China’s Hainan Group to set up rubber zone in Kegalle next year

The first specialised free trade zone for rubber-based value-added exports of China Hainan Rubber Industry Group Co. Ltd will be set up in Kegalle next year. 

“We are negotiating with China’s Hainan Group to set up rubber zones in Sri Lanka. I am very keen that we set it up in Kegalle. Hainan Group held extensive discussions with Sri Lanka’s private sector. They are planning to invest between US $ 50-100 million per venture,” Plantation Industries Minister Navin Dissanayake said. 

He made these remarks at the MoU signing ceremony of Sri Lanka Rubber Industry Master Plan 2017-2026 between the Plantation Industries Ministry and Sri Lanka Society of Rubber Industries, at the Sri Lanka Rubber Secretariat (SLRS), last Thursday.  

The minister was optimistic that the discussion between Sri Lanka and China’s Hainan Group will be materialised between the next four to five months. 

He noted that Hainan Group is currently exploring avenues of sourcing raw materials for value-added rubber exports to China. 

“They are looking at the bigger picture of getting raw materials,” he said.

As Sri Lanka doesn’t have sufficient capacity to meet such demand, Dissanayake said that Hainan Group may have to import rubber raw materials for value-added re-exports.

Hainan Group is also in discussions with at least two Regional Plantation Companies (RPCs) to set up joint ventures, which would allow Hainan Group to bring in the latest technologies to boost the current low yields in these RPCs. 

The ministry expects that low rubber yields could be elevated from the current 800 kg/ha to minimum of 2000 kg/ha.

The Plantation Industries Ministry expects Hainan Group would enter Sri Lanka investing in one to three RPCs and would expand gradually across plantation value chains in Sri Lanka.
In particular, one of the RPCs owned by a leading furniture manufacturer has indicated a keen interest for a joint venture with Hainan Group.

Dissanayake also emphasised on the need to facilitate the necessary legal and investment environment in a timely manner for Hainan Group to invest in Sri Lanka by overcoming the bureaucratic red-tape. 

Dissanayake signed an MoU with Executive Governor of People’s Government of Hainan Province, Dr. Shen Danyang, in China this May, subsequent to consultation with the private sector. 

The MoU is aimed at rejuvenating Sri Lanka’s ailing plantation sector that comprises of rubber, tea, coconut, cashew, sugarcane as well as related industrial value chains.
Ernst & Young China is currently playing an advisory role to Hainan Rubber Group on its plans to expand into Sri Lanka.

Hainan Group has also expressed strong interest on playing a major role in certain projects in Sri Lanka’s Rubber Industry Master Plan RMP – 2017-2026.

The SLRS is established as a public-private partnership to manage the implementation of the RMP. 

China Hainan Rubber Industry Group Co. Ltd is a listed firm on the Shanghai Stock Exchange, with a market capitalisation of over US $ 4.2 billion. It’s is a subsidiary of Hainan State Farms Ltd that manages over one million hectares of rubber estates.   

(NF)