Plantation companies diversifying earnings

Plantation companies are starting to plant more rubber trees to diversify their earnings and not rely solely on oil palms, said Malaysian Rubber Board director-general Datuk Dr Salmiah Ahmad.

At current high prices, the investment return on one hectare of rubber is better than of oil palm planted on marginal soil. Last Thursday, centrifuge latex at the physical market of the Malaysian Rubber Exchange closed at RM9.86 per kg. Marginal soil is land on hilly areas that are typically not so fertile and drier than flat area.

In an interview in Kuala Lumpur, Salmiah said the government policy is for estates to expand their rubber acreage or at least maintain it.

IOI Corp Bhd had, a few years ago, started replacing oil palm trees with rubber trees when the palms succumbed to the deadly fungal disease called ganoderma.

Sime Darby Bhd and Felda Plantations Sdn Bhd too have been planting rubber trees on hill slopes where it is not suitable for oil palm trees.

Kuala Lumpur Kepong Bhd, one of the biggest rubber estate owners in Malaysia, expanded its holding to 24,000ha from some 20,000ha five years ago.

"In 2010, we saw 20,000ha of new rubber plantings among big plantation companies. Of this total, about 15,000ha were carried out in Sabah and Sarawak," Salmiah said.

Their renewed interest in rubber estates may have been spurred by tax incentives. Plantation companies are eligible for pioneer status and investment tax allowance to plant rubber trees on a large scale under the forest plantation scheme.

Since 2002, the federal government has extended these incentives to approved agricultural projects under schedule 4(A) of the Income Tax Act 1967 to forest plantations. "This is in the form of deductions for capital expenditure to clear at least 50ha land, construct road and bridges in the farm and plant rubber trees," Salmiah said. "The deductible expenses stretch across 25 years, the average lifespan of rubber trees."

As of 2010, there were 1.05 million ha of land planted with rubber trees in Malaysia. "Although the total area planted with rubber trees has been shrinking since the 1980s, we have set a cut-off point at one million ha to ensure minimum annual production of a million tonnes," she said.

"Last year was the turning point from 2009's low of 1.03 million ha," Salmiah said, adding that the national rubber planted area must go on expanding in the years ahead to ensure sustainable supply of resource for a myriad of downstream businesses.

She explained that rubber is a national strategic crop because it provides much needed latex for downstream businesses such as tyre-making and the manufacture of rubber gloves. "Nothing can match the superior grip and elasticity features of natural rubber, not even synthetic rubber. For example, airplane tyres are 100 per cent natural rubber for the simple reason of safe landing," she said.

Salmiah added that when rubber trees reach maturity at 15-20 years old, their trunks become useful resource for the furniture industry.

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