The government and private sector in Mon State are seeking financial support for more factories to produce high-quality rubber.
A blackout had halted production when we visited U Win Tin’s rubber factory at Bohnat village in Mon State’s Chaungzon Township on November 20 2018.
“There are fewer blackouts this year, but we still have at least one a day,” said Win Tin, who chairs the Rubber Growers and Producers Association in the township which occupies Bilin Island, opposite the Mon state capital, Mawlamyine.
Win Tin invested K200 million (approximately USD128,000) to build the small-scale factory last year. He wanted to produce the high-quality smoked rubber sheets that could fetch up to K300 more per pound compared to those of poorer quality.
“There are more than 6,000 acres (2,428 hectares) of rubber plantation in this township, but not a single factory until I opened mine last year,” said Win Tin, who grows rubber on a 65-acre plantation.
“That’s why I built it, even though I had to raise the money,” he said in an interview at the factory compound, where he employs about a dozen people.
He borrowed about half of the money from relatives because it was easier and faster than borrowing from banks. However, it is also considerably more expensive – he pays an interest of 24 percent a year; banks typically charge 9 percent a year.
“I know the interest on bank loans is quite low, but if I wanted to borrow from a bank using my home as collateral it would take years to arrange,” Win Tin said.
The entrepreneurial rubber grower has achieved his objective of producing high-quality ribbed smoked sheets. Under an international classification system, rubber sheets are graded according to quality, with RSS1+ being the highest.
“Mine is the first factory in this township to produce RSS1, RSS2 and RSS3 rubber,” Win Tin said, adding that about 20 more factories were needed in Chaungzon Township alone to help develop the industry.
“However, most of the rubber growers are small-scale and are unable to establish factories with their own money, so access to loan financing is vital to upgrade the industry,” he said.
Loans critical to expanding the rubber industry
Rubber is grown on more than 500,000 acres (202,000 hectares) in Mon and is one of the state’s major industries and employers, creating hundreds of thousands of full-time and seasonal jobs throughout the year.
“A third of the population in Mon State is involved in the rubber industry and most belong to the lower and middle class,” said Saw Aung Myint Khaing, the state government’s Minister of Kayin Ethnic Affairs. Mon has a population of over two million,according to the 2014 census.
Aung Myint Khaing, who was appointed last year to head a committee aimed at upgrading and expanding the industry, said it had made the production of high-quality rubber sheets its top priority.
“Without high-quality rubber, no one will invest in manufacturing finished-rubber products,” he told Frontier..
Aung Myint Khaing said the state has 17 rubber factories in operation, most of which are small.
“We are helping them to get loans from government-run banks as well as from private banks,” he said, adding that the loans range between K30 million and K300 million.
“Red tape produces delays in most cases,” he said, referring to the complex procedure for borrowing from state-run banks.
“What makes the situation worse is that most local banks do not seem to be interested in providing finance for the rubber industry,” he added.
Aung Myint Khaing said that the recent move by the Central Bank of Myanmar to allow foreign bank branches to provide finance and other services to businesses has raised hope for easier borrowing.
“The industry has a bright future if it is developed in the right way and we are hoping the foreign banks realise the industry’s potential and provide the finance for it,” he said.
The area under rubber in Mon suggests that it could easily support hundreds of medium and small-scale processing factories.
The committee has also advised growers to switch from sulphuric acid, which has long been used in the industry, and use formic acid to treat the rubber after it is harvested to make rubber sheets.
“Formic acid is used to produce high-quality rubber, but it is a bit expensive compared to sulphuric acid, so the prices differ,” Aung Myint Khaing said.
However, small-scale growers, who often struggle to support their families and cover production costs, rely on brokers who care only about quantity, not quality.
“Most brokers export rubber to China, so it doesn’t need to be high quality,” said U Phay Thar, a member of the Rubber Growers and Producers Association in Mon’s southern Ye Township.
“So farmers are thinking, ‘why not sulphuric acid’?”, he said in a telephone interview
“Raising awareness among farmers is as important as access to finance,” Phay Thar said.
The state government has imposed restrictions on the import and sale of sulphuric acid in a bid to promote the use of formic acid.
Shops that sell chemicals were asked to sign a document last year acknowledging that sulphuric acid should not be used in the rubber production process.
Mon imports an estimated 550 tonnes of formic acid from China each year, and Aung Myint Khaing said he hopes the state can become self-reliant in the chemical.
“We are thinking it would be great to have a factory producing formic acid in the region, then farmers can have it at cheap prices,” he said, adding that such a facility would also benefit the rubber industry in neighbouring Kayin State and Tanintharyi Region. Mon, Kayin and Tanintharyi account for about 70 percent of the nation’s rubber plantations.
The future of Mon State’s rubber industry
The Mon State Investment Committee, established in early 2017 under the Myanmar Investment law, has approved applications for four domestic and two foreign companies but none is in the rubber sector.
U Min Thein, deputy director of the Directorate of Investment and Company Administration in Mon, said the state has hardly attracted large-scale investments, but was hoping that improvements in roads and the electricity supply would change the situation for the better.
“If the region produces quality rubber, there will be opportunities for business to invest in manufacturing finished products,” he said.
Industry sources say the Ministry of Industry has been inviting domestic and foreign businesses to invest in a state-owned tyre and rubber factory in Mon’s Thaton Township, which ceased operating in 2015.
“If enough good quality rubber can be produced, someone might invest in it,” said Aung Myint Khaing.