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.