Indonesia opposes forming new rubber body

Indonesia opposes forming new rubber body

JAKARTA (JP): Indonesia ruled out on Monday acceptance of a
likely offer from Malaysia and Thailand to form a new buffer
stock agency to support falling rubber prices.

Minister of Industry and Trade Rahardi Ramelan said Indonesia
did not plan to join the agency to be set up by its neighbors.

He said the government would prefer to work together with
Thailand and Malaysia to save the beleaguered International
Natural Rubber Organization (INRO).

"We feel it will better if Malaysia and Thailand can sit
together with us to discuss how to revitalize INRO's buffer stock
mechanism, which failed to stabilize rubber prices because the
organization is short of money," he said after meeting with
President B.J. Habibie.

Rahardi said it would be difficult for Indonesia to join the
buffer stock agency because the country would have to spend a
large amount of cash to help finance the new agency's market
intervention program.

"The planned new buffer stock agency will be based on a
tripartite agreement. If we joined, the members would only be
Thailand, Malaysia and Indonesia. It means the three countries
will bear all the responsibility in funding the market
operation."

Rahardi said that establishing a buffer stock through the
ailing INRO would be more effective because it would involve both
producers and consumers.

INRO's intervention to stabilize prices was supported by its
four producers and 17 consumer members which shared the financial
burden together, he said.

Thailand, Malaysia and Indonesia account for more than 80
percent of world rubber production.

AFP reported last week that Malaysia and Thailand would set up
a joint ministerial committee to intervene in domestic markets to
stabilize falling rubber prices.

The joint effort was described as a forerunner to possible
regional cooperation, with the two countries soon to make
overtures to Indonesia.

Malaysia's Minister of Primary Industries Lim Keng Yaik was
quoted as saying that joint efforts were necessary in view of the
anticipated demise of the INRO.

Although he said the world's three biggest rubber producing
countries should have a common stand, he denied this was
tantamount to creating a cartel.

Lim said Malaysia and Thailand would sign a memorandum of
understanding on the joint committee in August in Chiengmai.

However, Rahardi said the Malaysian and Thai governments had
not contacted him to discuss the invitation.

Rahardi met Malaysian Minister of International Trade and
Industries Rafidah Azis last week, but the Indonesian minister
said they discussed ways to save INRO and did not broach the
subject of the buffer agency.

Thailand and Malaysia, the first and the third biggest rubber
producers, pulled out from INRO when the organization failed to
support falling rubber prices.

The two countries said the agency was only useful for rubber
consumers, but of no help to natural rubber producers.

INRO, which includes rubber producers and consumers, uses
funds provided by members to buy rubber on the open market to
support prices and releases supplies from buffer stocks when
prices rise too high.

The group's operations are based on the UN-brokered
International Natural Rubber Agreement (INRA), now into its third
cycle since 1980, which is due to expire in February 2001. (gis)