Robert Go, Jakarta – Indonesia's businessmen and labour unions have formed a rare alliance to protest the government's New Year price hikes – paving the way for a mass nationwide strike this week.

Labour activist and union chief Dita Indah Sari said employers have not only backed, but also encouraged, union plans to strike against the latest series of price hikes.

"Employers will not sanction workers who go on strike to protest against the price hikes," Ms Dita, who heads the National Front for the Struggle of Indonesian Workers, told the Antara national news agency.

As many as 23 labour unions, which have often competed for worker support, have banded together since the government raised fuel, electricity and telephone prices on January 1.

In a bid to reduce costly subsidies and contain the budget deficit, the government raised fuel prices by up to 22 per cent last Thursday, after increasing electricity and telephone charges by an average of 6 and 15 per cent respectively the day before.

Unions have vowed to mobilise workers on January 9 for a one-day mass strike, which could bring industrial activities to a halt nationwide.

Separately, tycoon Sofyan Wanandi, who heads an economic-recovery committee, told The Straits Times of an unprecedented alliance between companies and their workers in the face of "a very serious threat to all".

"These price hikes are very unpopular for good reason – they hurt everyone. Labour and the business community are presenting a united front to ask the government to reconsider its plans," he said.

Smaller strikes are already taking place in several areas, particularly among transport providers unhappy with higher fuel costs.

In some Jakarta neighbourhoods, public transportation has ground to a stop after bus and mini-van operators refused to work if they could not increase their fares.

Protests over higher prices, which in May 1998 helped bring down former President Suharto, are also giving ammunition to the government's political critics.

Dr Amien Rais, speaker of the country's top legislative body, the People's Consultative Assembly, has joined the fray. "The government's decision to increase prices needs to be annulled as its timing is inappropriate," he said on Saturday.

Never one to miss a chance to stoke up public anger against the administration, he also suggested Jakarta should instead go after big businesses and those who have not repaid debts to the country.

But most analysts agree the country cannot continue to give energy subsidies, and these price hikes had been planned for some time.

A government economic source said: "There is no choice. Our budget situation is so tight – we have to cut subsidies and raise prices."

Numerous analysts have also argued that raising prices for energy and utilities mostly hurts the middle class, not the poor. Price hikes have also been recommended by the International Monetary Fund, World Bank and other lenders, who say subsidies benefit the smuggling industry and harm the country's ability to compete in the free market.

Indeed, economists frequently comment on how Indonesia's businesses had in the past grown fat on the back of subsidies, which artificially depress the cost of doing business at the expense of competitiveness.