Rubber plays, at least, five important roles in the Indonesian economy that pushes economic growth through positive backward as well as forward linkages. First, as the income source of a substantial number of rubber smallholder. Of the national rubber area of 3.50 million hectares in 1995, 2.95 million hectares (84.5 percent) constituted smallholder rubber, involving 1.47 million farm households (DGE, 1996). In some monoculture areas, rubber farm becomes the principal source of smallholders' income. Second, as one of the promising business investment areas by large scale companies such as state-owned companies (Perseroan Terbatas Perkebunan, PTP), domestic private companies (Perkebunan Besar Swasta Nasional, PBSN), or foreign private companies (Perkebunan Besar swasta Asing, PBSA), in addition to smallholders. In 1995, rubber area of PTP, PBSN and PBSA respectively accounted for 248,393 hectares, 239,850 hectares and 294,824 hectares (DGE, 1996). The total value of rubber investment during the first long term development stage (1.969-1994) was 2,153 million US dollars, 28.84 percent and 71.16 percent of which were respectively allocated for large scale companies and smallholders (PT IDU and WHAD, 1996). Third, as an agro-industrial development corner stone. Traditionally, primary rubber produce has been the only source of raw material for rubber processing industries to produce semi-finished goods for export, such as SIR (Standard Indonesian Rubber), RSS (Ribbed Smoked Sheets), crepe, etc.
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