EU Deforestation Regulation Poses Challenges for Sri Lankan Rubber Exports

Strategic Insights -

The European Union's Deforestation Regulation (EUDR), set to take effect on December 30, 2025, aims to prevent deforestation associated with various commodities, including rubber. Sri Lanka, a major rubber exporter to the EU, is facing significant challenges in complying with the regulation. The country's smallholder farmers, who manage 68.14% of the total 98,393 hectares of rubber cultivation area, are struggling to provide geolocation data and proof of legal land ownership, which are essential for compliance.

Key Takeaways:

  • The EU's Deforestation Regulation requires rubber exports to be deforestation-free, legally produced, and traceable to the specific plot of land where it was sourced.
  • Sri Lanka is classified as a low-risk country under the EUDR, but exporters must still submit detailed geolocation data and proof of legal land ownership for farms producing the commodities.
  • Smallholder farmers, who manage 68.14% of Sri Lanka's rubber cultivation area, face significant challenges in providing the required documentation, including lack of internet access, smartphones, and technical skills.
  • The economic costs of EUDR to Sri Lanka are significant, with modelling suggesting a 7.6% reduction in rubber exports to the EU, resulting in a $24.4 million annual loss.
  • The primary reason for the noteworthy GDP impact is the high domestic value added within the rubber sector, as raw materials are primarily sourced from local farmers.
  • In the event of non-compliance, the reduction in labour demand from the rubber industry is a significant 15.6%, resulting in 5,312 fewer workers demanded by the industry.
  • Under the assumption that job vulnerability will be proportionate, 4,013 men and 1,299 women will face direct employment vulnerability.
  • Sri Lanka's Survey Department and Rubber Development Department have commenced a GIS-based mapping scheme of smallholder rubber plantations, but progress remains slow due to staff shortages and unreliable internet connectivity in rural areas.

Statistics:

  • 68.14% of Sri Lanka's rubber cultivation area is managed by smallholder farmers.
  • $24.4 million is the estimated annual loss for Sri Lanka's rubber exports to the EU in the event of non-compliance with EUDR.
  • 15.6% is the reduction in labour demand from the rubber industry in the event of non-compliance.
  • 34,048 workers were employed in the rubber manufacturing sector in 2023.
  • 5,312 is the number of fewer workers demanded by the industry in the event of non-compliance.
  • 4,013 men and 1,299 women will face direct employment vulnerability in the event of non-compliance.

Sources:

  • European Union's Deforestation Regulation (EUDR)
  • Survey Department and Rubber Development Department, Sri Lanka
  • International Labour Organization (ILO)
  • World Bank
  • OECD
  • Various industry reports and research studies