Indonesia fuel price hikes spark street protests, strikes
JAKARTA, Indonesia – Indonesia more than doubled the average cost of fuel today 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 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.”
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.
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.