Doubt cast on rubber cartel<\/p>\n
Sari P. Setiogi, The Jakarta Post, Jakarta<\/p>\n
The establishment of a rubber cartel by Indonesia, Malaysia
\nand Thailand has had an immediate positive impact on the price of
\nthe commodity.<\/p>\n
However, a top executive warned that International Rubber
\nLimited (IRCo), which was set up by the three countries on
\nTuesday, might not succeed in propping up rubber prices in the
\nlong term.<\/p>\n
Local traders said the rubber price on the international
\nmarket rose to US$1.20 per kilogram after the signing of the
\naccord for the establishment of IRCo from $1.17 per kilogram on
\nTuesday morning.<\/p>\n
IRCo was established amid concerns over the declining price of
\nthe commodity over the past several years. The cartel was
\nexpected to prop up the price of the commodity and thus ensure
\nbigger profits for millions of rubber farmers in the three
\ncountries. Thailand is the world's largest rubber producer,
\nfollowed by Malaysia and Indonesia.<\/p>\n
However, a top executive of an Indonesian rubber company told
\nThe Jakarta Post that he doubted the effectiveness of the cartel.<\/p>\n
He mentioned the failure of the former International Natural
\nRubber Organization (INRO), which was dissolved in September
\n1999. The organization, which consisted of 21 countries made up
\nof both natural rubber producers and consumers, failed to
\nstabilize the price of the commodity.<\/p>\n
"If an organization of 21 countries failed, how can a cartel
\nmade up of three countries do better?" he said.<\/p>\n
The three countries have estimated that a total investment of
\nUS$225 million will be needed to make IRCo effective. They have
\nagreed to put in $4.5 million as the initial investment in the
\nfirm, with Indonesia and Malaysia providing $1.5 million each and
\nThailand $2.5 million.<\/p>\n
The three countries will share the total investment in the
\nfuture based on their output with Indonesia obliged to provide
\n$75 million.<\/p>\n
However, the executive doubted if Indonesia could meet its
\nobligations.<\/p>\n
"Given the financial situation recently, are we really able to
\nafford that much?" he questioned.<\/p>\n
He also pointed out that each country in the cartel had their
\nown interests, which could cause internal conflicts in the
\ncompany. As an example, he mentioned Thailand's plan to open up
\n160,000 hectares of rubber plantations starting in 2004.<\/p>\n
"This goes against the supply management scheme deal of 2001,"
\nhe said.<\/p>\n
IRCo will prop up the rubber price by controlling exports and
\noutput.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/doubt-cast-on-rubber-cartel-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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