Gapkindo asks for credit facilities for retention program

Gapkindo asks for credit facilities for retention program

Johannes Simbolon, The Jakarta Post, Jakarta

The Indonesian Rubber Producers Association (Gapkindo) has
asked the government to provide credit facilities for its members
to implement a rubber retention program agreed by Indonesia,
Malaysia and Thailand.

Gapkindo's executive secretary Suharto Honggokusumo said on
Thursday the credit facilities with low interest rate were
necessary as not all of the association's members were
financially capable of continuing to buy rubber from farmers
while at the same time cutting their exports.

Suharto said former minister of industry and trade Luhut
Pandjaitan had promised to provide such credit facilities and the
association now hoped the current minister, Rini M. Soewandi,
would deliver on the promise.

He estimated the association's members needed about US$7.5
million per month to implement the retention program.

"Some of our members are financially able to carry out the
program, others are not. Thus, we expect the government in the
near future to appoint banks from which our members could receive
credit facilities," Suharto told The Jakarta Post.

Indonesia, Malaysia and Thailand -- the world's three largest
producers of rubber -- agreed on Wednesday to cut their rubber
output and exports in order to prop up the sagging price of the
commodity.

The agreement was signed by Indonesia's Minister of Industry
and Trade Rini M. Soewandi, Malaysia's Minister of Primary
Industries Lim Keng Yaik and Thailand's Deputy Minister of
Agriculture and Cooperatives Prapat Panyachatraksa on Wednesday
in Denpasar, Bali.

According to the agreement, the world's top rubber producers
would each cut output by four percent and exports by 10 percent,
starting in January next year.

The ministers refused to specify the price target aimed at by
the retention program.

However, they were all concerned about decreasing rubber
prices, which they said had started in 1997 and turned worse more
recently amid the global economic slowdown.

"The rubber price now hovers around 45 U.S. cents per kilogram
(kg) on the international market, as against the peak price of
$1.50 per kg the commodity once reached," Rini told a media
conference on Wednesday.

The three countries will establish the International
Tripartite Rubber Organization (ITRO), based in Bangkok, to
monitor both output and the export cuts.

ITRO will start working in early February, Rini said.

The three countries would each set up a national body to
manage and monitor implementation of the output and export cuts.

Indonesia, Malaysia and Thailand account for almost 80 percent
of the world's rubber production.

Rini said both the Malaysian and Thai governments had
allocated funds to finance the retention, but the Indonesian
government did not have money to do so.

As such, Rini said, the government had asked local rubber
exporters to continue buying rubber from farmers and, at the same
time, curb their exports.

Suharto said Gaikindo's members were committed to making a
success of the retention program as they were optimistic that it
would shore up rubber prices.

The government's data indicates that Indonesia has 3.4 million
hectares of rubber plantation, with a total output of 1.6 million
tons. Of this, 1.4 million tons are exported, according to
Suharto.