Subsidies vs. efficiency

Subsidies vs. efficiency

To be frank, there is a good point in the arguments of both
the government, which wants to abolish fuel and energy subsidies,
and businesspeople, who reject the higher rates that this would
bring. What then is wrong?

Our present dilemma arises from the fact that we have been
maintaining an unhealthy situation for too long. Had the
government acted long ago to gradually raise the prices of fuel
and energy, while at the same time exerting a tight control over
producers and explaining the need of such a measure to the
people, the shock would have been greatly reduced. Moreover, the
subsidies which the government provided did not reach the right
targets. Subsidies which should have benefited the poor were
equally enjoyed by everyone else.

The government therefore needs to revise its entire policy on
subsidies without abandoning prudence. Industrialists should
start now to try to make their enterprises more efficient so that
they will be ready when the subsidies are withdrawn. In the long
term, the current system of subsidies is not maintainable and
even more so because we have already entered the free market
arena.

-- Bisnis Indonesia, Jakarta