INRO's price proposal dead on arrival

INRO's price proposal dead on arrival

KUALA LUMPUR (Reuters): The International Natural Rubber Organization's (INRO) proposal to raise intervention price levels is unlikely to change the decision of key producers Thailand and Malaysia to quit the rubber pact.

Industry sources said the proposal came too late to win back the world's largest and third largest rubber producers.

Upset by low prices, Malaysia and Thailand have said they will INRO by October 1999 and March 2000 respectively and start their own rubber intervention schemes.

INRO mooted several suggestions at its two-day council meeting last week in an attempt to bring the two producing countries, which together account for more than 50 percent of the world's production, back into the fold.

One proposal was to denominate the reference price in a single currency -- the relatively strong Singapore dollar. That move would raise the reference price by nine percent.

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

The plan, spearheaded by consumer states, would allow the body to intervene more quickly in the world market.

INRO, worried that the departures would spell a premature end to the group, still holds out hopes for the 19-year-old pact.

"We are still hoping that this proposal will bring back those countries that have withdrawn," INRO council chairman Walter Bastiaanse said at the end of the meeting on Friday.

Delegates failed to agree on the plan, saying they had no mandate from their governments. INRO will meet again in September in Kuala Lumpur to decide on the measure.

Industry executives said even if the proposal to denominate the reference price in Singapore dollars were approved, Thailand and Malaysia were unlikely to change their minds.

"Malaysia and Thailand have both taken a tough stand, and I don't think they will change their mind," said a trader in Kuala Lumpur.

"The decision by the Thai and Malaysian governments to withdraw were cabinet decisions taken at a very high level. It's a political decision," an INRO official said.

Thailand said last week it would not review its withdrawal decision even if the reference prices were changed. Officials at Malaysia's Primary Industries Ministry were not available for comment.

The trader said with Thailand and Malaysia likely to stand by their decision to quit the pact, it was only a matter of time before INRO is dissolved. "With producers not paying up, INRO will not be effective at all," the trader said.

INRO said last month that none of its producing members had contributed towards its appeal for 200 million ringgit (US$53 million) for a new round of rubber intervention, preventing it from stepping into the market due to a lack of funds.

Both Malaysia and Thailand have said that they will not contribute, while Indonesia, the world's second largest producer, said it was in the process of paying its dues.

INRO groups six rubber producing and 16 consuming countries. The producers are Thailand, Indonesia, Malaysia, Ivory Coast, Nigeria and Sri Lanka.

Consuming members are the United States, Japan, China, Germany, France, Austria, Belgium, Luxembourg, Denmark, Finland, Greece, Ireland, Italy, the Netherlands, Spain, Sweden and Britain. Belgium and Luxembourg are considered one.