New rubber pact likely to go ahead amid opposition

New rubber pact likely to go ahead amid opposition

MALACCA, Malaysia (Reuter): Southeast Asian rubber growers
were opposed on Saturday to a new producer-consumer pact to
stabilize prices, but said the accord was likely to go ahead.

They said the pact would proceed because of the political,
social and diplomatic objectives of their governments.

"The governments are worried about the effect of rubber prices
on smallholders. They have to fight elections...and hope to
stabilize rubber prices," Wate Thainugul, head of the Thai
delegation to the ASEAN Rubber Business Club, told Reuters.

He was speaking after a meeting of the club and ahead of a
trade dinner in the southwestern Malaysian state of Malacca.

Other delegates from Indonesia and Malaysia, present at the
meeting, said producers would prefer a free market in rubber but
added they understood their governments had different social and
political priorities.

"We don't want an artificial market. Market forces must
dictate prices but we understand that governments have different
social and diplomatic aims," said a senior delegate, who declined
to be named.

Wate said in Thailand, 85 percent of the country's rubber
output was from smallholders.

Daud Husni Bastari, chief of the Indonesia delegation, said
the proportion of small-holding production was similar in
Indonesia.

At a U.N.-sponsored meeting in Geneva last February, major
rubber producing and consuming countries agreed to a modified
roll-over of the International Natural Rubber Agreement (INRA),
which expires on December 28 this year.

Fluctuation

The INRA sets a minimum reference price for rubber at which
the International Natural Rubber Organization (INRO) buffer stock
manager intervenes to buy or sell rubber in the open market to
help minimize price fluctuations.

INRO buffer stock manager James Hegarty said although the
current pact would soon expire, a new agreement did not have to
be ratified until January 1, 1997.

Hegarty told Reuters he believed producers and consumers would
agree to a new deal before the deadline, although there is some
concern over the position of the new Republican-dominated
Congress in the United States to commodity pacts.

Indonesia, Malaysia and Thailand -- members of ASEAN or the
Association of Southeast Asian Nations -- are three of the
world's largest producers of natural rubber. The United States is
the world's largest consumer, followed by the European Union,
Japan, China, India and Malaysia.