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by Channa Kasturisinghe

The Government is planning to extend rubber plantations in the Moneragala District on a large scale in a a bid to meet the growing demand for natural rubber for the manufacturing sector.

Plantations Industries Minister Lakshman Kiriella told the Daily News that his ministry has already started planting one thousand hectares of rubber in the district this year.

"Nurseries have been already set up and regional plantations will supply plants to these nurseries. Every year we will plant one thousand hectares each until we reach a target of 25,000 hectares of rubber in this area," the Minister said.

Although Sri Lanka pioneered the Asian rubber industry in 1876, its current contribution to the global rubber industry is less than 1.5 percent. Over the last three decades, the focus of Sri Lanka's rubber industry has shifted from the growing and primary processing sector to the value added rubber goods sector. The experts in the industry have pointed out that since Sri Lanka's rubber industry has found it difficult to become the market leaders in large volume categories it should aspire to improve its competitiveness by pursuing small volume applications in niche markets which yield higher profits.

The Minister said that the Government has realised that Sri Lanka's future rubber industry depended on value addition in the manufacturing sector.

"Rubber consumption will be so great that rubber product manufacturers will mostly depend on local natural rubber production. Therefore, I encourage the factory owners to go to the Moneragala and Wellawaya areas to set up new factories there," he said.

According to a senior official of the Sri Lanka Rubber Cluster the manufacturing sector drives Sri Lanka's rubber industry and that this sector must be expanded and upgraded to increase the percentage of manufactured products exported.

"This will require a consistent, high-quality domestic supply of raw rubber. The manufacturing sector will also benefit from duty-free access to all other required raw materials imported, such as synthetic rubbers, chemicals and other components.

Given good domestic supply and duty-free access to other raw materials, the manufacturing sector should grow from 50,000 metric tons of raw rubber in rubber products exports in 2,000 to 1,000,000 metric tons by 2010, once the recommended strategies are implemented. Further, the value per metric ton of production should improve from US$33,000 average in 2,000 to US$43,000 by 2010," the official said.

Minister Kiriella said that in order to increase local rubber production special attention should be paid to the rubber small holding sector.

"One of the reasons for our tea small holding sector to be developed to the present level is that it has an effective organisational structure. We need to establish a similar structure to promote the rubber smallholding sector. We have to organise them at village level, district level and at national level. I have already started organising small holders at village level in the Kalutara and Ratnapura districts," he said.

According to Sri Lanka rubber cluster statistics Sri Lanka's rubber small holding sector accounts for 65 percent of national rubber production. They normally produce-smoked sheets but sometimes sell field latex to central latex processing factories. A few central processing plants are available to manufacture centrifuged latex based on small holder field latex but their operations are affected due to seasonal demand fluctuations and selling prices often fall below the cost of production.

Large estates or the company owned plantations produce the balance consisting mostly of latex crepe rubber and some latex concentrate in addition to a small volume of smoked sheets. The Latex crepe industry is facing a crisis at present due to low prices fetched continuously at the Colombo auctions. Technically the Specified Rubber Industry began in early 1970s but never grew as expected due to lack of sufficient raw materials to efficiently operate semi-automated factories.

Total production by the small holders and plantations has declined to 86,000 tons in 2001 from 157,000 tons in 1970s. These raw materials are then sold for export or processed locally in to semi-finished goods while the rest is exported in raw form. The declining trend in the production of raw rubber is contrary to the continuous total global increase in natural rubber tonnage. It is also contrary to the high growth trends of smaller participants, such as Vietnam, India, China and several African countries.

At the same time, the value of Sri Lanka's total rubber industry exports has increased significantly. In 1995, the total value for exports of raw rubber and rubber product was approximately US$ 135 million, and in 2000 it exceeded US$200 million.

The share of rubber products in export value is 87.1 percent in 2000, which suggests that the industry's growth is currently being driven by the manufacturing sector.

Minister Kiriella said that due to the low rubber prices which prevailed in the last few years about 20,000 acres had to be abandoned.

"Fortunately prices have picked up of late due to various reasons. One reason is that natural rubber consumption in China has increased lately. Another reason is that rubber producing countries such as India, Malaysia and Thailand came into an agreement to cut down rubber production and exports by 10 percent," he said. The Minister said that the Government would receive grants from the Asian Development Bank and JBIC to promote rubber production at village level and to increase productivity with effective technological input.

The rubber cluster official said that Sri Lanka is yet to develop other competitive factors such as technology, marketing and innovative capabilities in the rubber industry. "The shrinking supply is attributable mainly to the 30-year low in prices for raw rubber that set in since late 1997 with the onset of the Asian financial crisis. There are many other systemic constraints, including the lack of proper marketing, effective extension services, credit facilities and smooth marketing channels for smallholders.

Industry performance is hampered by a lack of expertise and organisational structures to engage effectively in learning market dynamics, product innovation and development, high quality human resource development, sales and marketing, financial planning, strategic planning and business development, and manufacturing and process integration," the official said.

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Copyright 2001 The Associated Newspapers of Ceylon Ltd.
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