THAILAND: Rubber export levy erodes competitiveness

Uthai Sonlaksup, chairman of the Para Rubber Council of Thailand, said the levy, known as the cess rate, should not exceed 1.40 baht a kilogramme, the same as Malaysia's.

"Some export competitors such as Indonesia and Vietnam even waive the surcharge in order to promote exports," he said.

Thailand uses a progressive rate for its cess on exports of ribbed smoked sheet grade 3 (RSS3) rubber.

"The highest levy of five baht is charged for every kilogramme of rubber priced over 100 baht. This is high and makes Thai rubber less attractive," said Mr Uthai.

The new cess rate, which took effect on Oct 1, 2010, is aimed at collecting money from bullish export prices for use in promoting new rubber planting to replace degraded trees.

Under the new rate, exports of RSS3 rubber are subject to 90 satang/kg if the selling price is less than 40 baht/kg.

The rate rises to 1.40 baht/kg for prices ranging from 40-60 baht/kg, two baht for 60-80 baht/kg, three baht for 80-100 baht/kg and five baht/kg after that.

Previously, the maximum cess was 1.40 baht/kg, based on an export price for RSS3 of 35 baht/kg, the going rate for the past decade.

The high cess has stimulated rampant illegal exports across borders, especially in the South, to avoid payment.

Mr Uthai said lowering the rate would curb such activities and protect planters' income, as exporters now just pass the cost on to them at the maximum five baht regardless of the actual rate.

"Therefore, lowering the cess rate would also increase planters' earnings, which have tumbled strongly in recent months amid a weak international market," he said.

To tackle the sluggish market, local industry has introduced several measures such as encouraging farmers to cut their supply by 25%.

Instead of doing latex tapping for two days followed by a one-day break, planters now tap every other day or about 15 days a month.

As well, the Rubber Growers Cooperative Federation of Thailand last week announced all 200 cooperatives will suspend commodity auctions in order to supply traders abroad for 60 days in a bid to salvage the sharp drop in rubber prices.

It reported the price of raw rubber sheet dropped to 75 baht/kg last week from 100 baht last month.

The recent severe flooding has prompted planters to sell their output quickly despite their plantations not being located in a flood zone, as news of the crisis has pulled down prices significantly.

Chinese traders have slowed down their purchases, a major factor in the weakening prices, said Mr Uthai.

However, he said last week's trip to secure the sale of 180,000 tonnes of rubber to China could eventually shore up the domestic price.

The price of unsmoked rubber sheet rose to 92 baht/kg last Friday, from 86 baht at the start of the week.

China is Thailand's largest rubber export market, buying 1.2 million tonnes of rubber last year or 44.3% of the country's total export 2.71 million tonnes.

Source: Daily "Bangkok Post", Bangkok; 21 Nov 2011

(Syed Rashid Ali, Karachi, Pakistan)