Thai govt seeks investors for Rubber City

  • Business
  • Saturday, 30 Jan 2016

It hopes projects will help boost rubber prices and triple local consumption

THE Thai government is wooing foreigners to invest in its latest Rubber City project in hopes of boosting rubber prices and tripling its local consumption to 30%.

Once completed, Rubber City is expected to attract some US$10bil worth of investments and aid Thailand’s challenge to solve the oversupply of rubber.

In recent days, Thailand has been hit with the slump in rubber prices, a supply glut and the slowdown in China, the world’s largest rubber consumer.

“With weak demand from outside the country, we need to create demand in the country. The only way is to process rubber and create new products, which is something new to the Thais,” says Thai ambassador to Malaysia Damrong Kraikruan in a media briefing.

Thailand produced some 4.1 million tonnes last year in raw rubber materials. However, it processes only 10% and the rest is for export. “With this Rubber City in place, we hope to achieve 15% to 30% later on,” he adds.

Damrong hopes that with the infrastruture, incentives and assistance provided by the Thai government, it will be able to attract some of the investments from abroad.

The Rubber City development is located in the Southern Region Industrial Estate of Hatyai, 946 km south of Bangkok.

The project, spanning across 364ha or half of the industrial estate, would be developed by the Industrial Estate Authority of Thailand (IET), a government agency.

Besides Hatyai, Damrong says the Thai government is also eyeing two more similar projects in the west of Bangkok and eastern part of Thailand.

Damrong says IET would start selling land to investors for them to set up their factories under the first phase of the project. Companies can start reserving their areas by February.

It has been reported that another similar project has been planned in Padang Terap, Kedah. According to reports, the 400ha project aims to link the region’s major rubber producers – Thailand, Malaysia and Indonesia – as part of the Indonesia-Malaysia-Thailand Growth Triangle.

“We want factories to be up by September and start operating by 2017,” he adds.

He says Rubber City, which focuses mainly on the midstream and downstream industry, is intended to be an integrated centre of production for rubber processing, such as tyres, rubber gloves and compound rubber.

“Right now, Michelin has already started their works in Rubber City,” he says, adding that land prices in the estate start from RM180,000 per half-acre, with rents starting from RM7,000 for half-acre.

Investors from China have also expressed interest in the Rubber City.

Damrong says that generally, foreigners are not allowed to directly purchase land in Thailand. Simply put, Thai laws prohibit foreigners from owning land in their own name. However, Rubber City is an exception.

“Foreign investors are given permission to own land in the industrial estate and to bring in foreign technicians and experts as well as their families to live in Thailand.

“Investors will also benefit from exemptions of import duty, value-added tax, excise tax on machinery and raw material, corporate income tax and tax on dividends for up to eight years,” he adds.

Thailand remains the world’s No. 1 grower and exporter of natural rubber although prices have dropped sharply on the international market in recent years.

The industry employs two million people in the kingdom, including many migrant workers, according to the Rubber Research Institute of Thailand.

The institute says a bloated oversupply of natural rubber produced in Thailand and increased demand for petroleum-based synthetic rubber have contributed, along with other factors, to falling prices.

The price for natural rubber from Thailand has plummeted since 2011.

Five years ago, sheets of ribbed rubber sold for 174 baht (RM20) per kg. Now they sell for 34 baht (RM4) a kg, according to statistics from the institute.

“Our farmers are struggling. Moreover, there is expansion of production in the past when the price was high. So farmers plant more trees.

“Now production has increased while price dropped. To be honest, we are quite in a difficult position to handle the rubber prices,” Damrong says.

The Thai government has been using up the supply of rubber for the construction of roads and stadiums. A report says that in response to falling rubber prices, farmers have called on the government to guarantee a price of up to 60 baht (RM7) per kg.

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