RISDA closes gap of rubber smallholder, tackle profit disparities

THE Rubber Industries Smallholders Development Authority’s (RISDA) recent National Direction Seminar for Rubber Industry Smallholders highlighted the struggles of rubber smallholders and discussed ways to increase Malaysia’s rubber production.

On the final day of the three-day seminar, the Smallholders National Association of Malaysia (PKPKM) central information bureau chief Amran Jaafar discussed the disparity in the profit margin that rubber smallholders receive and suggested long-term solutions for the industry.

He said rubber prices do not match, made apparent by a simulation of the smallholders’ income, revealing a monthly total of RM1,120 for every two hectares (ha) compared to the benchmark smallholder’s income of RM1,500 per month.

This means that smallholders either need to have more than 3ha to reach the benchmark, or everyone involved in the rubber industry needs to increase the price rate of natural rubber, which currently sits at RM5.60 per kg.

However, this poses a challenge as the rubber price is influenced by leading rubber import countries, primarily China, which produces 40% of the global natural rubber.

“If they store up to one million tonnes soon, it means that the price will not increase,” Amran said.

Compared to new players in rubber production, Ivory Coast has a scrap rubber rate of RM1.73 in January 2023, while Malaysia and Thailand have rates of RM2.38 and RM2.48, respectively. Despite these differences, Ivory Coast ranks third in production among Asian countries, contributing 8.8% to the total rubber production in Asia.

He stressed that Malaysia needs to emulate Ivory Coast’s methods to solve the income disparity of Malaysia’s rubber small-holders.

“Ivory Coast produces a large amount of natural rubber with low cost of production and price rates,” he said.

The current pricing mechanism is decided daily by the price advisory panel (PAP), Singapore Exchange (SGX), and Malaysian Rubber Exchange (MRE).

These three organisations will submit a rate for the day to the Malaysian Rubber Board (LGM) to be processed in a simulation system called Automated Price Adjustment Mechanism (APAM).

The pricing mechanism has no involvement from the rubber smallholders, which results in the current mechanism being more beneficial to the consumer market rather than the other way around.

Hence, PKPKM suggested setting the price based on the cost of production instead.

The association plans to solve this issue by implementing four action phases involving the government, the pricing mechanism and creating new models.

Amran added that LGM plays a pivotal role in deciding the price rate of Malaysian natural rubber, but does not seem to recognise its power and authority to do so.

“LGM does not realise how big it is. Rubber smallholders need the support of LGM as well as RISDA,” he said.

He also advised Malaysian rubber small-holders to take care of the quality of rubber trees and use the right method of selling their products, which is through group sales.

Meanwhile, in his presentation, RISDA’s Deputy DG of Development Ahmad Zainal Abdullah highlighted RISDA’s ideas and initiatives to increase Malaysia’s rubber production.

Its main focus is to maintain on promoting the upstream activities as well as monitoring the livelihood of smallholders.

Referring to the National Agricommodity Policy 2021-2023, which was discussed on the first day of the seminar, he said RISDA is aiming to help Malaysia achieve the target with its key areas of success for 2021 until 2025.

Among the targets is to replant up to 110,000ha of rubber trees, provide productivity assistance up to 230,000ha, increase the number of entrepreneurs among rubber smallholders by providing support to over 22,500 entrepreneurs and achieve production results of 900,000 metric tonnes per year.

RISDA also conducts rubber tapping campaigns to encourage latex production, using stimulants and fertilisation, among others. For 2024, it plans to organise 313 rubber-tapping campaigns for 10,950 small-holders.

Meanwhile, the aim for the potential notched areas for rubber plantation is to produce 10,000ha of newly scored rubber plantations yearly, reactivating 15,000ha of inactive plantations, and the rest from mature rubber scheme (SGM) participants and group replanting projects (TSB).

Through RISDA’s smallholder development implementation programmes that include replanting aids, an additional economic activity (AET) programme, guidance and advisory services, and increasing productivity of natural rubber to 1,800kg per year, Ahmad Zainal hoped that RISDA’s efforts can increase the national rubber productivity.

Rubber smallholders participating in the rubber tree replanting programme will be entitled to partake in other aid programmes such as agro replanting, agro Internet of Things (IoT), agro-food, community tuitions, and more.

The replanting programme covers aid in farm maintenance, supplying seeds, and fertilisers.

“We have also opened tuition classes in up to 55 districts nationwide for the farmers’ children to prepare for their Sijil Pelajaran Malaysia (SPM) examinations,” he said.

Ahmad Zainal also said RISDA is revising its approach to the replanting programme, giving the chance to individuals and small-holders who have land to receive aid.

Besides that, it also builds farming infrastructures, launching fund assistance, raising funds for funeral expenses of its smallholders, SGM, latex incentive scheme (SIL), offering monsoon reliefs (BMT), and marketing infrastructure facilities.

Lastly, RISDA provides support programmes such as increasing the labour capacity by training Malaysians to reach up to 1,200 labourers per year, grouped rubber production incentives (IPGB), and mobile rubber marketing model (MPGB).

“We have procured a licence to buy rubber via mobile in Pahang, so the lorry can go anywhere and buy natural rubbers from smallholders,” he added.

RISDA aims to establish up to 250 scrap collection depots and 120 latex collection depots by 2030.

“RISDA will continue with these programmes. As the old saying goes: “Even if the chicken doesn’t crow, the sun still rises’,” Zainal said.

The National Direction Seminar for Rubber Industry Smallholders closed with a message to revitalise the country’s rubber production industry for the future of smallholders that sell unprocessed rubber.

RISDA chairman Datuk Seri Dr Noraini Ahmad expressed her gratitude for the seminar’s success and acknowledged the diverse participation of up to 400 people from ministries, agencies, academia and small rubber farmers.

Emphasising the historical significance of Malaysia’s rubber industry, she underscored its pivotal role in the nation’s economy, providing employment and income, and contributing significantly to national revenue.

“The role of the rubber industry in providing job opportunities, income to smallholders, and being able to contribute to the national income has made it one of the main sectors in the Malaysian economy,” she said during the closing ceremony.

Addressing challenges, Noraini highlighted a recent deficit in natural rubber production, citing a 19.7% reduction in yield from 2021 to 2022, showing the deterioration in the national rubber industry.

She outlined complex challenges such as climate change, global price instability, shifting market demands, and the search for alternative materials.

She added that the discovery of substitutes and alternative materials also posed a challenge to rubber usage.

“These conditions undoubtedly impact the entire ecosystem of the country’s natural rubber production, subsequently reducing the income of smallholders,” she said.

She also stressed the need for collaborative efforts to ensure the industry’s resilience.

With collaboration as a key theme, Noraini recognised the roles of agencies such as RISDA, LGM, Malaysia Rubber Development Corp (MARDEC), and others in advancing the rubber industry.

Based on Rubber Statistics in September 2023, she said the country’s natural rubber production reached up to 32,773 metric tonnes.

From that amount, 28,041 metric tonnes (86%) were issued by the smallholders, while the estate sector only contributed 4,732 metric tonnes (14%).

“These figures emphasise the importance of the smallholders in the rubber industry that is sheltered under all agencies that implement rubber planting,” she added.

Noraini was grateful that the government has provided a budget of RM676.1 million for RISDA to launch up to six programmes; crop area development programmes, increasing production, productivity boost of rubber and latex for smallholders, and seasonal monsoon aid.

She disclosed significant allocations from the Malaysia Madani Budget 2024, including substantial funds directed to RISDA for implementing essential programmes benefitting over 741,000 beneficiaries.

“Besides the allocation to RISDA, the government also provides initiatives to increase Incentive rates Rubber Production (IPG) under LGM.

“Activation price for IPG is increased from RM2.70 to RM 3 per kg with an allowance worth RM400 million,” she said.

Noraini also expected the resolutions derived from the seminar to be translated into effective and inclusive development policies, specifically tailored for the progress of small rubber farmers.

The focus remains on improving access to technology, education and financial resources, and strengthening support networks between farmers, the government and private entities.

The collaborative efforts and government initiatives that she outlined aim to address challenges, uplift the industry, and ensure the well-being of communities involved in rubber cultivation.

The National Direction Seminar for Rubber Industry Smallholders, held from Nov 20 to 22, was facilitated by RISDA and attended by 400 participants, as an initiative by the Rural and Regional Development Ministry (KKDW) to ensure the well-being and prosperity of more than 500,000 smallholders in the country.

The seminar aimed to ensure the direction and continuous development in an increasingly competitive and dynamic rubber industry ecosystem that includes financial aspects, agricultural inputs, technological improvement, human capital development and other needs of the smallholder community.

A total of 12 topics were presented covering various fields including rubber development policy and policy, commodity sustainability and the rubber community, initiatives towards the wellbeing of small-holders, the potential of rubber plants and others.

Among the parties involved were KKDW, the Plantation and Commodity Ministry (KPK), Rubber Authority of Thailand (RAoT), International Rubber Research and Development Board (IRRDB), LGM, MARDEC, Industry Board Sabah Rubber (LIGS), Sarawak Department of Agriculture (JPS), Malaysian Timber Industry Board (MTIB), Universiti Putra Malaysia (UPM), PKPKM and the Institute for Democracy and Economic Affairs (IDEAS).

Read more at The Malaysian Reserve