Analyst predicts RI rubber will bounce back

Analyst predicts RI rubber will bounce back

JAKARTA (JP): Indonesia will see a robust rubber business in
2000 as the country's production and exports of rubber will
increase by respectively four percent and six percent, an analyst
said on Monday.

Chairman of the Indonesian Rubber Foundation Harry Tanugraha
also predicted that Indonesia would earn higher foreign exchange
earnings from its rubber industry this year as the price of
rubber was expected to increase to US$1 per kilogram.

He said Indonesia and other rubber producing countries would
generally see a steady increase in the demand from major markets
such as the United States and Korea as the economic growth of
those countries would stimulate the headway of rubber related
industries there.

"Indonesia itself, however, will likely switch its main market
from the U.S. to China and India in a bid to take advantage of
the recent efforts of President Abdurrahman Wahid to rejuvenate
our diplomatic relations with these countries," he told The
Jakarta Post.

He said there would be a great market opportunity for rubber
trading with China and India as the two, which had always
imported quite a large amount of rubber to offset their
relatively limited domestic supplies, were expected to speed up
their economic recovery this year.

Indonesia is the world's second largest rubber producer after
Thailand, with total production reaching 1.65 million tons in
1999 as against 1998's output of 1.53 million tons.

Harry said Indonesia's rubber output would increase this year
by almost 5 percent to reach 1.71 million tons, while exports
would rise by up to 6 percent to between 1.65 million tons and
1.7 million tons.

Indonesia, which has always sold most of its national rubber
output overseas, exported 1.6 million tons from 1999's 1.65
million tons output, Harry said.

He predicted the selling price of Indonesia's rubber to
improve to an average of $1 per kilogram (kg) this year from 70
cents per kg in 1999, thanks to higher demand and the
implementation of the free market mechanism.

"The free market mechanism -- which has replaced the previous
price control and intervention by the now defunct International
Natural Rubber Organization (INRO) -- will definitely bring a
much more favorable business climate as producers and consumers
can now reach a reasonable price based on the real supply and
demand mechanism," he said.

Harry said the disbanding of INRO, which was accused of
hampering the world's rubber trade for 20 years from 1979 to
1999, was the best decision for rubber producers since the
organization had failed to secure a stable and good price.

INRO stopped its operations in Oct. last year, following the
withdrawal of producer members Malaysia, Thailand and Sri Lanka.

The three countries were angered by INRO's inability to raise
prices and charged that the organization was more inclined to
protect consumers than the rubber producing nations.

INRO groups six rubber producing countries and 17 rubber
consuming countries. The producing countries are Thailand,
Malaysia, the Ivory Coast, Nigeria and Sri Lanka and Indonesia.

Rubber importers who hold membership are the United States,
Japan, China, Germany, France, Austria, Belgium, Luxembourg,
Denmark, Finland, Greece, Ireland, Italy, the Netherlands, Spain,
Sweden and Britain.

INRO had the mandate to buy rubber from the open market to
boost prices and sell from its buffer stocks when prices rose.

Payments to INRO are based on the size of a country's output
and for consumers on the quantity of imports.

The group's operations are based on the UN-brokered
International Natural Rubber Agreement, scheduled to expire in
Feb. 2001.

A team of producer and consumer members is now working to
decide the fate of the organization's 140,000 tons of buffer
stock.

Harry said independent rubber traders and brokerage businesses
were expected to grow tremendously under the free market scheme
to create a more dynamic trade.

"The world rubber market will grow tremendously. We expect the
existing rubber exchanges in Singapore and Japan to reactivate
their operations this year to make the world trade even more
dynamic," he said.

"Unfortunately, Indonesia's futures bourse seems to ignore the
chance, excluding rubber from its lists and instead making itself
busy with currency and stock trading, which are not actually
their fields of business," he said. (cst)