Casting Off the Crutch of Cheap Gas
The government’s plan to restrict subsidized fuel for private cars in Greater Jakarta this April has garnered much criticism — enough that it seems Coordinating Minister of the Economy Hatta Rajasa has considered rescheduling the program.
Critics say the program would negatively affect the economy both for producers and consumers by driving up the price of commodities. Moreover, they say, the poorest citizens would be hardest-hit.
But although the restriction on the subsidized fuel program will indeed adversely affect the economy and the poor in the short term, most of the negative effects will not last. Indeed, in the long term the restrictions will lift the Indonesian economy. Freeing the government of its expenditure on subsidies would allow it to finance the development programs that the poor desperately need.
For decades, fuel subsidies in Indonesia have encouraged an inefficient national budget and lackluster development because they have created market distortion. The group that has seen the greatest benefit from the program is not the poor, but the wealthier households that own the vehicles which run on cheap gas.
The policy can distort economic development because it can foster a sense of extravagance in fuel consumption, even while the supply of fuel is quite limited and highly influenced by global oil prices. If global oil prices begin to rise suddenly (as they have been doing steadily due to the wave of unrest sweeping the Middle East), the government is then forced to reallocate funds from other programs in order to keep prices stable here in Indonesia.
In other words, the fuel subsidy program reinforces inefficient practices in the economy and curbs the effectiveness of other government programs.
On the flip side, restricting the purchase of subsidized fuel by private car owners could potentially save the government Rp 3 trillion per year in the Greater Jakarta region alone.
Nationwide, the government could save about Rp 20 trillion from 2011 to 2013. If the program were expanded to include all fuel subsidies, the government could save a staggering Rp 92.8 trillion per year, based on the subsidies allocation in 2011.
Not allowing the restrictions will increase our budget deficit, harming the government’s ability to finance programs meant to foster economic development.
In particular, the government could use the savings to increase financing for infrastructure to support development in six main regions: Sumatra, Java, Kalimantan, Sulawesi, Bali-Nusa Tenggara and Papua-Maluku.
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Critics say the program would negatively affect the economy both for producers and consumers by driving up the price of commodities. Moreover, they say, the poorest citizens would be hardest-hit.
But although the restriction on the subsidized fuel program will indeed adversely affect the economy and the poor in the short term, most of the negative effects will not last. Indeed, in the long term the restrictions will lift the Indonesian economy. Freeing the government of its expenditure on subsidies would allow it to finance the development programs that the poor desperately need.
For decades, fuel subsidies in Indonesia have encouraged an inefficient national budget and lackluster development because they have created market distortion. The group that has seen the greatest benefit from the program is not the poor, but the wealthier households that own the vehicles which run on cheap gas.
The policy can distort economic development because it can foster a sense of extravagance in fuel consumption, even while the supply of fuel is quite limited and highly influenced by global oil prices. If global oil prices begin to rise suddenly (as they have been doing steadily due to the wave of unrest sweeping the Middle East), the government is then forced to reallocate funds from other programs in order to keep prices stable here in Indonesia.
In other words, the fuel subsidy program reinforces inefficient practices in the economy and curbs the effectiveness of other government programs.
On the flip side, restricting the purchase of subsidized fuel by private car owners could potentially save the government Rp 3 trillion per year in the Greater Jakarta region alone.
Nationwide, the government could save about Rp 20 trillion from 2011 to 2013. If the program were expanded to include all fuel subsidies, the government could save a staggering Rp 92.8 trillion per year, based on the subsidies allocation in 2011.
Not allowing the restrictions will increase our budget deficit, harming the government’s ability to finance programs meant to foster economic development.
In particular, the government could use the savings to increase financing for infrastructure to support development in six main regions: Sumatra, Java, Kalimantan, Sulawesi, Bali-Nusa Tenggara and Papua-Maluku.
Steel Investment Casting , Aluminum Investment Casting , Excavator teeth , Copper sand Casting , , Hydraulic Valve Castings
aircompressor - 3. Mär, 08:06
