests that Malaysia has escaped the resource curse, especially given its successful structural transformation into a manufacturing and services-led upper-middle-income economy, with relatively low unemployment, and slowing population growth.

Several individual states, however, may be overly dependent on timber resources, such as the peninsula's east-coast states as well as Sabah and Sarawak, to the extent that state development efforts could have been less vigorous in diversifying into other economic activities, particularly manufacturing. These states displayed some symptoms of the resource curse but it is difficult to disentangle the proximate causes of the lack of economic diversification and underdevelopment. These include low population density, state government capability, poor locational factors, and inadequate infrastructure and capital resources.

Malaysia’s structural transformation has eased the pressure on natural forests. Still, the extent and composition of forest areas needed for sustainable development remain open to scientific inquiry and policy debate, but the focus in recent decades has shifted beyond timber production. Professional forestry was centred on improving forest management regimes, originating the ‘regeneration improvement fellings’ in the mould of even-aged forest management in temperate countries to the Malayan Uniform System formulated by the British administration for lowland dipterocarps forests. Post-independence, after the exhaustion of the lowland forests, the Selective Management System for the hill forests was introduced.

Megatrends shaping the global economy have resulted in a tectonic shift in influences on the forestry sector, notably national and global sustainable forest management. The sector’s economic role has somewhat diminished, but its environmental, ecological, and cultural importance has increased in tandem with the disruptive threats facing the global economy, such as climate change, deforestation, water scarcity, and excess production and over-consumption of forest-related resources.

As such forest management in Malaysia requires a multi-sectoral and multi-stakeholder ecosystem-based approach. Professional foresters can no longer focus on the Selective Management System as the core practice for sustained yield management; they need to embrace further the global principles of sustainable forest management, including worldwide moves to a low-carbon economy.

The FAO and the ITTO were earlier important in financing and legitimizing systematic forest development and the tropical timber trade, but the sphere of influence has since shifted to nongovernmental organizations, corporations, and international agencies forming collaborative alliances. Driven by a convergence of country and market needs, these have focused on adopting sustainability principles and market-based certification standards for ‘good’ environmental, social, and governance practices. Since the introduction of certification in forestry in the 1990s, private and multi-stakeholder voluntary standards and rating systems have proliferated and influenced producer, consumer, and investor behaviour. Malaysia was early in voluntary forest certification when it set up the Malaysian Timber Certification Council in January 1999, as both a country- and market-driven initiative (Freezailah, 2016).

Concluding Remarks

A double-edged sword, the rapid commercialization of tropical timber and expansion of the tropical timber trade to meet rising global demand—while contributing significantly to the country’s growth take-off and early industrialization—perhaps inevitably led to the virtual disappearance of the lowland dipterocarp forests by the mid-1970s. But by the early 1990s, with the country attaining upper-middle-income status, the pressures on natural forest resources were somewhat lessened, affording policymakers the space to curb deforestation and shift the focus to sustainable forest management.

While Malaysia possesses the necessary conditions to ensure that at least 50 per cent of the land area will remain under forest cover in perpetuity, the challenge for the current generation of professional foresters and policymakers is to optimize the development and use of forest resources in a holistic manner as encapsulated in the Sustainable Development Goals (SDGs), balancing economic and market needs with environmental, social, and governance standards.

The future role of Malaysia’s forest sector in economic development therefore lies in harnessing both the timber and non-timber values of the natural forests, including eco-tourism, and integrating the management of the forests with the relevant SDGs. A Malaysian SDG Forest Sector Roadmap—to complement the global Forest Solutions Group’s equivalent of 2019—would be a welcome initiative for long-term planning, while also complementing the Strategic Plan of Action for ASEAN Co-operation in Forestry (2016–2025) and other multi-stakeholder global platforms.

Preservation of Forests in Malaysia
Source: www.ehm.my