Indonesia mulls pullout from INRO

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)