GOVT TO DIVERT FUEL SUBSIDY TO PRODUCTIVE SECTORS

By Andi Abdussalam

Jakarta, Nov 8 (Antara) -- The government has decided to reallocate some Rp330 trillion of energy subsidy to productive sectors that will benefit the people and will also raise the prices of subsidized fuels this month.          "We want to divert subsidy for fuel to subsidies for fertilizers, seeds, infrastructure and irrigation for the benefit of farmers," President Joko Widodo stated while opening a national coordination meeting of his working cabinet last Tuesday.          This move has confirmed that the price of subsidized fuel will be increased in November, although the exact hike has yet to be finalized.          President Joko Widodo, better known as Jokowi, also said that he was ready to become unpopular for raising the prices of subsidized fuel in the interest of the people.          "Some say I will become unpopular (if I make this decision). I told them that I did not become a leader to seek popularity. A leader has responsibilities and every decision he makes carries a risk," he remarked at the opening of a national meeting of the alumni of Yogyakarta-based state Gadjah Mada University in Kendari, Southeast Sulawesi, on Thursday.          Earlier, the president had noted that fuel subsidy should also be diverted to purchasing ship-related machinery and cold storage units for fish for fishermen and to activities related to infrastructural development and other productive projects.          Jokowi also pointed out that in the last five years, the value of fuel subsidies was recorded at Rp714.5 trillion. "We burn it (fuel) and it (funding) disappears in five years," he remarked.          On the contrary, subsidies for health and infrastructure totaled only Rp202.6 trillion and Rp577.9 trillion, respectively.          "This needs to change," he noted, claiming that improving investment in the sectors of health and infrastructure was a key economic challenge for his government.          Moreover, the government has confirmed that the price of subsidized fuels will be raised and the subsidy will be diverted. "We have decided to hike the price of subsidized fuel this month (November)," Coordinating Minister of Economic Affairs Sofyan Djalil said on Wednesday.          Djalil added that the government will reallocate fuel subsidies to more productive sectors keeping its business objectives in mind.          "That the subsidies do not reach the intended target is a concern for us from the business perspective. So we will reallocate them to a more productive sector," the minister affirmed.          He stated that reallocating subsidies from unproductive sectors, such as fuel oil, to productive ones can accelerate infrastructure development in priority areas.          "Available data shows that fuel oil subsidies over several years amounted to Rp714 trillion. This subsidy will be reallocated to productive sectors," Djalil affirmed.          The minister further explained that Indonesia needed large funding to develop infrastructure. Earlier, a number of observers predicted that the country needed at least Rp1,900 trillion to develop infrastructure in 2014.          In the revised state budget of 2014, only Rp206 trillion was allocated as funding for infrastructure-related expenditures, which was about 20 percent of the total expenditures of the central government.          In the 2015 state budget, funds earmarked for infrastructure dropped to only Rp196 trillion, which is why the government is determined to cut fuel subsidy and increase the prices of subsidized fuels.          Furthermore, the plan for this hike has received mixed reactions from the public. While some are opposed to it, others favor it.          The Secretary General of the Democratic Party, Edhie Baskoro Yudhoyono, rejected the government's plan to raise subsidized fuel prices, arguing that the global oil prices were showing a downward trend.          "The global oil price is currently US$84 a barrel. It is even lower than US$80 a barrel. The government of former president Susilo Bambang Yudhoyono had cut down oil subsidy because back then, the global oil price was more than US$100 a barrel," he said at the House of Representatives (DPR) building on Thursday.          Now that the global oil prices are stable, the plan to slash fuel subsidy is questionable, he remarked, adding that the Indonesian economy has slowed down in the wake of the general elections and the cabinet announcement.          "There is no urgency to raise the prices of subsidized fuels," he pointed out.          The All Indonesian Workers Union (SPSI) also held a similar stance. It noted that workers would suffer if the government increased subsidized fuel prices. "Fuel price hikes will increase the prices of basic necessities and clothes, besides increasing the cost of living," SPSI Deputy Chairman Hermanto Ahmad affirmed.          He stated that no matter how much the wages of laborers were raised, it would not be adequate to cover their daily needs if the prices of goods soared following the fuel price hike.          "The rate of increase in wages has been low so far," the SPSI deputy chairman added.          In keeping with this fact, the SPSI has opposed the government's plan to raise fuel oil prices as it has indicated in public discourses. "We strongly oppose a hike in the price of subsidized fuel," Ahmad emphasized.          Despite the opposition, many parties also support the government's plan to revoke fuel oil subsidies, including the Indonesian Chamber of Commerce and Industry (Kadin).          Suryo Bambang Sulisto, the chairman of Kadin, stated that the chamber has urged the government to revoke fuel subsidies because it was not utilized appropriately.          "Fuel subsidies should be used by the intended parties. However, they are utilized only in unnecessary sectors, which ultimately leads to a price disparity," Sulisto explained.      He further noted that it was a misconception among people that withdrawing fuel subsidies would worsen their condition.          "It is a misconception that people will suffer if the subsidy is revoked. In my opinion, people will be far more miserable if our economy weakens due to the allocation of fuel subsidies. We are unable to carry out many activities that would be more useful to the people," he stated.          The National Democratic Party (NasDem) also supported the move.  "The NasDem is united in supporting the plan to hike subsidized fuel prices," Secretary General Patrice Rio Capella noted on Thursday.          He stressed that the price hike would not be based on global oil prices but on the reduction in the allocation of fuel subsidy, which has burdened the state budget.          "The reason for raising subsidized fuel prices is no longer related to the world crude oil price," he remarked, adding that the idea was not to adjust domestic prices according to global fuel prices but to divert funds for long-term use, such as for the development of infrastructure.          Capella pointed out that he understood the government's desire to increase fuel prices because the amount of subsidy granted so far had been fantastic.          He also noted how an oil subsidy of some Rp400 to500 trillion could hamper the development of infrastructure.          "The country's fuel subsidy almost amounts to Rp400 to 500 trillion. This is why our infrastructure is still not developed," Capella stated.          In addition, the central executive board of the country's largest Islamic organization, Nahdlatul Ulama (NU), has also expressed its support to the government's plan to raise the prices of subsidized fuel oils.         "Fuel oil subsidy has been burdensome to the state budget. We had better divert the subsidy to productive activities," NU General Chairman, KH Said Aqil Siroj, said after the conclusion of the NU national congress and conference on Sunday.     ***2*** (T.A014/INE/B003) EDITED BY INE (T.A014/A/BESSR/Bustanuddin) 08-11-2014 21:08: