Malaysia plans to revive INRAPS

Malaysia plans to revive INRAPS

KUALA LUMPUR (Reuters): Malaysia, en route to quitting the International Natural Rubber Organization (INRO), plans to revive an old rubber agreement as an alternative to the global rubber pact.

Local newspaper said yesterday Malaysia will propose the revival of the International Natural Rubber Agreement on Price Stabilization (INRAPS) at a meeting of the Association of Natural Rubber Producing Countries (ANRPC) later this month.

ANRPC had shelved INRAPS in the late 1970s to allow for the implementation of the International Natural Rubber Agreement (INRA), which forms the basis for INRO's operations.

Malaysian Primary Industries Minister Lim Keng Yaik was quoted by local newspapers as saying that INRAPS would give producers more say on the pricing of the commodity than the consumer- oriented INRA.

Lim has hurled a barrage of criticism at INRO in the last one year for being more biased towards rubber consumers than producers. This was one reason why INRO has failed to lift rubber prices during the Asian financial crisis, he said.

"INRAPS has been put under wraps for too long," Lim was quoted by the Business Times as saying.

ANRPC, which groups Malaysia, Indonesia, Thailand, Sri Lanka, Singapore, India, Papua New Guinea and Vietnam, will meet in Bangkok between Aug. 19 and 22.

The workings of INRAPS is quite similar to that of INRA, in that international rubber prices are stabilized via buffer stock operations.

However, INRAPS has the added option of putting in place a supply rationalization scheme, Lim said.

INRO was set up 16 years ago to ensure stability of supply and demand in the world rubber market and to protect both consumers and producers against price fluctuations.

The organization groups 16 rubber consumers, including the United States and the European Union, and six top importers, as well as producers Thailand, Indonesia and Malaysia.

Lim said Malaysia would call for stronger cooperation from members of the ANRPC, particularly regarding efforts to rationalize rubber supply.

"While members do currently rationalize their supplies on their own, it has not really helped the prices. Perhaps through closer cooperation, like an ASEAN-type buffer stock mechanism, prices can be checked," he said.

Lim reiterated Malaysia's stand to pull out of INRO.

"Our stand (on INRO) is still the same. We have already decided to leave the organization. We will inform ANRPC members at the meeting," he said.

In Jakarta, INRO has bought around 7,000 tons of Standard Indonesian Rubber (SIR) 20 at $570/ton for September and October shipment, traders said yesterday.

"We heard INRO entered the market yesterday and bought rubber fob Palembang and Medan," said one trader in Jakarta.

Traders said INRO planned to buy around 30,000 tons of rubber from the world's top producing countries -- Indonesia, Thailand and Malaysia -- to prop up sagging prices.

"It is good news that INRO has entered the market. But we never know whether prices in Indonesia will strengthen further," said the Jakarta-based trader.

"We learn INRO will only buy around 30,000 tons of rubber. It means the excitement will end as soon as it started," he said.

Traders in Palembang in South Sumatra said October tire-grade SIR20 firmed to 25.875 U.S. cents/lb because of the INRO news. Prices were earlier quoted at 24.60