Sri Lanka’s rubber industry has excellent potential for exponential growth

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Regardless of Sri Lanka being the pioneer of the Asian Rubber Industry in 1876 that started by planting 1,919 rubber seedlings in the Henarathgoda botanical garden in Gampaha; today the country can only cater to 50% or less than in terms of the required demand due to various factors such as unavailability of adequate land, very less production of yield, low productivity and much more. 

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However, with about 136,625 hectares of rubber plantations and more than 200,000 employees working, Sri Lanka is currently identified as the 13th largest rubber producer in the world. Therefore, to get an in-depth analysis of the rubber industry, The Sunday Morning Business took the initiative to investigate the market. 

What makes Sri Lankan rubber special? 

Firstly, Sri Lanka is the main manufacturer and exporter of the highest quality of natural rubber latex crepe rubber, which is considered as the creme de la creme of rubber that results in the industry having a competitive advantage in fetching a premium price over all other types and grades. 

According to the Export Development Board (EDB), one of the premium quality natural rubber types manufactured in the country is known as Lankaprene. Due to its properties such as odour free, light-coloured and cleanliness, it is extensively used for medical equipment and upmarket value-added products locally and globally. 

Secondly, with the availability of high quality ribbed smoked sheet rubber (RSS Rubber), expertise and the experience of the people in the industry, Sri Lanka is recognised as a global hub for solid tyres in the international market. 

Besides, manufacturers based in Sri Lanka are now able to cater to the globally rising demand for rubber gloves during the Covid-19 pandemic due to the availability of superior latex crepe in the country. 

Commenting with regards to this subject, the Sri Lanka Association of Manufacturers and Exporters of Rubber Industry (SLAMERP) Director General Rohan Masakorala stated that the rubber industry is picking up after being adversely affected by Covid-19 last year. 

“Right now, the demand for gloves is increasing which has resulted in the overall rubber industry having grown from 15% to 20% in comparison to the previous financial year. However, we are also expecting the tire industry to boost after the world market stabilises,” Masakorala said. 

How big is the industry? 

With reference to EDB, 70% of natural rubber production in Sri Lanka is consumed by the rubber products manufacturing sector for local sales or predominantly for the lucrative export market. Even so, as mentioned above Sri Lanka is only capable of producing 50% or less of the demand thereby resulting in 50% of raw materials being imported by other countries to facilitate local manufacturers. 

Explaining this subject, Masakorala said that the rubber plantation is limited thereby creating space for the inability to expand geographically within Sri Lankan borders. 

“We are a small export market in comparison to the global rubber industry, hence the productivity and the volume of natural rubber for production should be increased. If not, we have to import which will obviously reduce the value addition component in Sri Lanka,” he said. 

Meanwhile, speaking to The Sunday Morning Business, Rubber Research Institute of Sri Lanka Additional Director Dr. V.H.L. Rodrigo said that the main issue is the overall productivity in the rubber land. “In Sri Lanka, the productivity is very much below par in comparison to other countries. Hence, we are taking several steps to improve the productivity of the existing land.” 

Moreover, he noted that the export target for the year 2021 is above 90,000 metric tonnes (MT) of rubber, produced in Sri Lanka. “Last year, it was about 74-78,000, and by next year (2022), we are thinking of achieving the target of 100,000 MT of rubber production in the country.” 

As of today,  Sri Lanka exports rubber and rubber-based products to the US, Germany, Belgium, Italy, and the UK and also exports semi-processed natural rubber to Pakistan, Malaysia, India, Japan, and Germany. 

What are the current concerns? 

Excluding unavailability of raw materials, low productivity and the current Covid-19 pandemic, the rubber industry also has another concern which is the recent decision taken by President Gotabaya Rajapaksa to ban the usage and importation of chemical fertiliser. 

Commenting with regards to this, Masakorala said that with the current fertilisation ban, there is a threat of rubber plantation yield further dropping in the upcoming months, “We have been warned by the plantation sector saying that there would be a drop but we are trying our best to facilitate with the best possible outcome,” he noted. 

Masakorala said that another concern the rubber industry is facing right now is the failure to implement the nine-year Rubber Industry Master Plan that was proposed to commence from 2017 with an aim of improving Sri Lanka’s rubber industry. 

“It has been delayed for quite a number of years and we would like the authorities to follow the master plan and implement the reforms as necessary,” he added. 

A Memorandum of Understanding (MoU) to implement the Rubber Industry Master Plan 2017-2026 was signed between the Ministry of Plantation Industries and the Sri Lanka Society of Rubber Industry on 12 September 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 Industries 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. 

Further, we spoke to Lanka Naigai (Pvt.) Ltd. Managing Director Neville Fernando revealed that rubber and rubber-based companies in Katunayake Zone face a severe labour shortage issue to carry out their operation in factories as recruiting in that area has become an extremely difficult task. 

“We can definitely cater to the rising demand of the global market but the only issue is shortage of workers. For example, we recruited 40 machine operators last time, out of which only two of them are remaining. What’s more surprising is that the entire zone is in need of 10,000 machine operators to work right now,” Fernando explained. 

Alternatives adopted to improve manufacturing 

Regardless of the hindrances faced by the country due to the prevailing Covid-19 conditions, SLAMERP along with the Board of Investment (BOI) is currently in the process of initiating a new rubber investment zone in Sri Lanka. 

Speaking on this subject, Masakorala mentioned that they have requested the Government for a new investment zone in order to attract foreign investment with an aim to expand the local rubber industry in Sri Lanka. 

“This zone will be entirely dedicated to rubber product manufacturing. There is a progression in the plan firstly because the Government and BOI have started looking for an appropriate plot of land in the Western Province and secondly because the private sector rubber companies have started submitting their expansion plans,” Masakorala said. 

We also spoke to BOI Executive Director of Investment Promotion Prasanjith Wijayatilake who stated that the rubber industry concept is one of the three main concepts BOI is currently working on to be initiated within the year. 

“We are looking at the apparel and pharmaceutical zone right now. In terms of the Rubber City zone we are looking at two plots in hand, and one will be chosen within this year. However, with the current hindrance due to Covid-19, it could be further delayed,” Wijayatilake stated. 

Nevertheless, Wijayatilake further noted that it is too early to comment on the investments involved with the project as it is still at the concept base. 

Meanwhile, the Deputy Minister of Plantation industries Lakshman Wasantha Perera providing a statement on the Sri Lanka Rubber Industry Master Plan 2017-2027 mentioned that the Rubber City project is aimed at enhancing the global competitiveness of rubber products in a timely considering the need for environmental impact mitigation and colocation advantages. 

Accordingly, the decision to initiate Rubber City in Sri Lanka is taken due to the fact that at present, rubber product manufacturers operate from state-owned industrial parks or from their own sites in which such locations do not provide rubber industry-specific common facilities or clustering advantages of co-location in activities such as joint procurement, collaborative R&D, product innovation, common effluent treatment, and HR development, etc. 

“Zone A will be allocated to large/medium industries based on dry rubber. Zone B will be for latex-based industries. Zone C will cater to SME types and house incubators, innovation systems, common testing, and R&D facilities, HR services including training, Engineering services with central workshops, and finally, Zone D will be for related and supporting industries and services suppliers such as chemical suppliers and mold makers. Solid-waste management and recycling of rubber materials will be done in a special location,” the Master Plan report said. 

Finally, what the rubber industry wants to achieve from developing the Rubber City is to have increased investments including Foreign Direct Investments in the rubber industry, to have reduced transaction costs of rubber products manufacturers that could lead to increased profitability, to increased employment opportunities in the country and also to have effective environmental management and managed social issues in Sri Lanka. 

Conclusion 

The rubber industry in Sri Lanka has excellent potential for exponential growth if the right direction is shown by the authorities for businesses to perform. According to EDB, with the global industry growing annually at 4-6%, Sri Lanka’s range of products has ample room to evolve with new developments and research in the field. 

Reflecting upon this topic, Masakorala said that if corrective measures are taken by the Government, Sri Lanka can have a sustainable growth in local rubber manufacturing along with regaining higher forign exchange returns by distributing rubber and rubber-based products in the global market. 

“Natural rubber price is increasing for the farmers due to the prevailing Covid-19 uncertainty in the market,  hence we need to manage until optimum efficiency for which efficiency and productivity improvement needs to be improved in the country,” Masakorala concluded.

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