Indonesians protest fuel price rise before parliament vote

Tue Mar 27, 2012 9:00am GMT
 

By Olivia Rondonuwu

JAKARTA, March 27 (Reuters) - Protesters rallied across Indonesia on Tuesday against a government proposal to increase fuel prices by a third as parliament prepared to vote on a divisive subsidy that cost Southeast Asia's largest economy some $18 billion last year.

Motorists in Indonesia, home to almost 240 million people and Asia's largest importer of diesel and gasoline, pay the least for fuel in Asia because of decades-old subsidies that halve pump prices compared with the market rate.

The subsidy has shielded politicians from any fallout from a recent rally in crude oil prices, but at a cost that President Susilo Bambang Yudhoyono and his government are no longer willing to pay: a budget deficit that could balloon to 4 percent of gross domestic product, over double the 1.5 percent target for 2012.

National police spokesman Saud Usman Nasution said about 80,000 people across Indonesia were expected to demonstrate against a fuel price increase on which, after months of debate, parliament will vote on Thursday.

"The richest half of households use almost 84 percent of the total subsidised gasoline. So the poor benefit the least from it," said Edimon Ginting, a senior economist at the Asian Development Bank in Jakarta.

"But the politics of it are very complex and reducing fuel subsidies everywhere is not an easy process."

POLITICS AND POVERTY

Just over a decade ago, protests over fuel price increases contributed to the downfall of former autocratic president Suharto, an event still fresh in the minds of many politicians eyeing 2014 presidential elections.   Continued...

Market Update

  • Africa
  • US
  • Europe
  • Asia
UK £ USD =1.6085
Euro USD =1.2669
Rand USD =0.0915