Thailand and Malaysia sever links with INRO

Thailand and Malaysia sever links with INRO

BANGKOK (AFP): Thailand and Malaysia, the world's two top rubber producers, Friday signed a landmark agreement to stabilize prices after their decision to withdraw from the International Rubber Organization (INRO).

The first such deal between two rubber producers was signed by Thailand's deputy agriculture minister, Akhom Engchuan, and Malaysia's minister of primary industries, Lim Keng Yaik, in Pattaya, east of Bangkok.

Both nations are pulling out of INRO, claiming it has been ineffective in propping up world rubber prices.

With the market for the commodity plumbing unprecedented lows, Lim made no effort to hide his disappointment with INRO.

"As we know, the natural rubber price fell to a 30-year low a couple of months ago," he said in a statement.

"We are extremely disappointed by the performance of INRO during this period of low prices.

"The organization has not been effective in propping up the market price through its buffer stock operation," he said. Both ministers agreed to negotiate with Indonesia in a bid to get Jakarta to join their pact as soon as possible.

Indonesia, the world's third largest natural rubber producer, said this year it would not follow Malaysia and Thailand out of INRO. The three countries account for almost 80 percent of world production.

The agreement commits Thailand and Malaysia to buy rubber direct from farmers and holding controlled sales from existing stock to avoid large impacts on the market.

The two countries will now spend at least four months mapping out joint strategies on production, trade and research and development for the industry.

The Memorandum of Understanding signed Friday was sketched out by the Thailand-Malaysia Ministerial Committee on Rubber (TMMCR).

The committee was set up to coordinate domestic market interventions, manage a joint buffer-stock, and to pave the way for technical cooperation, and exchange of research findings and market intelligence.

Malaysia and Thailand's decision to quit INRO, is effective on October 15 and March 26 next year respectively.

Both claim INRO had failed to stabilize rubber prices despite substantial contributions from members.

The Kuala Lumpur-based group of exporters and importers uses a buffer stock mechanism to buy and sell rubber but said it had not been able to intervene in the market since February due to a lack of funds.

With Malaysia and Thailand quitting, the group will be left with four other producing countries and 21 consumer members including the European Union, United States, Japan and China.