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should start now to try to make their enterprises more efficient so that they will be ready when the subsidies are withdrawn.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