Malaysia threatens to break rubber pact

Malaysia threatens to break rubber pact

KUALA LUMPUR (AFP): Malaysia warned yesterday it would refuse
to ratify a new United Nations-brokered rubber price pact unless
Indonesia withdrew its bid for the top post of the global rubber
group.

Primary Industries Minister Lim Keng Yaik accused Indonesia of
seeking to sabotage Malaysia's bid for the executive directorship
of the Kuala Lumpur-based International Natural Rubber
Organization (INRO).

"We will take this up with (Indonesian President) Soeharto
through our prime minister when he visits our country," Lim told
a news conference, referring to Soeharto's impending visit to
Kuala Lumpur.

Indonesia has put up a candidate for the post, although the
identity has yet to be revealed.

The post, first held by Indonesia at the start of the INRA I
16 years ago, is currently held by Thailand's Pong Sono.

"It is almost amounting to sabotaging our bid, so I have to
seriously consider whether to join INRA or not," Lim said,
alluding to the third International Natural Rubber Agreement
(INRA III).

INRA III can only replace the INRA II, which expired last
December, if it can garner 75 percent support from both INRO's
exporting and importing members by Jan. 1, 1997.

INRO, which groups six producers led by Indonesia, Thailand
and Malaysia and 21 consuming nations headed by the United
States, European Union and Japan, administers INRA through a
buffer stock mechanism to stabilize rubber prices.

So far only six INRO members have ratified the pact, namely
Japan, Spain and Greece representing the consumers and Thailand,
Sri Lanka and Nigeria from the producers' side, officials said.

Lim said Malaysia was to be given the executive directorship
of INRO by rotation among the key producers and slammed Indonesia
for attempting to deny Kuala Lumpur its right.

"It's a matter of principle. We feel very strongly about
this.. If they (Indonesia) don't withdraw, we'll just forget
about it," he warned.

Although Malaysia was a founding member, Lim said it could do
without INRO.

Indonesia had last November declared that it was Jakarta's
turn again under a "gentleman's agreement" among INRO's key
producer members.

"It is a gentleman's agreement that Indonesia gets the post
again after Thailand. Malaysia gets the headquarters," an
Indonesian official had said.

While the INRO council has declared an interim period pending
the ratification of INRA III, officials had warned that INRO
could go into liquidation if either Indonesia or Malaysia opted
out of the agreement.

Rapidly industrializing Malaysia, which has graduated out of
its past heavy reliance on commodities, is now almost indifferent
to the fate of the new pact.

Rubber traders, meanwhile, had said an international
agreement such as INRA would only serve to "confuse" the rubber
trade.

"The market will perform better without such an international
agreement," a Singapore trader said.