Lower fuel prices will not quell unrest: Experts<\/p>\n
JAKARTA (JP): The government's decision to set lower fuel and
\npower prices may have a little impact in dampening the escalating
\nsocial unrest in the country, economists said yesterday.<\/p>\n
The compromise to lower fuel prices seemed to be a response to
\nthe increasing social unrest throughout the country during the
\npast two weeks, said Mari Pangestu, an economist with the Center
\nfor Strategic and International Studies (CSIS).<\/p>\n
"But it's too late," she said, pointing out that the unrest
\nsituation was now more than just an objection to the oil price
\nhikes.<\/p>\n
She said that although the recent rioting in Medan, the
\nprovincial capital of North Sumatra, and Jakarta seemed to be
\ninitiated by the increase in fuel prices, it was only one of the
\nfactors in the antigovernment protests, which had led to lootings
\nand burnings.<\/p>\n
"The new policy will not by itself solve the problem (social
\nunrest)," she said.<\/p>\n
Minister of Mines and Energy Kuntoro Mangkusubroto announced
\nyesterday lower oil prices and electricity tariffs in a hearing
\nwith members of the House of Representatives.<\/p>\n
The new prices are set at Rp 1,000 per liter for gasoline, Rp
\n280 per liter for kerosene and Rp 550 for automotive diesel. The
\nrise in the electricity tariff has been lowered to 18 percent
\nfrom 20 percent previously.<\/p>\n
Earlier on May 4, the government raised fuel prices by between
\n25 percent and 71.43 percent along with the electricity rate in
\nan effort to reduce subsidies.<\/p>\n
Kerosene's price was increased by 25 percent to Rp 350 per
\nliter, gasoline by more than 71 percent to Rp 1,200, automotive
\ndiesel oil to Rp 600 from Rp 380, industrial diesel to Rp 500
\nfrom Rp 360, bunker oil to Rp 350 from Rp 240, and jet fuel to Rp
\n600 from Rp 420.<\/p>\n
The price hikes set off transportation prices soaring as high
\nas 60 percent, which also triggered a commensurate rise in prices
\nof basic commodity, causing widespread antigovernment protests
\nstaged by the country's university students.<\/p>\n
Anwar Nasution, the dean of the School of Economics at the
\nUniversity of Indonesia, said that the decision to cut the
\nincrease in fuel prices and electricity tariffs would only show
\nthat the government was inconsistent with its own policy.<\/p>\n
"The rice has turned into porridge, and human blood has been
\nspilled all across the country. So the decision will not end the
\nrioting and crisis because it hasn't touched the essence of the
\nproblem," he said.<\/p>\n
Umar Juoro, an economist at the Center for International and
\nDevelopment Studies (CIDES), agreed, saying that it would be
\nbetter if the government made a more concrete and comprehensive
\npolicy including a cabinet reshuffle and continue to restructure
\nthe country's macro economy that would eradicate nepotism and
\ncrony capitalism.<\/p>\n
"The government's agreement with the IMF could not abolish
\nnepotism practices which have become a long time habit in this
\ncountry," he said.<\/p>\n
Anwar explained that the government should realize that the
\nmain cause of the fuel price problem was the inefficiency in the
\noperation of state-owned oil company PT Pertamina which has
\nresulted in the high cost and huge subsidy.<\/p>\n
Economist Faisal Basri concurred, saying that improving the
\ncountry's oil industry and cleaning it up from crony capitalism
\nwould have saved the country a lot, pointing out that just from
\nimprovements in the export activities would save between Rp 2
\ntrillion and Rp 3 trillion.<\/p>\n
He said that the lower oil price policy may be used as a
\njustification for the government to slide over some difficult
\nitems in the agreed reform programs because the people had
\nobjected to the cutting of subsidies in oil and electricity.<\/p>\n
Mari, however, said that the new fuel price policy did not
\ncontravene the agreement with the IMF, because the deadline for
\nthe subsidies was at the end of the 1998\/1999 fiscal year.<\/p>\n
"What really matters is the increasing unrest and how the
\ngovernment would handle it," she said, adding that the IMF and
\nother institutional agencies would adopt a wait-and-see position
\nbecause of the current tense situation. (rei\/gis)<\/p>",
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