Joining Force to Improve Competitiveness and Value of Vietnam Rubber

 

According to the Vietnam Rubber Association (VRA), natural rubber sales have slowed in the past year. The oversupply is forecast to continue in next few years and natural rubber price is unlikely to increase because of stiffer competition among natural rubber producers and exporters which will use prices, business efficiency, particularly product quality and trade reputation as weapons. Rubber companies are forecast to see difficulties in a couple of years to come.

 

Not only that, rubber prices keep going down on slow global economic recovery while rapidly increased supply has pushed up inventories, thus causing pressures on price and shrinking import demands. Current low selling prices are hurting rubber growers, especially smallholding farmers. In many places, even the area regarded as the cradle of rubber industry, farmers cut down rubber trees to opt for other crops with higher economic value.

 

Domestic rubber manufacturing industry still relies on imported rubber materials. In 2013, Vietnam imported around 313,000 tonnes of rubber materials, including synthetic rubber and natural rubber. Of the sum, approximately 217,000 tonnes was natural rubber, mainly imported from Cambodia, Thailand, Myanmar, Laos and Malaysia. According to the VRA, as Vietnam was unable to manufacture synthetic rubber, it had to import all for domestic use. In addition, although material natural rubber in the country is abundant, much of it is not suitable for rubber product manufacturing.

 

The unstable and uneven quality of preliminarily processed latex is also an obstacle to enhance the reputation of Vietnam's rubber industry. Most rubber businesses take no notice of or lack conditions to build national and international brands, thus weakening their competing forces against rivals in the region. National natural rubber quality management system is not close across the country and just applicable in large companies.

 

Moreover, according to VRA, structure and categories of Vietnamese natural rubber depend on demands in China. Rubber companies find it hard to make inroads into such markets such as the United States and Japan…

 

Mr Tran Ngoc Thuan, Chairman of VRA and CEO of Vietnam Rubber Group (VRG), said, to overcome difficulties in rubber production, in recent years, rubber companies have increased investment to upgrade processing facilities, complete production systems and focus on natural rubber quality management and processing technological modernisation. Specially, to secure their rubber brand names, they have also boldly launched many kinds of natural rubber to meet the wide range of international market requirements.

 

Besides, rubber exporters have been accelerating trade promotion to expand new markets to reduce dependence on the Chinese market. According to VRA Chairman Tran Ngoc Thuan, if natural rubber shipments to China accounts usually accounted about 65-70 percent of Vietnam’s exports in previous years, the rate was under 50 percent in 2013. Other markets such as Malaysia and India substantially increased their import of rubber from Vietnam. For instance, Malaysia was the second biggest importer of Vietnamese rubber with about 21 percent of market share, making an increase of 10.64 percent from the previous year. Currently, Vietnam is a member of the International Rubber Association (IRA), the ASEAN Rubber Business Council (ARBC), the Association of Natural Rubber Producing Countries (ANRPC) and the International Rubber Study Group (IRSG). Thereby, the rubber industry of Vietnam in general and rubber companies in particular are receiving reliable and transparent information on market research, price trend forecast and opportunities to meet with potential customers.

 

According to the VRA, Vietnamese rubber companies will continue to focus on maintaining traditional China market and expanding into potential markets such as India, Japan, South Korea and Eastern Europe while increasing domestic consumption to enhance the value and reduce raw rubber export so as to sustain development.

Now and in the near future, the rubber industry of Vietnam and the world is still facing numerous difficulties and challenges. So, it is necessary for Vietnam to further accelerate trade promotion and market expansion to boost rubber exports to other countries, especially potential ones where there is a stable demand for natural rubber.

 

In addition, related units need to join forces to build rubber quality management systems and advance to build Vietnam Rubber brand to enhance the reputation and value for natural rubber and rubber products as well as protect legitimate interests of members and consumers as well.

 

And, importantly, smallholding farms are being expanded rapidly and now accounting for 50 percent of the rubber area and production output. However, this is also the cause of dissimilar. Therefore, the Association needs to encourage its members to step up technology transfer from planting materials to growing and harvesting techniques to help rubber smallholders to improve productivity, product quality and economic, social and environmental efficiency.

 

In the coming time, the Ministry of Agriculture and Rural Development will direct its agencies to better coordinate with the Vietnam Rubber Association to help the rubber industry to develop rapidly and sustainably.

 

The Vietnam Rubber Association (VRA) has mobilised supports of concerned ministries (the Ministry of Industry and Trade and the Ministry of Agriculture and Rural Development) and successfully asked for the approval of the Ministry of Finance to revise export duties on natural rubber from 3-5 percent to 1 percent and then 0 percent (according to Circular No. 111/2014/TT-BTC dated August 18, 2014 of the Ministry of Finance).

 

Besides, exhibition and market survey programmes in potential markets like Germany, France, Spain, Russia, Ukraine, the United States, China, Malaysia, Thailand and Japan also introduced key rubber products from raw materials to industrial products such as tyres, gloves, rubber spare parts, mattress, pillows, shoe soles, tubes, mats and sports equipment to international partners.

 

Facing volatile prices, rubber companies necessarily prepare response plans and choose markets and products to focus on while improving the competitiveness of rubber products in Vietnam and in world markets.

 

Currently, Vietnam has nearly one million hectares of rubber trees. But in the coming time, the rubber industry cannot continue to enlarge the area rapidly because of limited land area. However, rubber production output may be doubled to over 2 million tonnes a year by productivity boosting solutions. Given volatile prices and sales in the context that many other crops and industries are becoming increasingly competitive to rubber, rubber productivity must be raised to 3.3 - 3.5 tonnes per hectare a year to ensure high economic efficiency and retain workers and investors after 2020. The Association needs to inform rubber growers of these issues to encourage them use new high-yielding clones.

 

To sustain the future development of the rubber industry, in addition to increasing the rubber productivity, the industry must focus on producing natural rubber that the market has high demand. Specifically, we need to reduce SVR 3L output because this type of rubber requires a lot of chemicals to produce, thus harming the surroundings, while raising the output of SVR 10, SVR 20 and latex because of their high market demands. The Association should intensify information on domestic and international natural rubber demands to assist its members, businesses and the entire sector to restructure Vietnam’s natural rubber production.

 

The rubber industry is now strongly developed and rubber has become a key crop of the province - the biggest producer of rubber in the country by area. The province is home to four member companies of the Vietnam Rubber Group (VRG) which are now employing 24,000 workers. More than 3,000 Party members are working in the rubber industry. Besides, the rubber industry helps maintain political security and develop rural areas.

 

Good business strategies, proactive international integration, focused investment for processing industry and manpower training will sustain the development of rubber industry.

 

The province is committed to supporting and facilitating rubber companies to do best business in the province.

 

In the process of construction and development, the rubber industry has always follows the two main tasks: Economic development and national security. In the past time, rubber companies have focused on expanding rubber growing areas to far-lying areas and strengthening community relations to overcome difficulties to raise productivity, quality and revenue.

 

However, the rubber industry is currently facing a lot of difficulties and challenges arising from increasing market volatility. Thus, in the coming time, the Association needs to side with its members to connect with ministries and branches and speed up international cooperation to restructure production to better meet market demand. The Association should connect material producers and product manufacturers.