Fuel politics<\/p>\n
One could read many things into the government's decision to
\ndelay the raising of domestic fuel prices. Skeptics
\nwould accuse President Abdurrahman Wahid of resorting to
\npopulism. Others would see this as common sense. Whatever
\ninterpretation we use, it is clear that political considerations
\nhave prevailed once again, even though the economic
\nconsiderations for hiking prices are so compelling.<\/p>\n
The government said the decision to delay the hikes was taken
\nbecause the political situation was not conducive. Labor
\ndemonstrations in some big cities in Indonesia this past week
\nwere originally held to protest against the government's policy
\nwith regard to severance or compensation payments, but some
\nexpanded into violent protests over the planned 30 percent
\naverage increases in fuel prices, starting on June 15.<\/p>\n
We could extend this argument and link it with the fact that
\nthe People's Consultative Assembly (MPR) is planning to hold a
\nspecial session on Aug. 1 to begin an impeachment process against
\nPresident Abdurrahman. At a time when his popularity is at such a
\nlow ebb, now would be the worst moment for him to implement
\nunpopular measures like increasing fuel prices.<\/p>\n
If history is any indication, such a measure would amount to
\npolitical suicide. President Soeharto's powerful regime collapsed
\nin May 1998, barely a month after he tried to increase fuel
\nprices. When he retracted the policy, the damage had already been
\ndone and the protests turned into uncontrollable, violent
\nunrests. That, and the massive student protests against his
\nregime, forced Soeharto to resign.<\/p>\n
There is no doubt that fuel prices must rise sooner or later.
\nCurrent prices, which are well below world levels, are
\nindefensible, without bankrupting the government or the nation.<\/p>\n
The government said the cost of subsidizing fuel, originally
\nestimated at Rp 41.3 trillion (US$3.75 billion at current prices)
\nin the budget year ending Dec. 31, could soar to over Rp 70
\ntrillion because of a combination of rising world oil prices and
\nfalling rupiah exchange rate since January.<\/p>\n
With the government hard pressed for money, it was forced to
\nreview its budget spending, and the fuel subsidy became an
\nobvious target for the axe. The House of Representatives, which
\nhad blocked some of the government's economic programs in the
\npast, endorsed with ease the proposal to increase fuel prices.
\nUltimately, however, it is the government, especially President
\nAbdurrahman, that would have to carry the political risks.<\/p>\n
It is not so much the timing, but the reason given, that is so
\nvery wrong about the government's decision to hike fuel prices.<\/p>\n
The way the proposal was pushed through the House left the
\nimpression that the increase was authorized because the
\ngovernment was running out of money. The soaring cost of the fuel
\nsubsidy resulted not so much from the increase in world oil
\nprices, but from the fall in the value of the rupiah.<\/p>\n
The public would therefore perceive the fuel price hikes as
\nresulting from the government's failure to defend the rupiah's
\nvalue. In other words, they would feel they were being penalized
\nfor the incompetence of this government.<\/p>\n
It would have been much more palatable had the government
\nhammered the point home that fuel subsidies should be phased out
\nbecause they have led not only to gross inefficiency in the use
\nof scarce resources, but also because they had caused massive
\ninequality. Since this is an across-the-board subsidy, the
\nlargest users of fuel are the chief beneficiaries. These include
\nindustrialists and the wealthier members of society. This is
\nessentially a subsidy for the rich by the poor, which is morally
\nas well as economically indefensible.<\/p>\n
Putting the timing factor aside, any plan to raise fuel prices
\nin the future should send the message that it is being done in
\nthe name of efficiency and equality, and never, as the case with
\nthe current plan, to plug the government's budget deficit.<\/p>\n
Unfortunately for this administration, however, efficiency has
\nnever been part of its vocabulary. For the government to argue
\nthat fuel prices are being increased in the name of efficiency,
\nit must lead the way in striving for the most efficient use of
\nscarce budgets, especially at a time of deep economic crisis.<\/p>\n
This week is a classic example. On the same week that the
\ngovernment was planning to increase fuel prices, which would mean
\nmore hardship for the people, aides to the President announced
\nhis plan for another one of his extravagant foreign trips, to
\nAustralia and the United States. It would be hard to find a
\ngovernment that is more insensitive than that.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/fuel-politics-1447899208",
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"sponsor": "Okusi Associates",
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