AN ANALYSIS OF THE STANDARD MALAYSIAN

RUBBER SCHEME (SMR) AND ITS IMPLICATIONS FOR

THE PERFORMANCE OF THE RUBBER
INDUSTRY IN MALAYSIA

BY
NAGESWARI A/P PARMASIVAM

A PROJECT PAPER SUBMITTED IN PARTIAL

FULFILLMENT OF THE REQUIREMENT FOR THE
DEGREE OF MASTER OF MANAGEMENT

MANAGEMENT CENTER
INTERNATIONAL ISLAMIC UNIVERSITY
MALAYSIA

DECEMBER 2000

ABSTRACT
The Malaysian natural rubber (NR) industry has had over 100 years of existence.
It has grown to become an important industry in Malaysia, especially in terms of
employment opportunities for rural smallholders' families, foreign exchange earnings and
downstream activities. However, over the last few years the NR industry has faced a
multitude of problems in the fields of economics, production and related aspects.
The purpose of this study is to investigate the performance of rubber industry in
Malaysia, mainly the SMR Scheme within the time frame of 1985-1995.
The Malaysian NR industry is determined to overcome it's problems by
implementing the (Standard Malaysian Rubber) SMR Scheme. The SMR Scheme has a
crucial role to play in the process of securing the status quo which natural rubber had
been enjoying before the establishment of the synthetic industry.
This study also attempts to examine the performance of the SMR Scheme in the
international market. It was revealed that SMR has the ability to compete against other
grades in the international market, as it has emerged to become stronger, more efficient,
dynamic and competitive in the international scene.
In order to conduct this study, the researcher used descriptive analysis and also
monitored the changes in terms of percentage (%). The secondary data was directly
obtained from the Rubber Statistics Handbook, Malaysia 1996.
The findings revealed that although the rubber production decreased over the past
10 years the SMR Scheme has played a crucial role by increasing the production of
rubber in both estates and smallholdings in Malaysia. This paper also shows that SMR
leads the field among other types of rubber in the international market as is in heavy
demand and is exported to almost 34 countries.

ii

TITLE OF PROJECT: AN ANALYSIS OF THE STANDARD

MALAYSIAN RUBBER SCHEME
(SMR) AND ITS IMPLICATIONS
FOR THE PERFORMANCE OF THE
RUBBER INDUSTRY IN MALAYSIA
NAME OF AUTHOR: NAGESWARI A/P PARMASIVAM

The undersigned certifies that the above candidate has fulfilled the condition of the
project paper prepared in partial fulfillment for the degree of Master of Management.

SUPERVISOR
Signature:
Name:

Dr Ka1thom Abdullah

ENDORSED BY:

Name: Dr Junaidah Hashim

Title: Head, Master of Management Program
Date:

Name. Dr Obiyathulla Ismath Batcha

Title: Director, Management Center,IIUM
Date:

iii

Declaration

1 hereby declare that the project paper is the result of my own investigation,
except where otherwise stated. Other sources are acknowledged by references and a
bibliography is appended

Date: 12-12-2000

Signature:
Name:

iv

Nageswari Parmasivam

Acknowledgement

1 am taking this opportunity to express my appreciation to all my lecturers who

guided my fellow classmates and me for the three semesters when we were at
International Islamic University. This appreciation also goes out to all the staff at
Management Center.

I would also like to convey my thanks to my supervisor, Dr. Kalthom Abdullah

for her patience and guidance in helping me to complete this project paper. It has been
hard but nevertheless a worthwhile effort.

To my fellow classmates, I hereby acknowledge your contributions and assistance

during the past three semesters that we went through together. 1 truly believe that your
presence had helped to make my studies an enjoyable experience. I wish you the very
best in all your future undertakings and may all of you have a pleasant life.

Lastly, I am taking this opportunity to express my greatest appreciation to my

family members
my father (Parmasivam), my mother (Sarojini), my elder brother
(Puvaneswaran), my younger brother (Maheaswaran), my younger sister (Kamaleswari)
and my friend (Usha) who all sacrificed much of their time and patience to ensure that 1
was able to focus on my studies and complete this program on time.

Once again, may God bless all of you and I pray that we find what we want in
life.

vi

Table of Content
Page
i.

Abstract

ii

ii.

Approval

iii

iii.

Declaration

iv

iv.

Acknowledgement

v.

Chapter 1. Introduction
1 1
1.2

SMR Investigation

1.3

Objectives

1 4

vi.

Standard Malaysia Rubber Concept

1
7

of

the

study

Research Guidelines

7
8

1.5

Significance

of

the

study

1.6

Limitations of the study

1.7

Organization of the project paper

10

Chapter 2. Review of related Literature

2.1

Characteristics of SMR

12

2.2

Problems In SMR Production

16

2.2.1

Field Site Problems

17

2.2.2

Production Site Problems

18

2.3

Success in SMR Production

21

2.4

Practices of Management Techniques in Rubber Industry

24

vii

Table of Content (Continued)

Page
2.5

Performance of Rubber Industry and its implication on

Marketing System

26

2.5.1

Open Market

27

2.5.2

Internal Marketing

29

2.5.3

External Marketing

31

Chapter 3. Research Design and Methodology

3.0

Research Methodology

38

3.1

Data Collection Approach

38

3.2

Definitions of Key terms

39

3.2.1

Yield and Production

39

3.2.2

Imports and Exports

40

3.2.3

Domestic Consumption

40

3.2.4

Planted Hectares

40

3.3

Rubber industry Measurement

3.4

Limitation

3.5

Research Guidelines

42

3.6

Research Hypotheses

42

3.7

Statistical

of

Analysis

viii

41
the

study

of

Data

41

43

Table of Content (Continued)

Page
viii

ix.

Chapter 4 Data Analysis

4.1

Introduction

45

4.2

Characteristics of Secondary Data

45

4.3

Psychometrics

4.4

Hypotheses Testing

Properties

of

the

Secondary

Data

47
48

Chapter 5. Conclusion and Suggestions

5.1

Discussions

5.2

Limitations

5.3

Implications of the study

70

5.4

Suggestions for future research

76

x.

References

xi.

Appendixes

of

major

of

the

Findings

66

study

69

81

Appendix A

84

Appendix B

85

Appendix C

87

Appendix D

88

Appendix E

89

ix

List of Figures
Page
i.

Figure

1.

Exports

of

Malaysian

NR

Types

ii

Figure 2. Marketing Channels for Smallholder's

iii

Figure 3 The Flow of Natural Rubber in the General Marketing System.

37

iv.

Figure 4. Principle Statistics of Rubber Industry, 1985-1995: Malaysia

90

v.

Figure 5. Total Imports of Rubber in the International Market in 1995

91

vi.

Figure 6. Total Imports of SMR( tonnes) in 1995.

92

vii.

Figure 7. Production of SMR in both Estates and Smallholdings:

rubber

1985-1995: Malaysia.
viii.

34
36

93

Figure 8. Estates and Smallholdings: Non- SMR Application:

1986-1995.

94

ix.

Figure 9. Estates and Smallholdings: SMR Application: 1985-1995

95

x.

Figure 10. Export of RSS,1985-1995: Malaysia

96

xi.

Figure 11. Exports of Latex (Concentrated Latex, Revertex,etc.)

97

1986-1995.
xii.

Figure 12. Exports of SMR. 1986-1995: Malaysia

98

List of Tables
Page
i.

Table 1.1. Types and Grades of 1928 and 1995

ii

Table 2.1. SMR Grade Structure- Old and Revised Scheme

35

iii.

Table 4.1. Principle Statistics of Rubber Industry, 1985-1995: Malaysia

48

iv.

Table 4.1.1. The Mean Difference between Rubber Production,

Planted Area and Number of Estates.

v.

50

Table 4.1.2. The Mean Difference Between Total Planted Area

And Total Production

52

vi.

Table 4.2. Total Exports of Rubber (tonnes) in 1995

54

vii.

Table 4.2.1. Percentage of SMR Imported by 34 Countries in 1995

55

viii.

Table 4.2.1.1. The Seven Other Countries as Main Importer of SMR

56

ix.

Table 4.2.2. The Mean Difference Between SMR, RSS and LC

Imported by 34 Countries in 1995.

x.

Table 4.2.3. Export of Rubber Products by Product Group, 1994-1998

(Value in RM million)

xi.

58

Table 4.3. Production of SMR Rubber from both Estates and

Smallholdings.

xii

57

59

Table 4.3.1 The Mean Difference Between Estates (SMR)

And Smallholdings(SMR)

xi

60

List of Tables (Continued)

xiii.

Table 4.4. The Differences Between Non-SMR Application and SMR

Application Between 1985-1995

xiv.

Table 4.4.1 The Mean Difference Between SMR-Application

And Non-SMR Application

xv.

Table 4.5. Exports by Type of Rubber, 1986-1995: Malaysia

xvi.

Table 4.5.1, The Mean Difference Between the Three Main

Types of Rubber.

xii