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Indonesia to Nearly Double Gas Prices

October 02, 2005|Alan Sipress | The Washington Post

JAKARTA, Indonesia — The Indonesian government announced early Saturday it would nearly double the price of gasoline, a dramatic move by President Susilo Bambang Yudhoyono to stem billion-dollar losses on subsidized fuel.

The price change, which takes effect immediately, raised the price of a gallon of gas from about 88 cents to about $1.65. It also more than doubled the price of diesel fuel and tripled the cost of kerosene, a common cooking fuel in Indonesia.

The government, reacting to the soaring price of oil on the global market, made the announcement just after midnight after a three-hour Cabinet meeting. Yudhoyono had confirmed earlier in the week that he would issue the new price levels but had provided no details.

There have been protests around the country since then, including some led by students in at least 15 cities on Friday. But with the rallies attracting fewer protesters than organizers had predicted, Yudhoyono decided to push for even deeper subsidy cuts than some of his advisors had counseled.

Indonesia's subsidized fuel prices have been among the lowest in the world. As oil prices have increased, the Indonesian government has been forced to drain its budget to maintain stable costs at the pump, spending an estimated $7.4 billion during the last year on subsidies. That sum had been projected to reach $14 billion a year if left unchecked. Meanwhile, education, health and other basic services have remained poorly funded.

Yudhoyono, who had already boosted fuel prices in March by about 29%, was not present at the late-night announcement, issued by his chief economic minister, Aburizal Bakrie. But he had defended his initiative Friday.

"I realize this is not a popular policy, a bitter pill that we have to swallow, but we have to do it to save the nation's budget and the future of the country," Yudhoyono said at the opening of an automobile plant near Jakarta, the capital. He urged opponents to temper their protests. "Anarchy will only deter investment," he said.

Most of the demonstrations Friday were peaceful, though police in central Jakarta briefly scuffled with about 100 Catholic university students heaving rocks and pieces of wood. In Semarang on the main Indonesian island of Java, protesters threw stones at the offices of the national oil company, Pertamina, breaking windows.

While the demonstrators focused on reversing the price increase, many also demanded that Yudhoyono order an audit of Pertamina, recently named in an official oil-smuggling investigation. Protesters in Jakarta also demanded that Yudhoyono overhaul his team of economic advisors.

"If he reshuffles his Cabinet, hopefully we can get a better economic situation," said Age Salahudin, 20, an electronics student wearing the yellow jacket of his polytechnic school.

There were, however, no calls for Yudhoyono to resign, a measure of his popularity one year after he became the country's first directly elected president. By contrast, the efforts by several previous Indonesian leaders to raise fuel prices provoked mass demonstrations that threatened their governments.

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