KUALA LUMPUR: The Malaysian Rubber Board (MRB) said yesterday that a technology with a cluster concept based on a vertical integration approach will curb falling rubber production.

Director-general (DG) of MRB, Datuk Dr Mohd Akbar Md Said, told reporters on the sidelines of the National Rubber Economic Conference 2016 that the new technology and initiative are expected to be ready by November.

He said the vertical integration approach model would enable the rubber upstream and downstream sectors to be combined together.

“We will encourage smallholders to have a small processing plant that can process up to 10 times its capacity per day. This will encourage them to bring the production into the supply chain.

“We believe with the introduction of this new technology, rubber production will not go below what it is today. We do believe [in seeing] an increase in production, but not so soon. The technology will reflect a better production next year, we believe,” he added.

When contacted by The Edge Financial Daily, Kossan Rubber Industries Bhd group managing director and chief executive officer, Datuk Lim Kuang Sia, said that it is still too early to know the effectiveness of such initiative but commented that the government should focus on the root cause of falling rubber production.

“I think the government should look at the factor that caused our falling production. I think the problem is that we have a lot of old trees. In comparison with Vietnam and Thailand, what is our yield per hectare? Because we have a lot of old trees, our output definitely will be low. This is one of the key areas that must be looked into,” Lim said.

The total production of natural rubber (NR) for the first six months of 2016 was 310,242 tonnes, a decline of 10.3% from the same period in 2015, dampened by prolonged low prices and uncertainties in weather that had affected latex harvesting in 2016. In comparison, NR production increased by 8% to 722,000 tonnes in 2015.

The rubber industry is expected to maintain its export earnings in 2016 at about RM30 billion to RM33 billion. In comparison, the rubber industry export earnings grew by 8% to RM33.3 billion in 2015 from RM30.9 billion in 2014.

Mohd Akbar also shared that by 2020, one million tonnes of NR are expected to be consumed locally. Out of this, 700,000 tonnes will be for latex dipped product sectors such as gloves while the remaining 300,000 tonnes will be for dry rubber.

“What the government asked MRB to do is to bring back the production of latex. This year, the government has allocated RM10 million for MRB to initiate the move to encourage small players to produce latex. We are working with Felda (Federal Land Development Authority) and other players to bring back the production of latex,” he said.

With the drop in production for more than 20 years, it is difficult to encourage smallholders to produce latex, thus it is necessary to have a certain incentive to encourage them, according to Akbar.

“The production of latex is on our agenda now to ensure latex supply to the downstream activities, mainly the latex dipped products, will be stabilised,” he added.

Lim told The Edge Financial Daily that while he is not sure how the RM10 million will be utilised, basic fundamentals such as the profitability of latex production business matters and it is important for businesses to succeed without relying on incentives or compensation.