INRO declared 'technically dead'

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)