Indonesia is among the biggest producers of rubber next to Thailand, Malaysia and China; however, Indonesian rubber farmers have been hit by low prices since late 2018, prompting the government to find ways to stabilise rubber pricesby forging cooperation with neighboring countries.
President Joko Widodo (Jokowi) has been concerned over the falling rubber prices – the Indonesian government has approached Malaysia and Thailand to reduce the rubber supplies to the world’s market, after a Special Ministerial Committee Meeting (MCM) of the International Tripartite Rubber Council (ITRC), held in Bangkok, Thailand on February 22, 2019.
The meeting was chaired by Grisada Boonrach, Thai Minister of Agriculture and Cooperatives, and attended by Darmin Nasution, Indonesia’s Coordinating Minister for Economic Affairs, and Teresa Kok, Malaysia’s Minister of Primary Industries.
The Special Ministerial Committee Meeting was held with the objective of exploring measures to address the prevailing depressed natural rubber price level: the ministers shared views on the natural rubber market and discussed related issues and efforts to ensure balanced and healthy natural rubber fundamentals toward fair and remunerative price levels; reviewed the market and price, from 2018 until early 2019, in relation to local smallholders; and formulated action plans to ensure the effectiveness of relevant concerted measures under the Cooperation.
The three countries have decided to implement the Agreed Export Tonnage Scheme (AETS) in order to reduce exports from related countries in the amount of 200,000-300,000 MT. They tasked the Senior Officials of ITRC to discuss details of the AETS implementation within two weeks in Thailand.In terms of each country’s contribution of rubber production, Thailand’s was the highest with 52%, followed by Indonesia, 38% and lastly Malaysia, 10%.
The meeting emphasised the implementation of projects under the Demand Promotion Scheme (DPS), which would significantly increase domestic consumption of natural rubber – the utilisation of natural rubber is present in various infrastructure projects in Indonesia, such as provincial and district roads, railroad track dampers, road separators, bridge bearings and tyre retreading.
President Jokowi has instructed the Ministry of Public Works and People’s Housing to use the local commodity and make use of rubberised asphalt for road construction. The uses of rubberised asphalt had already been tested in road construction projects in provinces such as South Sumatra, Riau, and Jambi – although more expensive, the results were remarkable.
Indonesia’s state-owned plantation firms have also been instructed to purchase rubber from local farmers and maintain it as their stock, which could be released to the global market if the price of the commodity increased.
In regards to the Supply Management Scheme (SMS) concerning the commitment to replant natural rubber, the Indonesian government has committed to replanting 50 thousand hectares of natural rubber plantations per year, according to Nasution – the Agriculture Minister has conducted rubber replanting of an area of 6 thousand hectares so far, but the current total rubber plantation area in Indonesia has reached 3.6 million hectares.
In addition to Indonesia, Thailand has then planned to optimise its replanting program to cover 60 thousand hectares per year, while Malaysia will replant 25 thousand hectares of rubber plantations per year. The SMS would play an important role in reaching a balance on supply and demand by accelerating the natural rubber replanting.
In the short term, the three countries would manage its respective supply of natural rubber; for the medium term, increase the domestic consumption of natural rubber; and for the long term, each will undertake natural rubber replanting.
Another agreement reached during the Bangkok meeting was the establishment of an ASEAN Rubber Council (ARC) as a platform for discussion on the development of the natural rubber industry and cooperation with other ASEAN countries and ASEAN dialogue partners.