INRO declared 'technically dead'

JAKARTA (JP): The International Natural Rubber Organization (INRO) has in effect been killed by the recent withdrawal of Malaysia and Thailand from its membership, according to the Indonesian Rubber Association (Gapkindo).

Gapkindo's executive director, A.F.S Budiman, said here on Friday that the withdrawal of the two major rubber producers would make the organization's buffer stock operations no longer functional.

"It will therefore be better for INRO to dissolve itself, because with the absence of Thailand and Malaysia, the organization is no longer useful," he told The Jakarta Post.

Asked if Indonesia would follow suit and quit the group, Budiman said that membership in the organization was no longer necessary because INRO technically did not exist anymore.

He said a special session would be formally held to talk about the fate of the rubber agency.

Thailand, Indonesia and Malaysia are the world's top rubber producers. Malaysia has served notice of withdrawal from INRO, a group of 6 producer countries and 17 consumers, effective Oct. 15, 1999.

Thailand, the world's largest producer, shocked the market early this week with the announcement it would also quit INRO, which has long been accused of not doing enough to prop up sagging prices.

Reuters quoted Thai deputy agriculture minister Newin Chidchob as saying in Bangkok on Thursday that Thailand had no reason to stay in INRO because the agency was only useful for rubber consumers, but of no help to natural rubber producers.

Thailand also decided not to pay contributions worth 401 million baht (US$10.84 million) to INRO's buffer stock account for the new round of interventions.

Budiman said INRO's imminent demise would put pressure on the already depressed Indonesian market.

"There's nothing we can do if INRO is disbanded. We expect prices to fall further, especially if consumers do not absorb enough rubber. But maybe there will be a miracle ... maybe the economic crisis will end," he said.

Rubber prices have slipped to a 30-year low of around 60 U.S. cents a kilogram since the Asian financial crisis began in the middle of 1997.

Budiman said that Indonesia would have preferred Thailand to stay in INRO, but admitted the organization could do nothing but accept its withdrawal.

He admitted that INRO, as charged by Malaysia and Thailand, had failed to prop up the world's depressed rubber prices.

"But for Indonesia, the agency is still needed to facilitate the country's rubber exports," he said.

Indonesia's rubber exports are predicted to increase by at least five 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 main aim is to stabilize world rubber prices by buying when prices drop sharply and selling when prices surge.

Budiman said that with the withdrawal of Thailand and Malaysia, the remaining four producing countries would have to provide more money for INRO's buffer-stock accounts.

"I think, from the funding side, Indonesia would be unable to afford to cover the agency's operation without the help of Malaysia and Thailand," he said.

Budiman said INRO had bought 110,000 metric tons of rubber from the three top producers since last August via market operations.

He said INRO last intervened in the Indonesian market in September and November, when it bought 8,000 tons of rubber. No fresh intervention has been heard since, and local traders complain that the group has not done enough to support prices.

Budiman said consumers would have to bear the consequences of INRO's demise. "It's their own fault. They were not concerned at all over the problems faced by the producers," he said.

INRO's former six rubber-producing countries were 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 International Natural Rubber Agreement, now into its third cycle since 1980, which will expire in February 2001. (gis)