INRO decides to wind up after three members quit

INRO decides to wind up after three members quit

KUALA LUMPUR (Agencies): Members of the International Natural Rubber Organization (INRO), the world's last commodity agreement with economic influence, decided Thursday to wind up the body following the withdrawal of three exporting members.

"In light of the withdrawal of three exporting members, namely Malaysia, Thailand and Sri Lanka, the Council has decided on the termination of the International Natural Rubber Agreement, 1995, with effect from October 13, 1999," said a statement from the governing council after a meeting here.

The council decided to establish "an open-ended working group" which would meet from December 13 to 17 during a special council session "to consider the future of international cooperation in natural rubber."

The fate of the 19-year-old organization linking producers and consumers was sealed after Thailand - the world's largest producer - and Malaysia - the third largest after Indonesia - decided to pull out.

They say INRO has failed to raise prices, which are currently at 30-year lows.

Malaysian Primary Industries Minister Lim Keng Yaik said INRO "had achieved its objective of stabilizing rubber prices, but within a narrow range.

"The prices had stabilized, but at a low level which would more benefit the consuming countries," he told the official Bernama news agency Thursday.

The governing council said it would reconsider its decision to close down should one or more of the countries reverse its decision to withdraw.

Council chairman Walter Bastiaanse told reporters members hoped they would "not completely close the door."

"It's difficult to say ... on the other hand we've seen a lot of press coming from Thailand, saying that the discussion (to withdraw) has not been completely finalized, but this was not confirmed by Thailand in the meeting," he said.

Lim however reiterated that Malaysia's decision was final. Thailand, Malaysia and Indonesia produce 80 percent of world output.

Malaysia and Thailand last month agreed to jointly help to boost rubber prices with the signing of a memorandum of understanding and Lim said the next step would be to include Indonesia.

Indonesia "so far" had no plans to enter into any bilateral or trilateral pact with the two other exporters, said Herry Soetanto, head of the Indonesian delegation.

He said Indonesia saw INRO as useful and had "tried so hard to preserve this organization." It would play an active part in the open-ended working group.

The governing council told its secretariat to prepare recommendations on the "orderly disposal" of the buffer stock, estimated by traders at more than 100,000 tonnes.

Gerard Loyen, deputy executive director of INRO, said the short-term effect of the wind-up coupled with the Malaysia- Thailand pact would be a bearishness on rubber prices. It would be difficult to determine how rubber prices would go until the council meets in December.

Buying by Malaysia and Thailand helped the most active rubber future contract in Tokyo surge 31 percent in two weeks to 77.2 yen per kilogram on Sept. 9, from a 30-year low of 58.8 yen on Aug. 25. Today, rubber futures contracts for March 2000 delivery fell 3.89 percent to 74.20 yen. Tokyo is the world's largest market for trading rubber futures contracts.

Still, much of the rebound in early September was on optimism INRO may get its six producer and 17 consumer member countries to settle their differences and pay their membership dues so that it can start buying rubber from the open market again, said Oophaswongse.

The failure means there will be no organization to support rubber prices and they may drop to "as low as it gets," he said.

Also, the pact between Malaysia and Thailand to buy rubber may not work because the two countries don't have enough money to implement the plans because their own economies are in trouble, he said.

"Those plans are going to take some time to implement. We still have to borrow from the International Monetary Fund."

Thailand yesterday said it will pay membership fees owing INRO from February and October, an amount totaling 1.2 billion baht ($30 million), raising hopes the country would reverse a decision to leave. Thailand contributes 44 percent of total INRO membership funds from producers, which the group uses to buy rubber on the open market when prices fall.

INRO's consumer member countries said the assurance to pay past dues wasn't enough and they wanted a commitment from the Thailand government by today that it will stay as a member of INRO.

"They should give us some more time," said Oophaswongse. Thailand's rubber producers and farmers want the country to remain as INRO members because that "can only benefit Thailand," but the government needs more time to decide, he said.