"Banks are not willing to fund things like that. The private sector prefers to go into shorter gestation investments where they can recover their capital fast," the minister told Reuters.

"That's why government has to take the initiative to go for these type of green bonds."

Chin said the government had approved a 15-year bond issue, worth up to 2.0 billion ringgit ($533 million), to cover forest replanting over an area of 375,000 hectares.

He did not say when the issue would roll out.

"We are working on the 15-year cycle because that would be in tandem with the growth cycle of fast-growing tree species," he said. "We want these species to be commercially available when the bonds reach maturity."

Malaysia needs about five million cubic metres of timber a year, but supply is short, at only 4.5 million. The current area under forest is about 310,000 hectares.

Chin said the government has allocated some 200 million ringgit as seed money for the timber industry this year.

"As soon as the planting takes off, we will ensure that it continues to the size that we want," the minister said.

According to latest statistics available from the Malaysian Timber Council, an industry lobby, the country exported about 15 billion ringgit of logs and timber products in 2004.