Analysis: Sharp fuel price hike puts Susilo's popularity in limbo

Indonesian President Susilo Bambang Yudhoyono is about to mark his first anniversary in office by putting his popularity in limbo with the much higher than expected hike in the politically sensitive fuel prices.

Never before has an Indonesian president raised fuel prices twice in a single year and by the scale of that of the current government.

Just after midnight Saturday, Coordinating Minister for Economic Affairs Aburizal Bakrie announced a presidential decree that specifies the rises, with gasoline price soaring to 4,500 rupiah (45 US cents) per liter from 2,400 rupiah (24 cents), diesel price to 4,300 rupiah (43 cents) from 2,100 rupiah (21 cents) and kerosene to 2,000 rupiah (20 cents) from 700 rupiah (7 cents).

In overall, the hike averages 126 percent, well above widespread speculations of 80 percent rise among local analysts. Earlier in March, the government imposed fuel price rises by an average of 29 percent.

Susilo, who was sworn in as president on Oct. 20 last year, said hours before the announcement the bold move was a tough choice he must take "to save the future of the country."

Indonesia, the only OPEC member in Southeast Asia, has recently become a net oil importer due to declining output and soaring demand. On the other hand, the government has allocated one fifth of its budget for fuel subsidy to keep fuel prices artificially low.

With the spiraling global oil prices, the government has no choice but to raise domestic fuel prices to cut the ballooning subsidy loads.

But the size of fuel price rises is really unexpected. It will drive up prices of everything and leave the poorest to suffer the most in a country where half of its 220 million population live on below 2 US dollars a day.

Nearly all of the poor use kerosene for cooking.

"I'm very disappointed with SBY. I voted for him in a hope that he will improve the living standards of people like me," said bus driver Cecep, the only breadwinner in a family of five.

The central bank has predicted that the inflation would exceed the expected 9 percent due to the hike.

Whoever behind the rises,"they have lost their heart. Those who initially supported the hike will not sympathize ... the government has gone too far this time," noted economist Faisal Basri was quoted by Kompas newspaper as saying.

He said the Indonesian people could afford a maximum hike of 50 percent in fuel prices.

Following the latest rises, land transport operators in Jakarta unilaterally raised fares with the absence of a new government regulation on official transport fares.

In the Central Java town of Wonogiri, local online media Detikcom reported all bus and taxi drivers launched a mass strike to oppose the rises, forcing the local government to deploy its limited fleet to carry thousands of stranded passengers.

But in general, the protests against fuel price hike was peaceful by Indonesian standard. In 1998, then President Soeharto introduced hike in fuel prices when the rupiah was in its lowest level and inflation in its highest, causing riots in the capital city and putting an end to his 32-year tenure.

Nobody expects that retired general Susilo, who won in a landslide in last year's election, will face the same fate of Soeharto's.

A national poll conducted early in August indicated that Susilo 's job approvals still enjoyed a mighty support of over 60 percent. But the poll by the Indonesian Survey Institute was made before the government publicly announced the plan to raise fuel prices.

The nationwide protests today, and more to come in the foreseeable future, may not lead to the toppling of Susilo, but they will undoubtedly shake Susilo's job approvals rating.

The mounting public unrest will at least add more pressure on Susilo to reshuffle his cabinet, especially the economic team.

The calls for replacement of economic ministers have mounted even before the hike was materialized, given the continued losses of the rupiah against the US dollar and the slow progress they have made in job creation and poverty eradication.

Launching a major reshuffle in his cabinet is something that Susilo needs to think to do in the near future.

The president himself promised last month he would review the performance of the cabinet and consider replacement, if necessary, by the time he marked his first anniversary in office.

Source: Xinhua