MIXED ASIAN REACTION TO NEW RUBBER PACT

  Governments of major Asian
  producing countries have welcomed the conclusion of a new
  International Natural Rubber Agreement (INRA), but growers and
  traders are unhappy with the development, according to views
  polled by Reuter correspondents.
      Officials in Malaysia, Indonesia and Thailand, which
  produce the bulk of the world's rubber, said they expected the
  new pact to continue to stabilise prices and help their rubber
  industries remain viable in the long-term.
      But traders and growers said they were against the new pact
  because its buffer stock mechanism was likely to interefere
  with free market forces and prevent sharp rubber price rises.
      The new INRA, to replace the current one which expires on
  October 22, was formally adopted by most of the world's
  producers and consumers in Geneva last Friday.
      It will be open for signature at the U.N. Headquarters in
  New York from May 1 to December 31 this year and will enter
  into force provisionally when ratified by countries accounting
  for 75 pct of world rubber exports and 75 pct of world imports.
      Malaysian Primary Industries Minister Lim Keng Yaik said
  the formal adoption of a new pact had dispelled fears of
  liquidation of some 360,000 tonnes of INRA buffer stock rubber
  and a possible depression of prices.
      He expressed confidence that the new INRA would continue to
  keep prices stable by selling or buying rubber as prices rose
  or fell through its buffer stock system.
      Malaysia was also happy that in the new INRA financing of
  purchases for the normal buffer stock of 400,000 tonnes and a
  contingency buffer stock of 150,000 tonnes would be done
  through direct cash contributions from members, he said.
      Under the existing pact, members can borrow from banks to
  finance INRA's buffer stock purchases. This has been viewed
  with concern by some members who fear the INRA may become
  indebted and ultimately face collapse, like the International
  Tin Agreement.
      "This will ensure the buffer stock operation is carried out
  without any financial encumbrance," Lim said.
       Malaysia, the world's largest producer, was seeking
  cabinet approval to join the new INRA and hoped other producers
  and consumers would also become members, he said.
      Officials in Jakarta said the new pact would bring benefit
  to Indonesia's rubber industry's by stabilising prices.
      It was unlikely to collapse like the tin agreement because
  its new financial provisions had been tightened, they said.
      Thai officials told Reuters they were optimistic the new
  pact was viable because it strictly limited the extent of debt
  the INRA buffer stock manager might commit to his market
  operations.
       Malaysian growers, however, said they preferred a free
  rubber market because an INRA had a tendency to keep prices at
  levels that were only acceptable to consumers.
      "With the INRA's ability to keep prices at a certain stable
  level, consumers are assured of rubber at almost a fixed price,
  while producers may never see sharp price rises," a Malaysian
  Rubber Producers Council source told Reuters.
      Producers also wanted a free rubber market without the
  overhang of a 360,000 tonne INRA buffer stock which had
  psychologically prevented price rises, he said.
      State plantation officials in Sri Lanka said prices had
  been depressed since INRA's inception and the creation of a
  buffer stock, and they seemed unlikely to rise.
      Sri Lanka should not be a member of the INRA because it was
  expensive to maintain a buffer stock, they added.
      Traders in the region, meanwhile, said prices might be
  pressured by the new pact in the long term as its potential to
  stabilise prices and buffer stock capacity would spur producers
  to produce more.
      Most Malaysian and Singapore traders said the new pact's
  conclusion had little impact on prices and it was unlikely to
  allow sharp price fluctuations in future.
      "The 360,000 tonnes in the INRA buffer stock must be
  liquidated and a free market returned," a Malaysian trader said.
      Japanese traders said the new pact had a chance for success
  as most world producers and consumers had adopted it, but they
  questioned the ability of some financially-strapped producers
  to finance buffer stock operations.
  

