The hundred-year history of the Malaysian rubber is marked by a lot of ups and downs. Two major developments during the period have been the country’s slide from the top slot in global natural rubber production to the third place and the shift into oil palm cultivation, mainly due to the un-remunerative prices of rubber as compared to the economical benefits from oil palm cultivation.
At the same time, the country’s rubber goods manufacturing industry grew by leaps and bounds over the years, thanks to the patronage and support of the Government, the Malaysian Rubber Board (MRB), the Rubber Research Institute of Malaysia (RRIM) and the UK-based Tun Abdul Razak Research Centre (TARRC).
Malaysia today is the world's third largest producer and exporter of natural rubber (NR), the fifth largest consumer and the largest global consumer of latex concentrate. In the products manufacturing sector, Malaysia is the leader in the production and supply of medical rubber gloves, catheters, latex threads and cords.
With NR prices on an unprecedented bull run, there is a renewed interest in rubber production and the Government has already recognised it as a National Key Economic Area (NKEA). Accordingly all-out efforts are being made by the Malaysian Rubber Board and the research and export promotion orgnisations associated with it to promote the rubber industry in a big way with a view to regaining Malaysian rubber’s old glory and making the country a centre of excellence in rubber, says Datuk Dr Salmiah Ahmad, the dynamic and graceful Director General of the Malaysian Rubber Board (MRB) in an exclusive interview to Rubber Asia during her recent visit to Kerala.
Given below is a detailed version of the interview in which she touches upon many aspects of the rubber industry with specific reference to Malaysia, the price scenario, R&D and the Malaysian rubber industry’s roadmap ahead. Over to her:
As the Director General of the MRB, what is your assessment of the rubber industry’s present status and prospects with particular reference to Malaysia?
After more than a year as a Director General of the Malaysian Rubber Board, the custodian for the Malaysian rubber industry, I have observed that the industry has undergone considerable changes, in line with developments in the world economy, in general and the national policies, in particular. Nevertheless, NR remains a major industry sector in the Malaysian economy in terms of its contribution to the Gross Domestic Product (GDP), export earnings, employment and income, involving large numbers of smallholders.
In 2010, the industry contributed about RM34 billion in export revenue, which more than doubled from RM13.27 billion in 2000 and accounted for about 6% of Malaysia’s total export earnings. NR exports accounted for RM9.13 billion, while rubber products contributed RM12.96 billion, other rubbers which include synthetic rubber, reclaimed rubber, recycled rubberand compounded rubber contributed RM4.27 billion and rubber wood products made up the rest at around RM7.63 billion.
Over the last one hundred years, the Malaysian rubber industry has evolved from being an important component in the agricultural sector into a force to be reckoned with in the manufacturing sector of the Malaysian economy. As Malaysia’s economic focus shifted from primary industries to manufacturing with the promulgation of the Industrial Master Plans, the rubber industry also underwent major structural changes. There was a steady decline in rubber cultivation and production while imports of rubber from the neighbouring countries increased to meet the growing demands of the domestic rubber product manufacturing sector which expanded rapidly.
In tandem with these developments, Malaysia has achieved several distinctions. Today, the country is a global player in the export of quality and competitively-priced rubber as well as rubber products in the international market. Malaysia is the world's third largest producer and exporter of natural rubber (NR), fifth largest consumer of natural rubber in the world and the world’s largest consumer of latex concentrate. In the rubber products sector, Malaysia is a leading producer and supplier of medical rubber gloves, catheters and latex threads and cords
What are your major initiatives after taking over as the Director General of MRB?
Malaysia's Vision 2020 sets out new goals for the Malaysian rubber industry, and this can be achieved by enhancing productivity and competitiveness and by modernising the predominantly smallholder sector in order to maximise the industry's contribution to the national economy. In tandem with these rapid changes, it is vital that the MRB re-examines its strategies, taking into consideration the changing scenario and developments.
In this regard, during the first three and a half months, MRB launched two strategies, namely, the Malaysian Rubber Industry Strategies and the Malaysian Rubber Board Strategies, for the period 2010-2020. The Malaysian Rubber Industry Strategies aim at sustaining the Malaysian rubber industry by contributing to a high-income economy. The Malaysian Rubber Board Strategies, on the other hand, chart a roadmap to enable the country’s transition to a global centre of excellence for rubber in the area of Research & Development.
These two strategies outline the prioritisation, implementation and the expected outcomes that MRB would undertake in order to ensure the continued viability of a fully integrated rubber industry through the generation of sustainable income and returns. The underlying thrust of the action plans under the strategies is to ensure that barriers to the growth of the rubber industry are removed and the execution of the strategies at the right time bring sustainable benefits to the stakeholders.
In another development, in November 2010, the Government included the rubber sector, together with 12 other sectors, in the National Key Economic Areas (NKEAs). The NKEA is a driver of economic activity that has the potential to directly and materially contribute a growth-quantifiable sum to the Malaysian economy and help Malaysia achieve high income status by 2020. Under the NKEA, it is anticipated that, excluding the rubber wood, the Malaysian rubber industry will contribute RM52.9 billion to Gross National Income (GNI) by 2020 as against RM18.5 billion in 2009.
Do you foresee Malaysia as a global centre of excellence for rubber?
Within a relatively short period, the Malaysian rubber products manufacturing industry has successfully evolved from a relatively small and unknown entity into a reputable major world supplier of quality medical gloves, latex thread and catheters. Creation of niche products, such as the Standard Malaysian Gloves and green material for tyres, has placed Malaysian rubber goods superior to such products from elsewhere in the world in terms of quality and competitiveness. In fact, in 2010, the industry, as a whole, contributed about RM34.00 billion in export revenue as against RM10.6 billion in 1990.
Rapid expansion of the industry is attributed to several factors such as well-planned and focussed industrial growth strategies, unfailing Government commitment, political and economic stability, stable infrastructure, forward-thinking Government policies, a large pool of well-trained local workforce, a pragmatic R & D policy as well as technical and product testing support.
Against this backdrop, I foresee that the Malaysia will emerge as a global centre of excellence for rubber. It was to realise this vision that MRB has launched the Malaysian Rubber Industry Strategies which are aimed at sustaining the industry by contributing to a high-income economy. It is targeted that national income per capita will be increased from the current level of US$7,000 to US$15,000 by the year 2020.
In line with this aspiration, MRB will continue to intensify its R&D efforts to give emphasis to the downstream, value-added sector. Selected areas of R&D in the upstream will continue to be emphasized in order to maintain the industry’s competitiveness. In addition, as a world leader in R&D of NR, the MRB will continue to be a resource centre for the supply of trained, experienced and highly qualified manpower for the rubber industry, especially the downstream rubber products sector.
The MRB will continue to conduct training to fulfil every requirement of the NR industry, including plantation and industrial courses as well as transfer of technology to entrepreneurs on the manufacturing of rubber products. In order to address the issue on tapper shortage, concerted efforts have been carried out to introduce automation in tapping. We expect the automated tapping machine developed by us will hit the plantations by October this year.
Do you think the present high prices will revive the interest on the part of growers to increase production by enlarging areas under rubber cultivation and going in for massive replanting?
The current SMR 20 prices of over 400 US cent/kg has managed to lift a great majority of smallholders above the poverty line. It has also managed to bring some of idle rubber areas into production. This price level has also attracted the estate sector to replant some of their areas. Natural rubber in Malaysia today is regarded as a strategic crop. Its socio-economic importance cannot be denied as it sustains the livelihood of about 400,000 smallholder families throughout Malaysia. The industry has regained considerable attention with the current high rubber prices and the Government’s emphasis on agriculture in general. The economic well-being of the smallholders is thus of considerable concern to ensure continuous stability in the rural sector.
I should say that the current prices and anticipation of future prices will be the determinant factors in the selection of the crop to be planted when the old trees are due for replanting. Any selection of crop to be planted will take at least 20 years cycle before the new replanting will take place. Due to traditionally depressed and protracted low NR prices in the 1990s and 2000s, more than 800,000 hectares of rubber area were converted to other more lucrative crops, especially oil palm.
In 2010, out of 1.02 million hectares of rubber area in this country, 94% is under the smallholder sector. Therefore, to encourage the existing smallholders to remain in rubber as well as to encourage other smallholders to venture into rubber cultivation, NR prices must remain remunerative and ensure sustainability of the industry. In 2010 alone, due to high prices, Malaysia’s NR production increased by about 10% to 939,039 tonnes.
Under the Malaysian Rubber Industry Strategy 2010 – 2020, we envisage that, by the year 2020, local rubber product manufacturing industry will consume about one million tonnes of NR, almost a two-fold increase from the current level of about 500,000 tonnes. Therefore, to ensure sufficient supply of domestic raw material, national rubber production would be increased to two million tonnes from total rubber plantation area of 1.2 million hectares and increase national rubber productivity to 2.0 tonnes per ha per year. The area under rubber will be maintained at least at 1.2 million hectare-level through replanting in 40,000 ha annually and new planting in 30,000 ha per year
Do you think the current high prices will stay? If so, how long?
It depends on various factors. The flooding in the rubber growing areas in Southern Thailand during March-April 2011 has affected NR production in the kingdom. As such, Thailand may miss its target of producing 3.3 million tonnes of NR this year. It has also been reported that, Thailand will have a production shortfall of about 18,000 tonnes for the next 5 years due to destruction of rubber plantation by floods in the Southern part of the country in 2010. Therefore, it will take at least 4 to 5 years before the rubber trees in this region to come into production.
In contrast, other main producing countries have predicted an increase in their respective NR production level this year. For example, NR production is expected to increase to 2.9 million tonnes in Indonesia and slightly to 970,000 tonnes in Malaysia this year. Private sector plantations in Vietnam will be opened for tapping this year and, therefore, that country’s NR production is expected to rise to 780,000 tonnes. In Cambodia, NR production expected to touch 45,000 tonnes due to an increase in new planting area to 5, 000 hectares.
Meanwhile, demand from China and India, as expected, will continue to increase due to an expansion of the automobile industry. Therefore, it is expected that the fall in NR production in Thailand may not increase rubber price too much as other market factors as mentioned above will have a balancing effect. However, as things stand now, NR price is expected to remain remunerative this year and the following years to come. Anticipation of high NR prices is also supported by estimation of oil prices which will be hovering above $100 per barrel for the next few years.
However, this assurance is subject to global economic factors, such as the effect from the political tension in the Middle East, sovereign debt crisis in the Euro-zone, the move from the Chinese Government in cooling off its economic activities, the economic growth prospects of the NR consuming countries, the performance of markets of other commodities and the movement of the US dollar.
You have already gone on record stating that Malaysia’s NR production is in for a massive rise in the next few years. What are your strategies for the same?
Apart from the expansion of area under rubber and replanting initiatives under the two strategies I mentioned earlier, we have ambitious plans to increase productivity. In 2010, the average land productivity of the estates sector was 1,620 kg/ha/year whilst that in the smallholding sector was 1,470 per kg/ha/year. The land productivity or yield suggests that Malaysia has the potential to increase her total production simply by increasing productivity levels in existing areas by replanting with better clones. The Malaysian Rubber Industry Strategies envisage increasing production to 2.0 million tonnes with a productivity of 2.0 tonnes/ha/year by 2020.
The Malaysian Rubber Board (MRB), through upstream research and development (R&D) activities, has given special priority to increase productivity through breeding and selection, agronomy and new latex harvesting techniques to meet the increasing demand by the industry.
The MRB has also developed new clones and technologies which will improve yield and production as well ensure better returns from rubber cultivation. The major research areas undertaken are in the breeding programmes with the aim of producing clones which can produce annual latex yield of more than 3,000 kg per ha and log volume of more than 1.5 cubic metres per tree. The success of the rubber breeding programme can be seen from the multifold yield increase -- from about 500 kg/ha/year for unselected seedlings to about 3,000 kg/ha/year for modern clones.
In 2009, MRB introduced the 1Malaysia Clone -- the RRIM 3001. It has a latex production potential of more than 3,000 kg/ha/year and is suitable for planting on a commercial basis including the rubber forest plantation programmes. This clone has shown good performance in early evaluation in terms of growth vigour and latex production and is, therefore, also suitable for planting as latex timber clone. The RRIM 3001 clone is still under evaluation in different environmental conditions. The 1Malaysia clone is tappable in less than five years with an average yield in the first three years between 2,264 kg/ha/year to 2,792 kg/ha/year and could surpass the 3,000 kg/ha/year.
What will drive the Malaysian NR industry in the future? Will it be plantation, value addition, manufacturing or exports?
It was rubber which provided the ‘engine of growth’ for the Malaysian economy for many decades as well as one of the main contributors for the country’s wealth creation.
The downstream sector will continue to contribute the most to the industry’s export earnings. However, labour and other related issues, total dependence on foreign supplies for most of the raw materials, narrow export product and market bases and competition from fast- emerging cheaper manufacturers within ASEAN, China and India are threatening its future prospects.
Although the Malaysian NR industry is facing these constraints, the future of the industry still holds promise. Focussed research and development, effective and efficient transfer of technology, commercialisation of technologies and environmental issues were key areas identified under our new strategies for rubber development. Execution of these strategies plus appropriate policy adjustments would make Malaysia a “Centre of Excellence for Rubber”.
History has also proven that plantation crops, such as rubber, are able to cushion the negative impacts during national economy downturn. Income from export of rubber was used to finance the development of the country which progressively led to the transformation of the economy towards industrialisation. Today, the industry has been transformed into one of world-class for manufacturing top quality medical latex gloves, catheters and latex thread in addition to a wide range of tyres and inner tubes, rubber footwear and products for industrial and general use.
Malaysia continues to maintain its position as the world's leading producer and exporter of medical gloves and catheters, supplying 80% of the world market for catheters, and 70% for rubber gloves. Malaysia is also the major consumer of NR latex and the fifth major consumer of natural rubber. With the availability of quality raw materials, strong and stable Government, good infrastructure underpinned by globally recognized R&D institutions, Malaysia is well placed to become a global player to supply the global market a wide range of rubber products. In the backdrop of the above realities, plantation, value addition or R &D, manufacturing and export will continue to play a major role in the Malaysian rubber industry’s future growth.
What are the major challenges facing the Malaysian NR industry.
The continued decline in rubber area since 1982 due to conversion of rubber area to other crops and economic activities that promise better returns has been a great challenge to the Malaysian rubber industry in improving its position as a major NR producing country.
Another one is labour shortage. Both the upstream and down stream activities are facing severe shortage leading to increasing dependence on foreign workers. Substantial costs have been incurred by our manufacturers to recruit and train new foreign workers from time to time. High production cost compared to other major producing countries is another issue. This is mainly due to higher cost of labour, which forms about 60% of the total cost of production. The downstream sector will further increase the cost of production.
Insufficient domestic supply of latex concentrates is also a problem for the downstream industries since dry rubber production is preferred by the smallholders. Approximately 70% of the total latex requirement is met by imports. Yet another one is the low rate of adoption of new technologies by small holders mainly due to the advanced age of many smallholders, uneconomical land sizes and high investment costs.
There is also growing concern is the stringent international standards for environmental protection, which constitute non-tariff barriers imposed by importing countries, especially the EU. Adhering to these regulations will incur extra cost to the manufacturers.
How far institutions like MRB has helped the country to have a cutting edge in rubber industry?
Back in the 1960s, when rubber was mostly traded in sheet and crepe forms, Malaysia introduced the Standard Malaysian Rubber (SMR) scheme, a revolutionary change in grading and presentation of natural rubber, which guaranteed uniformity in quality and properties. The success story of SMR, which was emulated by other producing countries too, became a milestone for MRB (which was then known as Rubber Research Institute of Malaysia, (RRIM)
As technology like SMR is now being considered ‘fundamental’ by other rubber producing countries like Thailand, Indonesia, India and Vietnam, the MRB focus has been shifted on new and unique downstream technologies that would further strengthen Malaysia’s position. The MRB is spearheading the Malaysian natural rubber (NR) industry’s drive to capitalise on the growing green consumerism movement in the world; where preference for natural and renewable materials -- NR is definitely natural and renewable -- is commanding preference over synthetic materials.
What are the latest innovative products from the stable of MRB and its research wings
The introduction of Ekoprena, a speciality rubber material for ‘green tyre’ production, and Pureprena, an advanced rubber for engineering and eco-efficient applications, are among many innovations by the MRB to further enhance the value of NR by improving the physical properties and pushing for more advanced applications.
Ekoprena is a form of epoxidised natural rubber and is an established class of speciality rubber obtained by expoxidation of natural rubber latex. A major demand for Ekoprena is from tyre manufacturers worldwide owing to its properties in the manufacturing of environmentally-friendly tyres. Thus, with the increasing demand to reduce fuel consumption, it is apparent that Ekoprena will have a role to play as a green material in the future development of tyres.
At the same time, the Board is also conducting research in nanotechnology and advanced materials for the benefit of the industry and society. MRB has already entered into ties ups with MARDEC and FELDA for popularizing more novel rubber varieties like Ekoprena.
The MRB is also involved in the successful design of a new rubber buffer for the Kuala Lumpur Monorail to provide a smoother ride for passengers and meeting the requirements specified. MRB has also been promoting the seismic rubber bearing technology in seismic-prone countries around the world for many years. The seismic rubber bearing technology, commonly known as base isolation, is being increasingly employed as a means of protecting structures from earthquakes.
Please tell us in brief MRB’s roadmap for the future.
In the upstream sector, the focus will be on breeding of high-yielding clones, improving yield harvesting technology and enhancing technology transfer, particularly to the smallholders. In the mid-stream sector, research will be centred on zero waste and speciality rubber for the market niche. Considering the intense competition in the manufacturing of rubber products, the MRB will focus on creativity, innovation, efficiency, cost reduction and product design. Also, efforts will be made, using advanced materials and processes, to ensure that the industry remains competitive.
As the custodian of the rubber industry in Malaysia, MRB, in early 2010, re-examined its R&D activities, taking into consideration the changing scenario and developments. Identifying the weaknesses and shortcomings, we have come out with strategies as stated in the MRB Strategies 2010-2020.
Undeniably, R&D has played a pivotal role in spearheading Malaysia's rapid rise into global prominence not only as a major producer of superior quality natural rubber but also of rubber products.