Bank guarantees hinder rubber exports: Association

Bank guarantees hinder rubber exports: Association

JAKARTA (JP): The Indonesian Rubber Association yesterday
requested the government to abolish its rule requiring importers
to provide bank guarantees when importing metal boxes used for
rubber export.

"We need the government's support. So, please, no more bank
guarantees for metal boxes. It has created additional costs," the
association's chairman, O.K Cornel, told journalists here
yesterday.

Cornel said that rubber is increasingly being packed in metal
boxes for container freight. Because of possible contamination,
metal boxes have replaced the wooden boxes traditionally used for
rubber freight.

There are only enough metal boxes, which are relatively new to
rubber shipping, to freight 300,000 tons of rubber per annum
worldwide, while the world's annual rubber output is six million
tons.

Cornel said that Thailand and Malaysia did not burden its
rubber exporters with bank guarantees on imported metal boxes,
even though they are the largest users of the boxes.

The Indonesian government, through a finance ministry decree
on Jan. 25, 1996, actually abolished import duties and taxes on
imported metal boxes used for export.

However, the government still requires rubber exporters to
provide bank guarantees when importing metal boxes: Rp 100,000
(US$42,680) a box (A 40-feet container holds 208 metal boxes).

"It is not the money that we are complaining about, but the
by-products of that requirement. The government knows all about
it, why don't they just abolish it altogether," said the
association's executive director, A.F.S. Budiman.

If the government does not tackle the matter soon, Budiman
warned, Indonesia would lose its share of the United States'
rubber market to Malaysia and Thailand, which are extremely
aggressive in that market. The United States has strict codes
regarding rubber quality.

He said the U.S. market is important to Indonesia because over
60 percent of its total rubber exports go there.

Indonesia, the world's second largest rubber producing country
after Thailand, exported 1.32 million tons of rubber last year,
up from 1.24 million tons in 1994.

Production

The country produces some 1.5 million tons of rubber a year,
mainly in the provinces of North Sumatra, South Sumatra, Jambi
and West Kalimantan. Small land holders produce 75 percent of
Indonesia's rubber. Their plantations make up 83 percent of
Indonesia's rubber plantation areas.

Indonesia's total rubber produce comprises 90 percent
technically specified rubber, 6 percent ribbed smoked sheet, 3
percent latex concentrate and 1 percent other rubber products.

Cornel said Indonesia faces stiff competition not only from
Malaysia and Thailand but also from some African countries,
especially Nigeria, Cameron and Ivory Coast.

As the quality of their rubber improves, they will easily
steal Indonesia's share of the U.S. market because they are
closer to the market. The delivery time from Africa to the United
States, for example, is between 10 and 12 days, compared with 30
days from Indonesia.

"Fortunately, their production is still very small, compared
to ours," Cornel said, adding that Indonesia will easily beat
Thailand to become the world's largest rubber producer,
considering its vast acreage and low labor costs.

But Cornel warned that natural rubber faces gloomy prospects
in the long run because of rapid technology advancements in the
production of tires and synthetic rubber. (rid)