Megawati defends price hike policy before party faithful

Megawati defends price hike policy before party faithful

Rita A. Widiadana and Wahyoe Boedhiwardhana, The Jakarta Post,
Badung, Bali

Speaking before thousands of her supporters from the
Indonesian Democratic Party of Struggle (PDI Perjuangan),
President Megawati Soekarnoputri defended her policy of hiking
fuel prices and utility charges amid vigorous protests
nationwide, saying the policy would help the economy in the long
run.

President Megawati was attending an event marking her party's
30th anniversary on the resort island of Bali on Sunday when she
made her first public response to the week-long spate of street
protests across the country against the increases in fuel prices,
and electricity and telephone charges.

"The people have always been lulled to sleep by subsidies, the
money for which comes from the excessive exploitation of natural
resources and from the piling up of foreign debts," Megawati said
before cheering PDI Perjuangan supporters.

Most of the crowd, however, left the venue before Megawati
could finish her address, during which she attempted to rally
support for the price increases.

"People must work harder and understand this unpalatable
policy (of increasing prices)," she said.

Over the last week, however, there have been almost daily
street protests demanding that the government revoke the price
hikes and condemning them as being unjust to the poor amid
continued economic hardship.

The nationwide protests, which have united workers, students,
activists and the business community, marked the biggest public
challenge so far to Megawati's one-and-a-half-year-old
government.

But in her usual taciturn manner, the president kept silent,
leaving it to her ministers to justify the hikes to the public.

Reading from a prepared speech, she explained that subsidies
only benefited the middle and upper-income groups.

"I must admit that this is not a popular policy, but I really
don't want to mislead my own people and feed them unrealizable
dreams while letting the country plunge into a deeper crisis,
thus ruining our economic foundations," Megawati told the crowd.

She said the policy would release money to directly help the
poor through better access to basic services such as healthcare.

The government has allotted Rp 4.4 trillion (about US$493
million) to reduce the impact of the higher utility and fuel
prices on the poor. But the Central Bureau of Statistics has
warned of a surge in inflation because of the price hikes. A
sharp rise in the consumer price index could drag tens of
millions of Indonesians living on $2 a day below the poverty
line, according to World Bank estimates.

Megawati said that the painful policy would help the nation's
economy in the long run. Economists agree, pointing to the money
that can be saved through the elimination of subsidies. This
year's state budget assumes Rp 16 trillion less in subsidy
spending than last year.

The reduction in subsidies has allowed a more generous
stimulus package in the form of government investment and tax
cuts to help business cope with the economic fallout from the
Oct. 12 Bali bombing. These are job-saving measures at a time
when the economy was badly hit by the Bali terrorist strike.

Indonesians, however, have enjoyed cheap fuel and power for
some three decades under former president Soeharto, who used
subsidies as political tools to lull the opposition.

"It is not easy to change this paradigm which was been
employed for more than thirty years," Megawati said.

The 1997 economic crisis forced Indonesia to gradually reduce
subsidy spending as part of its economic reform deal with the
International Monetary Fund (IMF).

Soeharto's government fell following the subsequent protests,
which turned into riots in 1998. The protests have declined over
the years under President Abdurrahman Wahid and Megawati.

Analysts now point to a series of unpopular government moves
preceding the recent hikes as reviving the nationwide protests.

Workers and students have vowed to continue protesting until
the government revokes the price hikes, with 11 student groups
from all religions planning more mass demonstrations on Monday.
The protesters have also lashed out against policies like
privatization and plans to drop possible criminal charges against
indebted business tycoons.

The demonstrations in several parts of the country continued
on Sunday with some calling for Megawati's resignation.