NEWSLET TER NOVEMBER/DECEMBER 2019
THE MALAYSIAN MDF MANUFACTURERS ASSOCIATION ( MMMA )
“ONE GENERATION PLANTS THE TREES, ANOTHER GETS THE SHADE” By Peter Fitch MMMA Newsletter for PF Asia Nov / Dec 2019
“O
ne Generation Plants
main causes as to why we find ourselves
countries, companies were encouraged
the Trees, Another
where we are today.
to invest in larger and larger capacities
Gets the Shade”. How
to satisfy this new demand. At the same
true this Chinese
In 2008, the world’s financial markets
time shareholders were rewarded with
proverb is on so many
went into meltdown after the sub-prime
increasing stock prices fuelled by more
levels, not just based
loan crisis. The U.S. Federal Reserve and
liquidity, low interest rates and company
on the current issues facing the timber
other central banks embarked on a very
share buyback schemes.
industry on sustainability and climate
aggressive recovery process which was
change, but also figuratively speaking
labelled Quantitative Easing (QE). This
What could possibly go wrong? We
on global events that have brought us
dramatically reduced interest rates and
were living in what many have termed
to where we are today. This one proverb
pumped billions of additional dollars,
the “Goldilocks Economy”; expanding
can have profound meanings for so many
euros, pounds, yen and yuan into the
economies, near full employment, low
people on so many levels. However, I will
global economy. Once the global economy
interest rates, bullish stock markets,
limit my interpretations to the timber
was on the road to recovery, central bank
exuberant funding liquidity from central
industry and wood panels in particular.
Balance Sheets should have been reduced
banks and reasonable geopolitical stability.
and interest rates normalised.
In fact, we were fooling ourselves that
I think that it is fair to assume that
68
this was a sustainable economic model.
the timber industry in general is in
As history will document, this did not
When in fact, this was not sustainable
the doldrums. Profitability, growth and
happen as Central Banks became addicted
environmentally, economically, financially
innovation are at an all-time low. There are
to low interest rates and cheap money
and politically in so many different ways.
only a very few exceptions to this general
all conveniently justified by the limitless
As a result of what we sowed all those years
malaise. On a positive development, I
growth potential from Emerging Markets
ago, we have created a partisan world
would like to acknowledge the improved
and, especially, China. With such low
order with a “Beggar Thy Neighbour”
profitability afforded to those furniture
interest rates and the relative ease at which
attitude that fuels Protectionism, Trade
companies in Malaysia, Vietnam and
loans were available, government bonds
Wars and a growing disparity between
Indonesia that have taken advantage of
yields turned negative and corporate
the rich and poor. Nationalism globally
the re-alignment of the U.S. supply chain
borrowings went into overdrive. With the
is fuelling Brexit, fragmentation within
away from mainland China. But first, let
promise of insatiable market demands
the EU, and regional disputes such as
us revisit what I believe to be some of the
from China, India and the other BRICS
that between India/Pakistan, Japan/
