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.