July 19, 2024
JAKARTA – Here is a truth-or-dare challenge for President Joko “Jokowi” Widodo. Truth, that the fuel subsidy is a gross waste of state financial resources. Dare for the President to end the subsidy once and for all, in the name of fairness. Somehow, however, we doubt he will.
The question of the economic efficiency of the fuel subsidy program has come up again and again for as long as we can remember. No president has ever dared to phase it out.
The last attempt by president Soeharto triggered nationwide unrest that led to his downfall in May 1998. He was forced to do it, hiking gasoline prices to secure the massive loan from the International Monetary Fund to bail out his bankrupt corrupt regime. All five presidents after him, including Jokowi, have learned the lesson to never tamper with the fuel subsidy.
This time round, the suggestion comes from Coordinating Maritime Affairs and Investment Minister Luhut Binsar Panjaitan, who posted on Instagram the government’s plans to restrict sales of subsidized gasoline only to those who need the assistance starting Aug. 17.
Luhut argued the move would give needed fiscal space for the government to spend on other, more important programs. In 2024, the government has earmarked Rp 187 trillion (US$11.7 billion) for the energy subsidy, the largest chunk of this is for gasoline.
Luhut is not saying anything new about the moral dilemma of the fuel subsidy program. It takes a huge chunk of government spending each year, and the largest sum of it goes to people who drive cars and motorcycles. The poorest of the poor – the latest official census put at over 9 percent of the population, or about 26 million people – rarely get a cent.
Other ministers have confirmed the issue has been discussed in cabinet meetings as the government drafts the budget plan for 2025, but Luhut may have spoken too soon. If anything, the decision is not to phase out the subsidy.
President Jokowi has weighed in on the issue to say that nothing will change in the government’s fuel subsidy program when he delivers the government’s 2025 budget plan on Aug. 16. He has basically ended the public debate, and passed the buck to president-elect Prabowo Subianto, who takes over from him on Oct. 20.
Talks about eliminating the fuel subsidy resurfaced in recent weeks as the incoming Prabowo administration searches for ways to raise funds to spend on many of his big item programs, including the school free meals, which Prabowo promised in his campaign to win the presidential election in February. The fuel subsidy looks like the perfect target to cut.
Prabowo’s transition team has been talking with Finance Minister Sri Mulyani Indrawati who is drafting the 2025 budget, which Jokowi has to present in August, for Prabowo to implement beginning in January. If the fuel subsidy is to be cut or phased out, ideally it would have to be announced by the outgoing rather than the incoming president.
We only wish President Jokowi would put his huge public approval rating to good use for once, besides using it to build his family political dynasty. He turned his popularity to good effect in getting eldest son Gibran Rakabuming Raka to win the February presidential race as Prabowo’s running mate. Now he is using it to support his youngest son Kaesang Pangarep to run for governor, either in Jakarta or in Central Java, in November.
If Jokowi used his popularity to do the unpopular thing of hiking the price of gasoline and ending the subsidy once and for all, he would go down as the president who made it happen where others before him failed. This could be a historic opportunity for him to create a real lasting legacy.
We dare him to do the morally right thing.