James Balowski, Jakarta
On October 1, under pressure from the International Monetary Fund and the World Bank, the government of President Susilo Bambang Yudhoyono announced massive cuts to fuel subsidies. The average cost of domestic fuel rose by almost 125% as a result, and the price of kerosene, which Indonesia's poor use for cooking, rose by 185%.
The increases are expected to trigger steep hikes in the prices of basic foods and public transport, lifting inflation to 11% from a projected 9%.
Although the government has promised a subsidy of US$29 a quarter over the next year for an estimated 16 million low-income households, most believe that this is not enough and will be siphoned off by corruption and mismanagement.
The government claims the move is unavoidable to contain its burgeoning budget deficit of $46 billion, after the double blow of global oil price increases and the rupiah's declining value increased fuel subsidies from just under $10 billion to $14 billion a year.
Even before the announcement, many parts of the country, including Jakarta, experienced serious fuel shortages, as unscrupulous distributors hoarded supplies to make a fast buck. Queues as long as 500 metres were reported at some petrol stations and kerosene supplies ran out entirely in some areas.
Despite an appeal from Yudhoyono for calm, protests in several cites resulted in clashes on September 29. Hundreds of students in the South Sulawesi capital of Makassar clashed with police guarding the residence of vice-president Jusuf Kalla. Clashes were also reported in Palu, Central Sulawesi, where students tried to occupy a petrol station.
In Cirebon, West Java, students blocked the busy north-coast highway, causing a five-kilometre-long traffic jam for almost four hours. A similar demonstration was staged at the provincial parliament in Bandung, where students and workers blocked off the road for around two hours. In Jakarta, thousands of students, workers and farmers from the Alliance of People's Demand marched to the State Palace where they were joined by thousands more from various student and youth groups.
Another wave of demonstrations took place on September 30 and October 1 in more than 10 cities in Java, Lombok and Sulawesi. In Yogyakarta, Central Java, hundreds of students picketed a local state fuel depot and demanded officials there sell kerosene at the old price. Students and bus drivers also demonstrated on the island of Lombok, while students in the Central Java city of Semarang set fire to effigies of Yudhoyono and Kalla. In Makassar, hundreds of students blockaded the streets outside their university and students in Jakarta clashed with police near their university campus.
Most demonstrations addressed the same themes: how the cuts will unfairly burden the poor; how market liberalisation and privatisation are fuelling unemployment; and how after almost one year in office, Yudhoyono has failed to curb corruption, convict those guilty of corruption, or recover the billions they stole (monies that would more than easily compensate for increased fuel subsides).
Demonstrators, consumer groups and economists have all claimed that the cuts will further damage Indonesia's domestic industries struggling to survive in the face of import liberalisation, state corruption and bureaucracy and a failure to invest in infrastructure and technology. The immediate consequence of this will be more mass layoffs as companies try to cut costs, or accelerated deindustrialisation, which Indonesia has been experiencing over the last few years.
While millions of people cannot afford health care or education, and malnutrition outbreaks in a number of provinces have resulted in the death of at least 15 children this year, billions of dollars continue to be lost due to government corruption and mismanagement. The government recently estimated that illegal logging alone — backed by state officials, the military and the police — is costing the country a massive $60 billion a year.
In September, for the fourth consecutive year, the Supreme Audit Agency placed a disclaimer on the government's financial statement for the 2004 fiscal year due to inadequate internal controls, noncompliance with financial accounting rules and discrepancies in current accounts. It said it was unable to verify $27.5 billion in tax receipts and could not find $19.4 billion in oil and natural gas sales receipts. Almost $17 billion in government balances at various commercial banks were unaccounted for and it found losses of more than 30% in the public procurement system. The same report also said the attorney-general's office had failed to recover $6.66 billion in fines and restitution that the courts had ordered those convicted of corruption to pay.
But by far the biggest factor contributing to the budget deficit is foreign debt, which now stands at $75 billion (adding to $65 billion in domestic debt). Most of this was incurred by the regime of former President Suharto and used to enrich his family and cronies, or to prop up the banking industry following the 1997-98 financial crisis. More than half of the country's annual budget allocation is now used for external debt servicing. To put this in perspective, the foreign debt is equivalent to $600 for each of Indonesia's 220 million people (more than half of whom live on less than $2 per day), amounting to 52% of the country's GDP.
From Green Left Weekly, October 12, 2005.
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