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Breakingviews: Bold fuel cut gives Indonesia opportunities

Tuesday, November 18, 2014 - 01:55

Indonesian President Joko Widodo's move to cut fuel subsidies may create room for necessary large-scale investments in the future, says Breakingviews' Andy Mukherjee.

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(SOUNDBITE) (ENGLISH) REUTERS REPORTER, TARA JOSEPH, SAYING: "Fuel subsidies in Indonesia has been a major issue for investors and it sounds like the country's new president is biting the bullet and pushing for reform here." (SOUNDBITE) (ENGLISH) COLUMNIST, REUTERS BREAKINGVIEWS, ANDY MUKHERJEE, SAYING: "You're right Tara, it's actually a very bold move by the new president and very early in his term. Now it saves the government some 8 billion dollars next year. That can pay for a lot of infrastructure, education and healthcare in Indonesia. And these are the things that that country needs because it's really allowed itself to become too dependent on exporting coal and palm oil and we all know what's happening to commodity prices. Now manufacturing has really not had a chance in Indonesia. Now it can have a chance and an economy that was basically consuming out of its commodity wealth can now invest and become a producing economy." (SOUNDBITE) (ENGLISH) REUTERS REPORTER, TARA JOSEPH, SAYING: "Yeah Andy, I mean this seems like a very bold move quickly by Widodo. The question here is, is there any chance of backsliding on this?" (SOUNDBITE) (ENGLISH) COLUMNIST, REUTERS BREAKINGVIEWS, ANDY MUKHERJEE, SAYING: "Well there will obviously be street protests, but the political hurdle has come down for the Widodo government thanks to falling global oil prices. Before that, to save the same 8 billion dollars, the increase in domestic oil price in Indonesia would have had to be much higher. So there will be some street protests but those should be manageable. Now the question is, what next? Assuming that global oil prices are steady, the subsidy bill in Indonesia will fall to something like 1 percent of GDP. Now Joko Widodo needs a plan to gradually eliminate it all together and free the government budget entirely from fickle global oil prices so he can confidently invest in infrastructure projects which are long gestation projects." (SOUNDBITE) (ENGLISH) REUTERS REPORTER, TARA JOSEPH, SAYING: "Indonesia's new president makes a bold move on fuel subsidies." ENDS

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Breakingviews: Bold fuel cut gives Indonesia opportunities

Tuesday, November 18, 2014 - 01:55