Asian govts bear brunt of high oil prices

Asian govts bear brunt of high oil prices

SINGAPORE (Reuters): Asian governments, mindful of inflation
and social unrest like that which has paralyzed parts of Europe,
are unlikely to reduce or scrap costly fuel subsidies despite
surging oil prices, analysts said on Wednesday.

Oil prices at post-Gulf War highs and near 10-year peaks have
so far resulted only in a few ad-hoc measures.

With some countries due to hold national elections this year,
state-run enterprises may even be running up losses to avoid
displeasing consumers, analysts said.

"I don't think any economy in Asia is making massive changes
in their market micro-structure just because of the high oil
prices right now," said Bhanu Baweja, regional economist at
IDEAglobal.com in Singapore.

"Removing subsidies is counter to what you would expect at a
time of high oil prices."

OPEC-member Indonesia's heavily subsidized oil market is due
to see subsidy cuts next month with Jakarta expected to hike
domestic fuel prices 12 percent as part of reforms under a loan
package from the International Monetary Fund (IMF).

Plans to raise fuel prices earlier this year were postponed
after a wave of mass protests. A similar across-the-board price
increase in May 1998 triggered bloody riots nationwide.

Growing consumer unrest over sky-high fuel costs in China may
lead the Beijing administration to defer the long-planned
introduction of fuel taxes, and in the Philippines and Thailand,
upcoming elections are likely to deter confrontation with voters.

Anger across Europe over rising oil prices has in recent days
spread to Germany where haulage firms have followed the blockades
set up by their French, Belgian and British counterparts.

"For the Philippines, inflationary pressure has been building
up steadily and will go up much further if oil prices stay high,"
Joan Zheng, Chase Manhattan senior economist in Hong Kong, wrote
in a recent report.

Both Philippine and Thai consumers have been to a large extent
shielded from this year's high oil costs.

The Philippines oil sector is deregulated, but the government
has repeatedly requested oil firms -- Petron, Caltex Philippines
and Pilipinas Shell -- to temper pump price rises to protect
consumers.

Philippine refiners on Tuesday raised pump prices for the
seventh time this year, but Petron said the latest increase
amounted to just one-third of its total losses on selling prices.

"In the Philippines, they are unwilling to pass on the price
increases (to consumers) because they've got elections coming
up," said Hong Kong-based Bob Broadfoot, managing director of the
Political and Economic Risk Consultancy (PERC).

Broadfoot said an election year in Thailand might also deter
the government from hiking prices in line with global oil rates.

"It will be a politicized issue," he said.

So far the Thai government has taken on a large part of rising
import costs.

"The Petroleum Authority of Thailand (PTT) is selling retail
at a loss for every liter to bring down prices," said Kannika
Siamwalla, energy analyst at ING Barings Securities in Bangkok.

"PTT is government. It can run at a loss to subsidize
consumers for some time," she said.

Thailand agreed last month to give partial diesel subsidies
for three to four months to 75,000 truckers, who disrupted
highway traffic to pressure the government to halt diesel's rise.

Net oil exporter Malaysia is considering cutting subsidies
that keep domestic fuel prices low, but is worried about the
impact on inflation.

Any subsidy cut would mark the country's first petrol price
increase since 1983.