INRO members in for vital meeting

INRO members in for vital meeting

KUALA LUMPUR (Reuters): The world's producers and consumers of rubber hold a pivotal meeting this week as hopes fade for the survival of the last global commodity agreement with economic clout.

The International Natural Rubber Organization's (INRO) governing council is expected to decide the fate of the pact during their twice-yearly meeting in Malaysia's capital starting on Monday.

The demise of the world rubber body is all but certain as leading producers Thailand and Malaysia have reiterated that their decision to quit INRO is final, industry officials said.

"It doesn't look good for INRO now that Thailand has said its decision to leave is final. Thailand was their last hope," said an official at a rubber trading firm in Kuala Lumpur.

"I can't think of how INRO can possibly continue and be effective without Thailand and Malaysia."

The meeting kicks off with talks between heads of delegation followed by the council meeting. A press communique will be issued at the end of the four-day meeting on Thursday, INRO said.

Thailand is the world's top rubber producer and exporter while Malaysia ranks third after Indonesia.

Thai Deputy Agriculture Minister Arkom Engchuan said on Wednesday that Thailand will not reverse a decision to leave INRO and not send officials to Kuala Lumpur since it has not paid cash call contributions and thus has no voting rights.

Arkom's statement ended all hopes that Thailand might be flexible and change its mind on INRO.

Malaysia has also relinquished its voting powers for failing to pay its INRO dues. Officials said that as of Thursday, Malaysia would be sending a delegation.

Thailand and Malaysia have accused INRO of failing to boost sagging rubber prices, currently at 30-year lows. Malaysia's departure takes effect on October 15, while Thailand leaves INRO next March.

Arkom's hardline stance came after a meeting with Malaysia earlier this month when both countries signed a pact to support rubber prices jointly.

Industry officials now doubt that an increase in INRO's market intervention reference price levels will woo Thailand and Malaysia back.

Currently, the INRO reference price is a hybrid of the Malaysian ringgit and the Singapore dollar.

INRO has proposed replacing it by a single currency -- the relatively stronger Singapore unit. This would lift the reference price by nine percent and force INRO to buy up rubber at a higher threshold price.

INRO officials said council members will vote on the proposal at the meeting.

"Under current conditions, INRO may not sell rubber until the price gets to 86 cents (a kg). If the currency proposal is adopted, it probably goes to 93 or 94 cents before INRO starts selling," INRO buffer stock manager Arch Roberts told Reuters.

Under the Thai-Malaysian pact, the two countries hope to achieve a price level of 80 U.S. cents a kg for their rubber, a level below which they would refuse to sell on the world market.

Indonesian Trade and Industry Minister Rahardi Ramelan said last week Indonesia, which has vowed to stay with INRO, will urge Malaysia to reconsider its departure during the meeting.

"The game is not yet over on INRO," he said.

A German member of the INRO council disagreed, saying the 19- year-old pact was dead.

"I find it difficult to believe that this agreement can be reviewed," said Edgar Nordmann, managing director of rubber trader Nordmann Rassmann GmbH & Co.

Consumers have long been skeptical of the pact and it might be very difficult to persuade them to agree to future extensions.

b"I think most people that are coming here want this to be a productive meeting. They want to put INRO back on track. But the consumers are not going to put INRO back on track without producers' money. It's not going to happen," Roberts said.

INRO officials said the council can at any time, by special vote, decide to terminate the current agreement which ends in February 2001. The council would then have up to three years to wind down the organization.

INRO members will have to decide how to liquidate its stocks if the price stabilization pact is scrapped. The stockpile is estimated by traders at more than 100,000 tons, but INRO does not normally reveal its stock levels.

Members may also decide whether to move the organization's Kuala Lumpur headquarters after Malaysia leaves the group.