This study assesses the performance of the forest pricing system currently in force in Peninsular Malaysia. It estimates the hypothetical value of timber resources in two states in the region and compares this with the actual revenue the government receives from logging companies. It finds that government revenue is small relative to the commercial value of the trees. The study advises that such underpricing encourages the rapid depletion of forest resources, wasteful extraction methods, and a bias against conservation. Based on an investigation of alternative pricing mechanisms, the study recommends that a competitive bidding system should be introduced to increase government revenue and so encourage sustainable forestry.