JAKARTA - Indonesia more than doubled the average cost of fuel on Saturday to try to stave off an economic crisis despite protests by thousands of people, some of whom burned tires and threw rocks at police. Security forces responded to Friday's demonstrations by firing tear gas at more than 100 rioting students, then chasing them down and hitting some with sticks. Transportation strikes in at least seven cities left thousands stranded, media reports said.

President Susilo Bambang Yudhoyono said the cash-strapped government of this major oil producer, 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 energy prices. The cost of gasoline will rise 87 percent to $1.71 per gallon, the government said. The price of diesel fuel will more than double and the cost of kerosene will nearly triple.

Those 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. ``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 as university students set tires ablaze, vandalized a bus and exchanged a volley of rocks with police on a busy street in the capital. ``Anarchy will only deter investment,'' he said, urging calm.

Despite the brief flare-up in Jakarta, most rallies were peaceful, scattered and relatively small - given the size of the country and its history of massive street rallies. But more demonstrations were expected. The government deployed thousands of soldiers and police at major intersections, the presidential palace and other strategic locations.

Indonesia is Southeast Asia's only OPEC member. But it has to import oil because of decades of declining investment in exploration and extraction due to corruption and a weak legal system that makes people wary of doing business here. Most in Indonesia agreed the current level of fuel subsidies were unsustainable, especially with the price of world oil hovering around $65 a barrel.

Coordinating Minister for the Economy, Aburizal Bakrie said Indonesia would consider adjusting prices if global costs slide. But if they go up, the country may have to hike prices again. Raising prices is 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.

``It's way to 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.'' 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. Some said he betrayed those who put him in office. Economists said Yudhoyono had little choice.

Nearly a quarter of the government's budget goes to fuel subsidies, with $7.4 billion doled out last year. At the same time, other sectors, such as health and education, are sorely underfunded. ``We are not happy, but it seems the government had little choice,'' said Airyanto Basuki, 38, a second hand car dealer who lives at home with his mother. ``With the price of oil so high, the current state of affairs was illogical.'' ``The whole economy would have crashed if we had kept things as they were.''

The government hopes to balance its budget by capping the 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 of $29.

Related event: Fuel price hike 1 October 2005

Related blog entries (category 'Protests'): 30 September 2005 · Indonesia shocks with fuel price moves 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

Posted in Protests @ 01 October 2005 08:38 CET by Jeroen · · permalink

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Jeroen
Administrator

Posted @ 30 September 2005 18:56

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
User

Posted @ 30 September 2005 19:07

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

Jeroen
Administrator

Posted @ 30 September 2005 19:12

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 nice rounding of numbers.

londoh
User

(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
Administrator

Posted @ 30 September 2005 19:25

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
User

Posted @ 01 October 2005 19:13

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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