Sunday, 1 June 2008


Most Asian countries have one form of subsidy or another, whether it's for petrol we all need to move around or cooking oil we use to cook the 3 or more meals in our daily lives.

But I'm sure when the late ex-President Suharto introduced fuel subsidies to the Indonesians, he had no hint that oil wil become such an expensive commodity and the subsidies an unbearable burden on the state's budget. Neither could he have anticipated that Indonesia has become a net importer of oil.

Will buffering our poor from market forces help them in the long run? Anyone with the slightest interest in economic theory would have know that the answer is a "BIG NO".

Distorting market forces has a heavy price - whether we pay it now or 30 years down the road. I can agree with temporary solutions and eradicating short term "obstacles" just so we get the nation building in progress. But governments have been slow to eradicate subsidies which were put in place for specific purposes. This must be a painful lesson for governments throughout Asia now.

Each time Indonesia raised fuel prices, there would be demonstrations and protests, the most severe being the one in May 1998 which rewrote history (although that was a long overdue change). The test of a government's political will when contemplating reducing fuel subsidies is immensely tougher after that fateful fuel hike in 1998.

Through the years of nation building, Indonesians have been pampered with low fuel costs to the extent that low fuel costs become a right they are born with. Budget deficits or insufficiencies, along with other things of concern in Indonesia, are aliens to the ordinary folks. They don't understand how these can and will impact on their lives and their kids' lives in future. Yet, I've not seen any effort being put in by the government to effectively communicate and educate the populace of what the country is going through and what the country needs to ensure stability and economic well being in the years to come. Every politician is busy politicking or trying to make the next million dollars from the next deal on the table. No one seems to be interested -- truly interested I mean -- in what will happen to the next generation, their own children included.

Malaysia's government is not much different, although the Malaysians are in a more enviable position as a net exporter of this expensive commodity called oil.

This is just the tip of the iceberg.

Soon there'll be problems with cooking oil which Indonesia and Malaysia have plenty of, from the millions of hectares of land cultivating palm oil; and rice, the staple food of most Asians. Maybe those who protested vehemently against the conversion of padi fields into golf courses saw something which our well-educated politicians didn't.

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