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Timber Risk Assessment
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Timber Risk Score 5 / 100 in 2018. The Timber Legality Risk Assessment contains an evaluation of the risk of illegality in Malaysia Peninsular for five categories and 21 sub-categories of law. We found:

  • Specified risk for 19 sub-categories.
  • No legal requirements for 2 sub-categories.

This page provides an overview of the legality risks related to timber produced in Peninsular Malaysia. There are separate timber risk assessments for Sabah and Sarawak.

Peninsular Malaysia has 5.8 million hectares of forest, covering 44% of the land area. Peninsular Malaysia accounted for 28% of the whole country’s timber production in 2012, with total annual log production averaging 4.2 million m3/year during 2010-2014 (FDPM, 2014). 

The main threats to forests in Peninsular Malaysia include illegal logging, clearing for plantations, and damage from invasive species. Chatham House has estimated that 35% of timber produced in the whole of Malaysia is illegal (Hoare, 2015). Numerous legality risks are present in timber supply chains in Peninsular Malaysia. The risks are wide-ranging and relate to all categories of law. If you are sourcing timber from Peninsular Malaysia you should take care to ensure the extensive risks identified are not present in your supply chains, or have been sufficiently mitigated.

This risk assessment was prepared between 2016-2018 according to the FSC-STD-40-005. The approved FSC Risk Assessment can be downloaded in the FSC Document Centre. ONLY Risk Assessments that have been formally reviewed and approved by FSC can be used by an FSC candidate or certified companies in risk assessments and will meet the FSC standards without further verification. 
Corruption Perceptions Index

Score: 48 / 100 in 2021

Rank: 62 out of 180 countries in 2021

Bans and restrictions

There is a ban on the export of rubberwood (Hevea brasiliensis) from Peninsular Malaysia, effective from July 2017.

Armed conflict

There are currently no armed conflicts in Malaysia according to the Council on Foreign Relations' Global Conflict Tracker.

According to the Uppsala Conflict Data Program there were 71 deaths in 2010-2019.

Voluntary Partnership Agreement

VPA status: Negotiating

 

CITES species

CITES appendix II: Aquilaria spp., Dalbergia spp., Gonystylus spp., Taxus chinensis, Taxus wallichiana,

Rauvolfia serpentina. 

Certification

FSC Certified Forest Area (in Malaysia): 710,311 hectares (4 December 2019)

PEFC Certified Forest Area: 4,376,622 hectares (31 December 2019). 

Timber sources

  • Find out the different sources of legal timber
  • Determine which source type your timber comes from
Timber source type Description of source type

Natural forest in the Permanent Forest Reserve not being cleared for plantation/other land use

Timber from natural forests in the Permanent Forest Reserve that is being managed as a natural forest (i.e. it is regenerated after harvest) and not being used for clearance or conversion. A harvest permit or license is required. 

Natural forest in Permanent Forest Reserve being cleared for plantation/other land use

Timber from natural forests in the Permanent Forest Reserve that has been cleared as part of a timber plantation concession (i.e. concession for the clearance of natural forest for conversion to monoculture timber plantations). A harvest permit or license is required.
Plantation in Permanent Forest Reserve Timber from a plantation (e.g. Acacia, Eucalyptus, rubberwood) in the Permanent Forest Reserve.  A harvest permit or license is required. 
State land and Alienated land

Timber from the clearance of natural forest on:

  • state land where private companies have the rights to log the area but do not have ownership rights to the land (the land is zoned for possible future use for agriculture, housing, etc. but no private titles to the land have been issued)
  • alienated land (which almost always results in the forest being cleared for non-forest use such as agriculture).

Timber plantations on state and alienated land are rare. Timber plantations that are established on forest reserves are sometimes later excised to state land. Alienated land is usually used for growing oil palm or rubber, rather than trees for timber. A harvest permit or license is required. 
Agricultural land (primarily rubberwood)

Timber from private 'agricultural' estates on alienated land. This are mainly rubberwood plantations that are being cleared for oil palm or for another rotation of rubber (i.e. grown primarily for latex rather than timber).

Timber from agriculture on state land includes rubberwood harvested from rubber plantations.

Very rarely, there are small agricultural rubber plantations (i.e. planted primarily for latex) in the Permanent Forest Reserve that can be harvested for timber. A harvest permit or license is required. 

Risk assessment summary

Legal rights to harvest

Legal rights to harvest, EUTR
  • Risk that grants for the privatisation of land for plantations (conversion of natural forest to plantations or non-forest uses) are corruptly awarded
  • Risk that customary lands and aboriginal reserves are not gazetted as such and thus are not recognised by law, resulting in tenure disputes
  • Risk that concession licenses for the Permanent Forest Reserve are corruptly awarded because of unfair competition, nepotism and cronyism
  • Risk that harvesting plans are not prepared in State Land, Alienated Land, and Rubber Plantations
  • Risk that harvesting permits are corruptly awarded, not adhered to or not obtained
  • Risk that timber from rubber plantations on alienated land does not have the correct licenses or permits
Taxes and fees
Taxes and fees, EUTR
  • Risk that tax fraud occurs due to stamping of logs from State/Alienated Land and Permanent Reserved Forest with royalty marks not being done consistently
  • Risk that goods and Service Tax (GST) is not paid
Timber harvesting activities

timber harvesting activities, EUTR
  • Risk that environmental regulations (e.g. that prohibit logging outside agreed boundaries, logging on steep slopes, and overharvesting) are not followed in the Permanent Forest Reserve 
  • Risk that protected areas are illegally harvested
  • Risk that environmental impact assessments are not conducted for forest clearance for oil palm and rubber plantations 
  • Risk that health and safety requirements (e.g. for protective equipment) are violated
  • Risk that legal rights of resident workers are violated (e.g. wages lower than the legal minimum, and sub-standard living conditions)
  • Risk that legal rights of migrant workers are violated (e.g. non-payment of wages, long working hours, lack of insurance, and unfair dismissal) 

Third parties' rights
Third party rights, EUTR
  • Risk that customary rights of indigenous peoples are violated because many customary lands and aboriginal reserves are not recognized by the Forestry Department and thus not taken into account in the issuance of licenses or subsequent management plans

Trade and transport

Trade and transport, EUTR
  • Risk that royalties are not paid on logs originating from clear-felled areas in natural forests because the practice for classifying logs from clear-felled areas is ambiguous and allows false classification 
  • Risk that timber from rubber plantations is illegally traded because the removal pass system is rarely applied to rubber plantations 
  • Risk that transfer pricing is practiced 
  • Risk that fraudulent CITES permits are used for products originating from Malaysia 
  • Risk that Ramin and Aquilaria spp. are illegally harvested and traded 

 

Specified risk species

Common/trade name Scientific name Risk information

Agarwood

Aquilaria beccariana 

CITES-listed 

Agarwood

Aquilaria hirta

CITES-listed 

Agarwood

Aquilaria malaccensis 

CITES-listed 

Agarwood

Aquilaria microcarpa 

CITES-listed 

Agarwood

Aquilaria rostrata

CITES-listed 

Agarwood

Dalbergia spp.

CITES-listed 

Ramin

 Gonystylus spp. CITES-listed 

Chinese yew

 Taxus chinensis CITES-listed 

Himalayan yew

 Taxus wallichiana CITES-listed 

 

Mitigate the risks in your supply chain

Learn which actions we recommended to mitigate the risks associated with the timber sources from Malaysia - Peninsular

Source Certified Materials 

NEPCon believes that third party certification (for example FSC and PEFC certification) can provide strong assurances of the legality of the products they cover. Companies seeking to mitigate the risks of sourcing illegal timber should seek to purchase third party certified materials wherever possible. 

While the European Timber Regulation does not include an automatic “green lane” for certified products, it does recognise the value of certification as a tool for risk assessment and mitigation. The European Commission says that companies “may rate credibly certified products as having negligible risk of being illegal, i.e. suitable for placing on the market with no further risk mitigation measures, provided that the rest of the information gathered and the replies to the risk assessment questions do not contradict such a conclusion.”

For more information on using certified materials in your due diligence, including how to assess whether a certification system meets EUTR requirements, see the page on Certification and Due Diligence.

Mitigation recommendations

There are six recommended actions to mitigate the risks associated with the timber sources from Peninsular Malaysia: 

1. Fully map your supply chain

2. Obtain and verify documents

  • Forest level documents
    • Land registry ownership and validity of property deed
    • Concession licence
    • Management plan, harvest plan and maps (delineate harvesting areas, and protected areas where harvesting is prohibited)
    • Timber Extraction Contract
    • Harvesting licence
    • Environmental impact assessment for FMEs greater than 500 ha.
    • Documents or records of consultations with local communities for any land or rights dispute resolutions
  • Tax related documents
    • Receipts for payments of harvesting related royalties, taxes, harvesting fees and other charges
    • Volumes, species and qualities given in sales and transport documents shall match the paid fees
    • Harvesting permits. These should provide information on origin. If the timber originates from cleared areas, royalty stamps on logs should be verified
    • Removal Passes. Verify that the species and volumes match the royalty payments
    • Tax invoices
  • Health and safety related documents
    • Health and Accident records
  • Employment related documents
    • Records of number of people employed
    • Compliance Report
    • Sustainable Forest Management Licence Agreements
    • Work permits for foreign workers
  • Trade and transport documents
    • Review transfer pricing documentation to prove market price-based transactions
    • CITES permits (verified by MTIB) for CITES species

3. Consult stakeholders

  • Confirm that the registration of FME has been granted following legally prescribed processes 
  • Confirm that legal procedures for obtaining concession licenses have been followed 
  • Conform that the harvest permit is valid
  • Confirm that the forest management plan has been approved according to legally prescribed process
  • Confirm that operations or rights for conducting the established activities are not subject to court orders or other legally established decisions to cease operations
  • Confirm that land tenure rights are clear and there are no land conflicts
  • Confirm that any public allegations of corruption in awarding of concession licence have been rebutted publicly
  • Confirm that customary rights are observed during harvesting activities
  • Workers confirm that they are aware of requirements for reduced impact logging
  • Workers confirm that they receive legal wages (and that wages have not been deducted to cover work permits of foreign workers), that working hours, living conditions, insurance are adequate and legal, and that travel documents are not being withheld by employers  

4. Carry out on-site verification

  • Confirm that contractors have a Timber Extraction Contract 
  • Confirm that management and harvesting plans are implemented
  • Confirm that maps are accurate
  • Confirm that harvesting takes place within limits given in the harvesting permit
  • Confirm that information regarding area, species, volumes and other information given in the harvesting permit is correct and within limits prescribed in the legislation
  • Confirm that procedures on reduced and low impact harvesting, if specified in the harvesting license, are being followed in the forest
  • Confirm that mitigation measures as prescribed in the environmental impact assessment are implemented
  • Confirm that the FME observes occupational health and safety requirements by all personnel involved in harvesting and forest management activities

5. Conduct targeted timber testing on sample of purchased materials

  • Conduct timber testing on samples of purchasd material to verify the species or origin of timber, where appropriate

6. Avoid / do not buy

  • Avoid products that include materials bought at spot- and/or open-markets
Profile Publication Date
2017-11-01