SUSTAINABILITY OF RUBBER INDUSTRY IN MALAYSIA: ECONOMIC AND SOCIAL PERSPECTIVE pot

SUSTAINABILITY OF RUBBER INDUSTRY IN MALAYSIA: ECONOMIC AND SOCIAL PERSPECTIVE Muhamad Thalhah Ab Karim Paper Presented at IRRDB-CATAS International Rubber Conference 18-19 October 201

SUSTAINABILITY OF RUBBER INDUSTRY IN

MALAYSIA:

ECONOMIC AND SOCIAL PERSPECTIVE

Muhamad Thalhah Ab Karim Paper Presented at IRRDB-CATAS International Rubber Conference

18-19 October 2010, Hainan PRC

1.Concept of Sustainable Development 2.Status of Malaysian Rubber Industry 3.Way Towards Industry’s Sustainability 4.Conclusion

CONCEPT OF SUSTAINABLE DEVELOPMENT IN

MALAYSIA

Environment

Social Economic

Meets present needs without compromising future generations:

-zero burning -use of organic fertilizer -cover crop

-composting -soil and water conservation

Rubber production and processing practices are required to carry out in a socially acceptable way.

Increase income of

rubber growers and

remunerative return

on investment

STATUS OF THE MALAYSIAN

RUBBER INDUSTRY

RUBBER PLANTED HECTARAGE

Source: Department of Statistics Malaysia

RUBBER PRODUCTION BY SECTOR

PROJECTION OF MALAYSIA’S NR PRODUCTION

‘000 tonnes

CAGR: 6.2%

MAJOR ISSUES AND CHALLENGES

- Inability to Attract New Participants to the

Industry

1,022

857.02

0 200 400 600 800 1000 1200 1400

With the decline in total planted area, policy has been formulated to ensure that

national production to be sustained at above 1.0 million tons to meet raw materials

requirement of the downstream sector

STRATEGIES TO INCREASE PRODUCTION

• Increase replanting area by 40,000 ha per year

• To expand rubber area – new planting by 20,000 ha per year

• Accelerate replanting to high yielding clones – Clone

1Malaysia

• Promote mechanization and automation

• Enhance adoption in the latest technology in latex harvesting

(LITS)

Clone 1 Malaysia LITS

LAUNCHING OF NEW CLONE RRIM 3001 OR

1 MALAYSIA CLONE ON 13 AUGUST 2009

INABILITY TO ATTRACT NEW PARTICIPANTS

TO THE INDUSTRY

The rubber industry has long been dubbed as a poor man’s industry due to

relatively low income

The consequences were abandoned holdings and productivity declines amidst uneconomic size holdings and skilled tappers shortage that plagued the industry

The scenario of the industry has now changed The current encouraging price of rubber sustained at relatively high levels is a departure from the traditionally low

NR price This has tremendous impact on income and returns of the upstream sector

COMPARISON OF PRICE AND PRODUCTION,

AVERAGE MONTHLY INCOME OF

SMALLHOLDERS

The price of NR once a disincentive to tapping turnout has now become the major

driving force in exploitation of rubber

276

1,900

1,440

2,395 285.98

Income ( RM ) Yearly Average Prices of SMR 20 (sen/kg)

* SMR 20 yearly average as at 13 October

MEETING BALANCED DEMAND-SUPPLY OF NR

On the international front, to sustain price at acceptable levels, the Tripartite cooperation among three major NR producing countries have “managed” their expansion programs

to ensure future supply of rubber does not exceed anticipated demand

2002 2003 2004 2005 2006 2007 2008 2009 2010*

Yearly Average Prices of SMR 20 (sen/kg)

World NR Consumption

9.5 mil tons

World NR Production

9.6 mil tons

2009

Source: Malaysian Rubber Exchange & International Rubber Study Group (IRSG)

* SMR 20 yearly average as at 13 October

WAY TOWARDS INDUSTRY’S SUSTAINABILITY:

• Strategies and Initiatives

• Transformation of Rubber Industry

- Restructuring the Rubber Smallholdings

- Increase Supply Chain Efficiency

HIGH-INCOME NATION

Projected GNI per capita (2020 1 ) RM48,000 or US$15,000

Current GNI per capita (2009 2 ) RM23,700 or US$6,700

MIDDLE-INCOME NATION

1 At 2020 prices, consistent with Economic Planning Unit (EPU)

assumptions for inflation= 2.8% and population growth=1%

2 2009 population 27.9 million, 2020 projected population 31.6 million (EPU projection)

Source: World Bank, Economic Planning Unit, Department of Statistics

ECONOMIC TRANSFORMATION PROGRAMME

• To transform Malaysia to become a high income and high

productivity economy

• Two main targets:

i.To increase national income per capita to RM 48,000 by

2020 (from RM 23,700)

ii.To achieve real GDP of 6.0% per annum

Sustaining Malaysian Rubber Industry Contribution To A High

improvement in procedures of selecting hevea clones for planting recommendation

Green Technology Financing Scheme

- enhance

Malaysia’s competitiveness

in low carbon economy

RESTRUCTURING SMALLHOLDING

• Significant transformation took place in the

smallholding sector by the way of land and management

consolidation into cooperative or cooperation

• Agencies responsible in smallholder development –

FELDA, RISDA, FELCRA

• Central management/large scale holdings would

benefit from economies of scale

IMPROVE MARKETING-CHAIN EFFICIENCY

Issues of transparency in farmgate price determination

(cont ) IMPROVE MARKETING-CHAIN EFFICIENCY

RRIMRAPID DRC – RAPID &

ACCURATE DRC DETERMINATION

1.7 million SMS subscription since its inception in 2006

Improve transparency in rubber trading activities

Encourage production of quality raw materials to ensure rubber industry remain productive and

competitive

The approaches adopted for the development of rubber planting and

processing industry in Malaysia takes into consideration of the concept of

sustainable development

Improvement in productivity, efficiency and quality; attainment of sustainable remunerative rubber prices and balanced growth in all industry’s activities are identified as major challenges faced by the industry

The strategies and activities implemented to address these challenges would lead to a more sustainable development of the rubber industry in Malaysia

T H A N K Y O U

MALAYSIAN RUBBER BOARD HQ, KUALA LUMPUR