INDONESIA: Government told to better fund rubber producers

The government needs to better fund small plantations and improve planting policies to boost Indonesia's rubber production, according to an international industry group.

Lekshmi Nairm a senior economist with the International Rubber Study Group, said that Indonesia's rubber output per hectare was still far lower than other rubber producers in Southeast Asia, such as Malaysia and Thailand.

"If some level of capital assistance for small holdings is given through different government policies, as has already implemented in the cases of Thailand and Malaysia, then surely [local producers] can increase productivity and Indonesia can be a leading producer,” she said on the sidelines of the Asian Commodities and Derivatives Conference 2011 in Jakarta.

Lekshmi said that Indonesia also needed to improve implementation of its plantation revitalization scheme.

According to recent information from the Indonesian Rubber Association (Gapkindo), Indonesian plantations produce an average of 880 kilograms of rubber per hectare every year, or about half of output of plantations in Thailand, which can produce more than 1,500 kilograms.

Gapkindo executive director Suharto Honggokusumo said the government's revitalization program had failed to help small plantations to raise output since the scheme's implementation in 2007.

Small scale rubber plantations comprise 86 percent of Indonesia's rubber plantations, while 14 percent are controlled by private and state-owned firms.

"Many farmers could not access the funds because most of them did not have the required land certificates as collateral,” he said.

The government revitalization program covered Indonesia's three main commodities - oil palm, rubber and cacao.

Under the program, the government allocated Rp 4.4 trillion (US$514.8 billion) between 2007 and 2010 for interest-subsidized investment loans to be issued by seven state-owned banks, including Bank Mandiri and Bank Rakyat Indonesia.

The scheme was aimed at, among other things, opening 1.5 million hectares of new plantations, including 1.3 million hectares of oil palm plantations, 50,000 hectares of rubber plantations and 110,00 hectares of cacao plantations.

However, only 6,000 hectares of new rubber plantations have been opened under the program.

Suharto said the low productivity of Indonesian plantations could be partly attributed to the use of low-yield, poor quality clones and improper tapping and planting techniques.

"The problem lies in the poor education of our farmers and their poor purchasing power,” he said, adding that around 40 percent of rubber farmers still used poor quality clones.

Indonesia is currently the world's second largest producer of natural rubber after Thailand. The nation's rubber plantations, located principally in Sumatra, Java and Kalimantan, are slated to produce 3.08 million tons of rubber this year, up 8 percent from 2.85 million tons last year.(Syed Rashid Ali, Karachi, Pakistan)