Govt defends price hikes despite rising protests<\/p>\n
Fabiola Desy Unidjaja and Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
Unmoved by thousands of people who rallied on Monday to protest
\nagainst utility cost increases, the government has defended its
\ndecision, saying the policy is part of a pledge to gradually
\nreduce costly and misdirected subsidies.<\/p>\n
\"The government will not change its policies in the case of
\nthe price increases in fuel and electricity and telephone rates
\nbecause this is a joint political decision together with the
\nHouse of Representatives,\" Coordinating Minister for the Economy
\nDorodjatun Kuntjoro-Jakti said after a Cabinet meeting.<\/p>\n
He said the move was in accordance with existing policy passed
\nby the People's Consultative Assembly (MPR) during the formation
\nof its five-yearly national economic guidance policy in 2000.<\/p>\n
The policy says the government must gradually reduce subsidies
\nto zero by 2004 in order to pave the way for larger development
\nallocations, which in turn were expected to stimulate the
\neconomy, Dorodjatun said.<\/p>\n
He was responding to rising public criticism over the policy.<\/p>\n
Led by students, protesters took to the streets on Monday to
\ndemand the government cancel the policy, which they said was
\nfurther damaging the people's purchasing power, especially the
\npoor who were still suffering under the prolonged economic
\ncrisis.<\/p>\n
The street rallies took place in several cities in Java, Bali,
\nSulawesi and Sumatra.<\/p>\n
A public outcry erupted when the government decided to mark
\nthe country's entrance to the new year with a bang by
\nimplementing the increases simultaneously.<\/p>\n
It raised fuel prices by up to 22 percent in a move to better
\nreflect international oil prices, thus containing the 2003 state
\nbudget deficit within a safe level.<\/p>\n
That followed average 6 percent and 15 percent increases in
\ncharges of electricity and telephone rates respectively. For
\nelectricity, the government is implementing the rise each quarter
\nduring the year.<\/p>\n
However, the government claimed the gradual reduction of
\nsubsidies was necessary to avoid repeating past mistakes, in
\nwhich hefty subsidies were provided by the government only to
\nfind that it did not benefit low-income families.<\/p>\n
Over these years, the hefty fuel subsidies, for instance, were
\nenjoyed more by the financially secure. A huge volume of the
\nheavily subsidized fuel products were also smuggled to
\nneighboring countries.<\/p>\n
Research conducted by the respected Institute for Economics
\nand Social Research, Faculty of Economics, University of
\nIndonesia (LPEM-UI), shows that poor Indonesians only spend 0.2
\npercent of their total incomes on fuel and electricity
\nconsumption, compared to some 8 percent spent by middle-class
\nIndonesians.<\/p>\n
This year, the subsidies on fuel products are estimated at Rp
\n13.2 trillion (US$1.5 billion), far below the Rp 43 trillion set
\nfor last year.<\/p>\n
Not to mention that, according to the government, the price
\nhike did not directly affect the poor.<\/p>\n
It referred to kerosene and power charges for the poor --
\ncustomers using below 450 watts per unit -- which are still being
\nheavily subsidized.<\/p>\n
Kerosene is widely used as a cooking fuel by poor families.<\/p>\n
As for a rise in telephone charges, the government said it
\nwould have little impact on the poor as they were owned by only 5
\npercent of the population, namely the well-off.<\/p>\n
Dorodjatun said the government would do its utmost to try to
\nminimize the impact of the price hikes, by, among other things,
\nhelping control the prices of basic needs.<\/p>\n
\"We hope by March or April, things will improve and the prices
\nwill stabilize,\" he said.<\/p>\n
Based on last year's experience, Dorodjatun was upbeat that
\nthe price hikes would not lead to spiraling inflation.<\/p>\n
Early last year, the government applied a similar policy, but
\nit proved to have little impact on inflation. Editorial -- Page 6<\/p>",
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