Indonesia mulls pullout from INRO
JAKARTA (JP): Minister of Trade and Industry Rahardi Ramelan said on Tuesday that Indonesia soon might announce its withdrawal from the International Natural Rubber Organization (INRO), following an earlier announcement by Thailand of its decision to leave the organization.
The minister said that the world rubber organization would no longer be effective because of the absence of Thailand and Malaysia, who also withdrew from INRO.
"With the world's number one rubber producer now having left INRO, do you think INRO can survive? If Thailand really quits INRO, Indonesia will have no choice but to follow suit," he said, adding that he would ask for formal confirmation of Thailand's withdrawal from the organization before making a final decision.
The bearish rubber market in 1998 and the steep fall in rubber prices caused great harm to the organization. Rubber prices have slipped to a 30-year low of around US$.60 a kilogram since the Asian financial crisis began in the middle of 1997.
Malaysia, a founding member of INRO, announced its withdrawal from the organization last year and Thailand, the world's largest rubber producer, shocked the market last week by announcing that it would pull out of INRO this year. Bangkok is unhappy with INRO's failure to shore up sagging rubber prices.
Thailand also decided not to contribute 401 million baht ($10.84 million) to the organization's buffer account for a new round of price interventions.
Thailand, Indonesia and Malaysia are the world's top rubber producers. Thailand and Malaysia account for 60 percent of the world's rubber output.
Rahardi said that in order to withdraw from INRO, Thailand first must inform United Nations Secretary-General Kofi Annan of its intentions and would then lose its membership a year after notifying Annan.
He also said that with the withdrawal of Malaysia and Thailand, the remaining members of the organization -- Indonesia, Nigeria, the Ivory Coast and Sri Lanka -- would find it difficult to shoulder the financial contributions to the organization.
"Indonesia is not willing to provide more money for INRO's buffer accounts," he said.
Rahardi said that Indonesia would release its rubber stockpile on the market if Thailand formalized its withdrawal.
"However, we will release our stockpile gradually to prevent a fall in prices," he added.
He said that by leaving INRO, locally produced rubber could be traded on the country's first futures commodity exchange, which will be operational later this year or early next year. The exchange will initially trade coffee and palm oil.
Rubber is currently excluded from the list of commodities which can be traded on Indonesia's futures exchange because it would violate INRO's global rubber pact, he said.
Indonesia's rubber exports are predicted to increase by at least 5 percent to 1.61 million metric tons this year, up from 1.53 million tons in 1998. However, the exports are expected to earn less foreign exchange because of lower prices.
The executive director of the Indonesian Rubber Producers Association, A.F.S. Budiman, said that INRO's collapse would lead to a liquidation of rubber stocks owned by each member country.
"This could further drag down rubber prices," he said.
In a related development, Thailand adopted a strategic plan for 1999-2003 on Tuesday to make its rubber industry more competitive following the country's departure from INRO, an agriculture ministry official said.
Despite the present bearish rubber market, Thailand was still optimistic about the future of the rubber industry and forecast world rubber demand would exceed supply again in 2002, the official told Reuters.
The plan covers measures to boost efficiency, manage supplies, increase additional sources of income for planters and increase domestic use of rubber, the official said.
According to the plan, a copy of which was obtained by Reuters, Thai rubber output is forecast to grow three percent in 1999 to 2.15 million metric tons, to 2.23 million in 2000, 2.32 million in 2001, 2.43 million in 2002 and to 2.55 million tons in 2003.
Thai rubber exports should reach 1.94 million tons in 1999, 2.01 million in 2000, 2.10 million in 2001, 2.19 million in 2002 and 2.30 million tons in 2003.
A world rubber deficit is seen setting in from 2002 when demand, at 7.45 million tons, will exceed supply of 7.43 million, the report forecast.
Besides the six rubber producing members INRO also groups 17 consumer members: the United States, Japan, China, Germany, France, Austria, Belgium, Luxembourg, Denmark, Finland, Greece, Ireland, Italy, the Netherlands, Spain, Sweden and Britain.
The group's operations are based on the UN-brokered International Natural Rubber Agreement, which will expire in February, 2001. (gis)