Background

Malaysia is  centrally located within the Association of South-East Asian Nations (ASEAN) which consisting of two regions separated by the South China Sea — the Malaysian Peninsula and the states of Sabah and Sarawak on the island of Borneo. Its territory comprises approx. 330,000 sq km, four fifths of which are covered by tropical rainforest make the World Competitiveness Yearbook 2011 Report released by the Institute for Management Development (IMD) continued to rank Malaysia as among the top 5 most competitive nations in the Asia-Pacific region, taking 6th position in the 20 million population category and 2nd position after Taiwan in the GDP per capita less than US$20,000 category.In 2009, the timber sector was the fifth largest export earner for the country and maintains its position as strong driving force within the industry. In 2010 the timber sector contributed to 3,7% of the GDP and 3,2% of the country‘s total merchandise export. The wood and wood products classification can be divided further into 10 subsectors of which 3 are of special importance: Plywood, sawntimber and wooden furniture. The further categories are logs, medium density fiber board (MDF), builder‘s carpentry and joinery (BCJ), mouldings, veneer and other timber.The wood-based industry in Malaysia can be described as large, with almost 5,870 manufacturing establishments with 80-90% of them are regarded as SME (small or medium enterprises). 

Today, more than 1200 sawmill mills cover a capacity of 9.5 million cubic meters per year and have a workforce of 5,500 employers. However, the timber industry normally generate a big amounts of sawdust which generally looks not useful and always dumped at the land field without people realizing the value of it. These unused materials are usually  applied as a fuel source or for the production of plywoods. Due to the  high availability and low  cost  of  the  sawdust,  it  can  be more versatile and valuable by processing the sawdust into pellets which are more environmental friendly. Pellets are the best alternative method for heating besides using oil and natural gas. They are safe, easy to use and environmental friendly.The most commonly used feedstock for producing pellets comes from sawdust. Currently in Malaysia, many small pellet producers produce 1,000-3,000 tonnes of wood pellets on a monthly basis using sawdust as feedstock.There are only around 10 active pellet producers, which export to Korea, Japan, Europe and China which create a potential to invest in the industries.