Price hikes recall another fitful January

Price hikes recall another fitful January

Priyono Tjiptoherijanto, Head, National Employee Affairs Agency
(BKN), Jakarta

The riots of Jan. 15, better known as Malari, were a true
disaster, inflicting massive losses -- perhaps exceeding those of
the anarchy of mid-May, 1998 in destruction and magnitude.

Five years after the New Order regime came to power, a
worsening economy triggered staged street protests by university
students, climaxing during Japanese Prime Minister Tanaka's visit
to Jakarta.

Much time has elapsed since that dark period beginning in the
first month of 1974. But now, the restless and mysterious
beginning of another daunting year is again upon us.

The year 2002, the Year of the Horse in the Chinese calendar,
was ushered in with objections by the Indonesian Employers
Association (Apindo) to the proposed minimum monthly wages of Rp
591,266 (UMP) per single employee in Jakarta.

Formerly called the regional minimum wages, the UMP indeed
needs careful scrutiny.

In the past, prior to the implementation of UMP in certain
areas, there were at least four elements for consideration.

The first was the rate of inflation in the district. The
second, the minimum material needs, or cost of living, later
calculated to a proper living wage for each employee per month,
differing from one region to another.

Third, the regional income through the figures of the gross
regional income.

And the fourth consideration was the financial ability of a
company to pay its employees, which should have been reflected in
its balance of payment and financial statement.

Owing to the complexities of a company's ability to report
losses and profits, coupled with the illiteracy among employees,
the forth factor, however, was often ignored.

The second potential flashpoint of January, 2002, may be the
six-percent increase in electricity rates, effective Jan. 1.
Through a complicated equation, the government has planned to
increase electricity rate by 24 percent in four phases over the
course of the year.

The four-stage implementation of the 24-percent hike is a
clear indication that the government is in grave financial
straits in its ability to address both development programs and
routine expenses on the one hand and a commitment to eliminating
poverty on the other.

With a daily income of US$2 per day, at least 55 percent of
Indonesia's 209 million live below the poverty line.

The third coming blow this month will be the planned fuel
subsidy reduction soon to be implemented.

In accordance with the letter of intent (LoI) signed by
Coordinating Minister for the Economy and the Minister of Finance
and the Governor of Bank of Indonesia -- and addressed to the
Executive Director of International Monetary Fund (IMF) in
Washington, DC, on Dec. 13 -- it is very likely that fuel prices
will be go up 30 percent by the end of the month.

IMF officials seemed to have pushed the measure, because they
wanted to have their loans and interests immediately repaid.

They could easily absolve themselves of their sins, as the LoI
states Indonesia's willingness to cope with its own economic
problems -- a promise made by Indonesia at its own discretion.

The LoI is akin to a testimony or dossier made before the
police or public prosecutor one must duly respect.

The final blow will come on Jan. 15, 2002. That's when PT
Telkom will raise domestic telephone rates by a whopping 15
percent. The 16.77 percent increase in local conversion, and
about 13.30 percent in long-distance calls seem to be completed
the people's suffering.

Although their customers are mainly middle class, many people
of lower income, nonetheless, have at least one personal
telephone line -- not to mention the cellular phones that can be
heard ringing all over Jakarta. Overall, the increase will
certainly increase people's monthly expenditures.

Collectively, these increases will force companies to raise
the prices of their products and costs of services, as they would
not want to see their profits hurt from the raise in the UMP,
electricity rates, fuel prices and, of course, telephone rates.

These successive body blows will make January, 2002 a month
marred by dread and apprehension.

Will it proceed smoothly, or will social upheaval and
political unrest prevail?

The unemployment rate would indeed swell should frustrated
entrepreneurs and cost-conscious companies decide to shutter
their activities rather than lose profits. Civil servants will
grow restless due to increased costs of living in the absence of
a raise in their salaries.

Those on a fixed income, of course, stand to be hardest hit by
these policies.

It is a bitter pill indeed to swallow to save the economy from
implosion. But will everyone be equally affected?

And does everyone feel and comprehend seriousness of the
looming crisis? If policies only touch the surface, such as the
use of paper, uniforms, hosting fewer parties and the like, will
it be an adequate savings?

Can't we acknowledge -- and act on -- the ever-worsening
plight of the overwhelming majority of Indonesia's people?

The moves certainly need not be as drastic as in Argentina,
but is there no dignity left? Is it not possible to plan for our
own financial future?