Poor will get fuel subsidy funds

Poor will get fuel subsidy funds

JAKARTA (JP): The government said on Tuesday it would allocate
Rp 800 billion (US$96 million) of the additional revenues to be
generated by the upcoming October hike in fuel prices in the form
of cash aid for the poor, seed capital for small businesses and
infrastructure development in rural areas.

The government has selected three mechanisms for channeling
the funds, namely direct cash transfers to the poor to insulate
them from the impact of the fuel price rise, credit schemes for
small businesses, and investment in infrastructure development.

Coordinating Minister for the Economy Rizal Ramli told a press
briefing that a team had been formed to manage the distribution
of the funds.

He said that the team, which is under his chairmanship,
comprised, among others, Minister of Energy and Mineral Resources
Purnomo Yusgiantoro; Minister of Settlement and Regional
Infrastructure Erna Witular; and State Minister for Cooperatives
and Small/Medium Enterprises Zarkasih Noer.

"The team is also responsible for disseminating information on
the fuel price increase so as to sway public opinion in favor of
this unpopular measure," Rizal said.

The government recently announced it would go ahead with its
plan, already delayed since April, to hike fuel prices by an
average of 12 percent as from October. The exact date has yet to
be set.

With the increase, the government expects to save Rp 800
billion in subsidies during the remaining three months of this
year's state budget, which expires in December.

Purnomo said the government had yet to determine how much of
the Rp 800 billion would be channeled through each of the
mechanisms.

He explained that the team would first monitor the public's
response to the subsidy mechanisms before deciding on fund
allocation.

"So the task ahead is to decide how will we go about
distributing the Rp 800 billion to the public," Purnomo said.

Deputy Head in charge of Natural Resources at the National
Development Planning Board (Bappenas) Herman Haeruman said that
the mechanisms allowed for direct public participation.

"Instead of the central government controlling fund
allocations, we'll let the people decide what they need," he
said.

He added that the government would use existing financing
mechanisms to channel the funds.

"These are reliable programs that we have been using for the
past two to three years," he said of the three mechanisms.

Herman, who is responsible for the direct cash aid mechanism,
said that locals in each village would themselves decide on the
use of their share of the funds.

The local community will determine by itself which families
will be eligible for the subsidy, according to information
contained in a leaflet on the scheme.

Under the previous subsidy scheme, the government had
identified some 17.4 million underprivileged families whom it
planned to insulate from the effects of the fuel price hike
through direct cash assistance.

While the previous scheme was to use post offices across the
country to distribute the funds, the new scheme will use banks.

So far the government has only selected Bank Rakyat Indonesia
(BRI), which has a nation-wide branch network, as a distributor
of the funds.

The second mechanism, which concerns small businesses, will be
managed by Minister Zarkasih Noer.

Zarkasih said the money, known as revolving funds, would be
extended in loan form to small businesses in a bid to strengthen
the economic recovery.

He said the loans would be subject to commercial interest
rates, but small businesses could receive discounts if they
repaid the loans upon maturity.

According to him, most small businesses only needed minor
credits ranging from Rp 1 million to Rp 5 million.

"We will distribute small amounts of funds to many
businesses," he explained.

Zarkasih said the government would transfer the funds to rural
financing institutions who would then relay the money to small
businesses.

Erna, who is in charge of infrastructure development, said the
fuel subsidy funds would also be used to develop infrastructure
in villages and urban slums which would be selected by the local
communities themselves. (bkm)