House divided over govt plans on fuel price hike in 2001
House divided over govt plans on fuel price hike in 2001
JAKARTA (JP): Factions at the House of Representatives are
divided over the government's politically-sensitive plans to
further raise fuel prices next year.
The Indonesian Democratic Party of Struggle (PDI-P), the
largest party in the House, supported the government's plans to
gradually reduce fuel subsidies which in turn would raise the
price of the commodity.
"In principle, the PDI-P faction agrees with the (government)
plans to gradually reduce fuel subsidies," said party spokesman
Max Moein during a plenary session on the government's 2001 state
budget proposal.
Citing research work of the University of Indonesia, PDI-P
said that the fuel subsidy had mostly benefited "the haves."
After increasing fuel prices by an average 12 percent earlier
this month, the government plans to raise the price of the fuel
by another 20 percent in April next year to reduce the burden on
the state budget.
The plan to reduce the fuel subsidy is part of an agreement
with the International Monetary Fund, which is providing cash in
a multi billion dollar bailout to help revive the ailing economy.
But raising fuel prices is a politically sensitive issue which
could trigger social unrest in the country.
The Golkar Party, also a large faction in the parliament, is
opposed to the plans.
Golkar spokesperson Hamka Yamdhu said that raising fuel prices
would ignite inflation which would be bad for the economy and the
people.
"The Golkar faction supports a policy of a continuation in
providing fuel subsidies...," Hamka said.
Instead, Golkar demanded the government boost efficiency in
managing the country's oil resources and to take energy
conservation measures.
Hamka also said that Golkar insisted that subsidies for other
commodities including rice, electricity and credit for the poor
should be maintained.
Although PDI-P supported the plans to raise fuel prices, the
faction demanded the government explain what measures would be
taken to control inflation.
The government unveiled the 2001 state budget draft earlier
this month.
The budget assumes an exchange rate of Rp 7,300 per U.S.
dollar, economic growth of 4.5 percent, inflation of 7 percent,
and an oil price of US$22 per barrel.
Legislators questioned the government's budget assumptions
particularly on the exchange rate level.
"We demand an explanation. What is the basis used by the
government to come to this assumption? What are the measures to
be taken by the government to reach this assumption?," Hamka
said.
Economists and legislators have earlier said that the exchange
rate assumption was unrealistic given the unstable political
condition at home, and the fact that the rupiah had been hovering
at more than Rp 8,000 per dollar.
The rupiah ended trading late Monday at Rp 8,875 per dollar
compared to Rp 8,922 late on Friday.
On the outlook for the economy, the PDI-P faction warned the
government of the grim reality.
"Our economy has not yet recovered not only because of the
unresolved economic (problems) ... but also because of non-
fundamental factors including government and political
instability, and the absence of security and legal certainty,"
PDIP said.
"The climate until now is not yet conducive particularly in
the area of politics and security. Bombs have exploded in various
places, unrest has occurred in several areas, and people continue
to hold demonstrations in Jakarta and other places."
PDIP said that the country could only enjoy economic recovery
if the government with the support of the House could resolve the
economic problems and overcome the non-fundamental factors.
The government envisaged total revenues of Rp 243 trillion
versus total spending of Rp 295.1 trillion. A deficit of around
Rp 53 trillion will be covered by the sale of state assets and
foreign loans.
The government is scheduled to meet with the country's
traditional donors grouped in the Consultative Group on Indonesia
(CGI) in Tokyo this week to seek a loan of around $4.8 billion.
Almost 70 percent of total revenue would come from domestic
taxes, particularly income tax and value-added tax.
Both PDI-P and Golkar factions questioned the government
regarding how it intended to reach the huge tax revenue target.
Golkar even suggested that the tax ratio be increased to 13
percent from the government assumption of 12.3 percent. (rei)