Indonesia still sees hope for INRO

Indonesia still sees hope for INRO

KUALA LUMPUR (Reuters): Indonesia has not given up hope for
the survival of the International Natural Rubber Organization
(INRO) and will continue to urge Thailand and Malaysia to
reconsider their decision to quit the group.

"There's still hope. If not we might as well pack and go
home," A.F.S. Budiman, executive director of the Rubber
Association of Indonesia, told Reuters on the sidelines of INRO's
twice-yearly meeting in Malaysia's capital.

"We will try to urge Malaysia and Thailand to stay with INRO."

Upset by depressed rubber prices, Malaysia and Thailand have
said they will quit the world's only remaining commodity pact
with power to intervene in the market. INRO has been accused of
not doing enough to support prices.

Malaysia's departure would not take effect until October 15
while Thailand would not leave before March.

Their departures could spell the demise of the organization
since Thailand is the world's top rubber producer and exporter
while Malaysia ranks third after Indonesia.

Budiman said Indonesia believed INRO remained the best option
to stabilize prices, currently around 30-year lows.

He said the Indonesian government has also made clear it would
not join a Thai-Malaysian pact to support prices.

"We see a lot of complications arising from such pact. And
then there's the funding part. As you know Indonesia is tied up
to the IMF," he said.

Thailand and Malaysia earlier this month signed a pact to
coordinate the operation and management of direct rubber
purchasing programs for national stockpiling by withholding
excess supply from the market and disposing of stocks in an
orderly fashion.

Budiman said the fate of INRO now rested with Thailand, which
was expected to make clear its latest position at a meeting of
the governing council on Wednesday and Thursday.

"We understand that the Thai delegates are actively consulting
Bangkok. We are hoping for the best.

"If they decide to pull out, then the council can make a
decision whether to close down INRO. You only need a special
council meeting to terminate the agreement," he said.

Budiman said the proposal to quote INRO's rubber reference
price in Singapore dollars, adopted on Monday, would make little
difference if producers were not contributing to the funding of
buffer stock operations.

Currently INRO's reference price is a hybrid of the Malaysian
ringgit and Singapore dollar.

Replacing the hybrid with the relatively stronger Singapore
currency would have the effect of lifting the reference price by
about nine percent, so forcing the group to buy up rubber at a
higher threshold price.

"It's implemented on paper but not in action. What INRO needs
right now is funds. INRO cannot do much without the money,"
Budiman said.

Apart from Indonesia, none of the other five rubber producers
have responded to INRO's recent call for cash to finance buffer
stock operations.