Jakarta cash for poor to offset fuel price rises
Lee Su Shyan
Mon, May 26, 2008
The Straits Times
JAKARTA - INDONESIA is handing out US$1.5 billion (S$2 billion) in cash to its poorest citizens to soften the blow of fuel price rises - a step which might bring the government short-term relief after weeks of protests, analysts say.

The government moved quickly in making initial payments of around US$30 each to tens of thousands of people, hoping to stave off any social unrest triggered by its decision to raise the prices of a range of fuel products by nearly 30 per cent.

A police spokesman said yesterday that at least 31 Indonesian students face charges for their role in a violent protest that followed Saturday's fuel price hike.

The hikes are expected to lead to costlier food, electricity and transportation in the country of 225 million, half of whom live on less than one US$1 a day.

Jakarta was forced to cut subsidies on fuel to avoid a budget blowout amid soaring cost of oil on the global market. It had been spending billions of dollars on the subsidies which, while keeping prices low for the poor, were also enjoyed by the rich.

'Please tell protesters not to be angry,' Vice-President Jusuf Kalla told people queuing for the handouts on Saturday. 'Tell them money for the poor is more important than cheap fuel for the rich.'

Using savings from the subsidy cut, the government plans to give US$10 a month each to about 19 million families for the next 11/2 years.

Mr Arbi Sanit, a political analyst from the University of Indonesia, said the move would help the government's image in the eyes of the poor, 'but it will be temporary because it will not be enough to compensate for the rises'.

He said the move was also aimed at blunting criticism from political parties seeking an edge ahead of next year's parliamentary and presidential elections by painting the government as anti-poor.

Students, Muslim groups and left-wing activists have staged daily protests in recent weeks against the rises. Similar demonstrations occurred the last time President Susilo Bambang Yudhoyono raised fuel prices in 2005, but they petered out once the hikes took effect.

Indonesia is South-east Asia's largest oil producer but it has been forced to import oil because of decades of declining investment in exploration and extraction.

The government is already struggling to pay for health, education and infrastructure development. Some analysts say that although the fuel price increases are a step in the right direction, they do not go far enough.



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