Protests over price hike threaten economy

Protests over price hike threaten economy

A'an Suryana, The Jakarta Post, Jakarta

The growing protests over a series of government economic policy
decisions taken since the start of the new year could potentially
lead to serious social and political turmoil that could badly
affect the overall economy this year, economists have warned.

Centre for Strategic and International Studies (CSIS)
economist Hadi Soesastro criticized the government for failing to
provide concrete explanations to the public about the importance
of the policies.

"The government has to convince the people that the policies,
including the utility price hikes, are correct and prudent so
that there will be no more rejection from the public," he told
The Jakarta Post on Sunday.

The government recently announced a series of major economic
policies to help fix the country's battered economy. They include
releasing former bank owners from criminal charges for past
crimes if they are deemed cooperative in repaying billions of
dollars in debts to the state; the sale of the government stake
in state-owned telecommunications firm PT Indosat; and raising
fuel, electricity and telephone charges.

The simultaneous increases in utility prices have angered both
workers and businesses as they will impose a heavier burden on
the many people already suffering from years of economic
difficulties and soaring production costs.

Some labor unions are planning to stage massive demonstrations
to protest the fuel and electricity hikes.

"I'm concerned that this collective anger could lead to
political chaos that would cause the country to lose the momentum
for economic recovery," said economist Drajat Wibowo of the
Institute for the Development of Economics and Finance (Indef).

He said that the government's real intention in forcing
through the utility price hikes simultaneously this year was
political in nature as it was trying to avoid raising prices in
2004 during a general election year.

Another Indef economist, Didik J. Rachbini, criticized the
government for its incompetence and insensitivity in dealing with
economic affairs.

"Even before these controversies, the investment situation was
already bad. After these events, the picture will surely get much
worse," he said, adding that without new investment, it would be
impossible for the government to achieve its 4 percent economic
growth target for this year.

University of Gadjah Mada (UGM) economist Sri Adiningsih said
that the fuel and electricity hikes would reduce people's
purchasing power, which in turn would put a brake on domestic
consumption, which has for the past couple of years been the main
driver of economic growth amid a lack of investment and weakening
exports.

She urged the government to revise the fuel price hike policy,
particularly the 22 percent increase in the price of automotive
diesel as this was the main fuel used by public transportation.

The government issued a "release and discharge" policy for
cooperative ex-bank owners as during the past frustrating four
years, the government had not been able to collect the debts owed
by the bankers. But critics have said that this policy ran
contrary to the public's sense of justice.

The sale of the Indosat stake to Singapore Technologies
Telemedia was protested mainly by opposition political parties
led by People's Consultative Assembly (MPR) Speaker Amien Rais,
partly due to a lack of transparency in the process.

Amien and other opposition politicians have also demanded that
the government cancel the utility price hikes.

The government has said that the utility price hikes were
important to cut expensive subsidy spending given the limits on
the state budget, and to help prevent state utilities from going
bankrupt.

But another CSIS economist, Pande Raja Silalahi, criticized
the hikes for not being accompanied by a government drive to
promote bureaucratic efficiency and fight corruption.

"It should have been done in stages, not all at the same
time," he told AFP.

"What is being shown instead to the population is differences
of opinion between decision-makers. We have to resign ourselves
to the fact that we have an incompetent government."