The increasing global rubber demand in recent years has encouragedVietnam, the fifth biggest natural rubber producer in the world in 2012,to restructure the industry to increase export value andimprove value chain . Report by the Vietnam Economic News.

Vietnam Rubber Group General Director Tran Ngoc Thuan said that torestructure the industry, implementing mergers and acquisitions(M&A) deals with small companies, associating with major brands,reducing crude production and diversifying products to improveadded-value and ensure sustainable development were needed.

Thuan also said that the group agreed with the restructuring projectof the Ministry of Agriculture and Rural Development. However, in termsof the cultivation sector, the ministry must have appropriate views.

The cultivation sector currently accounts for 72 percent of the GDP ofthe agricultural sector. Therefore, it needs to confirm the role ofbusinesses involved, especially in the fields of processing and creatinga brand, building added-value chain and improving internationalcompetitiveness. It is difficult to maintain growth, increase income,eliminate food shortage and reduce poverty for rural householdsthroughout the country when lacking the role of businesses.

In terms of competitive capacity of the rubber industry, Thuan saidthat Vietnamese rubber stood at top five in terms of area and top fivein terms of exports. In addition, rubber production in Vietnam reached1.75 tonnes of latex per hectare. Management and technology havebasically met practical requirements.

Highdependence on the Chinese market with 60 percent of exports to thismarket remains a weakness of Vietnam’s rubber industry. Therefore,promoting the exploitation and expanding the market are needed in therestructuring project.

The government assigned theVietnam Rubber Group to develop 500,000 hectares of the tree by 2015.However, this goal seems infeasible in the context of current economicdifficulties, and needs to be adjusted. The group’s point of view is toimprove the quality of varieties, production and added-value chain.

To improve value chain for the industry, implementing M&A dealswith small companies and linking to major brands to be able to producecompetitive products are needed. In addition, the rubber industry shouldfocus on constructing industrial infrastructure and manufacturing tire.

The group will focus on producing Medium-densityfiberboard (MDF) in Quang Tri, Binh Phuoc and Kien Giang provinces.Moreover, research to expand business and production activities in thecentral region is necessary. The group strives to account for 50 percentof MDF output providing to the domestic market by 2015 and produceswooden boards and bars to diversity products.

Vietnam’s rubber industry strives to reach sales of 150 million VND(7,100 USD) per hectares. To build a brand for Vietnamese rubber, thegroup has successfully registered “caosuvietnam” brand name in somemajor markets.

According to Thuan, closely managingavailable rubber area is also an important point in the restructuringproject, helping ensuring the quality of varieties and production.

The industry’s restructuring project only mentioned rubber areas insoutheastern region and the Central Highlands. Therefore, Thuan proposedto add the south-central coast, the north-central coast and northernmountainous provinces into the list, adding that the establishment of amanagement agency on rubber is needed.