RI asks ASEAN to help rubber processors

JAKARTA (JP): Indonesia has asked other members of the Association of Southeast Asian Nations (ASEAN) to establish a joint venture to help rubber processors, says a local rubber producer.

Chairman of the Rubber Association of Indonesia (Gapkindo), O. K. Cornel, said here Thursday that the proposed company, to be called ASEAN Rubber Corporation, was expected to raise loans from overseas banks and channel the funds to rubber processors and exporters in Indonesia, Thailand and Malaysia.

"If the proposed company raises a loan with an interest rate of 6 percent per annum it can pass it on to a rubber processor or exporter with an annual interest rate of 8 percent, far lower than the 18 percent charged by Indonesian banks," he told The Jakarta Post.

The processors and exporters would be able to keep production costs lower than world market prices, he said.

He said the current rubber price of US$1.02 a kilogram on the world market was too low for Indonesian exporters because production costs ranged from 75 U.S. cents a kilogram for big state-owned plantation companies to about 90 cents for farmers. Farmers contribute about 72 percent to Indonesia's total rubber production of about 1.4 million tons a year.

He said that compared to the reference price band of 74 cents- $1.10 set by the International Rubber Organization, $1.02 was high, but "it is too low if we compare with our production costs".

Cornel said Gapkindo proposed forming the ASEAN Rubber Corporation at a meeting of ASEAN's Rubber Business Club in Thailand last week, and rubber producers in Thailand were interested.

ASEAN groups Brunei, Indonesia, Thailand, Singapore, Malaysia, the Philippines and Vietnam.

"We are trying to attract Singaporean companies, particularly banks, to join the proposed company so it will be easier to raise loans," he said.

He said Gapkindo also suggested village cooperatives provide low-interest loans for rubber farmers, particularly when they were forced to reduce latex production. Reducing latex production is needed to prop up prices when the market is in an over-supply and prices are low.

Indonesian rubber farmers usually tap more latex to increase their earnings when rubber prices are low and this causes prices to fall further.

"Village cooperatives can raise their funds from the Jimbaran Group's big companies," Cornel said. (13)