tyre association

1 ANRPC Newsletter Volume 21 No. 2

Volume 21 No. 2 December 2006

Editors: Phillip T. Pondikou – Secretary-General, Arumugam – Deputy Secretary-General and Toms Joseph – Economist

ANRPC NEWSA newsletter of theASSOCIATION OF NATURAL RUBBER PRODUCING COUNTRIES7th Floor, Bangunan Getah Asli (Menara), 148, Jalan Ampang, 50450 Kuala Lumpur, MalaysiaTel : 603-21611900. Fax : 603-21613014. E-mail: [email protected] : www.anrpc.org

C O N T E N T S

FROM THE SECRETARY-GENERAL’SDESK

There have been major and significant politicaland economic developments in the recent past,which can be generally referred to as economicliberalisation and globalisation. Such changes hadcritical implications on all spheres of economicactivities including the functioning of commoditybased intergovernmental organisations. Most ofthe commodity based intergovernmentalproducer-consumer forums collapsed or wererelegated to the status of monitoring agencies.In the case of NR, the producer-consumer forum,International Natural Rubber Organisation (INRO)collapsed in late 1990s. The ANRPC, which isa producers’ forum established in 1970,continues its activities focusing on promoting thedevelopment of the NR industry and bringingabout remunerative and stable prices for NRthrough co-ordination in production andmarketing.

NR price continues to be a sensitive issue inmost of the producing countries because of theoverwhelming dominance of small producers andthe economic and social consequences involved.From the turn of 2002 the rubber prices startedmoving northwards and the prices are still in thecomfortable zone. The Association is very muchconcerned of the welfare of the smallholders whoshoulder this industry. Hence deliberations onmeasures and strategies to enhance the netreturns of the smallholders through costminimising and income augmenting culturalpractices take a centre stage in ANRPCmeetings. Measures to increase the absolute andrelative consumption of NR is also given dueimportance.

This would be my last message, as I will becompleting my term in May 2007. During myterm the Executive Committee met five times inPort Moresby, Papua New Guinea in October2004; Kuala Lumpur, Malaysia in February 2005,Chiang Mai, Thailand in April 2005; Penang,Malaysia in February 2006 and Colombo, SriLanka in December. The Executive Committee

meeting in Chiang Mai was followed by a SpecialSession of the ANRPC Assembly at Ministeriallevel which was opened by the then PrimeMinister of Thailand. The Assembly Sessionsalso were held along with the ExecutiveCommittee meetings (except in February 2005).The Co-ordinating Committee on Production andMarketing Strategies (CCPMS) was convenedtwice in August 2005 in Bali, Indonesia andColombo, Sri Lanka in December 2006. TheCommittee on NR Statistics (CNRS) met twicein Kuala Lumpur in September 2005 and inColombo, Sri Lanka in December 2006. Furtherthe Working Groups and Expert Groups met onseveral occasions to deliberate on and overseespecific activities. The Ninth ANRPC Seminar onProgress and Development of RubberSmallholders was held in Kochi, India inNovember 2005.

A review of the Association was undertakenby a specially constituted Expert Group with aview to make the organisation leaner and moreresponsive to the current needs of the membergovernments as well as to improve its efficiencyand effectiveness under the current globalenvironment. The recommendations of the Expert

From The Secretary-General’s Desk 1

ANRPC Meetings/Conferences 2006 2

News from ANRPC Countries 2

Rubber Industry News 8

Economic News 10

NR Market Review 15

WTO Corner 25

Other Regional Agreements 26

Natural Rubber Industry inPapua New Guinea 28

Country Profile in Brief: Indonesia 31

Exchange Rate 32


Group were adopted by the Executive Committeein December 2006 and implemented. The CNRSand CCPMS were renamed as Information andStatistics Committee (ISC) and Industry MattersCommittee (IMC) to reflect the broader terms ofreference and functions defined.

In the emerging context, the Association hasan important role as a forum for exchange anddissemination of information. Hence therestriction on the circulation of the ANRPCQuarterly NR Statistical Bulletin was lifted in2004. The ANRPC Newsletter was improved byexpanding the content of the regular items andadding new items such as WTO corner, otherregional agreements, NR market review andspecial articles on relevant topics. Anotherimportant development was the launching of theANRPC website in 2005. All the ANRPCpublications, except the confidential documents,are available in the public domain of the site.

The ANRPC Secretariat had a hecticschedule during the last three years. I would liketo place on record the efficient services renderedby my colleagues, Mr. Arumugam, DeputySecretary-General and Mr Toms Joseph,Economist at the Secretariat during my term. TheAssociation and the industry have beenimmensely benefited by their service.

I also would like to place on record my deepgratitude to the member governments and otherrelated organisations for their valuablecooperation and continuous support extended tothe Association during my term. I wish theAssociation a flourishing future and anaccomplishing term for the incoming Secretary-General, Ms Suchada Varaphorn from Thailand.

ANRPC MEETINGS/CONFERENCES2007

1. Fourth Meeting of the Working Group on NRProtein Allergy is scheduled to be held onMay 3rd and 4th, at the Secretariat, KualaLumpur, Malaysia.

2. Fifth Meeting of the Expert Group onPromotion of NR as an Environment-friendlyRaw Material and a Renewable Resource, isscheduled to be held at the Secretariat,Kuala Lumpur, Malaysia.

3. First Meeting of Information and StatisticsCommittee is scheduled to be held inMalaysia.

4. First Meeting of Industry Matters Committeeis scheduled to be held in Malaysia.

5. Thirty-third Meeting of the ANRPC ExecutiveCommittee is scheduled to be held inMalaysia.

6. Thirtieth Session of the ANRPC Assembly isscheduled to be held in Malaysia.

NEWS FROM ANRPC COUNTRIES

India

Special Fund for PlantationsHaving successfully launched a special purposefund for tea plantations, the Commerce Ministryhas proposed to float such funds for coffee,pepper and rubber plantations in order to boostproduction. The Ministry would provide Rs 1,500crores for these three sectors. The respectiveCommodity Boards are working on the structureof the fund.

Source: Indian/International Rubber Journal,July-August 2006

Ageing Rubber Trees Cause ConcernThe Rubber Board Chairman, Sajen Peter saidthe potential for increasing NR production hadbeen limited due to the continued exploitation ofthe ageing rubber trees. He was presenting thelatest trends and outlook for NR at the 113th

Annual Conference of the United Planters’Association of Southern India (UPASI).Unscientific and excessive harvesting by asection of small growers is likely to take its tollon the NR production potential in the comingyears. High price realisation has also made thegrowers complacent about replanting of agedtrees, leading to lower yields.

Source: Rubber India, November 2006

Tripura’s Potential in Rubber CultivationAccording to the Union Minister of State forCommerce, Jairam Ramesh, Tripura is thecountry’s next frontier for the rubber industry.Among the states Tripura is the second largestNR producer after Kerala. The Rubber Board hasidentified 100,000 hectares as the potential areafor rubber in Tripura, of which roughly 31 percent has come under cultivation.

Source: Press Release, Ministry of Commerce,Government of India, 16th December 2006


ISI a Must for Tyres

The government has passed a ruling making itmandatory for all automobile tyres in thereplacement and original equipment markets tobear the ISI mark. Several premium andimported cars have tyres sourced frominternational markets which do not bear an ISIcertification. Introduction of this norm wouldmean that these cars will now have to source ISI– marked tyres or run the risk of being taken offthe roads. The Society of Indian AutomobileManufacturers (SIAM) is seeking a review of thenorm by the government.

Source: India Business, 9th August 2006

Apollo signs MoU with Tamil NaduThe Apollo Tyres signed a Memorandum ofUnderstanding with the Tamil Nadu governmentto acquire 135 acres of land in the OragadamIndustrial Park for the construction of a radialtyre facility. The company will be investing Rs300 crores initially and the final investment willbe between Rs 450 to 520 crores. The radialtechnology currently being developed by thecompany using the internal R&D expertise wouldbe used.

The company currently has three tyre andone tube plants. The Tamil Nadu unit will beused exclusively for manufacturing high qualitytruck, bus and light truck radial tyres along withhigh and ultra-high performance passenger carradial tyres for the domestic and export markets.The company expects to complete the TamilNadu project within a time span of 24 to 36months.

Source: Press Release, Apollo Tyres Ltd.,August 2006

JK in Formula TyresAs part of its ongoing efforts to promote motorsports in the country, J K Industries launched‘formula tyres’ in August 2006. The first set ofJK formula tyres had been fitted to three differenttypes of formula cars for which engines weresupplied by Maruti Udyog, General Motors andHyundai Motors. The three formula machines arecalled Formula-LGB-Swift, Formula-Rolon-Chevrolet and Formula-LGB-Hyundai.

Source: Rubber India, September 2006

Yokohama Entering IndiaYokohama Rubber Co. would establish a wholly

owned subsidiary named Yokohama India in NewDelhi in January 2007. Yokohama India is toserve as a tyre sales and marketing company.In future the company may have a localheadquarters should the tyre maker opt to addtyre manufacturing or marketing of automotivehoses and sealants. Yokohama currently marketspassenger car tyres in the country through itsSingaporean tyre distributor.

Source: www.tirereview.com 5th October 2006

Anti-Dumping Duty on TyresThe government imposed anti-dumping duty onimport of cross-ply truck and bus tyres and tubesfrom China and Thailand. The domestic tyremajors, Apollo and Ceat, had filed complaintsbefore the designated authority in the Ministry ofCommerce.

Source: www.indiabusinessweek.com 13th

October 2006

Goodyear Plans New RangeGoodyear India, a subsidiary of the US tyre giantGoodyear Tyre & Rubber Co, is planning to rollout its new range of ‘Excellency’ tyres for thepremium car segment. It will initially import thetyres from China. Depending upon the demandin the domestic market it might considermanufacturing the product at its Indian unit inAurangabad.

The premium tyres are being launched inresponse to the soaring demand for luxury carsin the country. The series will be available formost luxury car models including the HyundaiSonata, Honda Accord, Honda Civic, SkodaOctavia, Mercedes E, C and S Classes and AudiA4, A6 and TT, among others, and will come in10 variants.

Source: Indian/International Rubber Journal,December 2006

HLL DiversifiesHindustan Latex Ltd. (HLL), a leadingmanufacturer of family planning and healthcareproducts, is branching out to new business. Thisis a part of the company’s plan to achieve aturnover of Rs 10,000 million by 2010.

The diversification plans also include vibratingcondom and three-in-one-condom (dotted, ribbedand foam-fitted). The company is also planningto market its premier male condom brand‘Moods’ in the US market. According to companysources, a draft agreement had already been


signed with WalMart for retailing the ‘Moods’brand through the latter’s outlets.

Source: Rubber Asia, September-October 2006

Car Output to Double by 2010By 2010, automobile companies in the countrywill produce more than double the 3 million unitsthey currently produce and invest almost Rs12,000 crores. While a large amount will beexported, the bulk of the output will be sold inthe domestic market. Industry experts estimatedemand to grow at a double-digit rate for thenext 3-4 years.

Maruti’s plant, located in Gurgaon, is runningat full capacity and a second plant is expectedto start production by the end of 2006. Aseparate facility, a proposed third plant for Marutiis also under deliberation, based on the group’starget of a million vehicles by 2010. The world’sbiggest automaker, General Motors, recentlydecided to invest over Rs 1,250 crores in thewestern state of Maharashtra to double itsdomestic capacity. Meanwhile the tyre major TataMotors has embarked on an ambitious andmuch-awaited project of making a small carwhich costs about Rs 100,000. Anothercollaboration between Tata Motors and Italianmajor Fiat involves a joint production facility of100,000 cars at Fiat’s unit in Ranjangaon.

Source: Indian/International Rubber Journal,September-October 2006

Forced to Buy Heavier TrucksFollowing the recent ruling by the Supreme Courtbanning the overloading of trucks, operators arebeing compelled to buy heavier trucks to carryconsignments. Over the past six months, salesof huge tractor-trailers capable of hauling a grossweight of 35 tonnes including the weight of thetrucks (called 35 tonners) have surged by 10times. Sales of tractors-trailer trucks sold by thethree big manufacturers – Tata Motors, AshokLeyland and Volvo increased to 7168 units in thelast six months from 704 units in thecorresponding period in 2005. The hottest sellingmodels are the 40 tonners launched recently byTata Motors and Ashok Leyland.

Source: Indian/International Rubber Journal,September-October 2006

IRMRA-UL MoUA Memorandum of Understanding was signedbetween Indian Rubber Manufacturers Research

Association (IRMRA) and Underwriters Laboratory(UL) of the US for the testing of rubber andpolymer products. This MoU with the leader inproduct-safety testing and certification will beanother form of international recognition forIRMRA.

Source: Indian/International Rubber Journal,December 2006

Indonesia

Cheap Loans for Rubber PlantationsThe government is in the process of drawing upa plan to offer subsidised loans for rubber, oilpalm and cocoa plantations. The objective is toencourage new investment and boost output. Aconsortium of banks, led by Bank RakyatIndonesia (BRI), would provide loans at a fixedinterest rate of 10 per cent. The differencebetween the fixed rate and the prevailing marketrate would be covered by a government subsidy.The government might allocate up to Rp10 trillion(US$1.08 billion) to subsidise increased lendingto the plantation sector.

Source: The Jakarta Post, 15th July 2006

Lower Rubber OutputRubber output could be 50,000 tonnes lower thanthe previously targeted 2.2 million tonnes in 2006due to unfavourable weather conditions accordingto the Indonesian Rubber Association(GAPKINDO). Its Vice-Chairman Asril Sutan Amirsaid the lower-than-expected production wouldmainly be the result of a forecast of “El Nino”.

Heavy rains have already caused flooding inseveral plantations in North Sumatra, he said.The unfavourable weather condition, which maycontinue until February 2007 coupled withpossible disruptions in the production cycle dueto the felling of rubber trees for timber couldfurther reduce output to 2.1 million tonnes in2007.

Source: The Jakarta Post, 14th November 2006

Gajah Tunggal’s New PlantsThe tyre major, PT Gajah Tunggal Tbk isspending US$ 170 million to establish two newmanufacturing facilities and increase its output tomeet growing demand. The company plans toset up a radial tyre plant and a motorcycle tyreplant which are expected to be in operation by2009. With the addition of production from thetwo new factories, the company expects its radial


tyre output to increase to 45,000 units per dayfrom the current 30,000 units a day andmotorcycle tyre output to reach 105,000 units aday from the current 37,000 units per day.

Source: Indian/International Rubber Journal,September 2006

Tyre Exports to Reach $600mAccording to the Indonesian Association of TyreProducers (APBI), tyre exports from the countrywill reach about US$ 600 million in 2006, ascompared to US$ 520 million last year. In 2005total tyre output had reached 57 million units, ofwhich 60 per cent had been exported. Fallingauto sales in the country led to a decline in tyredemand domestically. However tyre exportscontinued to rise in the past two years.

Source: Indian/International Rubber Journal,September 2006

Malaysia

RISDA to Boost Rubber ReplantingThe Rubber Industry Smallholders DevelopmentAuthority (RISDA) will use 80 per cent of theRM1.4 billion set aside for it under the 9th

Malaysian Plan (9MP) to replant rubber trees andoil palm. The agency plans to replant 20,000 haof land a year. It funds smallholders with RM7,000 per ha for replanting rubber trees. Theremaining 20 per cent allocation will be used tofund training and other research anddevelopment programmes. There are about253,000 rubber smallholders on 800,000 ha ofland managed by RISDA. RISDA wants to boostthe income per capita of rubber smallholders tomore than RM 2,000 a month by 2010.

Source: New Straits Times, 10th August 2006

Calls on IRCo to Stabilize PriceDatuk Peter Chin Fah Kui, Plantation Industriesand Commodities Minister said that there was aneed to stabilise the price of NR. IRCo shouldfind out the reasons behind the rubber pricefluctuations and provide proper strategies andrecommendations to counter the situation.

Source: Rubber India, October 2006

Rain-CoatThe Rubber Industry Smallholders DevelopmentAuthority (RISDA) has come up with a RM4

device that will prevent rain from diluting latex.‘Rain-Bust’ consists of a plastic sheet, a wire anda gutter band which can be removed after use.The ‘raincoat’ has to be placed over the tappingpanel as protection against the rain.


Reclaimed RubberA Taiwanese company in Selangor transforms10,000 tonnes of rubber discards into reclaimedrubber annually. It reclaims rubber from rubbertread, tyre inner tubes, industrial rubber wasteetc. The reclaimed rubber is cheaper than NRand is used in manufacturing tyres, inner tubes,conveyor belts, automotive and engineeringrubber parts etc.

Source: Rubber India, October 2006

Englotechs ExpandsEnglotechs Holdings Bhd is investing RM30million to expand production of a new range ofsupported gloves at its plant in Kulim. Thisinvestment in Padang Meha Industrial Estatewould add another seven production lines. Thenew range included non-toxic polymer gloves,cut-resistant gloves and hobby gloves. The non-toxic polymer gloves, made from water-basedpolyurethane chemicals, are used in electronicand automotive industries.

The cut-resistant gloves, made from a specialtype of yarn called dyneema, are used inslaughter houses and glass industries. The hobbygloves are used mainly in gardening. They givea better grip, compared to the conventionalleather hobby gloves.

Source: The Star, 11th July 2006

IRCB into Nitrile GlovesIntegrated Rubber Corp Bhd (IRCB) plans todiversify into the production of nitrile gloves at itsnew plant in Taiping, Perak. The new plantwould have 12 production lines, of which, halfhad been installed and the balance would beready by November 2006.

Source: The Star, 19th July 2006

Supermax Invests in Seal PolymerThe glove-making group, Supermax Corp Bhd,spent close to RM60 million to boost itsassociate Seal Polymer’s glove output sincetaking a controlling stake in the company. Some


RM50 million was used to establish SealPolymer’s new 18 line factory in Taiping while upto RM8 million was invested for upgrading thecompany’s 25 line plant in Lahat. The expandedglove-making group under Supermax cancollectively produce up to 23.3 billion pieces ofgloves annually from 2006.


Top Glove Targets Media-FlexTop Glove, the world’s largest glovemaker, hopesto turnaround Singapore stock exchange-listedMedi-Flex by August 2007. Medi-Flex produces1.6 billion pieces of medical and clean roomgloves per year. Clean room gloves are usuallypriced 15-20 per cent higher than the normalexamination gloves. Top Glove told the stockexchange that it was going to buy 60.06 per centin Medi-Flex for S$21 million by subscribing to300.3 million shares at S$0.07 each.

Source: New Straits Times, 19th October 2006

Ban on Rubberwood ExportsThe ban on sawn rubberwood exports wastightened by including roughly-sawn finger-jointedplanks, effective August 11, 2006. The move wasin response to the concern from the furnituremanufacturers that there was still a shortage ofrubberwood in the country. Minister of PlantationIndustries and Commodities, Datuk Peter Chin,said that one of the main reasons forrubberwood supply inconsistency was thecontinued export of sawn rubberwood, disguisedas roughly-sawn finger-jointed planks.

Source: New Straits Times, 12th July 2006

Singapore

SICOM – NYBOT CollaborationThe Singapore Commodity Exchange (SICOM)and the New York Board of Trade (NYBOT)have signed a Memorandum of Understanding(MoU) envisaging collaboration on projects thatwill be mutually beneficial, such as informationsharing, joint educational seminars andsymposiums and other products and services.Such enhanced cooperation, according toSICOM’s Chairman Lim Hod Teck, will leverageon NYBOT’s expertise in commodities andSICOM’s knowledge of the Asian market to meetthe growing needs of the Asian commodity

market. SICOM’s Board of Directors andNYBOT’s Board of Governors have bothapproved the MoU.

Source: Rubber Asia, November-December2006

Thailand

Latex Standards to be RevisedThe Thailand Industrial Standards Institute (TISI)is planning to revise the standards of NR latexconcentrate to maintain the country’s export leadin the rubber market. Latex operators and stateagencies, such as the National Bureau ofAgricultural Commodity and Food Standards, hadagreed that the physical and chemical propertiesof rubber were to be improved. The currentstandard, titled TIS 980-2533, has been in forcesince 1990.

Source: Bangkok Post, 8th July 2006

AFET to Trade OnlineThe Agricultural Futures Trading Commission hasgranted the Agricultural Futures Exchange ofThailand (AFET) permission to start onlinetrading service in a bid to raise AFET’s tradingvolume. Internet trading will facilitate investors asthey can directly carry out transactions withouttraders. However, customers must trade viawebsites of brokers. When they send an order,it will be passed through control and risk-management systems of brokers to be verifiedfirst. There are five agricultural products tradingon AFET which include RSS3, STR 20 and latexalong with rice and tapioca starch.

Source: www.nationmultimedia.com 29th July2006

Import Quota by ChinaChina has imposed import quotas on Thai rubberat the Chiang Saen Customs Office in thenorthern province of Chiang Rai. Rubber is oneof the products listed under the Thai-ChineseFree-Trade Agreement’s early-harvestprogramme. Despite zero import tariffs, China isable to impose any restrictions or quotas toprotect its farmers and industries.

Source: www.nationmultimedia.com 14th

September 2006


Yokohama’s Two Phase PlanYokohama has a two-phase production plan inThailand. The first was the production of bus andtruck radial tyres at a plant with a capacity of350,000 units per year. Phase two, which is anew factory making tyres for sport-utility vehiclesand light trucks, has been completed and willproduce 1.4 million units per year. Both plantsare in the Amata Nakorn Industrial Estate inChon Buri province. Tyres from the new plant willbe available in the Thai market by the secondquarter of 2007.

Investment budgets for phases one and twowere US$48 million and US$100 millionrespectively. The new plant will be the biggestproduction facility for Yokohama in the world. Ofthe total production, 20 per cent will be for thelocal market. The remainder will be exported tothe US, Europe and other parts of SoutheastAsia.

Source: www.nationmultimedia.com 26th August2006

PP Parawood Turns its Focus to EuropePP Parawood is a major manufacturer of high-quality wooden furniture. Currently, PP Parawoodexports about 90 per cent of its products to theUS and the rest to Europe. However, within twoto three years it hopes to be selling 50 per centof its products to the US with the remainderequally divided between the EU and the localmarket. One of the main problems being facedby the company is the shortage of raw material.The high prices of NR have deterredsmallholders from replanting, reducing the supplyof rubberwood.

Source: www.nationmultimedia.com 7th

November 2006

Vietnam

Dak Lak to ExpandThe Dak Lak Rubber Co plans to increaseacreage under cultivation in southern Laos to6,000 ha pursuant to an economic co-operationprogramme between the Central Highlandsprovince of Dak Lak and the Lao provinces ofAttapeu, Sarawan and Champasak. Since 2004,the company has planted 3,167 ha of rubberplantations.

Source: www.vietnamnews.vnagency.vn, 22nd

September 2006

GERUCO Reaches Agreement with CambodiaVietnam Rubber Corporation (GERUCO) reachedan agreement with Cambodian authorities tocultivate rubber trees in three provinces in theneighbouring country. The provinces are Kratie,Kompongthom and Modolkiri. GERUCO hascompleted surveys and chosen 100,000 hectaresfor planting the trees. GERUCO has beencultivating rubber in Laos for the last two years.

Source: www.thanhnienews.com 20th October2006

Phu Rieng in CambodiaPhu Rieng Rubber Co. from the southern BinhPhuoc province has conducted a geographicalsurvey and started reclaiming wasteland to plant20,000 hectares of rubber in Kratie province ofCambodia.

Source: www.thanhniennews.com 1st November2006

Highland Province Targets 50,000 haDak Lak province is carrying out a project togrow 30,000 ha of rubber trees, aiming toexpand its total rubber cultivation to over 50,000ha by 2010. To reach the target, the ProvincialPeople’s Committee signed a memorandum ofunderstanding with the GERUCO under whichthe latter will grow 15,000 ha of rubber trees andthe remaining areas will be planted by the DakLak Rubber Co. and local farmers. Dak Lak hasaround 700,000 ha of land suitable for growingcoffee, rubber and other crops.

Source; www.thanhniennews.com 26th December2006

GERUCO RestructuredThe state-run Vietnam Rubber Corporation hasbeen restructured into a holding company knownas Vietnam Rubber Group (VRG) to spur therubber industry’s development and sharpencompetitiveness as the country moves towardsWTO membership. The parent company willinclude Dong Nai Rubber Corporation, RubberIndustry Corp, and Viet-Laos Rubber Corp.

Source: www.thanhniennews.com 3rd November2006

Motor cycle ExportsThe Ministry of Industry is planning to boost thecountry’s motorcycle industry over the next


decade, hoping to earn US$ 300 million annuallyfrom exports by 2010. By 2015, it hopes theindustry will expand further, with annual exportsof motorcycles and parts amounting to US$ 500million. With a strong domestic market, thecountry is expected to become one of the majorcentres for the motorbike industry in Asiancountries in the coming years.

In 2005, motorcyle output rose by 11.7 percent to 1.8 million units, and seven foreign firmsincluding Honda, Yamaha, Suzuki and VMEPaccounted for 65 per cent of the total production.By 2010, the industry is expected to have anannual capacity of about 2.5 million units.

Source: www.vietnamnews.vnagency.vn 20th

September 2006

Record High ExportsRubber exports would fetch a total of US$1.2billion in 2006, a 78 per cent increase over theprevious year and the nation’s third leading agro-forestry exports, after rice and timber, accordingto the Vietnam Rubber Association. The volumeof rubber exports, nearly 660,000 tonnes,presents a 31 per cent increase over last year’s.GERUCO accounted for 60 per cent of therubber exported.

Source: www.vietnamnews.vnagency.vn, 23rd

December 2006

Rubber Cultivation ExpandsAttracted by the high NR prices severalprovinces had been expanding rubber cultivation.Many provinces have devoted more acreage torubber; Binh Phuoc Province added 8,300 ha,Tay Ninh 5,600 ha and Binh Duong, 3,000 ha.The rubber sector has set a goal to increaseoutput by more than 60,000 tonnes annually,according to the Vietnam Rubber Association.

Source: www.vietnamnews.vnagency.vn, 23rd

December 2006

RUBBER INDUSTRY NEWS

China’s Investment in Rubber PlantationsChina, the world’s largest consumer of rubber,intends to develop rubber plantations in Malaysiaand Myanmar. Chinese companies had set uprubber plantations in Laos two years ago and thetrees would be ready for tapping in about fouryears. The Chinese government had also

approached the Thai government to lease landto plant rubber trees.

Source: New Straits Times, 28th July 2006

Philippines to Expand Rubber CultivationThe Philippines government set apart P55 millionfor the development of new rubber plantations inthe country. South Cotabato Chief Agriculturist,Reynaldo Legaste, said the investment is part ofthe government’s commitment to expand rubberplantations in 11 priority provinces. The priorityprovinces are Antique, Benguet, Bukidnon,Isabela, Maguindanao, Negros Occidental,Occidental Mindoro, Palawan, Sarangani,Zamboanga and Sibugay. A National RubberDevelopment Program (NRDP) was launched inKidapawan City in late August 2005 to build upthe country’s position as one of the top playersin the world NR industry. According to theDepartment of Agriculture’s Bureau of AgriculturalResearch, at least 81,925 hectares are currentlyplanted with rubber in the country.

Source: Rubber India, December 2006

Rubber Prices in 2007The brewing El Nino weather pattern and socialunrest in Southern Thailand may curtail rubbersupplies in 2007 in South-East Asia and boostprices, according to Kazuya Tetsu, ManagingDirector of Marubeni International Commodities(S) Pte Ltd. US weather officials predict that ElNino, the abnormal warming of waters in theequatorial Pacific Ocean that can cause droughtin Australia, Indonesia and other parts ofSoutheast Asia would peak in the next fewmonths.

Supplies from Thailand, the world’s leadingrubber producer and exporter, were disruptedbecause of separatist violence in the South.Tetsu said demand from the US next year wasexpected to remain strong, despite talk ofslowing growth. In addition, Chinese appetite forthe commodity was expected to remain buoyantahead of the Olympics in 2008. Rubberproduction in India was also likely to grow at asharp rate in 2007 to match its fast-growingeconomy, but most of the additional productionwould be consumed in the domestic markets.

Source: New Straits Times, 21st December 2006

Glove Price IncreaseChairman of the ASEAN Rubber GloveManufacturers’ Association (ARGMA), Henry


Tong, said to cope with the high rubber prices,members were encouraged to educate importersand end-users by providing latex price charts andother supporting documents explaining theincrease in glove prices. As latex constitutesmore than 60 per cent of the total productioncost, it is inevitable for the glove manufacturersto pass the cost increase to customers. Glovemanufacturers are still optimistic of the latexglove industry in spite of higher cost of rawmaterials due to the fact that NR latex glovesare technically still superior to synthetic rubbergloves. Demand for NR latex gloves are stillstrong especially with the ongoing concern onbird flu and other life-threatening diseases aswell as increasing awareness of hygiene forprotection and safety. ARGMA comprises glovesmanufacturers’ associations of Malaysia, Thailandand Indonesia.

Source: BERNAMA, 11th July 2006

Glove SectorGlobal demand for NR gloves remains strong butthe high prices of latex squeeze industry players’profit margins. The global demand for rubbergloves has been growing at 10 per cent annually.Of the annual world production of 120 billionrubber gloves, Malaysia contributes about 60 percent, Thailand 30 per cent and Indonesia 10 percent.

Source: The Star, 13th September 2006

Global Automobiles ProductionAccording to the International Organisation ofMotor Vehicle Manufacturers, global production ofvehicles grew in the first half of 2006 by 6 percent (almost 2 million vehicles), compared to thesame period in 2005, reaching a total output of35.4 million vehicles. For the year as a whole,production could rise by more than 5 per centto 70 million vehicles. The markets grew atwidely varying rates in the first half of 2006.Automobile production in NAFTA countries roseby about 2 per cent and the EU recorded anincrease of 1.5 per cent. The number ofvehicles manufactured in South America grew by18 per cent and in the non-EU countries ofEastern Europe by 5.4 per cent. Production ofautomobiles rose by more than 4 per cent inJapan and by 5.5 per cent in South Korea. Inother Asian countries, production skyrocketed by18.5 per cent, with most of the increaseregistered in China and India.

The world’s leading manufacturer ofautomobiles is the US (with an output of 6.1

million vehicles in the first half of the year),followed by Japan (5.7 million vehicles), China(3.6 million), Germany (3 million) and SouthKorea (just under 2 million vehicles).

Source: Press Release, OICA, Paris, 6th October2006

OTR Shortage to ContinueThe shortage of off-the-road (OTR) tyres ispredicted to last for another two years. Theproblem is not exactly shortage of raw materialsto make OTR tyres but rather the capacityconstraints of major manufacturers. In thisbackground, Bridgestone is investing around 17billion yen in OTR production and Michelin, US$85 million.

Source: Rubber Asia, September-October 2006

Asia to Dominate Carbon Black ProductionThe carbon black industry is going through atime of intense change as the future growth willbe in Asia, rather than in the establishedcountries of the west. Of the total 9,300 kt ofcarbon black produced in 2006, around 70 percent goes into tyres with a further 23 per centgoing into belts, hoses and other rubber goods.The remaining 7 per cent is used in inks and aspigments in plastics and other products. Themain driver of the carbon black business is thetyre industry, and the tyre industry is in theprocess of moving capacity to low cost countries.Hence the carbon black industry is trying toreduce capacity in the old world and expand intonew regions. Global demand likely to grow to11,300 kt in the five years to 2011. Theincreased growth will be driven by increaseddemand for tyres and vehicles in Asia.

Source: European Rubber Journal, November-December 2006

EU Landfill DirectiveThe European Union’s directive banninglandfilling with shredded used tyres came intoeffect on 16 July 2006. All used tyres will haveto be recovered, reused or recycled. This followsan earlier ban on landfilling of whole tyres in2003.

Source: Rubber Asia, November-December2006


Rubber SidewalksMore than sixty cities around the US, includingNew York and Washington DC, have installedrubber sidewalks made from recycled tyres.Since 2001, thousands of old tyres have beentransformed into crumbs, added with chemicalbinders and baked into sidewalk sections thatweigh less than 11 pounds a square foot, or aquarter of the weight of concrete. Sidewalks ofrubber coexist with tree roots more easily thanconcrete sidewalks. The latter buckles as rootsgrow under it; rubber merely bends. As a result,trees are spared from root damage. They alsohelp recycle the vast supply of old tyres.Washington DC spent about US$ 60,000 toinstall 4,000 square feet of rubber sidewalks onseveral leafy blocks in the city’s Northeastsection in early 2006.

Sources: www.boingboing.net 26th July 2006 andwww.usatoday.com 19th September 2006

ECONOMIC NEWS

ADO Update 2006: Developing Asia and thePacificAccording to the ADO Update the year 2006 wasanother good one for developing Asia and thePacific. The regional economy was expected togrow by 7.7 per cent, an upward revision of 0.5percentage points from the ADO 2006 forecastin April. Growth is also expected to be robust in2007, though some easing is likely as demandfrom industrial countries slows. The ADO Updateprojects growth for 2007 of 7.1 per cent, upmarginally from the ADO 2006 forecast of 7.0per cent.

Fast growth at a regional level is supportedby strong performances by the PRC and India,since together these two economies account forover 50 per cent of regional GDP. The remainingeconomies of developing Asia are expected togrow by more modest averages: 5.5 per cent in2006 and 5.1 per cent in 2007. The outlook forSoutheast Asia has weakened marginally asdownward revisions for Malaysia and Thailandoutweigh upgrades for the Philippines andSingapore. The forecast for growth in 2007 isbased on generally favorable external conditions,but it factors in tighter global liquidity and softergrowth in the industrial countries. The forecastalso anticipates oil prices staying high. Theimpact on commerce of the recent heightenedsecurity alert on international air travel isexpected to be short-lived.

In the first half of 2006, East Asia grew at afast tempo and a growth of 8.2 per cent isexpected for the year, up from the estimate of7.7 per cent made in ADO 2006. The upwardrevision reflects a faster expansion in the PRCon greater than expected strength of fixedinvestment and exports. The PRC’s growth for2006 is projected at 10.4 per cent.

South Asia continues to make strongheadway. Growth of 7.5 per cent is estimated for2006, slightly higher than April’s 7.3 per centforecast. Annual income growth in the sub-regionhas averaged 7.7 per cent since 2002, outpacingSoutheast Asia by about 2 percentage points andalmost matching that of East Asia. Recent dataprovide a basis for modestly upgrading forecastsfor India, Bangladesh and Pakistan as well as forother smaller economies. South Asian growth isexpected to consolidate at 7.5 per cent in 2007,an unchanged aggregate from 2006.

In Southeast Asia, growth in Thailand andMalaysia could be prone to weakness next year.Thailand’s growth forecast for 2006 has beenreset at 4.0 per cent from 5.5 per cent whileMalaysia’s is adjusted to 5.0 per cent from 5.8per cent. In Thailand, since political uncertaintyis clouding the near term, investors are likely todefer projects until the direction ahead is clearer.Public sector investment programs may also takea back seat until the new government resolvesvexed political issues. If heightened securityconcerns were to impact on travel and tourism,this would be another negative element for thecountry. Vietnam’s entry into WTO should helpsupport growth at 8.0 per cent. South East Asia’sprojected growth for 2007 has been reviseddownwards at 5.3 per cent.

The sub-regional averages for Central Asiaand the Pacific are heavily influenced by theoutlook for oil prices, and the baseline forecastassumes a higher level in 2007 than waspredicted in ADO 2006. For Central Asia, theUpdate revises growth for 2007 up to 10.3 percent from 9.8 per cent in ADO 2006, in reflectionof an improved outlook for the two major oilproducers Azerbaijan and Kazakhstan. In thePacific, most economies are totally reliant on fuelimports, but Papua New Guinea, with about twofifths of the sub-region’s GDP, and Timor-Lesteare net oil exporters. Upward revisions to theirgrowth projections have lifted the aggregatePacific outlook.

Looking ahead, developing Asia’s growth in2007 is now expected to be 7.1 per cent, up anotch from the 7.0 per cent forecast in ADO2006 in April. This minor revision balances a lessoptimistic outlook for Southeast Asia with apositive reassessment of East Asia’s prospects.


GDP Growth in Developing Asia and the Pacific2005-2007 (%)

2006 2007Region 2005 ADO

UpdateADO

Update(Actual) 2006 2006Developing Asia 7.6 7.2 7.7 7.0 7.1Central Asia 10.9 10.3 11.3 9.8 10.3East Asia 7.9 7.7 8.2 7.1 7.5South Asia 8.1 7.3 7.5 7.5 7.5Southeast Asia 5.5 5.5 5.4 5.7 5.3The Pacific 2.3 2.9 3.3 3.0 3.4

GDP Growth in ANRPC Member Countries2005-2007 (%)

2006 2007Country 2005 ADO

UpdateADO

Update(Actual) 2006 2006India 8.5 7.6 7.8 7.8 7.8Indonesia 5.0 5.4 5.4 6.0 6.0Malaysia 5.5 5.5 5.2 5.8 5.0Papua New 2.9 3.2 3.5 3.0 4.0GuineaSingapore 2.9 6.1 6.6 4.6 4.6Sri Lanka 6.0 5.3 6.1 5.2 5.8Thailand 7.0 4.7 4.2 5.5 4.0Vietnam 7.3 7.8 7.8 8.0 8.0

Source: Asian Development Outlook, April 2006and Asian Development Outlook Update,September 2006, Asian Development Bank

ADO Update 2006: Industrial CountriesThe pace of US economic activity is slowing.Real GDP grew by 2.9 per cent in the secondquarter, after registering 5.6 per cent growth inthe first quarter. The relatively sharp decelerationin the second quarter primarily reflected in aboutequal measure a weakening in consumerspending and in fixed investment expenditure,mainly in equipment and software. Monetarytightening over the past 2 years is apparentlytaking its toll on housing markets. A cooling inhouse price inflation appears to be dampingconsumer activity and confidence, cutting strongconsumer spending that has been supported bythe wealth effect of rapidly rising property prices.Inflation has clearly edged up, with sustainedhigh oil and commodity prices feeding into bothconsumer prices and production costs. The UStrade and fiscal deficits also continue to causeconcern. The baseline projection for US realGDP growth is 3.3 per cent for 2006, slowing to2.8 per cent in 2007. Despite the strengthening

downside risks, and rising concerns that thehousing market could unravel and trigger weakerdemand, US fundamentals remain generallypositive.

The Japanese economy continues amoderate expansion based on broadeningdomestic demand. Second-quarter GDP growthcame in at 0.8 per cent, after 2.7 per cent in thefirst. Although second-quarter performance wasrather flat, this was largely due to a reduction inpublic spending. Private domestic demandcontinues to firm up on the back of buoyantbusiness investment and robust consumerspending. Business investment rose by 11.1 percent in the first half of 2006 from the previousyear. Increases in wage income and strongerlabor market improvements have boostedconsumer confidence. While exports grewrobustly through the first half of 2006, thecontribution of net exports to GDP growth turnednegative in the second quarter, reflecting a surgein imports. Japan is set to enjoy a healthyeconomic expansion with GDP expected to growat 2.8 per cent and 2.4 per cent in 2006 and2007 respectively.

The euro zone economy grew by 3.6 percent in the second quarter of 2006, up from 3.2per cent in the first. Indeed, almost all majoreuro zone economies except Italy were strongerin the second quarter than the first, indicating agenerally harmonious recovery across the zone.The second-quarter acceleration reflectedstrengthening domestic demand, including arecovery in capital formation. Industrial productionhas accelerated in major euro zone economiessince the beginning of 2006. Robust businessactivity has exerted a positive influence on thelabor market, and unemployment rates havetrended down. GDP growth in the euro zoneeconomy is forecasted at 2.3 per cent in 2006.A combination of moderating exports andtightening fiscal policy is expected to bring downgrowth to 1.8 per cent in 2007.

GDP Growth in Industrial Countries 2005-2007 (%)

2006 20072005 ADO Update ADO Update(Actual) 2006 2006Industrial countries 2.5 2.9 2.9 2.6 2.4United States 3.2 3.3 3.3 3.1 2.8Euro zone 1.3 2.1 2.3 2.0 1.8Japan 2.6 2.9 2.8 2.4 2.4

Source: Asian Development Outlook, April 2006and Asian Development Outlook Update,September 2006, Asian Development Bank


World Economic Outlook: IMFGrowth was particularly strong in the UnitedStates in the first quarter of 2006, although itslowed in the second quarter, because of acooling housing market and rising fuel costs. Theexpansion gathered momentum in the euro areaand the Japanese economy continued to expand.Growth in China has accelerated even further,emerging Asia and Europe have continued togrow rapidly, and the pace of activity has pickedup in Latin America. Middle Eastern oil exportersand low income countries in Africa have alsomaintained impressive growth rates. Sustainedhigh rates of global growth have absorbed sparecapacity and led to some emerging signs ofinflationary pressures. Against this background,central banks in the major advanced economieshave taken steps to tighten monetary conditions.Since late 2005, the US dollar has depreciatedagainst the euro and to a lesser degree the yen,partly reversing its appreciation during theprevious 12 months. The US current accountdeficit has continued to widen and the surplusesin parts of emerging Asia and oil exportingcountries have increased further. Rising inflationconcerns and tightening by major central bankshad a marked impact on financial markets. Oiland other commodity prices continued atelevated levels in the first eight months of 2006,with petroleum and metal prices reaching newhighs.

Notwithstanding tightening financial conditions,the baseline forecast for world output growth hasbeen marked up to 5.1 per cent in 2006 and 4.9per cent in 2007. This would be the strongestfour-year period of global expansion since theearly 1970s. This favourable outlook depends onthe view that inflationary pressures will besuccessfully contained with modest furtherinterest rate increases by the major centralbanks, the growth of domestic demand will bebetter balanced across the advanced economies,emerging and developing countries will largelyavoid capacity bottlenecks, and global financialmarket conditions will be more stable. The USeconomy would grow by 3.4 per cent in 2006,before slowing to 2.9 per cent in 2007. A coolinghousing market would continue to dampenprivate consumption and residential investment,but corporate investment should be supported byhigh capacity use and strong profitability. Growthin the euro area would rise to 2.4 per cent in

2006 – its highest rate in six years – beforemoderating to 2 per cent in 2007. Strongercorporate balance sheets have paved the way forhigher investment, rising employment and abetter balanced expansion. The Japaneseeconomy would grow by 2.7 per cent in 2006,based on solid domestic demand, before easingto 2.1 per cent in 2007. Growth in emergingmarkets and developing countries would remainvery strong at 7.3 per cent in 2006, and slowonly marginally to 7.2 per cent in 2007. Chinawould sustain growth around 10 per cent – anupward revision relative to the April 2006 WorldEconomic Outlook – while India and Russiawould also continue to grow rapidly. LatinAmerican countries would continue to lag,although growth prospects have been marked upin this region.

Turning now to the downside, markets havebeen concerned that a continued build up ofinflation pressures in advanced economies couldrequire a more aggressive monetary policyresponse to cool the growth momentum,particularly in the United States. A related risk tothe outlook comes from the continued potentialfor supply-side shocks in the oil market, whichcould give a further upward impetus tointernational oil prices, thus exacerbatinginflationary pressures while cooling householddemand. In the baseline forecast, theinternational oil rice is expected to averageUS$75 a barrel in 2007.

There are also supply-side risks from non-fuel commodity prices. In total, non-fuelcommodities represent almost twice as large ashare of world trade as fuels and can have animportant impact on the global economicenvironment, both for consumers and theexporters. A key risk on the demand side is thatthe continued cooling of advanced-economyhousing markets will weaken household balancesheets and undercut aggregate demand. At thispoint, concerns center on the United States,although other markets, such as those in Ireland,Spain and United Kingdom, also still seemovervalued by most conventional measures.Other demand-side risks relate to the extent towhich expansions in Europe and Japan will besustained by increasing strength of householddemand, reducing reliance on exports andexposure to a slowdown of demand in the UnitedStates.


World Output Growth 2004-2007 (%)

2004 2005 2006 2007World 5.3 4.9 5.1 4.9Advanced Economies 3.2 2.6 3.1 2.7United States 3.9 3.2 3.4 2.7Euro area 2.1 1.3 2.4 2.0Germany 1.2 0.9 2.0 1.3France 2.0 1.2 2.4 2.3Italy 1.1 - 1.5 1.3Spain 3.1 3.4 3.4 3.0Japan 2.3 2.6 2.7 2.1United Kingdom 3.3 1.9 2.7 2.7Canada 3.3 2.9 3.1 3.0Korea 4.7 4.0 5.0 4.3Russia 7.2 6.4 6.5 6.5Developing Asia 8.8 9.0 8.7 8.6China 10.1 10.2 10.0 10.0India 8.0 8.5 8.3 7.3Indonesia 5.1 5.6 5.2 6.0Malaysia 7.2 5.2 5.5 5.2Thailand 6.2 4.5 4.5 5.0Brazil 4.9 2.3 3.6 4.0Mexico 4.2 3.0 4.0 3.5

Source: World Economic Outlook, IMF,September, 2006

OECD Economic OutlookUntil recently, the OECD area was enjoying aprolonged period of non-inflationary growthdespite rising oil and commodity prices.Underlying these favourable trends, persistentwage moderation provided for both price stabilityand strongly rising profits as well as vigorous jobcreation in the main OECD regions.

This smooth performance has beensomewhat disturbed recently. In the UnitedStates, signs of inflationary pressures and labourmarket tensions have recently built up whileinvestment in housing has fallen sharply,following a long boom in residential construction.In the OECD area as a whole, however, thereare still few signs of general overheating.Aggregate demand and supply broadly match, incontrast with the previous cyclical peak at theturn of the century when demand pressures weremuch stronger. While in the United States andJapan aggregate demand may be somewhatabove trend, in the euro area substantial slackremains.

Rather than a major slowdown, what theworld economy may be facing is a rebalancing

of growth across OECD regions. Indeed, recentdevelopments point to an unwinding of cyclicaldifferences, with activity having slowed in theUnited States and Japan and gathering speed inEurope. Looking ahead, and given what isseemingly a mild degree of initial excess demandin the United States and Japan, the slowdown inthese countries should remain well-contained. Inthe euro area, recent business and consumerconfidence suggest that a solid upswing may beunderway. In addition, growth should remainbuoyant in China, India, Russia and otheremerging economies. All in all, Japan and theeuro area would grow slightly above trend overthe next two years while US growth would returnprogressively to potential in the course of 2007,following the recent steep deceleration in activity.The degree of overheating in the US still looksmodest despite some tensions in US labourmarkets which should recede progressively. Infact, the recent increase in core inflation oweda lot to past hikes in oil and gasoline prices,which have now partly been reversed. Becauseof its high energy intensity, the Americaneconomy has been subjected to a strongerexternal inflationary shock than the OECDaverage. Assuming in oil prices stabilizing aroundtheir current levels, a mild economic slowdownmay be enough to progressively restore pricestability in the United States.

In Japan, the return to price stability isproving longer and less assured than expected.Looking at GDP deflators and consumer priceinflation excluding food and energy, deflation isnot over yet. Although strong profits and exportmarkets will continue to underpin Japan’s growth,it also relies on at least moderate support fromhousehold spending.

In the euro area, activity has finally taken off,following a series of aborted recoveries. Therecent fall in oil prices has driven headlineinflation back below the 2 per cent threshold.Although in recent years housing markets haveplayed an important role in supporting economicactivity, prices may now have reachedunsustainable highs in certain countries (notablythe United States, Denmark, France and Spain),at least according to OECD Secretariatestimates. When price corrections set in, housingmarkets may thus reduce the speed of economicexpansion even though the economy at large isnot strongly overheating and macroeconomicpolicies are only mildly restrictive.


GDP Growth in OECD Countries, 2006-2008 (%)

2006 2007 2008United States 3.3 2.4 2.7Canada 2.8 2.7 3.1Japan 1.8 2.0 2.0Euro area 2.6 2.2 2.3Germany 2.6 1.8 2.1France 2.1 2.2 2.3Italy 1.8 1.4 1.6United Kingdom 2.6 2.6 2.8Total OECD 3.2 2.5 2.7

Source: OECD Economic Outlook, Volume 80,November 2006

US Indices ImproveThe US Conference Board’s ConsumerConfidence Index had posted a sharp decline inAugust 2006 to 99.6 (1985=100) after recordinga moderate increase in July to 107.0. Thereafterthe Index increased to 105.9 in Septemberbefore edging down to 105.4 in October 2006.The Index, which was virtually unchanged inNovember, improved in December reaching109.0. The Present Situation Index increased to129.9 in December from 125.4 in November. TheExpectations Index improved to 95.1 inDecember from 91.9 in November.

Despite the latest improvement in the Index,there is little to suggest that the pace ofeconomic activity in the final quarter of 2006 isanything but moderately better than itsuninspiring performance in early 2006. Given thesee-saw pattern in recent months, it is too soonto tell if this boost in confidence is a genuinesignal that better times are ahead.

Source: www.conferenceboard.org, December2006

Asia-Pacific Region OutlookThe rising economic powerhouses of China andIndia are driving the Asia-Pacific region’seconomic performance. Added stimulus hascome from the continuing revival of the Japaneseeconomy. These three countries togethercontribute 62 per cent of the GDP of the regionand 44 per cent of imports, creating considerableopportunities for their trading partners.

China’s growth is accelerating, despitepolicies to moderate its pace. Growth in thesecond quarter of 2006 stood at an annualized11.3 per cent, the fastest since the mid-1990s.The Indian economy, driven by industrialproduction and a booming service sector, isexpected to grow at 8.2 per cent in 2006. Withtotal consumption accounting for around two

thirds of GDP, a vibrant domestic marketprovided the backbone for economic expansion.Japan has emerged from its decade-longeconomic slump, with GDP estimated to grow at2.8 per cent in 2006, up from 2.6 per cent in2005. The robust growth of the United Statesand the continued recovery in the economies ofthe Euro Zone contributed to the goodperformance of the developing Asia and Pacificregion.

For developing Asia-Pacific economies, theeconomic growth outlook in 2007 is one ofcontinued dynamism. Economic growth isprojected at 6.9 per cent in 2007, marginallylower than in 2006. The global economicenvironment is expected to remain favourable,particularly the ongoing domestic demandrecovery in Japan.

A moderate decline is expected in globalelectronics demand in 2007 as well as a slightlyless accommodative macroeconomic policystance, reflected in a high level of domesticinterest rates and a limited role of fiscal policyin many Asian economies. These developmentsare expected to marginally mitigate the positiveimpacts of global economic conditions on Asia-Pacific economies in 2007.

The growth momentum in the Asia-Pacificregion in 2007 is expected to come from stronggrowth in China and India and a rebound ineconomic growth in the South-East Asianeconomies. In China, GDP growth is expected tobe about 9.9 per cent in 2007, slightly less thanthe 10.2 per cent growth of 2006. India isexpected to grow at 8.1 per cent in 2007,virtually unchanged from 2006. Due to weakeningdemand for imports among the advancedeconomies, GDP growth in East and North-EastAsia (except China) is projected to soften in2007. In North and Central Asia, growth isprojected to ease slightly, to 6.5 per cent.

A modest rebound in GDP growth in theSouth-East Asian economies is expected in 2007as the factors constraining domestic demandrecede. In Indonesia, investment is expected tobe boosted by lower interest rates and new pro-business regulations that are coming into effect.Strong electronics exports and higherdevelopment spending related to the NinthMalaysia Plan (2006-2010) would help to boostinvestments in Malaysia.

Source: Key Economic Developments andProspects in the Asia Pacific Region 2007,UNESCAP, November 2006

World Trade Report 2006The deceleration of global trade expansionobserved since mid 2004 was arrested and


reversed in the second quarter of 2005. Theyearly real growth of world merchandise exportsaveraged 6 per cent in 2005 after a stronggrowth of 9.5 per cent in the preceding year.Regions and countries exporting fuels and othermining products, which benefited strongly fromrelative price increase expanded their importssharply. According to provisional data, theCommonwealth of Independent States (CIS),South and Central America, Africa and theMiddle East expanded their imports at least twotimes faster than world trade.

Large variations of relative prices had amajor impact on nominal trade developments in2005. The prices of fuels and metals rose byabout one-third in 2005, while the prices of manyagricultural products and manufactures increasedonly moderately or stagnated. Prices for globalmerchandise trade increased on averagemarkedly less than in the preceding year, largelydue to the deceleration of prices formanufactured goods, which account for aboutthree-quarters of merchandise trade.

World merchandise exports rose 13 per centand exceeded for the first time the US$10 trillionmark. Oil market developments were the principalfactor leading to the sharp rise in the exports ofAfrica, the CIS and the Middle East. In 2005,Africa and the Middle East recorded their largestshare in world merchandise exports since themid-1980s. Europe, the largest trader among themajor geographic regions, recorded by far theweakest export and import growth in 2005. NorthAmerica’s nominal trade growth deceleratedmoderately and rose roughly in line with globaltrade. Merchandise trade growth of the Asianregion exceeded on average that of global trade,but large variations in export performance couldbe observed between China and the otherleading traders in Asia.

Source: World Trade Report 2006, WTOSecretariat, July 2006

World Investment Report 2006Inflows of foreign direct investment (FDI) weresubstantial in 2005. They rose by 29 per cent –to reach US$ 916 billion – having alreadyincreased by 27 per cent in 2004. Nevertheless,world inflows remained far below the 2000 peakof US$ 1.4 trillion. Similar to trends in the late1990s, the recent upsurge in FDI reflects agreater level of cross-border mergers andacquisitions (M&As), especially among developedcountries. It also reflects higher growth rates insome developed countries as well as strongeconomic performance in many developing and

transition economies.Inflows to developed countries in 2005

amounted to US$ 542 billion, an increase of 37per cent over 2004, while to developing countriesthey rose to the highest level ever recorded,US$ 334 billion. In percentage terms, the shareof developed countries increased somewhat, to59 per cent of global inward FDI. The share ofdeveloping countries was 36 per cent and thatof South-east Europe and the Commonwealth ofIndependent States (CIS) was about 4 per cent.Services gained the most from the surge of FDI,particularly finance, telecommunications and realestate. There was a sharp decline in the shareof manufacturing in FDI and a steep rise of FDIinto the primary sector, primarily the petroleumindustry. According to estimates by UNCTAD, theuniverse of TNCs now spans some 77,000parent companies with over 770,000 foreignaffiliates.

The TNC universe continues to be dominatedby firms from the Triad – the EU, Japan and theUnited States – home to 85 of the world’s top100 TNCs in 2004. The automobile industrydominates the list, followed by pharmaceuticalsand telecommunications.

In 2004 there were five companies fromdeveloping economies in the list of the top 100TNCs, all with headquarters in Asia and three ofthem were State-owned. These five companies– Hutchinson Whamoa (Hong Kong), Petronas(Malaysia), Singtel (Singapore) SamsungElectronics (the Republic of Korea) and CITICGroup (China) – topped the list of the largest100 TNCs from developing countries. Altogether,77 of the top 100 TNCs in developing countrieshad their headquarters in Asia; the remainingwere equally distributed between Africa and LatinAmerica.

Source: World Investment Report 2006,UNCTAD, October 2006

NR MARKET REVIEW1

NR PRICES TO BE STEADY DESPITE APROJECTED MILD SLOWDOWN IN THEWORLD ECONOMY

The global economic recovery from 2002 helpedthe NR market to recover from the prolongedslump began in mid-1997, triggered by the Asianfinancial crisis. The positive trend in NR pricescontinued thereafter though there had beenshort-term fluctuations caused mainly byseasonal, speculative and currency factors. The

1 The views expressed are entirely the ANRPC Secretariat’s.


main factors contributing to the rise in NR pricesincluded robust growth of the world economy,continued strong presence of China in themarket, climatic factors, bullish futures and highoil prices. The world economy which expandedby a nominal 1.2 per cent in 2001 grew by 1.9and 3.2 per cent in 2002 and 2003 respectively.In 2004, it had registered the highest growth ratesince 1976 at 5.3 per cent.

NR prices in H1 of 2005 had been marginallylower compared to the same period in theprevious year in most of the markets but by themiddle of the year they rose above 2004 levels.The third and fourth quarters of 2005 recordedsteady improvement in prices and the year endedon a higher note. Global GDP expanded in 2005by 4.9 per cent, despite the mild slow down inthe euro zone. Even with the high oil prices andnatural disasters, industrial activity in H2 of 2005was relatively stronger compared to H1. The USand Chinese economies grew by 3.2 and 10.4per cent respectively in 2005. The longanticipated economic recovery of Japan took holdin 2005 with a GDP growth of 2.7 per cent.India recorded an impressive GDP growth of 8.5per cent in 2005 (World Economic Outlook,International Monetary Fund, September 2006 &Asian Development Outlook Update, AsianDevelopment Bank, September 2006).

Supply-side factors also supported NR pricesin 2005. The drought in Thailand which persisteduntil May 2005 and the intermittent rains in thelast quarter of the year led to a 6.2 per centdecline in Thai NR production compared to theprevious year. The typhoon Damrey whichslammed into Hainan Island in September 2005had damaged rubber plantations, trimmingChinese production. Oil prices also appeared tohave influenced the NR price movements in2005. The average price of WTI oil in H2 of2005 was higher at US $ 61.60 per barrel,compared to that of H1 at US $ 51.30.

Major Factors Influencing NR Market in 2006Most of the factors which influenced the trendsin NR prices in the recent years continued toimpact in 2006 as well. The single major factorwhich influences the price of industrial rawmaterials including NR is the state of the worldeconomy. It was projected that the worldeconomy would record a growth of 5.1 per centin 2006. The world GDP growth in 2005 being4.9 per cent, the projection for 2006 indicatedcontinuance of the tempo of global economicgrowth (World Economic Outlook, IMF,September 2006). China maintained its steadygrowth in 2006 with a GDP expansion of 10.7per cent which was marginally higher than thatof 2005 at 10.4 per cent. (News Release,

National Bureau of Statistics of China, January2007). The GDP of the US increased by 3.3per cent in 2006 according to preliminaryestimates. (News Release, US Bureau ofEconomic Analysis, January 2007). Japan’s realGDP expanded moderately by 1.9 per cent in2006 (Government Economic Outlook, Bank ofJapan, January 2007). The growth of the worldeconomy in 2006 generated sustained demandfor raw materials including NR. However, therehad been apprehensions stemming from a mildslowdown in some parts of the world from thesecond quarter of the year.

The tight supply concerns usual to the onsetof the wintering season were present inFebruary. Another factor was the unusual rainsin May and June in South East Asian countries,especially in the southern provinces of Thailand.The unusual showers at a time when supply wasexpected to improve after the wintering seasoncaused frantic buying and raised NR prices frommid-May to mid-July. As Thailand is the majorproducer of RSS, the production squeezeappeared to have positively influenced the pricepremium of RSS 3 over STR 20 during theperiod. From July beginning, NR market arrivalsincreased as weather conditions improved. Againtowards the end of the year there were supplydisruptions due to heavy downpours and rains inSouth-East Asia. Insurgency in the southernrubber growing provinces of Thailand continuedto be a supply deterrent factor.

The rubber futures market was bullish at theturn of the year and the price (six month forwardprice in TOCOM) on the last trading day ofJanuary was 257 Yen per kg compared to Yen200 per kg on the first trading day of December2005. Thereafter, the NR futures market did notmake much headway though there had beenminor ups and downs and the price on the lasttrading day of April was Yen 255 per kg. Therewere fresh leads from early May amidst supplyconstraints and intensive speculation. The pricerecorded on the last trading day of May was Yen304 per kg and the monthly average was Yen285 per kg. The monthly average priceincreased further to Yen 304 per kg in June.Prices declined in July as NR supply improvedand the price was Yen 277 per kg on the lasttrading day. The decline continued and the pricewas Yen 216 per kg on the last trading day ofSeptember. Though prices improved moderatelyin the initial weeks of October, there was adecline towards the end of the month reachingYen 216 per kg on the last trading day. Andthe prices further declined in November reachingYen 202 per kg on the last trading day.However, prices recovered in December onaccount of NR supply shrinkage due to adverseweather conditions.

Currency factors generally have favoured NR


NR Market – 2006Generally, NR prices remain flat during the earlyweeks of a year because of the lack of freshmarket leads in the holiday season. However,in 2006 NR prices have been soaring to newhighs in the initial weeks. From mid-February,NR prices remained nearly flat for a few weekstill April end, followed by a steady rise whichcontinued until mid-July. Thereafter, NR priceshave been declining because of improved supplyand other factors. There was a short-livednorthward movement in NR prices in October.NR prices improved towards the end of the yearmainly because of the adverse climatic conditionsin the major producing regions.

TSR 20 PricesIn Q1 of 2006, average prices of SIR 20, SMR20 and STR 20 were 15.7, 14.1 and 12.3percent higher respectively over the previousquarter. Prices continued to increase in Q2 of2006 with average prices of SIR 20, SMR 20and STR 20 increasing by 13.7, 12.8 and 12.1per cent over Q1 of 2006 respectively. AverageSIR 20, SMR 20 and STR 20 prices in Q3declined marginally over Q2 by 0.3, 2.0 and 4.3per cent respectively. In the last quarter of theyear average SIR 20, SMR 20 and STR 20prices declined noticeably; by 19.4, 20.4 and 21.6per cent respectively over Q3.

Table 1. Average TSR 20 prices in 2005 & 2006

TSR 2005 2006

Q1 Q2 Q3 Q4SIR 20

139.37 187.43 213.17 212.63 171.35(US cents/kg)SMR

523.07 690.01 781.76 762.19 606.5120(Sen/kg)STR

56.53 74.80 84.11 80.47 63.0520(Baht/kg)

Source: ANRPC Secretariat

The SIR 20 prices, which recovered inDecember 2005 after a marginal decline in theprevious month, began improving further from theturn of the current year. The prices continuedto increase until mid-February and the monthrecorded an average price of US cents 193 perkg compared to US cents 164 per kg inDecember 2005; up by some 17.7 per cent.From mid-February prices remained more or lessflat for a few weeks and then improved from thebeginning of May with the weekly average pricereaching US cents 243.71 per kg. Thereafterprices started retreating gradually and the weekly

prices in the near past. The US monetaryauthority had been allowing the US dollar todepreciate as a means to ease the burden of itsgrowing current account deficit. This led to anappreciation of several other currencies includingNR producers’ currencies. Indonesian Rupiah,Malaysian Ringgit and Thai Baht have beenappreciating from the beginning of the year. Theexchange value of the three currencies againstthe US dollar which stood at Rp 9724, Baht40.77 and RM 3.78 on the first day of thecurrent year rose to Rp 8767, Baht 37.50 andRM 3.63 respectively by the turn of May.Thereafter, Rupiah lost its value marginally(reaching Rp 9292 by June end) with no muchchange in the other two currencies. But thedepreciation of the Rupiah did not have a notableimpact on the NR market as it occurred in aphase of supply constraints due to theunexpected showers. From July onwards themajor producer currencies have been more orless stable and improved towards the end of theyear with rates at Rp 8964, Baht 36.14 and RM3.53 to the US dollar on the last trading day ofthe year.

In H1 of the current year the average WTIoil price was US $ 66.84 per barrel. The oilprice, which had been flat during the first threemonths of the year, rose in April because ofreported reduced inventories, unrest in Nigeria,Middle East developments etc. From May toAugust, the oil price averaged above US $ 70per barrel. Thereafter, oil prices retreated andthe average price of WTI oil in December wasUS$ 61.96 per barrel (www. eia.gov, January2007 & Bloomberg News, April 20, 2006).

The rise in the price of oil could exertpressure on SR prices and may influence theSR:NR consumption ratio. In 2005 the share ofNR in China’s rubber imports had increased to56.4 per cent from 53.9 per cent in 2004.However, during January-October 2006 the shareof NR in China’s rubber imports declined to 52.8per cent. Until August 2006 price of NR hadbeen notably higher than that of SR.


average SIR 20 price reached US cents 177 perkg in the last week of September. The month ofOctober showed a short lived recovery in pricesfollowed by further declines in November. Therewas some improvement in the prices towards theend of the year when it increased to US cents182 per kg in the last week of the year from UScents 154 per kg in the last week of November.

The SMR 20 prices also had startedimproving from the beginning of December 2005after a mild slow down in the previous month.Prices continued to increase until around mid-February. The monthly average SMR 20 price inFebruary was higher at Sen 712 per kgcompared to Sen 612 per kg in December, anincrease of 16.3 per cent. This was followed bya few weeks of more or less flat prices. Pricesbegan to improve further from the turn of Mayand the first week of July recorded an averageprice of Sen 875 per kg. Thereafter, SMR 20prices started falling and the weekly averagereached Sen 641.40 per kg by the last week ofSeptember. Prices showed a mild recovery inthe first three weeks of October but again startedfalling towards the end of the month. Thedecline in the price continued until the end ofNovember and the trend reversed with the priceincreasing from Sen 547 per kg in the last weekof November to Sen 622 per kg in the last weekof December.

The prices of STR 20 also started improvingfrom early December 2005 but at a more gradualpace compared to SIR 20 and SMR 20 prices.The STR 20 prices had declined less in theprevious month compared to the prices of theother two grades. In January 2006 also theincrease in STR 20 prices was gradualcompared to SIR 20 and SMR 20 prices. But inFebruary STR 20 prices recorded higher increasecompared to the other grades. The average priceof STR 20 in February was Baht 77.8 per kgcompared to December’s Baht 68.1 per kg anincrease of 14.2 per cent. Thereafter, pricesremained nearly flat for a few weeks and beganto improve around mid-May, lagging behind SIR20 and SMR 20. The first week of Julyregistered an average price of Baht 94.3 per kgfor STR 20. Thereafter, prices began to declinewith average weekly STR 20 prices reachingBaht 65.8 in the last week of September. In thefirst week of October prices mildly improved andremained flat during the following weeks beforedeclining further in November. In December theprice recovered reaching Baht 65.18 per kg inthe last week compared to Baht 56.92 per kg inthe last week of November.

RSS PricesThe prices of RSS grades in Singapore andBangkok markets showed similar trends whereasColombo and Kottayam markets displayed somevariations. RSS 3 prices in Singapore andBangkok increased in Q1 2006 by around 15.5per cent over the previous quarter. In Q2 theRSS 3 prices in Singapore and Bangkokincreased by 18.5 and 17.5 per cent respectivelyover Q1. And in Q3 the RSS 3 prices inSingapore and Bangkok declined at relativelyhigher rates at 10.7 and 11.1 per centrespectively compared to other markets. RSS 4prices at Kottayam and RSS 3 prices in Colomboincreased by 17.3 and 19.5 per cent respectivelyin Q1 2006 over the previous quarter. In thesecond quarter, Kottayam RSS 4 prices and


The Colombo RSS 3 prices which had beenmore or less flat in December 2005, startedimproving from the beginning of 2006. Pricescontinued to move up until mid-February with themonth recording an average price of Rs184 perkg compared to Rs 147 per kg in December.Thereafter prices remained flat for a few weeksbefore improving from early May and the weeklyaverage price of RSS 3 reached Rs 244.40 inthe first week of July. Then prices began todecline and the weekly average price reached Rs175.05 per kg in the first week of Octoberfollowed by weeks of more or less flat pricesbefore declining again in November. Pricesrecovered in December with the last weekrecording an average of Rs 180 per kg.

Colombo RSS 3 prices increased by 24.2 and19.4 per cent respectively over Q1. However inQ3, the RSS 4 prices in Kottayam and RSS 3prices in Colombo declined by 7.0 and 2.3 percent respectively over Q2. In the last quarter ofthe year average RSS 3 prices in Singapore andBangkok markets declined by 21.4 and 22.3 percent over Q2. In Colombo the average RSS 3price declined at a lower rate of 16.6 per centin Q4 over Q3. And in India the average RSS 4prices recorded only a noticeably lower rate ofdecline in Q4 at 5.8 per cent over Q3.

Table 2. Average RSS prices in 2005 & 2006

RSS 2005 2006

Q1 Q2 Q3 Q4RSS 4Kottayam 60.68 78.25 97.22 90.57 85.28(Rs/kg)RSS 3Singapore 249.83 328.89 390.00 346.73 272.65(Cents/kg)RSS 3Colombo 136.91 178.00 212.59 207.74 173.14(Rs/kg)RSS 3Bangkok 60.17 79.12 92.96 82.64 64.22(Baht/kg)


The Singapore RSS 3 prices had startedimproving from early December 2005 after amarginal decline for a few weeks. The pricescontinued to increase until around mid-Februaryand the month recorded an average price ofSingapore cents 338 per kg compared toSingapore cents 284 per kg in December, anincrease of 19 per cent. For the next few weeksprices remained more or less flat but began toimprove from the turn of May. The last week ofJune had an average price of Singapore cents438 per kg. Thereafter, prices retreated graduallyand the weekly average price reached Singaporecents 282 per kg in the last week of September.The prices had been more or less stable inOctober but dipped in November averagingSingapore cents 240 per kg in the last week.The prices improved towards the end of the yearwith the last week recording a price of Singaporecents 299 per kg.


In India, RSS 4 prices had been steadilyrising from early December 2005 crossing Rs 70per kg towards the end of the month. Pricescontinued to increase until around mid-February2006 and the month recorded an average priceof Rs 80.5 compared to Rs 68.90 per kg forDecember. This was followed by a few weeks ofmore or less flat prices. From early April, pricesbegan to improve steadily with the averageweekly price reaching around Rs 111 per kg inthe week starting May 27th. Thereafter, theprices more or less remained flat till mid Julybefore declining gradually. The weekly averageprice of RSS 4 reached Rs 78.33 in the lastweek of September. In the month of October theRSS 4 prices registered a relatively fasterrecovery compared to the other markets withweekly average price reaching Rs 92.40 per kgin the last week. There was a deep dip inprices in November followed by a strong recoveryin December. The last week of Decemberrecorded an average price of Rs 93.45 per kgcompared to Rs 77.13 per kg in the last weekof November.

RSS 3 prices in Thailand, which hadrecovered in December 2005 from a marginaldecline in the previous month, continued toincrease until mid-February 2006. The averageprice of the grade in February was Baht 82.1 perkg compared to Baht 69.20 per kg in December2005. The prices, which remained more or lessflat for a few weeks from the middle of February,began to improve steadily from around mid-Mayand the weekly average reached Baht 104.1 inthe first week of June. The prices were more orless flat until mid July. Thereafter, the pricesbegan retreating with the weekly average RSS 3price reaching Baht 70.18 per kg in the firstweek of September followed by weeks of moreor less flat prices. The prices declined furtherin November and recovered in Decemberreaching Baht 69.56 per kg in the last weekcompared to Baht 56.24 per kg in the last weekof the previous month.

The price premium of RSS 3 over STR 20in Thailand in 2005, which went above Baht 10per kg in late July, had narrowed towards theend of the year. In the initial weeks of 2006 theprice premium gradually rose reaching aroundBaht 6 per kg by early February. Then the pricepremium came down for a few weeks and beganto rise from the end of March and in June theprice difference was around Baht 11 per kg. Withthe improvement in NR supply the price premiumof RSS 3 over STR 20 declined steadily in Julybeginning reaching around Baht 2 per kg by theend of the month. Thereafter, the premiumalmost disappeared. In December when theprice of NR increased the price premium of RSS3 over STR 20 also increased reaching Baht4.38 per kg in the last week.

Price VolatilityThe co-efficient of variation (CV) of the weeklyaverage prices of RSS and TSR 20 grades indifferent markets in 2005 and 2006 arepresented in Table 3. RSS prices were relativelymore volatile in 2006 compared to TSR 20prices.

Table 3. Co-efficient of variation of weekly averageNR prices in 2005 & 2006

Market/grade 2005 2006Medan/SIR 20 9.0 11.3Kuala Lumpur/SMR 20 12.2 12.2Bangkok /STR 20 11.9 12.5Kottayam/RSS 4 14.0 15.9Singapore /RSS 3 10.2 12.2Colombo/RSS 3 15.3 14.0Bangkok /RSS 3 14.2 16.7



SBR Vs RSSIn 2005, SBR export unit values (Japan) andRSS 3 prices (cif) in Tokyo market averaged Yen182.4 and 165.1 per kg respectively. Themonthly SBR average export unit values whichstayed below average monthly RSS prices fromAugust 2003 had exhibited a reverse trend fromJuly 2004 in line with the rising trend in the priceof oil and the margin between the two widenednotably in early 2005. However, by mid-2005 thegap narrowed considerably. From late Decemberthe trend reversed and RSS 3 prices went aboveSBR export unit values. During January-September 2006 the monthly average RSS 3price in Tokyo was higher at Yen 256.0 per kgcompared to the SBR average export unit valueof Yen 212 per kg. However, the differencebetween the two which peaked to Yen 117 perkg in June declined considerably in the recentmonths and in September 2006 the gapnarrowed to 2 yen per kg (Rubber StatisticalBulletin, IRSG, January-February 2007).

The average unit value of Chinese imports ofSRs was higher at US$ 1.65 per kg comparedto that of NR at US$ 1.32 per kg in 2005.During January-October 2006, the unit value ofChinese SR import stood at US $ 1.81 per kgcompared to that of NR at US $ 1.91 per kg. InOctober 2006, the latest month for which dataare available, unit value of Chinese SR importwas marginally higher at US $ 1.90 compared tothat of NR at US $ 1.86 per kg. The comparisonbetween the import unit values of SR and NR inChina has to be noted with caution as theycomprise several types/grades (www.china.org.cnJanuary 2007).

NR ProductionStatistics on ANRPC NR production for the latestfive years are presented in Table 4. In 2005 NR

production in some of the member countries hadbeen adversely affected by the drought in H1 ofthe year, rains towards the end of the year andother factors. The ANRPC countries togetherproduced 7.724 million tonnes in 2005, recordingan average annual compound growth rate of 7.24per cent over the last five years. The estimatedworld output of NR in 2005 was 8.80 milliontonnes. The positive supply response to higherprices is evident from the annual growth ratesrecorded in 2002, 2003 and 2004 at 6.6, 9.5 and9.4 per cent respectively.

Table 4. NR production during 2001-2005(‘000 tonnes)

Country 2001 2002 2003 2004 2005India 631.5 640.8 707.1 742.6 772.0Indonesia 1607.3 1630.0 1792.0 2066.0 2271.0Malaysia 882.1 889.8 985.7 1168.7 1126.0Papua New 4.1 4.2 4.0 4.5 4.7GuineaSri Lanka 86.2 90.5 92.0 94.7 104.4Thailand 2319.6 2615.1 2876.0 2984.3 2937.0Vietnam 309.0 355.5 363.50 402.7 509.0ANRPC 5839.8 6225.9 6820.3 7463.5 7724.1Growth (%) 1.0 6.6 9.5 9.4 3.5

Source : ANRPC Secretariat

There are constraints in expanding NRproduction in the short-run, rubber being aperennial crop. The upper cut-off point dependson the extent of planted area, clone, age of thetrees, exploitation techniques employed,availability of labour etc. Much of the short termpotential to enhance rubber production inresponse to higher prices may have already beenexploited at least in some of the membercountries. Hence though 2005 recorded thehighest NR price in the recent years the annualgrowth in NR production in the ANRPC regiondeclined to 3.5 per cent compared to previousyear’s growth of 9.4 per cent.

NR Production OutlookANRPC NR production in 2006 and 2007 wouldbe around 8.11 and 8.39 million tonnesrespectively. According to the ANRPC Secretariatestimates, world NR production would be around9.20 and 9.51 million tonnes in 2006 and 2007respectively. According to IRSG, world productionof NR in 2006 and 2007 will be 9.26 and 9.71million tonnes respectively (Rubber IndustryReport, IRSG, January-February 2007).


Table 5. NR Production projections (‘000 tonnes)

Country 2006 2007 2010 2015 2020India 853 874 929 988 1107Indonesia 2367 2453 2708 3134 3460Malaysia 1230 1232 1236 1253 1185Papua New 5 5 7 - -GuineaSri Lanka 112 118 124 150 185Thailand 3000 3130 3290 3910 4210Vietnam 540 580 750 825 -


NR ConsumptionTable 6 provides NR consumption growth ratesin the world’s top 10 consuming countries inrecent years. These countries together accountedfor around 75 per cent of global NR consumptionin 2005.

Table 6. Annual growth in NR consumptionduring 2003-2006 (%)

Jan-Oct 2006Country 2003 2004 2005 over

Jan-Oct 2005China 9.3 22.3 9.7 7.1USA -2.9 6.0 1.4 -11.1Japan 4.7 11.5 5.0 3.3India 5.5 3.9 5.9 3.6Malaysia 3.2 -4.3 4.2 -2.9South Korea 2.1 5.7 4.9 -1.6Thailand 7.3 6.7 4.8 -0.6Brazil 9.5 11.5 5.6 -8.7Germany 5.4 -6.9 7.9 0.9France 30.1 -23.4 - -11.2World 4.9 7.2 4.7 -1.9

Source: Computed from data in IRSG RubberStatistical Bulletin, January-February 2007- Negligible

Global NR consumption had declined by 0.7per cent in 2001 over 2000 when global GDPregistered a marginal growth of 2.4 per cent. In2002, the world economy and NR consumptionexpanded by 3.0 per cent and 4.0 per centrespectively over 2001. In 2003, the globaleconomy gained momentum with a GDP growthrate of 4.0 per cent over 2002 and NRconsumption rose by 4.9 per cent. The worldeconomy expanded by 5.1 per cent in 2004 andglobal NR consumption grew by 7.2 per cent. In2005 world economy expanded by 4.8 per centand global NR consumption rose by 4.7 per cent.

Consumption of NR during January-October

2006 marginally declined by 1.9 per centcompared to the same period in the previousyear. During this period, elastomer consumption(NR and SR) increased by 2.0 per cent as SRconsumption had increased by 4.9 per cent.

Major NR Consuming CountriesNR consumption in some major consumingcountries and the underlying factors arediscussed below.

China: - The country has been on a sustainedgrowth path backed by strong exports anddomestic consumption during the recent years. In2005, GDP registered a growth of 9.9 per cent.China’s measures to address overheating maynot significantly impact its NR consumption asgrowth has not moderated. All the four quartersof 2006 recorded consistently high GDP growthrates of 10.4, 11.5, 10.6 and 10.4 per centrespectively and the annual growth was 10.7 percent. During January-November 2006 vehicleproduction amounted to 6.68 million units, up by26.1 per cent compared to the same period inthe previous year (www.stats.gov.cn January2007). The economy is projected to grow by 9.5per cent in 2007 (Asian Development OutlookUpdate, ADB, September 2006). During January-October 2006, NR consumption increased by 7.1per cent over the same period in 2005. Theshare of NR in rubber imports which haddeclined from 53 per cent in Q1 to 48.1 per centin Q2 because of the relatively higher price ofNR recovered in Q3 to 55.5 per cent as the gapbetween NR and SR prices narrowed (RubberStatistical Bulletin, IRSG, January-February2007).

USA: - During January-October 2006, NR andSR consumption dropped by 11.1 and 5.5 percent respectively compared to the same periodin the previous year (Rubber Statistical Bulletin,IRSG, January-February 2007). The ConsumerConfidence Index of the US Conference Boardwhich dipped below 100 in August had improvedin September. In October it was 105.4. Theindex which was virtually unchanged inNovember improved in December to 109.0(Consumer Confidence Index, The ConferenceBoard, October 2006). The US Fed rate wasraised to 5.25 per cent by June end, the highestlevel in more than five years(www.washingtonpost.com, 30 June 2006). FromQ2 of 2006 investment weakened dragged downby the housing sector. The growth of 5.6 percent recorded in Q1 could not be sustained andthe growth rates in the subsequent quarters were2.6, 2.0 and 2.2 per cent respectively. Thegrowth of the economy would moderate in 2007


with a projected GDP expansion of 2.4 per centbut would improve in 2008 with a growth at 2.7per cent (OECD Economic Outlook, OECD,December 2006).

Japan: - NR consumption grew by 5.0 per centin 2005 and by 3.3 per cent during January-October 2006 over the corresponding period inthe previous year. Japan’s long anticipatedeconomic recovery strengthened in the recentpast with a GDP growth of 2.7 per cent in 2005,up from 2.3 per cent in 2004. The moderategrowth in GDP of 1.9 per cent in 2006 isexpected to continue with a projected growth of2 per cent in 2007 and 2008 (OECD EconomicOutlook, OECD, December 2006).

South Korea: - NR consumption, which hadincreased by 5.7 and 4.9 per cent in 2004 and2005 respectively declined by 1.6 per cent duringJanuary-October 2006. The economy had grownby 4.0 per cent in 2005. The first and secondquarters of the year could record growth of only1.2 and 0.8 per cent over the previous quartersmainly because of worsening terms of trade dueto high oil prices and a steep decrease inconstruction investment. The growth projectionsfor 2006 and 2007 have been revised downwardsto 5.0 and 4.3 respectively (Quarterly Bulletin,Bank of Korea, June & September 2006 & WorldEconomic Outlook, IMF, September 2006).

France & Germany: - These two major NRconsuming countries in the euro zone hadrecorded declines in NR consumption in 2004. In2005 consumption of NR in France remainedconstant while there was an increase in Germanyby 7.9 per cent. During January-October 2006NR consumption in France declined by 11.2 percent and that of Germany increased marginallyby 0.9 per cent compared to the correspondingperiod in the previous year. France’s GDP growthhad declined in 2005 to 1.2 per cent from 2.0per cent in 2004 but the first two quarters of2006 recorded growth rates of 0.5 and 1.2 percent respectively over the previous quarters. InQ3 GDP remained static with zero growth andQ4 registered a growth rate of 0.6 per cent. Theeconomy is projected to expand by 1.8 and 1.7per cent in 2006 and 2007 respectively(Informations Rapide, National Institute forStatistics and Economic Studies, February 2007& OECD Economic Outlook, OECD, December2006). The growth in Germany also haddecelerated in 2005 to 0.9 per cent from 1.6 percent in 2004. In the first three quarters of 2006the German economy grew by 0.7, 1.2 and 1.0per cent over the previous quarters respectively.In Q4 the growth rate declined to 0.8 per cent.In 2006 the GDP growth would be 2.0 per centand would decline to 1.7 per cent in 2007.

(Press Release, Federal Statistical Office,November 2006 & OECD Economic Outlook,OECD, December 2006).

Brazil: - The growth in NR consumption hasdeclined from 11.5 per cent in 2004 to 5.6 percent in 2005. During January-October 2006 therewas a decline in NR consumption by 8.7 percent over the same period in 2005. Theeconomy which grew by 4.9 per cent in 2004could record a growth of only 2.3 per cent in2005. However, industrial production indices(1992=100) grew from 141 in January 2006 to161 in May 2006 indicating industrial expansion.Though the indices declined in the next twomonths a recovery reaching 168 was observedin August 2006. After remaining flat for the nextthree months the indices fell to 148 in December2006. The economy is projected to grow by 3.6and 4.0 per cent respectively in 2006 and 2007(Monthly Bulletin of Bank of Brazil, February2007 & World Economic Outlook, IMF,September 2006)).

India: - NR consumption in 2005 increased by5.9 per cent over the previous year and January-October 2006 recorded a growth of 3.6 per centover the corresponding period of the previousyear. Indian economy had achieved notablegrowth of 9.0 and 9.2 per cent in the financialyears ending March 2005 and 2006 respectively.The current financial year ending March 2007 isalso expected to return a growth of 9.2 per centsupported by sustained industrial activities andimpressive performance in the agricultural andservices sectors. According to ADB theeconomy would grow by 7.8 per cent each in2006 and 2007 (Economic Survey 2006-07,Government of India, February 2007 & AsianDevelopment Outlook, ADB, September 2006).

Malaysia: - NR consumption declined by around4 per cent each in 2004 and 2005 and declinedby 2.9 per cent during January-October 2006compared to the same period in the previousyear. The Malaysian economy grew at 5.3 percent in 2005 compared to the previous year’sgrowth of 7.1 per cent. The four quarters of2006 registered GDP growth rates of 5.5, 5.9,5.8 and 5.7 per cent respectively supported bysustained growth in manufacturing and servicessectors and strong performance on theagricultural front. According to ADB theeconomy would grow by 5.8 per cent in 2007(Quarterly Bulletin Q4/2006, Bank Negara &Asian Development Outlook Update, ADB,September, 2006).

Thailand: - The annual growth in NRconsumption had declined from 6.7 per cent in2004 to 4.8 per cent in 2005. During January-


October 2006 NR consumption marginallydeclined by 0.6 per cent over the same periodin the previous year. Irrespective of the restraintsimposed on growth by the increase in oil pricesand the impact of natural calamities - tsunamiand drought – the economy grew by 4.5 per centin 2005 supported by the rebounding agriculturalsector and surging exports. The growthmomentum was sustained in the first quarter of2006 with a GDP expansion of 6.3 per cent.However GDP growth declined to 4.9 per centin Q2. Q3 and Q4 recorded GDP growth ratesof 4.7 and 4.2 per cent respectively and in theyear 2006 the economy expanded by 5.0 percent. The GDP growth projection was sharplyrevised down to 4.0 per cent each in 2007 byADB because of the decline in governmentspending and other developments(www.nesdb.go.th, February 2007 & AsianDevelopment Outlook Update, ADB, September2006).

NR Consumption OutlookThe consumption of NR in the short term ismainly determined by global economic growth.The global economic recovery which built upmomentum from H2 of 2003 had softened fromQ2 of 2004 and then improved from mid-2005.Economic expansion in Developing Asia remainssolid with sustained growth in China and India.According to ADB, developing Asia would growby 7.7 per cent in 2006 irrespective of the mildslowdown elsewhere. However, growth in 2007 isprojected to ease to 7.1 per cent because of thedeclining demand for Asian products fromindustrial countries. According to IMF theadvanced countries would grow by 3.1 and 2.7per cent in 2006 and 2007 respectively. TheOECD region recorded a growth of 3.2 per centin 2006 and the region is projected to grow by2.5 and 2.7 per cent in 2007 and 2008respectively. Projections indicate that the worldeconomy would grow by 5.1 and 4.9 per cent in2006 and 2007 respectively (Asian DevelopmentOutlook, ADB, September 2006; Press Briefing,OECD, December 2006 & World EconomicOutlook Update, IMF, September 2006).

The moderation in the growth of the USeconomy in the near past could be partlyattributed to the cooling of the housing sectorpartly. Several analysts expect that the possibleresurge in consumer spending from lower fuelprices decrease would compensate to someextent the slowdown in the housing sector. Thegrowth performance of the large economies inthe euro zone, Germany and France in therecent months was lower compared to the initialmonths of the year. Growth in Japan ismoderate. The impact of a mild slowdown in

economic activities in the industrial countries wasreflected in the declining demand/prices ofindustrial raw materials from the third quarter ofthe year. The uncertainties in oil prices, risinginterest rates, widening current accountimbalances, depreciating US dollar, geo-politicalfactors etc. are matters of concern.

Middle East developments and unrest inNigeria affected oil supply towards the middle ofthe year. The oil rigs damaged by the hurricanesin the US were reported to be in operation bythe third quarter of the year. The oil supply anddemand projections stand at 86.0 and 86.7million barrels per day respectively in 2006.The abnormally warm temperatures in the USand throughout the northern hemisphere in Q4reduced the demand for heating oil. The WTIcrude oil price which averaged US $ 74.41 perbarrel in July 2006 had declined to US$ 58.39per barrel in October. Then the average WTI oilprice moved up slightly in November andDecember to US $ 59.08 and US $ 61.96 perbarrel respectively and the average for the yearwas US $ 66.02 per barrel (Oil Market Report,International Energy Agency, February 2007 &Short-Term Energy Outlook, Energy InformationAdministration, US, February 2007).

According to the IRSG, NR consumption in2006 amounted to 8.97 million tonnes. The NRconsumption projections for 2007 and 2008 are9.41 and 9.95 million tonnes respectively,marking annual growth rates of 4.9 and 5.7 percent respectively. The consumption of NR isprojected to increase to 10.51 million tonnes in2009, an increase of 5.6 per cent (RubberIndustry Report, IRSG, January-February 2007).

NR Market outlookThe outlook for the world economy and majorconsuming regions indicates a mild slowdown inglobal economic activities in 2007. It could beshort-lived as a relatively higher rate of growthis projected for 2008. On the supply side, theshort-term potential to enhance production of NRmay have been almost exploited. Further, theimpact of the slowdown in rubber planting/replanting from 1997 to 2002 would be felt in themarket in the next few years. The NR marketis constantly in the fear of tight supply concernsbecause of predictions of adverse climaticconditions and other factors.

Oil prices could influence SR/NR input mix inproduct manufacturing, to a certain extent,depending on the relative prices of NR and SR.The oil supply and demand projections for 2007are 88.4 and 88.5 million barrels per dayrespectively. The price projections for WTI oil in2007 and 2008 are US$ 59.46 and US $ 62.58per barrel respectively. The supply and price of


oil could be highly influenced by geo-politicalfactors (Oil Market Report, International EnergyAgency, February 2007 & Short-Term EnergyOutlook, Energy Information Administration, US,February 2007).

According to the Secretariat’s projections,there was a small surplus of 232 thousandtonnes in 2006 between NR production andconsumption. In 2007 there could be a marginalsurplus of 102 thousand tonnes. Howeverproduction of NR could be highly influenced byclimatic and geo-political factors. As productionand consumption of NR in 2007 are expected tobe close, the market could be highly sensitive asin the previous year to seasonal, currency andspeculative factors. There are reports of aslowdown in replanting to take advantage of theprevailing relatively higher NR prices in the majorproducing countries. On the other hand there isalso a renewed interest in rubber planting. Thenet impact may be an increase in NR supplyfrom the start of the next decade.

WTO CORNER

Growing Role for Developing CountriesDeveloping countries are playing a growing rolein the WTO, in the Doha negotiations, in thedispute settlement process and in all facets ofWTO activities, according to the annual reportpublished by the WTO in December 2006.Currently the real dynamism in trade is found inthe developing world, where Brazil, China, India,Malaysia, Mexico and Thailand all posted doubledigit growth in exports. Africa too has staked itsclaim to a bigger share of the pie by postingexport growth in excess of 25 per cent in eachof the past three years. The formation of groupslike the G-90, G-33 and G-20 illustrates the roleof developing countries in powerful collectivebargaining. The new edition of the Annual Reportpresents an overview of the activities of theWTO from the latest Ministerial Conference tothe work of the different committees and bodies,and also facts and figures to illustrate thefunctioning of the Organization.

Transparency Mechanism for RTAsThe General Council, on 14 December 2006,established on a provisional basis a newTransparency Mechanism for all regional tradeagreements (RTAs) in accordance with Para 47of the Doha Ministerial Declaration. Informationon new RTAs and changes affecting theimplementation of RTAs or the operation ofalready implemented RTAs shall be notified to

the WTO Secretariat. At the end of theimplementation period of RTAs, the parties shallsubmit to the WTO a short written report on therealization of the liberalization commitments inthe RTAs as originally notified. The Committeeon Regional Trade Agreements (CRTA) and theCommittee on Trade and Development (CTD) areinstructed to implement the TransparencyMechanism.

Vietnam to Join WTO in January 2007Vietnam informed the WTO on 12 December2006 that it had ratified its membershipagreement. It would now become the WTO’s150th member on 11 January 2007. TheGeneral Council had approved Vietnam’smembership on 7 November 2006. Vietnam wascomplimented for the remarkable efforts put intopreparing for membership.

WTO Trade Report Focuses on SubsidiesThe World Trade Report published by the WTOin July 2006 had focused on subsidies.Government subsidies can be useful instrumentsin correcting market failures and working towardssocial objectives but can also distort trade andprovoke strong responses from trading partners.Many governments maintain extensive subsidyprogrammes at the national and sub-nationallevels, and invoke a multiplicity of objectives tojustify the programmes. As subsidies can betrade distorting, WTO Member governments mustnotify the organization of any such support. Yetfew governments fully meet their notificationobligations under the WTO, contributing to aserious lack of information and transparency onthe use and effect of subsidies.

The Report estimates that 21 developedcountries spent almost US$250 billion onsubsidies, while all countries spent over US$300billion. The average ratio of subsidies to GDP islower in developing than developed countries, butlarge variations of the ratio can be found in bothcountry groups. For a sample of 31 developingcountries the average ratio of subsidies to GDPwas 0.6 per cent, while the comparable figure fora sample of 22 developed countries was 1.4 percent.

WTO Documents Related to Rubber andRubber Products Issued during July-December 20061. Notification No. G/TBT/N/KOR/122 dated 30th

October 2006 (06-5210) by the Republic ofKorea on safety criteria on retreaded tyres.

2. Notification No.G/TBT/N/TPKM/36 dated 29th

September 2006 (06-4646) by Taiwan on


labelling requirements of shoes with solesmade of rubber and others.

3. Notification No. G/TBT/N/KEN/69 dated 29th

September 2006 (06-4574) by Kenyaprescribing requirements and methods ofsampling and test for rubber erasers forremoving pencil writing, ink pen writing,ballpoint pen ink writing, typewriting, carboncopy characters and for drawing cleaning.

4. Notification No. G/TBT/N/KEN/56 dated 15th

September 2006 (06-4415) by Kenyaprescribing the requirements and testmethods for intermediate super abrasionfurnace carbon black used in rubberproducts.

5. Notification No. G/TBT/N/KEN/45 dated 24August 2006 (06-4002) by Kenya specifyingthe requirements of flexible rubber hose foruse in vehicles for the transport of liquefiedpetroleum gases.

6. Notification No. G/TBT/N/IND/20 dated 17th

July 2006 (06-3447) by India bringingproduction and import of automotive tyresand tubes under mandatory certification. Forcompliance of this requirement, allmanufactures of these products, shall berequired to obtain certification from Bureau ofIndian Standards (BIS).

7. Communication No. WT/DS332/7 dated 22December 2006 (06-6146) by Chairman ofthe Dispute Settlement Panel on Brazil’smeasures affecting imports of retreaded tyresinforming that its final report would be readyby April 2007.

8. Notification No. G/TBT/N/CAN/186 dated 13December 2006 (06-5977) by Canada onmotor vehicles which covers tyre and rimsafety regulations in line with U.S.FederalMotor Vehicle Safety Standards No.110 and120.

9. Notification No. G/TBT/N/COL/58/Add.2 dated13 December 2006 (06-5985) by Columbiarelated to an amendment of technical andlabelling regulations of new, retreaded, radialor non-radial pneumatic tyres.

10. Notification No. G/TBT/N/ECU/9/Add.1 dated6 November 2006 (06-5334) by Ecuadorrelated to technical regulations of domesticallyproduced or imported pneumatic tyres.

OTHER REGIONAL AGREEMENTS

ASEAN, India to Resume TalksThe ASEAN and India agreed to resume stalledfree trade talks, although several issues remain

in dispute still. Negotiations to forge an FTAstalled after the dispute over India’s exclusion listof 1,414 products could not be settled. Indiasubmitted a revised list which reclassifiedproducts for tariff reduction over differenttimeframes and reduced items in the exclusionlist to 560. The ASEAN appreciated India’sefforts but expressed dissatisfaction on thepermanent exclusion of some products of interestto ASEAN, including ceramics, wooden furnitureand agricultural products, and also the proposalto reduce tariffs on palm oil products over 16years. The negotiations at the level of officialswould proceed to liberalising trade in servicesand investment once issues related to trade ingoods had been resolved. However no deadlinefor the completion of negotiations is fixed. Indiais keen to expand trade ties with ASEAN, butwants to protect its own sensitive sectors, suchas agriculture and textiles which providelivelihoods to millions of people.

Source: www.aseansec.org, August 2006

Asia-Pacific Trade AgreementThe first Agreement on Trade NegotiationsAmong Developing Member Countries of theEconomic and Social Commission of Asia andPacific (ESCAP), known as the BangkokAgreement, was signed in July 1975 under theauspices of ESCAP. The Ministerial CouncilSession held in November 2005 renamed it intoAsia Pacific Trade Agreement (APTA). TheSession also agreed that the results of the ThirdRound would be implemented as of 1 July 2006pending completion of domestic approval andratification procedures. Subsequently this datewas postponed to 1 September 2006. A meetingof the Standing Committee of APTA held inNovember 2006 in Kolkata, India made anassessment of the Third Round Results.

The Third Round of negotiations took placefrom October 2001 to April 2003 along withnegotiations for a revised text to the BangkokAgreement. At the end of the Third Round theParticipating States had exchanged concessionson 4,270 products and an additional 587products concessions were offered exclusively toleast developed countries. This is a markedincrease from the 1,721 products (plus 112products for LDCs) on which concessions wereoffered before the Third Round. The averagemargin of preference (MOP) upon completion ofthe Third Round was 26.8 per cent comparedwith 32.2 per cent before the Second Round butthe MOP offered as special concessions onproducts from LDCs almost doubled.Consolidated results showed that China offeredconcessions on the largest number of products


followed by Korea and India. The margin ofpreference offered by China is the highestfollowed by Korea for both general and specialproducts.

Source: www.unescap.org, November 2006

Japan-Indonesia FTATokyo and Jakarta agreed on an overallframework for liberalizing bilateral trade, includingJapanese autos and Indonesian natural gas andhuman resources, in November 2006. The movefor an FTA came as Japan tries to secure astable supply of natural gas, including liquefiednatural gas, and Indonesia hopes to increase thecompetitiveness of its products in Japan.Indonesia also needs to attract foreign investors.The Japanese government had been pursuingFTAs in Southeast Asia. The accord withIndonesia would be Japan’s seventh; after pactswith Singapore, Mexico, the Philippines, Malaysia,Thailand and Chile.

Under the two countries’ FTA framework,Indonesia would cut tariffs on about 90 percentof Japanese imports from the current level ofroughly 30 percent, while Japan would lift tariffson about 93 percent of Indonesian imports, whichwere set at around 70 percent. Tariffs on autoswith engine displacements higher than 3 litres willbe lifted by 2012, while those under this size willbe reduced to 5 percent or less by 2016. Tariffson Japanese steel used for automobiles and autoparts, electronics and construction machinery willbe cut. Import tariffs on some electronic goodswill also be eliminated. Japan for its part willscrap some 90 percent of the import tariffs onIndonesian industrial product imports and lift thetariffs on shrimp, tropical fruit, including bananasand pineapples, and forestry and marineproducts.

Source: Japan Times, 29th November 2006

Asia Pacific Free Trade AreaThe Eighteenth APEC Ministerial Meeting washeld in Hanoi, Vietnam on 15 and 16 November2006. The theme of the Meeting was “TowardsOne Dynamic Community for SustainableDevelopment and Prosperity”. The status ofRTAs/FTAs in the region was discussed andtheir implications were examined. The Meetingacknowledged the role of RTAs/FTAs inadvancing trade liberalization and reducing tradetransaction costs. The APEC Meeting also dealtwith model measures on RTAs/FTAs. Themodel measures would be non-binding andvoluntary and would not prejudice the positionsof APEC members in their existing and future

RTAs/FTAs negotiations. The work on modelmeasures would be continued. The need forgreater economic integration in the Asia-Pacificregion was reiterated but the Meeting noted thatthere were practical difficulties in negotiating aFree Trade Area of the Asia-Pacific. However,ways and means to promote regional economicintegration including a Free Trade Area of theAsia-Pacific as a long term prospect would bestudied.

Source: www.apecsec.org.sg, December 2006

ASEAN Ministers Signed Six AccordsEconomic Ministers of the Association ofSoutheast Asian Nations (ASEAN) signed sixagreements in Cebu, Philippines in December2006. Of the six agreements signed, fourdocuments were intra-ASEAN and two wereASEAN-China. The six agreements signed werethe following:

ASEAN Framework (Amendment) Agreementfor the Integration of Priority Sectors; ASEANSectoral Integration (Amendment) Protocol for theIntegration of Priority Sectors; Protocol toImplement the 5th Package of Commitmentsunder the ASEAN Framework Agreement onServices (AFAS); ASEAN Mutual RecognitionAgreement (MRA) on Nursing Services; SecondProtocol to Amend the Framework Agreement onComprehensive Economic Cooperation betweenASEAN and the People’s Republic of China; and,the Protocol to Amend the Trade in Goods in theFramework on Comprehensive EconomicCooperation between ASEAN and the People’sRepublic of China.

The first two intra ASEAN agreements reflectthe amendments necessary to implement Phase2 of the Priority Integration Sectors (PIS). Theministers also agreed to add the logistics sectoras the 12th PIS to the 11 original PIS that includeagro-based products, air travel, automotiveproducts, information and communicationstechnology, electronics, fisheries, healthcare,rubber-based products, textiles and apparel,tourism and wood based products. The originalsix ASEAN countries agreed to fully bring downto zero the tariffs and eliminate non- tariffbarriers in the 12 sectors by 2007 and the fournew members (Cambodia, Laos, Myanmar, andVietnam) by 2012. The latter were given fiveyears to fully integrate these sectors. Under theCommon Effective Preferential Tariff Scheme, theregular tariff reduction program of AFTA, theoriginal six member countries should attain fulleconomic integration by 2010 while the fourothers by 2015.

The third agreement relates to theconsolidation of commitments made in previous


packages under the AFAS and the GeneralAgreement on Trade in Services in onedocument. The ASEAN MRA on NursingServices is a Philippine initiative and is in supportof the Bali Concord II for the completion ofMRAs for qualifications in major professionalservices. The two other agreements with Chinawere the amendment to the framework with theaccession of the Philippines in the Early HarvestProgram, and the amendment on trade in goodsof the framework agreement between China andVietnam.

Source: Manila Bulletin, 10th December 2006

NATURAL RUBBER INDUSTRY INPAPUA NEW GUINEA2

Natural rubber is one of the first perennial cropsintroduced by the erstwhile colonial administrationin the then territories of Papua and New Guinea(now Papua New Guinea (PNG)) in early 20th

century on a plantation mode of production. Itwas mainly cultivated in the southern regioncomprising Central, Gulf and Oro provinces.Growth in rubber planted area was minimal untilthe second half of the 20th century. In 1960s thegovernment through the erstwhile Department ofAgriculture, Stock and Fisheries (DASF), nowDepartment of Agriculture and Livestock (DAL)),crafted a policy to promote rubber as asmallholder crop in the villages in coastalprovinces. At the time of independence in 1975,there were around 13,000 hectares of land underrubber cultivation but output was low at about5000 tonnes per annum. Australia had been themain market for rubber from PNG under asheltered marketing arrangement resulting fromclose historical ties between the two countries.

The concept of rubber based resettlementscheme was introduced in 1970s under the AsianDevelopment Bank (ADB) assistance package forintegrated rural development and povertyalleviation programme in PNG. Under the ADBprogramme two agricultural development projectsinvolving rubber cultivation were implemented inGavien in East Sepik and in Cape Rodney inCentral Province. Through the projects thegovernment envisaged to modernize the rubbersector mainly by introducing budded plantingmaterials and switching over from processingribbed smoked sheet (RSS) to technicallyspecified rubber (TSR), both of which have sincebecome standard practices in PNG.

This report provides a general overview ofthe natural rubber industry in PNG and a case

study of the Upulima Rubber Smallholdings Sub-division (URSSD) under the Cape RodneyAgricultural Development Project (CRADP). Thedata source comprises information collectedthrough field visits undertaken in October 2004and statistics available at the Secretariat.

Overview of PNG Rubber Industry

Area under rubberStatistics of rubber planted area in the estateand smallholding sectors are presented in Table1. Estates are defined as lands aggregating morethan 20.23 hectares, planted with rubber. Landsaggregating less than 20.23 hectares, plantedwith rubber are classified as smallholdings. Areaunder rubber increased from 14,000 hectares in1970 to 19,280 hectares in 2004. The share ofsmallholdings increased from 3.6 per cent in1970 to 55.3 per cent in 1990, but later declinedto 47.6 per cent in 2000. In 2004, thesmallholding sector accounted for 50.7 per centof total planted area. Currently, there is only onerubber estate in operation, Galley ReachHoldings Ltd., owned by Sipet, a Belgiumcompany. The company has 5112 hectares ofrubber plantations in Galley Reach in CentralProvince.

Table 1. Area under rubber in estates andsmallholdings (1970-2004)

Area under rubberEstates Relative Small RelativeYear (ha) share holdings share Total

(%) (ha) (%)1970 13500 96.4 500 3.6 140001975 10100 78.3 2800 21.7 129001980 7500 60.5 4900 39.5 124001985 8848 54.5 7385 45.5 162331990 7504 44.7 9294 55.3 167981995 9555 52.4 8675 47.6 182302000 9555 52.4 8675 47.6 182302004 9499 49.3 9781 50.7 19280

Source : ANRPC Quarterly Rubber StatisticalBulletin (various issues) and Report of theTwenty-eighth Meeting of the ANRPC ExecutiveCommittee

A major portion of the rubber area undersmallholdings is in Central and Westernprovinces. Other provinces with smallholderrubber cultivation are Gulf, Oro, East Sepik,West Sepik, Manus and New Ireland. The

2 The views expressed are entirely the ANRPC Secretariat’s.


national average size of a rubber holding was1.67 ha. The average size of a holding inCentral province was notably higher at 4.72 hacompared to 1.03 ha in Western province and1.18 ha in the rest of the country.

Planting materialThe major clones planted are the Malaysianclones - RRIM 600 and PB varieties, and theIndonesian clone, GT1. In most of the placesmixed planting had been done with these clones.

NR Production and exportsOut of the about 19000 hectares of maturerubber plantations only around 6000 hectares arebeing tapped because of constraints such aspoor infrastructural facilities, low farm-gate price,non-availability of tapping accessories and lackof marketing outlets. The smallholding sectorcontributed around 50 per cent of NR productionin 2004. Fig.1 shows the trends in NR exportsfrom PNG from 1966 to 2005. The averageannual exports of NR declined from 5,911 tonnesin the second half of 1960s to 5,007 tonnes in1970s and further declined to 4,109 tonnes in1980s. However, during 1990s average annualexports of NR marginally increased to 4,353tonnes because of the relatively higher exportsin 1995 and 1996 at 5,396 and 7,019 tonnesrespectively, presumably responding to the thenhigh NR prices. During 2005, the countryexported 4,719 tonnes of NR.

Processing and marketingDuring early 1980s, factories were established toprocess NR into TSR under the Papua NewGuinea Classified Rubber (PNGCR) Scheme.Currently the entire rubber output is exported asPNGCR 10. There are four TSR factories in thecountry, viz., Cape Rodney, North Fly, Doa andGavien. Currently, the factories at Doa in CentralProvince and North Fly in Western Province arein operation. Galley Reach procures rubber from

smallholders in addition to its plantations. NorthFly entirely processes smallholders’ rubber fromWestern Province. The companies directlyexport the processed PNGCR 10.

Institutional set-upThe DAL is currently the lead governmentagency in charge of the functional responsibilityfor the development of rubber industry at thenational level. In September 2006 thegovernment established PNG Rubber Boardwhich would serve as a conduit for thecorporatization of the rubber industry as aparastatal entity. The Board would beinstitutionally mandated to be responsible for allmatters related to the rubber sector at thenational level.

Upulima Rubber Smallholdings Sub-DivisionUpulima is one of the sub-divisions ofsmallholder blocks of rubber developed under theCRADP. It was funded by the ADB and theGovernment of PNG. The other sub-divisionswhere rubber smallholdings were developedunder the CRADP are Cocolands, Manabo andIanu which are located in the Abau district inCentral Province. There are 265 smallholderblocks in the Upulima sub-division and the totalarea is above 1800 hectares. Generally, eachblock measures 7.5 hectares, comprising 4hectares rubber, 3 hectares other crops and 0.5hectare for homestead. Social services were alsoprovided including a police station, health centreand a community school.

Plantation development and upkeepClearing and other pre-planting operations startedin 1982 and planting of rubber was completed in1985. The rubber blocks were mixed planted withRRIM 600, GT1 and PB varieties. Initial plantingdensity was 470 plants per hectare. Thedevelopment costs were entirely met by theProject. In 1995, the blocks were handed overto the designated settlers under a 99 year leasearrangement. The settlers, brought from differentvillages, were given training on tapping of rubbertrees.

TappingGenerally ½ S d/2 tapping system is followed.The tappers are mainly men but women also areshowing an interest. Tapping task is around 500trees and if tapping cannot be completed inmorning hours the rest of the trees are tappedin the afternoon. In blocks where settlers reside


in their holdings tapping is regularly undertakenand partial incidence of tapping panel dryness isobserved. But in blocks where growers resideelsewhere tapping is not undertaken regularlyand tapping panel dryness is not observed. Thetapping intensity is reported to be influenced bya host of factors which include the location ofthe residence of the settler, social activities andcash requirements.

Table 2. Targeted and actual cup lump productionin URSSD 1995 to 2003 (tonnes)

Year Cup lump production

Targeted Actual1995 50 101996 300 2261997 400 3871998 500 4811999 500 4712000 500 2802001 500 3982002 500 4662003 750 791

Source: URSSD Field office, Upulima

Yield and productionThe targeted and actual production of cup lumpin URSSD is shown in Table 2. Yield per hain 2003 when production reached its highest wasaround 800 kg of cup lump per hectare. This isconsiderably lower compared to the relativelyhigher yield reported in some estates upto 1800kg per ha.

Processing and marketingThe TSR processing factory, established underthe Project at Moreguina to process rubber fromall the four sub-divisions, was closed in 2001.Since then Galley Reach factory at Doa hasbeen processing the cup lump from URSSDunder a Memorandum of Understanding signedwith the DAL. Cup lumps are collected andpacked as 90 kg lots in plastic bags. The factorytruck collects the cup lump bags once a weekand the proceeds are credited to settlers’accounts in BSP Bank in Port Moresby.However there were times when the truck couldnot reach the sub-division because of poor roadconditions. In 2004, the average farm-gate pricereceived by the growers averaged around 60toea per kg of cup lump. During the 1995-2004period the farm-gate price ranged from 48 to 63toea per kg of cup lump.

Table 3. Monthly sales of cup lump from Upulimasub-division (tonnes)

Month 2001 2002 2003January - 23 25February - - 39March 46 35 35April 21 - 124May 38 81 52June 30 - 68July - 57 48August - 42 106September 136 90 77October - 70 54November 60 - 60December 67 68 103Total 398 466 791

Source: URSSD Field Office, Upulima

The month-wise sales of cup lump from thesub-division are presented in Table 3. The blankcells show months when the factory truck couldnot reach the sub-division. The pattern ofmonthly sales cannot be related directly to agro-climatic factors as tapping is mainly determinedby other factors mentioned earlier.

Other cropsThe main crops being cultivated are pineapple,banana, cassava, sweet potato, taro, yam, sugarcane, ibica etc. The farming is donepredominantly for subsistence purposes asmarket accessibility is limited.

Concluding remarksThe CRADP covered institutional arrangementsfor processing and marketing of rubber and hadtaken into consideration the food requirements ofthe settlers and provided basic social necessities.The URSSD is a well-conceived model but therewere implementation and follow-up issues. Themodel could be replicated with appropriatemodifications in other places.

PNG has tremendous potential to expandrubber cultivation in terms of availability ofsuitable land, congenial agro-climatic conditionsand labour. Rubber cultivation could be used asa means to resettle villagers. Moreover, rubberplantations can also earn substantial revenue forthe country. Schemes are being drawn up underthe National Agricultural Development Plan(NADP) for the promotion of rubber cultivation inthe country.


COUNTRY PROFILE IN BRIEF: INDONESIA

General

Land Area : 1,860,359.67 km2 (2005)

Climate : Tropical

Temperature : 25.300C – 31.470C (2004)

Annual rainfall : 497.20 mm – 996.60 mm (2003)

Population (million) : 219.21 (2005)

Population growth rate (%) : 1.34 / year (2005)

Economic and Trade Statistics 2003 2004 2005

Total workforce (million) 100.32 103.97 105.80

Unemployment rate (%) 9.50 9.86 10.26

Employment by sector (%):

a) Agriculture, Forestry and Fishing 46.26 43.32 44.04

b) Manufacturing 12.04 11.81 12.27

c) Services 10.74 11.22 11.14

d) Others 30.96 33.75 32.55

GDP (current prices, billion US$) 209.51 246.02 277.13

Real GDP Growth (%) 4.10 5.13 5.60

Contribution to GDP by sector (%):

a) Agriculture, Forestry and Fishing 16.58 15.38 13.40

b) Manufacturing 24.65 28.34 28.06

c) Services 10.39 10.18 10.10

d) Others 48.38 46.10 48.44

Nominal GDP per capita (US$) 930.37 1,097.80 1,224.51

Consumer price Index (%) 5.06 6.40 17.11

Current account balance (billion US$) 8.11 1.56 0.34

Source: Central Bureau of Statistics, Indonesia, 2005


EXCHANGE RATE: 29TH DECEMBER 2006

US$1 = 44.13 Indian Rupee8,964.24 Rupiah

3.530 Ringgit3.080 Kina1.534 Singapore Dollar

107.41 Sri Lankan Rupee36.15 Baht

14,051.13 Dong

Source: www.exchangerate.com, December 2006