THAILAND: Soft loans to bolster rubber industry

The soft loan is expected to absorb a glut of 500,000 tonnes of rubber latex a year from planters.

Mr Chakramon said 10 billion baht had been earmarked for borrowing for working capital by rubber latex processing factories. This will be a one-year loan with a 5 % interest rate, with businesses paying 2 % and the Finance Ministry 3 %.

The loan is expected to be provided by six commercial banks — Bangkok Bank, Krungthai Bank, Kasikornbank, Siam Commercial Bank, TMB Bank and Thanachart Bank.

The loan is projected to help absorb 200,000 tonnes of rubber latex by year-end, resulting in a price rise of two to three baht per kilogramme. The price stands at 49 baht per kg now.

Businesses will soon discuss loan conditions with commercial banks and the Industrial Economic Office. The scheme is scheduled to start in November and end in April next year.

The ministry aims to raise the rubber price to 66 baht per kg under the scheme.

Mr Chakramon said the remaining 15 billion baht would be used for medium-term measures improving the production process and updating machinery of rubber-processing factories.

The government targets downstream rubber industries such as tyre manufacturers, glove makers and producers of engineering rubber as production improvements could translate into value added and a higher margin.

He said nine downstream companies had shown interest in joining the scheme for a combined loan of 7.65 billion baht.

The Government Savings Bank will be the sole provider of the loan, charged at a six-month fixed deposit rate for a 10-year period. The Industrial Works Department will provide information about the valuation of machinery assets to GSB.

The cabinet recently approved the scheme as an urgent measure to tackle low rubber prices caused by oversupply.

Of the 4.17 million tonnes of rubber Thailand produced last year, only 12 % could be processed into higher-priced products, with the lion's share directly exported unprocessed.

The Industry Minister plans to develop a rubber industrial estate integrating the production chain from rubber latex to higher value products, similar to Akron Rubber City in the US.

Source: Daily “Bangkok Post”, Bangkok; 25 Oct 2014
(Syed Rashid Ali, Karachi, Pakistan)