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Fuel price hike sparks protests in Indonesia

Indonesia more than doubled the average cost of fuel Saturday in a bid to stave off an economic crisis, sparking transport strikes and violent protests.
Indonesian student perform during anti-government protest in Jakarta
A student performs in Jakarta Saturday during a protest against the fuel price hike.Dadang Tri / Reuters
/ Source: The Associated Press

Indonesia more than doubled the average cost of fuel Saturday in a bid to stave off an economic crisis, sparking transport strikes and violent protests from people who have long enjoyed some of the cheapest gas prices in the world.

The larger than expected increases, announced after a Cabinet meeting Friday and implemented the following day, raise the price of gasoline by 87 percent to $1.71 per gallon, more than double the price of diesel fuel and triple the cost of kerosene.

The increases will push up the price of everything from rice to fish to cigarettes in the sprawling country of 220 million people, half of whom live on less than $2 a day.

Rowdy protests
Protesters burned tires and effigies of President Susilo Bambang Yudhoyono, while others commandeered diesel trucks and blocked roads.

Thousands of protesters have taken to the streets nationwide in recent days and rowdy rallies were reported in at least 10 cities early Saturday, though the turnout was small given the size of the nation and its history for massive street protests.

Yudhoyono said Indonesia’s cash-strapped government, which for years has subsidized fuel to let motorists fill up for less than 95 cents per gallon, could not afford to keep doing so amid spiraling global energy prices.

Some economists praised Yudhoyono’s decision, saying it was a bold move that could prevent additional hikes in the future. Others questioned whether the country’s poorest would be able to bear the additional burden.

“It’s way too drastic,” said Udin, 58, a security guard and the father of 3-year-old twin boys. “Prices are already too high. Now they’re going to go through the roof.”

Hundreds of students burned tires in South Sulawesi province following an all night protest; demonstrators in Riau briefly commandeered a diesel truck.

Transport strikes in at least seven cities left thousands of people stranded.

“I realize that this is not a popular policy ... but we have to do it to save the nation’s budget and the future of the country,” Yudhoyono said, calling on everyone to remain calm, saying “anarchy will only deter investment.”

Economists say decision was right one
Indonesia, the world’s most populous Muslim nation, is Southeast Asia’s only member of OPEC, but it has to import oil because of decades of declining investment in exploration and extraction.

Most in Indonesia agree that the current level of fuel subsidies — which have eaten up nearly a quarter of the budget this year — are unsustainable.

“Economically speaking, the president has made the right decision,” Kahlil Rowter, an analyst with Mandiri Securities was quoted as saying in the newspaper Kompas. “By raising the prices all at once, the government will be able to tackle many of its problems by the year’s end, spurring economic recovery in 2006.”

Fuel hikes are a sensitive issue in Indonesia, where a big increase in 1998 triggered rioting that helped topple former dictator Suharto. Protests also forced former President Megawati Sukarnoputri to scale back a fuel price increase in 2002.

Second price hike
This is the second time that Yudhoyono, who was elected last year on promises to fight poverty and revive the economy, has pushed up prices.

The government hopes to balance its budget by capping subsidies at $8.68 billion this year, while bolstering confidence in the stock market and the local currency, the rupiah, both of which have taken a hit recently amid the economic uncertainty.

Seeking to cushion the blow to the poor, the government has offered 15 million poor families a lump-sum compensation payment of $29. People started picking their money at local post offices early Saturday, many waiting in lines for more than an hour.

“Thank God,” said Suryati, a housewife in Jakarta, after receiving her cash. “Of course it’s not nearly enough, but it will help me feed my family.”