T

he government expects domestic absorption of natural rubber to climb to 40 percent in the next five years from 18 percent now as it plans to spur growth in the downstream industry.

'€œAt present the world price of rubber is tumbling and it affects farmers'€™ income. So we must stimulate the downstream industry to increase our local output to the level of 40 percent, as seen in other producing countries,'€ Industry Minister Saleh Husin told reporters during a rubber exhibition at the ministry.

Indonesia, the world'€™s second largest rubber producer after Thailand and before Vietnam, currently produces more than 3 million tons of rubber each year.

Domestic industrial use of rubber is dominated by the tire industry, followed by manufacturers of rubber gloves and yarn, footwear makers and other industries, according to data from the Industry Ministry.

The majority of domestic natural rubber is currently shipped unprocessed to overseas industries. Overall exports of rubber products totaled US$6.9 billion last year, $4.74 billion of which were upstream rubber products, according to data from the Trade Ministry.

Plunging global rubber prices, which hit $3 per ton, have already raised concerns, not only from authorities in Indonesia but also in several other producing countries.

The global rubber supply may reach 12.77 million tons this year, while its demand may only total to 12.76 million tons, resulting in a 11,000 ton surplus.

The Industry Ministry'€™s director general for base manufacturing industries Harjanto said the government would design a long-term road map to develop the downstream rubber industry and prepare necessary incentives to meet that goal.

'€œWe will map out what kind of incentives we should put in place, this may include trade arrangements so that the absorption can reach 40 percent as targeted,'€ he said. Harjanto added that the priority ahead might be to encourage the development of the tire industry, which apart from supplying domestic demand, could also take advantage of overseas tire markets.

The ministry also plans to promote the production of non-conventional tire products, such as dock fenders, rubber bridges, rubberized asphalt and retread tires. Recently, industry officials asked French tire maker Michelin to run a retread tire business in Indonesia.

Agency for the Assessment and Application of Technology (BPPT) chief Unggul Priyanto said his agency would be open to any party willing to benefit from its innovations in the production of rubber. The products include rubber air bags, retread aircraft tires, dock fenders and floating rubber pipes.