ASPEE AGRIBUSINESS MANAGEMENT INSTITUTE, NAVSARI AGRICULTURE UNIVERSITY.

Title: - RUBBER INDUSTRY OF MALAYSIA

Assignment
Submitted to:Dr. Alpesh Leua, Assoc. Prof. in Economics, AABMI NAU, Navsari 396 450. Submitted by:Yazad P. Minocheherhomji MBA (ABM) SEM II Registration No: - 04-1165-2012

ASPEE AGRIBUSINESS MANAGEMENT INSTITUTE

The Rubber Sector in Malaysia

General information about Malaysia
Malaysia is centrally located within the Association of South-East Asian Nations (ASEAN). Consisting of two regions separated by the South China Sea the Malaysian Peninsula and the states of Sabah and Sarawak on the island of Borneo Malaysia is a federation of 13 states and three federal territories. The former British colony gained its independence in 1957. Since Independence, Malaysia has adopted the political system of a parliamentary democracy with a constitutional monarch whose position is rotated every five years between each of the nine hereditary state rulers. The political scene has been characterized by an extra-ordinary degree of political stability and continuity through an encompassing national coalition of political parties. Its territory comprises approx. 330,000 sq km, four fifths of which are covered by tropical rainforest. Due to its bio-diverse range of flora and fauna offering excellent beaches and brilliant scenery, the country is one of the regions key touristic destinations. Malaysia is a multi -ethnic, multicultural and multilingual society with 28.66 million members. Ethnic Malays make up the majority of the population at 57.1% followed by Chinese at 24.6%, Indian at 7.3% and other local ethnicities at 11%. The Malaysian constitution guarantees freedom of religion, although Islam is the largest and official religion. Approx. 61.3% of the population practice Islam, 19.8% Buddhism, 9.2% Christianity, 6.3% Hinduism, and 2.6% practice Confucianism and other traditional Chinese religions. The official language of Malaysia is Bahasa Malaysia, but English as well as Chinese are the business languages.

Economical Overview
Malaysia is a dynamic country which is constantly evolving. Being a middle-income country, Malaysia has transformed itself since the 1970s from a producer of raw materials into an emerging multi-sector economy spurred on by high technology, knowledge-based and capitalintensive industries. Malaysias Economic Performance ranking improved to 7th place out of 59 economies this year compared with 12th position in 2007. It is one of the 20 largest trading nations worldwide and was headed of Taiwan, Sweden, Canada, Australia, the United Kingdom and Switzerland. The World Competitiveness Yearbook 2011 Report released by the Institute for Management Development (IMD) continued to rank Malaysia as among the top 5 most competitive nations in the Asia-Pacific region, taking 6th position in the 20 million population category and 2nd position after Taiwan in the GDP per capita less than US$20,000 category. Moreover, the country is the 21th largest exporter among all trading nations worldwide. Strategically located in the heart of South-East Asia, Malaysia offers a cost-competitive location for investors intending to set up offshore operations in order to manufacture advanced technological products for both regional and international markets. In addition, Malaysia has a market-oriented economy which is supported by pro-business government policies. Last year, the Malaysian Government launched the Economic Transformation Programme (ETP) which is managed by PEMANDU (Performance Management & Delivery Unit) under the patronage of the Prime Minister. The ETP identifies 12 National Key Economic Areas (NKEAs) which are drivers of economic activities that have the potential to materially contribute to the growth of Malaysia. Its objective also known as Vision 2020 is to transform Malaysia

ASPEE AGRIBUSINESS MANAGEMENT INSTITUTE

into a high income country by year 2020. The programme will lift Malaysias Gross National Income (GNI) to US$523 billion by 2020, and raise per capita income from US$6,700 to at least US$15,000, meeting the World Bank's threshold for high income nation. To achieve the targets set, Malaysia needs an annual growth of GNI of 6%. There are plans to revitalize Malaysia's private sector, to grow the service sector from 58 to 65% and to create 3.3 million new jobs. The Government will also introduce other transformation plans in 2012. In Malaysia, the 2011 GDP growth edged lower to 4.0 percent year-on-year due to a weaker domestic demand. Further implementation of ETP projects and a RM 232.8 billion 2012 Budget tabled by Prime Minister Datuk Seri Najib Razak will boost domestic demand, but unlikely to offset underperformance in net exports.

Economical Key facts Malaysia

Currency: 1 Ringgit (RM) = 100 Sen Exchange rates: 1 EURO = RM4.3; 1 US$ = RM3.2 (17.11.2011) GDP (billion RM): 2009: 679.94; 2010: 765.97; 2011: 829.34 GDP - real growth rate: 2010: 7.2%; 2011: 4.0%, 2012: 5.0% (est.) Inflation rate: 3.3-3.5 % (est. 2012 IMF) Exports: RM513.59 billion (Jan- Sep 2011) Exports - commodities: Electronics 34.5%; petroleum & products 9.9%; palm oil 9.3%; chemical products 6.9%; machinery 3, 4%; manufactures of metal 3.0%; rubber products 2.6% Exports partners: Singapore 13.3%, China 12.5%, Japan 10.5%, USA 9.5%, Thailand 5.3%, Hong Kong 5.1%, Germany: 2.7% Imports: RM424.37billion (Jan Sep 2011) Imports - commodities: Electronics 31.2%, petroleum & products 10.1%, chemical products 9.2%, machinery 8.0%, manufactures of metal 5.9%, transport equipment 5.1%, iron & steel products 4.3%, optical & scientific equipment 3.2%, processed food 2.2%, other products 20.8% Imports - partners: Japan 12.6%, China 12.6%, Singapore 11.4%, USA 10.6%, Thailand 6.2%, Germany 4.0% Unemployment rate: 3.0% (2011) Average wage 2011: Project manager IT: RM 8,415, lecturer/speaker: RM3,459, mechanical engineer: RM3,070, account executive: RM2,572, plantation worker: RM850 Population below poverty line: 3, 6%

Bilateral Trade: Malaysia & Germany

Malaysia is EUs second largest trading partner inside ASEAN, behind Singapore, with bilateral trade in goods reaching 31.9 billion Euros in 2010 and the EUs 22nd largest trading partner. Germany enjoys intensive trade relations with Malaysia and is one of the main foreign investors in Malaysia, while among members of the European Union, Germany is Malaysias leading trade partner. Besides, Malaysia ranks 2nd as a consumer of German products among the ASIAN countries.

ASPEE AGRIBUSINESS MANAGEMENT INSTITUTE

Rubber Sector Overview

The rubber products industry can be categorized into the latex, tires and tire- related and industrial as well as general rubber products. For example, Latex products include rubber cloves, catheters, latex thread, condoms and foam products. Malaysia is the worlds largest exporter of rubber gloves with an average annual GDP of RM 6 billion. The rubber gloves industry has been generally recessionproof and has recorded increases in exports since 2000. With regard to the number of employers hired in the rubber estates, there was an increase by 497 persons (4.8%) in 2011. However, when comparing the monthly figures, there was a decrease of 0.1% from August to September. In total, there were 10.943 people working in the rubber estates in September 2011. However, the increase of employees working in this industry is clearly visible in the figure below whereas most workers were employed in the month of July.

Figure 1: MATRADE (2011). Number of employees 2010/2011. Retrieved December 14, 2011 from http://www.matrade.gov.my/ Note: The latest data from October 2011 show again an increase of the number of workers employed in the rubber estates. For this month 11,053 persons were engaged and therefore, 94 persons more than in September.

ASPEE AGRIBUSINESS MANAGEMENT INSTITUTE

Rubber Production and Consumption

The newest figures from October 2011 show a natural rubber production of 85,800 tones of natural rubber which is an increase of 10, 4% compared to the previous month September. However, the annual production was 8.8% fewer than in 2010. The domestic consumption of natural rubber showed changes in both the monthly and annual production. In 2011, the domestic consumption of rubber decreased by 6.6% compared to the year before. Thus, the monthly production of natural rubber in October 2011 was about 35.394 tones, therefore increased by 8.5% compared to September 2011. The industries that used natural rubber the most were the rubber gloves, rubber thread as well as the tyres and tubes industry. Thereby, the rubber gloves industry had a percentage of 68.3% while rubber thread and the tyres/tubes industry each had 10.5% and 8.3% respectively. All in all, these industries contributed 86.9% of the total domestic consumption.

Exports
The countries to which most of the natural rubber from Malaysia is being exported generally are China, Germany, the Republic of Korea and the United States as shown in Figure 1. Furthermore, Portugal, the Netherlands, Turkey as well as the UK and the Islamic Republic of Iran each have percentages of less than 2.8%. However, for October 2011 the Islamic Rep. of Iran and the UK respectively accounted 3.4% and 3% of the total exports.

Figure 2: Department of Statistics Malaysia (2011). Exports by country. Retrieved December 20, 2011 from http://www.statistics.gov.my

ASPEE AGRIBUSINESS MANAGEMENT INSTITUTE

The latest figures from October 2011 show that the overseas exports in October declined to 78.967 tonnes compared to September, whereby the overall exports increased by 1.3% besides, the Standard Malaysian Rubber (SMR) had a percentage of 93.9 of the total exports. Moreover, the SMR 20 grade was the highest grade exported with a percentage of 57.6%. However, in US$ speaking the whole rubber sector had exports in 2011 that were worth $6,947.647Mio. Thereby, the market share of the rubber sector was 4, 61%. Thus there was an increase of 38.4% compared to the previous year where total exports were only worth $5,019.955Mio. The fewest exports for rubber took place in 2009 with a total of $2,965.269Mio. Table 2: Total rubber exports Malaysia from 2009 to 2011

Total rubber sector Exports in $ Millions Market share (%)

2009
2,965.269 3,07

2010
5,019.955 3,87

2011
6,947.647 4,61

Change 2010/11 (%)

38,40

From the overall rubber exports that were worth $6,947.647Mio., an amount of $3,085.022Mio. can be ascribed to natural rubber. This however means that natural rubber has a share of 44.4% of all rubber types exported. Especially, the exports of natural rubber increased from 2010 to 2011 with 74.26%. While the export of natural rubber in 2009 only brought a return of $707.154Mio., it increased the following year with $1,770.307Mio. until $3,085.022Mio. in 2011. Table 3: Natural rubber exports in Malaysia from 2009-2011

Natural Rubber Exports in $ Millions Market share (%)

2009
707.154 23.85

2010
1,770.307 35.27

2011
3,085.022 44.4

Change 2010/11 (%)

74,26

Rubber-based Industry
The Malaysian rubber products industry is made up of more than 500 manufacturers producing latex products; tyres and tyre-related products; and industrial and general rubber products. The industry contributed 18.1 billion to the country's export earnings in 2011. Rubber products accounted for 3.9 per cent of Malaysia's total exports for manufacturing products. Malaysia's natural rubber production in 2011 amounted to 996,210 tonnes compared with 939,241 tonnes in 2010. The domestic consumption of natural rubber for 2011 was 401,923 tonnes. The natural rubber consuming industries for 2011 were latex products (80.3%), tyres (9.2%), general

ASPEE AGRIBUSINESS MANAGEMENT INSTITUTE

rubber products (7.2%), industrial rubber products (3.2%) and others (0.2%). The rapid growth of the industry has enabled Malaysia to become the world's largest consumer of natural rubber latex. The latex products sub-sector is the largest sub-sector within the rubber products industry and comprises 125 manufacturers producing gloves, condom, catheters, latex thread and others. This subsector accounted for 81 per cent of the rubber total value of exports, largely contributed by gloves, catheters and latex threads. Malaysia continued to maintain its position as the world's leading producer and exporter of catheters, latex threads and natural rubber medical gloves. There are currently 120 companies in the tyres and tyre-related products sub-sector comprising nine tyre producers while the remaining companies produce retreads, tyre treads for retreading, valves and other accessories. There are three major tyre producers producing passenger car tyres, commercial vehicle tyres and earthmover tyres, and another nine manufacturing other types of tyres. Exports value of rubber tyres, flaps and inner tubes in 2011 amounted to RM779.3 million. The industrial and general rubber products sub-sector comprises 185 companies producing a wide range of rubber products such as mountings, beltings, hoses, tubings, seals, and sheetings for the automotive, electrical & electronics, machinery & equipment and construction industries, largely for the domestic market. The rubber products industry will need to diversify further, emphasising on high value-added and high technology rubber products, such as products for engineering, construction and marine applications. Under the Palm Oil and Rubber NKEA, four EPPs are being implemented including accelerating downstream activities and commercialising new rubber products. The rubber industry is targeted to contribute RM52.9 billion to the GNI by 2020. The government continues to promote the development of Malaysia's resource-based industries to diversify the country's sources of growth. In addition to fiscal incentives which are currently available for promoted products and activities, the government has further fine-tuned the incentives to promote specific activities among which is the rubber products industry. To further encourage investments in resource-based industries, local companies in the rubber industry that reinvest to expand their projects are eligible for Pioneer Status or Investment Tax Allowance.

ASPEE AGRIBUSINESS MANAGEMENT INSTITUTE

Imports
When it comes to the import of natural rubber the main country was Thailand with a percentage of 57.7. Moreover, other suppliers were from Vietnam, the Philippines, India, Cambodia and Indonesia.

Figure 3: Department of Statistics Malaysia (2011). Imports of Malaysia by country. Retrieved December 20, 2011 from http://www.statistics.gov.my/ Even though, the import rate of rubber was higher in October 2011 than in the same month last year (1,079 tonnes), specifically the imports of natural rubber in October decreased by 5.1% (3,270 tonnes) and accounted an amount of 61,123tonnes in total. In contrast to that the imports in September were still increasing by 14.464 tones (29%) and made up a total amount of 64.393 tones as shown in figure 4. Figure 4: Total import of rubber to Malaysia as of September 2011.

ASPEE AGRIBUSINESS MANAGEMENT INSTITUTE

Figure 5: Total import of rubber to Malaysia as of October 2011.

Similar to the export figures, the money spent on imports for rubber increased as well. Whereas Malaysia was spending $1,304.165Mio. For imports in 2009, they spent $1,951.198Mio. in 2010. Thereby, the market shares each were 1.72% (2009) and 1.84% (2010). Until August this year, the government already spent $2,699.569Mio. (2.17%) for the whole rubber sector. This is an increase of 38.35% compared to the previous year. With regard to natural rubber, there was also an increase of 35.44% in 2011. The amount of money spent for imports of natural rubber almost doubled from 2009 to 2011. Besides, natural rubber again had most of the share in the rubber sector between the years 2009 until 2011. Table 4: Malaysia natural rubber imports & percentage market share from 2009 to 2011.

Natural Rubber Import in $ Millions Market share (%)

2009
751.274 57.61

2010
1,080.065 55.35

2011
1,462.799 54.19

Change 2010/11 (%)

35.44

Stocks
In October 2011, the level of stocks of natural rubber was 139.388 tonnes and went up by 1.9% compared to the previous month. Furthermore, when one compares the overall stocks from 2010 and 2011, there is a new increase of 1%.

Price
The average monthly price of both latex concentrate and Standard Malaysian Rubber (S.M.R) dropped in October compared to September 2011. As shown in the figure 3 below, the average price of S.M.R.20 was 1,364.40sen at the end of September. In the same month, one had to pay 854.90sen for the latex concentrate.

ASPEE AGRIBUSINESS MANAGEMENT INSTITUTE

However, in October latex concentrate was worth only 806.0sen and S.M.R.20 1,261.95sen on average. This means the average price respectively dropped 5.7% and 7.5%. But compared to the year 2010, both prices were higher in October this year.

Figure 4: MATRADE (2011). Prices in the rubber sector 2010/2011. Retrieved December 20, 2011 from http://www.matrade.gov.my/ Table 5: Average monthly price of S.M.R. 20 & latex concentrate in sen/kg from May October 2011.

Average monthly price 2011 May October

S.M.R.20 (sen/kg)
1,334.33 1,261.95

Latex concentrate (sen/kg)

943.33 806.00

Developments and productivity in the Industry

The worlds top three rubber-producing countries namely Thailand, Indonesia and Malaysia stopped setting export limit quotas following a rise in prices in the second half of 2009. The worldwide spread of the influenza A (H1N1) has resulted in increased demand especially for examination rubber gloves from overseas buyers. Local rubber glove producers have increased production to their maximum capacity to meet the demand from international markets.

ASPEE AGRIBUSINESS MANAGEMENT INSTITUTE

10

The imposition of mandatory standards of new tyres and approved permits on selected used tyres had increased the standards of manufactured tyres in the market. The standards have been imposed to reduce the number of tyre-related road accidents in the country. According to the Malaysia Department of Statistics (2011), the ratio of total production to total area tapped was 121.1Kg per hectare (kg/ha). In comparison to the figures from September, productivity in October increased about 3.1%. However, the year-on-year productivity recorded a decrease of 16.8%. The table below is a principal statistic for the years 2010/11 and covers among others the production, export, import and consumption in the rubber sector.

Table 2: Ministry of International Trade and Industry (2011). Principal Statistics: Rubber sector Malaysia. Retrieved December 19, 2011 from http://www.miti.gov.my/

Global Economic Outlook and its Implication on Elastomer Industry

The demand for natural rubber is not expected to decrease. The growth of the automotive sector will be the driver of growth of the natural rubber industry. Between 2006/2007 China tyre production has increased by about 28.5% while the US tyre production has decreased by about 6.6%. The Global demand for NR has shifted from Europe and the US to Asia Pacific particularly China and India. China, with a huge population base and a rise in the middle class population who has a much greater purchasing power as well as impressive GDP growth is expected to contribute about 7-8% growth in elastomer consumption. The consumption pattern of the NR is predicted to increase gradually. By 2020 the world NR consumption is predicted to around 12.49 million metric ton (MMT) while the forecast production is about 8.94 MMT, a shortfall of about 3.55MMT. The price of NR is also expected to increase due to a possible limited supply. This scenario has resulted with a renewed interest in the plantation industry in ASEAN and the West African nations.

ASPEE AGRIBUSINESS MANAGEMENT INSTITUTE

11

Competitiveness of the Malaysian Rubber Products Industry

The rubber products manufacturing industry has achieved remarkable progress with the launching of the IMPs in terms of rubber consumption and export earnings. In the last seventeen years (19902007) total rubber consumed by the industry increased by 209% from 187 592 tonnes to 579 248 tonnes, of which NR was the main material used. Malaysia is now the fifth largest consumer of NR in the world after China, the USA, India and Japan and also the biggest consumer of NR latex. Malaysia is also the world's largest producer of latex gloves, catheters and latex thread. In tandem with the increase in rubber consumption, the corresponding increase in the volume and value of exported rubber products has also grown significantly. Export earnings of the industry expanded by 438.1% from RM 1.87 billion in 1990 to RM 10.09 billion in 2007. It is significant to note that the bulk of the earnings were attributed to the latex-based sub-sector, in particular gloves. The country has also remained as a major rubber trader and exporter of quality rubber. The imports of NR had increased from 548,234 metric tonnes in 2000 to 605,000 metric tonnes in 2007. Resulting from the processors activities, the country remains as a major global player in the export of quality and competitively priced rubber.

Policy Trust - Environment

The rising tide of environmental consciousness has put rubber cultivation and processing in favorable light. Atmospheric pollution from the release of 'greenhouse gases', especially carbon dioxide, from the combustion of fossil fuels and the depletion of forests, especially the tropical rain forests, have been viewed with great concern. Studies have shown that rubber trees convert carbon dioxide at a rate comparable to if not better than that of the natural forest. The potential of natural rubber for sequestering the carbon from the atmosphere to support the ecosystem is widely recognized and adopted for establishing new forests or for reforestation purposes. Besides being environmentally friendly, natural rubber trees are a renewable resource where rubber wood can be extracted on a shorter cycle without endangering the environment. In the processing sector, effort is being made to turn the processing factory as a green factory. New grade of rubber that enable the whole tyre products to be made from more 97% a non petroleum based material are being processed with less energy consumption. The discharged from the factory has been clean via bio processing up to a level where the water is drinkable. The new generation factory comes with a zero discharged facilities, making it environmentally friendly. The greener aspect of natural rubber will be the attraction of the future.

Technical & Industrial Support

Most rubber product manufacturing industries in Malaysia can be categorized as SMEs. The industry lacks the facilities and expertise in certain aspect of rubber science and technology. Hence Malaysian Rubber Board, the government agency that oversees and regulates the orderly development of the industry has to provide technical and industrial support services to enable the industry to be more competitive. a) Technical services The Malaysian Rubber Board provides a wide range of testing services for the rubber industry. To ensure the reliability and integrity of the test results, five laboratories have obtained accreditation to

ASPEE AGRIBUSINESS MANAGEMENT INSTITUTE

12

ISO/IEC 17025 under the governance of the Department of Standards Malaysia. They are the Physical Testing Laboratory (PTL), The Tyre Testing laboratory (TTL) , the Standard Malaysian Rubber Control Laboratory (SCL), the Pollution Control Laboratory (PCL) and the Material Characterization Unit (MCU). Besides Malaysian standards, standards such as ASTM and ISO are also adopted and added to the scope of accreditation. An accreditation to ISO 17025 has also been obtained for the calibration laboratory. The laboratory specializes in providing calibration services in the field of mechanical testing, with special emphasis on rubber and rubber product testing equipment, including on-site calibration. The ISO accreditation of the laboratories will enable the local rubber product manufacturing in Malaysia to have access to testing services that is recognized worldwide. Double testing will be will be eliminated and the cost of production should be able to be reduced. b) Industrial Support
Malaysian Rubber Boards technical advisory programme for improving productivity, efficiency and quality of rubber products manufacturing in Malaysia (Project A5) was initiated 2004. To date, the activities have included visiting 43 companies, where work was done with technical and production staff to review their manufacturing facilities and to address `waste, `not right first time and housekeeping aspects as they arose in addition to improving quality productivity and efficiency levels and finding, whenever possible, cost savings. Experienced scientists with industry expertise from the RRIM Rubber Technology Centre Malaysia and Tun Abdul Razak Research Centre, UK, all of whom have a `hands on approach providing real solutions to real problems, conduct these visits. The approach has been to leave recommendations categorized as short term (ie. no/low cost to implement), medium-term (low/medium-cost to implement) and long-term (higher cost to implement). The successes enjoyed so far by the companies involved in this project have been productivity and efficiency gains of up to 100 per cent, waster reductions of up to 20 percent, operating cost reductions of up to 50 per cent, and mixed compound cost reductions of up to RM0.60/kg in addition to improvements in quality levels. The program has given benefit to participating factories.

International Linkages
At the international level, jointly with the Federation of the Rubber Trade Associations of Malaysia (FRTAM), the MRE is a member of the ASEAN Rubber Business Council (ARBC). The MRE is currently appointed as the permanent Secretariat of the ARBC. The membership of the ARBC is open to organizations within the ASEAN region whose members are engaged in the production or marketing of natural rubber. MRE is also a member of the Management Committee of the International Rubber Association (IRA), which is a permanent international agency responsible for international commercial matters relating to natural rubber. The post of the Chairman of the IRA is currently held by the Director General MRB cum Chairman MRE. The Management Committee comprises of member Associations from both the producing and consuming countries. The IRA formulates International Contracts for natural rubber and ensures healthy trade practices among members of the trading fraternity. Malaysia current holds the chairmanship and the secretariats for the ISO TC 45 on rubber and rubber products. This ISO technical committee discusses and

ASPEE AGRIBUSINESS MANAGEMENT INSTITUTE

13

deliberated on the standard to be published by ISO and it is a useful post to hold to enable us to be aware of the current development in the standardization matters. Malaysia also chairs the ASEAN rubber based product working group. The group coordinates and deliberate on the ASEAN harmonized standardized. These ASEAN harmonized will form the basis for the forthcoming regulatory requirement within the proposed ASEAN union.

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 mans 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.

ASPEE AGRIBUSINESS MANAGEMENT INSTITUTE

14

SOCIO-ECONOMY TRANSFORMATION OF RUBBER SMALLHOLDERS

Before (1980s)

Now

The recent steady cash inflow from rubber cultivation has changed the lifestyle of rubber smallholders.

ASPEE AGRIBUSINESS MANAGEMENT INSTITUTE

15

MALAYSIAN RUBBER INDUSTRY STRATEGIES, 2010-2020

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 RM 28,000 to RM 35,000.

INITIATIVES
Effective TOT, R & D, High yielding clone made available. Environmax method improvement in procedures of selecting hevea clones for planting recommendation. Green Technology Financing Scheme - enhance Malaysias competitiveness in low carbon economy.

Conclusion
Malaysia has positioned itself to be the worlds leading producer and exporter of rubber products. One of the challenges for the Malaysian rubber industry is to remain competitive against cheaper products from low-cost producers, particularly the Peoples Republic of China and India, through higher productivity and quality. The Malaysian rubber products industry also has to remain resilient in competing with other natural rubber producing countries such as Thailand and Vietnam, as these countries also have easy access to readily available raw materials. Malaysian companies need to focus on R&D activities. Efforts have been made to improve efficiency, productivity, and new product development in the downstream activities to produce high value-added and high-technology rubber products such as for engineering, construction, and marine applications. R&D is also required to comply with stringent standards and regulations imposed by export markets, particularly in the EU.

ASPEE AGRIBUSINESS MANAGEMENT INSTITUTE

16

Malaysia rubber product manufacturers and exporters will face greater challenges to penetrate the global market, particularly the European market. The EU has implemented the Registration, Evaluation, Authorization, and Restriction of Chemical Substances (REACH) regulations since the 1st of June 2007. With the deadline for the process of pre-registering chemicals with the European Chemical Agency (ECHA) ending on the 1st of December 2008, the rubber products industry will have to reformulate its products to comply with the regulations. It was estimated that the rubber products industry would have to register over 300 substances compared with 70 for the chemical industry, 40 for the pharmaceutical industry and 38 for the petroleum industry. However, Malaysian rubber manufacturers and exporters can benefit from the ASEAN-China Free Trade Agreement, the Malaysia-Pakistan Closer Economic Partnership Agreement, and the ASEAN Korea Free Trade Agreement, and the Japan-Malaysia Economic Partnership Agreement to gain new market access in these countries. Intensifying promotional and branding activities, which include the promotion of a greenimage in the finished products, need to be undertaken to further strengthen Malaysias position in the global market. 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 industrys 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. The rubber industry can no longer be viewed from the narrow perspective of a mere supplier of raw rubber. Developments in the last decade give a clear indication of the vast potentials for the industry when it is developed in a more integrated manner. The competitiveness of the rubber industry should be examined as an integrated entity spanning the entire industry from rubber cultivation to the downstream value-added industries. Whilst rubber cultivation per se does not generate attractive returns to investment, rubber products manufacturing and rubberwood industries offer lucrative returns. The main competitive edge of Malaysias integrated rubber industry vis--vis other producing countries is the comprehensive R&D and technical back-up as well as the several incentives offered by the government to all sectors of the industry. This has largely enhanced Malaysias productivity in terms of output per unit of land, labour and capital. The Malaysian rubber product industry has been dominated by the latex product sector because of their competitiveness. The general and industrial rubber sector is growing at a slower rate and is less competitive. To sustain and expand the current growth of the industry, proper strategies have to be put in place. The edge that natural rubber, particularly in the aspect of environment should be usefully utilized to ensure a comfortable future for the industry. Natural rubber is a green material and it is a material for the current era. It is also a strategic material. The Malaysian Rubber industry is here to stay and proper.

ASPEE AGRIBUSINESS MANAGEMENT INSTITUTE

17

References:
Anonymous (2012) Market Watch 2012 The Rubber Sector in Malaysia, DE International The German Chamber Network, pp. 1-15. Alias Othman (2008) FUTURE OF MALAYSIAN RUBBER PRODUCTS INDUSTRIES, Malaysian Rubber Board, IPiCEX Shah Alam, SELANGOR, pp. 1-5. Muhamad Thalhah Ab Karim SUSTAINABILITY OF RUBBER INDUSTRY IN MALAYSIA: ECONOMIC AND SOCIAL PERSPECTIVE, Paper Presented at IRRDBCATAS International Rubber Conference, Hainan PRC, pp. 14-28.

ASPEE AGRIBUSINESS MANAGEMENT INSTITUTE

18