"Is Vietnam's rubber really that big an industry?" Many people probably think so.
In fact, Vietnam is the world's third-largest producer of natural rubber, after Thailand and Indonesia. Its production reaches about 1.2 million tonnes a year, making it an indispensable presence in any discussion of Southeast Asia's rubber industry.
This article explains the structure, main growing regions, international competitiveness, and future challenges of Vietnam's rubber industry, for agriculture-related and business-related readers.
The Background to Vietnam Becoming "World No. 3"
Rubber cultivation in Vietnam began in earnest back in the late 19th century, during the French colonial era. French capital opened large plantations in the red-soil belt of the south, and that foundation was carried on even after independence.
The 1986 Doi Moi Since the (Renovation) policy, the privatization of state-run farms and their opening to smallholders advanced. As farmers became free to grow rubber, the cultivated area expanded rapidly.
Exports began in earnest in the 2000s, and today annual export value has reached a scale of about US$2 billion. In both production and export volume, it remains among Asia's top tier and is one of the pillars of agricultural exports.
Main Growing Regions: The "Rubber Belt" Centered on Binh Phuoc Province
Vietnam's rubber-growing regions are concentrated mainly in the "red-soil (basalt soil) belt" from the south to the central highlands.
| Province name | Characteristics |
|---|---|
| Binh Phuoc province | The largest growing region. Accounts for about 25% of the nation's cultivated area |
| Binh Duong province | Adjacent to the southern industrial zone. Many processing plants as well |
| Tay Ninh province | Bordering Cambodia, with active cross-border trade |
| Kon Tum Province | The central highlands. Cultivated area has been expanding in recent years |
| Gia Lai province | The cool highland climate stabilizes rubber quality |
Binh Phuoc province in particular is also called "the capital of Vietnamese rubber." Within the province, the main farms of the state-run Vietnam Rubber Group (VRG) are concentrated, and research institutions and processing facilities are well developed.
The cultivated area nationwide is about 970,000 hectares (as of 2023). Of that, the area managed by smallholders accounts for about 50%, a structure in which large-scale farms and smallholders coexist.
Competitiveness in International Markets
The main export destination for Vietnamese natural rubber is China, which accounts for about 75% of total export volume. It is followed by Europe, India, Japan, and South Korea.
Price competitiveness
Vietnam's production costs are said to be about 10 to 15% lower than Thailand's. The main reasons are the following three points.
- Labor costs lower than Thailand's
- Government investment in agricultural infrastructure
- High productivity from the red soil
However, in recent years the wages of agricultural workers have continued to rise, and the cost advantage is gradually narrowing.
The State of Quality Grades
The main grade of Vietnamese rubber is SVR (Standard Vietnamese Rubber).
| Grade | Use | Market reputation |
|---|---|---|
| SVR 3L | Tires and industrial goods | High quality, high export unit price |
| SVR 10 | General industrial use | The main export product |
| SVR 20 | Low-grade industrial use | Intense price competition |
| Concentrated latex | Gloves and medical supplies | High added value and growing |
Exports of concentrated latex, a high-value-added product, are increasing year by year, with 2023 up about 12% from the previous year.
The Relationship with Japan: Import Trends and Fields of Use
Japan ranks as a medium-sized importer of Vietnamese natural rubber, but demand for SVR 3L and latex products of stable quality is rising.
The main uses are tires, auto parts, medical gloves, and anti-vibration materials. Especially since the COVID-19 pandemic, the surge in demand for medical gloves has raised attention to Vietnamese latex.
Among Japanese-affiliated companies, there are increasing cases of setting up processing plants locally in Vietnam to manufacture rubber products and re-import them. Several Japanese-affiliated rubber-related companies have entered the industrial parks of Binh Duong and Dong Nai provinces, and the deepening of industrial cooperation continues.
Four Challenges Facing the Industry
While Vietnam's rubber industry has continued to grow, structural problems have also come to the surface.
1. The risk of international rubber-price fluctuations
Because the price of natural rubber is set in international commodity markets, both farmers and companies are exposed to price-fluctuation risk. The price, which was about US$5,000 per tonne at its 2011 peak, fell to around US$1,500 to 1,700 by 2023.
As this price slump continued, some farmers have begun converting their rubber plantations to Cashew nuts or to eucalyptus for timber.
2. Responding to the EU Deforestation Regulation (EUDR)
The EUDR (EU Deforestation Regulation), enforced by the European Union in 2023, restricts imports of agricultural products linked to deforestation. Natural rubber is one of the covered items.
Vietnam's rubber farmers and exporters are required to build traceability systems proving that their growing land is not converted forest. At present, responses at the smallholder level lag, and the impact on exports bound for Europe is a concern.
3. The problem of replacing old trees
In Vietnam, the rubber trees planted in the 1980s and 1990s are reaching the replacement period (tree age 25 to 30 years). Replacement requires an investment of several million Vietnamese dong per hectare, which is a heavy burden for smallholders.
The government has set up subsidies and low-interest loan programs, but the pace of adoption is not sufficient.
4. The risk of dependence on China
The fact that about 75% of exports are concentrated in China heightens geopolitical risk and demand-fluctuation risk. The impact when China's economy slows or trade friction arises is large, and diversifying export destinations is a challenge.
The Future Outlook for Vietnam's Rubber Industry
Despite the many challenges, Vietnam's rubber industry also has clear growth potential.
In its "Vision 2030," the government positions adding value to the rubber industry as a priority policy. Specifically, the following directions are indicated.
- A shift to more highly processed products (tires, industrial goods)
- Expanding exports of latex products
- Responding to EU-bound exports through obtaining certifications (FSC, PEFC)
- Cutting costs by introducing smart-agriculture technology
Also, to respond to the change in tire demand brought by the shift to EVs (electric vehicles), research to improve the quality of rubber for high-performance tires is advancing at the national rubber research institute.
Summary
As the world's third-largest producer of natural rubber, Vietnam produces about 1.2 million tonnes a year in the red-soil belt centered on Binh Phuoc province.
Its international competitiveness remains high, but four challenges — slumping rubber prices, responding to the EUDR, dependence on China, and replacing old trees — will determine the industry's sustainability.
For Japanese companies, the possibilities are also expanding, both as a procurement source for Vietnamese rubber and as a local production partner in the latex-products and industrial-rubber fields. As responses to traceability and quality certification advance, Japan-Vietnam transactions are expected to deepen further.
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