Immediate Decision Needed On Subsidized Fuel Policy

Jakarta, May 3(Antara) - Coordinating Minister for Economy Hatta Rajasa said here on Thursday that immediate decision on the prices of subsidized oil fuels will contribute to improving the country`s economic condition. Immediate decision will give certainty to investors, Hatta said, but the government has yet to announce details of the decision. Earlier government officials had been quoted as saying the prices of subsidized oil fuels would be raised. "Our policy is very clear on subsidy, therefore, I appeal not to see the decision from political point of view. The policy will create a healthier economy," Hatta said. He said delay in the decision will create uncertainty in the investment climate, adding good management of energy subsidy is needed to create fiscal stability and the economy in general. "This should be managed properly. We are talking on matter based on economic point of view , to improve fiscal health for which we provide subsidy in a fairer way and provide social protection and improve infrastructure," he said. The government has been accused of faltering in its decision on the subsidy policy. President Susilo Bambang Tydhoyono was expected to announced the government decision on the oil fuel subsidy earlier this week but he said approval for a form of compensation for the poor had yet to be asked from the House of Representatives. Observers said apparently the government has not firmly made up its mind about the options to cut oil fuel subsidy. One of the options was to raise the price of subsidized gasoline from Rp4,500 to Rp6,500 per liters for private cars, but later it was said the government will raise the prices without exception but for which a compensation is needed for low income people. Hatta said he could understand that the international rating agency Standard & Poor`s has revised down Indonesian outlook from "positive to stable," because of the government being not clear about its oil fuel subsidy. "We see that it was a signal that a lot of redressing is needed especially in the context of subsidy despite high market confidence as indicated by rising share price index," he said. Standard & Poor`s said in its latest release that policy being not clear in supporting economic reform amid unfavorable external condition reduce the opportunity for Indonesia to gain a higher rating in the next year. In addition,Indonesia still faces constraints in connection with inadequate infrastructure, legal uncertainty and red tape that potentially slowdown economic growth and hamper efforts to reduce poverty, it said. The rating agency,however, said Indonesia still has good record of debt and fiscal management with debt to GDP ratio of 22 percent in 2013. Therefore, the Indonesian outlook rating could still rise from "stable" if rationalization of subsidy policy could be improved and fiscal vulnerability to external situation could be reduced, it added. On the contrary, failure in coping with fiscal pressure with rightly implemented policy, the rating could shrink and harm the process of structural reform and in turn hampering economic growth, it said.