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)