The Competitive Context of the Sri Lanka Rubber Industry

Nursery women busy at work	Rubber plants ready for transfer to the field

The Sri Lanka Rubber industry consists of the plantations sector, which grows and harvests latex from trees and converts this latex to processed raw rubbers of different types; and the rubber products manufacturing sector, which converts raw rubber into value added rubber goods. A third sector is emerging- which is the use of rubber wood as a material resource for manufacturing a wide range of wood based value added products.

Rubber production was established in Sri Lanka in 1876 with the planting of rubber plants imported from Brazil. The rubber products manufacturing industry emerged in the 1950s primarily to retread tires and the industry expanded rapidly after the introduction of free trade policies and investment promotion zones in the late 1970s. At present, the value of the rubber products manufacturing sector is five times greater than the export value of raw rubber from Sri Lanka. However, the plantation sector remains an important component as it is the ‘resource base’ or the primary competitive advantage of Sri Lanka’s rubber industry.

Raw Rubber Production

Sri Lanka recorded around 229,000 hectares under rubber in the 1960s but currently the land area under rubber is less than 129,000 hectares. Of this area, approximately 65% is less than 20 hectares in size and mostly owned by smallholders. The main types of rubber produced in Sri Lanka are Ribbed Smoked Sheets, Latex Crepe, Sole Crepe and Centrifuged Latex. Technically Specified Rubber is not produced in significant volumes due to lack of economies of scale. Production of raw natural rubber was 92,000 metric tons in 2003 although production levels in the 1970s have exceeded 155,000 metric tons. Frequently depressed global market prices coupled with increasing costs of production, owing to the low yields and poor labor productivity, are some of the main factors that contributed to this decline in raw rubber production.

Local Rubber Consumption

The local consumption of raw rubber for value addition was around 63,000 metric tons in the year 2003. This accounted for 70% of local production. Raw rubber exports were mainly Latex Crepe and Sole Crepes, which serve a niche market. Statistics reveal that over the years more and more raw rubber was being consumed locally by the rubber products manufacturing sector. In the year 1980, local consumption stood at only 15,000 metric tons, however over the next 20 years domestic consumption grew rapidly at approximately 16% p.a.

Rubber Products Sector

This is the key driver of the rubber industry today. Few companies have taken the lead in capturing global markets and have shown creditable performance. Among them are: Loadstar Limited, which markets ‘Solideal’ industrial tires and wheel systems; and Dipped Products Limited, which markets industrial and household latex gloves under its own brand name. Loadstar Ltd. recorded an export turnover of Rs 8.0 billion in 2003 and is the current global market leader in industrial solid tires serving around 22% of the global market. Dipped Products Limited had a turnover around Rs 2.0 billion from glove exports and is the 5th largest industrial glove manufacturer in the world. Both companies have resorted to forward integration by acquiring global distribution networks.

Related and Supporting Services

The Sri Lanka rubber industry is served by various organizations and agencies that provide essential support services. From the public sector, the Ministry of Plantation Industries (MPI) primarily looks into the rubber growing sector’s needs. The Rubber Development Department (RDD) and the Rubber Research Institute (RRI) come under the purview of the MPI. RDD manages the smallholder support programs including the subsidy schemes and control the activities of the rubber trade. RRI serve both the plantation sector and the products manufacturing sector with technology related services. In the past, public sector activity in developing the Sri Lanka rubber industry had been limited by funding constraints. As a solution, an industry CESS was introduced in November 2004, aimed at collecting around Rs 400.0 million for development work.

In addition to the above, the Sri Lanka rubber industry has four trade associations that promote private sector interests. One of these is the Plastics and Rubber Institute of Sri Lanka (PRI) which conducts regular diploma courses in rubber and plastics technology and serves as the primary professional association in the rubber industry having its own headquarters with facilities to train personnel. PRI receives benefits from various donor agencies in conducting training programs and other value adding activities.

The other three include, The Colombo Rubber Traders Association, (CRTA), the Planters’ Association of Ceylon (PA), which protect the interests of producers and traders and the Sri Lanka Association of Manufacturers and Exporters of Rubber Products (SLAMERP) - the apex body of rubber products manufacturers.

Rubber Industry Statistics

Sri Lanka’s position in the global market.

The Sri Lanka Society of Rubber Industry

The Sri Lanka Society of Rubber Industry (SRI) was incorporated July 20, 2004 under the companies Act No 17 of 1982 as the private sector driven apex body of the local rubber industry. The SRI is the final development of the Rubber Cluster, formed with the assistance of the U.S. Agency for International Development (USAID) funded program- The Competitiveness Initiative (TCI).

The Rubber Cluster was initiated to promote the competitiveness of the Sri Lanka rubber industry and its membership is comprised of the four main trade bodies: Plastics & Rubber Institute of Sri Lanka (PRI), Sri Lanka Association of Manufacturers & Exporters of Rubber Products (SLAMERP), Colombo Rubber Traders Association (CRTA) and the Planters Association of Ceylon (PA).

SRI Board of Directors:

Mr. W T Ellawala – C W Mackie & Co. Ltd (Chairman SRI)
Mr. Kulatunga Rajapaksa – DSI Samson Group
Mr. Damitha Dharmasena – Hanwella Rubber Products Limited
Mr. Anil Wickremeratne – Microcells Ltd (Chairman PRI )
Mr. Ananda Caldera – Associated Motorways Group (President SLAMERP)
Mr. Amanda Weerasighe- Almar Trading Company Ltd. (Chairman CRTA)
Mr. Ranjith Pieris – Kotagala Plantations Ltd (Vice Chairman – CRTA)

In order to achieve competitiveness at an industry level, the SRI defined quantified growth targets for the industry. The following table lists these targets both in terms of value and volume to be achieved by 2010.

Key Strategic Drivers

	Down stream value addition as the key industry driver
	Growing and primary processing is to support value addition activity
	Target marketing of primary processed rubber exports
	Supporting rubber wood as an integral supplementary source of revenue
	Institutionalizing the Rubber Cluster to lead and sustain industry competitiveness initiatives
	Promoting Government and the private sector collaboration within a single strategic framework

Key Strategic Initiatives

SRI’s currently focusing on the following two strategic initiatives:

	Consolidation of Supply Side/Expansion of Rubber Plantations – 40,000 hectares in the Moneragala District
	Improving Marketing Effectiveness- “Lankaprene” Latex Crepe repositioning program

MOU signing event: Wellassa Rubber Company and JEDB at the Ministry of Plantation Industries	Moneragala Project Area View	Wellassa Rubber Company Limited- first meeting of board of directors on 12/11/2004

Contact Information

Offices:
The Sri Lanka Society of Rubber Industry
C/o C W Mackie & Co. Ltd
36, D R Wijewardena Mawatha
Colombo 10
Telephone: 94-11-2325665

Contact:
Mr. W T Ellawala
Chairman
C/o C W Mackie & Co. Ltd
Website: http://www.crtasl.org