(source: Thailand Investment Reivew, August 2016)
Thailand is the world’s number one rubber producer. With its strategic location at the center of Southeast Asia and an abundance of natural rubber, it remains an attractive destination for investment in the rubber industry.
Not only is the country a regional vehicle production and export base for some of the world’s leading carmakers, the growing demand in the nation’s healthcare market and the strong government support for rubber and its supporting industries also makes it an ideal destination for foreign investors to set up manufacturing bases.
Global Rubber Consumption Increases
According to the International Rubber Study Group (IRSG), global rubber consumption in 2015 was 26.8 million tons, with synthetic rubber accounting for 14.4 million tons and natural rubber accounting for 12.4 million tons.
Thanks to growing markets in both the global automotive and medical device industries, IRSG sees strong growth opportunities in total global rubber consumption and has forecasted a growth rate of around 2.7% per annum over the next decade.
Thailand Leads in Natural Rubber Production
Thailand has retained the top spot as a world leader in natural rubber since the 1990s. According to the IRSG, global natural rubber production in 2015 was 12.3 million tons, 92% of which was produced in the Asia-Pacific region. Thailand remains the world’s number one producer and exporter of natural rubber; in 2015, the country produced around 4.5 million tons and exported about 3.7 million tons, which accounted for 36% of global natural rubber production that year.
In terms of growth over the past five years, Thailand’s production of natural rubber has grown at a Compound Annual Growth Rate (CAGR) of 5.8%. This is largely due to Thailand’s tropical climate, advanced cultivation methods and its dedication to research and development (R&D) that has helped the country consistently improve the quality and consistency of its natural rubber output.
Regional Hub for Global Rubber Companies
Given its leading status in natural rubber production, it is easy to see why many leading international rubber product companies such as Bridgestone, the Siam Michelin Group, Dunlop, Von Bundit, Top Glove, Thai Rubber Latex, and Durex have set up manufacturing bases in Thailand.
In 2015, the domestic consumption of natural rubber accounted for only roughly 13% of production, or about 0.6 million tons, according to the Rubber Authority of Thailand.
Thanks to a strong manufacturing segment and the large volume of natural rubber, Thai and foreign companies not only produce enough rubber products to meet local demand but also have a surplus to export internationally. In 2015, the total value of rubber products exported was THB 230 billion (USD 6.6 billion) according to the Thai Customs Department. The top five exports that accounted for 75% of the total were tires (51%), gloves (14%), hoses (4%), elastics (4%), and condoms (2%); and the top five export destinations were China (57%), Malaysia (12%), Europe (7%), Japan (6%), and South Korea (4%).
Rubber City Receives Strong Government Support
The Ministry of Industry has assigned the Industrial Estate Authority of Thailand (IEAT) to establish a Rubber City in the southern border province of Songkhla, to serve as a hub for rubber products. It is expected to be operational in July 2017.
Set up over a total area of 487.2 acres (1,218 rai), around 175.2 acres (438 rai) will be used as a ‘premium zone’ for clean industries and 311.6 acres (799 rai) will be set aside for midstream and downstream rubber industries.
Rubber City offers both Thai and foreign investors many business opportunities; its location in the southern part of Thailand is clearly a comparative advantage being home to many of the country’s latex plantations, accounting for over 70% of the supply of national gross latex. The location also has the comprehensive infrastructure needed to support the export needs of businesses such as inland waterways and air transport hubs.
Attractive BOI Incentives
Thailand’s Board of Investment (BOI) offers various tax and nontax incentives to businesses in the rubber industry; eligible activities related to the manufacture of natural rubber products and rubber tires for vehicles are granted an exemption of corporate income tax for up to eight years. Non-tax incentives include the exemption of import duties on machinery and raw materials used in manufacturing export products, and permission to bring in foreign experts. Additional information about specific manufacturing activities related to the rubber and automotive industries can be found on the BOI website or by contacting your nearest BOI office.