Sense of crisis deepening in beleaguered Indonesia

SINGAPORE: Rising oil prices and fears of a bird flu epidemic are deepening a sense of crisis enveloping Indonesia and prompting predictions of a cabinet shake-up next month as President Susilo Bambang Yudhoyono attempts to defuse mounting public tension.

The darkening mood stands in stark contrast to the optimism that surrounded Yudhoyono's victory a year ago in Indonesia's first direct presidential elections. Despite enduring faith in his own competence as an administrator, Indonesians are voicing growing doubts about whether his unwieldy coalition government can steer the country through its mounting list of troubles.

Analysts warn that the risk of unrest is growing as Yudhoyono prepares to raise fuel prices in October just as the country celebrates the traditional Muslim fasting month.

"The situation is not understood by most people here. They oppose it," said Kurtubi, an analyst at the Center for Petroleum and Energy Economics Studies in Jakarta. "But the government has no choice."

Although Indonesia is a considerable producer of oil, economic growth in recent years and inadequate spending on new wells have made the country a net importer of petroleum. The government is also saddled with extensive fuel subsidies that are particularly important to Indonesia's many poor people.

Yudhoyono is a former general with experience fighting both rebels and terrorists, and his promises to uproot corruption and revive investment still inspire confidence among business leaders at home and abroad. So does his willingness to acknowledge and tackle longstanding problems like bureaucratic inertia and legal uncertainty.

But because his party lacks a majority in Parliament, Yudhoyono rules through a coalition that has since stumbled over a string of calamities. These include the devastating South Asian tsunami, illegal burning of jungles that covered parts of neighboring countries in choking haze, the re-emergence of polio, spiraling commodity prices and increasing cases of avian influenza that the government has labeled an emergency.

With a second hurricane in the Gulf of Mexico threatening still higher oil prices, anxiety in Jakarta is high. The benchmark stock index dropped 2.6 percent Thursday.

Opposition party leaders have been calling for Yudhoyono to replace his economics team, saying it had lost the confidence of the people and of investors, although political analysts have long been predicting that the president was eager himself to form a more cohesive cabinet.

Yudhoyono alluded to the possibility of a reshuffle last month, saying that he would review his cabinet's performance.

Coordinating Economy Minister Aburizal Bakrie is a member of the party of the ousted former President Suharto. He was among a group of politically connected tycoons who after the Asian financial crisis fought government efforts to wrest control of their bankrupt companies to help pay for a huge bailout of the banking system.

He may enjoy the support, however, of fellow party member Jusuf Kalla, Yudhoyono's vice president.

More speculation surrounds the possible replacement of Finance Minister Jusuf Anwar, a technocrat formerly at the Asian Development Bank, and of Attorney General Abdul Rahman Saleh over what critics complain has been meager progress in tackling corruption among high-level officials.

But even SBY, as Yudhoyono is widely referred to in Indonesia, has not escaped criticism, particularly over what many see as his own indecisiveness. A national magazine recently had a cover story playing on a popular re-translation of the president's ubiquitous acronym: "Selalu Bimbang, Ya," or "Forever undecided, right?" The president's spokesman could not be reached for comment.

The anxiety created by rising living costs has been exacerbated by the government's admission that it could face an epidemic of the bird flu virus. Bird flu has killed four people in Jakarta alone, while eleven other patients remain hospitalized with symptoms of the virus.

On Monday, the government invoked powers to hospitalize and quarantine those suspected of being infected by the virus. It has since announced plans to conduct mass slaughters of poultry.

Chicken is perhaps the most widely consumed meat in Indonesia's diet, and the country has vast numbers of free-range poultry, so the impact on public consumption is likely to be significant, analysts said.

Already, fears of the virus have sparked travel warnings and sent members of the foreign investment community in Indonesia rushing to clinics for vaccines and remedies.

Yet paramount among the fears facing Yudhoyono is the effect of rising oil prices on his country's 218 million people. Early this month, Yudhoyono announced plans to cut fuel subsidies in October.

Indonesia subsidizes the price of fuel in the amount of 73 trillion rupiah, or $7 billion, a year, a figure that it estimates will balloon to 140 trillion rupiah this year as world oil prices rise.

The swelling cost to the government of the subsidies sent the rupiah plunging in August to its lowest level in four years and precipitated a similar decline in stock prices.

The subsidies are a legacy of Indonesia's days as a big oil exporter. Few analysts or economists dispute that the subsidies need to be eliminated. Not only do the subsidies eat up government revenue that could be used for public works or alleviating poverty; they also offer relatively little benefit for the poor.

Subsidies on gasoline prices benefit primarily wealthier Indonesians who drive fuel-inefficient cars. And the artificially low prices the subsidies create has given rise to a brisk trade in smuggling Indonesian crude and refined product out of the country.

Source : www.iht.com