44^th Assembly of Nations of the IRSG

26 March 2009

Singapore

Statement by

International Rubber Consortium Limited (IRCo)

First and foremost, let me take this opportunity, on behalf of the International Rubber Consortium Limited (IRCo), to congratulate the IRSG on the auspices occasion of its 44^th Assembly of Nations. We are indeed honored to be given this opportunity, to present a statement to this august gathering.

The year 2008 has been fantastic, dramatic and drastic. These three words should be ample to describe what we all already know and are experiencing. Let me spare everybody by not repeating the nightmarish details here. The effects are flowing into 2009 and we have yet to see the end of it, despite all the monumental efforts and huge resources being expended to turn the tide around.

The natural rubber industry is not spared the predicament that the world is in. Natural rubber prices having peaked on 2 July 2008 at the IRCo’s Daily Composite Price (DCP) of 325.74 US cents/kg. plunged to a low of 110.26 US cents/kg. on 11 December 2008, a loss of 215.48 US cents/kg. or 66.15% within a period of just under 6 months. For the first couple of months of 2009, it has been hovering in the range of 150.00 – 135.00 US cents/kg., albeit more inclined towards the lower end.

The pundits are not talking about recovery this year but more about bottoming of the downturn, which they expect around the fourth quarter and for the pessimist, the middle of 2010, and thereafter a very slow process of consolidation and recovery which may stretch between 3 to 5 years.

The Tripartite Cooperation in natural rubber amongst Thailand. Indonesia and Malaysia, under which come the International Tripartite Rubber Council (ITRC) and IRCo, is being put through an acid test in its objectives:

• To achieve a long term price trend that is stabilized, sustainable and remunerative to the farmers.
• To maintain a supply-demand balance to ensure adequate supply of natural rubber to the market at fair prices.

On 29 October 2008, the tripartite cooperation agreed to the implementation of the following measures under the Supply Management Scheme (SMS) to counter the prevalent fall in natural rubber prices:

• Accelerate Replanting: That the total annual replanting area of the 3 countries in 2009 be accelerated from 112,000 hectares to 169,000 hectares, which would reduce natural rubber production by around 215,000 tons.
• Decelerate New Planting: That new planting be decelerated by encouraging smallholders to diversify to other crops and by controlling the issuance of licenses for new planting.
• Slowdown Tapping Activities: That rubber smallholders will be encouraged to reduce their tapping intensity. Relevant measures will be undertaken to educate and discourage them from using stimulation.

The continued worsening of the natural rubber market and prices were reviewed in mid December, 2008. It was agreed that the Agreed Export Tonnage Scheme (AETS) also be implemented to match the forecasted decline in demand in 2009.

A total of 700,000 tons of natural rubber from the 3 countries was agreed to be withdrawn from the export market in 2009 under the AETS. This would be in addition to the 215,000 tons agreed earlier under the SMS.

Considering that the effect of the SMS could only be felt from the second quarter 2009 onwards as well as the seasonally high production months in the first quarter, it was further agreed that 270,000 tons or 38.57% of the total 700,000 tons under the AETS be implemented in the first quarter.

There were also these concerted actions by all 3 rubber trade associations in the tripartite countries, in their contributory efforts to counter the decline in natural rubber prices, namely:

• To encourage amicable and speedy solutions to non-fulfillment of contracts.
• To take stringent measures against contract defaulters
• Not to offer natural rubber for export at less than US $1.35 per/kg.

Ladies and gentlemen, we must realize that the predicament we are in is generated by non-rubber factors. The total global economy is in turmoil and the impact is over bearing on every sector of the economy.

We are confident that our efforts had stopped the “bleeding”, so to say. We believed that, if these measures were not in placed, natural rubber prices today will be lower than what it is.

The challenges ahead are greater, especially in these coming few months. We have to brace ourselves against the on going free fall in demand and prices until the global economic crisis find its bottom, survive their impact, pull ourselves out of it and build up all over again.

Collaboration and cooperation among the fraternity of the rubber industry is more essential now than before.

Thank you.