Bringing tech to agarwood

Affecting change: (From left) Lim, Liew and Tan hope to modernise the agarwood production industry.

FOR close to 10 years, David Liew spent countless hours doing research and going down to the ground in search of the right vaccination formula for aquilaria plantations. The goal: to produce the highly prized agarwood.

Agarwood, also known as gaharu in Malaysia, is a fragrant dark resinous wood formed in the heart of the tree trunk that is used in the production of incense, perfume and other consumer products.

It is produced either from naturally or scientifically-induced infected Aquilaria trees, which are native to South-East Asia.

There are basically two methods to “injure” an aquilaria tree in order to produce the chemical reactions to produce agarwood, shares Liew.

Trees could either be injured naturally, for example, by being struck by lightning, insects or bacterial infection, or artificially through human interventions like hacking at the tree to expose the bark, tying the trunk with a wire or inoculating it with fungi.

Over time, Liew found that injuring the tree via inoculation has been proven to be the fastest method in inducing agarwood formation.

Abundant resource: There are more than 2 million Aquilaria trees registered in Malaysia.

Having perfected his formulations and confirming the results of his inoculation technology, Liew managed to get the backing of seasoned investor Davidoff Lim, which eventually led to the founding of DAdvance Agarwood Solutions Sdn Bhd. Liew hopes to position the company as a Malaysian agarwood plantation and product specialist.

While many farmers and plantation owners are keen to tap into the promising potential of the Malaysian agarwood industry, Liew highlights that many do not know the methods to producing them.

“There is difficulty in finding a source of supply because the majority of agarwood farmers did not know that these aquilaria trees needed to be wounded to produce agarwood. This further contributes to the poor supply.”

He took the time to understand the problems faced by farmers and plantation owners and worked towards helping them with a solution.

“The vaccine developed by us has proven to increase the chances of producing agarwood through inoculation by up to 90%,” he says.

Nonetheless, he notes that the company may need further funding to finance the expansion of its vaccine production as DAdvance looks to ramp up the inoculation process to increase yield and develop new plantations.

It plans to raise up to RM20mil through alternative funding platforms next year as it looks to expand its inoculation technology.

Liew says it is also currently in talks with a local investor who is keen to acquire a stake in the company. If the deal goes through, this will increase the number of shareholders in the company to four.

Currently, its shareholders are Liew, Lim and the company’s international trade director Adrieent Tan.

Gold chips: DAdvance is finalising deals with several manufacturers and traders to sell agarwood chips and oil from its harvest.

The company is looking to expand its proprietary bio-serum engineering technology for agarwood inoculation, which it pioneered in 2008 and was certified in 2019.

Currently, DAdvance has the capacity to produce 50,000 litres of vaccine, which Liew says is only sufficient to inoculate around 6,780 trees per month.

Each cycle of new vaccine production needs about four months to mature before it is ready to be applied on the trees, he adds.

Despite the huge potential for growth in the industry, he notes, however, that unscrupulous parties promoting fictitious inoculation methods and solutions pose a risk to the sector. Many plantation owners have fallen prey to dishonest traders that failed to deliver the promised results.

Over the years, Liew says there is a trust deficit among plantation owners for inoculation technology and, thus, the whole agarwood industry has been affected.

But the company hopes to change that.

According to Lim, the industry can be positioned to sustainably meet growing demand and has the potential to be a new key agricultural export for the country. It can also play a significant role in bringing new employment opportunities for the orang asli and local villages as they get involved in agarwood-based downstream activities.

“We have seen so many locals especially from the B40 segment as well as indigenous population who are eager and able to work, and the ability to provide decent employment opportunities is one of the biggest benefits of this project,” says Lim.

The potential to upscale the industry is supported by the fact that more than two million aquilaria trees are registered in Malaysia alone and the figure excludes many of the aquilaria trees that are growing in the wild.

The majority of these trees have yet to be inoculated as most of the current inoculation technologies are not able to optimise the yield.

Another challenge faced by the industry is the illegal hunting and over-harvesting of agarwood in the wild, which has caused a number of these species to decrease in the natural forests with a possibility of extinction.

Currently, many of the illegal poachers, including from neighbouring countries, have been exploiting the lucrative resource in the wild while many of the local dedicated plantations are left without proper guidelines and technologies to develop further, says Lim.

DAdvance is working with the Malaysian Timber Industry Board (MTIB), which has a unit dedicated to training those who are interested in the agarwood industry.

This should help instil better professionalism in managing plantations.

Global research analysts report that the agarwood oil industry alone is estimated to reach US$64bil (RM279bil) by 2025. This spells out plenty of opportunity for Malaysia if the country is able to boost production of agarwood.

However, the industry is hindered by issues such as inconsistency in supply chain and lack of organised standard guidelines.

Success of the commercial agarwood plantation and having effective inoculation techniques are expected to help increase the production of agarwood to meet the demand in the future, Lim says.

He adds that the company is now harvesting around 800 trees monthly and is projected to reach the critical mass of around 1,800 trees per month by the third quarter of next year.

It expects revenue to possibly reach the RM30mil mark by that time.

By next year, DAdvance also expects to start developing its own aquilaria plantation to produce agarwood.

It is looking at a 700-acre land, which will be developed in collaboration with the Pahang state government and is expected to provide the market with a longer-term supply.

“But for us to be a pioneer in bringing technological advancement to the industry, it requires more than just a proven solution to the issues concerning the effectiveness of inoculation methods and quality of product,” says Lim.

As part of its quest to modernise the industry, DAdvance is working with Huawei cloud and automation solution company XTS Technologies Sdn Bhd to install digital trackers to monitor the progress of the inoculated aquilaria trees.

According to Lim, DAdvance is also looking to finalise deals with several manufacturers and traders to sell agarwood chips and oil from its harvest to firm up its business-to-business segment, while the business-to-consumer segment will be mainly for its downstream products including incense, agarwood oil and agarwood tea.