Fuel price hikes 'a potential cause of political instability'

JAKARTA (JP): Several observers warned yesterday that Monday's government decision to raise fuel and electricity prices amidst the economic hardships faced by the people and strong demands for reform, could be a potential source of political instability.

Christian Wibisono, director of the Center for Indonesian Business Data, said the fuel and electricity price increases would negatively impact national stability, "but we cannot measure how far the negative impacts will be."

"The price hikes will certainly affect political stability during such a severe situation. It is difficult, however, to make a prediction on how much it will negatively impact stability," he said after attending a seminar on the Asian crisis organized by the Center for Strategic and International Studies (CSIS) here yesterday.

Pande Radja Silalahi, former rector of Parahyangan Catholic University in Bandung, West Java, said the fuel and electricity price hikes would worsen the political and economic situation, especially if the government failed to adequately cushion the harsh impacts felt by the people.

"The monetary crisis, plus the student movement demanding political and economic reforms, has already brought political stability to the brink.

"Now the government raises fuel and electricity prices. This move could jeopardize political stability because it will certainly worsen the hardships faced by the majority of people," he said.

He argued that the government must sufficiently explain the controversial decision to the people, in a transparent and honest manner.

"The government should provide repeated explanations on its reasons behind the decision so the people can accept it," he said.

Pande himself claimed that he understood the considerations behind the price increases, "but most people have yet to understand the economic and political reasons behind the fuel price hikes."

He also pointed out that the government made the decision without any endorsement from the House of Representatives (DPR).

In Yogyakarta, sociologist Loekman Soetrisno of the Yogyakarta-based Gadjah Mada University, said yesterday that the government must hastily follow through with its promises to subsidize other sectors of the economy.

The government, according to Loekman, said it was terminating fuel subsidies so the money could be allocated to help other areas such as food and medicine.

"The rise in fuel prices will create a precarious situation. It would become even more dangerous if, as fuel prices rose, the price of medicines and food became too high for the people as well," he said as quoted by Antara.

But he was doubtful that the government could fulfill its pledge to stabilize prices even with large subsidies.

He said that failure to control prices in such important commodities like food and medicines would only heighten public mistrust felt toward the government.

"Just so you know, the promise to subsidize food and medicines will be well remembered. That's why they will be tolerant of the fuel price increases as long as other prices become affordable," he remarked.

Economist Anggito Abimanyu, also of Gadjah Mada University, was skeptical that food and medicine prices would go down.

"Fuel prices are one of the key factors in the chain of production costs," he argued.

He questioned the government's move to raise fuel prices at this point, especially since it had taken other "expensive measures" to bring down and stabilize prices. This latest move would only further push up the market price of various commodities, he said. (rms/mds)