Rubber Industries Of Malaysia

Published Date: 02 Nov 2017

ON

"PLANTATION AND

RUBBER INDUSTRIES OF MALAYSIA OF MALAYSIA"

Submitted to

Parul Institute of Management and Research

INSTITUTE CODE 711

IN PARTIAL FULFILLMENT OF THE

REQUIREMENT OF THE AWARD FOR THE DEGREE OF

MASTER OF BUSINESS ASMINISTRATION

Under

Gujarat Technological University

UNDER THE GUIDANCE OF

Faculty Guide

Mrs. Kosha Nair

Professor - PIMR

Submitted by

Group No.: 7

Roll No.: 37, 38,39,40,41

M.B.A – II, SEMESTER – IV

Parul Institute of Management and Research

M.B.A PROGRAMME

Affiliated to Gujarat Technological University, Ahmedabad

December, 2012

SR.NO

CONTENTS

PAGE NO.

PART: 1

General information about Malaysia

Brief Introduction

Conditions favorable for Rubber Growing 

Area of Production

3

4

4

4

PART: 2

Rubber Sector Overview

Brief Introduction

H.R. Overview

Adopting new technologies

Rubber-based Industry

Rubber Export 

Uses of Rubber 

5

5

6

7

8

9

10

PART: 3

Malaysia eyes rubber, oil plantations in Myanmar

Developments and productivity in the industry

11

14

PART: 4

Trade relations between INDIA & MALAYSIA

Opportunities for India

Rubber plantation in Gujarat

Conclusion

Bibliography and References

15

15

16

16

18

19

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 it had been ruled by Britishers, the conception of Rubber plantation which was initially as a trial bases from the Brazil forests, today Malaysia is very well known for the rubber industries, natural rubber, oil and other natural base industries in the world which are contributing a flamboyant amount into the GDP of the country.

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 region‘s 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.

Part: 1

Brief Introduction

Malaysia is the leading producer of natural rubber in the world. Being a leader producer of natural rubber, Malaysia is contributing around 46% of total rubber production in the world.. The rubber plantation was started in Malaysia in 1877. First, the seedlings were brought from the Amazon Basin, and were planted here on an experimental basis. Later, when the rubber seedlings were successfully planted, attempts were made to produce it on a commercial scale. The British people, who colonized the region and introduced rubber tree, provided the capital for clearing the forest and planting rubber trees. They also provided the market for rubber. The skilled labour that was needed was managed from India, particularly from South India. 

FAVORABLE CONDITIONS FOR RUBBER PLANTATION

A mean temperature of 27°C, never falling below 22°C. 

Heavy rainfall above 200 cm. with no drought. 

Deep rich soils with good drainage preferably crumbly, well-oxidized and acidic in reaction. 

Adequate supply of labour is an important factor for the collection and plantation of rubber over large holdings.

Area of Production 

Rubber can grow anywhere in Malaysia, because of the suitability of climate and soil; but most of the rubber estates are concentrated in the western coastal plains of Malaysia. The plantation in coastal zone gets the advantage of nearest port for its export. Yet very low areas are avoided in order not to suffer from stagnation of water. The greatest production is in its Jahore State of Southern Malaysia. Here Rubber cultivation occupies about 4-2 million acres or about 65% of the total cultivated area in the country. 

Problems of the Rubber Industry At present, the policies of the Malaysian Government are not as favorable to foreign investors as previously. The Government regulations, regarding benefits and wages to native workers, are more strict, and the taxes are higher. The rubber planters also face the problem of surplus production (it is because the huge areas are available for the rubber plantation), which results in lowered prices and profits. The abundant production of synthetic rubber in the U.S.A. and other countries has also given a great set back to marketing. The synthetic rubber, which is made from petroleum, coal, alcohol or other materials, is obtained at a very low cost of production. Another problem is the need to replace a large proportion of the trees, which are very old, with new ones of very high yield. The Government has laid a special tax on exported rubber, and the money, thus, raised is utilized for the cost of replanting trees. Because of all these hazards, the rubber planters are now converting the rubber estates to that of palm. But it does not mean that the rubber plantation system will discontinue. The synthetic rubber is excellent for certain purposes, but it is not yet as satisfactory as natural rubber for general purposes, such as tyres. As such, with an expanded role of the Government in the management of the rubber plantation, the production of rubber in Malaysia will undoubtedly continue, and, perhaps even increase in importance.

Part: 2

Rubber Sector Overview

Brief Introduction

Malaysia is the leading producer of natural rubber in the world. About 46% of the total world's rubber is produced in Malaysia. The rubber plantation was started in Malaysia in 1877. First, the seedlings were brought from the Amazon Basin, and were planted here on an experimental basis. Later, when the rubber seedlings were successfully planted, attempts were made to produce it on a commercial scale. The British people, who colonized the region and introduced rubber tree, provided the capital for clearing the forest and planting rubber trees. They also provided the market for rubber. The skilled labour that was needed was managed from India, particularly from South India. 

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 world‘s largest exporter of rubber gloves with an average annual GDP of RM6 billion. The rubber gloves industry has been generally recession-proof and has recorded increases in exports since 2000.

H.R. Overview

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.

Production (Ratios of 2012)

Malaysia's natural rubber production in 2012 amounted to 996,210 tonnes compared with 939,241 tonnes in 2011. The domestic consumption of natural rubber for 2012 was 401,923 tonnes. The natural rubber consuming industries for 2012 were latex products (80.3%), tyres (9.2%), general 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 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.

Adopting new technologies

To overcome the productivity stumbling blocks, MRB presented its newly hatched technologies to make life easier for rubber producers and increase productivity too.

Presenting the Automatic Rubber Tapping System (ARTS), Datuk Dr Salmiah Ahmad, Director-General of MRB, said this technology, which is in a pre-commercial trials now, was developed to primarily address labour shortages (and to reduce dependency on foreign workers) and increase output. 

"Rubber tappers have to be at the plantations early in the morning when the turgor pressure is high and more latex can be tapped," she said. A mechanized and automated device, ARTS is able to undertake the task without any human supervision.

The solar-powered device is attached to a rubber tree and at a programmed time can perform the tapping (without the presence of a field operator). The system has a rotating blade to skin the bark with precision to expose the latex vessels. It can also cut at precise depth and thickness. The tapping time is also programmable and has a short tapping length of 1 inch. A piping system is also attached at each tree to collect the latex.

Industries in Malaysia

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 2012 amounted to 996,210 tonnes compared with 939,241 tonnes in 2011. 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 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 sub-sector 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 sheeting’s for the automotive, electrical & electronics, machinery & equipment and construction industries, largely for the domestic market.

The rubber products industry will need to diversify further, emphasizing 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 commercializing 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.

Rubber Export 

Malaysia produces about 1-5 million tons of natural rubber annually. A major part of it is sent to Singapore or Penang, from where it is exported all over the world. The chief rubber-importing countries are: 

(i) Singapore (for re-export), 

(ii) Russia and European countries, 

(iii) The U.S.A., 

(iv) Japan,

(v) India. 

Malaysia’s Export Partner

Note: India is indirect importer of Malaysian rubber from Singapore.

Uses of Rubber 

Rubber is used for making innumerable articles ranging from footwear, sports goods, cushions, insulated material for cable, and pencil erasers to tyres and tubes. 

However, it is its use for making tyres and tubes of automobiles which is of greatest importance. Thus, indirectly, rubber helps in promoting the system of modern transport and communication. Malaysia will continue to play its dominant role in world's rubber production and export.

Part: 3 Expansions

Malaysia eyes rubber, oil plantations in Myanmar

Malaysia is planning to expand the rubber plantation by going globally in certain countries. Recently in a press conference the Minister of oil and plantation, Malaysia has announced to go for rubber plantation in Myanmar.

Developments and productivity in the Industry

The top three rubber-producing countries in the world namely Thailand, Indonesia and Malaysia stopped setting export limit quotas following a rise in prices in the year 2009.The higher level of world wide spread of influenza, H1N1 had increased the overall demand for rubber glove during the period. Local rubber glove producers have increased production to their maximum capacity to meet the demand from international markets.

The nuisance of compulsory 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 region 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.

Part: 4

Trade relations between INDIA & MALAYSIA

The legal framework central mutual trade and economic cooperation includes a Trade Agreement signed in October 2000, Bilateral Investment Promotion and Protection Agreement in April 1997 and a Double Taxation Avoidance Agreement signed in May 2001.Due to the poor performance of local and domestic rubber producers, India will need to have more rubber import from Malaysia during the current year. However India also eyes to have rubber plantation to have natural rubber sources in the various parts of the country.

Opportunities for India

As a part of the expansion of Malaysia’s natural based Industrial sectors, India has the opportunity to establish trade relations by welcoming them in India and accept their business in certain east regions nearby Myanmar-Bangladesh.

Initiative of Apollo Tyres.

in the midst of the domestic tyre industry facing a crisis due to the global shortage of natural rubber, according to recent information in corporate Apollo Tyres Ltd has taken on lease about 10,000 hectares of land in Laos, in South-East Asia, for rubber plantation to have better cycle of rubber production.

With this move, Apollo being the first Indian company to acquire a property for growing rubber. It would take 2-7 years for the yield to be tapped, Apollo Chairman and Managing Director Onkar S Kanwar has announced in front of media recently.

Rubber plantation in Gujarat

The rubber plantation in Gujarat is a difficult challenge to take due to obvious reasons.

The overall temperature of Gujarat is quite not suitable for the rubber plantation in comparison with Malaysia and other such regions of India.

However an attempt has been made recently. The details regarding The Rubber plantation has been introduced for the first time in Gujarat, a non-traditional area for cultivation of natural rubber, with the support of voluntary organizations and government agencies. A Pilot project for rubber plantation in 20 hectares was launched near lachakhedi village in Valsad district in August this year with the joint efforts of Gujarat Narmada Valley Fertilizer Company (GNFC), a state government undertaking, a famous voluntary organization -dharamvir uttan vahini (dhurva), and, the rubber board.

Dr B Rajeevan, assistant development officer of Rubber Board's regional office here, said UNI that planting of rubber saplings began this year and more than 10,000 trees would be planted in an area of 20 hectares during the next four years. As soil condition of this hilly region is generally suitable, the irrigation facilities available there would contribute to the success of the rubber plantation programme, he added. Further he also said that (GNFC), which took the initiative to introduce rubber plantation, was funding the whole Pilot project, which is being implemented by dhurva with technical and other support from the rubber board.

The rubber board is offering preservation grant and subsidies under different categories to promote the plantation which could offer a stable income from the eighth year of plantation for a further period of 20 to 24 years. About the returns, Dr Rajeevan told that the net income per year, per hectare would come to around Rs 35,000 to 40,000, as per the widespread market rate which is at present in the lowest level due to industrial recession. However, the rubber board is anticipating a promising price hike within the next two to three years. He said the proposal to introduce rubber plantation at other suitable places in Gujarat is also under consideration of the Gujarat state forest development corporation (GSFD) and the rubber board, a statutory body under the ministry of commerce of the Union government, which in turn is keen to promote plantation both in the government and the private sectors in the state.

To overcome the problem of long the development period of seven years, the rubber board is also suggesting inter-planting and inter-cropping of selected crops in the rubber plantation area and also provides necessary guidance to the farmers to go for an apiculture which could generate additional income during the non-yielding phase.

The main source of natural rubber is`heavea brasilliensis', a tropical forest tree which is very well conventional in Kerala and Kanyakumari -the traditional rubber plantation areas. The rubber board had already conducted surveys and identified suitable land for economic cultivation of rubber trees in non-traditional areas of Goa, the Konkan belt of Maharashtra, Orissa and in the North eastern states.

Conclusion

Malaysia has located itself to be the world‘s 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 People‘s Republic of China and India, through higher productivity and quality. The Malaysian rubber products industry also has to remain flexible 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 fulfill with stringent standards and regulations imposed by export markets.