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.