Rubber producers said yesterday the government’s decision to amend the export tax scheme on natural rubber fell short of expectations and would do little to stem the losses of farmers as rubber prices hover near a six-year low.
Prime Minister Hun Sen issued a sub-decree on March 4 to revise the sliding tax scale tax on exports of natural rubber, previously set at $50 per tonne where the export price is below $2,000 per tonne.
Under the new scheme, rubber shipments will not be taxed when the export price is below $1,000 per tonne. Exporters will pay $150 per tonne on shipments valued between $1,000 and $2,000 per tonne, and $200 per tonne on shipments up to $3,000 per tonne.
Leng Thyvuth, finance director of Krek Rubber Plantation, said that the sub-decree could help some producers, but at current market prices the $50 per tonne export tax would remain in effect.
“As the international market price is above $1,000 per tonne right now, the sub-decree doesn’t help with the current situation,” he said, adding that the current export price of rubber is about $1,050 per tonne.
According to Thyvuth, Krek Rubber Plantation exported a total of 4,000 tonnes in 2015 – a slight uptick from 2014 – but while sustaining a loss on lower market prices.
World prices of natural rubber have plummeted over the last five years due to slower demand in China and a glut of supply.
The market price of processed natural rubber is currently less than a quarter of 2011 levels, when the commodity was trading at $4,500 per tonne, fuelling a rush to cultivate plantations.
While Thyvuth does not expect rubber prices or demand to pick up anytime soon, he said the sub-decree failed to address the current market situation.
“It would have been better if the sub-decree said that when the price is below $1,500 per tonne, there is no tax,” he said, adding that local production costs were about $1,400 per tonne.
A rubber exporter, who asked for anonymity, echoed the sentiment that the sub-decree did little to help local producers. “It is similar as before,” he said.
“We suggest having a discussion between the private sector and the Ministry of Agriculture, Forestry and Fisheries, as well as the Ministry of Economy and Finance to find acceptable solutions.”
If a solution is not found, he said, most farmers will switch to products that can make a “profit and fast money.” Cambodian Rubber Association president Mok Kimhong declined to comment yesterday.
Cambodia has cultivated rubber trees on an area of about 330,000 hectares, though only about 60,000 hectares contain trees mature enough to yield latex. The cultivated area is expected to reach 400,000 hectares by 2020.
According to the 2015 annual report of the Ministry of Agriculture, Forestry and Fisheries, total natural rubber export volume reached 124,614 tonnes, a 24.4 percent increase over the previous year, while the value of these shipments fell by about 2.5 per cent to $150 million.