Malaysia has a total capacity pulp and paper production at over 1 million T/year. The country is a net importer of pulp, paper, and paper board, and progressively tends to decrease its dependency. However, the self-sufficiency is growing at a slow rate. All the paper mills of the country are small by the world industry standards, none producing more than 300 000 T/Year. The Malaysian government has identified this particular industry sector as one of the priority areas for investment in the second industrial master plan (IMP2). The strategy is to achieve a state of self sufficiency, to reduce import, and to encourage foreign capital inflow. The industry was one of the industries to survive the economic downturn resulting from the “Asian crisis” in 1997, as much as the softening of the economy following the September 11th, 2001 event. No paper mill was closed down or taken over by larger companies at these occasions. The paper mills survived by remaining small but efficient, while cutting the cost of production at the same time. The industry also managed to remain buoyant by focusing on niche markets at the national scale. The Malaysian pulp and paper industry is heavily dependant on imported fibre, particularly virgin pulp, and is also facing the need to find a new source of fibre to strengthen and retain the quality of secondary fibres as the use of recycled paper is growing in Malaysia. As for the other wood-based Malaysian industries, further development of integration of downstream activities is highly promoted. The utilisation of wood waste is promoted through the emphasis on R&D and technology improvements. Meanwhile, more forest plantation projects are planned to ensure a sufficient and steady source of fibre supply in the long run. Other sources of supply are non-wood materials, such as oil palm residues; Kenaf (Hibiscus cannabinus) are also presented as alternatives to wood fibre.