Indonesia's president defended a decision to raise fuel prices beginning today as the only way to stave off an economic crisis, while calling on thousands of demonstrators who have taken to the streets to refrain from violence.
"Anarchy will only deter investment," President Susilo Bambang Yudhoyono said hours before the size of the hike was to be announced.
Ministers said the cost of gasoline, diesel fuel and kerosene could climb by as much as 50 percent -- pushing up the price of everything from rice to cigarettes in the sprawling country of 220 million people, half of whom live on less than US$2 a day.
PHOTO: AFP
Demonstrations in 17 cities were small and scattered, though numbers swelled in the predominantly Muslim nation after Friday prayers, with thousands turning out.
Soldiers and riot police patrolled major traffic intersections and strategic locations across the capital, including the presidential palace, parliament and some gas stations.
The price hikes follow Yudhoyono's decision to slash fuel subsidies that have helped protect Indonesia's poorest from spiraling global prices for years, but also threatened to blow the cash-strapped government's budget. Last year, the government doled out US$7.4 billion for the subsidies -- more than the international community has pledged on rebuilding efforts in countries hit by last year's tsunami.
"I realize that 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 a new Honda motor plant outside of Jakarta.
Motorists hoping to fill their tanks with cheap gas formed long lines at gas stations nationwide. Some stations were closed, hanging up signs that said "Sorry, we've run out." So far the demonstrations have been smaller than expected, given the size of the country and its history of massive street rallies, cheering investors. The Indonesian stock market and the local currency have taken a hit recently amid the economic uncertainty.
"Investors are just relieved the fuel price hike demonstrations haven't happened," one dealer said on condition of anonymity. "There really isn't much other news to boost the market," the dealer added.
Despite being Southeast Asia's only member of OPEC, Indonesia has to import oil because of decades of declining investment in exploration and extraction due to corruption and a weak legal system that makes people wary of doing business here. Everyone agrees that the current level of subsidies -- which allow Indonesian motorists to fill up for less than US$0.25 per liter -- are unsustainable. Still, raising prices is a sensitive issue in Indonesia, where a massive hike in 1998 triggered rioting that helped topple former dictator Suharto.
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