INRO blames lack of fund for its failure
INRO blames lack of fund for its failure
KUALA LUMPUR (AFP): The International Natural Rubber
Organization (INRO) blamed a lack of funds on Wednesday for its
inability to intervene in the markets to stabilize flagging
prices.
In a statement, the Kuala Lumpur-based INRO noted speculation
over its fate following the withdrawal of two major rubber
producers, Malaysia and Thailand, from the body.
"As a result of the current economic difficulties, and perhaps
due to some of the uncertainties surrounding INRO's future, some
member governments have yet to meet their financial
commitments," it said.
"This has meant that INRO's rubber purchases could not be made
in a manner sufficient to meet the objectives of the (rubber)
agreement and all its members."
The group of exporters and importers uses a buffer stock
mechanism to buy and sell rubber to stabilize prices.
Under the mechanism, INRO said it purchased and stockpiled
rubber when price dropped 15 percent below an agreed "reference
price" and sold the stocks when prices rose at least 15 percent
above the point.
The reference point, which was denominated in a hybrid made up
of the Malaysian ringgit and the Singapore dollar, was
"artificially inflated against the U.S. dollar" amid the regional
crisis since 1997, it said.
"As a result, INRO's measurements of market trends was
distorted and its market interventions were greatly delayed," the
statement said.
Although it tried to adjust the price range to reflect Asia's
weak economic conditions, member governments have not reached a
consensus and would discuss the matter again in a meeting here on
April 20-23.
INRO said it had not purchased rubber in the market following
its last intervention on Feb. 24 this year, despite prices
drifting to a 30-year low.
"When new funds are received, INRO expects to resume its
purchases of natural rubber. It should be clear however, that any
new interventions in the market are contingent on the
availability of funds contributed by member governments," it
added.
The body said it had not received any formal notification from
Thailand on its resignation.
"Whatever the outcome of the current uncertain situation, INRO
remains an important part of the body of international law," it
added.
Malaysia, whose withdrawal takes effect this Oct. 15, has told
INRO to cease operation as it failed to stabilize prices despite
substantial contributions from members to support its operations.
With Malaysia and Thailand quitting, the group will be left
with the other four producing countries and 21 consumer members
including the European Union, United States, Japan and China.
Malaysia is the world's third largest rubber producer, after
Thailand and Indonesia. The three countries account for almost 80
percent of the world's rubber production.