FDI in Timber Processing Tops $51Mln, India Biggest Investor

By Thit Nay Moe 5 March 2014

RANGOON — Foreign investment in Burma’s timber industry reached US $51 million last year and India was the biggest investor with six investment projects representing about half of all investments, government figures show.

According to statistics from the Directorate of Investment and Company Administration, which is under the Ministry of National Planning and Economic Development, eight timber-processing licenses were granted to foreign firms in the fiscal year 2013-2014, out of which India had acquired five, Singapore two and Korea one.

The figures indicate that the timber processing attracted a total of $51 million in foreign investment last year, with India investing $26.04 million, while Singapore and South Korea invested $24.26 million and $0.93 million, respectively.

Minister of Environmental Conservation and Forestry Win Htun said that Burma’s upcoming log export ban had prompted an increase in foreign investment in timber processing.

“We usually exported wood to India as logs before, but not anymore. So, businessmen there have no other choice but to come and do business inside our country,” he told The Irrawaddy.

Burma is one of the last countries in the world that still allows for the export of unprocessed logs, and raw timber makes up the majority of its wood export. As a result, the country has failed to build up a wood-processing industry that can add value to the vast quantity of timber that Burma produces.

In an effort to reduce deforestation and the outflow of unprocessed timber, the government has banned the export of raw logs by April 1 this year and only sawn wood is allowed to be exported.

India, China and Thailand are the biggest importers of Burmese timber, which is estimated to have a total worth of more than $1 billion per year, according to US-based research group Forest Trends, which estimates that about half of all timber is exported to India.

Burma’s timber industry has long been dogged by unsustainable practices and corruption, and is largely controlled by tycoons with connections to the former military regime. The unregulated cross-border timber trade to southern China passes through conflict-torn northern Burma and is being taxed by ethnic insurgent groups and Burma Army units.

Consequently, Burma has suffered from high rates of deforestation, while a recent increase in agro-industry investment—such as rubber and palm oil plantations—is driving further forest losses, Forest Trends has warned.

Last year, the European Union lifted trade restrictions on Burma, but the country would need to reform its timber sector in order to gain access to the EU export market.

Burma’s government has shown an interest in such reforms and is in discussions with the EU about the joint implementation of a Forest Law Enforcement Governance and Trade (FLEGT) action plan.

The Myanmar Timber Association, a government body in charge of regulating the timber industry, has said that an increase in trade in high-quality timber with the EU would be a boon for Burma’s timber industry.