Tony Sitathan, Jakarta – "I do not know how I am going to survive with three children, an ailing mother and an unemployed husband, with the current increases in basic electricity and telephone charges. Although the fuel increases do not impact me directly since we do not own any means of transportation, now it's more expensive traveling in the metro buses and on the bajai [motorized three-wheelers]," moaned Yati Taruna, a domestic servant who has been working in Jakarta for three years. Her complaints are characteristic of the current situation plaguing Indonesia.

Instead of capital reforms and tight fiscal controls, the government has done the opposite and decided to raise tariffs of electricity, telephone as well as fuel price. Electricity and telephone charges have increased 6 and 15 percent respectively, while fuel prices have increased by Rp60-Rp440 per liter, except for kerosene that is rationed to households.

The government's arguments for raising tariffs lack substance, maintains Gombang Hutagalong. "As a private businessman I can see the direct impact of these tariff hikes. It's not affecting the rich, since the rich are already cushioned [against] any price increases and their savings are hedged in US dollars instead of rupiah. The middle-lower [income groups] and general poorer masses are being affected, since these fuel hikes are also affecting the prices of basic food commodities like rice and sugar as well as cooking oil, [which] has already seen an increase of more than 5 percent."

One wonders how much more the general Indonesian worker, who earns less than Rp800,000 (US$90) a month, can tolerate since inflation was also close to 7 percent in 2002.

But the 6 percent increase in electricity rates is just an initial step. The government plans to increase the electricity tariff in all four quarters of 2003, hence bringing the increase in tariffs close to 24 percent in one year. The increase in the telephone tariff is the second step of the 45.49 percent increases scheduled for 2002-04. The first increase was on February 1, 2002, and the next general increase will be in 2004.

According to Dorodjatun Kuntjoro-Jakti, the coordinating minister for the economy, the increases in electricity, telephone and fuel prices this year are part of the government's effort to reduce a severe misallocation of subsidies in the government budget. He is confident that once economic growth heads back to normalcy, such increases will not create any big impact. "The most important thing is that we have plenty of space for the state budget," he said.

"I am not sure what school of economic thought the minister comes from. Neither do I understand the rationale for any increase in basic necessities at this juncture, especially when Indonesia seems to be losing its credibility [with] foreign investors," responded Ananda Mohanadas, an economics professor at one of the top state universities in Jakarta. "I am really puzzled as to how this measure would improve the state's budgetary imbalance and help to correct the budget deficit. Perhaps it would be wiser to impose such measures once the economy has picked up later in 2003, instead of implementing it now."

There are several theories as to why the government has so blatantly increased these basic commodities. One explanation is that the price hikes are in line with International Monetary Fund (IMF) recommendations that demanded that state subsides be lifted gradually toward the beginning of 2003 if Indonesia is to continue to receive close IMF support as well as much-needed funds. Another theory is that the government needs as much money as possible for campaigning for the 2004 presidential elections.

One political risk analyst based in Jakarta called the price increases a big shakedown, since a great percentage of the state's budget will inevitably be allocated to the main political parties contesting the elections. "Perhaps it's the timing or the mere coincidence of increasing tariffs before an election year. But whatever the reasons behind the tariff increase, Indonesia and Indonesians in general are vehemently and unilaterally opposed to these tariff hikes," he maintained.

The Indonesian Consumer Foundation (YLKI) has criticized the increases and urged Indonesians to protest the price hikes. Indah Suksmaningsih of YLKI said the increases will create serious economic hardship for people in the mid- to low income bracket as most of them are already suffering from the ongoing economic crisis. There have already been several demonstrations held outside the parliament gates and in certain busy intersections of the capital.

Bambang Yudhisthra, a student activist at Tri Sakti University, recalled the days leading to the forced resignation of the former president Suharto. "Suharto too listened to [the] IMF and tried to increase these basic subsidies. That created a lot of discontent and was one of the motivating reasons to put an end to his corrupt regime. I can see similar strains in the Megawati [Sukarnoputri] government, a government that is equally corrupt and authoritarian as well as incredibly slow to react to the rakyat, or people's wishes," he said.

Although conditions during the fall of Suharto were different from today's, many of the reformists of that reformasi era are disillusioned with the current government. "We did not take the punches and the stabs of the military without a reason. We wanted a change for the better," reflected Agus K Widjaja, a retired civil servant acting as an ombudsman to civil servants who served during the Suharto era. "It certainly looks like the sacrifice of our youth and our children have gone to waste.

"Instead of a better government that would be anti-corrupt and pro-business in outlook, we have a weak, struggling government that is dealing with regional integration issues, high levels of corruption, nepotism and scandals that would outrage any other decent government. We have become a basket case for other governments not to emulate, when once back in the early 1960s and late 1970s we were considered a model developing nation by the world."

What then is the government's reaction? Finance Minister Boediono has said that the tax office is reviewing a series of tax cuts for 20 product items that would be an incentive for businesses. He also promised to cut bureaucratic procedures at the customs office and rein in corruption. To those ends, a joint task force consisting of government members and business representatives is to be set up.

"We do not need another joint task force. What we need are clear reforms and a stop to these basic price increases of electricity, telephony charges and fuel," said Jonathan Henardo, the head of a small retail business enterprise group in Jakarta. "Many businessmen are already disfranchised with the central government and having such incentives for businesses is nothing but a small drop in an ocean of economic troubles."