The Legacy of Mardec

Rajarao, Jeyaraj C. (2013), The Legacy of MARDEC. Origin, Development and Contributions to the Natural Rubber Industry

Kuala Lumpur: University of Malaya Press. Pp. xxv, 280; bibliography and index.

Reviewed by Colin Barlow

This splendid account of a key initiative in processing and marketing rubber begins in the 1960s, when that crop was a pillar of the Malaysian economy. It records how a government-sponsored organisation supported by good technical expertise, clever management and strong political support can materially enhance small farmers’ incomes and livelihoods. The book describes MARDEC’s difficult but ultimately successful path to rural improvement, strewn as it was with numerous problems. The present reviewer participated in the early developments described, and can attest to the accuracy of J.C. Rajarao’s description of this important venture.

The book commences with a brief history of rubber’s introduction to Malaysia in the late 19th century, and describes the efforts from the mid 1960s of the late Tan Sri BC Sekhar, then Director of the Rubber Research Institute, to establish the factories that became part of MARDEC (Chapters 1-3). Rubber smallholders at that time received very low prices for unsmoked sheet and cup lump, and a good route to improving their miserable incomes was raising prices through making better product. The book recounts the progressive establishment of bigger more scientifically advanced factories producing high-quality elastomers, and the formal establishment of MARDEC proper in 1973. It scrutinises all aspects of the growing organisation in Malaysia, and goes on to cover the building of relations with overseas consumers. It appraises the continuing and inherent conflict between socioeconomic and commercial goals, the difficulties flowing from early financial losses, and the progressive achievement of more economic performances (Chapters 4-6).

The book then treats the development of rubber products in Malaysia, scrutinising MARDEC’s progressive establishment from the mid-1970s of joint ventures with rubber manufacturers. Plaat Malaysia, making bathing caps, was one of 17 companies in this category, as was the even bigger Ansell Malaysia making rubber gloves, Alfagomma MARDEC making hydraulic hoses, and Regal MARDEC making rubber utensils in oil and gas drilling. MARDEC’s relations with these companies strengthened and stabilised the market for its rubber, which also became subject to increasingly stringent specifications (Chapters 7-8). Not all relations worked well, of course, and both Plaat and Regal had later financial problems which were partly overcome through MARDEC’S interventions.

These advantageous market linkages were made against a background of periodically low rubber prices, which were exacerbated by the poorly implemented International Natural Rubber Agreement. This global scenario, and the negotiation by Malaysia, Indonesia and Thailand of the Tripartite Agreement finally stabilising prices, are treated in the final Chapter 9. The market difficulties and concurrent fashion for privatisation served from the early 1990s to stimulate government interest in selling MARDEC to commercial parties. This took time, owing to justified concerns of the National Association of Smallholders (NASH) that farmers’ welfare would be neglected for commercial gain and to problems of identifying a suitable buyer.

But privatisation was finally achieved in 2004 in a sale to a newly formed business consortium, Semi Bayu Sdn. Bhd., which in turn sold MARDEC in 2010 to Tradewinds Plantation Sdn. Bhd. for RM140 million. MARDEC is today increasing its overseas processing capacity and strengthening its links with Malaysian and overseas rubber products manufacturers. But in light of the well-founded fears of NASH it is interesting to note that MARDEC has now divested its interests in R1 International, its international marketing arm, by selling all its shares. This effectively removes the direct link between the international rubber market and the smallholders which was important in Mardec’s effort to ensure fair farmgate prices.

An interesting and attractive feature of the book are the interwoven stories of main players in the MARDEC enterprise. Thus Suleiman Manan,(now Dato) first Malaysian head of MARDEC from 1976 and a senior civil servant with wide commodity experience, comes out as a tough and effective leader, particularly concerned to achieve good commercial viability through well-trained staff. Suleiman as a young man with strong views nonetheless had real differences with Board members who were mostly much senior in age. But his toughness and astuteness were crucial in enabling MARDEC to successfully resolve disputes with many parties and to build the significant processing capacity needed to address smallholder needs. Again, Dr Mahmood Abdul Kadir (now Dato’), who had previously assisted Suleiman as technical controller, replaced him in 1982 for almost 30 years and was essentially the architect of MARDEC’s development. He was a highly effective and socially motivated person whose tactful, subtle and dynamic actions, and ability to take holistic perspectives, made him more acceptable to Board members. Sandana Dass, who took charge of marketing from the late 1970s, was another highly effective figure whose efforts along with those of Mahmood secured profitable relationships with consumers around the world.

J. C. Rajarao also stresses the key role of underlying ministerial support, first from the Minister of Primary Industries Dato’ Musa Hitam (now Tun Musa Hitam), then from Dato’ Paul Leong, and finally, over many years up to the time of privatisation, from Tun Dr Lim Keng Yaik. Rajarao relates many instances when explicit or implicit political support was crucial to MARDEC, as for example when Risda in 1974 began competing with MARDEC in buying and processing smallholders’ rubber, and Suleiman Manan stopped this with help from Dato’ Musa Hitam. Tun Dr Lim in particular had a close and supportive relationship with Dr. Mahmood and Dass, and this proved vital in facilitating operations. MARDEC was indeed fortunate, as J.C. Rajarao attests, in enlisting over many years the services of able and dedicated people who successfully implemented an important social and economic enterprise.

This is a highly significant book dealing with the key role of a government organisation in a major rural socio-economic improvement. It excellently illustrates the strong tradition of Malaysian government interventions to assist poor rural households, showing how agencies which include the Rubber Replanting Board, FELDA, FELCRA and RISDA can with good leadership, well-trained staff, and appropriate political support achieve their intended objectives. The book is recommended not only to interested Malaysians, but also to international development practitioners from other countries weighing up the relative merits of government-controlled and commercial approaches to relieving poverty. It is also an interesting and enjoyable read.