http://www.thejakartapost.com/news/2013/05/13/imo-view-cut-baby-halves.html
After a dual pricing system for subsidized Premium gasoline was met with skepticism and harsh critics, the Government stepped back from the brink last week. Once again, the President sent confusing signal as he was not yet sure with the option to raise the prices or cut fuel subsidy. As a result, the government has for the many time prolonged and created an ambience of uncertainty for business and the economy. The longer it delays to deliver the solution, the worse the situation would get. It creates a deadly time bomb!
The dual price policy came as a compromise in hope to avoid mass protests lead to violence and ease the ballooning budget deficit. The Indonesia’s gingerly President, mindful of his legacy after reaching his constitutional two-term limit, is always reluctant to raise the fuel price. The policy is considered terribly unpopular and costly politically and economically.
Politics always cast negative light. While fuel subsidy is not a matter of politics; nor is a matter of being isolationist or protectionist, it is always traded as political issue. Various plans to either cutting or removing the burdening fuel subsidy have been debated, fought over, amended and then dropped amid political opposition and procrastination.
Fuel subsidy is simply a matter of the bottom line, the best possible survival for the nation. The government has the means to diffuse the bomb! To save the nation from bankruptcy! Yet, it is too busy to escape from the intricate knots of the warring machines of the political parties. The time bomb keeps on ticking. The decision to save the nation from the imminent threat remains on the shoulder of our leader.
A great leader always comes with wisdom in time of peace or crisis. He is almost always a great simplifier, who can cut through argument, debate, and doubt to offer a solution everybody can understand. He is the anchor to keep the nation intact.
The suspense drama over the tangle of fuel price reminds me of one such great leader whose legacy has become an archetypal example of a judge displaying wisdom in making a ruling. With his most legendary expression "splitting the baby" or "cutting the baby in half", King Solomon has been successful to settle a great argument of two young mothers claiming as the true mother of an infant in their care.
Splitting the baby is essentially an unreasonable decision, a total madness that men consider a barbaric cruel act. Yet, the Wise King has seen it as the most logic solution to the case. He sternly gave an order to cut the baby in two; each woman shall receive half of the son.
He certainly doesn’t mean to literally cut the infant. He uses the ruling to reveal the true feelings of the two mothers. Cruel as it may seem, the decision has offered a solution to know the real mother of the baby.
Against this backdrop, I see the Indonesia’s current leader has been trying to apply such policy by implementing the dual price policy. Sadly, King Solomon’s wisdom has been translated incorrectly. The grand idea of the ruling is to save the baby as well as find the true mother and not the other way around.
Similarly, the Government intended to satisfy all parties; the people, the political parties; while at the same time safeguarding his legacy to save the government’s budget deficit. Each received a fair share according to the ruling of splitting the state coffer (the baby).
However, instead of saving the state coffer from unnecessary spending, the government literally cut and distributes the money in waste. It considered only the short term remedy for the complex case. It was almost as if rather than saving the baby, the policy taken by the government would accidentally kill the baby in the most horrific scheme.
Without doubt, any logical thinking would voice a protest of the bizarre ruling. No parties would benefit such policy in the long run. It would only delay the bomb to explode. While in reality, the time bomb keeps on ticking faster by the minutes.
Fuel subsidy scheme in Indonesia, at least in the last eight years, is no longer sustainable since 2004 Indonesia was no longer a net oil-exporting country. Thus, an increase in international crude price (ICP) would create oil trade deficit. It hurts the economy, causing a chronic illness that gets worse and worse every year. It needs a cure that could guarantee permanent healing.
Slashing the fuel subsidy is a politically-sensitive issue and will trigger massive demonstrations as seen in the past. The policy will hurt the economy in the short run. It will create an economy tsunami. Price levels will increase as prices of goods and services adjust. It will also put great pressure on the achievement of the country's inflation targets. The poor will be hardest hit. They will face more economic hardships. There’ll be politically and economically great costs if not buffered properly.
Nonetheless, to postpone the policy will only hinder the sustainability of Indonesia economic growth in the long run. It will rain down acids upon state finances and upon other macroeconomic fundamentals. Consequently, it will make the economy vulnerable to external shocks.
Therefore, to save the state coffer from bankruptcy, the government should execute the painful and agonizing measure. People might consider the policy madness. It tortures the poors. But, it is the most feasible solution for the long run to achieve sustainability. To raise fuel price is inevitable if the country wants to get benefits in the long run. It is the tool to diffuse the ticking bomb.
First, there is an urgent need to reduce the burgeoning fuel subsidy bill to prevent the 2013 budget deficit expanding beyond a legal limit of 3 percent of gross domestic product. Providing fuel at around half the real market price eats up a large chunk of the coffers. Billions of rupiah are spent annually to keep the fuel price low, intended to help lower-income citizens. People in turn have taken it for granted for a long time that to live without it would be terribly scary and choking.
While "the poor" get some crumbs from energy subsidies, the middle classes and rich use much more energy per capita and get the vast majority of fuel subsidies.Yet, by the end of the day, the lion’s share of such scheme accrues to the car-driving middle class rather than the motorbike and bicycle-riding poor.
Second, cutting fuel subsidies would reduce fuel smuggling. It is the natural law that price difference between subsidized and non-subsidized fuel opens opportunities for smuggling. If there was no price difference, such corruption could be mitigated and stopped.
Third, the money saved from these subsidies can be channeled to finance other important programs, particularly in health care, education, and other spending such as compensation programs for the poor (Bantuan Langsung Tunai) to improve their lives. The fuel subsidy should also be allocated to infrastructure development to lure more investors and other government programs to sustain economic sustainability.
Fourth, the policy will help to support innovative alternatives for renewable energy and curb the nation’s reliance on carbon-intensive fuels. As shown by supply and demand law, the rare commodity would tend to having increasing price over time. Fossil fuel is non-renewable resource that would someday exhaust.
For those reasons, the government should be more careful and wise in managing its policy. It is not just a playful impression to entertain the public. It is a real serious business to deal with as it has wide-ranging impact and great economic magnitude.
Like the Great King Solomon, a leader should use his wisdom to lead in time of peace or crisis.
After a dual pricing system for subsidized Premium gasoline was met with skepticism and harsh critics, the Government stepped back from the brink last week. Once again, the President sent confusing signal as he was not yet sure with the option to raise the prices or cut fuel subsidy. As a result, the government has for the many time prolonged and created an ambience of uncertainty for business and the economy. The longer it delays to deliver the solution, the worse the situation would get. It creates a deadly time bomb!
The dual price policy came as a compromise in hope to avoid mass protests lead to violence and ease the ballooning budget deficit. The Indonesia’s gingerly President, mindful of his legacy after reaching his constitutional two-term limit, is always reluctant to raise the fuel price. The policy is considered terribly unpopular and costly politically and economically.
Politics always cast negative light. While fuel subsidy is not a matter of politics; nor is a matter of being isolationist or protectionist, it is always traded as political issue. Various plans to either cutting or removing the burdening fuel subsidy have been debated, fought over, amended and then dropped amid political opposition and procrastination.
Fuel subsidy is simply a matter of the bottom line, the best possible survival for the nation. The government has the means to diffuse the bomb! To save the nation from bankruptcy! Yet, it is too busy to escape from the intricate knots of the warring machines of the political parties. The time bomb keeps on ticking. The decision to save the nation from the imminent threat remains on the shoulder of our leader.
A great leader always comes with wisdom in time of peace or crisis. He is almost always a great simplifier, who can cut through argument, debate, and doubt to offer a solution everybody can understand. He is the anchor to keep the nation intact.
The suspense drama over the tangle of fuel price reminds me of one such great leader whose legacy has become an archetypal example of a judge displaying wisdom in making a ruling. With his most legendary expression "splitting the baby" or "cutting the baby in half", King Solomon has been successful to settle a great argument of two young mothers claiming as the true mother of an infant in their care.
Splitting the baby is essentially an unreasonable decision, a total madness that men consider a barbaric cruel act. Yet, the Wise King has seen it as the most logic solution to the case. He sternly gave an order to cut the baby in two; each woman shall receive half of the son.
He certainly doesn’t mean to literally cut the infant. He uses the ruling to reveal the true feelings of the two mothers. Cruel as it may seem, the decision has offered a solution to know the real mother of the baby.
Against this backdrop, I see the Indonesia’s current leader has been trying to apply such policy by implementing the dual price policy. Sadly, King Solomon’s wisdom has been translated incorrectly. The grand idea of the ruling is to save the baby as well as find the true mother and not the other way around.
Similarly, the Government intended to satisfy all parties; the people, the political parties; while at the same time safeguarding his legacy to save the government’s budget deficit. Each received a fair share according to the ruling of splitting the state coffer (the baby).
However, instead of saving the state coffer from unnecessary spending, the government literally cut and distributes the money in waste. It considered only the short term remedy for the complex case. It was almost as if rather than saving the baby, the policy taken by the government would accidentally kill the baby in the most horrific scheme.
Without doubt, any logical thinking would voice a protest of the bizarre ruling. No parties would benefit such policy in the long run. It would only delay the bomb to explode. While in reality, the time bomb keeps on ticking faster by the minutes.
Fuel subsidy scheme in Indonesia, at least in the last eight years, is no longer sustainable since 2004 Indonesia was no longer a net oil-exporting country. Thus, an increase in international crude price (ICP) would create oil trade deficit. It hurts the economy, causing a chronic illness that gets worse and worse every year. It needs a cure that could guarantee permanent healing.
Slashing the fuel subsidy is a politically-sensitive issue and will trigger massive demonstrations as seen in the past. The policy will hurt the economy in the short run. It will create an economy tsunami. Price levels will increase as prices of goods and services adjust. It will also put great pressure on the achievement of the country's inflation targets. The poor will be hardest hit. They will face more economic hardships. There’ll be politically and economically great costs if not buffered properly.
Nonetheless, to postpone the policy will only hinder the sustainability of Indonesia economic growth in the long run. It will rain down acids upon state finances and upon other macroeconomic fundamentals. Consequently, it will make the economy vulnerable to external shocks.
Therefore, to save the state coffer from bankruptcy, the government should execute the painful and agonizing measure. People might consider the policy madness. It tortures the poors. But, it is the most feasible solution for the long run to achieve sustainability. To raise fuel price is inevitable if the country wants to get benefits in the long run. It is the tool to diffuse the ticking bomb.
First, there is an urgent need to reduce the burgeoning fuel subsidy bill to prevent the 2013 budget deficit expanding beyond a legal limit of 3 percent of gross domestic product. Providing fuel at around half the real market price eats up a large chunk of the coffers. Billions of rupiah are spent annually to keep the fuel price low, intended to help lower-income citizens. People in turn have taken it for granted for a long time that to live without it would be terribly scary and choking.
While "the poor" get some crumbs from energy subsidies, the middle classes and rich use much more energy per capita and get the vast majority of fuel subsidies.Yet, by the end of the day, the lion’s share of such scheme accrues to the car-driving middle class rather than the motorbike and bicycle-riding poor.
Second, cutting fuel subsidies would reduce fuel smuggling. It is the natural law that price difference between subsidized and non-subsidized fuel opens opportunities for smuggling. If there was no price difference, such corruption could be mitigated and stopped.
Third, the money saved from these subsidies can be channeled to finance other important programs, particularly in health care, education, and other spending such as compensation programs for the poor (Bantuan Langsung Tunai) to improve their lives. The fuel subsidy should also be allocated to infrastructure development to lure more investors and other government programs to sustain economic sustainability.
Fourth, the policy will help to support innovative alternatives for renewable energy and curb the nation’s reliance on carbon-intensive fuels. As shown by supply and demand law, the rare commodity would tend to having increasing price over time. Fossil fuel is non-renewable resource that would someday exhaust.
For those reasons, the government should be more careful and wise in managing its policy. It is not just a playful impression to entertain the public. It is a real serious business to deal with as it has wide-ranging impact and great economic magnitude.
Like the Great King Solomon, a leader should use his wisdom to lead in time of peace or crisis.
No comments:
Post a Comment