Kafil Yamin, Jakarta – Police used tear gas on about 100 rioting students during one protest over the government's decision to more than double the average cost of fuel.
That protest was just one of many over the weekend when thousands took to the streets. Some burned tires and threw rocks at police while others waved placards denouncing the government, which maintains the fuel increases are aimed at staving off an economic crisis brought on by mounting external debt.
"Another corrupt government, another fuel price hike," said a placard waved Saturday by a demonstrator on the capital's streets. That and similar placards were reflective of popular opinion that the price hikes were somehow linked to various irregularities on the part of the government, including the recent discovery that petroleum was being smuggled out of the country.
It was the third day of protests against the fuel increases as angry Indonesians anticipated the increases. The demonstrations failed to sway the government, which, after a three-hour cabinet meeting on Saturday, announced that gasoline would immediately rise to $1.71 a gallon. The average cost of domestic fuel went up by close to 125%. Worst hit was the price of kerosene, used mainly by the poor as cooking fuel and on which there was a rise of 185%.
The higher gas prices will in turn push up the price of everything from rice to fish and cigarettes on the archipelago with a population of 220 million people, half of whom live on less than $2 a day.
The government promised an interim subsidy of US$29 that is supposed to help 15 million households subsisting on incomes of less than $17 a month. (The government's penchant for subsidizing fuel was expected to cost $14 billion this year.)
Minister for Mines and Energy Purnomo Yusgiantoro said there would be no further price hikes this year, adding there was a possibility of prices going down if international prices went down. "There should be no more price rise until the end of the year," the official Antara news agency quoted him as saying on Saturday.
But the government promises did not satisfy protestors in several Indonesian cities because the hikes were larger than expected. With petrol prices going up by 87% and diesel costs doubling, there were fears of a cascading effect on the prices of goods that are dependent on transport.
It was not just the demonstrators on the streets, but consumer activists and well-respected economists believe the country could have managed its petroleum resources better and more honestly without burdening ordinary people by lifting subsidies.
"Without strong commitment and real action in combating corruption, lifting subsidies is not going to improve the economic situation," said Indah Sukmaningsih, of the Indonesian Consumers Foundation (YLKI).
Indonesia has consistently been rated by watchdog groups such as the German-based Transparency International as among the most corrupt nations in the world.
Fadhil Hasan, an economist at the Institute for Development Economics and Finance (INDEF), has similar views but he preferred to dwell on the question of better management in Indonesia, a member of the Organization of Petroleum Exporting Countries.
"Increases in the price of oil have always been followed by rising prices of basic necessities. And now we are facing the holy month of Ramadan and Idul Fitr festivities when prices of basic items soar," he said.
Hasan said hiking oil prices was not the only way of reducing the 2005 budget deficit. Making strict efficiencies in state-spending from the highest to the lowest level of government administration would, he said, actually be more effective.
"And if [the government] aimed to prop up the falling rupiah, they are supposed to increase exportation and draw foreign investment," Hasan said.
YLKI and INDEF had separately demanded that the government postpone the new prices until early next year. Already in March, prices had been raised by an average of 29%. The anger of ordinary people has been growing not only because of the announced hikes and the reports of petroleum smuggling but also because of hoarding of fuel stocks by dealers out to make a fast buck.
People queuing up for kerosene were seen in greater Jakarta, Bandung, Makassar and Medan, with many returning home disappointed.
"Foul-minded businessmen made use of this situation because they can earn a huge profit. They buy at the present low price, then release to the market at the new price. Smart but immoral," said Baihaqi, a Bogor resident.
"Lifting subsidy on oil is unavoidable because we have a huge budget deficit [of about $46 billion]," Vice President Yusuf Kalla said.
Indonesia's obligation to repay its external debt, now recorded at $75 billion, adding to its $65 billion in domestic debt, has caused a massive budget deficit. More than half of the budget allocation is used for external debt servicing.
The scarcity of kerosene and diesel is at least partly caused by the huge scale of fuel smuggling out of the country, involving officials of Pertamina, the state oil corporation, and police officers. Police found that Pertamina workers in the Lawe-Lawe oil refinery in East Kalimantan had pumped crude oil to Singaporean tankers offshore. The crude oil was allegedly sold at $35 a barrel, while international prices were more than twice that figure.
Fuel prices are a sensitive issue in Indonesia. Former president Suharto faced an uprising which saw his ouster in 1998, after he raised fuel prices in the middle of a serious economic crisis. In 2002, former president Megawati Sukarnoputri was compelled to roll back a fuel price hike that she had ordered.