INDONESIA: Rubber industry in need of boost amid price drops

From 2012 to 2013, realized domestic investment in the rubber industry totaled only Rp 590.87 billion (USD 50.63 million) and foreign direct investment from 2011 to 2013 amounted to USD 81.52 million, according to data from the Investment Coordinating Board (BKPM). All investment, however, was limited to the upstream sectors of rubber curing, remilling and production of crumb rubber.

Exports of rubber products rose by just 4.9 % to USD 629 million last year from 2009, lower than the 6.7 % growth in shipment of unprocessed rubber to USD 2.7 billion in the same period, statistics from the Trade Ministry show.

Tjutjuk Ismujanto, an expert from the Agency for the Assessment and Application of Technology (BPPT), said that although his office had already generated a number of new finished rubber goods in the past few years, the innovations remained unpopular with investors.

These products include rubber air bags, retreated aircraft tyres and dock fenders. Another innovation - floating rubber pipes, a tool normally used in onshore oil explorations and mining - has been sold to Indonesia's biggest tin miner, PT Timah.

"The outcome of the government program has not been well-linked to the market so these products cannot be made in bulk,” said Tjutjuk, who heads the rubber downstreaming program at the agency.

Indonesian Rubber Council chairman Aziz Pane said that like other industrial sectors, one of the major obstacles to growth in the rubber industry was the shortage of energy.

"The lack of electricity and gas has caused many [glove] factories to shut down,” he said.

Once the world's biggest glove producer, Indonesia has seen its glove manufacturers shrink from 45 firms in 1989 to only six firms at present, including North Sumatra-based Indorub Nusaraya and West Java-based Arista Latindo Industrial Limited, according to the Indonesian Rubber Glove Manufacturers Association.

While Indonesia is the world's second-largest rubber producer, it controls only 13 % of the world market for rubber gloves, lagging behind Malaysia, the world's third largest rubber supplier, which in 2012 held a 63 % share of the global rubber gloves market.

The Industry Ministry's director general for agriculture and chemical industries, Panggah Susanto, said that priority for now would be given to the development of the latex industry as the market was prospective, while the technology applied in production was quite simple. This would mean that the dowstream sector would be unlikely to pick up in the near future.

Source: Daily "The Jakarta Post”, Jakarta; 8 Sept 2014
(Syed Rashid Ali, Karachi, Pakistan)