Business

Rubber exports on track to reach $ 1 b in 2021

  • Milestone expected to be achieved despite low yield
  • Industry calls on Govt. to expand cultivation area
  • Existing rubber import ban to bring down rubber export revenue in 2022

BY Shenal Fernando

Sri Lanka’s rubber exports are on track to achieve $ 1 billion in export revenue this year, making it the first time the annual rubber exports will touch the $ 1 billion mark.

During the budget debate last Saturday (27), Minister of Plantation Dr. Ramesh Pathirana described 2021 as a historic year for Sri Lanka’s plantation industry and stated that as per forecasts, export revenue from rubber products is expected to exceed $ 1 billion for the first time in history.

This remarkable performance will be recorded despite the fact that many local rubber plantations have been devastated by a leaf fall disease caused by pestalotiopsis (a fungus). So far, around 20,000 hectares of the 107,000 hectares of rubber cultivated land have been impacted by this disease.

According to the Rubber Research Institute of Sri Lanka (RRISL), this leaf fall disease is expected to decrease productivity by 70-90% in the worst-affected areas and by around 30-50% in moderate-affected areas.

Speaking to The Morning Business, RRISL Additional Director Dr. V.H.L. Rodrigo stated that the disease is still ravaging through local plantations and in certain areas it has gone out of control.

He further explained that Sri Lanka was able to achieve an export revenue of $ 1 billion in 2021 from rubber product exports – despite the yield drop observed as a result of the leaf fall disease – due to the fact that only a limited amount of export earnings from rubber is generated from the export of raw material; the remainder is generated from value-added products and the value-added rubber industry supplements its input requirements through natural rubber imports.

“In Sri Lanka, around 90% of locally produced rubber is value-added within the country. Only around 10% of the rubber produced in Sri Lanka is exported in raw form, and that too is exported to niche markets such as medical industries which require high-grade rubber. The remainder is consumed locally and value-added in the form of tyres and gloves. The rubber requirement for such value addition requires the importation of rubber – especially BOI companies are allowed to import rubber in order to run their companies at full capacity,” stated Dr. Rodrigo.

Only around 50% of the local demand and value addition is satisfied by local rubber production, thereby resulting in more than 50% of raw materials being imported by other countries to facilitate local manufacturers.

DSI Samson Emeritus Managing Director Kulathunga Rajapaksha, speaking to us, called on the Government to expand the rubber planting area and set up new plantations. According to him, previously local plantations produced around 10,000 kg of natural rubber, including latex per month, but now this has fallen to around 5,000 kg per month, which is insufficient to satisfy the requirement of the local consumption and value addition.

“Local rubber manufacturers are currently facing a shortage of natural rubber, and to ease this shortage, the Government must encourage the expansion of rubber planting areas. The main reason why many people don’t venture into rubber planting is that the gestation period is six to seven years. Therefore, the Government should have a long-term plan to plant rubber and support the planters for six years (gestation period) by having another under-cropping or some other source of income. The previous Government had such a plan and asked rubber end-product manufactures to encourage planters to replant rubber. Accordingly, our company started a rubber nursery in Monaragala, where we planted 5,000 hectares of rubber, and those plants are now producing natural rubber,” he explained.

In the absence of adequate local production of natural rubber, local manufactures are forced to rely on rubber imports, which constricts the value addition component. Also, considering the prevailing foreign liquidity crisis of the country, efforts must be made to substitute natural rubber imports with local production.

Another issue plaguing local rubber plantations is the low productivity. Speaking to us previously in July 2021, Dr. Rodrigo claimed that the low productivity of rubber land is an key issue plaguing the industry, adding: “In Sri Lanka, the productivity is very much below the par in comparison to other countries. Hence, we are taking several steps to improve the productivity of the existing land.”

The previous Government introduced a nine-year Rubber Industry Master Plan. A Memorandum of Understanding (MoU) was signed between the Ministry of Plantation Industries and the Sri Lanka Society of Rubber Industry on 12 September 2019, with an aim to make Sri Lanka’s existing $ 1 billion rubber industry a $ 3 billion industry before 2026.

Accordingly, as of September 2020, the Ministry of Plantation began developing 10 selected rubber projects at a cost of over Rs. 12 billion, out of the 25 overall projects under the nine-year Rubber Industry Master Plan.

However, industry sources claimed that many of the policy reforms set out in the master plan are yet to be implemented.

According to Dr. Rodrigo, the new rubber testing laboratory is expected to be operational by early 2022. This laboratory is expected to asset local small and medium-scale enterprises (SMEs) engaged in tyre manufacturing to test their products and assist them in approaching the international market.

“We have finalised the tender procedures and ordered the necessary equipment, and they are expected to be imported within three to four months. Renovations of the building for setting up the equipment have already commenced and we are only waiting for the equipment to arrive to commence operations,” stated Dr. Rodrigo.

The Minister of Plantation further claimed in Parliament: “Revenue from export of coconut-related products is forecasted to reach an all-time high of $ 900 million this year and export revenue from export crops such as cinnamon is also forecasted to reach a historic high of $ 450 million this year. Total export revenue from the plantation industry is also forecasted to reach all-time high of $ 3.8 billion in 2021.”

He further stated that currently, the largest export contributor is the local textile industry, which is forecasted to generate $ 4.8 billion in export revenue. He said: “However, the hope of the Ministry of Plantation, and the three state ministries under it, is to increase the export contribution of the plantation industry to Sri Lanka’s economy to $ 5 billion within two years.”

Rubber exports on track to reach $ 1 b in 2021