(AFP) The government today approved a RM1 billion fund to provide loans to some 300,000 rubber planters hit by flagging prices.

The decision to set up the fund was made by a special cabinet committee to raise the income of rubber smallholders, said Deputy Prime Minister Abdullah Ahmad Badawi who chaired a four-hour meeting.

"This cabinet committee agrees that the natural rubber industry is a vital industry and therefore the welfare of rubber smallholders must be looked after," he was quoted as saying by the Bernama news agency.

"We hope the plight of these smallholders can be alleviated and what the government has done can assist these smallholders to overcome the impact of flagging rubber prices."

Abdullah said the fund, which would be disbursed through various agencies, would be used for rubber replanting and to help the smallholders cultivate other crops for extra income.

It would also aid smallholders who want to venture into other more lucrative activities such as animal rearing, he said.

"The government also hopes rubber smallholders would replant their smallholdings with new and better clones and use modern tapping methods."

The committee has also proposed that research and development be enhanced to produce more rubber-based products and for an award to be given for encourage researchers, he added.

Incentives offered

Bernama quoted rural development ministry secretary-general Rahmah Kassim as saying that there were an estimated 300,000 rubber smallholders in the country.

Rahmah said 800,000 hectares (1.97 million acres) of land were available for replanting, of which 85 percent belonged to smallholders.

With the establishment of the fund, she said many incentives and assistance including loans could be given to smallholders to carry out integrated rubber cultivation alongside other crops and animal rearing.

Malaysia is the world's biggest palmoil producer, and the third largest for rubber after Thailand and Indonesia. It has recently launched several programmes to help boost prices of the two commodities.

Last month, the goverment announced a RM500 million allocation to provide incentives for rubber and oil palm smallholders.