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Indonesia shocks with fuel price moves JAKARTA - Indonesia's government on Friday night raised key fuel prices by a higher-than-expected average of 126 per cent and announced a plan to bring prices in line with the global market in moves likely to test the patience of its people for tough reforms.

President Susilo Bambang Yudhoyono's decision to slash fuel subsidies and more than double prices just days before the Islamic holy month of Ramadan marks one of the most daring economic reforms launched by a leader in Jakarta since the 1998 fall of strongman Suharto.

But in raising prices far more than the expected 50 per cent, Mr Yudhoyono's government also risks provoking an angry reaction from a public that for decades has been accustomed to heavily subsidised fuel.

Earlier on Friday in Jakarta riot police fired tear gas and warning shots into the air as they clashed with students protesting over the impending rise. The protest was the only sign of real violence among a series of demonstrations that hit at least 15 cities across the country.

The fixed price of kerosene, the politically sensitive primary cooking fuel for Indonesia's poor, was raised by more than 185 per cent to Rp2,000 (19 US cents) a litre, effective from today. Petrol rose 87.5 per cent to Rp4,500 a litre while diesel more than doubled to Rp4,300 a litre.

By doing so, government advisers said, Jakarta would slash $2.3bn off a subsidy bill expected to reach $11bn this year. But, in a decree signed last night, Mr Yudhoyono took a step that would make today's unpopular price increase the last to be decided by an Indonesian president.

Under a new pricing system due to come into effect in January 2006, a committee of seven ministers led by the chief economic minister, currently former tycoon Aburizal Bakrie, will decide how much to adjust fuel prices every quarter.

The target, government advisers said, is to bring petrol prices in line with market levels by January 2007, with diesel to follow by July 2007 and kerosene, the most subsidised fuel, to be brought to market prices by January 2008. All would float freely once they reach market levels.

Mr Yudhoyono promised after a more modest 29 per cent increase in March that his government would not raise prices again. Until market turmoil drove the rupiah to four-year lows last month, he was said by senior officials to favour waiting until January next year. Mr Yudhoyono said: I realise that this is not a popular policy, a bitter pill that we have to swallow, but we have to do it to save the nation's budget and the future of the country. To ease the pain of a rise, Jakarta has promised monthly Rp100,000 payments to 15.6m poor families for the rest of this year.


Link to related event Related event:
Fuel price hike 1 October 2005

Related blog entries (category 'General') Related blog entries (category 'General'):
30 September 2005 · New fuel prices up by 126%
30 September 2005 · Household oil Rp 2.000, Premium Rp 4.500, diesel Rp 4.300
30 September 2005 · Police fires tear gas at Jakarta students
30 September 2005 · Short news around fuel price hikes
30 September 2005 · Securing Jakarta: police concentrate on three locations


Posted in General @ 30 September 2005 20:59 CET by Jeroen · 'Blog' RSS feed · permalink





Jeroen
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Almost double the price.. I expected a big rise, maybe somewhere near Rp 4.000, but this is more than everyone seemed to expect.



londoh
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Better do it as it should be done at once they would have thought, instead to raise the prices once again in a few months. Police and Army will be "Siaga nomor satu" the coming days. Rakyat Indonesia will be outraged. Billions of $/Rp are corrupted the common man have to pay. Another proof of mismanagement of the Republik Indonesia. What a mess Emoticon: Nooo



Jeroen
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It should be done indeed. This is probably the only best thing to do now. As Yudhoyono said :"Kenaikan Harga BBM Adalah Keputusan Pahit". I heard, prices in Yogya were already at Rp 5.000 a few minutes ago Emoticon: nice rounding of numbers.



londoh
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(Edited) Posted @ 30 September 2005 19:16

Tidak dihukumi ribuan koruptor besar adalah keputusan jauh lebih pahit. If one does one thing which seems important one should be also be brave to make decisions that are much more important if the future of the nation is at stake.



Jeroen
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I hope he will.. I really hope so.. but he will have to face bigger silent opposition to do that, than to raise fuel prices. At least now the Rupiah will be a little stronger and the government will have an additional Rp 10 trilyar to spend, if only a little bit reaches the common people.. it's at least something.



gmee01
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Hallo Londoh and Jeroen,
thats a different discussion: this language-issue.
About the oil-prices: this was already expected because the prices in the world also rose. And despite a promise of SBI ,one has to be pretty dumb, not to understand this had to happen.Most Indonesian know the petrol is subsedised. And a lot of this subsedised petrol was smuggled to Malaysia and Singapore. By whom, of course by people who have money, because who else can buy a tankfreight of petrol. This evening a taxidriver who drove me home did not expect that a lot of cars or motor-bikes would come to a stillstand. People here learned to adjust to a situation. Besides that real poor people get a subsidy of RP. 100.000,- a month to buy household-kerosene( app. 15.6 million ppl). I remember the sixties in Holland. We had the same problems. Prizes went up, there came social unrest and the wages went up. With this social unrest a higher level of political intrest. Which let to a better division in means(money, property etc.) untill there was a reasonable difference between the haves and have-nots. But here in Indonesia the Kencana-family is still around and they wont let go of their wealth that easy.
Besides that the prize of petrol will be rising till january 2007 untill it is on the level of the rest of the world. Because also Indonesians have to learn to live in reality. And that takes a prize, necessary and sometimes bitter. They cannot buy that much pulsar more for their mobil-phones. friendly greetings Gerard.



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