THAILAND: Rubber subsidy likely to backfire

But the economic crisis in the US and Europe has brought down the price of natural rubber, narrowing the price gap, Mr Chaiyasit said.

Natural rubber is priced at about 80 baht a kilogramme compared with 60 baht for synthetic rubber.

"It doesn't affect us whether the price of raw rubber is high or low as long as it stays close to the market. If the price fluctuates from that, it will be hard for us to compete with other players," Mr Chaiyasit said.

Each year, ND Rubber consumes about 2,000 tonnes of natural rubber and 1,000 tonnes of synthetic rubber.

Mr Chaiyasit said the rubber market is readjusting to the real price of natural rubber, so planters should learn to adapt as the business sector does.

"The tyre industry will be weakened further if the government levies an additional tax on the downstream rubber industry as planned," he said.

Mr Chaiyasit also urged the government to help rubber farmers reduce operating costs instead of offering a price guarantee.

Founded in 1992, ND Rubber has served the domestic motorcycle tyre market under its own brand. It also produces tyres for Malaysian firms FKR, Modenas and Y-Teq under original-equipment manufacturing (OEM) contracts.

After earning 700 million baht in revenue last year, the company targets 800 million this year.

It expects revenue to reach 1 billion baht within two years.

Companies in the timber and furniture sector using wood from rubber trees face a different problem.

"The ongoing problem for rubber farmers is only about the price of natural rubber, not the trees themselves," said Kittiphong Dajkuhapoompitak, the managing director of Parawood Design Industries Co.

The company is competing with cheap imports from China and Vietnam while also having to overcome negative perceptions of parawood furniture.

"Many in Thailand think it is not a quality wood, as termites like it. We don't have this kind of problem in Europe," said Mr Kittiphong.

Source: Daily "Bangkok Post", Bangkok; 25 Sept 2013(Syed Rashid Ali, Karachi, Pakistan)