Jakarta Globe, Sharon Chen, Jan 05, 2015
Jakarta. Indonesia will save about $10 billion from the biggest overhaul of its decades-old fuel subsidy system, allowing the government to double spending on transportation, agriculture and public works, the energy minister said.
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| Motorists ride their motorbikes between cars during rush hour on a main road in Jakarta on Nov. 28, 2014. (EPA Photo/Mast Irham) |
Jakarta. Indonesia will save about $10 billion from the biggest overhaul of its decades-old fuel subsidy system, allowing the government to double spending on transportation, agriculture and public works, the energy minister said.
The finance
ministry estimates that at least 120 trillion rupiah ($10 billion) in savings
will be made this year, and the number will increase in coming years, said
Energy and Mineral Resources Minister Sudirman Said in a Bloomberg Television
interview with Angie Lau on Monday.
“What
happened is shifting the subsidy from consumption into more productive
spending,” the minister said.
“Because of
the policy this year 2015, the public works, the transportation sector and the
agriculture will double the capital expenditure budget.”
President
Joko Widodo scrapped the subsidy for gasoline on Jan. 1 and capped the amount
of aid for diesel, joining India and Malaysia in taking advantage of plunging
oil prices to wean their nations off government subsidized fuel. Indonesia had
been subsidizing fuel since the first oil price shock in the 1970s and kept
prices at less than $0.20 per liter until 2005, according to a World Bank
report published in March.
The
government plans to double spending on transportation from last year, according
to Said. The budget for public works such as roads, housing and irrigation will
be more than twice the original allocation and more money will be set aside for
farmers and the agriculture sector, he said. Building infrastructure for the
oil and gas industry and electricity will be part of the government’s focus
this year, he said.
Dismantling
the subsidy program is a political hot potato — protests accompanied past price
increases and riots spurred by soaring living costs helped oust dictator
Suharto in 1998.
“The
challenge would be of course the response from the public, but I have
confidence that if we communicate well, then they will understand” and in the
longer term it is going to be a much better budget structure, the minister
said.
Bloomberg
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