Fuel Policy and Politics
I must applaud SBY’s decision to raise fuel price as a matter of policy. Politically, this decision is very unpopular, at least for now. The popular pressure to keep the price at its current level would be very happy to support him if he gives in.
Politically, SBY must be pretty sure that not only this policy will work, but also it will give him results relatively quickly, before 2009 election. Then, he has to hope that the voters can connect the change in their situation to him. Voters don’t have long memory, and 3-4 years is a long time in political time.
His decision might also be based on the prediction that the current economic situation cannot sustain itself for extended period of time. Again, the period is about 3-4 years. Otherwise, he could hang on to the popular support until after the next election, before inflation and other negative effects of fuel subsidy take over.
I think since he has realized the current economic will not able to substance if he does not increase the fuel price, why not increase completely rather that some sector still benefit the subsidise and others are not. Simply at the same time, the cost of living will increase and soon it will reach an equilibrum whereas everyone has to bear. The current situation is that for those sectors which benefit are smuggling the fuel out to other country. We are only the encourage more of this and more corruption. Better still is that this people who get rich yet need not to pay income tax!