To boost prices, Nasution is asking Thailand, Malaysia, and Vietnam to hold back from producing in large quantities.
Rubber Karet

As commodity prices remain sluggish, the government has asked three major rubber producers to lower their production volumes to help jack up the current price of rubber of US$ 2.4 per kg.

According to Coordinating Minister for Economic Affairs Darmin Nasution, rubber’s glory days are in distant past thanks to declining prices. To boost prices, Nasution is asking Thailand, Malaysia, and Vietnam to hold back from producing in large quantities.

"The key is how to talk to Vietnam, Thailand, and Malaysia;asking them to reduce production," Nasution said at the national working meeting of the Association of Indonesian Rubber Industries (Gapkindo) in Jakarta, Thursday (25/8).

(Read: Moratorium in Place, Oil Palm Licences to be Reviewed).

According to Darmin, production volume can be lowered by replacing elderly rubber trees. Based on the age of the trees, Indonesia's rubber plantations are amongst the oldest in the world. Therefore, replanting will have many advantages.

Darmin used three indicators to assess Indonesia's rubber industry. First, Indonesia is currently the largest rubber producer. Second, the country's rubber trees are older than those in Vietnam, Thailand, and Malaysia, therefore replanting will benefit Indonesia the most. And third, having older trees, the quality of Indonesia's rubber is also the lowest.

These circumstances do not apply to the other three countries, which is why they tend to be reluctant to replace their trees.

(Read: Darmin: Sugar Price Hike Triggers Inflation in July).

This is where the government must play the key role of talking to the other three countries about their rubber production. However, Nasution said, industry players must also take part by negotiating with rubber business players from those countries.

Responding to the issue, Gapkindo chair Moenardji Soedargo said he supports the government's plan to cut back on production. Gapkindo has started reducing its rubber exports, and plans to do so until the end of this year.

(Read: Oil Palm BPDP Waits for Presidents Instructions on Land Clearing Moratorium).

"Reducing export will allow prices to increase, but not significantly. Therefore, Gapkindo urges the government to extend the partnership (in reducing production) to all ASEAN countries, not just the three producers," said Moenardji.