Govt to cut rubber output

Debbie A. Lubis, The Jakarta Post, Jakarta

The government plans to cut rubber output by 60,000 tons this year and 75,000 next year in a bid to boost sagging prices of the commodity, according to an official from the Ministry of Agriculture.

Head of the subdirectorate of institutional cooperation at the Directorate General of Plantations, Irmia Nur Andayani, said the plan was part of a tripartite agreement with Malaysia and Thailand to cut output by 4 percent per year over the next two years.

Indonesia is the second largest rubber producer in the world after Thailand with a total output of 1.55 million tons last year.

Speaking to reporters at a press conference, Irmia said that in order to achieve the target the government would launch a supply management scheme (SMS), a program to reduce rubber output by replanting old rubber plantations, prohibiting the expansion of existing rubber acreage and switching to other crop cultivation.

She said that Indonesia had 3.4 million hectares of rubber plantations, and that 107,300 hectares of these would be affected by the output cut this year.

She added that around 97,450 hectares would be replanted while the remaining 9,850 hectares would be allocated for intercropping and crop conversion.

For next year, some 149,650 hectares would be affected, of which 118,150 hectares would be replanted, 16,150 hectares given over to intercropping, and 15,350 hectares allocated for crop conversion.

She explained that the ministry planned to implement the replanting effort in the first and second quarters of this year, while intercropping was being targeted for the third quarter.

Since tapping can only begin seven years after replanting, the method is a useful tool for cutting output, she said.

She did not specify what the cost of the replanting and crop conversion efforts would be, but said that the budget would be obtained from both the national and provincial levels, and also from society's participation and partnerships with business.

Irmia said that the progress of the scheme would be reported every month to the Rubber Association of Indonesia (Gapkindo).

Meanwhile, Gapkindo chairman Asril Sutan Amin predicted that rubber prices would rise to 70 U.S. cents per kilogram following the cut in rubber supply.

Standard Indonesian rubber 20 grade is currently priced at between 54 cents and 56 cents per kilogram, free-on-board for February shipments.

Asril also said that the government would cut 2002 exports by 10 percent to some 1.23 million tons.

Asril said that in order to finance the export cut program, Gapkindo members would need to take out loans of up to US$60 million from banks.

He added, however, that although rubber exporters would have to talk directly with the banks to get the loans, the Indonesian government had asked three national banks to provide negotiable, instead of commercial rates.

He also explained that there was a drop in last year's rubber exports to 1.34 million tons from 1.38 million tons in 2000.

He said that last year's output was the same as two years ago, namely 1.55 million tons.