Malaysia's glove industry is booming amid COVID-19, but are rubber smallholders seeing the huge benefits?
10 October, 2020
The clock shows 7.30am, and daylight has just broken over the trees and small rise around Ab Manap Minhat’s house. The 65-year-old steps out of his home, clad in a thick, long-sleeved shirt with long pants tucked into his boots.
He begins his motorcycle and heads out to start out tapping the trees on the 6 acres of rubber plantation that he and his wife own in Bukit Katil, Melaka.
Further later on in the same kampung, Faridah Wahab has stepped out earlier at 7am to get started on tapping her rubber smallholding, which measures just over 2 acres of land.
Strapping a mosquito coil holder around her waist, over a thick secondhand shirt like Manap's, she starts tapping the plantation surrounding her compound in the kampung.
While many livelihoods have already been ravaged by the COVID-19 pandemic, this year is a bumper year for rubber glove manufacturers in Malaysia, as the fight to support the disease led to a surge popular for latex surgical gloves and other latex medical products.
For tycoons such as Stanley Thai and Lim Kuang Sia, the founders of glove manufacturers Supermax Berhad and Kossan Rubber Industries respectively, they have reportedly been elevated to billionaire status after their stocks became popular because of global demand.
The stock value reportedly tripled for the world’s major rubber glove manufacturer, Top Glove Berhad. Founder Lim Wee Chai’s net worth is thought to have jumped to RM2.5 billion (US$599 million).
Malaysian firm Top Glove founder Lim Wee Chai tells CNA that 2020 will probably be an archive year for the business.
According to numbers published by the Department of Statistics Malaysia (DOSM), export of rubber gloves rose steadily, from just RM1.7 billion in March this year, to RM3.17 billion in July.
However, for the lives of individuals such as Faridah and Manap, there has been little trickle-down effect regarding income.
There are various known reasons for their predicament. Notably, many smallholders produce rubber in cup lump form, but what is required by the major manufactures is liquid latex.
DECLINING PRICES PROVIDED BY MIDDLEMEN
In line with the rubber tappers, the prices they are on offer for rubber have already been dropping steadily.
“I moved here back 1998, when I acquired married to my late husband. In those days, with both folks, there was a great deal of rubber to tap,” Faridah recounted.
Faridah and her late husband would start tapping before light, rather than stop work until 11am.
“Last time, with my hubby, we could sell one kg for approximately RM5. About six years back, we could get RM7 to RM8. That was for a few months but I could create a garage,” Faridah said.
But that also meant their effort suffered from theft, as a result of good price rubber commanded then.
“We would go out, start tapping rubber at 2am in the morning, and then we’ll be back around 6am to pour formic acid into the cups to make the latex coagulate faster.”
“By morning, persons were already waiting in the nearby oil palm estate to steal the latex we’ve tapped. You get back to the plantation, and nothing looks out of place. Nevertheless, you rise to the cup and it’s empty already,” she said.
Nowadays, the price is so low, the rubber lumps coagulated are not worth stealing, she said with fun.
From her small plot, now divided between her and her children according to Islamic inheritance regulations, she might earn a couple of hundred ringgit a month.
Over the last week of August this year, Manap said 1kg of rubber cup lumps could only fetch RM2.10. And sometimes, the tappers said they had been offered only RM1.70 per kg.
MAKING ENDS MEET
To make ends meet, Manap also taps the rubber trees on other estates near his home. Then splits the arises from the sale with the landowner.
“Once a week, I’ll go around different plots to tap, then gather the lumps around Friday morning, so by 10am on Friday, we are able to sell the cup rubber in buckets to the middleman buyer,” he said.
While Faridah might only sell her latex lumps once a fortnight, Manap sells his cup lumps and any collected latex strands from the trees every Friday.
“The towkay is certified by the Malaysian Rubber Board, so he manages Jasin, Tehel and the encompassing areas,” Manap told CNA, when asked if the middleman was accredited by the government.
Both tappers noted that the government middlemen offer higher prices. If indeed they were to market to the private middlemen, they would get offered less and possess to invest money on petrol to move the latex to the private middlemen.
From a weekly sale and after giving back the landowners their share of the proceeds, Manap said he'd earn about RM600 to RM700 per month.
“Then I’ll execute a selection of odd jobs, like small repairs and helping other landowners spray pesticide on the land or weeding. The afternoon is spent maintaining my herd of cows, which I’ve been accumulating with my family through the years,” he said.
From all these efforts, plus whatever money his children, all developed send to him, Manap gets about RM1,500 a month.
"And then at times, if it rains, you can't tap. As the water would dilute the latex and it becomes even poorer in quality," both Faridah and Manap pointed out.
Through the strict phase of Malaysia’s movement control order, enforced from Mar 18 until May 4, Manap and Faridah claimed they lost almost all their normal income, given the ban on all non-essential movement.
“Luckily, my wife, who's also a smallholder and I both got some school funding as smallholders. And we are in the kampung, our lifestyle is not so expensive,” he said.
The Malaysian Rubber Board's Director-General Zairossani Mohd Nor told CNA that the monetary situation of smallholders was a problem. This group, totaling 445,479 smallholders and non-landowning rubber tappers, accounted for 90 perc ent of rubber production and total planted area in the united states.
Currently, the government, through the Rubber Board offers the Rubber Production Incentive (IPG), which stands at RM2.50 per kg for Standard Malaysian Rubber (SMR) 20.
This signifies that if the average price in the field happens to be at RM2.10, the federal government will pay out a motivation of RM0.40 for each and every kg sold.
This incentive is bound to Malaysian smallholders with less than 100 acres and also have a Rubber Transaction Authority Permit (PAT-G) issued by the Rubber Board.
While this incentive pertains to only peninsula smallholders, rubber smallholders in Sabah and Sarawak also have similar incentives issued by the states’ respective rubber or agricultural authorities.
During the annual monsoon season, smallholders get one-off school funding given out by the Rubber Industry Smallholders Development Authority (RISDA), at the mercy of certain eligibility conditions.
For instance this year, each eligible recipient will receive RM300 for just two months between December to January.
SMALLHOLDERS PRODUCE CUP LUMP RUBBER, MANUFACTURERS NEED LATEX
According to Department of Statistics Malaysia (DOSM), natural rubber production in July had increased 24.7 % to 41,801 tonnes, from 33,531 tonnes in June.
However, DOSM noted that this was a 30.4 per cent decrease in comparison to July 2019, an undeniable fact also noted in the Rubber Board’s statistics.
Zairossani explained that whenever buying cup lumps from smallholders, dealers would make reference to the latest processed rubber prices, namely Standard Malaysian Rubber (SMR) 20 on the Malaysian Rubber Exchange, published by the Rubber Board and used as a reference for certified dealers and manufacturers' purchasing arms.
One of the known reasons for the low prices offered to smallholders is because latex production has been on the decline, that your board is attempting to solution through soft loans, replanting grants and increasing collection technologies for smallholders.
While smallholders are mostly making cup lumps, glove manufacturers depend on liquid latex for his or her products.
Currently, Malaysia imports latex from all over the world, to create up for the shortfall in local production. That is borne out by Rubber Board statistics, which showed a regular drop from over 200,000 tonnnes in 2006 to 36,193 tonnes of latex in 2019.
"The full total latex needed by the industry, or total consumption is approximately 435,000 tonnes. But local production is merely at 36,000 tonnes. To create up for the gap, we must import," Zairossani of the Rubber Board explained.
"The import duties for latex is zero, as part of the government's support to industry players to expand downstream activities," Dr Zairossani said, adding that a lot of recycleables are imported into Malaysia at zero tariff rates, that assist bring down production charges for manufacturers.
While there are no import duties for all natural rubber, whether raw or processed, there are duties levied on products, such as tyres and condoms.
This means that the level of price correlation between smallholders and glove manufacturers was very limited.
The production of latex has been shrinking in Malaysia. From the perspective of the rubber tappers, it is much easier to accumulate and transport cup lumps in comparison with liquid latex extraction, or even latex sheets, Manap said.
There is a gap between prices listed on the Malaysian Rubber Exchange (around RM5.50 per kg for the cheapest grade and around RM8.30 for the best grade currently), in comparison with what smallholders were on offer.
However, it is noteworthy that what's publicly listed is only a reference for accredited rubber merchants and manufacturers’ purchasing arms.
“The accredited dealers in the field, those venturing out to meet up the smallholders, have their calculations concerning the price of production. For instance, if they’re covering smallholders in more rural areas, you then need more effort and expenditure to move the harvested rubber," Zairossani said.
A MANUFACTURER'S PERSPECTIVE
In a written interview with Ian Leong, a representative for Karex Berhad, a glove and condom manufacturer, he said that the intake of rubber for medical products actually pales compared to the automotive industry, where much of the world’s rubber production can be used to make car parts and tires.
“(The costs) have already been relatively low in modern times, as the industry has benefitted from ample supply from growers in Southeast Asia,” Leong noted.
He also said that Thailand is now the most significant producer of rubber globally, as not a lot of rubber has been planted in Malaysia recently.
“It’s proximity to Malaysia and the general oversupply on the market that contain contributed to prices in Malaysia being relatively lower in recent years,” Mr Leong said.
Mr Leong corroborated that the costs as listed on the Malaysian Rubber Exchange were merely for reference purposes.
“The prices quoted, specifically for bulk latex, affect the price of which we and similar manufacturers purchase latex around the region,” he said.
He added as Karex’s production line is determined by fresh latex, this meant the business was not able to keep large inventories of latex over an extended period.
“Because of this, most pricing for the latex that people utilise inside our factories will be priced at spot rates or only locked in a couple of months at the same time by the supplier,” Mr Leong explained.
ANOTHER FOR RUBBER SMALLHOLDERS?
For Manap, his aim as a retiree is to keep working and earn his own keep.
"So long as we remain able, we'll work," he said, adding that tending to his smallholding, his herd and other odd-jobs kept him and his wife active.
But concerning whether his children might continue tapping rubber after he passes on, Manap said once he passes on, what his children and his heirs did with the land will be their own issue.
Manap said his only son, who works as a power technician and includes a side business along with his daughter-in-law owning a cafe, can earn much more when compared to a tapper.
"Nowadays, tapping rubber for the younger people, they feel it isn't worthwhile. Anyway, my smallholding is indeed tiny. If we were talking 10 acres or even more, then maybe it could be different," he said.
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