Indonesia wants Thailand to scrap rubber subsidy

JAKARTA (JP): The Indonesian government will be requesting that the Thai government lift its subsidy for rubber farmers in their meeting scheduled for August, a minister said on Wednesday.

"We have to take political steps to face them (Thai government) because in Bangkok, rubber is treated as a political commodity," Minister of Industry and Trade Luhut Binsar Panjaitan said, adding that the meeting will take place from Aug 15 through Aug 16.

Thailand is the world's largest rubber producer and exporter, followed by Indonesia and Malaysia. Together the three countries produce about 80 percent of the world's rubber.

The Thai government's intervention scheme was initiated 10 years ago to protect farmers and is scheduled to last until the end of next year.

Luhut did not say why the Indonesian government will make the request but analysts say Thailand's rubber subsidy policy has enabled Thai rubber producers to sell their produce more cheaply than other countries' producers and it has further pressured the already low price of the commodity.

Over supply of rubber has undermined the world's rubber prices to about 49 U.S. cents to the dollar, Luhut said.

"We have to increase the prices gradually to at least 90 cents," he added, noting that at that price, the price of natural rubber will equal that of synthetic rubber.

Earlier, Thailand's Deputy Prime Minister Pitak Intraqwitayanunt said the country would only stop the intervention scheme ahead of schedule if Indonesia and Malaysia agreed to cooperate with Thailand in developing natural rubber products.

The meeting next month would precede the Tripartite Rubber Cooperation (TRC) meeting in September in which the three member countries -- Thailand, Indonesia and Malaysia -- will formalize an agreement to reduce rubber production by 4 percent each year.

The government has agreed to slash rubber production by 70,000 metric tons beginning next year to help shore up prices.(tnt)