In Myanmar hundreds of thousands of hectares of land is leased to investors for rubber plantations, often in controversial circumstances.
Just 8 percent of total production is used within Myanmar, with the rest sent to China, 70pc of which is low quality, said U Khine Myint, secretary of the Myanmar Rubber Planters and Producers Association (MRPPA).
Without a proper legal framework, foreign investment into rubber plantations tends to be short-term gambles by companies seeking natural resources for their own gain, he said.
“The type of investors that we want will only come when they are 100pc covered by law,” he said.
To attract more sustainable investment, rubber planters also need to consider the quality of their product, he said.
“If it’s good quality, they will find it easy to sell at a higher price. If they produce low-quality rubber, they will have to sell to China at rock-bottom rates.”
There are many opportunities in the local tyre industry, but foreign companies looking to enter the market need access to high-quality raw materials, he said.
The government has been trying to improve the quality of local rubber for the past few years with limited success – only 20pc of rubber produced nationwide is suitable for making tyres.
The four existing tyre companies already compete hard for access to the best materials, and two of the three state-owned factories are unable to run to full capacity.
Only the Yangon Tyre Factory, the only privately owned plant in the country, is able to export.
This is a concern, particularly as foreign investors are now eyeing the market, said U Htin Kyaw Oo, the factory’s marketing director.
Companies from Thailand have already expressed an interest in opening tyre factories, he said.
“We hear some Thai investors will set up a factory in the special economic zone at Dawai [Tanintharyi Region].”
His own business would benefit if automobile companies such as Japan’s Nissan open assembly factories at Thilawa special economic zone on the outskirts of Yangon, he said.
However, for U Khaing Myint, foreign investors will stay away until Myanmar improves domestic production.
“They will only invest when we can sell sufficient high-quality rubber,” he said. “This is why the Japanese government has been helping us improve the quality.”
“As more automobile plants and construction businesses open in Myanmar, sales of locally made tyres could surge,” he said, noting that last year, as investment in construction picked up, more vehicles were used to carry sand and gravel for buildings.
Another barrier to tyre production is an unreliable electricity supply, said U Htin Kyaw Oo. Myanmar also has to import the chemicals necessary to make tyres, which is not easy or cheap in comparison with other countries, he said.
With help from Japan, a laboratory for testing the quality of rubber has been set up in Yangon, and Myanmar is also applying for membership at the International Rubber Association (IRA) in Malaysia.
In Mon State, the country’s top rubber producer, the Ministry of Commerce has plans to set up a central rubber market to be jointly managed by the ministries of commerce, agriculture and the MRPPA.
Source: Myanmar Times