House cool on planned price hikes<\/p>\n
JAKARTA (JP): The House of Representatives responded coolly on
\nFriday to the government's planned fuel and power price hikes,
\nwith House Speaker Akbar Tandjung saying the move was
\n\"understandable\" due to the severe budget deficit.<\/p>\n
Akbar was quick to add, however, that further explanation from
\nthe government was needed to prevent any ramifications from
\nraising fuel and power prices.<\/p>\n
\"It does not mean that we fully agree with the move. The House
\nneeds further explanation from the government,\" Akbar said.<\/p>\n
Indonesian Democratic Party of Struggle (PDI Perjuangan)
\nlegislator Pramono Anung also stressed the need for a clear
\nexplanation from the government.<\/p>\n
\"It should be clearly stated ... how much will we get from the
\nhikes and how the government will disburse it to the public,\"
\nPramono, a member of House Commission VIII for the environment,
\nresearch and technology Affairs, told The Jakarta Post.<\/p>\n
Economists have warned that the hefty fuel and power price
\nrises set by the Cabinet for next month are likely to hit
\neconomic growth and send inflation soaring to 13 percent.<\/p>\n
But President Abdurrahman Wahid said the government had to
\nincrease fuel prices and electricity rates, as well as the value
\nadded tax (VAT), because the increases were tied to the
\nInternational Monetary Fund (IMF)'s US$5 billion bailout program
\nfor the country.<\/p>\n
\"We are tied to the IMF rules that say we should cut the
\nsubsidies, so from now on the subsidies will gradually be phased
\nout,\" Abdurrahman said after Friday prayers at the presidential
\npalace's Baiturrahim Mosque.<\/p>\n
The Cabinet decided on Thursday to cut subsidies and raise
\nfuel and power prices by 30 percent and 20 percent, respectively,
\nin June, as well as to increase the VAT by 2.5 percent in July.
\nThe moves are designed to plug a budget deficit that is
\nthreatening to reach 6 percent of gross domestic product (GDP).<\/p>\n
The price hikes are the outcome of the finance ministry's
\nrevision of the 2001 budget at the behest of the IMF, which has
\ndemanded steps be taken to bring the deficit back to 3.7 percent
\nof GDP as originally projected.<\/p>\n
The IMF has said it will not release a stalled $400 million
\nloan tranche unless the budget is revised and approved by the
\nHouse.<\/p>\n
The revised budget will be presented to the House on Monday
\nfor its approval, but analysts have predicted objections from
\nlegislators and a lengthy debate.<\/p>\n
The head of the House's budget affairs committee, Benny
\nPasaribu, said the timing of the price rises needed to be
\nreviewed.<\/p>\n
\"The policy itself is unavoidable, but given the prevailing
\npolitical and social conditions we have to question the timing,\"
\nBenny said.<\/p>\n
He suggested subsidy cuts and corresponding price rises be
\nphased in over several years, with no more than one price
\nincrease per year.<\/p>\n
Benny acknowledged the IMF stance that fuel and power
\nsubsidies should be phased out, but he said the move should be
\ncushioned with welfare and income subsidies for the poor.<\/p>\n
Responding to a complaint from a businessman on Friday that
\nthe price hikes would hit the ordinary people, Abdurrahman said:
\n\"If you think your business will suffer because you cannot
\ncompete, then you have to change your way of doing business so
\nthat you can compete.\" (dja\/byg)<\/p>",
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