Indonesia's decision to stay in INRO will not help boost prices

JAKARTA (JP): Indonesia's decision to remain a member of the International Natural Rubber Organization (INRO) would not help in stabilizing the commodity prices if the existing rubber trade pact is not changed, according to Gapkindo, the Indonesian rubber association.

Gapkindo's executive director, A.F.S. Budiman, said on Monday that the International Natural Rubber Agreement (INRA), which forms the basis for INRO's operations, has to be revised to give more say to producers in the pricing of the commodity.

"We support the government's stance not to quit because it still regards INRO as the only organization which can support prices.

"But the government should not support INRO blindly. The group should also help us in stabilizing the prices by improving its performance and revising the rubber pact. The government should renegotiate the agreement," he told The Jakarta Post.

Budiman said that technically INRO is dead with the withdrawal of Malaysia and Thailand, but it will be more expensive and less efficient for Indonesia to go it alone rather than sticking with INRO.

He charged that INRO throughout the past year had favored rubber consumers over producers.

He said this was one reason why INRO, as stated by Malaysia and Thailand, failed to lift depressed rubber prices during the Asian financial crisis.

Indonesian Minister of Industry and Trade Rahardi Ramelan has said that Indonesia would remain a member of INRO, despite defections from the group by Thailand and Malaysia, the first and the third biggest rubber producers, who are angered by the drop in rubber prices that INRO failed to prevent.

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

Thailand said in February it would pull out of INRO following Malaysia's departure from the group last year. Thailand, Malaysia and Indonesia account for more than 80 percent of world rubber production.

The INRO group, 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.

INRO's buffer stock manager, Arch Roberts, said recently the organization is now short of money because some INRO members, including Indonesia, have not paid their dues this year.

Roberts said members would lose their votes unless they pay before the council meeting, which takes place from April 20 to April 23.

INRO has collected 80 percent of consumer countries' contributions since it called for the dues last December, but no producer countries have paid yet, he said.

Budiman said Indonesia would have to pay its contributions to INRO for it to vote in the council meeting.

"Our position is much stronger now as we are the biggest producer in INRO. We could push to renegotiate the agreement," he said.

Budiman said the withdrawal of the two biggest rubber producers has put pressure on the already depressed rubber trade.

"There's nothing we can do. We expect prices to fall further, especially if consumers do not absorb enough rubber," he said.

He said rubber prices slipped to an all-time low of around 53 U.S. cents per kilogram after Thailand's withdrawal. The price has been mired since the Asian financial crisis began in the middle of 1997.

Indonesia's rubber exports are predicted to increase by at least 5 percent to 1.61 million metric tons this year from 1.53 million tons in 1998, but the exports are expected to earn less foreign exchange due to lower demand and lower prices.

INRO's original six rubber-producing countries are Thailand, Malaysia, the Ivory Coast, Nigeria, Sri Lanka and Indonesia.

The 17 consuming members are the United State, Japan, China, Germany, France, Austria, Belgium, Luxembourg, Denmark, Finland, Greece, Ireland, Italy, the Netherlands, Spain, Sweden and Britain.

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