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.