Indonesia&#;s downstream rubber industry is still underdeveloped. Today, the country depends on imports of processed rubber products due to the lack of domestic processing facilities and the lack of a well-developed manufacturing industry. Little domestic consumption of rubber explains why Indonesia exports about percent of its rubber production. However, in recent years there is a change visible (although a slow one) as exports slightly decline on the back of increased domestic consumption. About half of the natural rubber that is absorbed domestically in Indonesia goes to the tire manufacturing industry, followed by rubber gloves, rubber thread, footwear, retread tires, medical gloves, carpets and other tools.

Compared to its rubber producing competitors, Indonesia contains a low level of productivity per hectare. This is in large part due to the overall older age of its rubber trees in combination with low investment capability of the smallholder farmers, hence reducing yields. Whereas Thailand produces , kilogram (kg) of rubber per hectare per year, Indonesia only manages to produce , kg/ha. Also Vietnam (, kg/ha) and Malaysia (, kg/ha) have higher rubber productivity.

Being the world&#;s largest rubber importer, policies in China can have far-reaching effects on the global rubber industry. In late the government of China decided to approve a new standard for compound rubber imports. The permitted crude rubber content in imported compound rubber was cut from -. percent to percent, implying that compound rubber imports into China became subject to a percent import duty (the same tariff as natural rubber import duties). China’s new policy is a blow to its rubber suppliers in Indonesia as it results in declining usage of compound rubber in the world’s second-largest economy.

Like most other key commodities, international rubber prices have been under pressure after amid weak global economic activity (which impacted negatively on the automotive industry) as well as a natural rubber supply glut. Moreover, low crude oil prices made synthetic rubber very competitive, hence the natural rubber price sunk significantly between early and late . Meanwhile, advances in the development of bio-based tires also pose a threat to the rubber industry.

As the second-largest rubber producer, Indonesia supplies a substantial amount of rubber to the global market. Since the s, the Indonesian rubber industry has been experiencing steady production growth. Most of the country&#;s rubber output &#; approximately percent &#; is produced by smallholder farmers. Government and private estates thus play a minor role in the domestic rubber industry.