Indonesia Conditions of Natural Rubber in Exporting Countries .1 Thailand

29 are found in North and South Sumatra, as well as Riau, Lampung and Java. Based on FAO data, total production reached 3 million MET in 2012 with production targeted to reach 3.6 million MET by 2015. Table 6 shows the increasing productivity trend of natural rubber in Indonesia from 2003 to 2012. Increased productivity of natural rubber is due to the expansion of the overall planting area, as well as the rejuvenation of existing natural rubber plantations in Indonesia. The natural rubber plantation area within Indonesia has grown by 23 percent over the last ten years. On the production side, the increase in Indonesias natural rubber production has increased very significantly, 41 percent over the last ten years. However, in terms of productivity, natural rubber productivity in Indonesia is still relatively lower than other natural rubber producing countries such as Thailand and Malaysia. According to the Rubber Association of Indonesia GAPKINDO, plantations in Indonesia produce an average of 880 kg–1,000 kg per hectare, compared with up to 1,500 kg for Malaysia and Thailand. Productivity per hectare is closely related to the age of the trees, as well as the quality of the clone seedlings, with both factors leaving Indonesia at a disadvantage. With most plantations being on family operated, small hold plots that lack the investment capacity to replace older trees, the average age of the trees remains high and therefore less productive. Low quality seedlings are also being used at an estimated 40 of all small hold rubber plantations, further resulting in lower quality rubber that is sold at a lower price. Table 6 Area Harvested, Production and Productivity of Natural Rubber in Indonesia, 2003 - 2012 Year Area Harvested Hectare Production Quantity Tonnes Productivity TonnesHectare 2003 2675060 1792350 0.670 2004 2675060 2065820 0.772 2005 3279391 2270891 0.692 2006 2725858 2637231 0.967 2007 2775546 2755172 0.993 2008 3424217 2751286 0.803 2009 3435270 2440347 0.710 2010 3445121 2734900 0.794 2011 3456100 2990200 0.865 2012 3484100 3040400 0.873 Source: Author’s elaboration with data from FAO, 2013 Rubber was one of the key focus crops under the Indonesian Ministry of Agriculture’s revitalization program introduced in 2007. The program aims to address the issues of low quality plants, as well as to expand the land area under cultivation by up to 1.3 million hectares. Farmers also gained access to loans of up to 40 million rupiah per hectare of land to encourage replanting. According to GAPKINDO, by the end of 2010, this program had achieved limited impact as only 6,000 new hectares had undergone rejuvenation. The Indonesian government decided to extend this project through 2014, with the intention of seeing up to 30 400,000 hectares of plantations undergoing replacement with new trees, as well as extensive education of farmers in regards to new technology and tapping techniques that will boost output. However, in order to make the government’s financing programs completely effective, greater collaboration is required. The private sector along with the rubber producers needs to take advantage of the research that is being undertaken by institutions such as the Bogor Research Station for Rubber Technology to improve output and competitiveness Statistics Indonesia, 2013. The potential for the natural rubber industry is positive, with the days of low priced natural rubber seeming unlikely to return. Demand from China and India will continue to grow as the ranks of car owners continue to swell and existing cars require tire replacements. Indonesia therefore hold the potential to eventually becoming the largest rubber producer in the worlds should the key issues of productivity and land fragmentation be addressed. Moving up to higher value rubber will increase returns and allow smallholder farmers to reinvest in new technology in an effort to further increase output in the future as global demand continues unabated.

5.2.3 Malaysia

Currently, Malaysia is the third largest natural rubber producer in the world. Before the 1990s, Malaysia was the largest natural rubber exporter in the world. Nevertheless, in 1990 the situation changed, with the number one position shifting to Thailand and the number two position to Indonesia. This was due primarily to the high labor costs in Malaysia, which caused many natural rubber farmers to change their livelihood to another sector. The overall plantation area and production level of natural rubber in Malaysia declined during the period from 2003 to 2012. On the other hand, productivity is likely to increase. Malaysia’s natural rubber productivity is not too different from that of Indonesia’s, despite its cultivation area being much different. The highest production year for Malaysian natural rubber was in 2006 at 1.2836 million tons with the highest productivity of natural rubber being 1,012 tons ha, also in 2006 Table 7. In the manufacturing sector, Malaysia is the leading producer and supplier of catheters, medical rubber gloves, latex cords and thread. The Malaysian rubber products industry is made up of more than 500 manufacturers that are producing latex products, tires and tire-related products, as well as industrial and general rubber products. The rubber industry contribution to total national exports was nearly RM40.42 billion. Furthermore, the gross national income GNI of Malaysia would rise to RM52.9 billion due to the contribution of the rubber sector, out of which 56.7 percent RM30 billion would be from the glove industry itself. Malaysian export earnings from rubber gloves in 2011 amounted to RM9.89 billion, an increase of 10.9 percent, compared to RM8.92 billion in 2010. The Malaysian government continues to promote the development of Malaysias resource-based industries in an effort to diversify the countrys sources of growth, with one primary source being the natural rubber industry. Therefore, the future of the Malaysian rubber industry is expected to be fairly prosperous. The government has previously established policies to encourage the rubber industry and measures have been taken to ensure the stabilization of the rubber industry so that Malaysia will remain an important player in the global market IA, 2014. 31 Table 7 Area Harvested, Production and Productivity of Natural Rubber in Malaysia, 2003 -2012 Year