Commentary: All the ‘low-hanging fruit’ programs in the first 100 days

Vincent Lingga , The Jakarta Post , Jakarta Thu, 01/28/2010 9:37 AM Headlines

Had President Susilo Bambang Yudhoyono (SBY) anticipated the thundering political noise he would encounter at the outset of his second term, he might not have trapped himself in the euphoria of the first 100-day theatre.

But then there was no reason at all why, after being re-elected with almost 61 percent of the votes, he should have such foreboding. What an unfortunate development it turned out.

was really a rough ride during the first 100 days of the SBY administration, with most of the public trust he gained in the July 2009 election wasted on adversary relations between his administration and the parliament.

The first 45 days saw the government besieged and the national mass media dominated by the tussle between the police and the Corruption Eradication Commission (KPK).
Then over the last six weeks, the public’s attention and the national mass media have been consumed by the parliamentary investigation of the controversial bailout of Bank Century in 2008, which has sapped the energy of the finance minister, the acting central bank governor, deputy governors and directors.

We didn’t actually expect that much from the Yudhoyono government during its first 100 days insofar as real programs of action that would have had a significant impact on the economy.
Because of the some 50 economic programs proposed during that “political spring”, they were all low-hanging fruits that did not require painstaking effort.

Quite a number of the programs consisted simply of making blueprints, plans of action or guidelines for various operations, such as mass rapid transport systems in urban areas, sea transport, inter-modal transportation and ports, food estate and self-sufficiency in corn, soybean sugar and beef.

These could be what Coordinating Economic Minister Hatta Rajasa dubbed “quick win” programs.

Also included in this category was the promulgation or amendments of regulations on the pricing of natural gas for domestic market obligation, tax incentives for renewable energy and domestic market obligation for coal producers, which were certainly achieved.

There was the ceremonial announcement of plans to develop clusters of agriculture-based (mostly palm oil) industries in North Sumatra, Riau and E. Kalimantan and natural gas-based industries in E. Java and E. Kalimantan.

These actions obviously do not immediately produce any significant impact on the economy, let alone make things easier for doing business, as from the outset they had been designed to be implementation over the next five years.

, the catalog of regulations, operational directives, blueprints and plans produced over the past 100 days would not do much in the way of convincing the public the government is really serious about implementing reforms.
But we should still give credit where it is due.

The government also implemented several measures to remove bottlenecks (“de-bottlenecking” as Hatta described it) in business/investment licensing, port-handling, infrastructure funds and customs service operations for 24 hours seven days a week at the four largest ports: Jakarta’s Tanjung Priok, Surabaya’s Tanjung Perak, S. Sulawesi’s Makassar and North Sumatra Belawan.

The ministers of trade, home affairs, justice and human rights, transmigration and manpower, and the chief of the Investment Coordinating Board issued a joint decree designed to expedite all licensing procedures to start up businesses that at present take about 60 days to complete, to only 17, by introducing a one-stop administration center for all kinds of licenses and abolishing 70 kinds of redundant permits.

Yet more significant was the launch of electronic one-stop processing for business/investment licenses starting on Batam Island, near Singapore, in mid-January. This bold measure will make the process much more expedient and transparent.

The 24/7 customs service operations and the application of a national single-window system in the processing of all documents needed to clear goods out of the port area are the first big steps in improving the efficiency of logistical systems that also involves many other government agencies and service companies.

Capping the achievements in the first 100 days was the government establishment Tuesday of PT Indonesia Infrastructure Finance with an equity capital of US$450 million in a joint venture with the Asian Development Bank, the International Finance Corporation (a World Bank subsidiary) and the German development bank DEG as shareholders. This new facility could be a financing breakthrough in accelerating the implementation of long delayed infrastructure projects in the country.

So all in all, taking into account its strong political mandate, we give the government performance in its first 100 days a score of 4 on a scale from 0 to 10.

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Commentary: Beleaguered government throws out sound energy policy

Vincent Lingga , The Jakarta Post , Jakarta Fri, 01/15/2010 9:20 AM Headlines

By deciding to increase budget allocations for energy subsidies by 50 percent to Rp 150 trillion (US$15 billion) this year, the government threw out a sound fuel policy launched early last year to gradually reduce dependence on fossil fuels.

That was strangely a very bad move from a government which just got a strong mandate from the people and whose coalition is supposed to control more than 70 percent of the parliament.
The government launched a strategic energy policy last January by floating domestic fuel prices on international market quotations after crude oil prices fell steeply from their peak of US$147 a barrel in July 2008 to as low as $40.

That was the right momentum for the wise policy because domestic fuel prices at that time — Rp 4,500 a liter (45 US cents) after three successive price cuts in six weeks — were only slightly lower than international prices in Singapore.

The January 2009 fuel-price floatation also was then seen as realistic because the government, in order to prevent a sudden shock to the economy, decided to anchor the floatation initially on fixed-price bands which capped gasoline prices at a maximum of Rp 6,000 per liter and automotive diesel oil at Rp 5,500.

The wise policy that allowed monthly adjustments for fuel prices would provide policy predictability for businesses and investors in energy development, protect the economy from shocking inflationary pressures and spare the government the wasteful political bickering with the parliament any time international oil prices fluctuated widely.

That measure also was rightly designed to free the government from being hostage to the wildly volatile oil market and to remove the fuel-subsidy “time bomb” from fiscal management.
Past experience showed any time the government moved to raise fuel prices, irrespective of its size, there was always political turbulence with the House of Representatives, not to mention street demonstrations and a shocking impact on general price levels.

But President Susilo Bambang Yudhoyono, fresh from a landslide victory in the July 2009 presidential election after winning almost 61 percent of the votes, simply abandoned that sound energy policy at the expense of the long-term good of the economy.

The Cabinet decided Tuesday to increase budget appropriations for energy subsidies to Rp 150 trillion ($15 billion) for this year as international oil prices have now risen to around $80, higher than the average $65 assumed for the 2010 fiscal year.

Had the government consistently implemented the fuel-price floatation policy last year with gradual monthly price adjustments, the government should not have to resort to such a policy flip-flop that is inimical not only to the credibility of the government’s policy-execution ability but also to future investment in energy conservation and diversification programs.
The government should have been fully aware that fuel subsidies do by no means benefit the poor segment of the population but mostly motor vehicle owners.

Subsidies for the poor are better distributed through specifically targeted programs.
And, given our vast, porous coastal areas, the wide fuel-price differences with our neighboring countries such as Singapore and Malaysia, which are only 30 minutes away by boat, are highly vulnerable to abuse by smugglers.

Yet more damaging is that the generous subsidy policy will deepen our dependence on fossil fuels, adversely affect the energy diversification program to promote renewable energy such as biofuel and discourages energy conservation and efficiency.

If the government does have such financial resources to spare, it would have been better to allocate much larger subsidies for micro-credits or biofuel, a wholly local product. Subsidies for biofuel will at least stay in the domestic economy, but those for fossil fuels will flow out of the country as we import more than one third of our consumption.

Also saddening to note, most of the appropriations for the energy subsidies, which are tragically larger than the combined budget allocations for education and health sectors, will be burnt by motorists into carbon dioxide.

Given the strong political mandate the Yudhoyono government just received from the people, we cannot help but get the impression that such a strangely bad policy could have been made only by a beleaguered administration with a weak leadership.

As the current parliamentary inquiry into the controversial bailout of Bank Century in November, 2008, is moving like a loose cannon that could hit the political and economic stability, the government should indeed feel embattled.

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