Rubber down amid doubt over ITRCo

Adianto P. Simamora, The Jakarta Post, Jakarta

The price of natural rubber has been declining during the past two weeks as the market doubts the rubber consortium formed by three major producers will work, an expert says.

"Today, the price of natural rubber on the international market is only 86 U.S. cents per kilogram, compared to around 92 cents two weeks ago," chairman of the Rubber Association of Indonesia (Gapkindo) Asril Sutan Amir said.

"The local farmers will suffer from this," he added.

Indonesia, Thailand, and Malaysia signed a memorandum of understanding (MoU) last month to set up the International Tripartite Rubber Company (ITRCo), a special consortium with a mission to help shore up the sagging price of the commodity and help improve the welfare of rubber farmers.

Under the plan, the consortium will buy and stockpile rubber from the three countries.

But Asril said there was now doubt in the market that ITRCo would work immediately as clear-cut guidelines to run the consortium had yet to be made.

He said there was no agreement yet on how much rubber the consortium would buy and at what price.

Asril urged the governments of the three countries to quickly realize the ITRCo plan.

"If they (governments) can not run the ITRCo, they can appoint the private sector to run it," he said.

Thailand, Indonesia and Malaysia jointly control around 62 percent of the world's natural rubber production.

Under the ITRCo mechanism, the above three countries agreed to raise an initial capital outlay of US$1 million.

ITRCo was established following the forming of the International Tripartite Rubber Council (ITRC) last year in Bali.

Under the council framework, the three countries have pledged to cut rubber output by 4 percent and exports by 10 percent starting this year.

For 2002, Indonesia will lower its rubber exports to 1.23 million tons, while Thailand has set a limit at 1.93 million tons and Malaysia will cap its export volume at 227,000 tons.

The Thai government has agreed to reduce rubber supply and raise prices by giving farmers $6.93 million to cut down and replant rubber trees.

The Indonesian government, however, has done nothing, said Asril.