REPUBLIKA.CO.ID, JAKARTA -- Crumb rubber industry is open to 100 percent foreign investment after the revision of the Investment Negative List (DNI) announced last Thursday, Industry Minister Saleh Husin said.
"We have opened the crumb rubber industry to all those who want to invest in this sector, be these domestic or foreign companies. We want this industry to absorb as much investment as possible," the minister said here on Tuesday.
The problem is that the crumb rubber factories in Indonesia could not absorb the abundant rubber supplies at home.
He said the supply of raw rubber in the domestic market has reached some three million tons per annum while domestic crumb rubber businesses has been only able to absorb some 700 thousand tons per annum.
The low utilization of raw rubber caused rubber prices to drop below the price of rice. As a result, farmers were reluctant to rejuvenate their rubber plantations, this making raw rubber supplies hard to come by.
"A number of companies face difficulties in obtaining raw rubber," noted Saleh.
For this purpose, Minister Saleh said, the government has now opened crumb rubber sector to foreign and domestic investment, with the aim to jack up prices.
As a result, he said, farmers will again be optimistic and will replant rubber trees and tap them to meet the national crumb rubber industry's need for rubber.
"We want welfare of rubber farmers. As of now, they had stopped tapping their rubber trees. The sector cannot be allowed to be run only by a handful of businesses," said Saleh.
The government has revised the DNI list, taking out 35 economic sectors from its purview and opening these to 100 percent foreign investment. These sectors included crumb rubber; cold storage; tourism businesses such as restaurants, cocktail lounges, cafe's, recreation centers, arts and entertainment; sports centers; and film industry.
The Indonesian Rubber Producers Association (Gapkindo) has said that rubber industry in the upstream sector, such as crumb rubber business, should remain confined only to national or domestic industry as the country now has 140 factories.
Currently, the existing rubber factories in the upstream areas could not operate to their full capacity and could not employ workers optimally. "With this revision in the DNI, opening it to new investment (in the upstream sector to foreign investors) will kill the existing industry," Moenardji Soedargo said in Jakarta on Monday.
Chairman of the Indonesian Rubber Business Council, Aziz Pane said the removal of the crumb rubber sector from the DNI will allow foreign investors to freely make new investment in the upstream rubber industry by establishing new factories or acquiring existing ones.
Pane said this can lead to a situation where the price of farmer's rubber produce will be determined by big oligopolistic companies.
The regional oligopolistic market will damage the cause of good cooperation order and result in farmers suffering losses. There are fears that it may lead to farmers shifting from rubber to more advantageous plants.
"Many farmers have cut down their rubber trees because the rubber price level no longer promises benefit. The situation can prove to be dangerous since Indonesia is known as a rubber producer country," Pane said.
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