Govt to cut rubber output

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.