Urban bias policy
The government's decision to postpone fuel price hikes, originally planned for this month, highlights the exceptionally large political leverage that the minority urban population in this country has. It is evidence of the strong urban bias in the present system of political representation and government. It is a system in which rural folks, although making up over half of the population, are not as well represented as they should be.
This strong urban bias is an aspect of the government's cheap oil policies that is rarely discussed objectively as politicians, activists, students and the media busied themselves opposing the planned increases. Yet, here is a government program whose benefit is enjoyed mostly by a small minority of the population, but whose burden, estimated at Rp 22.4 trillion ($2.9 billion) between April and December even with the price increase, is equally borne by everyone in the country.
The oil subsidy benefits mainly those who travel frequently, including owners of private vehicles. The more cars you have and the more often you drive, the more benefit you reap from the system, and the more burden you impose on the rest of society. The rural population has the benefit of cheap kerosene, their main cooking fuel. But the biggest beneficiaries of this cheap oil policy are people in urban areas, mainly private car owners and to a lesser extent public transportation users.
Yet, someone must ultimately bear the heavy cost of the subsidy. It sure is not the International Monetary Fund (IMF) -- often depicted as the evil force behind the government's decision to hike fuel prices -- or any other major foreign lender. Even if the money to pay for this program comes from foreign loans -- a probable scenario since the government is broke -- it is the entire nation who will have to pay this, sooner or later. Surely there are much wiser ways of spending the billions of dollars which the nation's wealthy squanders each year on oil subsidies.
A common fallacy found among people who object to the planned fuel price increases is to blame the IMF for putting pressure on the Indonesian government. Given Indonesia's financial predicament, the government is often portrayed as a weak party with no option but to accept IMF's terms in return for the massive bail out program. While the IMF may indeed have required the government to phase out the fuel subsidies, the program makes economical sense. It makes better use of Indonesia's precious oil resources, and addresses the rural-urban imbalance. Raising fuel prices is a course that the government must pursue even without the IMF prodding.
Consciously or not, politicians, non-governmental organizations, students who took to the streets, and the media are protecting the interests of the wealthy few by speaking out against the fuel price hikes. The IMF -- even if we assume they have dictated the policy -- has actually a greater legitimate claim that these people do of acting on behalf of the larger population who live in the countryside.
Other instances where urban bias is most apparent is in the government's policy of keeping rice prices cheap to protect urban consumers. The urban population have also enjoyed far greater access to government-provided basic facilities, including education and health, not to mention infrastructures built by taxpayers money. All of this may be acceptable since the urban population is politically better organized and have the advantage of proximity to the centers of power. But this is an unhealthy situation. If tolerated it will only widen the gap between the urban and rural populations. Whatever the outcome of the current debate about phasing out oil subsidies, we need to redress the heavy urban bias in our political system.