Rubber industry of Sri Lanka

J. Abeywickrama

Secretary, Ministry of Plantation Industries

Rubber industry is continuing to play an important role in the national economy in terms of the contribution to the GDP, foreign exchange earnings, value addition, agro-based industries, employment generation, rural development and poverty alleviation in the country. The sector occupies 119,500 hectares of productive land; provides 11 per cent domestic timber requirements, contributes 0.7 per cent to the GDP excluding value of rubber based products with a crop value of Rs. 69 billion including value of rubber products. Over 200,000 persons are employed in the rubber industry/cultivation and over 30,000 are employed in the rubber-based industries.

Rubber plantations in Sri Lanka peaked in 1978 with 202,000 hectares producing 165,000 tons, but sharply declining prices owing to competition from synthetic rubber has led to a dramatic decline. However, the rubber product industry in the country has recorded a remarkable development and at present 64 per cent of the natural rubber production is used locally in the rubber manufacturing and value addition industries.

Export and import of NR

In the year 2006, export of rubber products and raw rubber earned a revenue equivalent to Rs. 46,864 million and Rs. 9,341 million respectively. It is estimated that domestic sales or rubber products earned a revenue equivalent to Rs. 6,809 million. Export of rubber wood based products earned Rs. 600 million (US$ 6 million). Sri Lanka has imported 7,186 mt. of NR in 2006 with a value of Rs. 1,307 million for value addition. The export volume in 2006 is 46,343 mt, with a 47 per cent rise over 2005.

In the case of RSS export, a 62 per cent rise has been recorded. The reasons can be given as the availability of adequate rubber for export and the forward contracts those signed earlier for high prices are still in operation.

Owing to the continuous appreciation of NR price level since year 2000, the SR price has started to become much cost effective than NR domestic end product makers, who has constrained by the increase of raw rubber prices, diverted to use SR, up to the extent allowable by the appropriate technology, to become cost effective. The reduced NR demand has led to lower the domestic price level moderately.

NR prices

The raw natural rubber import up to August 2007 was 4,561 mt., which was 0.9 per cent reduction over the previous year. However, the import of SR during the first 8 months of 2006 has amounted to 18.515 mt, which is a 48 per cent drop over the previous year. SR imports contribute to NR based exports and the industry generating employment opportunities.

The upturning trend that prevailed in 2006, has further appreciated in first two quarters of 2007. The monthly average RSS4 price in January 2007 was Rs. 139.49 which has risen up to Rs. 219.64 (by 14 per cent) in September 2007. It was 6 per cent when compared with that of July, previous year.

However, the high prices noted in second quarter 2007, of which the monthly average of RSS 4 stood at Rs. 288.04 while it further dropped to Rs. 217.25 in 3rd quarter 2007. When compared with the peak value up to 2007, the September average RSS 4 price (Rs. 219.64) records a 9 per cent drop. The price of RSS 1 has again risen up to Rs. 231.03 in September 2007 providing sufficient margin to the growers. (1 US $=Rs. 11044 as at 23.03.2007)

Domestic value addition

Sri Lanka has historically developed as a prime global supplier in industrial solid tyres and household/examination gloves. This factor has addressed to 73 per cent domestic value addition level in recent times. The consumption in 2006 has been reduced up to 63,064 mt. The total rubber consumption (out of local and imported rubber) would be estimated as 80,000 mt, which is 64 per cent of the production.

Future challenges

It is projected that Sri Lanka will require 180,000 mt of NR by 2016 with a land productivity of 1,800 kg/ha. The global demand for NR continues to be higher than supply. This will result in NR prices to remain high in the future as well. The NR production has to be increased through productivity improvement in the short term and through increased rubber extent in the long term.

Development Initiatives

It is expected to add 40,000 ha new rubber extent during 2007 to 2016 under the following sources. 12,500 ha by Regional plantation companies, 20,000 ha in Moneragala district, 1,000 ha in Hambantota district and 6,500 ha in traditional rubber growing areas.

A donor funded project is being negotiated with the International Fund for Agricultural Development (IFAD) to improve the rubber industry in Moneragala which is one of the least developed districts.

The Department of Rubber Development has already established a nursery in Moneragala and facilitated the private sector to establish nurseries in order to facilitate farmers. The Rubber Research Institute has opened up sub stations in Alawwa and Moneragala.

A development policy has been prepared for the rubber sub sector considering the following policy instruments: improving the productivity and production; quality improvement in the primary processing, production and market integration; human resource development and tapper training; institutional reforms and environmental protection by raw rubber processing factories.