Rubber Prices Plummet... Cambodian Government Emergency Measure "Duty-Free If Below $1400"

Nearly Halved in Two Years... Annual Tax Revenue Expected to Decrease by $28 Million

[Asia Economy Phnom Penh, Guest Reporter Angilhyun] As natural rubber prices fail to recover from their weak trend, Cambodia will exempt export taxes from this month if the export price per ton does not reach $1,400.

According to local media on the 14th, the Cambodian government announced an export tax exemption policy based on this. According to the policy, a tariff-free rate will be applied to export prices below $1,400 per ton, $25 will be charged for prices between $1,400 and $1,800, and $50 for prices up to $2,500. If the price per ton exceeds $3,500, a $200 tax will be imposed.

Originally, Cambodia imposed an export tax of $100 for prices between $1,000 and $2,000 per ton, $150 up to $3,000, and 10% ($400) if the price exceeded $4,000. Although rubber accounts for only 2.6% of total exports, it is the second most profitable agricultural product after rice. Due to this measure, the Cambodian government is expected to lose $28 million in annual tax revenue.

The government made this decision because the current market price is putting pressure on the production costs of large-scale rubber plantations. The natural rubber market has generally been in decline since 2010. Prices plummeted from $3,500 per ton in 2017 to $1,336 last year. This year, prices have not improved beyond last year's level. Rubber plantations hire labor for tapping, but low rubber prices have made it difficult to even pay wages. Especially recently, the spread of the novel coronavirus (COVID-19) has drastically reduced demand for natural rubber. Although there is demand for gloves, the main demand sector, automobile sales, is sluggish. As a result, small-scale rubber farmers have begun switching to high-profit crops instead of rubber trees.

As rubber prices continue to decline overall, Thailand, the world's largest rubber producer, began reducing rubber cultivation areas starting in 2018. Thailand's annual natural rubber production is 5.15 million tons, accounting for 37% of the global supply.

Meanwhile, Vietnamese investment in Cambodian rubber plantations is reportedly still active. The Vietnamese state-owned Vietnam Rubber Group (VRG) recently announced plans to increase its rubber plantation area in Cambodia from 47,000 hectares to 65,000 hectares this year. VRG has invested $800 million so far and produced 50,000 tons of natural rubber last year.

This content was produced with the assistance of AI translation services.