Can RP Meet the World’s Ballooning Rubber Demand?

E-mail Print PDF
AddThis Social Bookmark Button

“If I didn’t move to the city to find a real job, I guess I’d still be earning 50 pesos (US$1) a day right now, like my father did 10 years ago,” Malik said as he taxied his tricycle cab behind a file of other “taxis.”

[Photo of Rubber tree]Taxis in Zamboanga City come in two forms: regular sedans and open passenger carriages attached to a motorcycle. Malik drives the latter.

He makes his living driving a rented cab and says he earns more than 10 times what he used to take home after spending the day collecting rubber sap in Tipo-Tipo, Basilan Province. Malik left his hometown at age 20 after his first child was born.

Slug’s Pace

The local rubber industry in Basilan (then the largest rubber-producing province in the country) became unstable after a spate of attacks by extortionists, as well as the rise of homegrown, kidnap-for-ransom groups in the mid-1990s.

Farmers, both Christian and Muslim, fled to the lowlands and neighboring cities. They were desperate to escape threats from Islamic forces wanting to control the rubber fields of the province, which were developed by American settlers after World War II.

Malik, whose father still collects latex sap for a top American rubber company in Basilan, says the situation of tappers (sap collectors) is getting worse. Those who have opted to stay earn an average of 60 pesos a day, a measly 10-peso increase in 10 years. Fearing a similar life for his newborn pushed Malik to try his luck in the city.

The RP Department of Agriculture (DA) admitted the plight of the country’s rubber industry is dismal. According to the agency’s 2006 figures, natural rubber production dropped by over 10,000 metric tons in the last decade.

Comparative figures from the 1990s show dramatic fluctuations in production, while figures from 2000 to 2006 show a stable but slow increase, with less remarkable fluctuations.

Although the Philippines achieved a sustained increase in rubber-export revenues from 2003 to 2006, it was a result of increases in world prices, not production output. The country’s production of natural rubber actually decreased consistently in the past three years.

In 2003, the Philippines exported 55,241,098 metric tons (MT) of natural rubber in primary forms (other than latex, that is) as crepe sheets, plates, and strips with a total revenue of US$32,779,749.

Out of this total, 2,351 MT of crepe rubber shipped to China, 6,574 to Taiwan, and 425 to Hong Kong —small figures compared to the 22,445 that shipped to Malaysia, then the Philippines’ top market.

In 2004, production dropped to 43,304741 MT, while revenue grew to US$34,487,598. Figures for 2005 showed a similar trend with production going down to 41,088,245 MT, and revenue going up to US$36,508,385.

Last year’s production similarly slumped to 33,717,602 MT, but revenue dramatically increased by almost US$10 million to US$46,236,728.

The DA explains this market behavior as the result of a consistent increase in latex production.

Gloves Down to Shoes

By 2006, production of latex rose to 351,565 MT, driven by increased demand from China and Europe. While China projects its own rubber production to increase to 550,000 MT by 2020, it will need to import rubber to keep up with escalating local demand.

The Philippines, meanwhile, aims to increase its exports to the mainland to take advantage of the ballooning Chinese market for rubber. The Zamboanga Peninsula produces around half the country’s rubber output, with more than 32,000 hectares planted with rubber trees.

The DA reports that around 70% of the rubber produced by the country is absorbed by the tire and footwear industries.

The local industry exports some 40% of its natural rubber, with China as the top market, followed by Taiwan, Malaysia, and Singapore. Meanwhile, world rubber consumption has increased by an average of 208,000 MT a year since 1995.

Natural Flexibility

Natural rubber is the raw material used in the manufacture of industrial products, automotive parts, latex products, and adhesives. Among its many end products are conveyor belts, rubber rollers, fan belts, radiator hoses, rubber gloves, hygienic products, and toys.

The rubber tree, scientifically known as heava brasiliensis, is a robust perennial that grows best in the tropics at temperatures ranging from 20°C to 28°C. It grows in all types of soil with year-round rainfall. In the Philippines, it grows mostly in Mindanao.

Mature rubber trees are usually 20 to 30 meters high, with graceful upward-extending branches and a relatively slim trunk. It takes an average of five to six years before the trees can be harvested. According to the DA, yield reaches 1 to 1.8 tons of dry rubber per hectare, per year.

Rubber Race

Latest figures show Thailand leading other countries in world rubber production with an output of 2,937,000 MT — that’s 44% global market share.

Next is Indonesia (2,271,000 metric tons), Malaysia (1,126,000 metric tons), and India (771,000 metric tons). The Philippines ranked 8th in global production with 79,000 metric tons harvested in 2005. World production of rubber is projected to increase at 3% to 5% a year, with prices climbing progressively.

Rubber is marketed by the Philippines as centrifuged latex (high grade rubber), cup lumps, crepe sheets, and crump rubber.

The DA said the low productivity of the country’s rubber-producing regions owes to the limited land area planted to it. The agency also lamented the low quality of locally processed rubber, which could be due to the lack of industrial standards and the limited access farmers have to technical information on the product.

Agricultural officials lament the lack of well-defined quality standards for rubber products and the limited value-adding activities for rubber products. The DA also observed that there are weak linkages between producers and industrial consumers in the marketing chain. What’s more, small industry players interested in investing have limited access to credit and financing.

Government’s Answer

To revitalize the local rubber industry, the DA implemented the Rubber Development Program (RDP) in early 2000. A component of the High Value Commercial Crops Program, the RDP’s goal was to develop a globally competitive rubber industry and empower small farmers, plantation owners, cooperatives, as well as new investors.

The program not only sought to increase investment in the industry through policy reforms and advocacy but also aimed to give investors access to financing. It tried to expand income opportunities for farmers by identifying derivative products for rubber and looked into improving the sector’s state of technology to make it globally competitive.

So far, the program has instituted planting in expanded areas and replanting activities in existing crop lands. The DA also facilitated investment in R&D, training, infrastructure, and human resources development. But the best news is that government is providing seed money to enterprising rubber farmers.

Through Quedancor and the Rural Credit Guarantee Corp., the program already allocated millions of pesos to support farmers via lending mechanisms. Plus, the DA also provides other financing schemes through the Land Bank of the Philippines.

Farmers like Malik may, someday, no longer have to leave lush croplands for the so-called greener pastures of the chaotic city.

print ed: 12/07

 

On Newsstands Now

DECEMBER 2014:
The Asian Consumer Goldmine

14-12