Malaysian minister criticizes Indonesia and Thailand on rubber pact
Malaysian minister criticizes Indonesia and Thailand on rubber pact
Dow Jones, Kuala Lumpur
A Malaysian government official has criticized Indonesia and Thailand for saying they won't stick to a plan to reduce rubber production and exports, concluding that this will drag down rubber prices.
"I would like to caution the ministers from these two countries that the (international) tripartite rubber agreement hinges very strongly on the understanding of a production cutback as well as an export cutback. The prices (won't go up) if you increase production and you increase exports," Malaysian Primary Industries Minister Lim Keng Yaik said in a press briefing.
Lim was referring to a pact signed in December 2000, when ministers from the world's top rubber producers - Malaysia, Thailand and Indonesia - agreed to cut rubber output and exports starting in 2002.
The cutbacks were aimed at shoring up rubber prices, which were then at a 30-year low, with the benchmark Thai ribbed smoked sheet rubber 3 grade at 45-50 U.S. cents a kilogram.
A long dryspell in 2002, coupled with news about the planned cutbacks in production and exports, helped prices to gradually recover.
Wednesday, the benchmark Thai RSS3 grade was offered at US$1/kg.
Lim's comments follow separate statements from Thai and Indonesian officials last week.
Thai Prime Minister Thaksin Shinawatra said the government aims to increase local natural rubber output by 350,000 to 400,000 metric tons over the next five years to meet growing demand from India and China.
Indonesian Trade Minister Rini MS. Soewandi said Indonesia has no plans to cut exports and rubber production this year amid growing export demand and stable rubber prices.
Lim said these moves will push rubber prices lower.
"(Indonesia and Thailand) have forgotten the tripartite agreement and they have unilaterally made a declaration that they are going to increase production. It's the surest way of bringing down prices," Lim said.
Lim didn't say whether Malaysia will reduce its rubber exports and production this year.
But, "if these people want to produce cheap rubber, then (Malaysia) might buy this cheap rubber and forget about producing rubber ourselves," he said.