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 and worthy 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 some 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.