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 2010, Hainan PRC CONTENT 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 SocialEconomic 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 Year Planted Hectarage ( ' 000 ha ) Estate Smallholding Total Area 1990 348.70 1,487.96 1,836.66 2000 123.78 1,306.90 1,430.68 2005 57.37 1,213.93 1,271.30 2006 54.15 1,209.40 1,263.55 2007 53.40 1,194.70 1,248.10 2008 61.10 1,185.90 1,247.00 2009 61.10 960.44 1,021.54 RUBBER PRODUCTION BY SECTOR (‘000 TONS) Source: Department of Statistics Malaysia 128.13 99.53 68.39 56.23 58.2 799.47 1,215.24 800.79 941.8 927.60 1,283.63 857.02 1,000.0 - 200.00 400.00 600.00 800.00 1,000.00 1,200.00 1,400.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e Estate Smallholding Total Production PROJECTION OF MALAYSIA’S NR PRODUCTION ‘000 tonnes CAGR: 6.2% 6% 94% Planted Area 2009 Estate Smallholding 7% 93% Production 2009 No. of Smallholders 400,598 With 94% of rubber planted areas and 93% of rubber production are from smallholding sector, acceleration of smallholding’s development is needed to sustain NR industry Source: RISDA, DOA Sarawak, Sabah Rubber Industry Board 1,289 1,358 1,361 1,344 1,372 1,381 1,525 1,520 1,600 1,620 1,630 1,184 1,167 1,211 1,270 1,296 1,320 1,358 1,414 1,420 1,440 1,500 1,226 1,211 1,237 1,280 1,300 1,320 1,370 1,420 1,430 1,450 1,500 1,000 1,100 1,200 1,300 1,400 1,500 1,600 1,700 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009p 2010e Estet Pekebun Kecil Purata kg/ha/year 2009 Avg Yield Smallholders Estate *Based on survey conducted by MRB e-estimates MALAYSIA LAND PRODUCTIVITY (KG/HA/YEAR) MAJOR ISSUES AND CHALLENGES - Declining rubber planted area - Inability to Attract New Participants to the Industry [...]... 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... 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... INDUSTRY S SUSTAINABILITY: • Strategies and Initiatives • Transformation of Rubber Industry - Restructuring the Rubber Smallholdings - Increase Supply Chain Efficiency 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%... scale holdings would benefit from economies of scale IMPROVE MARKETING-CHAIN EFFICIENCY Smallholders Rubber Dealer(s) Issues of transparency in farmgate price determination Processors (cont ) 50,000 IMPROVE MARKETING-CHAIN EFFICIENCY RRIMRAPID DRC – RAPID & ACCURATE DRC DETERMINATION Improve transparency in rubber trading activities Encourage production of quality raw materials to ensure rubber industry. .. MALAYSIAN RUBBER INDUSTRY STRATEGIES, 2010-2020 Sustaining Malaysian Rubber Industry Contribution To A High Income Economy • NR production to increase to 1.8 million tons with productivity of 1.8 tons per hectare by 2020 • Annual income of smallholder to increase by 25% from RM28,000 to RM35,000 INITIATIVES • Effective TOT • R&D • High yielding clone made available Environmax method – improvement in procedures... Dept of Statistics Malaysia 1,600 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 REPLANTING RUBBER TO RUBBER. .. – 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 –... Yearly Average Prices of SMR 20 (sen/kg) 2010* SOCIO-ECONOMY TRANSFORMATION OF RUBBER SMALLHOLDERS Before (1980s)…… ……Now The recent steady cash inflow from rubber cultivation has changed the lifestyle of rubber smallholders 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”... price to a higher level this year, production has increased by 15% y-o-y 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 1200 3,000 987.04 1000 2,500 831.37 800 2,000 637.36 600 1,500 2,395 400 1,000 1,900 285.98 1,440 200 0 500 276 2002 2003 2004 Income ( RM ) * SMR 20 yearly average as at 13... supply of rubber does not exceed anticipated demand Yearly Average Prices of SMR 20 (sen/kg) 987.04 831.37 710.92 734.06 637.36 461.93 523.07 World NR Production 9.6 mil tons World NR Consumption 9.5 mil tons 378.97 285.98 2009 2002 2003 2004 2005 2006 2007 2008 2009 2010* Source: Malaysian Rubber Exchange & International Rubber Study Group (IRSG) * SMR 20 yearly average as at 13 October WAY TOWARDS INDUSTRY S . TOWARDS INDUSTRY S SUSTAINABILITY: • Strategies and Initiatives • Transformation of Rubber Industry - Restructuring the Rubber Smallholdings - Increase. out in a socially acceptable way. Increase income of rubber growers and remunerative return on investment STATUS OF THE MALAYSIAN RUBBER INDUSTRY RUBBER