IRCO’S STABLE, SUSTAINABLE STRAGEY
By TA News Bureau
The International Rubber Consortium Limited (IRCo) represents countries that produce nearly 70 per cent of natural rubber globally. Its CEO Datuk Dr Salmiah Ahmad, who came to IRCo in 2015 after a distinguished stint as Director General of Malaysian Rubber Board, is a well-known researcher and administrator. She holds a Masters in Organic Chemistry from Northern Illinois University, USA, and a PhD from Imperial College London. She has also an Executive MBA from the Asean Institute of Management, Manila. In this interview, she explains her plans for IRCo that aims at achieving stable, sustainable and remunerative prices for natural rubber. She would like to see supply-demand balance is achieved at fair prices. Under her leadership IRCo is playing a pivotal role in ensuring a balanced and healthy supply of NR to meet its short as well as long-term demand. Excerpts from the interview
What are the major policy measures that you have taken or intend to take to ensure that NR will be remunerative to growers?
The policies or measures taken by IRCo are decided by member countries of the International Tripartite Rubber Council (ITRC), some of which are suggested by IRCo either by the management, the Committee of Strategic Market Operation (CSMO) or by IRCo Board. During my term, these are the policies and measures that are being initiated or implemented:
(a)Agreed Export Tonnage Scheme (AETS) from March 1, 2016 to Dec 31, 2016 involving 700,000 MT with support from trade associations in Thailand, Indonesia, and Malaysia. (b)The launch of Regional Rubber Market (RRM) operations on Sep 26, 2016
(a)Prize competition (b) Collaboration between rubber research institutes on rubberised road (c) Latex Regional Rubber Market.
What is the ideal NR price band that will help sustain rubber production in the region?
Generally speaking, the ideal price should be above the cost of production (CoP). ITRC member-countries, namely Thailand, Indonesia and Malaysia (TIM), have each different cost in producing 1 kg of Technically Specified Natural Rubber (TSNR) or Ribbed Smoke Sheets (RSS). Maintaining NR prices above its CoP is crucial to ensure that rubber smallholders continue planting NR instead of changing to other crops.
TIM had come up with one cost of production for ITRC member countries and the last one was agreed in 2011. A series of discussions were held to revise it to incorporate latest development of costing and other related economic developments. To date, ITRC has not finalised its revised CoP.
What are the sectors where you plan to foray into where NR as a raw material would find new possibilities and push up demand?
The related activities to increase NR domestic consumption in each ITRC member country are: Rubberised road project; rubber in futsal playground; various latex foam products; rubber block for playground; latex liner for pond; aircraft tyre; dock fender; sea toll; water stopper in peat soil area; NR geogrid; construction of low-rise building protected by rubber seismic bearing; projects such as rubber dam, rubber mat for livestock.
We are also looking at potential rubber products that include: transportation (aviation, railway and marine); infrastructure; sport defence; health sector; consumer goods.
What is the future of Hevea rubber in the light of attempts at large-scale commercial production of rubber from Guayule and Russian dandelion? What are the short and long-term strategies that South Asian NR producing countries should take to remain globally competitive in the years to come?
Natural rubber sourced from Hevea Brasiliensis has many positive attributes and advantages ranging from established quality raw material for a plethora of rubber and latex base products to sustainable supply due to its high yield and a stable and disease-resistant crop. Hevea Brasiliensis is also very environment friendly as it requires less fertilizer than other economic crops and is able to sequester a high level of carbon dioxide, thereby contributing to reducing carbon footprint in producing rubber base products.
Other sources of rubber have yet to prove their sustainability and economic viability. Hevea Brasiliensis has proven itself as an economically viable and sustainable (140years history) crop for commercial activities. Extensive research carried out by research institutes in NR producing countries has increased yields from 600kg/ha to 2500kg/ha and diseases could be contained. We hope that collaboration with South American countries is expected to increase the gene pool of natural rubber.
NR producing countries are also focusing on producing NR in a more sustainable manner to ensure both a sustainable supply to our consumers and remunerative crop for our producers.
What are the key policy measures to ensure price stability that would particularly help the small plantation holders who are now compelled to stop tapping?
In Thailand there are three initiative projects approved by the Thai National Rubber Committee to ensure the price stability. They are: i. Expanding soft loan project for rubber farmer’s institute; ii. Building rubber buffer stock project; iii. Supporting loan banking service project to rubber processors; iv. Subsidy fund for micro smallholders who own not more than 15 rai (2.4 hectares) amounting to 1,500 baht/smallholder. This project aims to assist smallholders to buy material i.e. fertiliser and tapping materials; v. Promoting the use of NR in government sector, e.g. rubberised road by the Ministry of Transport and installation of rubber pads in various stadiums/sports centre under the Ministry of Sports.
In Indonesia the main activities are as follows: i. Accelerating replanting programme with priority in damaged area of around 10,000 ha. The new planting programme is limited at around 500 ha in border area and post disaster regions that are suitable for rubber plantation;
ii. Implementing the export cut back in 2016 to decrease the NR supply in the global market with the aim to curb NR price from further sliding below US$ 1 per kg. During the export cut back implementation, the SIR20 price moved upward from US$ 1.08 to US$ 1.6 and finally reached US$ 2 per kg; iii. Increasing domestic consumption of NR by supporting the rubberised road programme. It has been planned to do a trial for rubberised road with the length of 4.2 km. At first stage, a trial of mixing latex for a road with the length of 200 metre in Sukabumi, West Java, has been done last year. It is estimated to consume 840 kg natural rubber;
iv. Encouraging intercropping programme, including intercropping rubber and corn.
v. Strengthening farmer cooperation and institution through the development of Joint Farmers Group (Gapoktan) in order to increase their bargaining position. It is being pursued. Ministry of Agriculture provides certified high-yielding seedlings to support smallholders.
vi. In order to improve efficiency of supply chain, a Joint Processing and Marketing Unit (UPPB) has been established where the farmers will have better access to sell directly to crump rubber industry/factory. The rubber farmers will receive 85 per cent FOB price for 100 per cent dry rubber content.
In Malaysia the initiatives include
I. Rubber Production Incentive which aims to reduce the burden of smallholders as a result of low prices and to encourage them to continue producing rubber as the incentive is based on rubber smallholder’s productivity. (Note: activated when SMR 20 FOB price less than RM 5.50 per kg or cuplump price lower than RM 2.20 per kg;
II.Pricing Mechanism at Field Level with objective to improve efficiency of supply chain. In this regards, the government provides soft loan for smallholder’s cooperatives to help them to operate more efficiently in larger volume;
III.Suspension of Rubber Cess Collection. Under this mechanism, cess is still be collected by the government. However, smallholder is eligible to claim cess back this month if average price of SMR 20 last month is below than RM 5.50 per kg;
IV.Rubber Price Fall Special Assistance amounting to RM500 per smallholder to assist them during low price situation;
V.Replanting programme. Replanting grant is provided as follows;
VI. Efforts to increase NR consumption and export by invention of new products through R&D & product commercialisation.
How do you plan to make IRCo and ITRC as powerful agents of change that will help contribute to price stability and modernisation of NR sector in collaboration with regional rubber organisations?
First of all, we are expanding the tripartite rubber cooperation to include Vietnam which is the world’s third largest NR producer to join ITRC. For a start, Vietnam has indicated its agreement to join ITRC as a Strategic Member with an aim to be a Full Member of the cooperation in the future.
Together with Vietnam, the cooperation now covers 72 per cent of global NR production and 90 per cent of global NR export.
ITRC/IRCo has also initiated various collaborations and discussions which will benefit all the parties involved. For example, tie-ups with the Association of Natural Rubber Producing Countries (ANRPC) and the International Rubber Study Group (IRSG). The aim is to strengthen NR statistics to ensure that market players receive credible and reflective data on NR.
We are also cooperating with renowned NR statisticians/NR statistical institutions. We are in continuous consultation with Dr Hidde Smit and a study on NR Forecasting Model with Kasetsart University – the largest university on agricultural economics –in Thailand.