In Indonesia it seems like everyone is up in arms about the upcoming price hike in subsidized fuel on April 1st. To see the gathering of Ikatan Mahasiswa Muhammadiyah—the university student branch of the socio-religious organization Muhammadiyah—in Yogyakarta last night, it’s clear that the hike is not an April Fool’s Day joke.
At a candlelight vigil at Yogyakarta’s main intersection, 40 student activists, all dressed in black, shouted slogans against Indonesian President Susilo Bambang Yudhoyono (called SBY). One student tossed a flaming portrait of the president on the ground, followed by another pretending to urinate on it by squeezing a water bottle held near his groin.
The rally was a commemoration of their organization’s 48th birthday. But current events gave the event a rallying cry. A pamphlet was passed out highlighting the disparity between Indonesia’s high endowment of natural resources and the impoverished conditions for millions of its citizens. Citing the upcoming fuel price increase, a group of these demonstrators told me that the rich and powerful government leaders have forgotten about the poor people in their country.
Currently, subsidized fuel costs Rp. 4500 (about 50 cents) per liter, or just under $2 a gallon. Feeling fiscal pressure from the rise in international petroleum prices, the Indonesian government has decided to increase the price of subsidized petroleum by 33%, or 1500 rupiah and subsidized diesel by 4500 rupiah.
While the price hike will not go into effect for another fifteen days, daily demonstrations, particularly among student groups, are taking place across the country. Last week, as reported by the Jakarta Globe, students from local universities held up fuel trucks in Central and East Java. In the Southeast Sulawesi capital of Kendari. University students “stormed” the DPRD (local legislature) building when DPRD members refused to meet them.
Yesterday, another group of students from the Alliance of West Java Student Councils smashed a portrait of Indonesian President SBY that was hanging in the lobby of the House of Representatives in Jakarta. “Long live the people! Down with SBY!”, one of the vandals yelled.
SBY’s insistence on the price hike is inarguably sound macroeconomic management to alleviate rising fiscal strains of the current subsidy. Yet the move is perceived by much of the population as callous, particularly against the country’s poor. Protestors claim the price increase will have a ripple effect on transportation costs (some bus companies have already raised their fares), as well as the costs of staple foods like rice and soybeans. Last month, the head of Indonesia’s central bank, Darmin Nasution, said that a fuel price increase of this magnitude could send inflation over the Bank’s top target of 5.5%.
In an attempt to address these concerns, the government plans to pair the fuel price increase with a direct cash assistance program for the poor: 150,000 rupiah each month per family for a total of nine months, as reported by the national daily Kompas. Critics of the direct assistance program claim that the assistance is too little, while others insist that the money is better spent on creating jobs or increasing wages.
Meanwhile, some Indonesians are taking matters into their own hands by stocking up on fuel at the current price. The state-run oil and gas company Pertamina, the sole provider of the subsidized fuel Premium, reported an increase in sales of 17% in the last two weeks. The National Police have already discovered over 1.5 million liters of hoarded fuel and confiscated nearly 100,000 trucks involved in the hoarding operations. The majority of the hoarded fuel is diesel, which will experience a much larger price increase than the subsidized petroleum.
The major labor unions in the country have also come out against the fuel price increase. A mass march to the State Palace and House of Representatives in Jakarta has been organized for March 21.
As police gear up for massive protests nation-wide, the SBY administration continues to insist that the fuel price increase will go on as planned. SBY contends that Indonesia must begin the process of “energy conversion” to petroleum alternatives such as natural gas and bio fuels. Even though this move lays the groundwork for the country’s energy security, it will cause significant short-term pain.