Sri Lanka’s Rubber Manufacturing and Export Industry
Insight into Sri Lanka’s longstanding rubber industry and government-backed plans for expansion
Writer: Phoebe Harper | Project Manager: Krisha Canlas
The Pearl of the Indian Ocean has long enjoyed the benefits of its strategic location as the centre for East West trade across foreign waters.
Ever since 1876, when 1,919 rubber seedlings were planted in the Henarathgoda Botanical Garden in Gampaha, prompting the birth of a lucrative supply chain that is yet to cease, Sri Lanka’s (then Ceylon’s) rubber industry has flourished.
70 percent of this natural rubber production is used by rubber manufacturing industries and their organizations, offering a wide portfolio of rubber-based products that are distributed globally. The most popular products include off-road and solid and pneumatic tyres and industrial/household rubber gloves.
This stable industry has become a mainstay of Sri Lanka’s economic growth as the third largest export sector, with the United States, Germany and Belgium amongst Sri Lanka’s top rubber export markets.
The Sri Lankan Association of Manufacturers and Exporters of Rubber Products, or ‘SLAMERP’ was born out of a need to organize and protect those trading in the country’s rubber manufacturing industry.
For Chairman of the Association, Mr. Ravi Dadlani, Sri Lanka’s advancement within the global supply of rubber is a source of great pride.
“The country has not only gained recognition as a sourcing destination for quality rubber products, but it has also over the decades transformed into a niche rubber manufacturing destination that has won the confidence of global brands and investors from around the world.”
With the explicit vision of making Sri Lanka the leading exporter of quality rubber products, ‘SLAMERP’ (Sri Lankan Association of Manufacturers and Exporters of Rubber Products), found its “humble beginnings” in 1984 at the Orient Club in Colombo. Here, several leading industrialists felt obligated to establish an organization to, “safeguard the interests of the industries engaged in the manufacture of rubber products for export.”
The association was born out of the allegiance of twelve reputable companies who became founding members when ‘SLAMERP’ was officially founded on the 31st January 1985. Original chairmanship was assigned to Mr. N. G. Wickremeratne, who had previously run one of the leading non-medical rubber glove companies in the country.
The association has since gained national recognition as the “key body”, representing the rubber manufacturers and export sector.
As Chairman Ravi Dadlani comments, “the sector has been recognised as a thrust sector of the export economy, which is now valued at $1 billion and is estimated to have the potential to be a $8 billion industry within a decade. Today, the Association has expanded its vision to encompass making Sri Lanka a preferred destination for global sourcing of quality rubber products.”
Alongside their traditional markets of the EU and US, SLAMERP has identified a growing market amongst African and Asian countries.
According to a report published by the Sri Lanka Export Development Board, the country’s exports last year contributed $9.9 billion to the economy, the results of which were aggravated by the current pandemic, leading to low demand and necessitating a revised financial target.
Despite these challenges, export earnings from rubber and rubber finished products have increased by 6.22 percent compared to results recorded in December 2019. This is due to an increase in exports of pneumatic and retreated rubber tyres and tubes, and surgical rubber gloves.
Challenges in the Industry
Despite rubber’s homegrown beginnings on Sri Lankan soil, one of the biggest challenges faced by the industry today is the importation of rubber from other countries. Although organizations prefer to invest in local rubber, “there is a shortfall every year versus demand.”
“Among the key challenges are the restricted number of new plantations for rubber cultivation, inadequate domestic yields and productivity levels.”
Refusing to be defeated, Dadlani instead sees this shortfall as an opportunity. “It represents new opportunities to diversify and establish backward linkages to investors”, with the need to outsource the country’s raw rubber imports to increase Sri Lanka’s manufacturing output by a “significant volume.”
The Master Plan
SLAMERP is involved in the Sri Lankan Government’s ‘Rubber Master Plan’, that intends to drive the industry’s growth to $4.4 billion by 2025.
“As the apex body representing the value-added component of the rubber industry. SLAMERP is very keen that the rubber master plan is implemented.”
Detailing SLAMERP’S role in enforcing this goal, Dadlani outlines how the industry is following the recommendations of the master plan by partnering government institutions in changing the “industry norms”.
“We are constantly working with the ministry, Rubber Secretariat, Rubber Research Institute, the Rubber Development Department the Export Development Board, the Board of Investment and other stakeholders to push for new reforms and to promote the sector to achieve its goals.”
Whilst adhering to the guidelines outlined by the master plan, Dadlani suggests further action could be taken by the government, in order to “ fast track the planned policy-based approach.”
This involves using incentives to attract exporters investing in high value rubber product manufacturing. Incentives should also be offered, “as need be, for plantation companies to spearhead this initiative.”
“Additionally, research and development on rubber yield increases and all-weather rubber tapping techniques need to be introduced with a government-led thrust towards increasing rubber production.”
Further steps include driving public-private partnership research and development, and investing in laboratory and testing facilities across the country, in order to meet the standardsset by the export market.
“We also expect the government to educate the smallholder rubber cultivators on international best practices to manage the rubber crop for better yields and outputs with the Rubber Development Department and the Rubber Research Institute as key government institutions.”
Surviving the Pandemic
As with all countries dependent on export, Sri Lanka has been adversely impacted by the pandemic. Speaking of the effect of the virus on the industry, Dadlani states, “the intermittent shutdowns have caused a tremendous loss both in terms of production and execution of sales commitments. The shutdown of countries has also resulted in widespread cancellation of orders across the tyre industry.”
This runs alongside the disruptions caused to domestic and international supply chains. But again, Dadlani’s prevalent tone when addressing the subject of the pandemic’s effect on the industry, is optimistic.
“We are positive that the Sri Lanka rubber industry is poised to benefit from the needs arising from the COVID-19 pandemic. Demand for PPE is particularly high and will be sustained until COVID-19 is no longer a pandemic. Therefore, gloves and other wearables made of rubber will be a good area for the Sri Lankan rubber industry to focus on.”
Due to the Sri Lankan government’s suspension of the import of certain tyre sizes, there has been a renewed demand for domestic manufacturers, boosting the local economy for the short term.
“For the rubber industry, managing the impact of the loss of exports and the timings of the opening of overseas markets are critical at this point.”
Looking to the Future
With all this in mind, the future looks bright for the Sri Lankan rubber industry. At present, SLAMERP are busy establishing a rubber manufacturing zone, intended to attract new investors.
The pipeline also includes new technological investments, “especially in the area of protective barrier products such as those required for medical purposes.”
“As a thrust industry we are also looking at increasing R & D for the tyre sector to develop new niche market products and have initiated 3D modelling for moulded rubber products.”
By specialising in a product that has proved to be invaluable to a modern context, Sri Lankan’s rubber manufacturing industry’s future is as good as guaranteed.
“The current global economy is around 90 trillion dollars, and this is expected to more than double in a few decades, which will generate huge demand for natural rubber and rubber-based products.”