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iconThailand-Indonesia-Malaysia Cooperation on Rubber [   February  2019 ]

 

Current rubber scenario is expected to slow down in line with global economic growth, mainly affected by trade war between China and the US. Gradual monetary tightening in major developed economies in 2019 is likely to weigh on capital investment and vehicle purchases. This results in weaker rubber consumption demand in contrast with relatively high stock of rubber. Moreover, the rubber price is also unlikely to see a meaningful boost from the recent fall in oil prices due to softening demand, as growth, especially in China, slows down. Furthermore, the appreciating Thai baht caused Thai rubber price to be relatively higher than those of other rubber producing countries. These scenarios prompted the International Tripartite Rubber Council (ITRC) to convene a special meeting on 22 February 2019 at Mandarin Oriental Hotel, Bangkok. The meeting agreed on five measures against the falling rubber price, namely 1) a collective export cut of 200,000-300,000 tons of rubber by Thailand, Indonesia and Malaysia; 2) increase of domestic rubber consumption in the three countries; 3) replacement of certain rubber plantation areas with other crops; 4) establishment of the Regional Rubber Market for physical rubber trade; and 5) establishment of the ASEAN Rubber Council.

The Thai Rubber Association advocates Thai government’s implementation of increasing domestic rubber consumption, especially the promotion of processing rubber raw material into finished products. Currently, Thailand consumes only 14% of total rubber production domestically. Private sector’s investment in fished product manufacture shall be fully supported. In addition, the control of rubber production shall be monitored through big data and blockchain in order to achieve transparency and maximum benefit. However, the Association is of the view that the export cut measure shall be exercised with scrutiny as this measure may affect Thai rubber industry as a whole. It reduces confidence of buyers who would resort to other producing countries. Domestic rubber stock would also build up massively. Therefore, this measure may not suit the current situation and may not bring about price stability in the long run.

In sum, the cooperation among Thailand, Indonesia and Malaysia will play a more significant role in the stabilization of rubber price and the development of rubber industry with maximum efficiency shall the measures suit the current situation and be planned and implemented with scrutiny. Therefore, all participants in the industry will not be affected.

Signature
Mr. Chaiyos Sincharoenkul
President

 

 
 
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