Making Best Use of All Resources to Improve Vietnam Rubber Position

Due to bigger demand and high oil price in the world, the price of natural rubber increased sharply in recent years. Vietnamese rubber sector also benefit from the changes and become a main export with export value of US$1.4 billion in 2007. In the first 10 months of 2008, in spite of the world economic crisis, Vietnam exported 519,330 tonnes of rubber valued at over US$1.5 billion, 8.6 percent less in volume but 31.1 percent more in value compared to the same period of 2007. The export value in 2008 is expected at nearly US$1.7 billion, 21.6 percent more than 2007. Beside natural conditions, the rubber sector has actively expanded the plantation area from 400,000 hectares in 2000 to 538,000 hectares in 2007 (up by 33.4 percent), diversified the products and applied new technology to meet market demand.

 

Like other products, the rubber price was up and down depending on the supply and demand. However, in 2008, the world rubber market is relatively balanced with output of 9.85 million tonnes and consumption of 9.84 million tonnes. Meanwhile three world biggest exporters: Thailand, Indonesia and Malaysia have reduced their output affecting significantly the supply. Therefore, if we can make the best use of the conditions, develop rubber plantation and increase competitiveness, Vietnamese rubber can improve its position in the world market.

 

In July 2008, the rubber price increased to the highest in the past 56 years due to the record height of oil price. Now, with the recession of the world economy, auto sales decrease in the US, China, Japan, Europe and oil price drop, the fall of rubber price is inevitable. However, compared to 2000 price, it is still high with US$1,700 a tonne and the rubber sector continues to make profit.

 

To cope with the situation, the rubber sector has reduced the output and re-adjusted the product structure to meet the market demand. For instances, in October 2007, in spite of decrease of 2.78 percent in export volume and 23.98 percent in value, the export of CVR 10 rubber increased significantly to Taiwan and China with 25,000 tonnes and over US$47 million (US$1,850 a tonne).

 

The problem is Vietnamese farmers have no market information and MARD fails to get timely and correct information. It is our biggest weakness that causes unstable production and consumption. Second, it is the herd behaviour of Vietnamese businesses and consumers rushing at some speculation of high profit without correct information and full consideration. Therefore MARD must follow closely and provide correct information and forecast on markets and prices. Vietnam does not have such expertise and often makes mistakes. Third, there must be adequate market information and planning for production and materials supply, forecast of demand at home and abroad, and influx of commodities from other countries. Fourth, the government should develop Internet in rural areas to provide farmers related information; build storage and processing industry to ensure the input and outlet. Fifth, there must be special policy for rural businesses. So far, Vietnam develops mostly businesses for urban areas and little for rural areas.

 

To ensure sustainable development and make rubber a multi-purpose tree, MARD has created a breakthrough in the structure, especially in industrial crops and forestry. Second, the decision will help cover the long stretch of land along Highway 14 from Kontum to Lam Dong province with rubber trees, improving the greenery and environment, economy and living conditions in the mountainous region. It secures local people stable jobs and higher income instead of planting cassava-root with lower income. The Decision also minimizes administrative formalities for forestry economy. Third, it is an opportunity for businesses to invest in forestry (rubber) without using State budget. However, we should not emphasize too much on rubber tree as each kind of land is suitable to a certain kind of tree, rubber cannot be planted in place of other crops. Fourth, MARD must issue regulations guiding farmers to plant rubber in forestry land. The Rubber Institute must develop new formula including new strains for rubber. Presently, Vietnam pursues rubber-timber formula while other countries apply timber-rubber formula with higher economic efficiency. We should coordinate businesses and farmers with businesses as the core. For example, if a rubber group liquidates 8,000-10,000 hectares of rubber trees, it can get only VND450 billion in timber while it can get VND900-1,000 billion in semi-processed wood and VND1,400-1,500 billion in wood works together with stable market, input and outlet.

 

Right, the equitization of rubber companies in recent years was slow for the following reasons: issues of agriculture and forestry land, plantations, plantation-latex processing factory. There are two tendencies: equitized factories stop operating immediately if rubber farms cease supplying latex or selling it at market price; or more efficiency for factories if they are supplied at floor price. Currently, the second tendency is taking place (shareholders of the factory connected with rubber farms).The genuine efficiency of the processing factory is not correctly demonstrated. Some are in experiment equitization with rubber farms incorrectly evaluated. Therefore the equitization must be considered carefully, especially on land issue. It is the cause of the slow process.

 

To expedite the equitization process, there must be land policy and coordination between rubber farms and processing factories. In initial period, to avoid losses and increase confidence of shareholders, the State besides dominating share must have strategic shareholders for latex processing and consumption and not rely on shareholders with more money. The equitization of rubber enterprises must be done in the process of equitizing agriculture and forestry farms.