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Crowds Protest as Indonesian Lawmakers Consider Raising Fuel Prices Crowds Protest as Indonesian Lawmakers Consider Raising Fuel Prices
(about 4 hours later)
JAKARTA — The Indonesian House of Representatives was meeting Monday to debate a revised budget that includes a highly contentious increase in the price of subsidized gasoline, which has been rejected by opposition lawmakers and has drawn protesters into the streets of the capital. JAKARTA — The Indonesian House of Representatives met Monday evening to debate a revised budget that includes a highly contentious increase in the price of subsidized gasoline, which drew thousands of protesters into the streets of the capital.
President Susilo Bambang Yudhoyono’s government wants to raise gasoline prices by 44 percent, from 4,500 rupiah, or 45 U.S. cents, a liter, or 0.26 gallon, to 6,500 rupiah to help close a widening budget deficit. The country’s Finance Ministry has said spending on fuel subsidies could reach $23 billion in 2013, compared with about $20 billion last year, if urgent action is not taken. The government of President Susilo Bambang Yudhoyono wants to raise gasoline prices 44 percent, from 4,500 rupiah, or 45 cents, a liter, or 0.26 gallon, to 6,500 rupiah to help close a widening budget deficit. The country’s Finance Ministry has said spending on fuel subsidies could reach $23 billion in 2013, compared with about $20 billion last year, if urgent action is not taken.
Amid heavy rain, thousands of protesters, including members of labor groups and students, staged rallies Monday outside the national legislative complex in south Jakarta and across the city to voice opposition to any price increases. Amid heavy rain, protesters including members of labor groups — the Jakarta police estimated as many as 4,000 — staged rallies and burned tires Monday outside the national legislative complex in south Jakarta to voice opposition to any price increases. The police said they had deployed nearly 20,000 officers to maintain order, given violent protests that had erupted during past fuel price debates.
Demonstrations by students and other groups were also reported in other cities around Indonesia.
International lenders like the World Bank have urged the Indonesian government to eliminate subsidies altogether, as savings could go to crucial social programs, including health care, as well as much-needed infrastructure investment.International lenders like the World Bank have urged the Indonesian government to eliminate subsidies altogether, as savings could go to crucial social programs, including health care, as well as much-needed infrastructure investment.
However, with national legislative elections scheduled for April 2014 and a presidential election three months later, fuel subsidies are a hot-button political issue. The Indonesian Democratic Party of Struggle, the country’s largest opposition party, has rejected any plan to raise gasoline prices. However, Mr. Yudhoyono’s governing coalition appears to have the backing it needs in the legislature, and a vote is expected by Monday evening. However, with national legislative elections scheduled for April 2014 and a presidential election three months later, fuel subsidies are a hot-button political issue.
The revised budget includes renewal of a cash compensation program for poor Indonesian families to cushion the blow from the subsidy decision and a resulting increase in inflation, as was done when gasoline prices were raised in 2008. ‘'They have to increase the prices because we are bleeding in our budget,'’ said Didik Rachbini, a prominent economist and member of Mr. Yudhoyono’s National Economic Council, which comprises economists and leading businessmen and advises the president on economic policy. ‘‘But this is political, a very political issue.'’
Although Indonesia has a plenty of oil production fields and is among the top 25 oil-producing nations in the world, it is a net importer of petroleum. Gasoline is so heavily subsidized that at the end of 2012, the country had the lowest fuel prices of any net oil-consuming nation in the world, according to the World Bank. The second-lowest was the United States, where a gallon sold for $3.29 on Dec. 31 — nearly twice as much as in Indonesia. Indonesian lawmakers may have to put politics aside, however, if they want to avoid harming one of Asia’s best-performing economies.
Hand-wringing on the fuel subsidy issue dating to April has caused foreign investors to abandon Indonesia’s capital and debt markets in recent days and has created growing trade and current account deficits. The rupiah, meanwhile, has fallen to nearly 10,000 against the dollar.
Although Indonesia has plenty of oil production fields and is among the top 25 oil-producing nations in the world, it is a net importer of petroleum. Gasoline is so heavily subsidized that at the end of 2012, the country had the lowest fuel prices of any net oil-consuming nation in the world, according to the World Bank. The second-lowest was the United States, where a gallon sold for $3.29 on Dec. 31 — nearly twice as much as in Indonesia.
The Indonesian Democratic Party of Struggle, or P.D.I.P., the country’s largest opposition party, has rejected any plan to raise gasoline prices, saying there are other ways to plug holes in the state budget.
‘'My party has done calculations and we suggest the government instead work on improving cost recovery in the oil and gas sector by about 153 trillion rupiah,’’ said Eva Sundari, a P.D.I.P. lawmaker. ‘‘At the same time we recommend improvements in the taxation collection process. There is more potential revenue if we intensify efforts.'’
She said she continued to support artificially low gasoline prices ‘'because I am a leftist.'’
Most members of Mr. Yudhoyono’s governing coalition have agreed to support the plan, which would also increase diesel prices 1,000 rupiah. The government also reached an agreement with House Commission XI, which oversees financial issues, on raising both fuel prices and the state budget purchase quota for subsidized fuel, as well as increasing the budget deficit target from 1.6 percent to 2.4 percent.
A final vote was expected Monday night, yet the outcome remained far from certain.
In March 2012, Mr. Yudhoyono proposed raising fuel prices, but even members of his own governing coalition revolted at the last minute, quashing his plan at a raucous House session as student and labor groups outside clashed with police officers on live national television.
The revised state budget includes the renewal of a cash compensation program for poor Indonesian families to cushion the blow from the subsidy decision and a resulting increase in inflation, as was done when gasoline prices were raised in 2008.
However, many working class Indonesians have said that any increase in the price of gasoline automatically creates higher costs for numerous items, including food staples, clothing and public transportation.