MALAYSIA: Right time for renewed interest in rubber sector

Malaysia may have slacken in its upstream rubber activities for over two decades but the downstream side, the local rubber products sector, has performed remarkably well.

Last year, exports of local rubber products hit RM12.9 billion, up 21.5% year-on-year and even suprassing 14.5% the pre-crisis exports recorded in 2008, according to the latest statistics from the Malaysian Rubber Export Promotion Council (MREPC).

In fact, MREPC chief executive officer Datuk Teo Suat Cheng expects higher rubber products export at about RM13.7 billion this year despite facing pressure from increasing prices of raw materials and the strengthening of the ringgit.

Rubber gloves, for example, will still remain as the largest contributor to rubber products total export with over RM10 billion to be achieved in 2011.

Previously, despite the country's insufficiency to supply rubber to cater for the booming integrated rubber sector, local rubber product manufacturers were still able to obtain reasonably-priced raw materials from Thailand and Indonesia.

However, the situation has now changed drastically. Increasing prices of raw materials, the strengthening of ringgit, coupled with shortage in global rubber supply, were fast eroding the competitiveness of many local downstream rubber players.

Malaysia is currently the world's largest producer and exporter of rubber gloves, commanding about 60% of the global market share.

Given the dire situation, the Government is now focusing on replanting and new planting activities to help improve the dwindling rubber production in efforts to support the thriving local rubber products sector.

After losing many of its hectarage to oil palm plantations over the past two decades, the recent focus on rubber under the Economic Transformation Programme (ETP) holds great significance. This is because it will help restore Malaysia's position as a major producer and strengthen its competitive exporter status in the global market.

In fact, the Plantation Industries and Commodities Ministry would soon proposed to the Cabinet that an RM500 million fund be set up to undertake more rubber-planting activities in the next decade.

The renewed interest in rubber by the Government could not have come at a better time as the global market was suffering from significantly high prices due to the shortage of rubber following climate changes, leading to poor production in major producing nations.

It is slated that Malaysia would need to replant some 40,000 ha of rubber trees and carry out new plantings of 13,000 ha a year to meet the global shortage for rubber.

Apart from maintaining the current rubber hectarage at one million, the Government has also allocated additional zoning of one million ha by exploiting suitable land bank in Sabah and Sarawak.

The maximum assistance for replanting rubber in Sabah and Sarawak is RM10,000 per ha compared with RM7,000 per ha in the peninsula. At present, there are 380,000 smallholders nationwide who contribute 90%, or about 900,000 tonnes, of the country's annual rubber production.(Syed Rashid Ali, Karachi, Pakistan)