ABOUT THE LOST MOMENTUM

Rumors spread out that there were some circles who suspected that Indonesia’s lowered outlook by a certain international rating agency was to serve certain interest. By referring to the burden of oil price subsidy as ground for lowering rating, suspicions crept in that there was some hidden agenda behind the rating as part of certain big scenario. There were allegations that the rating was not purely a rating process but rather something with certain motives behind it.

               

They suspected there was certain motive behind the pressures on the government to increase oil price. Therefore the government was reminded that in making any decision, it should be based on sound calculations not just to comply to agency’s recommendations.

               

The point was that the government must not make any decision by external pressures: national souverignity comes first. To increase oil price in Indonesia seemed to be the most wanted step by the superpowers, this was the suspected thing behind their hidden agenda.

               

Indonesia’s economic outlook as rated by the international rating agency was not an aimless step: the final objective was to leave Indonesia’s economic life to the world’s market mechanism, not to support it with oil subsidy. By such measure, they expected that the extended arms of foreign power could claw in to Indonesia’s economic system to dominate. With increased oil price, competitiveness of national commodities would drop as production cost would increase.

               

There was no need for the government to worry too much about the impact of outlook rating. The causes of economic downturn was many, not just one single factor. I could be slow budget absorption, export downturn, global economic crisis which had not subsided.

               

As footnote, early in the month of May Mood’s investor’s services rating agency warned that inability of the Indonesian government to reform subsidy policy in oil pricing, would have its bad effect on Indonesia’s debt rating. Analyst of senior moody’s investors services Singapore Christian de Guzman said so far moody’s still maintained Indonesia’s rating at Baa3 with stable outlook.

               

Moody’s was following the steps of international Standard & Poor’s [S&P] who on Thursday [2/5] had affirmed Indonesia’s sovereign credit rating at BB + long term and ‘B’ short term and revised Indonesia’s outlook from positive to stable.

               

According to Moody’s the Indonesian government had weakness in policy implementation which was not supportive to economic growth and economic condition in general. Besides, the external economy was also fragile as indicated by deficit in current transaction and swelling of overseas debt of the private sector. Clearly Moody’s stated that inability of the Indonesian government to reform oil pricing policy would have its negative impact on debt rating.

               

Whatever the cause of Indonesia’s demotion, still the government must be considerate and try to improve things as soon as possible so foreign investors remained to be attracted to invest in Indonesia. Direct investment, in tandem with domestic consumption was still something to pin hope on, moreover the government had lowered economic growth target to 6.3% from the previous 6.7% - 6.8% this year.

If the principle thing to the rating agencies was subsidy for oil, then it was this oils pricing policy that must be settled once and for all. In fact with or without intervention of the rating agencies the government of RI must reduce subsidy for oil price because every year the overall financing tend to overshoot target.

The latest news was that the government planned in increase price of premium oil to become Rp6, 500/liter and solar to become Rp5, 500/liter which would save subsidy by Rp40 trillion. According to the acting head of fiscal policy board [BKF], ministry of finance, Bambang Brodjonegor, the government fund would be used for compensation and infrastructure building.

The compensation to be distributed was rice for the poor [Raskin], scholarship for the poor, prospective families [PHK] AND Direct Cash Aid [BLT]. One of the BLT compensation fund to be distributed was called people’s temporary direct aid [Balsem]. All the compensation were designed for protection for the poor people after the increased oil price. As with infra structure, the fund would be spent on building of basic infra-structure which were directly related to people’s well being.

On the other hand, the government also enhanced austerity measures in expenditures at the ministries to keep deficit below 3%. The tolerable deficit was 2.75% of GDP. So reduction of oil subsidy alone was rated as not sufficient, it should be accompanied by reduction of spending plus any possible unexpected expenditure.

Therefore the government must not hesitate to lift up subsidy for oil in the draft of APBN budget 2013 to be submitted to house after opening of parliamentary session this week. After being signed by the president, the draft would be dissected by the commissions in house in relation to the respective ministries.

               

In regard to the plan to increase price of subsidized oil, it was right indeed for president SBY to conduct a consultative meeting with the house. President SBY was highly expectant that house would approve oil price increase as proposed by the government.

               

From the above picture it was apparent in a matter of days the new oil price would be announced although there were one or two non coalition parties in house who would reject it. If voting were to be exercised, almost certainly the new oil pricing policy would be exercised.

               

The public was expecting legislation process of oil price increasing as written in the APBN-P 2013 draft would run fast to prevent speculations and black-marketing in the market. Although the issue of oil increase was inseparable from the political do main, advisably economic rational thinking In house remained to be uplifted.

               

Indonesia had increased oil price several times, so if the same thing was to be done this year, there was nothing new about it and nothing strange about it. To quote remarks of ex vice president Jusuf Kalla which was popular among the public, “the faster the better”, the public was expecting oil price increase be decided soonest to bring assurance for the general public. The nation must not lose the golden momentum. (SS)

Business News - May 17,2013