IMF does not object to delay in fuel price hikes: Kwik<\/p>\n
JAKARTA (JP): The International Monetary Fund (IMF) did not
\nobject to the government's decision to delay fuel price hikes,
\nCoordinating Minister for Economy, Finance and Industry Kwik Kian
\nGie said.<\/p>\n
\"When we consulted them (IMF), they showed no reaction,\" Kwik
\nsaid on Saturday following a cabinet meeting of economic
\nministers at the presidential office.<\/p>\n
Kwik said although the delay had been set for an indefinite
\nperiod, the government would set a deadline.<\/p>\n
\"If we still don't raise the fuel prices after three months,
\nit will be fatal,\" Kwik said.<\/p>\n
Kwik said if the delay lasts for more than three months, the
\ngovernment would have to cut its expenditure on development.<\/p>\n
\"Therefore, damaged bridges and bad roads will remain
\nunrepaired,\" he said.<\/p>\n
He said the government planned to conduct a weekly evaluation
\non whether to continue the delay.<\/p>\n
The government canceled plans to raise fuel prices by 10
\npercent on Friday, one day ahead of the scheduled hikes, amid
\nthreats of mass demonstrations from various parties protesting
\nthe planned increases.<\/p>\n
The threats reminded people to events that took place
\nfollowing the government's decision to raise fuel prices in May
\n1998. The fuel price hikes then sparked violent riots that led to
\nthe resignation of former President Soeharto.<\/p>\n
The fuel price hikes are part of the agreement between the
\nIndonesian government and the International Monetary Fund (IMF)
\nas part of the efforts to cut fuel subsidies for the April-
\nDecember 2000 fiscal year.<\/p>\n
By increasing fuel prices, the government expected to reduce
\nfuel subsidies to Rp 22.4 trillion (US$2.9 billion) from an
\nestimated Rp 27.5 trillion during the last fiscal year, which
\nended on March 31.<\/p>\n
Chairman of House of Representatives' Commission VIII, Irwan
\nPrayitno agreed that a delay longer than three months would be
\ndetrimental to the state budget.<\/p>\n
He suggested a delay of one to three months. At least one
\nmonth is needed for the government to prepare the public for the
\nincreases.<\/p>\n
\"The government must use the delay period to raise the
\npublic's awareness and understanding of the importance of the cut
\nin fuel subsidy,\" Irwan told The Jakarta Post over the weekend.<\/p>\n
Last week, the House's Commission VIII requested the
\ngovernment to delay the fuel price hikes, saying that the public
\nwere not prepared.<\/p>\n
He said the public's strong objection to subsidy cuts stemmed
\nfrom misperception that fuel subsidies were beneficial mostly to
\nthe poor.<\/p>\n
\"However, we know that most of the fuel subsidies go to car
\nowners who are in fact not eligible for subsidy,\" Irwan said.<\/p>\n
He added that fuel costs in industries made up an average of
\nonly 2.2 percent of their total operating costs. Hence, a slight
\nincrease in fuel prices should not jerk up the prices of consumer
\ngoods.<\/p>\n
Irwan further said that the government was not prepared to
\ndistribute the fuel subsidies to the poor and inefficiencies in
\nthe distribution was very possible.<\/p>\n
The government initially planned to introduce a coupon system
\nfor the poor and public transportation owners to buy fuel at
\ncheap prices but it later replaced the coupon system with a cash
\ntransfer system.<\/p>\n
Under the cash transfer system, the government would send Rp
\n495.8 billion in subsidy funds to the poor and to land
\ntransportation owners through post offices to help them afford
\nfuels at new prices.<\/p>\n
Tini Hadad, a member of the board of directors at the
\nIndonesian Consumers Agency (YLKI), agreed that the government
\nshould boost publications on its plans to cut fuel subsidies.<\/p>\n
\"It's important that the people understand why we need to cut
\nour subsidy spending,\" Tini said over the weekend.<\/p>\n
She said she understood the people's strong objection to the
\nsubsidy cut as most of the people were still enduring economic
\nhardships.<\/p>\n
Tini added that inefficiencies in state-owned oil and gas
\ncompany PT Pertamina had made the public reluctant to pay more
\nfor fuel.<\/p>\n
Tini declined to suggest how long the government should
\ndelay the increase in fuel prices, saying during the delay period
\nthe government should focus on preparing accurate data on the
\npeople eligible for subsidy.<\/p>\n
The present fuel subsidy scheme is based on data from the
\nsocial safety net programs of 1999, which counted 17.4 million
\npoor families. (bkm\/cst)<\/p>",
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