Article Exploring relationships between rubber productivity and R&D in Malaysia Ibragimov Abdulla and Fatimah Mohamed Arshad Abstract In recent decades, the Malaysian rubber sector has developed from a supplier of raw materials to a rubber-based manufacturing industry producing export products such as gloves and tyres. In contrast, the upstream rubber sector has experienced a declining trend in both plantation area and production capacity. In 2015, almost 95% of rubber pro- ducers were smallholders who depended on plantations as their main source of income. Despite government efforts to boost growth in the industry, the area and productivity have continued to decline. This study attempts to examine the structural factors that led to a decline in rubber area and natural rubber production and proposes strategies to enhance productivity and returns for smallholders. A system dynamics approach was used to capture the feedback relationships between variables in the rubber production system as well as the temporal lags and non-linearities. The findings suggest that gradual research and development funding for development of high-yielding clones holds major promise for yield improvement and increased income for smallholders. Keywords plantation area, production capacity, income, smallholders, system dynamics Introduction The rubber tree (Hevea brasiliensis) was brought into Malaysia from South America in the 19th century by Brit- ish scientists and is currently grown in many Asian coun- tries (Fox and Castella, 2013; Nyaka Ngobisa, et al., 2013). Since then, the industry has developed through the years and became the second major commodity product in Malaysia after palm oil and was considered to be a crop in focus in the First (1956–1960) and Second Malaysia Plans (1961–1965). In the 1960s, Malaysia was one of the world’s largest natural rubber producers. However, by 2014, Malaysia contributed only about 8% to world production and was ranked third globally. Currently, the largest rubber produc- ing countries are Thailand, Indonesia, Malaysia, Vietnam, India and China which collectively account for 90% of world production (Fox and Castella, 2013). Rubber is primarily exported to China, Germany, United States and Iran to be processed to produce vehicle tyres and gloves. One of the main structural modifications in the Malaysia rubber industry was the expansion into local processing of value-added products. Nevertheless, the plantation area under rubber has declined since the 1980s in accordance with the diversification programme driven by unfavourable rubber prices. The decline in area resulted in a correspond- ing fall in rubber production which led to the failure of several rubber-based factories. Moreover, as the country’s economic policy shifted from primary production to export-oriented manufacturing, this structural moderniza- tion had a major impact on the rubber industry and wider agricultural sector. The industry contributes to the coun- try’s gross domestic product (GDP), export earnings as well as employment. In 2010, the export value of rubber and rubber products was valued at RM25 billion, representing 4% of the total export value. In the same year, the share of the industry in GDP was 1.4% with 10,813 workers engaged in the sector. Malaysia also plays a significant role in the world rubber market, despite the fact that its contribution is declining. In 1980, Malaysia was the dominant producer of rubber glob- ally, accounting for 41% of total world production, fol- lowed by Indonesia and Thailand with 27% and 12%, respectively (FAO, 1989). In 1980, Malaysia was also the dominant exporter of rubber in the global market with 48% of world production, followed by Indonesia and Thailand with 31% and 14%, respectively (FAO, 1989). By 2010, it accounted for only 9% of world production and was the third largest producer, followed by Thailand and Indonesia with 30% and 28%, respectively. This study focuses on understanding the dramatic changes undergone by the upstream sector and proposes a model based on a system Institute of Agricultural and Food Policy Studies, Universiti Putra Malaysia, Serdang, Malaysia Corresponding author: Ibragimov Abdulla, Institute of Agricultural and Food Policy Studies, Universiti Putra Malaysia, Serdang, Selangor 43400, Malaysia. Email: upmikdpm@gmail.com Outlook on Agriculture 2017, Vol. 46(1) 28–35 ª The Author(s) 2017 Reprints and permission: sagepub.co.uk/journalsPermissions.nav DOI: 10.1177/0030727016689731 journals.sagepub.com/home/oag