Dhananath Fernando 00:12 Welcome, mr. Harin Di Silva, to Advocata Studio. Thank you very much for your time and joining this conversation. Speaker 1 00:17 Thank you very much for having me. Dhananath Fernando 00:18 So, Harin D Silva is the chairman of Colombo Rubber Traders Association. I'm sure we all had basically a stressful time with the U.S. tariffs. Speaker 1 00:30 Stressful time. Dhananath Fernando 00:32 How do you feel after after the revisions at 20% Also with competitors getting pretty much similar rates, except India. How do you analyse the situation on a rubber trader's point of view? Speaker 1 00:45 Right. So the onset when the tariff started, it was at it started at 44% and then it was brought down to 30% A lot of people thought that it will stay at 30 percent, but fortunately, the government engaged with the private sector, especially the the value-added rubber product manufacturers, and we've finally managed to get it down to 20 percent, which is which was huge because the rubber sector, Nana, it's a sector that brings in close over a billion dollars in revenue to Sri Lanka. Had we been at 44 and 30 percent, we would have had to kiss the American market goodbye, and that would have been a massive dent on our revenues because the American market for our products is about 300 to 350 million US dollars a year in revenue. So had it been at 30 percent or 44 percent, that revenue, that market was going to be completely cut off from us. So bringing it down to 20 percent was fabulous. Very thankful to the government and the diplomatic corps for liaising with the with the Americans, and bringing it down to 20% So now we are competitive regionally with countries like Indonesia, Vietnam, and Thailand. And Thailand, and India is a different story. Of course, right now the Trump administration has put their tariffs up to 50 percent, but still, the cost of manufacturing in India is is still extremely competitive. So, it's something that us in the rubber trade in Sri Lanka might be able to to utilise going forward, but it's going to be a very it's going to be a very hard task because, like I said, cost of manufacturing anything in India is is very very competitive. Dhananath Fernando 02:54 So Harin, now can you explain first about the rubber value chain because a lot of what lot of Sri Lankans know is okay. We have some rubber plantations. Some know that we are quite popular, competitive in the solid tie industry. Could you could you shed some light on like what's the value chain looks like and how does it work? You mentioned it's 1 billion US dollars and about 350 million exports to the U.S. Yes. Also, what's the composition of our exports to other countries, and also what's like the domestic consumption if there's any like significant amount. Speaker 1 03:31 Right. So, for starters, I joined the rubber industry in 2002, and when I joined the trade, the natural rubber production in Sri Lanka was close to 120,000 tonnes. Now, in 2025, that production figure has come down just under 70,000 tonnes, which means 50,000 tonnes less than when I started 23 years ago. So, the Sri Lankan rubber industry is predominantly a smallholder-driven industry. If you talk about these 70,000 tonnes that we are currently producing, a good 70% will come from your smallholders, that is your farmer, and the balance will come from your regional plantation companies like Yohorna plantations, Karinivati plantations, private companies. Out of that, the if you're talking about the local consumption demand for the value-added rubber industry in Sri Lanka, it's about a 150,000 tonnes, and the production is just under 70,000 tonnes, so a balance that 80,000 tonnes shortfall is what everyone is importing at the moment, and that takes out a fair amount of foreign exchange out of Sri Lanka, but the industries have no other alternative. Have to import, and I don't see the natural rubber industry growing exponentially over the next five years. There is, there are things that the government can do to make it work, but that's over. I would say more a 10 to 12 year plan. But imports of natural rubber will happen. It has to happen. Dhananath Fernando 05:23 Also, now what are the countries that we import natural? Currently, we Speaker 1 05:26 are importing natural rubber from Vietnam, Thailand, Indonesia, Malaysia, Cambodia, Ivory Coast, Nigeria, Liberia. Those are the I would say the Southeast Asian origins that I mentioned were the traditional natural rubber growing countries in the world. Right, West Africa, like Nigeria, Ivory Coast, Ghana, Liberia, new kids on the block, relatively new kids on the block. But they've they've they've grown very very aggressively, and currently Ivory Coast is probably the fifth largest producer of natural rubber in the world. But in the next five years, they are projected to be in the top three, and that is that is some some feat. Also, Dhananath Fernando 06:14 before we I mean move forward with the conversation, there is always a conversation about the synthetic rubber and the and the natural rubber. How's the market dynamics play out, and how do you see the competition, or what are the market movements around these two? Well, Speaker 1 06:30 synthetic rubber is, as you know, is derived from petroleum from the petroleum industry, petroleum products. So the price of synthetic rubber will always depend on the price of the crude oil, so that is up and down. Natural rubber used to be pegged to crude oil prices as well, but of late, natural rubber markets around the world seem to be having their own mind. They do not. They do not coincide with what the crude oil prices are doing. So, two different varieties of rubber, but especially if you're talking about tires, you cannot build a tire purely with synthetic rubber because there are certain properties like resistance to pressure, heat tolerances, things like that, where natural rubber is better than synthetic rubber. But you have to use them together. Together, Speaker 1 07:36 you cannot you cannot make a tire with just synthetic rubber. Neither can you make it with 100% natural rubber. Dhananath Fernando 07:43 So you, what you, what you mean to say is that the demand for natural rubber will always be there. Speaker 1 07:49 Absolutely. I mean, if you look at, if you talk about our day-to-day lives, the amount of times that a person would come into contact with a product that is manufactured using natural rubber is unbelievable. From your household glove to your the eraser that you find at the back of a pencil, your shoe sole, the gums that you use, especially the the clear gums that you use adhesives, all that has a fair amount of natural rubber that goes into it. So, natural rubber will always be in demand. Dhananath Fernando 08:30 Is there a uniqueness in Sri Lankan natural rubber compared to Ivory Coast or Vietnam or any other parts of the world? And is there a do we carry a unique proposition, especially when it comes to solid tire? We'll come to that category since we are one of the main exporters of solid tire. What is the uniqueness of Sri Lankan rubber? Speaker 1 08:51 From well, from my time in the industry, having spoken to a lot of the tire guys here, what they one thing they've all told me is the strength of Sri Lankan rubber that is manufactured, especially the the sheet rubber, is probably very superior to anything produced anywhere else in the world, right? So, as consequently, they like the rubber that they produce here. They pay a premium for it, but they like it; they still like it. But the problem in Sri Lanka is the scale. Like I said, we don't from 120,000 to 70,000 tonnes in 20 plus years doesn't give us economies of scale. So as a result, our cost of production will always be on the high side, and the buyers here will always pay a premium for Sri Lankan natural rubber. And also, like with the other plantations in Sri Lanka, basically plantation industry itself is has always been. Is a political pawn, because what we've seen in in in our time is any government that wants to come into power will always start talking about guaranteed pricing, price flows for the farmers. It's it's it's that's how they look at it, they look at it from point of getting a vote, but if you actually break it down, it's it's it's it's an industry in crisis, and the politicians and the governments know what the crisis is because similar our chamber and similar chambers have been in dialogue, constant dialogue with subsequent governments that have come in and left, but very little seems to have happened, and that is why one of the main reasons why the rubber industry in Sri Lanka finds itself where it is today. Dhananath Fernando 10:58 So, just wanted to understand a little bit more on the value chain because when I asked the other sectors like the apparel guys, not the TE, but the apparel guys, when I asked like, what's the support that you need from the government, they said if the government is not intervening, that's the best help that they could do on their front. But on the value chain, so you have the planters and you have the buyers like yours and the the manufacturing arms. Who else? Like, is there like any other importers? Like, how does it? I mean, you you get the you buy the rubber and the balance, or like the synthetic rubber certain components that you import. And I know there are some big companies who are also set it up here for solid tires, so on and so forth. Who are the other main players in this entire group? You covered Speaker 1 11:47 all the players. You covered all the players. You have the the growers, which are the regional plantation companies, and the smallholder. What's Dhananath Fernando 11:56 like their average extent of of their land? Smallholder like five acres, 10 acres. Speaker 1 12:02 No, I think on average, one to one and a half hectares. It's most of this land is inherited. Dhananath Fernando 12:09 Inherited, yeah, Speaker 1 12:10 and so it is what they have inherited from their parents. So, yeah. Dhananath Fernando 12:16 Okay, and and in the pre-conversation, you mentioned like if you replant, I mean, if you plant a new rubber tree, how long does it take? Speaker 1 12:24 Seven years Dhananath Fernando 12:24 to maturity. To maturity. Yes. And also, I think I remember when we did some numbers, we analysed coconut, we analysed rubber, tea. The productivity is reasonably. I mean, quite low in all our agricultural products, including rubber. Yes. Could you give a colour of why is it or is it actually low or what can be done? What is the what is the reason? Because you also mentioned from the time that you joined, from 120,000 it dropped to 70,000 in tonnes. Yes. Yeah. Speaker 1 12:53 I mean, if you look at the national average for natural rubber production, it's about between 650 to 700 kilos a hectare, right? Now, if you're talking about a player like Vietnam, who have done a lot of research and development into introducing new clones, disease-resistant, drought-resistant clones, some of those produces up to about 2,000 kilos per hectare, so you can see the the the massive delta that that I'm talking about. Research and development is also extremely important in natural rubber because currently the trees that are in the ground are very very old. The clones that have been planted Were planted at least 30, 40 years ago. So naturally, their their their productive time is done. Now it's time to take them out of the ground and replant them with newer clones. But again, the funding that have been allocated for research and development for new, more weather-resistant digit assistance clones in Sri Lanka has been very minimal. So as a result, we are still planting the same old clones, but but has been planted over and over again. And as time goes on, there are new diseases. Now at this point in time, the Sri Lanka Rabi industry is battling with a leaf blight. Dhananath Fernando 14:23 Right, Speaker 1 14:24 it's a it it brings down the yield by a good 30% and it it comes on as soon as the rain starts. Right, because rain and that humidity gives that the blight of an ideal environment in which to thrive. The rub. Research Institute of Sri Lanka has come up with couple of protocols on how to control it, but that still has not been informed to the public domain, or no one has. But we are in touch with them, but nothing has come out of it yet. We know they are trying, but the results are still to be seen. But yeah, research and development is also very very slow in Sri Lanka. So without research and development, I mean you can't flock the same horse for for years and years. Dhananath Fernando 15:17 Just wanted to understand since you mentioned a new plant takes about seven years. Now, what's the financing model? Because it seems, for if the already if the existing trees are about like 3040 years old, there is no real incentive for even for the planters to replant. I mean, because it takes about seven years. So, what I mean, are there any tested models, or is it like has to be subsidised by the government, or what's what has been worked mainly? Speaker 1 15:45 Subsidies have to be paid by the government because, like I said, smallholders you're talking about average smallholder who's living day to day, day by day, so they need to be given that incentive, and so with the plantation companies, because it's it's because to plant to replant their kind of extants that we are talking about, which is a lot larger, 1000s of hectares, also requires some kind of assistance from the government. But since the economic downturn, a lot of the subsidies that were handed out to the rubber industry are withdrawn. So currently, the Colombo Arbitrator Association we are engaged the government to get those reinstated again, those subsidies. So hopefully, hopefully this government will will do that. They have said we can let let let tell us what your problems are. We will try to fix what we can. There'll be certain things that we cannot fix. But yeah, this has always been one of our replanting subsidy has always been one of our main main areas of of interest that we always highlight at all the forums. If I may Dhananath Fernando 16:59 ask, when it comes to replanting, like what's the success rate? Like for to get like, let's say one successful plant which gives the adequate harvest. How many plants that you have to plant because there'll be a well, ideally Speaker 1 17:16 in a Rabe state, the extent is about 550 to 600 trees an acre, so you give and take another 10% for for for diseases and drought and things like that. So yeah, if you have between 550 to 600 on in an acre, I think you you you've done pretty well. You've done pretty well. Yeah. Dhananath Fernando 17:40 So so far we covered like the main ecosystem and the stakeholders in the game, and only thing that we know at the moment is there's some relief after the tariff changes because at least we are regional on a regional level we can compete. But what I gathered from Harin was that still India, while they have a 50% tariff, their cost structures is such that still they can give it a good competition. So they cannot expect any. I mean, shifting of the manufacturing to here or services to here. Probably not. Probably not because still they have. They're still cheaper Speaker 1 18:14 to produce there. Dhananath Fernando 18:15 Yeah. So so that's that's interesting to know. So now let's move to in terms of the categories, like in the value additions and the solid tire, I think most of the time when I have the conversations, not many people know. Actually, we are like the capital of solid tires. Like, how did it happen? Because generally, our stories we haven't been really competitive in exports market. I think, but the solid tire is a game that we somehow, I mean, really being able to. Do you have any insights? Like, what did we do right, or what are the challenges do we have? Speaker 1 18:47 Well, I mean, the Solitaire is set up here long before I joined the industry. The industry, but from the little I know, is they were again very attracted with the strength of the Sri Lankan natural rubber that is being produced here, that was I from what I've heard was one thing that got them got your Yokohamas, your Michelins, to come to come here, and also at the time the kind of the tax holiday tax exemptions that these companies got from the government were also very attractive at the time, so they came up, came out here, they set up, and yeah, they're still here. They're they're they're some of the largest exporters of these products from Sri Lanka. So yeah, that's that's what Dhananath Fernando 19:32 worked for them. Speaker 1 19:32 Yeah, and then Dhananath Fernando 19:34 now the next episode is while we got a, I mean, some but relief from President Trump's administration was he expected like demand contraction because still it is while we are we can compete at a regional level still it is like 20% higher than it was before. Yeah. So do you expect like a demand contraction or are these like essential goods for the U.S. Speaker 1 19:59 essential goods? I think, I think I don't see a huge drop in the orders that customers in America will place out of Sri Lanka. So, which is good. I don't think it. There was a short-term impact, of course, but after the 20% was done and dusted, I think I think business should be able to continue as it has. How was the response Dhananath Fernando 20:24 from the buyers and like the cost the additional 20% Because Abram guy said they had to absorb like half of it, and at the 10% when they were when it was the interim period, it was at 10% Yeah, but not sure how things have changed at 20% But how was the response from the buyers, was it like splitted and absorbed by by your I mean stakeholders versus them, or was it basically passed on to the consumer? What exactly had happened? Speaker 1 20:51 Well, I think some some of the buyers were okay to pass it on to the consumers, but a great majority of them were reluctant at first. I'm not. I cannot comment on what each buyer how they have approached it with the companies. But if you if if you if you take our company for example, the the buyers were really were very happy when it came down to 20% and they were willing to bet on. I'm not too sure about what the glove manufacturers and the solid tire guys, what their buyers were said, but I think everyone is pretty happy with with what the government has done to get to reduce this to 20 percent. Dhananath Fernando 21:32 Absolutely, and now the challenge is generally with President Trump's decisions. There's some level of uncertainty, while we have a bit of a relief period. What if if something happens and it's not about I mean, Sri Lankan taxes going up. Even if the competitive countries taxes going down, will will pose the same threat as a tariff increase for Speaker 1 21:56 us. Yes, absolutely. Dhananath Fernando 21:57 So on that context, how do you see this plays out, and what do we have to do actually? Speaker 1 22:03 Well, I mean, I think it's important to take it in context of the Sri Lankan context as opposed to say Indonesia. Indonesia said they will buy Boeing aircrafts. I think it was something like 30 or 40. They will buy more agricultural products from from America, but Sri Lanka is a lot smaller place. We we don't have the capacity to buy 30 Boeing aircraft or absorb a lot of the agricultural products that the U.S. is willing to sell. But one thing that we we can talk about is our purchase of energy, crude oil. It it was something that was spoken about very recently that the government has is looking into. But if you ask me, when these tariffs first came along, crude oil was a low-hanging fruit as far as I was concerned. I I I don't know why the negotiators didn't catch on to it a couple of months ago? Because a crude bill is quite quite considerable, and I think out of everything, that has the most potential to wipe out this deficit that mr. Trump hates to see with his trading partners. So, yeah, but Sri Lanka is different. All the other countries are a lot. They have a lot more products to offer. They have a lot bigger populations, and they can absorb a lot more products that the Americans are willing to sell to them. A lot more than we are here able to do in Sri Lanka. Dhananath Fernando 23:42 Also now, while if we were to make this an opportunity, because one you are on an individual or like your company is one of the main exporters of rubber products, so the the custom procedures that's what at Advocata that we generally recommend and advocate for that there are so many procedural and many barriers for exporters at the operational level. While tariff itself is a challenge, there are so many other cost factors that incurs because you have to manage with all those issues. And for every bureaucratic issue, there's a cost involved in terms of time, in terms of capital, in terms of employing someone to get things sorted Speaker 1 24:26 out. Dhananath Fernando 24:26 So, any any recommendations that you have on that front? While of course President Trump's what he does with I mean very limited in our control, but any other challenges that like that the government can sort out. Speaker 1 24:43 Yeah, I mean, first things, like you said, customs. It's as we know, it's it's all been a very grey area of how how things happen in the customs. So, simplifying those things, getting rid of the bureaucracy. I mean, simple things. Like you know, importing certain raw materials into Sri Lanka, a very big problem that currently the valued industry is having is application for licences because there are so many products that need to be imported into Sri Lanka where the customs requires us to apply for advanced licencing. Now we can do that, but the thing is, it takes them four months to sign off on those licences. Dhananath Fernando 25:29 What sort of licences are you talking? If I may ask, Speaker 1 25:31 it's say at the moment there is a it's it's a product called rubber processing oil. It's an oil that we have to import, which we use in a lot of our formulations. Now to import that, what the customs is saying is a lot of the people. There are some players in the lubricant industry here that are also importing this these particular oils, mixing it with what is manufactured locally and and selling it in the open market, I I I can't verify that, but this is what what the customs is saying. So as a result, as as as a way to monitor what is being imported, each of the importers need to have a licence. Dhananath Fernando 26:21 Oh, Speaker 1 26:21 so. it's a huge problem. I mean, we've we've made many representations to the the finance ministry, the customs on numerous occasions, and what we say is okay, fine, we are we are okay to apply for these licences, but we can't wait for four months because orders cannot take four months to manufacture. These because if these buyers can't buy it here, they will go somewhere else. So bureaucratic red tape. It's it's that's that's what it that's what it comes to. And the most recent thing is when we are importing natural rubber. Also, they have started saying we there there are certain quarantine regulations that we need to follow. Now, Sri Lankan businesses have been importing natural rubber for for for decades. Nothing like this was spoken about back then. So, what's why are they bringing this up now? And natural rubber is extremely important ingredient for our industry. So, by by doing this, these are the bureaucratic red tape that is holding our our businesses up, and I think this withdrawal of a swat come October is also something that you know they say we can have refunds in X number of days, but that is what so many administrations told us. But it just doesn't happen like that. So what we are bargaining for is and and and working for is for the government to keep this SFAT system going. It's a good system. Otherwise, you know, something like this can have massive implications for our operating costs. For you know, so because we know that the refunds are not going to come to us at the particular time that the government says it. It never has. Maybe this government might. If it does, that's great. But yeah, that's where we stand. Dhananath Fernando 28:23 Also, I wanted to understand now the exporters, the rubber exporters, are basically some of the main foreign direct investments that are working Yokohama's and Micheline. So, is there a way because the we are basically importing natural rubber on one side, at the same time you have a local manufacturing. If we, I mean, if we allow more industrial zones to set up, is there a is there reason for a major rubber player to invest more? I mean, in terms of this context, whether is do we still have an advantage? Maybe that ecosystem advantage or the presence of two main players already. Why I mean, why it is not growing from those two or three main players? I think Speaker 1 29:15 I think the fact remains that anyone worthwhile who's looking at coming and setting up in the rubber industry? I would first thing they're going to do is they're going to look at what the supply chain is, and when they do the numbers, they're going to see what it was in the early 2020s, in the early 2000s, as opposed to now, and then they are going to obviously ask the authorities, "What are you guys going to do about this? So, from my point of view, I don't see any worthwhile rubber company coming and sitting up here, because again, there is bureaucratic tape is one thing. Secondly, is you don't have the main ingredient here, not the ingredient is here, but it is very very overpriced. You can import it cheaper from overseas, so I think that's a reason why that no one apart from your Yokohamas and Michelins, after they've set up no one worthwhile. A foreign player has come to Sri Lanka because because they see what is going on here, and yeah. So we have Siat from India. They've they've been here for a long time, but yeah, I I don't see anyone having any any advantages in coming to Sri Lanka at this juncture with the supply situation for natural rubber and the bureaucratic red tape that is that that is very evident coming here anytime soon. So, Dhananath Fernando 30:54 as on a strategic point of view, so if we were to attract them, okay, we can even if we okay, let's say we'll bring down the regulatory barriers to a certain extent. Do you think still it won't work that we have to bring down like the I mean we can we have to increase the availability of natural rubber? Is it just one thing? And also, Speaker 1 31:12 if you see the rubber industry is very energy intensive, and and and Sri Lankan energy prices is some of the most expensive in the region currently, if I'm not mistaken, right? So that again is a is a huge is a huge drawback for anyone worth while coming here. So even there are and and producing anything in Sri Lanka is not cheap now. So if your cost of production is not going to be competitive with what your competitors are at, you're better off going and setting up somewhere else. Vietnam, Thailand, Cambodia are the big, big player in natural rubber. Very pro investment, foreign direct investment, but yeah, but setting up in Sri Lanka is is expensive. It's it's an expensive operator operation to run. Dhananath Fernando 32:09 Also, wanted to understand in terms of the rubber lands, the the the plantation companies and the smallholder farming. The land has been a another main issue. While 80% of the land is owned by the government, plantation companies have their lands, but I think again Speaker 1 32:31 it is on lease. It Dhananath Fernando 32:32 is on lease. All Speaker 1 32:33 all the plantation companies' lands are on lease. Dhananath Fernando 32:35 So basically, they do not have a incentive to again replant or Speaker 1 32:40 no. See if. if if the plantation companies one of the big problems the plantation companies are having right now is getting the extensions for the leases because most of them have rather 12 or 15 years left on their leases. So out of that you plant rubber, you have seven years, and then after that, you have another window of maybe five or six years, so it doesn't it doesn't look attractive to any investor to put his money down on rubber here. So that again is something that the government needs to look at, granting extensions to the leases that they have given the regional plantation companies. Dhananath Fernando 33:20 Got it. Also, now when it comes to investments and working with this U.S. tariff structure, what the other countries are doing right? Let's say Indonesia, Malaysia, and Thailand. Because from the little that I know, these moles and everything, as you mentioned, it's energy intensive and at the same time it's quite capital intensive. It's like you cannot easily move a plant from Thailand to here or here to Thailand. What the other guys are doing because it seems if President Trump's strategy is going to work with making America great again and more manufacturing going there. That means the demand for other products will also drastically increase. Which actually, if it works, if its strategy works, your industry should grow. Should grow. So, how do you see like others are responding to this trend? Speaker 1 34:18 To be honest, I it's still a little too early. I since these tariffs were brought down 20% I haven't had the chance to speak to a lot of the other stakeholders in the other countries. So, at this point, I'm not in a position to comment on how they are going to look at this and how what their plan is to moving forward. So, unfortunately, I'm unable to comment on that. Dhananath Fernando 34:40 Got it. So what I gathered from this conversation was 20% tariff is welcome. We can compete. 15% Speaker 1 34:48 would be ideal. 15% would be ideal. Dhananath Fernando 34:50 Still, we we basically we are still in the in the game. In the game. In the game. And you do not see a major demand. Contraction from the U.S. market is it? Speaker 1 35:02 Probably not. Probably not because it's quite Dhananath Fernando 35:04 essential. Yes. At the same time, there are challenges in terms of for planters because it's mainly smallholders and plantation companies are finding it difficult to extend their lease agreements, and it takes about seven years to when you plant a rubber tree to get the expected harvest, and at the same time, the production on the natural rubber is declining, which will not place us on an advantageous position to attract the investment. So also now things like rubber is quite, as you mentioned energy intensive. At the same time, these are also climate. I mean, quite sensitive for the climate. Speaker 1 35:48 Yes. Dhananath Fernando 35:48 Do you want to give like a sense of because the recent climate climate change scenarios? How does it work out? I mean, the because luckily after the crisis, when we looked at the data, we had fairly my chairman calls it God was always a Sri Lankan because we had we had a very good weather, which brought our I mean our renewable energy manufacturing was good at the same time the agriculture. How does it play out with rubber? Speaker 1 36:17 Well, rubber is a crop that if it rains too much, it's not good. If it rains too little, also it's not good. So you have to be somewhere in the middle. So thing is done. The rubber producing regions of Sri Lanka is predominantly in our wet zones in Kalutara, Avisavel, that area, Kagol. That's where the Ratnapura. That's where the Balkava rubber plantations are. So, when I joined this industry in 2001, if you take Avisavella for example, the average yearly rainfall there was about 3,250 millimetres, which was which was fine according to my friends who planted out there, which is fine. Today, it is over 6500. It is more than doubled, and naturally, the the the productivity of those plantations have come down quite drastically. Right now, if you take the month of May and June, we we had we had rains, and if you look at the catalogues for the weekly auctions, there were some auctions where there were only about 4050 tonnes available for us to buy. So yes, rain is a huge huge deal for rubber. Our association has always asked the government to move out from our traditional areas of the areas that I told you into places like Putlam, Polonnaruwa, Anuradhapura, Vavunia, and the Mahaveli zones, because they are relatively dry, but there is a very interesting case study, successful one, where about 15 years ago the government went and planted rubber rubber in Monaragala, because at that time Munaragala was a relatively dry area. Dhananath Fernando 38:24 Right. Speaker 1 38:25 I think they planted up something a couple of 1000 hectares, and today that is an absolute success. If you are talking the months of May and June or any rainy months in Sri Lanka, the bulk of the natural rubber that are available to local buyers comes from Monragala, because this project was absolute success. And if you look at the weather in Monragala now, like I said, when we were growing up, Monraga was considered a very dry, arid area, but it no longer is a dry, arid area. There's a lot more rainfall. the The temperature in those areas have reduced by several degrees. So it's it's a it's it's it's a living testament to a project that the government got involved in with the private sector, and did, and we are seeing the benefits of it being reaped now. So, if you can do it in Monaragala, why not do it with the other areas? Dhananath Fernando 39:34 Areas, but but from what I gather is you need land and better structure to move to those areas, and making sure that the rubber. Yeah, and and Speaker 1 39:45 another thing in those areas is, if you talk about Ratnapura, Avisavella, you'll see if you're driving those areas are very hilly, which makes it very difficult to tap and bring the rubber to the factories. Dhananath Fernando 39:58 Right, Speaker 1 39:59 whereas. Monaragala, Polonnaro, Putlam-the the the land is very Speaker 2 40:04 flat. Speaker 1 40:05 Now that is the same advantage that a Vietnam or Thailand would have, because having travelled to all those plantations in my time in the industry, those lands are very very flat. So the workers don't have to really tire themselves out to climb mountains just to get a a few kilos of latex. You know they can just move from one tree to other very freely, do it in half the time that they would trying to climb a mountain. So yeah, Dhananath Fernando 40:33 and improves productivity absolutely. Speaker 1 40:35 Yeah, yeah, yeah. Dhananath Fernando 40:36 And in terms of rubber, I mean the the other countries like Vietnam and Thailand. Additionally, do I mean, in terms of their rubber research institutes, and you mentioned about certain diseases. What's the what's the structure? Is there a best practice? Is it? No, it's it's about Speaker 1 40:57 coming up with the most disease resistant clone, and countries like that have invested a lot of money, and and and they've come up with a with a with a with a clone that can withstand these leaf blight attacks and things like that. Now the Sri Lanka Rubber Research Institute, Nana, is the oldest rubber research institute in the world. Dhananath Fernando 41:19 Okay, Speaker 1 41:20 you know, but with all that history and all that knowledge behind it, it it still finds it difficult to access to funding to fund its R and D practices, the the R and D activities. So yeah, other countries have been very focused in how they've approached this industry, and they are reaping the benefits of it now. Dhananath Fernando 41:46 We are the final part of our conversation, Harin. Except for U.S. what are the other main countries that we export for? Is it for the European Union? Yeah, Speaker 1 41:54 I mean, so if you talk about well, say natural rubber product, natural rubber, Sri Lanka also produces the the purest form of natural rubber in the world. It's called Sri Lankan pale crepe. It's it's used in it's used in industries like pharmaceutical industry to serve. It's used in the aerospace industry, various different applications. Now, apart from the U.S. the European Union is a huge buyer of these these rubbers, and we also produce another grade of rubber in Sri Lanka called Sole Crepe. It's manufactured predominantly for the shoe industry, so it's a natural rubber alternative to your synthetic sole. It comes in sheets, and a lot of the big shoe manufacturers like your Clarks. Clark's is probably the largest buyer, so they buy it. Then you have a lot of buyers out in in Japan. There's a sizeable market for a pear crepe and sower crepe. So, yeah. Apart from the U.S. there are other countries that are buying our rubber. But if you talk about margins, the margins that a U.S. customer pays is a lot better than what you would find anyone else paying? Dhananath Fernando 43:23 Thank you, Harin. And also, you mentioned, I mean, do we export natural rubber in the natural format? Like, Speaker 3 43:30 yes. Dhananath Fernando 43:30 And that is even for US. Is it tax free? You mentioned Speaker 1 43:34 raw materials are tax free. Tax free. These these tariffs do not apply for. But Dhananath Fernando 43:38 what's like the percentage of our raw material level exports to U.S. Speaker 1 43:43 negligible. Negligible. It's negligible. Negligible. Maybe one or $2 million. Dollars. It's it's negligible. Dhananath Fernando 43:50 So so. But Speaker 1 43:51 still, for a country like Sri Lanka, a million dollars is a million dollars. Yes, a million Dhananath Fernando 43:55 dollars. Absolutely. Harin, I think we covered a lot, but did I miss anything? Do you have any other comments which I could not cover, which you think the audience and the policymakers should know? Any final recommendations? Yeah, Speaker 1 44:07 I think a big challenge for us is going to be the European Union deforestation regulation compliance. What is that? Sorry, basically, so EU it's called UDR. UDR is basically a compliance that was brought in by the European Parliament, where any raw rubber or any value-added rubber product that is exported into the European Union and the rubber that is used to put that product together, must come from a plantation that is deforestation free. Dhananath Fernando 44:46 Right. Speaker 1 44:47 So, how do you monitor that? Is when when we source natural rubber, we we give certain geo coordinates of the land parcels. Where the rubber trees are grown, Dhananath Fernando 45:02 right, Speaker 1 45:03 right, and then there are certain due diligence statements that we have to also give to our customers with every shipment that we do, saying that there is no child labour, that the labour laws of the land are being followed, there is no pollution that takes place if you're talking about something like wastewater, which which is which is quite wastewater is something very big in the natural rubber industry. We need to treat it properly before we let it out. So a lot of those compliances will come in. This was supposed to come in first of January 2025, but the European Parliament got to know that the world was still not 100% on board with this. So they gave us, they gave the industry a one-year extension, and so from the first January 2026, everything that we ship out of Sri Lanka needs to be EUDR compliant. Now, in Sri Lanka, the bulk of the rubber is manufactured by the small holder, and a lot of the regional plantation companies, which are privately managed and owned, are on board. But the small holders, a great majority of them, do not even know where to start. They're completely at sea. Now we've been lobbying with the government, telling, look, we will give you the required assistance in terms of advice on how to do this. So far, it's the government has given you the rubber development department to oversee. But with personal experience, I know there are so many smaller in Sri Lanka that, first of all, do not understand what EDR is, do not understand how to get on board and be compliant, and that that that they're quite desperate at the moment, so if anyone is not compliant, from the end of this year, will cease to exist as a farmer providing natural rubber to the Sri Lanka rubber industry, which is a shame. Dhananath Fernando 47:14 How does it work now? You are a main rubber buyer. Speaker 1 47:17 Yes. Dhananath Fernando 47:17 So imagine if you are buying rubber from a small holder, how does they check whether that small holder has come? I mean, whether I mean, do you go? I mean, let's say the child labour, just as an example. So we we Speaker 1 47:31 we we have to do audits, periodical audits. We have to go, we have to go, we have to go unannounced. There are certain checklists that we have to sit with them and filter and have them sign off on it. We have to see if the the the the deeds of the land, if if they are legal, because there are some people who have acquired land and who have put up rubber and trying to sell like that. So, EODR addresses all those all those issues, so it's all about getting a whole load of smallholders under one umbrella and telling them this is what you need to do to sell rubber to anyone in Sri Lanka moving forward, because it's it's it's it's very important. A lot of these people, if they are not on board, they won't be relevant in the rubber industry in Sri Lanka, unfortunately, Dhananath Fernando 48:21 and you will not be able to buy from them. No, we won't. We won't because because Speaker 1 48:24 the the penalties that my buyers are faced with in Europe for importing something that is not compliant with EUDR is huge. It's something like 4% of the annual turnover, and they lose their licence to import natural rubber for 18 months. So that's not an option that they want to pursue. So they, they, and even now we have a lot of buyers who are coming to Sri Lanka, going to the estates, auditing it with us. So they are very, very concerned, and they are also very concerned about the our smallholders. The fact that a great majority of them are still not on board. Dhananath Fernando 48:58 Got it. Any other comments? That's the important thing that I really did not miss out. The Speaker 1 49:04 government. We asked the government reintroduce the replanting rubber replanting subsidy, reintroduce the rain guarding subsidy. The Kalambo Rubber Traders Association. We we are we are in the process of working out a 14 million dollar grant from the ADB with the Plantation Ministry and the Department Finance Ministry to rain guard all the extent of rubber in Sri Lanka. Now we've been trying to get this off the ground. We the ADB said, fine, this is a great proposal. We can do this for you, but you need to come via the government, the government, which is the Ministry of Finance and the Ministry of Plantation Industries. Now, for the past six to seven months, we've been going for meetings, emails, phone calls. It's nothing seems to have progressed. So, the rain guards are. Subsidy, the replanting subsidy, and taking the rubber plantations from the traditional plantation areas to non-traditional plantation areas. Those would be the three main things that I would like the government to be more aware of, and getting the smallholders EUDR compliant. I think if the government can do that, a lot of other things will fall into place. Dhananath Fernando 50:26 So basically, your three proposals are mainly connected to improving the productivity, the rain guards, and moving to the non-traditional areas, and the replanting. Yes, all three basically improves productivity, and at the same time, there's a there are a lot of regulatory barriers that has to be removed. So then the exporters can bring down the cost. At the same time, there's a big challenge coming from the European Union on their deforestation, new regulations that a lot of smallholder farmers have to comply with. At the same time, there's a lease extensions is a question mark for the the big plantation companies in the rubber sector. So Harin, with that, thank you so much for spending your time and knowledge on this industry. Thank you for having Speaker 1 51:15 me. Dhananath Fernando 51:15 Always welcome, and I think this is a crucial area because, of course, we all speak about diversifying exports, but we cannot diversify overnight. It's the same players who are in the game who slowly, slowly diversify for other sectors. When they become successful in their respective sector, they already have skin on the game. So let's we are looking forward, and you can subscribe on Advocata Institute, of course, we are available in Singhala and Tamil under Advocata Plus and as Advocata Kural. You can find us on all sorts of social media platforms, including Instagram, TikTok, WhatsApp, YouTube, Facebook, LinkedIn. You will be able to find us anywhere, and you will be able to see small eclipse of this conversation with Harin. He is the chairman of Colombo Rubber Traders Association. So then you can consume our content. Of course, you can subscribe and you can be a member of Advocata and become a subscriber of Advocata. So then you can you have you will have the access for the detailed reports that we do on many other industries. With that, Harin, thank you very much. Wishing you all the very best, and it's a quite a relief as at now. But we we hope that this relief period will stay during the rest of the time at office by President Donald Trump. Speaker 1 52:36 Thank you. Dhananath Fernando 52:36 Thank you very much. Thank you very much. Transcribed by https://otter.ai