Colombo Rubber Traders’ Association

CRTA HOLDS EIGHTY SIXTH AGM

(From L to R) – Amanda Weerasinghe (Immediate Past Chairman), Nirmala Wickramaratne (Chief Guest, Managing Director – Dipped Products Ltd), Jayantha De Silva (Chairman), Ranjith Peiris (Vice Chairman), David Janszé (Ceylon Chamber of Commerce)

“It is only the private sector that can spearhead the required expansion in rubber cultivation. The role of the Government should be to push the private sector in this direction with the necessary incentives and reduction of procedural obstacles encountered by those engaged in these expansion projects” said J. B. L. De Silva of Eastern Merchants Ltd, who was elected as the Chairman of the Colombo Rubber Traders’ Association (CRTA) at their 86th Annual General Meeting held recently. Mr. N. G. Wickramaratne, the Managing director of Dipped Products Ltd was the Chief Guest.

“The Association has, together with other interested organizations, been constantly lobbying for the opening up of new plantations in areas hitherto thought unsuitable for rubber cultivation and the Government has, in the recent past, heeded our collective call and made available land in the Moneragala area. The optimistic target set for this ambitious project is to open up 40,000 Ha, by the year 2015!. Though this project is now about two years old, the extent of land in fact brought under rubber is disappointing. Sadly, only 146 hectares of land was opened up in the Moneragala District, in the whole of last year!” said newly elected Chairman in his address.

Expressing his view on the Cess that had been imposed it was stated “As brilliant as any project may be, the availability of funds is always the major stumbling block. In addressing this problem, the Government made note of the healthy rubber prices prevailing at the time and proposed the imposition of a cess on rubber to put together at least a part of the financing that was necessary. This Association did not oppose the basic proposition of a cess. On the contrary, we were in favor of such a levy but we were of the view that it should be charged in such a way so as not to disproportionately burden or favor any of the parties with interests in the rubber industry.

It was our view that

a) a cess, if introduced, must be levied on each and every kilogram of rubber produced in this country;
b) the cess should not be excessive so as to make Sri Lankan rubber uncompetitive in price in the International Rubber Market;
c) the cess should be introduced and levied with advance notice of at least 3 months so that existing forwards sales of rubber would not be adversely affected.

However, it is with some regret that I have to state that the Government introduced the cess on rubber totally neglecting our views. In October 2004, a cess of Rs. 4/- was imposed on every kilogram of unprocessed rubber exported from this country and this levy was made effective two weeks retrospectively!

This sadly resulted in a “Rs. 4/- per kilogram bonanza” being bestowed on the local rubber consuming industries. The unprocessed rubber exporting sector was dealt a very severe blow by being called upon to pay Rs. 4,000/- per tonne of all the rubber they exported. This action by the Government immediately made Sri Lankan rubber 3 - 4% dearer in the International Market.

In a market where contracts are made or missed by a quarter or half of one US Dollar cent, this 3 - 4% increase in price made Sri Lankan rubber, especially RSS, almost unmarketable. The available statistics for the last three months of last year and the available statistics of first five months of this year show a dramatic downturn in the volumes of unprocessed rubber exported from Sri Lanka.

It is our view that the Government must provide an absolutely level playing field to all the players in any trade, if that trade is to develop and prosper. While we agree that local industries adding value to raw rubber must be encouraged and fostered, we cannot in any way applaud the hobbling of the raw rubber exporting sector by the imposition of unbearable financial burdens on it. This is a sector as old as the rubber industry of this country and it has rendered yeoman service to the economy of this country. I believe, we certainly deserve better!

The local rubber consuming industry has, in our view, been granted more than sufficient relief and incentives to set up and run their businesses. The published and unpublished reports of their profitability speak eloquently of how well they have prospered! The raw rubber exporting sector does not deserve to be sacrificed in this unceremonious way for the greater good of the local rubber consuming industry.

Accordingly it is our firm view that the cess must be collected on each and every kilogram of rubber produced in this country. Mechanisms must be formulated and put in place to collect the cess whether the rubber is processed and sold locally or exported in the value added or raw form. We are lobbying the powers that be with these objectives in mind and it is with some satisfaction that I report that the validity of our contention has been acknowledged.

I see no reason why the local rubber consuming sector should oppose these moves. If the cess is levied on the rubber they consume, all they have to do is to reduce this sum from the price paid for the rubber at the point of purchase. If this system is implemented, it will be the producer who will ultimately be paying the cess. This is what it rightfully should be! As I have said before, it is the grower/producer who must be made to contribute towards the development of his sector.”

He further said “It is our view that the need for good planting material is so acute today that the Rubber Development Department alone would not be in a position to supply it. We believe that the private sector must be aggressively encouraged to enter this field - under the close supervision of the RRI - and set up private nurseries of the best available planting stock. Thus far, I have highlighted only just one of the many areas in which the Association sees the involvement of the RRI as indispensable. There are number of other equally important areas such as the selection of clones to suit the various elevations and climatic conditions, devising ways and means of increasing the national average yield to, at least, 1,200 kgs./Ha in the short term etc. where the RRI has an equally important roll to play.

All these aspects of rubber cultivation require research to be undertaken and here again we come up against the same old problem of the lack of funds. The RRI has the qualified and talented personnel but without the funds necessary for research they tend to get demoralized and de-motivated.

Accordingly, it is the view of this Association that the Government must give serious thought to the vital roll played by the RRI in the rubber industry and make available to it the necessary funds for it to perform the functions originally expected of it”.

The Chairman applauded the replanting subsidy that was increased from Rs. 49.000/- to Rs. 100,000/- per hectare, as the extension of the subsidy scheme to the Plantation Companies, for the first time, was another laudable decision of the Government, for which the CRTA had lobbied strenuously. However, the pace at which the Rubber Development Department disburses these subsidy funds remains a cause for concern. Bureaucratic delays and red-tape often bring about delays in these funds reaching the farmer. Furthermore, the monitoring of the replanting programme by the Rubber Development Department deserves closer examination.

Mr. De Silva also cautioned against a situation, which could quickly develop into a serious problem for the rubber industry. There is an establishment currently engaged in the manufacture of Medium Density Fiberboard (MDF), which is consuming a disproportionate share of the timber resources of this country at a rate that is truly alarming. He said that he has credible information that young and productive rubber plantations are being felled to supply the needs of this industry. Expressing his concern, he added that, at a time when we were actively seeking ways and means of expanding our acreage under rubber, it is really sad to hear of this development, as we seem to be subsidizing the cultivation of rubber trees not for the extraction of latex but for the manufacture of MDF! . He requested the Ministry of Plantation Industry to inquire into this matter on an urgent basis and take whatever firm action that needs to be taken to stop this wasteful practice.

Mr. N. G. Wickramaratne, the Chief Guest, in his Keynote Address, said that at present everybody speaks of the problem of the dwindling output in Sri Lanka. But what was causing the output of rubber to decline was not only restricted to rubber, but also to other forms of extensive agriculture, such as tea, coconut and paddy.

“Rubber output will continue to fall as the land under rubber is utilized for urban and village expansion. As I said, this is surely not only a consequence for rubber and neither is it the most important casualty. Sri Lanka enjoys one of the most beautiful landscapes in the world. But it has also one of the highest population densities. One of our greatest attributes, the beauty of our country, famed for thousands of years, which gave the island the name Serendib, is being destroyed as the verdant green of forests and even plantations, be it Tea, Rubber, Coconut or Paddy, gives way to sub optimal land use for housing. Holland has greater population density than Sri Lanka but preserves the beauty of its country by clustering housing into village communities. We need some regulation on land use for housing and the incentive of better delivery of utilities and infrastructure. Law and order will ensure that farmers can sleep at night without having to watch over their crop. In fact, all of these social goods can be better delivered to communities than to individual homesteads. We should keep this in mind” said the chief guest.

“Rubber is a small holder crop. There is really no place for plantation management of rubber properties except perhaps as nucleus estates which provide extension. Now, I am speaking as the head of one of the plantation companies. However, it is probably not sensible for the plantations to be handed over to the farmers who, under the current set of circumstances, may well sell off the remaining rubber lands for more housing. Furthermore there are more emotive and politically sensitive reasons for not handing over lands acquired by the colonial powers under the Wastelands Ordinance to the labour presently working on them. In the interim, we should develop a new contract where self employed farmers will tend and farm rubber lands of estates under some form of control by the plantation companies which will process the latex into whatever form of rubber has a market and provide extension to those farmers.

I have also argued for labour market reform for 20 years. The present laws and their application serve only to suppress productivity in all areas of the industry, be it the plantation or in finished products manufacture. Low productivity means that people will get paid lower wages than they are capable of earning. Lower wages means a dearth of tappers, completing a vicious cycle. Is it not incredible that we are driving our young men and women to the Middle East, whilst we stifle the jobs that can be created here? Our laws have had precisely this effect.

These are rather obvious issues that affect all sectors of the economy and represent policy initiatives that will have economic and social outcomes, which are desirable. You get these right and you will get the rubber industry right. There are several other macro-economic issues such as inflation and the exchange rate that, again, not only affect rubber but other sectors of the economy and exports.” said Mr. Wickranaratne.