Exporting SVR 3l rubber of vietnam to india

Type Name Page 2 Table 1.1 Natural rubber production of major rubber producing 3 Chart 1.2 World natural rubber consumption 6 4 Chart 1.3 Consumption of NR in main consuming countries i

HO CHI MINH CITY CAMPUS

Ho Chi Minh City, May 2013

TABLE OF CONTENT

LIST OF ABBREVIATIONS

LIST OF TABLES, CHARTS AND DIAGRAM

INTRODUCTION 1

CHAPTER 1: OVERVIEW OF RUBBER EXPORT OF VIETNAM TO INDIA 3

1.1 Overview of rubber export of Vietnam 3

1.1.1 General introduction 3

1.1.2 Features and Competitive advantages of Vietnam’s natural rubber 6

1.1.3 Grades and Specifications 10

1.1.4 Factors affecting Exporting activities of Vietnam’s rubber 12

1.2 Overview of India’s rubber market 14

1.2.1 Key indicators 14

1.2.2 Production 15

1.2.3 Consumption 16

1.3 The necessity of improving the export of SVR 3L Rubber of Vietnam to India 19

1.3.1 Contribution of SVR 3L rubber to general rubber export of Vietnam 19

1.3.2 Contribution of Vietnam’s SVR 3L rubber to Indian Market 20

1.3.3 Contribution of Indian Market to Vietnam’s SVR 3L rubber exporting 20

1.3.4 Social – economics benefits of exporting SVR 3L rubber 21

Summary of chapter 1 23

CHAPTER 2: CURRENT SITUATION SVR 3L RUBBER EXPORT OF VIETNAM TO INDIA PERIOD 2007-2012 24

2.1 Current situation of rubber export of Vietnam to India and the contribution of SVR 3L grade period 2007-2012 24

2.1.1 Rubber export turnover 24

2.1.2 Structure of natural rubber export 29

2.1.3 Rubber export price 33

2.1.5 Shipment method 37

2.1.6 Trade promoting activities 38

2.2 Assessments of the current situation of SVR 3L rubber export of Vietnam to India 51

2.2.1 Achievements and reasons 51

2.2.2 Limitations and reasons 53

Summary of chapter 2 54

CHAPTER 3: THE OUTLOOK, ORIENTED DEVELOPMENT AND RECOMMENDATIONS FOR PROMOTION OF SVR 3L RUBBER EXPORT OF VIETNAM TO INDIA 55

3.1 The outlook of SVR 3L rubber export of Vietnam to India period 2013 – 2018 55

3.1.1 Opportunities 55

3.1.2 Threats 56

3.2 Oriented development and objectives of solutions 57

3.2.1 Oriented development 57

3.2.2 Objectives of solutions 57

3.3 Solutions for promotion of SVR 3L rubber export of Vietnam to India period 2013 – 2018 58

3.3.1 Solutions for improving competitive advantages of SVR 3L rubber 58

3.3.2 Solutions for guaranteeing stable and sustainable sources of supply 69

3.3.3 Solutions for improving human resources 73

3.3.4 Solutions for development and innovation of production technology 75

Summary of chapter 3 77

CONCLUSION 78

Abbreviation Full word

AIRIA All India Rubber Industries Association ANRPC The Association of Natural Rubber Producing

Countries ASEAN The Association of Southeast Asian Nations

DEPB Duty Entitlement Passbook Scheme

DEEC Duty Exemption Entitlement Certificate

DFIAS Duty Free Import Authorization Scheme DFRC Duty Free Replenishment Certificate

No Type Name Page

2 Table 1.1 Natural rubber production of major rubber producing

3 Chart 1.2 World natural rubber consumption 6

4 Chart 1.3 Consumption of NR in main consuming countries in

10 Table 1.7 Key Indicators of Indian natural rubber industry

12 Table 1.9 India’s rubber small holdings and estates 16

14 Table 1.11 Import as percentage to consumption of NR of India 17

15 Table 1.12 NR consumption per capita of major NR consuming

16 Table 1.13 India’s rubber consumption - sector wise 18

17 Table 1.14 India’s rubber consumption according to end products 19

18 Table 1.15 Major Export market of Vietnam’s SVR 3L in 2012 20

19 Chart 1.4 Bilateral trade between Vietnam – India 22

21 Table 2.1 Origin-wise Vietnam’s natural export volume in 2012 25

22 Table 2.2 Top export market of Vietnam’s NR in 2012 26

23 Table 2.3 NR export turnover of Vietnam to India 28

24 Table 2.4 Import Value of major NR import market of India in

25 Table 2.5 Export Rubber grades produced in Vietnam in 2012 29

26 Table 2.6 Export Turnover of SVR 3L Rubber 30

27 Table 2.7 Main Rubber Grades of Vietnam exported to major

28 Table 2.8 Export structure of Vietnam’s NR to India 32

29 Chart 2.2 Export value and export price of Vietnam’s NR 33

30 Table 2.9 Average export price of major grades in Vietnam’s NR

34 Table 2.12 Import Duty Structure for the year 2012-2013 44

INTRODUCTION

I The necessity of the topic

In the industrialization and modernization of the country, rubber industry has played an increasingly important part Rubber is an economic crop with social, economy and political benefits Over years, Rubber is considered to be a major export product of Vietnam with export value of over 1 billion USD a year

Vietnam is now the 4th largest rubber exporter with presence in over 78 countries However, a majority of Vietnam rubber is exported to China market, which contains many risks, especially in payment and price fluctuation

This places a need to diversify the export market of Vietnam in recent years Since 2010, India appears to be a very important strategic partner of Vietnam Rubber export to India market has improved amazingly, especially SVR 3L grade Aware of the importance and necessity of the diversification of Vietnam’s natural rubber and competitive advantage of SVR 3L grade, the writer has chosen

the graduation thesis with topic: “Exporting SVR 3L Rubber of Vietnam to India”

II Research subject

Research subject of this thesis is the export Vietnam’s SVR 3L rubber to Indian market

III Research scope

For content: The current situation about exporting activities of Vietnam’s SVR 3L rubber in India market in the period of 2008 – 2012

For time: research about export of Vietnam’s SVR 3L rubber to India market

in the period from 2008 to 2012

IV Research objective

The objective of this thesis is to evaluate export competitiveness of Vietnam’s natural rubber to India market in the period from 2008 to 2012, and give some suggestion about solution to improve export competitiveness of Vietnam’s natural rubber in the period of 2012-2020

V Research method

The research methods are collecting, analyzing, comparing between theory and reality based on information sources of experts, researchers, associations, government agencies, enterprises and newspapers

Structure of the thesis includes 3 chapters:

CHAPTER 1: OVERVIEW OF RUBBER EXPORT OF VIETNAM TO INDIA

CHAPTER 2: CURRENT SITUATION SVR 3L RUBBER EXPORT OF VIETNAM TO INDIA PERIOD 2007-2012

CHAPTER 3: THE OUTLOOK, ORIENTED DEVELOPMENT AND RECOMMENDATIONS FOR PROMOTION OF SVR 3L RUBBER EXPORT OF VIETNAM TO INDIA

Although a lot of effort has been invested in research and evaluating process, there are limitations in time and research resources therefore, the thesis might contain mistakes As a writer, I welcome all comments from professors and my colleague for further development on my findings

The writer would like to express my deep gratefulness to Vietnam Rubber Association, Dr Tran Thi Thuy Hoa, Chief Secretary of Vietnam Rubber Association for sincere support The writer would also like to say thank to lecturers

of Foreign Trade University for knowledge and experiences, which is the key factor helping the writer complete this thesis, especially Associate Professor, PhD Nguyen Xuan Minh for his devoted instructions

Ho Chi Minh City, April, 2013

Writer Duong Tan Vu

CHAPTER 1: OVERVIEW OF RUBBER EXPORT OF VIETNAM TO

INDIA 1.1 Overview of rubber export of Vietnam

1.1.1 General introduction

The term "rubber" encompasses not only the natural product that yields from the tree Hevea Brasiliensis and other vegetative sources but also the variety of synthetic polymers or lesser degree to natural rubber Generally, "rubber" is used in its wider meaning to encompass both the natural product and synthetic materials commonly known as "synthetic rubber" However, in the scope of this thesis,

“rubber” without any further explanation is referred as natural rubber

1.1.1.1 Natural rubber and synthetic rubber

Physically, the properties of natural rubber (NR) are plasticity, resistance to electricity, adhesiveness and elasticity Chemically, NR is a high-molecular weight terpene hydrocarbon polymer NR is found in the lattices of over 2000 species of plants belonging to 311 genera of 79 families However, Hevea Brasiliensis now accounts for over 99% of NR produced and used because of high yield and low impurities Contrary to NR, synthetic rubber (SR) has no specific chemical or technical connotation; it usually refers to a group of high-molecular weight polymers, having physical properties similar to NR

1.1.1.2 Collection of natural rubber

Natural rubber is collected in form of latex, which is a neutral milky fluid flowing out of a cut on the bark of the tree This fluid flows down to a collection container, which can be half shells of coconut or plastic cups… Latex should be collected as soon as possible after the flow has ceased, which may be 3 to 4 hours after tapping Latex is then transferred into galvanized iron buckets

Some trees will continue to drip after the collection and this leads to a small amount of "cup lump" which is collected at the next tapping In some countries, farmers may intentionally collect rubber in form of cup lump instead of latex because it takes less labor In terms of latex, tappers have to wait on field to collect latex from containers before coagulating For cup lump, they can come back after several days to collect cup lump in containers without having to wait on field The

latex that coagulates on the cut is also collected as "tree lace" Tree lace and cup lump together account for 10–20% of the dry rubber produced Latex that drips onto the ground is called "earth scrap", which is also collected for processing of low grade product

1.1.1.3 Production trend

Chart 1.1: World’s rubber production

Unit: 1000 metric tons

(Source: Natural rubber statistics 2012, Malaysian Rubber Board) The world rubber production increases very fast over years in general In

2012, total rubber production reached over 26.4 million metric tons, increased by 1.31% over the previous year The period 2008-2009 marked the crisis of global economy, so the world’s total production of rubber declined in this period and recover faster in 2010 with an increase of 11.03% The synthetic rubber production

is more sensitive to the global economy than natural rubber production This is because natural rubber production is strongly affected by climate and rubber’s tree yield

Table 1.1: Natural rubber production of major rubber producing countries

Unit: 1000 metric tons

to grow rubber tree

1.1.1.4 Consumption trend

Chart 1.2: World natural rubber consumption

(Unit: 1000 metric tons)

(Source: "Rubber Statistical Bulletin”, the International Rubber Study Group.)

Rubber consumption in 2009 dropped down by 7.7% due to global crisis, but

in 2010, rubber consumption recover to a higher level than before crisis with 10.778 million metric tons, increase by 14.78% over the previous year In general, rubber consumption is affected strongly by the performance of the economy However, the upward trend always exists in the world’s rubber consumption

Chart 1.3: Consumption of NR in main consuming countries in 2012

(Unit: 1000 tons)

(Source: the International Rubber Study Group) China is the biggest rubber consuming market with nearly a third of total world’s rubber consumption Ranking 2nd and 3rd are India and the U.S.A

1.1.2 Features and Competitive advantages of Vietnam’s natural rubber

1.1.2.1 Natural rubber production

In 2012, Vietnam’s rubber area is about 910,500ha, ranked 5th

among the world’s largest rubber plantation area Vietnam has long been a strong country in this industry due to long – established growing history and favorable climate and soil

China, 3852.9

India, 988 U.S.A,

949.5

Japan, 719.8 Malaysia,

Table 1.2: Area, output and productivity of Vietnam’s natural rubber period

Productivity (kg/ha) Amount (ha) Percent (%)

2nd globally (after India – 1.784kg/ha) However, average productivity in 2012 is down to 1.707kg/ha, decreases by 0.5% because a substantial new area has been put

in to harvesting in 2012

Table 1.3: Region-wise output and productivity of Vietnam’s NR in 2011

Region Total area (ha) Harvesting area (ha) Output (tons) Productivity (kg/ha)

There’re two forms of natural rubber producers in Vietnam, which are rubber estates and rubber small holdings Before 1975, rubber small holdings take a proportion of about 4% total rubber area After that, rubber was encouraged by the government as a multi-purpose plant, which brings substantial profits to the growers While the rubber price was increasing every year, more and more people started growing rubber According to Vietnam Rubber Association, in 2007, small holdings take a rubber area of 253,320 ha, or 46.1% of total area under rubber, compared to which in Indonesia, Malaysia, Thailand are 85%, 90% and 95% respectively The small holding area is estimated to increase 3% each year

Most of large rubber plantations in Vietnam were run by state-owned corporations, which are in form of rubber estates However, since 2006, the development of small holdings has been quite impressive In 2009, rubber estate area increased by only 3.8%, reaching 333,900ha or 49.3% total rubber area This is the first time when the proportion of rubber area of estate is less than which of small

holdings In 2011, balance comes in share between estates and small holdings

Table 1.4: Production type – wise output and productivity in 2011

Production type Total area

(ha)

Harvesting area (ha)

Output (tons)

Productivity (kg/ha)

of Vietnam including central coast and northwestern area, where growing conditions are less favorable Since small holdings crowd in the most suitable

region in Vietnam, especially Southeast region, their productivity is averagely high Besides, the farmers are also very dynamic in adapting new growing techniques and make a lot of serious effort in raising their productivity

1.1.2.2 Natural rubber consumption

Table 1.5: Vietnam’s NR output, import and consumption in 2011

Year Output

(tons)

Import (tons)

Domestic consumption Amount (tons) Proportion over output (%)

to year regardless of world economy crisis However, domestic consumption of natural rubber takes a very limited part (about 17.37% in 2012) of overall national output The reason is that Vietnam’s rubber manufacturing industry has not been developed yet In fact, there a priority for export exist in domestic natural rubber producers, so many domestic rubber product manufacturers have to rely on import source to safeguard their supply and protect business performance

1.1.2.3 Vietnam natural rubber grades

Vietnam has its own TSR grades with country scheme code: SVR CV 60, SVR CV 50, SVR L, SVR 3L, SVR 10CV, SVR 10, SVR 20CV and SVR 20 Technical parameters of these grades can be found at Appendix

Besides, Vietnam also exports a substantial amount of RSS rubber (especially RSS3), Latex (DRC 100%), SKIM rubber and compound rubber

1.1.2.4 Competitive advantages of Vietnam’s natural rubber

Suitable natural conditions

Vietnam is located in Southeast Asia, which accounts for 80% of total world’s rubber area Rubber is considered to be industry, in which the scale goes along with

advantages Vietnam’s climate and other plantation conditions, especially rainfall level is very suitable with rubber tree

Cheap labor cost

Rubber producing is a labor-intensive industry In Vietnam, labor working in agriculture and forestry sector accounts for about 52% of total labor Vietnamese labors are hard-working and blooming, which brings a competitive advantages regarding price over competitors such as Thailand, Malaysia and Indonesia

National development mode

Vietnam government supports strongly the rubber industry Via Vietnam Rubber Group, Vietnam government successfully controls and directs this industry Group management model is not only conducive to centralized processing, stable processing quality, improve product quality, but also conducive to the advanced technology to promote synchronization and unity within players in the industry

1.1.3 Grades and Specifications

1.1.3.1 Major types of rubber worldwide

The most important forms of processed natural rubber are sheets, crepes, technically specified block rubber, and preserved latex concentrates and specialty forms Among these, the first three are in dry form, in which almost 90% of the production is marketed at present Out of them, sheet rubber and block rubber dominate the world NR market In each type of rubber, there’re many different grades of rubber

1.1.3.2 Common Grades and Their Usage

In each type of rubber, there’re many grades with different specifications and characteristics, below are the most common grades and their usage:

RSS: Sheets are graded and marketed based their quality and market

acceptability Specifications are decided on visual assessments of quality There exist 6 popular grades of Ribbed Smoked Sheets rubber, namely RSS IX, RSS 1, RSS 2, RSS 3, RSS 4 and RSS 5 (in order of quality from the highest to the lowest)

Pale Latex Crepe (PLC): There are eight grades of PLC, all produced from

fresh coagulum of latex with all processes carefully and uniformly controlled

Estate Brown Crepe: There are six grades under this category, all are made

from lump and other high-grade rubber scrap generated on the estate

TSR: The International Standards Organization has specified six different

grades, namely TSR CV, TSR-L, TSR-5, TSR-10, TSR-20, TSR-50 (in order of quality)

Table 1.6: End uses of NR Forms and Grades End use

Lower grades of RSS like

RSS 5 and off grades

produced by small growers

Retreading material, low-quality footwear and soles, cycle tyres, black colored moulded products and channels

Medium grades of RSS like

RSS 3, RSS 4, mostly

produced by small growers

Automobile tyres, cycle tyres and tubes, automobile components, moulded and extruded products

High grades of RSS like RSS

1x, RSS 1 and RSS 2

Aero tyres, radial auto tyres, conveyor belts, hoses, cables and wires

Pale latex crepe Chlorinated rubber, colored, moulded, extruded

and calendered products, nipples, teats and high quality footwear

Estate brown crepe Automobile and cycle tyres, retreading material,

channels and automobile components

Centrifuged latex Latex foam, high tech dipped goods such as

examination and surgical gloves, condoms, catheters and elastic thread

Highest grade TSR – TSR CV Aero tyres and high tech NR products

TSR-L Colored, moulded, extruded and calendered

products, high-quality footwear and pharmaceutical products

Medium grades of TSR like

TSR-10 and TSR-20

Automobile tyres, cycle tyres, tubes, black colored moulded goods, belts and hoses

Lowest grade of TSR Retreading material and black colored

(Source: Dhanam, ASIAN Rubber Handbook and Directory 2005)

1.1.4 Factors affecting Exporting activities of Vietnam’s rubber

Clone and age: Suitable clones improve the productivity as well as the

sustainability of rubber tree over negative influences such as unfavorable climate or harmful weeds and insects Moreover, how to maintain consistent characteristics of

a clone is also an important concern Besides, the age structure of rubber estate also affects strongly to the production The economic life period of rubber trees in plantations is around 32 years – up to 7 years of immature phase and about 25 years

of productive phase Different age structures link with different yield number

Rubber Plantation Area: Total area of rubber plantation affects directly to

the production Since the world rubber consumption is always increasing, developing new rubber area is a must to every producing country, which is conducted either domestically or oversea and usually a huge long-term investment

Natural condition: climate and other required plantation conditions play very

fatal role in rubber production These factors include land, temperature, humidity, rainfall, soil, wind… which determine the different density of rubber in different countries and different regions every year Among these, rainfall is the most influence factor Therefore, rubber production has a seasonal characteristic This characteristic is transferred to exporting performance: due to limited production, the price of rubber in dry season is relatively higher than rainy one

Human resources: Tappers is the most crowded force in rubber human

resource While education level is normally not a requirement, labor’s skill is really

a concern, which contributes largely to productivity

Technology: New technology brings new way of growing, collecting and

processing rubber The country which applies more technology and spends more on R&D activities will have more competitive advantage over quantity and quality of natural rubber New way of growing gives higher-yield and more sustainable estate,

new machine helps reduce the dependence of rubber production on human, especially tapping is a very labor-intensive stage, which places a lot of concerns over new substitute technology Modern technologies also improve the processing quality and productivity

Domestic consumption of natural rubber affects strongly to rubber export of

Vietnam When the need of domestic rubber product manufacturers increase, the amount of rubber export will be reduced However, the impact of domestic need over rubber export is relatively limited, domestic product manufacturing companies sometimes have to struggle over their raw material supply since the domestic natural rubber producers have their priority in oversea market

Last but not least, governmental policies influences substantially to exporting

activities of domestic enterprises The key drivers of the industry are state-run, so government can direct the production as well as export of almost all players in the industry Besides, Vietnam Rubber Association also runs as a bridge bringing government closer to local enterprises

1.1.4.2 International factors

World economy situation: Global economy environment affects not only

business performance of enterprises but also consuming habit of people Especially, the auto industry is very sensitive to fluctuation of the economy Therefore, the world economy affects the demand for rubber worldwide and then influences the exporting activities of rubber producing countries

Oil price: Oil price is one of the most important factors to consider whenever

a change in rubber price may appears Oil is the main material to produce synthetic rubber – a substitute product for natural rubber Therefore, an increase in oil price will lead to an increase in natural rubber price

Performance of major rubber exporting countries: The performance of

natural rubber producers as well as the performance of Auto industry and Tire industry also affects heavily the exporting activities of Vietnam

Agreements and trends: Related multi-lateral or bi-lateral agreements

between major countries have substantial impact on rubber export price and volume For example in 2009, Thailand, Indonesia and Malaysia, representing about

70 percent of global natural-rubber supply, agreed to cut exports by 690,000 tons from January to July 2009 to combat a 56 percent price decline the previous year The result was 103 percent increase in price in 2009 New trends are also a big concern of every exporter For example, when the environment-friendly tire attracts more and more attention from tire manufacturers around the world, many exporters have to think of new grades of rubber to meet the new requirements Therefore, having a prompt understanding about current trend and future changes will brings many competitive advantages for the exporters

1.2 Overview of India’s rubber market

1.2.1 Key indicators

Table 1.7: Key Indicators of Indian natural rubber industry (2010-2011)

World Ranking in Area under rubber (Next to

Indonesia, Thailand, Malaysia, China, Vietnam)

Sixth

World Ranking in NR Production ( After Thailand,

Indonesia, Malaysia and India)

Fourth

World Ranking in NR Consumption ( After China

and India)

Second

World Ranking in productivity First

Relative share of India in global area 6.30%

Relative share of India in global production of NR 8.20%

Relative share of India in global consumption of

Total area under rubber plantation 711560 ha

Number of small holdings (Less than 10ha In area) 1.19 million

Number of estates (20ha and above) 550 nos

Average size of small holdings 0.54 hectare

Share of area in small holding sector 90%

Share of production in small holding sector 93%

No of registered rubber goods manufacturers 4356

(Source: AIRIA’s member directory, 2012-2013) According to the Economic Survey of 2010-11, India is the world’s 4th largest producer There are three categories of rubber: natural rubber, synthetic rubber, and reclaimed rubber Of the overall global production of rubber, natural rubber accounts for approximately 42% Till date, Kerala contributes to approximately 90% of the India’s natural rubber production India is also a major rubber

consuming country with nearly 9% global consumption, ranking 2nd after China The 2nd rank used to be the U.S but due to the high development rate of Indian’s auto industry, India has taken this position On the other hand, India is also famous for its highest productivity, which has been kept for years The small holdings dominate the industry with 90% total rubber area and 93% total production After collection, small holdings sell natural rubber to dealers who are responsible for its sale to rubber manufacturers

1.2.2 Production

Table 1.8: India’s rubber production

(Unit: metric tons)

Year NR % of growth

over previous Year

SR Total (NR

& SR)

% of growth over previous Year

Reclaim Rubber

2007-08 825345 -3.23 101265 926610 -2.71 83075 2008-09 864500 4.74 96739 961239 3.74 86390 2009-10 831400 -3.82 106743 938143 -2.40 93535 2010-11 861950 3.67 110340 972290 3.64 99960 2011-12 900000 4.41 120000 1020000 4.91 105000 (Source: Member directory 2012-2013, AIRA)

India is the fourth largest producer of natural rubber next only to Thailand, Indonesia and Malaysia, accounting for more than 9% of the global output Whereas most of the major rubber producing countries, except China, experience moderate and well distributed rainfall, the rubber growing regions of India are characterized

by excessive and highly seasonal rainfall This produces a longer gestation period, loss of tapping days, fungal diseases and escalating cultivation and production costs

In general, natural rubber takes largest part in total rubber production of India, compared with synthetic rubber and reclaim rubber (the smallest proportion) The balance between NR and SR is relatively stable with about 88-89% natural rubber

In 2010-2012, both natural rubber and synthetic rubber production of India recovered strongly in volume Besides, reclaim rubber production also increases in every year

Table 1.9: India’s rubber small holdings and estates

Units Area (ha) Area (%) Units Area (ha) Area (%)

2003-04 1016544 509652 88.48 281 66328 11.52 2004-05 1029002 518157 88.71 273 65933 11.29 2005-06 1049388 532058 89.03 267 65552 10.97 2006-07 1072860 549715 89.36 260 65485 10.64 2007-08 1097310 569155 89.57 259 66245 10.43

(Source: Member directory 2012-2013, AIRA) Cultivation and production is dominated by small holders Since 2010, “small holdings” in India are referred to unites having area up to 10 ha In 2008, 98.4% of producers in India have less than 2.0 ha in area and the average holding size in the rubber sector is 0.44 ha There’s an increasing trend in the proportion of smallholding in total rubber area of India

Reclaim Rubber

Table 1.11: Import as percentage to consumption of NR of India

(Source: Ms Sheela Thomas, Chairwoman of Rubber Board of India, Report

of Indian Rubber Industry at ASEAN Rubber Day 2013, Thailand)

The increasing rubber demand of India cannot be met by domestic production and the gap has been increasing over years This results in the increasing dependence on import of Indian rubber industry In fiscal year 2007-2008, import only took a part of 10% in total natural rubber consumption However, in 2011-

2012, this number was 22.3% Industry experts and tyre companies say it is cheaper

to import rubber rather than procuring it from the domestic markets, as global rates are lower Rubber Board Chairman Sheela Thomas said so far in the current financial year, domestic prices have averaged around 185 rupees a kg compared with an average of 178 rupees in the global markets Thomas said global rubber prices have been weak for most of the year due to the global economic slowdown, which has led to shrinking demand

Table 1.12: NR consumption per capita of major NR consuming countries in

2012 Population Consumption (Kg) Consumption per capita (Kg)

India 1,210,193,422 988,000,000 0.82

Japan 127,360,000 719800000 5.65

China 1,354,040,000 3852900000 2.85

USA 315,676,000 949500000 3.01

(Source: The writer capitalized data from the International Rubber Study

Group and each country’s Bureau of Statistics) The per capita consumption of natural rubber in India is only about 800 grams against 3 to 6 kg in China, USA and Japan This promises tremendous growth

prospects of the industry in the years to come as India is far from attaining any saturation level, so far as consumption of rubber products is concerned A big population and a late development position are factors contributing to this low rate

of consumption per capita This rate will be raised fast in near future with the trend

of increasing living standard and cheap automobiles

Table 1.13: India’s rubber consumption - sector wise

(Unit: metric tons)

Indian government also create favorable condition to make India a workshop of global tire industry

Table 1.14: India’s rubber consumption according to end products

(Unit: metric tons)

End Product 2006-07 2007-08 2008-09 2009-10 2010-11p Auto Tires & Tubes 622575 670752 680339 819505 909190 Total Non – Tire Sector 546995 571023 570361 551020 550645

Cycle Tires & Tubes 136824 143311 140832 139405 139880 Foot wears 113402 122105 122600 121375 116345 Belts & Hoses 60765 65378 67278 67845 67840

1.3 The necessity of improving the export of SVR 3L Rubber of Vietnam to India

1.3.1 Contribution of SVR 3L rubber to general rubber export of Vietnam

SVR 3L is the most popular export natural rubber grade of Vietnam In 2012 export volume of SVR 3L rubber is 401,174 tons, equals to 39.2% of total rubber export produced in Vietnam SVR 3L is of relatively high quality, usually used in high-quality footwear and pharmaceutical products The motivation of producing

SVR 3L of Vietnamese enterprises derives from traditional producing practice, which brings competitive advantages to local producers over this grades and prevents them from switching to other grades or diversifying their products However, diversifying is becoming a popular trend in local exporters nowadays It helps diversify the market and lower risks of depending too much on a single product range or a single market

1.3.2 Contribution of Vietnam’s SVR 3L rubber to Indian Market

In 2012, export volume of Vietnam’s rubber to India is 71,676 tons Among this, SVR 3L grade takes up to a major part of 40,490 tons, equals to 56.5% India is the second largest consumption country in the world due to high demand of its auto industry Therefore, the major consumption of rubber in India as well as other major consumption countries is contributed by tire sector, which needs lower-quality rubber grades than SVR-3L such as RSS rubber of Thailand, SMR 10, 20 of Malaysia, SIR 20, 50 of Indonesia or SVR10, 20 of Vietnam

1.3.3 Contribution of Indian Market to Vietnam’s SVR 3L rubber exporting

Table 1.15: Major Export market of Vietnam’s SVR 3L in 2012

Market Amount (metric tons) Proportion (%)

SVR 3L is the grade has the most diversified market with over 60 countries, compared to the second, which is SVR 10 is 52 countries India is the second largest export market of SVR 3L, next to China In 2012 Vietnam exported 40,490 tons to India, equivalent to 10.08% of total SVR 3L export

1.3.4 Social – economics benefits of exporting SVR 3L rubber

Increase in volume and value of export, increase foreign exchange inflow and balance of payments

Vietnam is currently a middle income country with GDP per capita of USD$1540 in 2012 The influence from global economy downturn has created constrains for Vietnamese export in recent years According to General Department

of Taxation’s data, trade surplus of Vietnam in 2012 is 4.7%GDP, which is the largest surplus level ever This helps improve the macro stability of Vietnam’s economy

Natural rubber is one of the main exporting products of Vietnam with 2.5% of total export value of Vietnam in 2012, ranking 13th in top exporting product and 3rd

in top agricultural exporting products An improvement in export competitiveness

of Vietnam’s natural rubber will help gain export value, government budget and balance of payment

Increase employment rate

Rubber industry has been the source of employment for thousands of people Nowadays, rubber is planted across the country, from Northwestern to Southeast provinces, attracting a substantial number of employments in rural areas, especially the remote areas in Highland Area and Northwestern provinces Therefore, development and increase in rubber export can make a lot of impact in creating employment, stabilizing per capita incomes

Contribute to improving export competitiveness of Vietnam’s agricultural product, and emphasizing the importance of export in the industrializing and modernizing process of the country

With the aim of developing agriculture to satisfy domestic demand as well as foreign export, government and agricultural organizations are well aware of the importance of export growth and stabilization

Vietnam’s agriculture market has achieved substantial growth in recent periods, in which natural rubber being one of the top export agriculture products Further growth in natural rubber export will enhance Vietnam position as an agricultural product exporter in the world and contribute to the export of other agriculture product such as rice, coffee, fruit, etc of the country

The quality as well as general brand characteristic of Vietnam’s natural rubber will spread over other agricultural exporting products of Vietnam, which helps create a trust-worthy brand for Vietnam as a major agricultural exporter of the world

Contribute to consolidation of trading relationship between Vietnam and India

Chart 1.4: Bilateral trade between Vietnam – India

(Unit: million USD)

(Source: Vietnam Customs) Vietnam and India governments have established trade relationship since

1954 The relationship has been upgraded to strategic partnership since July 2007

In 2006, bilateral trade between Vietnam and India reached nearly USD1.02 billion; the number is developed amazingly up to USD1.53 billion in 2007 Bilateral trade

in period 2007-2012 shows a big improvement with about USD1.5 billion in 2007

up to about USD4 billion in 2012 In this period, Vietnam’s trade balance was

always negative In 2006, trade deficit was 5.4 times as much as export in the same period However, Vietnam’s export showed a faster growth rate than import Vietnam’s export to India in 2012 is 10 times as much as which in 2007, the number regarding import is just 1.6 times This helps reduce substantially trade deficit in this period Vietnam’s trade deficit with India in 2012 is USD379 million showing a decrease by over 50% compared to which in 2011 At the moment, India is the 13thlargest export market of Vietnam in general

Free Trade Agreement between India – Vietnam has come to effect on 1st June

2010 This agreement has boosted strongly overall export turnover of Vietnam to India in 2010, especially export turnover of Rubber has showed a heavy increase by 641.18% over the previous year However, this amazing soar in rubber export turnover is mainly because of high rubber price in 2010 and the substantially increased domestic need of India in 2010 The fast recovery of the Indian economy

in general and of tire industry in particular, especially the trends of cheap automobile (price of USD2000-USD3000) lead to the big domestic demand in India That year, India imported 110,000-120,000 tons rubber, higher than expected

by India Rubber Board by 70,000 tons

Summary of chapter 1

In this chapter, the thesis focuses on describing generally about natural rubber and its plantation, collection, production and consumption in the world Besides, the thesis also gives a deeper overview of natural rubber industry of India and Vietnam Major factors affecting exporting activities of natural rubber are also mentioned in two categories of domestic one and international one

These insights provide a base for the writer to conduct analysis the situation of SVR 3L rubber export of Vietnam to India, period 2007-2012

CHAPTER 2: CURRENT SITUATION SVR 3L RUBBER EXPORT OF

VIETNAM TO INDIA PERIOD 2007-2012 2.1 Current situation of rubber export of Vietnam to India and the contribution of SVR 3L grade period 2007-2012

2.1.1 Rubber export turnover

2.1.1.1 General natural rubber export turnover of Vietnam

Chart 2.1: Rubber Export volume and value of Vietnam

(Source: Summary of Vietnam Rubber Association from data of Vietnam Bureau of

Statistics and Vietnam Customs) The economic downturn of the period 2008-2009 affects strongly to the export volume and value of every rubber producing country and Vietnam is not an exception In 2007, Vietnam exported $67.4 million rubber to Taiwan but in 2008, the export value was down to $40 million In spite of a slightly decrease in volume, export volume of 2008 is higher than 2007 This is a consequence of relatively high price in earlier months of 2008 In late 2008 and early 2009, the price was down tremendously which lead to a consequence of heavy drop in export value

From 2008 to 2012, the rubber export volume increased continuously Averagely, Vietnam export more natural rubber by 12% each year Year 2012 marks the highest export volume ever with 1,023,231 tons, increases by 25.34%

0 200000 400000 600000 800000 1000000 1200000

0 500000

over 2011 This is due to the increased domestic production and increases in temporary import and re-export volume After a fruitful year of 2011, more entities entered into rubber industry However, the price was down and consequently, export value was decreased by 11.6% over 2011

Table 2.1: Origin-wise Vietnam’s natural export volume in 2012

Origins Export volume (tons) Proportion (%) Compared to 2011 (%)

(Source: Summary of Vietnam Rubber Association from data of Vietnam Customs)

In the total of over 1 million ton rubber export in 2012, rubber which has its origin from domestic production was 892,969 tons taking up to 87.3%, the rest is from temporary import and re-export source taking up about 12.7% The major sources include Cambodia (2% with major grades of CSR L, CSR 5, CSR 10), Thailand (0.7% with major grades of RSS 3), Myanmar (0.6% with major grades of MSR 20 and RSS 3), Malaysia (0.6% with SMR 20), Laos (0.1% with SLR 10, SLR 3L) and other sources (9.2%) Though Vietnam is the 5th largest natural rubber producing country, the rubber temporary import and re-export still contributes substantially to the total export turnover The rubber imported temporarily and re-exported is usually of grades which are not a current competitive advantage of local producers Vietnam produces mainly SVR 3L but the tire industry, which consumes about 70% world’s natural rubber amount, normally uses lower-quality grades (equal to SVR 20) Those grades are not produced much domestically Therefore, Vietnamese enterprises choose to from oversea sources In addition, they still gain profits in short term, which is the main motivation In 2010, Vietnam imported 127,100 tons natural rubber with value of from USD300 million to USD400 million The most popular import form is block rubber TSR 10 (18.4%) and TSR 3L/L, next is RSS (15.7%) and TSR 20 (8.3%) Among these, about 60% volume is for re-export and 40% is for domestic consumption

Table 2.2: Top export market of Vietnam’s NR in 2012

No Market

Export in 2012 Compared to 2011 Volume

(tons)

Proportion (%)

Value (000USD)

Change in volume (%)

Change in value (%)

(Source: Summary of Vietnam Rubber Association from data of Vietnam Customs)

Due to global economy downturn, in 2009, number of export market was down to 71 countries, compared to 73 countries in 2008 However, in 2012, Vietnam exports rubber to 78 countries (more than which in 2011 by 5 countries) The major part of Vietnam’s rubber is contributed by 20 top export markets with 96.8% volume and 96.7% value

In 2012, China continues to be the main export market of Vietnam’s natural rubber with share of 48.2% (compare to which in 2011 is 61.4%), volume of 492.749 tons and USD1.3 billion in value This shows a decrease of 1.7% in volume and 31.5% in value compare to those of the previous year China is not only the main export market of Vietnam but also of many other major rubber producing countries such as Thailand, Malaysia and Indonesia China is also the largest rubber import country in the world with 30% of total import-export rubber In recent years,

share of Vietnam’s natural export to China has decreased gradually due to diversifying effort of local exporters and restrictions from Chinese authorities over cross-border trade Cross-border trade between Vietnam and China plays a very important share in total rubber export turnover of Vietnam Export quantity via official channel did not improve over years because of high taxes Chinese importers had to pay a tax of 25 per cent for official imports, but did not have to pay taxes for cross-border imports In addition, procedures for cross-border exports were simple and fast, so both sellers and buyers preferred this kind of export However, since late 2009, China Commodity Import and Export Management Department has imposed restrictions on the border trade port for safety-check reason Chinese authority also creates many policies to control the importers, then control demand and price at border When the supply is surplus, the Chinese traders together push the price down To make things worse, China’s border trade policies change every now and then for the benefit of Chinese traders and Vietnamese suppliers are usually the last to hear about such changes; and usually after they have arrived at the Chinese border with their goods This causes the goods to be stuck at the border and the price was driven down in result Experts believe border trading could badly affect the Vietnamese economy due to its risk in price and payment In fact, low quality requirements from Chinese buyers at border gates are not really a blessing Vietnamese manufacturers will not be motivated to improve their products and will keep producing low-quality goods without knowing what the Chinese market is really demanding Besides, border trade ultimately prevents the government from profiting on the business since traders do not use a contract and

do not pay via banks, so it’s impossible to collect tax revenues

Malaysia rises dramatically in 2012 as the second biggest export market of Vietnam with share of 19.6% (200,400 tons in volume, USD564 million in value) This shows an increase of 246.3% in volume and 145.9% in value over the previous year

The third biggest export market of Vietnam’s rubber is India with share of 7% (71.676 tons in volume, USD211 million in value) This shows an increase of 198.1% in volume and 116.8% in value

Other smaller markets with share below 5% include Korea (3.9%), Taiwan (3.8%), Germany (3.3%), and USA (2.3%) Russia market has decreased significantly ( -50.9% in volume) and now receives share of only 0.6%

2.1.1.2 Rubber export turnover of Vietnam’s natural rubber to India

Table 2.3: NR export turnover of Vietnam to India

Amount (tons) Proportion (%) Amount (USD) Proportion (%)

(Source: Summary of Vietnam Rubber Association from data of Vietnam Customs)

Before 2010, India is a minor export market of Vietnam with share of less than 1% of total Vietnam’s natural rubber export Period 2010-2012 sees a fast development of export turnover of Vietnam’s rubber to India In 2010, Vietnam exported 20,038 tons natural rubber to India, equal to 2.56% of total Vietnam’s natural rubber export This shows an increase by 245% over previous year The year

2012 also experienced a huge increase by 198.1% in volume and 116.8% in value With share of 7%, India becomes the 3rd largest rubber export market of Vietnam (next to China and Malaysia) and have 3rd fastest growth rate among top export markets of Vietnam’s natural rubber (next to Malaysia and Pakistan)

Table 2.4: Import value of major NR import market of India in 2011 Exporters Import in 2008 Import in 2009 Import in 2010 Import in 2011

000USD % 000USD % 000USD % 000USD %

In five years from 2007 to 2011, Indonesia and Thailand is the largest natural rubber import market of India Before 2009, Thailand ranked first with about 50% market share but since then, India and Indonesia got engaged in putting up numerous seminars, exhibitions, festivals and top visits to build bilateral relations Indonesia has surpassed Thailand to be the largest rubber import market of India Before 2010, Vietnam is a minor natural rubber exporter of India with about 2.6% market share Since 2010, the value of natural rubber export of Vietnam to India has improved extensively and become the 3rd largest natural rubber import market of India with 11.49% market share in 2011

2.1.2 Structure of natural rubber export

2.1.2.1 Major export grades of Vietnam’s natural rubber

Table 2.5: Export Rubber grades produced in Vietnam in 2012

Grades

Export Volume

Proportion in total export

Besides the temporary import and re-export source of natural rubber, domestically produced rubber accounts over 87.27% total rubber export volume of Vietnam Among these, the most popular grade is SVR 3L with 401,174 tons, equal

to 39.21% total rubber export This shows an increase by 13.3% over 2011 The grade standing in 2nd rank is SVR 10 with 195,546 tons (19.1% over total export volume), increases by 32.6% compared to the previous year The compound rubber export volume in 2012 is 109.857 tons, which doubles the number in 2011 The compound rubber is gaining interests of Chinese importers since the import tax for this grade to China is zero The other grades take a minor contribution and generally increases in volume compared to 2011 except for latex, SVR 10CV and skim, which shows decreases in volume So in general, 2012 saw increase in export volume of all rubber grades due to peak price in 2011 However the value is decreased because

of lower price

2.1.2.2 Export turnover of Vietnam’s SVR 3L rubber

Table 2.6: Export Turnover of SVR 3L Rubber Year Volume

(tons)

Proportion (%)

Value (000 USD)

Proportion (%)

(Source: Summary of Vietnam Rubber Association from data of Vietnam Customs)

In general, Vietnam exports more SVR 3L year to year The price of SVR 3L is relatively high since its proportion in total value is always bigger than that in total volume This can be obviously explained since SVR 3L is a high quality grade The year 2010 marked an important point since the export value nearly double that in previous year with over 1 billion USD total value The year 2011 and 2012 also saw

a big increase in volume by averagely 14% compared to the previous year In 2012, the export value decreased regardless of a substantial increase in export volume This is in accordance with a decreasing trend in rubber price around the world in

2012

2.1.2.3 Export market of SVR 3L rubber

Table 2.7: Main Rubber Grades of Vietnam exported to major market in 2012

Compound rubber has its share of 10.7% The main export market of this type

is China with 64.4% share and Malaysia with 35.3% share Malaysia import Vietnam’s compound rubber temporarily and re-export later to China to take advantage of zero tax rate That is the reason why this country takes a big share of total compound rubber export of Vietnam recent years In 2011, Malaysia only imported 7144 tons of Vietnam’s SVR 3L rubber, compared to which in 2012 is 20,164 tons

SVR 10 rubber is exported to 52 countries 2 main export countries of this grade are Malaysia (49.7%) and China (20.8%)

SVR CV50 and SVR CV60 are exported to 32 countries Germany is the largest market for this grade with 33.4% of the total volume Other markets with share less than 10% are Korea, China, USA, Japan and India

Latex is exported to 30 countries, mainly the USA with 18.9% Korea, Indonesia and China are following

The main export markets for Vietnam’s RSS rubber grade are India with share

of 38.8%, China with share of 30.3% and Malaysia (16.7%) There are 23 markets more importing this grade

SVR 20 is exported to 22 countries, the main market is China with 54.7%, and Malaysia and Korea are following up with 22% and 15.3% respectively

2.1.2.4 Export structure of Vietnam’s natural rubber to India

Table 2.8: Export structure of Vietnam’s NR to India

Grades

Volume (tons)

Value (USD)

Volume (tons)

Value (USD)

Volume (tons)

Value (USD)

SVR3L 9,444 33,996,877 17,954 72,980,640 40,490 117,775,475 RSS3 5,840 19,008,159 3,558 13,937,289 16,853 50,409,342 SVR10 3,031 8,935,898 1,713 6,645,305 9,067 27,410,933

SVR 3L is the main grade exported to Indian market In 2012, Vietnam export 40,490 tons SVR 3L to India, accounting for 56.49% of total rubber export to India, compared with what in China at the same period is 48.22%

2.1.3 Rubber export price

Chart 2.2: Export value and export price of Vietnam’s NR

(Source: Summary of Vietnam Rubber Association from data of Vietnam Customs) According to the chart, there’s a similar pattern between export price and export value Period 2008-2009 marked the tremendous damage of world economy downturn to rubber price In 2008, the price was still higher than that in 2007 The reason for this is that oil price in earlier months of 2008 was high (over USD100/barrel) and the natural rubber demand was stable, which then pushed the natural rubber price to increase In late 2008, the price started to dip Price in 2009 was down to $1679/ton The price in Jan 2009 was very low as USD1278/ton; the price had been recovered a lot in later half of the year due to many efforts of reducing export from 3 major countries

The price kept its upward trend in 2010 and 2011 February 2011 marked a record price level as 4,567 USD/ton averagely, SVR 3L price was 5,704 USD/ton Overall, average export price in 2011 was USD3961/ton, the highest price level ever

0 500 1000 1500 2000 2500 3000 3500 4000 4500

In 2012, rubber price was USD2.625/ton, decreased by 29.4% over 2011 This

is due to slow global economy recovery and European public debt crisis, which limited natural rubber demand, especially in tire industry

Table 2.9: Average export price of major grades in Vietnam’s NR export to

(Source: Summary of Vietnam Rubber Association from data of Vietnam Customs)

In equivalence with global trend, the price of every grades experienced a big dropdown in 2012 Among these, SVR CV60 and SVR 5 had the largest decreases with about 40% and 50% respectively Latex and SVR 20 had the slightest decrease

in price with 16.5% and 12.5% respectively SVR 3L price decreased by 28.4% compared with which in 2011

In general, the quality of grades in descendent order is SVR CV 50, SVR CV60, SVR 3L, SVR 10, SVR 20 Among these mentioned grades, SVR 20 is of the lowest quality However, the average price of SVR 20 is higher than that of SVR 3L The average prices of SVR 20 when exported to Indian market are 4270