Inflation will rise in wake of fare hikes: Economist

Inflation will rise in wake of fare hikes: Economist

JAKARTA (JP): This week's transportation fair hikes will probably have contiguous effects on other sectors and send April's month-on-month inflation rate to over 2 percent, an economist has warned.

Christianto Wibisono, chairman of the Indonesian Business Data Center, forecasted that the fare hikes will have psychological effects in other sectors, especially those directly or indirectly influenced by transportation.

"Its psychological effects will spread everywhere very quickly just like a chemical reaction," Christianto said here Thursday.

He explained that the fare hikes, ranging from 9.2 percent to 66.7 percent, could see prices of goods rise by an average of five percent.

With transportation constituting 20 percent of a company's costs, a 30 percent increase in transportation fares will increase the company's costs by six percent.

"In this case, the company will raise the prices of their goods by more than six percent to compensate for the increasing cost," Christianto said.

Such contagious effects will contribute to a rise in inflation, especially for this month. Christianto predicted that this month will see a month-on-month inflation rate of over 2 percent.

Indonesia's consumer price index dropped by 0.61 percent last month after increasing by 1.7 percent in February and 2.16 percent in January.

Sharing Christianto's view were Heijrahman and Anggito Abimanyu, both economists at Yogyakarta-based Gadjah Mada University. They said that an increase in this month's inflation rate is inevitable.

"The impact of the fare hikes will be very extensive, considering that all public goods have direct relations with transportation, especially land and sea transportation," Heijrahman, chairman of the university's Economic Research Center, was quoted by Antara as saying.

Meanwhile, Achmadi, chairman of the House of Representatives' public works and transportation commission, suggested that the fare hikes should be followed by better management of and better services by transportation firms.

He called on public transportation companies to abolish their target system, under which they set a revenue target for drivers, to improve their service and passengers' safety.

Concurring with Achmadi's suggestion, Christianto said that such a target system is responsible for the further deterioration of public transportation conditions in big cities.

"I suspect that with such high fare hikes, public transportation firms will follow them up by raising the revenue targets for their drivers," Christianto said. "Thus, drivers will never think of providing a better service or better safety for their passengers as they will just chase the targets." (icn/rid)