Yudhoyono braces for backlash over fuel subsidy cuts

Updated On: Mar 01, 2005

Jakarta- The Indonesian government is bracing itself for public unrest this week following its decision to press ahead with a controversial plan to cut fuel subsidies by increasing fuel prices.The success or failure of the plan - which is economically sound but politically dangerous - may well determine the fate of President Susilo Bambang Yudhoyono’s administration.

From March 1, the government plans to raise fuel oil prices by an average 29 per cent to reduce its subsidy burden, which takes up a huge chunk of the state budget.It wants to reduce the subsidy to 39 trillion rupiah this year from 61 rupiah last year.

To help Indonesians cope with life without fuel subsidies, the government will introduce a “compensation programme”, in which some 10 trillion rupiah will be set aside for expenditure on education and healthcare, in addition to the 7.8 trilion already set aside under the 2005 state budget.

Many Indonesian legislators are against the price hikes but the President has hinted that he would go ahead with the plan without waiting for the House of Representatives’ approval.

Observers have warned that the fuel hikes would affect Mr Yudhoyono’s popularity, which has already started to decline due to his apparent lack of progress in improvingIndonesia’s economy during his three months in power.

However, the President said: “Many have warned me that increasing fuel prices will lower my popularity. But I told them that I am willing to prevent our economy from collapsing at the expense of my popularity. A true leader is not afraid to make unpopular choices when it comes to policy.”

In an editorial, Media Indonesia said the key issue in the fuel hikes is not the President's popularity, but one of trust in his government. It said that the public has yet to be convinced that the savings made from the subsidy cuts will be used to fund legitimate government programmes instead of being pocketed by corrupt officials.

“So long as there is no public trust (in the government), turmoil over the rise in fuel prices is going to happen. The President’s popularity will decline. The President has said that it doesn’t matter. He once said: ‘I don’t care about my popularity.' But the President cannot not care about public trust.”

* Govt presses ahead with fuel price hike (The Jakarta Post, Feb 25)

* Popularity or public trust (Media Indonesia, Feb 26)