Thailand, Indonesia, Malaysia quit INRO

Thailand, Indonesia, Malaysia quit INRO

SINGAPORE (Bloomberg): The world's top three rubber producers
-- Thailand, Indonesia and Malaysia -- said they will pull out of
the International Natural Rubber Organization and set up a rival
group that aims to cut production 20 percent below world demand.

The three countries, accounting for 80 percent of world rubber
production, are angered by a lack of action by the rubber group,
known as INRO, to stem a 30 percent slide in rubber prices in the
last year. The countries said they will withdraw all their funds
from INRO, depleting its intervention reserves and leaving the
rubber cartel largely ineffective.

"The withdrawal of the three countries will put into question
the existence of INRO," said Gerard Loyen, INRO's deputy
executive director in Kuala Lumpur. He said withdrawal by any
member is effective after one year, although the INRO council has
the option to dissolve the cartel before that.

Rubber prices have fallen as industrial production in Asia
slumped along with economies across the region, pulling down
demand for cars and tire sales

Loyen said with supplies still outstripping demand, prices
"may continue to slip" should INRO be liquidated.

Market Buys

While producer members of INRO complain about the lack of
intervention in the market by the cartel earlier this year, it
did buy rubber on the market in the past two weeks. Those
purchases, though, did little to support prices.

INRO bought around 30,000 metric tons of natural rubber last
week, spending as much as 100 million ringgit ($23.8 million),
traders said. INRO wouldn't confirm those purchases.

No matter how much they are buying, "there is still too much
rubber in the market," said Singapore-based Kang Liat Bin,
marketing manager with Sahabat Co., a subsidiary of privately
held PT Kirana Megatara, one of Indonesia's largest rubber
producers.

As rubber prices fell in the past year, consumer members of
INRO benefited, adding to the anger among producer countries.

"INRO isn't receptive to our needs and is incapable of
rendering immediate assistance in price adjustment," Thailand's
Deputy Agriculture Minister Somchai Soonthornvat said.

He added that "some concrete action" will be seen within a
month on setting up a new rubber group.

Soonthornvat said the decline in rubber prices has caused
hardship to Thailand's six million growers, at a time when the
country is suffering from an economic crisis.

The withdrawal of funds from INRO by the three countries
amounts to 200 million baht ($4.9 million) for Thailand and 29
million ringgit ($6.9 million) for Malaysia. The figure for
Indonesia wasn't immediately available.

As for the new group they plan to set up, it will include the
three largest producers and Singapore, said Malaysia's Primary
Industries Minister Lim Keng Yaik.

Other possible members include producer members of the
Association of Natural Rubber Producing Countries (ANRPC), he
said. The ANRPC met today in Bangkok.

The ANRPC is an intergovernmental group that promotes
producers' interest and runs development programs for small
farmers. Its members are Thailand, Indonesia, Malaysia,
Singapore, Vietnam, Sri Lanka, India and Papua New Guinea.

Singapore is the only member that doesn't produce natural
rubber.

INRO includes 18 importing and six exporting countries. It
manages the third United Nations-backed International Natural
Rubber Agreement, which came into force in February 1997. This
agreement to stabilize world natural rubber prices extends
through 2001.

Ribbed Smoked Sheet 3 rubber for October delivery on the
Singapore Commodity Exchange rose 1.6 percent to 64 cents a
kilogram.