Govt intervention still needed to curb price hike

Govt intervention still needed to curb price hike

JAKARTA (JP): The government's market intervention is still
needed to anticipate a possible sharp increase in prices in the
next few months, economic analysts have said.

Tadjuddin Noor Said, a noted economic analyst and former
legislator, said yesterday the rise in fuel prices starting April
would lead to a sharp increase in food prices and other
essentials.

Without the government's intervention, the price increase
would become uncontrollable, he said. Therefore the government's
intervention was still needed even though the State Logistics
Agency (Bulog), as the buffer stock agency, had lost its
monopolistic privileges.

Bulog will only hold its monopoly on the import of rice
beginning next fiscal year. As the consequency, it will no longer
operate as the buffer stock agency to stabilize other important
products such as sugar and cooking oil.

A member of the United Development Party (PPP) faction in the
House of Representatives (DPR), Muchsin Bafadal, told The Jakarta
Post the increase in fuel prices would worsen the economic crisis
and sociopolitical situation unless the government was able to
control food prices.

The government should anticipate an increase in food prices
after fuel prices start to increase beginning April 1, the
legislator said.

"I am really worried about what will happen if the government
fails to control food prices after the fuel price hike," Muchsin
said.

Tadjuddin said the government should intervene in the market
to control food prices for the benefit of the public.

"That kind of intervention is line with Chapter 33 of the
Constitution which stipulates that things which concern the
majority of the public should be controlled by the government,"
Tadjuddin said.

Minister of Finance Mar'ie Muhammad said yesterday in his
speech on the revised 1998/1999 state budget at the House of
Representatives that the government would raise fuel prices
starting April as it reduced fuel subsidies by between 30 percent
to 40 percent to Rp 7.45 trillion (US$1.49 billion) from Rp 10.07
trillion projected in the initial draft state budget.

The state budget has been revised as part of the accord
between the International Monetary Fund (IMF) and the Indonesian
government.

The IMF and the Indonesian government agreed to raise fuel
prices to reduce fuel subsidies, except for the price of kerosene
and diesel fuel, where increases would be kept to a minimum so as
to protect the poor.

Tadjuddin said the Indonesian government should not blindly
follow the IMF's requests to abolish subsidies and to stop
intervention in the market.

"The IMF is only a way and not an end," Tadjuddin said, adding
that government intervention in the market was still needed
otherwise the market would be controlled by a small number of
wealthy people.

Tadjuddin said the decrease in fuel subsidies projected for
next fiscal year would result in an increase in fuel prices by
between 30 percent and 40 percent.

He believed the government would apply a cross-subsidy scheme
where the price of avtur, avgas, and premium gasoline -- which
were mainly used by wealthy people -- would be increased more
than the price of kerosene and diesel fuel -- which were mainly
used by poor people, industries and public transportation.

He projected the government would raise the price of avtur,
avgas and premium gasoline by more than 50 percent, while
kerosene and diesel fuel by 10 percent.

The price of avtur and avgas is now Rp 420 per liter
domestically, premium gasoline Rp 700 per liter, kerosene Rp 280
per liter, and diesel fuel Rp 240 per liter. (jsk)