It was once the darling of the Malaysian economy, along with tin mining. The North South Highway in the early years was lined by kilometres of its plantations but that has changes today with Oil Palm in the ascendancy. But, as Datuk Dr Salmiah Ahmad, Director General of the Malaysian Rubber Board highlights in the following Q&A with Business Circle, while the rubber sector faces many challenges, it also has opportunities that are waiting to be tapped. This is Part 1 of the rubber story.
The three major threats identified are:
- Declining area for rubber
Although demand globally has grown, Malaysia’s rubber plantation area has been gradually declining at a compound annual rate of 2.65 percent over the last 10 years. The conversion of rubber land to other crops and economic activities needs to be addressed. In 2000, the land area was 1.43 million hectares but in 2011 it declined to 1.02 million hectares. This decline is automatically viewed as a decline in production by customers and actually pushes them to look for supply in other markets in order to ensure their sustainability.
- Low Productivity
Productivity remains low due to the existence of old and low yielding clones, aging smallholders that do not practice Good Agriculture Practices (GAP), unskilled harvesters and low adoption of latest latex harvesting technologies and low mechanization. Malaysia’s average yield per hectare stands at about 1,500 kg which is much lower than other major producing countries. Low productivity directly relates to higher cost of production.
- Shortage of Labour
High turnover of labour as well as difficulty in attracting local labour is a constant concern for the rubber industry. Of the total rubber area, 94% is owned by smallholders aged more than 55 years and hinders the effectiveness in the transfer of technology. When unskilled foreign tappers are brought in to meet the demand for tappers this has long term repercussion on the productivity of the tree.
But it is not all gloom. These are the areas of opportunity.
- Clones with high productivity
Years of breeding research and development has generated a variety of rubber clones with high productivity. The implementation of aggressive replanting and new planting under the rubber NKEA will help to speed up the planting of new clones and this will increase national productivity in the next 5 to 6 years.
- Automation and Mechanization
The automation and mechanization in latex harvesting would eventually replace the country’s dependency on foreign labour while at the same time could increase land productivity to two tonnes per hectare per year as envisaged under the Rubber NKEA. Since one of the main reasons for the current low productivity is low tapping intensity, the mechanization of harvesting would solve problem of labour, increase the number of tapping days and hence enhance yield.
- Customers preference for green products
Rubber tree is a carbon dioxide sequester. This green image of rubber has not been fully exploited but yet customers in the developed countries require this type of green materials in order to meet their carbon emission reductions targets.
- Creating differentiation
Malaysia is well known for her R&D and innovation capabilities. In rubber, Malaysia leads in terms of the production of latex based and/or green products. These capabilities allow Malaysia to be differentiated from her neighbouring countries that currently specialize only in the production of solid rubber.
Speaking to one of our largest glove makers, Supermax, they see the synthetic nitrile gloves being more dominant than natural rubber gloves. If they are right, where do you see new sources of demand for natural rubber coming from?
Malaysia is a producer and a consumer of both synthetic and natural rubber. Developments in both areas are welcome since the availability of different feedstock would allow Malaysia to create a variety of differentiated products. In the traditional application such as gloves, synthetic rubber is preferred over natural rubber because of lower price, lower price volatility and lower product specifications. Due to the better carbon foot print, it is strategic to position natural rubber as a premium raw material compared to synthetics. Currently natural rubber is the material used for medical gloves – which is a specialized application. I personally think this is a healthy development for Malaysia.
MRB hopes that Malaysia could quickly leap into the production of specialty rubber such as Ekoprena and Pureprena as these products would differentiate Malaysia from her competitors. Ekoprena and Pureprena require latex as feedstock instead of the rubber cup-lumps. This is already under way as the Rubber NKEA is targeting to produce 300,000 tonnes of Ekoprena and Pureprena by the year 2020.
What is the typical profile of a rubber smallholder and what are the most pressing issues they face?
In 2011, Malaysian produced 996,210 tonnes of natural rubber. The smallholding sector accounts for 942,866 tonnes or 95% while the estate sector make up the remaining of 53,344 tonnes.
In 2012, about 1 million hectares have been planted with rubber but only 70% of these areas are tap-able or being tapped. Some of the matured rubber areas are not being tapped due to lack of labour and the smallholders old age. More than 50% of the smallholders are above the age of 60.
Uneconomic holding size and low productivity
The average holding size per smallholder has been reduced to less than 2 hectares and productivity remains low due to the existence of old and low yielding clones.
Low Level of Technology Adoption
Many smallholders do not adopt the latest technology particularly in rubber harvesting due to financial constraint, old age or lack of confidence in the new technologies.
Good Agriculture Pratices (GAP)
About 60% of smallholders do not apply GAP, particularly in manuring due to escalating fertiliser costs.
Shortage of Labour
The rubber industry is a sector with high labour, capital ratio and ageing smallholders. Labour therefore continues to be a major problem.
Photo credit: Flickr user noodlepie