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)