Vincent Lingga, The Jakarta Post, Jakarta | Tue, 12/14/2010 10:47 AM | Headlines
Want to know what an incompetent government looks like?
You’re looking at it.
As early as December 2007 then chief economics minister Boediono, who is now the Vice President, announced after a Cabinet meeting that the government was preparing a program that would restrict the sales of subsidized gasoline only to public transport vehicles and motorbikes, thereby forcing private cars to use fuel sold at international prices.
But the program, which would be phased in initially in Jakarta, West Java and Banten provinces, was eventually buried under the indecisiveness of the government and opposition from the House of Representatives.
Tens of billions of dollars in taxpayers’ money continued to be burned annually into carbon-based emissions by private-car owners.
The government revived the same idea in June but the plan was again shelved due to the acute leadership of the government and resistance from politicians in parliament.
The same song played again in October when fuel subsidies became an increasingly heavy burden on the state budget.
But two weeks before the program was supposed to be initiated in Jakarta and its surrounding towns on Jan. 1, the pathetic government had not shown the House technical details on how the policy measure, which would affect tens of millions of people, would be implemented.
Even state owned oil company Pertamina, which controls more than 95 percent of the distribution of subsidized fuels, has not started logistics preparations.
The question then is how will the government be able to gain a national political consensus for a policy measure that is so strategically important to the nation?
The House would surely not want to be made the culprit for approving a policy that could potentially cause chaos in fuel distribution due to a lack of infrastructure and the inadequate institutional capacity of both Pertamina and gasoline stations.
Having said all that, I don’t mean to say the energy policy is not good.
Instead, I think the move to stop subsidizing fuel to private cars could become one of the best economic policies of the Yudhoyono government.
Technically, socially, economically and politically, the measure is the best option available.
Technically, the measure is not completely new because fuel for industrial users has long been floated on international market prices. Hence, the move will only extend the enforcement of the same fuel-pricing policy to private-car owners.
Since the restriction will start only in Jakarta and its surrounding towns, the program will not likely cause major supply disruptions to private-car owners because most of the gasoline stations in these areas have been selling unsubsidized, high-octane gasoline from Pertamina, Shell, Petronas and Total.
A one-year transition before the policy becomes effective in the rest of Java and Bali and other major islands of Sumatra, Kalimantan and Sulawesi seems adequate for Pertamina and gasoline stations to make adjustments to their storage facilities and logistics arrangements.
Economically, the measure is also the most feasible and one that poses the least risks, yet immediately with the greatest impact, because Jakarta and surrounding towns account for almost 20 percent of subsidized fuel consumption, Java and Bali 40 percent, Sumatra 18 percent and the other islands the remaining 22 percent.
The move also is socially and politically acceptable because it will affect mostly better well-off households or families who own cars.
Hence, the new fuel policy, if approved, will by one stroke generate multiple great benefits to the nation because energy subsidies actually have been a missed opportunity for investment in health and education, reducing poverty and building up infrastructure.
Since almost 55 percent of fuel subsidies have been enjoyed by private-car owners, this budget spending is simply a gross misallocation of scarce resources and a future tax and burden on the economy.
It has been too long for the government’s fiscal management to be held hostage by fuel subsidies. The policy will give investors certainty as to the future direction of the energy policy. Such a long-term perspective and policy guidance is key to wooing investment in alternative, renewable energy such as biofuel and in energy conservation and efficiency programs.
Moreover, as long as the differences between domestic gasoline prices and those in our neighboring countries such as Singapore remain large, it is rather impossible to prevent export smuggling from Indonesia, the vast archipelago country with such long porous coastal lines.
If the House members use their intelligence and reasoning properly, they should approve the new fuel policy, though under a more flexible implementation schedule — say starting next July, instead of next month as originally planned — to allow more time for infrastructure development and logistics preparations.
