Fuel subsidy for vehicles

Fuel subsidy for vehicles

The fuel subsidy for motorcycles and cars is creating more and
more financial problems for Indonesia. The subsidy
disproportionately benefits the "haves" as opposed to the "have-
nots", for the latter more often than not are not even able to
buy bicycles, much less motorcycles and cars.

Complete elimination of the subsidy will permit the government
to use the funds thus freed up to help those who most need help
by providing, for example, really free and adequate schools,
functioning health care units (Puskesmas) and potable water.

The reduction in that subsidy earlier this year has proved
ephemeral in the face of the drastic increases in the world
market price of oil. The most feasible way for the Indonesian
government to stanch the outflows of its revenues due to that
subsidy is to gradually eliminate it entirely instead of, as it
futilely hoped last March, trying to reduce it enough to stop
most of the bleeding from the budget.

To eliminate it without resorting to "shock therapy," the
subsidy should be reduced by a fixed amount each month so that it
will be entirely eliminated by, say, next June. To attempt to
eliminate it in one fell swoop has the potential for overthrowing
the government, as the Egyptian government learned to its horror
when it tried to raise the price of bread by a very large amount
all at once at the behest of the international financial
institutions. But a monthly salami increase in the price of fuel
for vehicle owners, albeit painful, can be stomached with nothing
worse than demonstrations and generalized griping.

WILL JOURDIN
Ubud, Bali