The Hindu Business Line : `India should return to IRSG fold to gain competitive edge'

INDIA, which withdrew from the membership of the International Rubber Study Group (IRSG), London in 2000, can enjoy a cutting edge in the global rubber industry by returning to the world rubber body, feel rubber experts.

Talking to Business Line in Mumbai recently at the sidelines of India Rubber Expo 2003, on the various issues pertaining to international rubber industry and markets, Dr A.F.S. Budiman, Secretary-General, IRSG, London said IRSG membership would provide India with an equal voice in discussions on future development of both natural rubber (NR) and synthetic rubber (SR) industries, particularly the ever-growing tyre industry.

Besides accessing published statistical and economic data currently available to major tyre companies operating in India, member Governments can also get additional informaation and services, he said.

Excerpts of the interview:

How confident are you that India will soon return to the IRSG fold?

I am certain that India will return to the IRSG fold. In fact, India should at the earliest. IRSG provides an authoritative, independent view of the world rubber industry through meetings and contacts, in addition to access to the unbiased database maintained by the Secretariat which has contacts through its panel of associates with the world's major companies in production, trading and manufacture. This is important for the country's planners seeking to ensure that India's rubber industry retains its competitive edge and attracts investments from global players.

Is there a convergence of views among other members?

Yes. All the 18-member Governments of IRSG feel that India's active participation will be of benefit to both the Indian Government and the group. Hence, India's return into the Group will be cordially welcomed.

Where does China fit in here?

In my personal opinion, China is bound to emerge as a major competitor to India in the world rubber market, even though their infrastructure for NR is not as good as that of India. India has the people, the expertise, the English language, the land for growing rubber, and above all, democracy, which is a big, big asset.

You have a strong foundation in rubber. But what you need is a political will. Now with the ground realities of WTO and free trade, you have to change.

I can already see a change in your Government's thinking. More interaction with the international rubber community, and a better understanding of the problems of rubber producers is now needed. There is a great need to join forces internationally to lift the fortunes of the rubber industry worldwide.

What are the global developments in rubber?

World total rubber consumption has increased at an average of 5.9 per cent per year since 1900 to reach 17.41 million tonnes in 2001 from just half a million tonnes in 1900, and the two major factors for this increased offtake are a steady rise in world population and the ever-increasing world output, particularly in vehicles, footwear and industrial goods sectors. In 2001, world rubber consumption was interrupted by a global slowdown. However, the painful transition towards a market-based economic system saw the rubber consumption plunge throughout the late 1980s and the first half of the 1990s. I would say that the economic recession of 2001 in major industrialised countries was the key factor sending regional rubber consumption on a downward trend.

When did the Asian dominanace come about?

Asia-Pacific's share of global elastomer (rubber) consumption reached 47 per cent in 2001, compared with 19 per cent for European Union, 18 per cent for North America, 9 per cent for "Other Europe'', 6 per cent for Latin America and 1 per cent for Africa. Asia-Pacific region showed the most rapid growth, driven by increaasing development of downstream tyre and rubber goods industries, and its share would have been 50 per cent, but for the Asian meltdown.

Would you say the centre of gravity has now shifted East?

Yes. It has not only shifted East, but Asia, despite the economic catasrophe that engulfed it in 1998, is now the dominant consuming region. The major consuming countries are China, Japan, India, Republic of Korea, Taiwan and Asean members. In fact, Malaysia, Thailand and Indonesia are the three largest consumers in ASEAN belt, and consumption in Thailand has now surpassed that of Indonesia and Taiwan, and approaching the level of Malaysia.

What about the competition between NR and SR in the global contetxt?

Technological changes, including the development of radial tyres and the increasing use of NR latex products, caused SR share to drop until the early 1990s. The share of SR has since remained stable at around 60 per cent. However, latex rubber goods such as gloves and condoms are produced in large quantities in Malaysia, India and neighbouring countries, and this has helped to maintain a relatively high NR share in total rubber uptake in Asia.

How do you think the situation of NR domination will change in India?

In the short term, the removal of anti-dumping duties implenmted against imported material should have an impact. Furthermore, under WTO, tariff barriers have to go, and theoretically speaking, this should result in a greater influx of material into the Indian market. In the long term, further development of the domestic rubber industry would lead to extra SR in the domestic supply chain. Additionally, demand for SR and share of SR in total elastomer consumption in India is expected to rise in response to improving living standards and an associated increase in demand for both tyre and non-tyre products.

What about the supplies scenario?

On NR, it was felt sometime back that the surplus in India would be a passing one, with the commodity moving onto deficit consistently over the next decade. I feel that with expectations of increased demand for NR, it would be necessary to expand the supply base to meet future consumption requirements. The expansion of area under rubber would be a central goal.

How important do you think is exports?

Of the points listed as crucial to further development of the Indian rubber industry, perhaps the most widely debated is that pertaining to increased exports. The issue of opening up the Indian industry to rigours of global industry, through heightened level of imports and exports, is a widely debated one. Under any case, proponents of a change in policy on rubber industry presume that Indian exports of NR would become increasingly competitive in the global market, should added emphasis on increased exports be forthcoming.

What about Indian NR prices?

Indian NR prices have traditionally been above world prices. Supporters of a policy of allowing imports argue that should imports penetrate the Indian market at a much faster rate than has been the case historically, it would lead to a convergence in Indian and international prices of NR. Additionally, consumers would be given a greater choice in the local market.

What are the new trends in consumption now?

A major trend that has emerged in NR production is the sharp rise in domestic consumption in producing countries. In the 60s and the first half of 70s, more than 90 per cent of world output was exported. As large rubber goods industries are established in the producing countries, NR is being consumed domestically and less is now available for export. So much so that the percentage of world exports vis-a-vis production has fallen sharply. The share of NR consumption to NR production in major NR producing countries has increased from 13 per cent in 1960 to 50 per cent till recently.

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`India should return to IRSG fold to gain competitive edge'