Rubber output to rise 5% in 2003: Gapkindo

Adianto Simamora, The Jakarta Post, Jakarta

The country's rubber production is expected to increase by 5 percent next year from an estimated 1.6 million tons this year, according to the Indonesian Rubber Association (Gapkindo).

Gapkindo's secretary-general Suharto Honggokusumo said that the expected output increase was the result of harvests from trees rehabilitated in the last 10 years in several producing areas, mainly on Sumatra island.

"If the weather patterns in general are normal, we predict the rubber output will increase by about 4 percent to 5 percent next year," Suharto told The Jakarta Post on Monday.

The government has targeted rubber output at 1.6 million tons this year.

The increase in rubber output in the world's top three rubber producing countries -- Thailand, Indonesia and Malaysia -- normally causes a weakening in the commodity's price, as the three account for about 80 percent of world rubber production.

However, Suharto said that despite the expected increase in Indonesian rubber output, the rubber price would remain strong next year.

"Thailand may suffer a drop in output next year as there will be a wet season in the country, so I believe the price will stay at about 90 U.S. cents per kilogram at least in the first three months of next year," Suharto said.

He said that the rubber price, which had been on the rise during the past several months, would continue its trend next year and was expected to hit the price agreed upon by the three rubber producing countries.

Ministers of the three countries have stepped up efforts to prop up the price of the commodity after the price plunged to a 30-year low of less than 50 cents per kilogram late last year.

As of this month, rubber was about 84 cents per kilogram.

The three countries have set up the International Tripartite Rubber Organization (ITRO) to help boost the depressed rubber price.

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

The Indonesian government earlier said that it would lower its exports to 1.23 million tons this year, while Thailand has set a limit on exports at 1.93 million tons and Malaysia at 227,000 tons.

The three countries have also formed the International Rubber Consortium Corp. (IRCo) to procure rubber from farmers and withhold it to help stabilize the price.

However, the IRCo is not functioning yet as Indonesia and Malaysia have not appointed their representatives to the consortium's management board and Indonesia has not paid its dues. The consortium needs at least $225 million in reserve funds to be capable of influencing the price by stock purchases.

Suharto said that the price of the commodity would continue to improve if the three countries implemented the above scheme consistently.

He added that the country's exports would also increase next year as China has opened its market for "technical specific rubber" (TSR) products.

The TSR type accounts for almost 96 percent of output in Indonesia, 50 percent in Thailand and 80 percent in Malaysia.