Fuel price hike fair for the poor: SBY

Wahyoe Boediwardhana and Ridwan Max Sijabat, The Jakarta Post, Denpasar/Jakarta

Aware that his popularity rating is likely to plunge over planned fuel price increases, President Susilo Bambang Yudhoyono said on Sunday his administration would never issue a policy that favored the rich at the expense of the poor.

Speaking during an informal meeting with local leaders and members of the tourist industry on the resort island of Bali, Susilo defended the government's plan to raise domestic fuel prices next month, despite protests by many economists, activists, legislators and political parties.

"Please see if there is any government policy that ignores and hurts the poor. Does the fuel subsidy policy take their side or not? We are trying to make things fair for (the poor)," Susilo said.

Critics have said the planned fuel price increases will only add to the burden on the poor.

The government has said that the savings generated by cutting the massive fuel subsidies, which have weighed down the budget, would be used to provide free education, free health care and inexpensive rice for the poor. The government expects to channel about Rp 10 trillion (US$1.07 billion) into social programs for the poor.

Susilo said another of his administration's policies that favored the poor was the allocation of credits for micro, small- and medium-sized businesses.

Bank Indonesia, the President said, was following up on this policy by outlining a strategy to continue increasing credits to these businesses, and also by dropping the central bank's benchmark interest rate on these loans.

Presidential spokesman Andi Alfian Mallarangeng said on Saturday that Susilo was prepared to see his popularity suffer as a political consequence of raising fuel prices.

"The increase in fuel prices is inevitable and will become reality in the immediate future. The government is just waiting for the right time to announce it to the public," Andi said.

Speaking as a panelist at an interactive dialog organized by the Asian Development Bank (ADB) and the Partnership for Governance Reform in Indonesia, the spokesman said the President had no choice but to raise fuel prices to avoid fiscal trouble as the fuel subsidy became more costly with rising oil prices.

"Unlike in the past, the benefits will now go directly to the people. Some 36 million people living below the poverty line will gain financial advantages from this decision since they will receive cheap rice and free health care, plus their children will receive a free education during the nine-year compulsory education program," he said.

Dewi Fortuna Anwar, a political researcher at the Indonesian Institute of Sciences, said that although raising fuel prices would be unpopular in the short term, the move would eventually gain support, especially if Susilo could provide a clear and effective explanation to the public about the importance of the policy for the economy.

"Of the utmost importance is that he must explain to the public why he made this unpopular decision ... and the funds for the poverty program must be disbursed transparently and audited," she said.

She predicted the unpopular policy would meet with strong opposition from political parties, students and the middle class, but in the end people would accept the price increases.

Dewi called on Susilo, who is the country's first directly elected president, to press ahead with tough reform programs to help resolve the country's economic problems.

She said polls showed the international community had more confidence in Susilo than voters at home because of his strong commitment to pursuing his social, political and economic programs, and creating a democratic government.

HS Dillon, executive director of the Partnership for Governance Program in Indonesia, said Susilo should strengthen his alliances not only with major political parties but also with the voters, especially those who supported him in the presidential election.

"All decisions and policies Susilo makes will certainly win political support from the people if they benefit the people," he said.