RI plans cut in rubber output by 70,000 metric tons

JAKARTA (JP): The government said on Tuesday that it planned to cut rubber production by 70,000 metric tons starting next year as part of a joint effort with Thailand and Malaysia to boost world rubber prices.

Minister for Industry and Trade Luhut B. Pandjaitan said the measure was expected to boost natural rubber prices to the same level as synthetic rubber.

"We have to cut our national rubber supply, which at the moment stands at about 1.6 million tons," he said.

Indonesia, Malaysia and Thailand recently formed the Tripartite Rubber Cooperation (TRC) to manage rubber trading and stock levels. The three countries make up about 80 percent of world rubber production.

Under the cooperation, the three countries have agreed to slash their rubber production by 4 percent each year.

"This is not a cartel. We just want natural rubber prices to move in tandem with that of synthetic rubber," Luhut said.

He said natural rubber prices stood at about 50 U.S. cents per kilogram, compared to 90 cents for synthetic rubber.

Luhut said a senior official meeting was slated for early September to finalize the details of the rubber output reduction scheme.

"Then on Sept. 8, there will be a tripartite ministerial meeting in Kuala Lumpur to endorse the agreement," he said.

However, the joint effort has been met with cynicism from rubber traders who dismiss the scheme as unrealistic.

They said controlling rubber output is difficult as production is mostly controlled by private plantations.

Questions also linger over the funding of the scheme, with the Indonesian government likely to skip Malaysia and Thailand's commitment to support the scheme with state funds.

Luhut confirmed that the Indonesian government had no plans to use state budget funds to finance the scheme.

"Where will we get the money? However, we will encourage the private sector to fund it," Luhut said.

Responding to comments that the deal had failed to help rubber prices, Luhut admitted that it would take some time.

CPO

He compared the process with the impact Indonesia and Malaysia's joint marketing efforts had on boosting crude palm oil (CPO) prices.

He said that since he and his Malaysian counterpart, Lim Keng Yaik, visited China and India earlier this year, CPO prices had improved by about US$30 per ton.

"This is a significant rise, and it is highly likely that this upward trend will continue," he said.

He said China recently raised its import quota for CPO by 300,000 to 400,000 tons after urging from Indonesia and Malaysia.

"We hope to gain a 40 percent to 45 percent share from the additional quota," he said.

Thus far, he said, Indonesia enjoyed only a 30 percent share of the 1.1 million tons of CPO which China allotted for Indonesia and Malaysia.

"How can this be so? Because there is not enough promotion and we have no representatives in China," Luhut explained.

He said the government and the Indonesian Palm Oil Producers' Association (Gapki) had agreed to set up a representative office in China.

Association members, he said, had pledged to donate $1 from each ton of CPO they sold to help establish an office there.

Indonesia's CPO output is estimated to hit 7.5 million tons this year, up from 6.5 million tons the year before. The country exports about half of its CPO production.

Indonesia and Malaysia together control about 90 percent of the world's CPO production while India and China are the biggest markets for that commodity.

Earlier this year, the two countries agreed on a joint marketing effort to lobby China in raising its CPO import quota.

They have also asked India to lower its import tariffs on CPO. (bkm)