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Price hikes add to Indonesians' pain
By Tony Sitathan
JAKARTA -
"I do not know how I am going to survive with three
children, an ailing mother and an unemployed husband,
with the current increases in basic electricity and
telephone charges. Although the fuel increases do not
impact me directly since we do not own any means of
transportation, now it's more expensive traveling in the
metro buses and on the bajai [motorized
three-wheelers]," moaned Yati Taruna, a domestic servant
who has been working in Jakarta for three years. Her
complaints are characteristic of the current situation
plaguing Indonesia.
Instead of capital reforms
and tight fiscal controls, the government has done the
opposite and decided to raise tariffs of electricity,
telephone as well as fuel price. Electricity and
telephone charges have increased 6 and 15 percent
respectively, while fuel prices have increased by
Rp60-Rp440 per liter, except for kerosene that is
rationed to households.
The government's
arguments for raising tariffs lack substance, maintains
Gombang Hutagalong. "As a private businessman I can see
the direct impact of these tariff hikes. It's not
affecting the rich, since the rich are already cushioned
[against] any price increases and their savings are
hedged in US dollars instead of rupiah. The middle-lower
[income groups] and general poorer masses are being
affected, since these fuel hikes are also affecting the
prices of basic food commodities like rice and sugar as
well as cooking oil, [which] has already seen an
increase of more than 5 percent."
One wonders
how much more the general Indonesian worker, who earns
less than Rp800,000 (US$90) a month, can tolerate since
inflation was also close to 7 percent in 2002.
But the 6 percent increase in electricity rates
is just an initial step. The government plans to
increase the electricity tariff in all four quarters of
2003, hence bringing the increase in tariffs close to 24
percent in one year. The increase in the telephone
tariff is the second step of the 45.49 percent increases
scheduled for 2002-04. The first increase was on
February 1, 2002, and the next general increase will be
in 2004.
According to Dorodjatun Kuntjoro-Jakti,
the coordinating minister for the economy, the increases
in electricity, telephone and fuel prices this year are
part of the government's effort to reduce a severe
misallocation of subsidies in the government budget. He
is confident that once economic growth heads back to
normalcy, such increases will not create any big impact.
"The most important thing is that we have plenty of
space for the state budget," he said.
"I am not
sure what school of economic thought the minister comes
from. Neither do I understand the rationale for any
increase in basic necessities at this juncture,
especially when Indonesia seems to be losing its
credibility [with] foreign investors," responded Ananda
Mohanadas, an economics professor at one of the top
state universities in Jakarta. "I am really puzzled as
to how this measure would improve the state's budgetary
imbalance and help to correct the budget deficit.
Perhaps it would be wiser to impose such measures once
the economy has picked up later in 2003, instead of
implementing it now."
There are several theories
as to why the government has so blatantly increased
these basic commodities. One explanation is that the
price hikes are in line with International Monetary Fund
(IMF) recommendations that demanded that state subsides
be lifted gradually toward the beginning of 2003 if
Indonesia is to continue to receive close IMF support as
well as much-needed funds. Another theory is that the
government needs as much money as possible for
campaigning for the 2004 presidential elections.
One political risk analyst based in Jakarta
called the price increases a big shakedown, since a
great percentage of the state's budget will inevitably
be allocated to the main political parties contesting
the elections. "Perhaps it's the timing or the mere
coincidence of increasing tariffs before an election
year. But whatever the reasons behind the tariff
increase, Indonesia and Indonesians in general are
vehemently and unilaterally opposed to these tariff
hikes," he maintained.
The Indonesian Consumer
Foundation (YLKI) has criticized the increases and urged
Indonesians to protest the price hikes. Indah
Suksmaningsih of YLKI said the increases will create
serious economic hardship for people in the mid- to low
income bracket as most of them are already suffering
from the ongoing economic crisis. There have already
been several demonstrations held outside the parliament
gates and in certain busy intersections of the capital.
Bambang Yudhisthra, a student activist at Tri
Sakti University, recalled the days leading to the
forced resignation of the former president Suharto.
"Suharto too listened to [the] IMF and tried to increase
these basic subsidies. That created a lot of discontent
and was one of the motivating reasons to put an end to
his corrupt regime. I can see similar strains in the
Megawati [Sukarnoputri] government, a government that is
equally corrupt and authoritarian as well as incredibly
slow to react to the rakyat, or people's wishes,"
he said.
Although conditions during the fall of
Suharto were different from today's, many of the
reformists of that reformasi era are
disillusioned with the current government. "We did not
take the punches and the stabs of the military without a
reason. We wanted a change for the better," reflected
Agus K Widjaja, a retired civil servant acting as an
ombudsman to civil servants who served during the
Suharto era. "It certainly looks like the sacrifice of
our youth and our children have gone to waste.
"Instead of a better government that would be
anti-corrupt and pro-business in outlook, we have a
weak, struggling government that is dealing with
regional integration issues, high levels of corruption,
nepotism and scandals that would outrage any other
decent government. We have become a basket case for
other governments not to emulate, when once back in the
early 1960s and late 1970s we were considered a model
developing nation by the world."
What then is
the government's reaction? Finance Minister Boediono has
said that the tax office is reviewing a series of tax
cuts for 20 product items that would be an incentive for
businesses. He also promised to cut bureaucratic
procedures at the customs office and rein in corruption.
To those ends, a joint task force consisting of
government members and business representatives is to be
set up.
"We do not need another joint task
force. What we need are clear reforms and a stop to
these basic price increases of electricity, telephony
charges and fuel," said Jonathan Henardo, the head of a
small retail business enterprise group in Jakarta. "Many
businessmen are already disfranchised with the central
government and having such incentives for businesses is
nothing but a small drop in an ocean of economic
troubles."
(©2003 Asia Times Online Co, Ltd. All
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