1. THE COUNTERMEASURES STRATEGY ADOPTED BY VIETNAM RUBBER INDUSTRY AGAINST GLOBAL ECONOMIC CONSTRAINTS Presentation by Dr. Tran Thi Thuy Hoa Secretary General The Vietnam Rubber Association The 1st Qingdao International Natural Rubber Forum, April 2 nd 2009, Qingdao CHINA Session “How rubber businesses should act under the global financial storm?”

2. TREND OF VIETNAM ECONOMY: KEY INDICATORS 20042005200620072008 GDP growth % 7.78.48.28.56.2 Agric. % 21.820.920.420.322.0 Industry % 40.241.041.6 39.9 Services % 38.038.1 Source: General Statistics Office of Vietnam Vietnam Rubber Association – Qingdao, 2 April 2009

3. TREND OF VIETNAM ECONOMY (1) The global financial crisis and economic recession have affected markets worldwide. It is predicted that world economic situation cannot recover quickly and consuming markets could be restricted until 2010.The global financial crisis and economic recession have affected markets worldwide. It is predicted that world economic situation cannot recover quickly and consuming markets could be restricted until 2010. Vietnam’s economy grew about 8% from 2004 to 2007, but only 6.2% in 2008. GDP growth rate in the first quarter 2009 reached 3.1%, only half of the level recorded in the same period of last year.Vietnam would suffer stronger impacts from the slowdown of world economy this year.Vietnam’s economy grew about 8% from 2004 to 2007, but only 6.2% in 2008. GDP growth rate in the first quarter 2009 reached 3.1%, only half of the level recorded in the same period of last year. Vietnam would suffer stronger impacts from the slowdown of world economy this year. Vietnam’s GDP would drop to 4.7% according to the predict of IMF in March 2009.Vietnam’s GDP would drop to 4.7% according to the predict of IMF in March 2009. Vietnam Rubber Association – Qingdao, 2 April 2009

4. TREND OF VIETNAM ECONOMY (2) Until now, agricultural products still play an important role in Vietnam’s economy. This sector shares around 20% – 22 % of the general domestic product value.Until now, agricultural products still play an important role in Vietnam’s economy. This sector shares around 20% – 22 % of the general domestic product value. The share of industrial sector is about 40%- 42% and the share of services sector is 38%.The share of industrial sector is about 40%- 42% and the share of services sector is 38%. Vietnam Rubber Association – Qingdao, 2 April 2009

5. TREND OF VIETNAM RUBBER INDUSTRY Natural rubber was the 9 th exported commodity in 2008 and the 3 rd exported agricultural products, behind rice and coffee.Natural rubber was the 9 th exported commodity in 2008 and the 3 rd exported agricultural products, behind rice and coffee. As a natural rubber (NR) producing country, Vietnam has been strongly affected by the downward trend in global rubber demand and declined prices beginning in late 2008 till now.As a natural rubber (NR) producing country, Vietnam has been strongly affected by the downward trend in global rubber demand and declined prices beginning in late 2008 till now. The current economic crisis impacts on automobile consumption which pulls the slowdown of tyre production and rubber demand. Besides this, prices of natural rubber and synthetic rubber cannot increase to high levels when crude oil prices are still at low levels.The current economic crisis impacts on automobile consumption which pulls the slowdown of tyre production and rubber demand. Besides this, prices of natural rubber and synthetic rubber cannot increase to high levels when crude oil prices are still at low levels. Vietnam Rubber Association – Qingdao, 2 April 2009

6. Trend of Rubber Area and Production in Vietnam, 1976 - 2008 Source: GSO, compiled by VRA The area and production of rubber plantations have been increased continuously since 1976. In 2008, this sector reached 618,600 ha and 662,900 tons. NR productivity was 1661 kg/ha.

7. Area and Production of rubber tree in Vietnam, 2007 SOUTHEAST: 374,950 ha (67.4%) 1714 kg/ha / 472,400 tons (78.5%) HIGHLANDS: 126,500 ha (22.7 %) 1,360 kg/ha / 106,560 tons (17.7%) COASTAL REGION: 55,150 ha (9.7%) 1,173 kg/ha / 22,700 tons (3.8%) NORTHWEST: 700 ha (0.1%) 2008: 4,600 ha TOTAL: 556,300 ha 601,700 tons The biggest rubber- growing area is located in the SE, following areas are in Highlands and Coastal region. New area has been in NE.

8. Area and production by sector, 2007 SectorHaTonkg/ha Estate301,800 (54%) 398,100 (66%) 1716 (106%) Smallholding254,500 (46%) 203,600 (34%) 1441 (90%) Total 556,300601,7001612 Source: Provincial Dept of Agriculture, compiled by VRA In Vietnam, state-owned rubber companies still dominate so far over area, production and productivity. Rubber smallholding has been encouraged to develop recently and would catch up 50% of the total area soon as the Government strategy.

9. Trend of NR export from Vietnam, 1990-2008 Source: General Statistics Office and MOIT, compiled by VRA NR export of Vietnam has been increased continuously in value but dropped 8% from 2007 in volume, reached 619,300 tons (drc).

10. Trend of NR Export Prices from Vietnam in 2008 and 2 first month of 2009 Source: Customs Office, compiled by VRA

11. Trend of NR Export Volume from Vietnam in 2007 and 2008 Source: General Statistics Office and MOIT, compiled by VRA NR export of Vietnam has been dropped 8% from 2007 in volume due to slowdown demand.

12. Vietnam NR Export by country in 2008 Source: Ministry of Industry and Trade, compiled by VRA China has been the NR biggest importer of Vietnam sharing 69 % of the total NR export in 2008. Other predominant importers were Korea, Germany, Malaysia and Taiwan which shared about 3-4% per each.

13. Vietnam NR Export by type in 2008 Source: Ministry of Industry and Trade, compiled by VRA The major type of the NR export was SVR 3L (48%), followed by SVR 10 (16 %) and latex concentrate (9%)

14. Vietnam NR Import by country, 2008 Total: 150,100 tons Source: Ministry of Industry and Trade, compiled by VRA Vietnam imported NR from other countries for re-export and domestic consumption, mainly from Thailand (49 %), Cambodia (26 %), Indonesia (17 %) and others (8%).

15. NR domestic consumption in Vietnam NR domestic consumption in Vietnam is still low, 80,000 – 100,000 tons/year, accounting 12 - 15 % of the total production. Value of Rubber Products made in Vietnam was estimated about US$ 300 million, which total export tunrnover was about US$ 100 million in 2008. The main rubber-based products are tyres and tubes produced for commercial vehicles, motorcycles and bicycles (70% of total value). Other rubber products are gloves, mattress, technical rubber products, shoe soles, conveyor belts, sport balls, rubber bands, mats, …(30% of total value).

16. COUNTERMEASURES OF VIETNAM RUBBER INDUSTRY In response to the sharp decline in NR prices and demand, the Vietnam Rubber Association (VRA) has recommended the following countermeasures against global economic constraints, which should be implemented in 2009 in order to minimize damages of NR producers: In response to the sharp decline in NR prices and demand, the Vietnam Rubber Association (VRA) has recommended the following countermeasures against global economic constraints, which should be implemented in 2009 in order to minimize damages of NR producers: Reducing NR production and export volumeReducing NR production and export volume Reducing cost of productionReducing cost of production Improving quality of rubber productsImproving quality of rubber products Stockpiling natural rubberStockpiling natural rubber Vietnam Rubber Association – Qingdao, 2 April 2009

17. COUNTERMEASURES OF VIETNAM RUBBER INDUSTRY (1) Reducing NR production and export volumeReducing NR production and export volume Speeding up replanting program is one of measures to reduce production, to compensate rubber income by wood income and to maintain jobs of labors, to have opportunities to use high-yielding clones and take full advantage of low prices of input in this period. Production cut-down will lessen pressure on pushing down prices deeper. Other measures would be applied such as reducing tapping intensity or frequency and late opening newly mature plantations. Vietnam Rubber Association – Qingdao, 2 April 2009

18. COUNTERMEASURES OF VIETNAM RUBBER INDUSTRY (2) Reducing cost of productionReducing cost of production Expenses to be cut or restricted will reduce production costs to avoid loss when turnover would be declined in this period. Current low prices of fertilizers and inputs will contribute to reduce rubber production costs in 2009-2010. Vietnam Rubber Association – Qingdao, 2 April 2009

19. COUNTERMEASURES OF VIETNAM RUBBER INDUSTRY (3) Improving quality of rubber productsImproving quality of rubber products Customers will be more and more exigent in narrow consuming markets and will prioritize high quality products or materials from reliable producers; therefore, consistent quality products must be given care. Vietnam Rubber Association – Qingdao, 2 April 2009

20. COUNTERMEASURES OF VIETNAM RUBBER INDUSTRY (4) Stockpiling natural rubberStockpiling natural rubber In case the NR trading prices in domestic markets below 1,000USD/ton or the NR export prices fall below 1,350USD/ton, state-owned companies and VRA’s members would be encouraged to cut rubber export and buy smallholders’ natural rubber for stockpile. The downward NR export volume could be amounted from 100,000 to 200,000 tons (15 – 30% of the total production) according to the demand and prices. Vietnam Rubber Association – Qingdao, 2 April 2009

21. Long-term responses to the impact of NR prices downturn In long-term responses to the impact of NR prices downturn, planters are encouraged to increase the productivity of rubber plantations by using high yielding clones, advanced techniques in planting and upkeeping, high effectively tapping systems to improve the productivity of tappers.In long-term responses to the impact of NR prices downturn, planters are encouraged to increase the productivity of rubber plantations by using high yielding clones, advanced techniques in planting and upkeeping, high effectively tapping systems to improve the productivity of tappers. The additional incomes for planters should be more focused such as intercropping, rearing and wood for furniture.The additional incomes for planters should be more focused such as intercropping, rearing and wood for furniture. New potential opportunity to improve the rubber planters’ income should be implemented as rubber planters contribute to reduce the impact of the climate change through carbon sequestration by rubber plantations.New potential opportunity to improve the rubber planters’ income should be implemented as rubber planters contribute to reduce the impact of the climate change through carbon sequestration by rubber plantations. Vietnam Rubber Association – Qingdao, 2 April 2009