The curse of oil comes back to haunt Indonesia
The curse of oil comes back to haunt Indonesia
The curse of oil comes upon Indonesia once more
Endy M. Bayuni
The Jakarta Post/Jakarta
The question most frequently asked in Indonesian political
corridors these past few months is, why is our nation so gloomy
when world oil prices have shot through the roof.
Shouldn't we, as a member of the OPEC oil cartel, be flush
with petrodollars by now and thus be elated by this development?
Shouldn't the windfall we have gained from the higher oil prices
relieve our headache in raising funds to lift us out of this
perpetual economic crisis?
Even if Indonesia has become a net oil importer (meaning that
we import more than we export of the black gold), theoretically
the impact of higher oil prices should not hurt us as much as
other countries that are not as blessed as we are with
hydrocarbon resources.
Yet, every time oil prices in the world markets move in either
extreme -- shooting up or experiencing a free fall -- Indonesia
goes into major-crisis mode. This has been happening since the
1980s, when we were still a major exporter of crude oil. We knew
then that the windfall profits we reaped each time prices went up
would evaporate just as fast when oil prices inevitably crashed
afterward.
The volatile oil markets also exposed our heavy dependence on
oil revenues to fuel our economy, as hard as we tried to develop
the other sectors of the economy. The worst part, of course, is
that the mass of petrodollars bred a culture of corruption, a
problem that we have not been able to resolve to this day.
Just about every economic crisis we have experienced since the
1970s can be linked to oil, going back to the Pertamina crisis in
1975 and the successive devaluations of the rupiah in the 1980s
that followed the crash in world oil prices. The 10 percent
plunge in the rupiah's value this year is also somewhat linked to
the soaring world oil prices.
The curse of oil, it seems, has returned to haunt us.
No longer a net oil exporter -- though we retain our OPEC
membership -- we continue to treat the commodity as if we still
have an abundant supply.
The government of President Susilo Bambang Yudhoyono continues
to subsidize the consumption of domestic fuel, which will easily
cost the government more than Rp 120 trillion ($12 billion) this
year.
This is an absurd amount, which would be better spent on other
more urgent causes. It is an amount that surpasses our education,
health and defense budgets. It is even more absurd considering
that the subsidy is enjoyed mostly by the wealthy and the middle
class. It's money that we burn unnecessarily.
The curse of oil was not escaped by the President's
predecessors, who erroneously thought they could use the
commodity to buy their way out of trouble.
Soeharto used oil most effectively to buy off the support of
the wealthy and middle class for three decades, only to learn in
1998 that when the real crunch came, the wealthy and the middle
class were ready to dump him.
Abdurrahman Wahid avoided increasing domestic oil prices, thus
effectively retaining the costly fuel subsidy scheme, during his
turbulent years in power from 1999 to 2001. Megawati
Soekarnoputri made the bold decision to increase fuel prices upon
taking office from Abdurrahman, using the huge political capital
she enjoyed then. But come election year 2004, she froze prices
in the hope of winning the hearts of the voters. What an
ungrateful lot they turned out to be, because most voters gave
the presidency to Susilo Bambang Yudhoyono.
Is President Susilo about to make the same mistake again?
Between coming to terms with high oil prices and avoiding the
wrath of a handful of students and politicians, he opted for the
latter and retains the expensive subsidy scheme.
When he announced his government's spending plans for 2006 in
mid-August, he calculated the budget on the unrealistic
assumption that world oil prices would average US$40 a barrel.
This would be laughable if it were not a tragedy for the nation.
The markets lost confidence in the government's handling of the
economy, thus perpetuating the rupiah's fall.
If the experiences of Soeharto and Megawati are any
indication, you can't buy your political support with cheap oil.
If oil is really more a curse than a blessing, then Indonesia
would have been better off without it. Our nation would not be as
complacent, and like other countries that have to import all of
their oil needs, we would have learned to live with the reality
each time oil prices go up.
But it is not really oil that our nation has been cursed with
as much as the figures who have been leading us: They are either
corrupt, greedy, incompetent, or unrealistic, or a combination of
all four. They have squandered precious natural resources for
their short-term political gains.
The worst imprecations of all will likely be uttered by our
children, grandchildren and great-grandchildren, who will have to
pay off the foreign debts that we have accumulated against the
future income of our oil and natural resources. They will be
asking what have we done with all the oil money? When they learn
the truth, they will curse us even more.