SBY's Balancing Act
FINALLY, fuel prices officially go up on March 1. The announcement had been delayed and long overdue, no thanks to the many objections and protests. And even after the announcement, the commiserations and harsh critiques over the government's policy are unlikely to subside. In fact, they will rise to a crescendo and become more political. The government must be ready for this and keep on persevering.
Government policies are essentially political in nature. There is no avoiding this, and it must be a point to consider when decisions are made. A good government must be perceptive and sharp in what it does. The popularity or unpopularity of a policy, the support or opposition it attracts, depends on the ability of the government to manage and direct public opinion. In this case, however, the government appears to be woefully inadequate and politically incompetent.
The willingness to understand and make sacrifices does not appear voluntarily from the public merely because the government believes its policies are right. Neither is it because there is no other alternative policy. The increase in fuel prices is unavoidable, and it is now a reality. The price people paid for their fuel in the past was not real. Some of the costs were borne by the government in the form of subsidies. When world oil prices rise, as they are doing now, subsidies soar. The spending on these subsidies—estimated to be Rp53.4 trillion this year—is too heavy a burden for the nation to bear.
Discontinuing the fuel subsidies means the state will cease "paying" part of the price people pay for their fuel. Instead, the whole price will now have to be borne by the people. Whoever buys it will have to pay for it. Fuel prices will rise, not to earn more profits for the Pertamina state oil company, but because the government no longer subsidizes them. Reducing subsidies and increasing fuel prices are two issues that appear to be separate, but which, in fact, cannot be separated.
But no matter how clear the matter appears to be, consumers will not be happy about being forced to pay more. The rise in fuel prices is not an isolated issue; prices of other commodities will also be affected. Excluding kerosene, fuel prices will rise 29 percent. The resulting reduction in subsidies is calculated to save the state more than Rp13 trillion. This saving, however, will still not be enough, because fuel subsidies are not budgeted for in this year's spending plans. This is because the 2000 National Development Program Law states that energy subsidies must be reduced to zero by the end of 2004.
The government appears to have lacked competence in advancing convincing economic or legal reasons why fuel subsidies should be removed from state spending. The money used to pay these subsidies belongs to the people. When fuel subsidies are abolished, the savings should be used for the needs of the people. Cutting back fuel subsidies has now been given a more appropriate name: the re-allocation of subsidies.
The Rp10 trillion that will be saved from cutting back the subsidies will be used instead to provide the poor with free education, free health care and basic needs such as rice. Certainly, dissatisfaction will remain. The effects of the subsidy re-allocation will not be felt immediately, and will not be enjoyed equally by all. In fact, many will not receive free education and health because they will not be regarded as being among the needy.
Dissatisfaction is bound to cause more problems if it comes in the form of political opposition. In the House of Representatives (DPR), for example, the finance, budget and energy commissions have all rejected the price hike. The reason given is that the government must first guarantee that compensation will help reduce poverty, that the impact on basic needs can be controlled and that inefficiencies in fuel distribution can be overcome. These are sensible conditions, which can only be met after the announcement of the price increase.
If these conditions are not met, several party factions have threatened to apply political sanctions. Some of the larger parties seem to want to avoid their responsibilities in explaining why fuel prices must be raised. This stance is extremely unbecoming, given that most of these parties, such as the Golkar Party, the United Development Party (PPP), the National Awakening Party (PKB), the Prosperous Justice Party (PKS) and the Crescent Star Party (PBB), are part of the current government. As members of the governing "coalition," they should be supporting every government policy, as should their legislators in the DPR. This stance may well be the result of the inconsistency of the political parties, or the failure of President Yudhoyono to control them.
There is no middle way, or half-hearted way, to abolish fuel subsidies. Remember, every government policy contains a political element. So SBY must work harder and more astutely in increasing political influence within his own government.