Lower fuel prices will not quell unrest: Experts
JAKARTA (JP): The government's decision to set lower fuel and power prices may have a little impact in dampening the escalating social unrest in the country, economists said yesterday.
The compromise to lower fuel prices seemed to be a response to the increasing social unrest throughout the country during the past two weeks, said Mari Pangestu, an economist with the Center for Strategic and International Studies (CSIS).
"But it's too late," she said, pointing out that the unrest situation was now more than just an objection to the oil price hikes.
She said that although the recent rioting in Medan, the provincial capital of North Sumatra, and Jakarta seemed to be initiated by the increase in fuel prices, it was only one of the factors in the antigovernment protests, which had led to lootings and burnings.
"The new policy will not by itself solve the problem (social unrest)," she said.
Minister of Mines and Energy Kuntoro Mangkusubroto announced yesterday lower oil prices and electricity tariffs in a hearing with members of the House of Representatives.
The new prices are set at Rp 1,000 per liter for gasoline, Rp 280 per liter for kerosene and Rp 550 for automotive diesel. The rise in the electricity tariff has been lowered to 18 percent from 20 percent previously.
Earlier on May 4, the government raised fuel prices by between 25 percent and 71.43 percent along with the electricity rate in an effort to reduce subsidies.
Kerosene's price was increased by 25 percent to Rp 350 per liter, gasoline by more than 71 percent to Rp 1,200, automotive diesel oil to Rp 600 from Rp 380, industrial diesel to Rp 500 from Rp 360, bunker oil to Rp 350 from Rp 240, and jet fuel to Rp 600 from Rp 420.
The price hikes set off transportation prices soaring as high as 60 percent, which also triggered a commensurate rise in prices of basic commodity, causing widespread antigovernment protests staged by the country's university students.
Anwar Nasution, the dean of the School of Economics at the University of Indonesia, said that the decision to cut the increase in fuel prices and electricity tariffs would only show that the government was inconsistent with its own policy.
"The rice has turned into porridge, and human blood has been spilled all across the country. So the decision will not end the rioting and crisis because it hasn't touched the essence of the problem," he said.
Umar Juoro, an economist at the Center for International and Development Studies (CIDES), agreed, saying that it would be better if the government made a more concrete and comprehensive policy including a cabinet reshuffle and continue to restructure the country's macro economy that would eradicate nepotism and crony capitalism.
"The government's agreement with the IMF could not abolish nepotism practices which have become a long time habit in this country," he said.
Anwar explained that the government should realize that the main cause of the fuel price problem was the inefficiency in the operation of state-owned oil company PT Pertamina which has resulted in the high cost and huge subsidy.
Economist Faisal Basri concurred, saying that improving the country's oil industry and cleaning it up from crony capitalism would have saved the country a lot, pointing out that just from improvements in the export activities would save between Rp 2 trillion and Rp 3 trillion.
He said that the lower oil price policy may be used as a justification for the government to slide over some difficult items in the agreed reform programs because the people had objected to the cutting of subsidies in oil and electricity.
Mari, however, said that the new fuel price policy did not contravene the agreement with the IMF, because the deadline for the subsidies was at the end of the 1998/1999 fiscal year.
"What really matters is the increasing unrest and how the government would handle it," she said, adding that the IMF and other institutional agencies would adopt a wait-and-see position because of the current tense situation. (rei/gis)