Three major rubber producers plan rubber support scheme

JAKARTA (JP): The world's largest rubber producers, Thailand, Indonesia and Malaysia, are set to agree on a rubber support scheme when they gather for a ministerial meeting this month, a senior government official said on Thursday.

Director general for international cooperation at the Ministry of Trade and Industry Hatanto Reksodipoetro said that a ministerial meeting would be held in Phuket, Thailand, to adopt the rubber support scheme.

"Indonesia is proposing to hold the meeting in Phuket on January 26," Hatanto told reporters at his office.

The meeting, he said, would be attended by the Indonesian Minister for Trade and Industry, Luhut B. Pandjaitan, and the agriculture ministers of Malaysia and Thailand.

He said that under the scheme, the three countries would form a pricing committee whose task would be to set a minimum selling price for rubber.

The plan requires Indonesia to retain its rubber stocks should prices fall below the agreed level, something the government had at first been reluctant to do, he said.

According to him, Thailand and Malaysia have long urged Indonesia to join them in forming the rubber pact, but the government refused their offers, concerned that it might lead to a retention agreement.

"We have consistently been against the formation of a retention agreement, because the government just doesn't have the funding for it," he said.

The government changed its mind after the Indonesian Rubber Association agreed to absorb retention costs, he explained.

Efforts to bring the three largest rubber producers together began when Thailand and Malaysia decided to withdraw from the International Natural Rubber Organization (INRO).

Thailand, Indonesia and Malaysia produce approximately 80 percent of the world's natural rubber output, with combined production of around 4.5 million tons per year.

Malaysia and Thailand charged INRO with failing to lift rubber prices, which have plunged to their lowest levels in 30 years.

Their decision to leave INRO prompted the abolition of the organization, which grouped rubber producers with consumers.

Hatanto said that, while Indonesia would involve its private sector for the rubber retention costs, Thailand and Malaysia had the means to finance the scheme from their own coffers.

"It will be a committee of three countries, involving the government and the private sector (from Indonesia)," he explained.

Hatanto declined to estimate the minimum price level, although officials have said that it might be up to one U.S dollar per kilogram for rubber purchased from scheme members.

The committee, he continued, would also evaluate market conditions that could potentially affect prices, which may lead to member countries being required to retain their surplus rubber.

A senior official meeting in Batam last December resulted in the rubber support scheme, to help lift natural rubber prices after the abolishment of INRO.

However, Hatanto admitted the rubber support scheme was difficult to implement.

According to him, each country could violate the agreement and sell their rubber at prices below the agreed level, while others retain their stocks.

"Commitment is one thing, implementation another," he said.

Hatanto said that Indonesia would call for tight supervision of the agreement, although no monitoring scheme has yet been outlined.(bkm)