China’s Hainan Group to invest US$ 300mn to set up two rubber trade zones

By Nishel Fernando 
China’s Hainan Rubber Industry Group Co. Ltd has reached an agreement with the Plantation Industries Ministry to invest US$ 300 million to set up specialised free trade zones for rubber-based value-added exports in Kegalle and Kalutara districts next year.

“We have already indentified lands for these ventures. Hainan Group is expecting to purchase a significant portion of local rubber production to manufacture value-added and finished rubber products in these zones to be exported to China,” Plantation Industries Minister Navin Dissanayake revealed. 

He made these remarks speaking at a symposium on smart plantations in Colombo on Monday.

The parent company of Hainan Group, Hainan State Farms Ltd in recent years has acquired several plantations and plantation-related firms across South-East Asia to source materials for value-added rubber exports for the Chinese market. 

China is currently the largest consumer of natural rubber in the world consuming almost 40 percent of global rubber production. 

Dissanayake noted that Hainan Group intends to reach a separate agreement with the local government of Hainan Province to export value-added and finished rubber products from Sri Lanka in the near future. 

Hainan Group is likely to enter Sri Lanka’s plantation sector mid next year.

The Plantation Industries Ministry has already signed a MoU with Executive Governor of People’s Government of Hainan Province, Dr. Shen Danyang, in China, subsequent to consultation with the private sector led by the Rubber Industry Association.

The MoU is aimed at rejuvenating Sri Lanka’s ailing plantation sector that comprises of tea, rubber, coconut, cashew, sugarcane as well as related industrial value chains.

Hainan Rubber Industry Group has expressed its interest to play a key role in Sri Lanka’s plantation industry value chains with a particular focus on the rubber sector. 

Hainan Group is already in negotiations 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 RPCs. 

In fact, one of the RPCs owned by a leading furniture manufacturer has expressed interest for a joint venture with Hainan Group.

Ernst & Young China is currently playing an advisory role to Hainan Rubber Group on its plans to expand into Sri Lanka.

The Plantation Industries Ministry expects Sri Lanka’s low rubber yields to elevat from the current 800 kg/ha to minimum of 2000 kg/ha by securing investments and technology transfers of Hainan Group.

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

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 a subsidiary of Hainan State Farms Limited, which is the largest State-owned agricultural enterprise in the country’s Southern most tropical island province.

Hainan State Farms is the owner of China’s largest natural rubber plantation base and the largest base of tropical crops.