Fund set up to stabilize rubber prices

Fund set up to stabilize rubber prices

KUALA LUMPUR (AFP): Malaysia and Thailand, among the world's top rubber producers, are to establish a US$43 million fund to help stabilize rubber prices, the official Bernama news agency said.

Primary Industries Minister Lim Keng Yaik said the two countries would buy up to 140,000 tons of rubber from the buffer stock of the International Natural Rubber Organization (INRO).

The fate of INRO, the 19-year-old organization linking producers and consumers, was sealed in September after Thailand -- the world's largest producer -- and Malaysia -- third largest after Indonesia -- decided to pull out.

Malaysia withdrew from INRO last October, while Thailand's membership will cease on March 25.

Lim said Saturday that the agreement was reached with the Thai deputy agriculture minister, who is in charge of rubber, on January 27.

In an effort to stabilize prices, the two countries have set up the Malaysia-Thailand Rubber Fund with Malaysia to commit 80 million ringgit ($21 million) while Thailand will contribute 800 million baht ($22 million), he said.

Lim said both countries would purchase from the buffer stock on an individual basis.

"There is going to be coordinated buying. (It) means how you buy, how to effect storage and sell ... all these must be coordinated," he said.

Malaysia and Thailand said INRO, the world's last commodity agreement with economic influence, had failed to raise prices.

Lim said it would take up to 18 months to dispose of the entire rubber buffer stock but declined to provide details about how and when it would be released onto the world market.

"So we will tell them (INRO) that not only consumer countries buy, but we as producing countries will also do so. This will boost the price," he said.

Lim said he would also try to persuade to Indonesia to participate in the scheme.

"We hope Indonesia will also participate with efforts to stabilize rubber prices at the international market," he said.

Lim said producing countries should not allow INRO's buffer stock to overhang in the international market as it would suppress prices.

Last September, the head of the Indonesian delegation Herry Soetanto said his country "so far" had no plans to enter into any bilateral or trilateral pact with the two other exporters.

He said Indonesia saw INRO as useful and had "tried so hard to preserve this organization."