Govt aims to redirect oil subsidy to the poor

The Jakarta Post, Jakarta

The government claims the massive fuel subsidy benefits the rich more than the poor, and that by cutting the subsidy and raising fuel prices it can redirect the money into programs that will benefit those most in need.

As part of its campaign to win the hearts and minds of the people, the government promised on Monday night to allocate Rp 10.5 trillion of the Rp 20.3 trillion saved by cutting the fuel subsidy to finance a number of programs targeted directly at the poor.

This Rp 10.5 trillion is in addition to the Rp 7.3 trillion already budgeted for programs to assist low-income families and individuals.

The majority of this Rp 17.8 trillion will go toward a scholarship program, for the purchase of subsidized rice for the poor, rural infrastructure projects and health programs (see table below).

But the skeptics remain unmoved. Amien Rais, leader of the National Mandate Party (PAN), last week questioned which poor people the government was targeting.

Some critics claim the government lacks accurate statistics on the number of poor in the country, who they are and where they live.

The government relies solely on data supplied by the Central Statistics Agency. For its subsidized rice program, for example, the government is relying on the same data used by the previous administration for a similar program.

Even if the government had accurate data, some critics still doubt the money and assistance would reach those it was intended for.

Indonesian Chamber of Commerce and Industry chairman M.S. Hidayat said during a discussion over the weekend the business community was willing to shoulder the burden of the fuel price increase as long as the money saved reached the poor.

Responding to these concerns, Coordinating Minister for the Economy Aburizal Bakrie said the government had included so- called safeguard funding in the programs to guarantee the assistance reached its intended targets.

For example, for inexpensive rice meant to be sold for Rp 1,000 per kilogram, the safeguard funding will ensure the rice is never sold for more than this set price.

Such safeguard funding will normally go to people at the village level to cover the cost of transporting the rice to the poor, or to non-governmental organizations helping to monitor the distribution of the rice.

According to an informed source, however, this safeguard funding often finds its way to unintended recipients -- legislators -- to make sure they do not block the assistance programs.

Assistance programs

Scholarships for 9.6 million students -- Rp 5.64 trillion Inexpensive rice for 8.6 million people -- Rp 5.44 trillion Infrastructure development in 26,737 villages -- Rp 3 trillion Health services for 36.1 million people -- Rp 2.17 trillion Social services -- Rp 0.65 trillion Construction of 225,000 low-cost houses -- Rp 0.6 trillion Subsidy for microcredit interest -- Rp 0.2 trillion Subsidy for family planning programs -- Rp 0.1 trillion Total -- Rp 17.8 trillion