EU ambassador Vincent Piket said the Forest Law Enforcement Gover- nance and Trade Voluntary Part- nership Agreement (VPA) would essentially assure EU member countries that Malaysian timber products were sourced legally.

He said Malaysia was set to become the first country in Asia to work such a trade deal that would give the country a comparative advantage.

“Plantation Industries and Commodities Minister Datuk Peter Chin realises the benefits of the VPA for the Malaysian timber sector,” said Piket after meeting timber industry officials here yesterday.

Malaysia’s timber exports to the EU amount to some RM2.5bil annually and Sabah’s share is about 20% to 25%.

Piket said negotiations were now focused on Malaysia’s legality assessment on how its timber is produced.

“The system is good but there are still improvements to be made,” he said.

Citing an example, he said that when a forest plantation licence was granted, environmental issues needed to be addressed such as the need for an environmental impact assessment.

“Transparency is the key word in such matters,” Piket said.

Malaysian timber set to get easy access into EU

Works Minister Datuk Mohd Zin Mohamed said his ministry had so far paid out RM44.2mil as part of the permitted variation of price (VOP) for 270 projects with calculations being made for the remaining 1,041 projects.

He also said that the ministry has expanded the VOP to a total of 15 construction materials from the current five.

“We have also allowed mechanical and electrical work for VOP if the work scope includes civil engineering and building construction,” he told reporters Wednesday after attending a briefing for contractors during his working visit here.

Besides Johor, he noted the ministry had also approved VOPs for its projects in Malacca and had since paid out RM7mil to contractors here.

Meanwhile, Mohd Zin said that a total of 406 projects totalling RM9.4bil would adopt the Industrial Building System (IBS) with 189 of the projects having been tendered out.

He said that a total of 121 projects under the IBS would be tendered out between 2009 and 2010.

He added that the Government would continue adopting IBS in a move to reduce dependency on foreign labour while improving the efficiency of the nation’s construction industry.

“Our dependence on foreign labour is extremely high at present with some estimated 2.2 million being employed with only 315,000 of them registered,” he said, adding that the workers sent at estimated RM780mil per month or RM18bil per year back to their respective countries.

With the IBS blueprint in place, he said the country hopes to reduce foreign labour in the construction industry to 250,000 by 2015.

Contractors allowed to revise project costs

On Tuesday, Perwaja Holdings Bhd and Choo Bee Metal Industries Bhd announced they had provisions of RM120.2mil and RM22.3mil respectively in the third quarter for impairment in the value of their inventories.

Other steel companies are likely to announce a similar provision when releasing their results.

An analyst at a bank-backed brokerage said it would be inevitable for steel makers to make that kind of provision as global steel prices had fallen significantly.

The plunge, which started in July, was sparked by weakening demand for steel products during a global economic crisis. Reduced material costs also mean lower selling prices of steel products.

China, which produces a third of the world steel supplies, saw output declining by 17% in October. Steel prices in India have plunged by about one third since July and halved from the beginning of this year.

Aseambankers said data from WorldSteel showed a 12.4% year-on-year and 7% month-on-month fall in global steel production in October due to falling demand. China’s economic stimulus package, although positive, may face a lag before implementation.

Additionally, it was still uncertain if the pump-priming efforts would generate sufficient demand, especially in the first half of next year, it said.

The analyst said, while the inventory issue would impact profitability in the short term, the greater concern currently was demand.

The global credit crisis has resulted in tighter lending, and infrastructure projects, in particular, are bearing the brunt.

“Stockists are throwing stocks at bargain prices but even buyers with deep pockets will be careful in spending in the current environment,” he said, adding that some buyers were willing to pay a penalty for cancelling earlier orders rather than collecting stocks with a diminishing value.

He said the catalyst for price recovery was to spur demand via fiscal stimulus, of which a number of governments had already announced.

OSK Investment Bank, in a report, said Malaysia Steel Works (KL) Bhd (Masteel) was able to liquidate stocks easier than its peers because of its small size and ability to keep inventory cycle short.

“While Masteel did not provide for diminution in inventory value, some of the losses are already reflected in the lower EBITDA (earnings before interest, tax, depreciation and amortisation) margin of 9.9% against 17.1% in the preceding quarter,” it said.

Steel companies make provisions