THAILAND: Expansion of rubber plantations benefit some parties: research

The expansion of rubber plantations benefits only some parties when prices increase, and without better control the benefits will not offset the negative impacts on food security and the environment, according to a research paper.

Completed by Assoc. Prof. Somboon Jarernjiratrakul, an economics lecturer at Prince of Songkla University, the paper suggests a more organised approach to overseeing plantations for sustainability in economic and environmental terms.

Rubber plantations from 2004-10 expanded 5.91 per cent on average every year to 17.96 million rai (one rai=1,600 sq m) in 2010 from 12.95 million rai in 2004. Thailand is second only to Indonesia at 21 million rai, but is the world's largest rubber producer with 3 million tonnes last year versus 2.83 million tonnes from Indonesia.

"The plantation areas expanded largely due to price increases, which are driven by factors - higher demand for natural rubber, speculation in futures markets and higher prices of synthetic rubber. Expanding upon the external variables subjects farmers to risks and this will also affect food security and cause environmental as well as social impacts," the researcher said.

On the economic front, farmers are more exposed to external factors, as rubber demand depends on economic growth, which becomes more and more unstable in the more globalised era. There is also no guarantee that in 10 years rubber demand in China - the world's fastest-growing economy - would increase 12.90 per cent per year, like in the past decade.

Notably, rubber prices are driven up or down by quotations in the futures market and government policies, not purely by demand. This explains why the rubber price rose from less than Bt30 per kilogram in 2002 to nearly Bt200 this year.

The paper shows that in a Songkhla village, nearly all villagers own rubber farms - 15 rai on average per household. But 80 per cent of the households own one pickup truck.

Yet, speculation from February 21-March 14 this year drove down the rubber price in Thailand from Bt183.64 to Bt95, much below the usual gap with the Singapore price. But upon Deputy Prime Minister Suthep Thuagsuban's assurance of higher prices on March 16, the price jumped to Bt121.38 on the next day and further to Bt169 on April 7.

Last but not least, Thai farmers are not alone in the world in turning to this commercial crop. Plantations have increased sharply in China, Vietnam and the Philippines. If the global economy turns dismal again and drives down demand, oversupply is very likely, the paper said.

As plantations expand quickly, this leads to huge demand for seedlings and to premature rubber cutting - and eventually lower quality. Worse, farmers now turn paddy fields into rubber farms and some encroach on forestland.

For example, half of the paddy fields in well-irrigated Tambon Harnpho of Chaison district in Phattalung have been converted into rubber plantations in the past three years.

In Khao Poo Khao Ya National Park in the South, 122,587 rai or 28.26 per cent of the park's area now house rubber trees. Plantations are also seen in the Khlong U-Tapao watershed in the South. Encroachment in first- and second-tier watersheds is believed to affect biodiversity, with a single plant. Rubber trees are less able to absorb water and this could lead to lower natural water levels and landslides.

Plantations grow larger mainly when prices are high, with support from the government. Yet, the government has failed to adopt a long-term plan to develop the industry.

"There was a strategy to turn Thailand into the world's rubber hub. But of the announced budget of Bt10 billion, only hundreds of millions have been invested. When the price was high (which allowed the government to reap Bt13.5 billion taxes from the export of 2.7 million tonnes in 2010), the government did nothing to put the money to good use.

"However, when the price fell, a strategy was launched but under pressure, it produced low yields. The rubber price intervention programme during 1993-2000, for example, cost the government Bt10.50 per kilogram," he said.

A more streamlined strategy must be put in place to develop the rubber industry from upstream to downstream, the paper said.

In 2009, rubber exports - at a volume of 2.7 million tonnes - totalled Bt146.2 billion. But exports of rubber products like globes and tyres in the year, which consumed only 400,000 tonnes of para rubber as a raw material, hit Bt152.8 billion.

This shows that more downstream projects would generate a higher return for farmers and the entire economy.

For quality rubber and limited impacts on food plantations and forestland, the government should exert better control over the expansion of rubber plantations.

"All parties - the government, government units, farmers and others - must brainstorm to turn this zero-sum game or negative-sum game into a positive-sum game - where all parties are winners," the paper concluded.

(Syed Rashid Ali, Karachi, Pakistan)