China-Cambodia deal boosts rubber sector
China-Cambodia deal boosts rubber sector
The recent influx of Chinese investment in Cambodia’s rubber industry, spearheaded by a collaboration between the government and the Chinese National Engineering Research Centre for Rubber and Tire (NERCRAT), marks an important turning point for the sector.
The partnership is set to bring a new level of stability to the market, potentially reducing the country’s reliance on global exports of raw latex in the coming years.
Sun Chanthol, first vice-president of the Council for the Development of Cambodia (CDC), led a delegation from the private sector to meet with various Chinese companies, particularly in the tyre industry, during a visit to China from January 5-8.
He also signed a memorandum of understanding (MoU) with the research centre to enhance Cambodia’s rubber industry.
The centre expressed their intention to invest $1 billion in priority projects within the sector, as per a CDC statement on January 10.
The council reported that Cart Tire Co Ltd is setting up a factory in Svay Rieng province, making it the first tyre manufacturing venture in the country with an initial investment exceeding $350 million.
The company plans to increase capital investment to $700 million across approximately 120ha of land.
The expansion aims to bolster exports to major markets, including the US, Canada and South Korea.
Men Sopheak, director of Sopheak Nika Investment Agro-Industrial Plants Co Ltd, one of the country’s leading rubber exporters, told The Post on January 10 that the partnership with NERCRAT represents a significant step forward.
It will not only boost production but also enhance the quality of rubber latex to meet the demands of local tyre-processing plants.
“It is a positive step for the industry because we currently have three rubber-processing plants. The collaboration with NERCRAT will introduce more expertise and technology to advance our industry,” he said.
Sopheak noted that they have been supplying to a tyre-processing factory but in limited quantities as negotiations over price and quality are ongoing.
“We are currently supplying CSR-10 [Cambodia Standard Rubber 10] to a tyre factory in Svay Rieng, although in small amounts. We usually produce high-quality rubber for export, but CSR-10 is level 3, whereas we mainly export grades 1 and 2,” he explained.
He also noted that other rubber-processing factories are in talks with processing plants to supply domestically, which could foster a new local market for the industry.
Expanding facilities and government incentives
According to Him Aun, head of the General Department of Rubber, the country currently has three tyre-processing plants.
These include Newbustar (Cambodia) Tire Co Ltd, a subsidiary of the Chinese state-owned Doublestar Group, which invested $138 million in a Kratie province factory; General Tires Technology (Cambodia) Co Ltd, with an investment of about $300 million in coastal Preah Sihanouk; and Cart Tire Co Ltd, which invested $350 million in Svay Rieng.
Sopheak added that the CDC recently approved two additional tyre-processing factories, signalling further investment in the sector this year.
“We hope the industry will continue to grow and stabilise as we increase our capacity to supply domestically rather than export,” he said.
On November 23, the government announced plans to extend tax incentives for rubber exports for another two years, starting January 1.
The move aims to support cultivation and assist growers and exporters amid falling international prices. The new regulations stipulate that exports will be exempt from tax if the price of rubber falls below $1,600 per tonne.
The sub-decree outlines varying duty rates for other scenarios based on current price and export value.
Lim Heng, vice-president of the Cambodia Chamber of Commerce (CCC), emphasised the significance of the tax incentives for the agricultural sector, particularly the rubber industry.
He believes the measures could help stabilise supply, considering the country’s vast rubber plantations covering more than 400,000ha.
Recent data from the rubber department showed that between January and November, the country earned $445.5 million from rubber exports and an additional $1.503 million from rubber wood.
In November, rubber was priced at $1,333 per tonne, a 7.7% decrease compared to the same period in 2022, while rubber wood was valued at $231 per cubic metre.
Cambodia’s current total rubber cultivation area spans 404,578ha, with 78% (315,332ha) dedicated to latex production and the remaining 22% (89,246ha) under maintenance.
The export of latex and rubber wood in 2022 exceeded $531 million, with exports contributing $527.8 million to the total and rubber wood exports accounting for $4.089 million, according to the General Department of Customs and Excise (GDCE).
