ASEAN: Regional Trends in Economic Integration, Export ... - USITC

investment activity has been more pronounced over the past several years, with much of
the foreign capital coming from outside of the region. Investors from Taiwan, Hong
Kong, Japan and, to a lesser extent, the United States and Europe have taken advantage of
competitively low wood costs and labor rates to locate wood furniture plants in the
region. Often, these facilities import temperate species of logs, lumber, and veneer from
North America and the European Union (EU) to make secondary products (such as
furniture and flooring) to be exported back to those markets. 4
To augment wood supply from natural forests, forest plantations have attracted some,
albeit limited, foreign investment in the form of joint ventures. Japan is the largest
outside investor in plantations in the region, with joint ventures reported in Thailand,
Vietnam, and Indonesia. 5 Chinese investment in the ASEAN wood-based sector has
focused on logging (mainly in Burma) and forest plantations in other ASEAN countries
to secure raw materials for factories in China. Intra-ASEAN investment in plantations is
reportedly highest in Indonesia, with investments by Malaysian and Singaporean
companies; some additional ASEAN cross-border plantation investment is reported in
Vietnam. With few exceptions, however, government control of forest land in ASEAN
countries complicates foreign investment and is a major barrier for foreign investors
because of ownership controls and regulations. 6
The ASEAN Roadmap for Integration of Wood-based Products Sector (Roadmap) shares
many of the same objectives and programmatic elements as other priority sector
Roadmaps, including tariff elimination, free flow of investment, and better trade
facilitation. Indonesia is the lead country for the ASEAN Wood-based Products Sector
Roadmap. Measures specific to wood products aim to, among other things, enhance
cooperation in certification of wood-based products; combat illegal trade in forest
products; ensure sustainability of forest resources; counter negative publicity about the
tropical hardwood products trade; develop joint marketing efforts for ASEAN wood
products; and promote investments in forest plantations. While ASEAN institutions have
successfully served as forums for dialogue, progress has been slow in developing
substantive region-wide approaches to many of these issues.
Hardwood Plywood and Flooring 7
Key Findings
Although unprocessed wood (referred to as industrial roundwood) is not included in the
ASEAN wood-based products priority sector, it is nevertheless a dominant factor
influencing economic integration. In fact, the single most important competitive factor in
the production and export of hardwood flooring and plywood is the availability of
competitively priced raw material; the basic cost for delivered logs typically accounts for
more than half of all production costs.
Without exception, all of the ASEAN countries have imposed prohibitions of one kind or
another on the harvesting and/or export of unprocessed roundwood (i.e., logs) and, in
4 Industry representative, telephone interview by USITC staff, Singapore, January 27, 2010.
5 Industry representative, telephone interview by USITC staff, Jakarta, March 2, 2010.
6 Ibid.
7 See app. F under “Wood-based Products” for HS subheadings that apply to the hardwood plywood and
flooring industry discussed in this chapter.
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