There’s subsidies and then there’s subsidies M Nur Djuli  ;   A former member of the Free Aceh Movement (GAM) peace negotiating team in Helsinki and the current head of politics, governance and peace in the Aceh National Party (PNA). He was a 2011-2012 Weatherhead Fellow for International Affairs at Harvard University

JAKARTA POST, 04 September 2014

                                                                                                                       

                                                      

Every country in the world, big or small, rich or poor, has one form of subsidy or another to assist a certain category of its people, not just the poor but sometimes even the rich. In the US, the government has a program to pay rich farmers not to plant certain crops and encourage them to plant another for the purpose of controlling the essential commodities market. Indeed, a subsidy is one of the most powerful social control tools of the state. So it is not strange that such a large country like Indonesia has its government use this tool for what it thinks is the best way to help some sectors of its people. With the gaps of incomes between the rich and the poor being so large in this country, using subsidies to help the weakest sector of the population is a necessity. Unfortunately, such a noble intention has been largely abused and we have the now infamous term “subsidy mafia” in this country. Politicians use it, either to support it or oppose it, for their own political advantage. No other subsidy is more talked about these days than “BBM”, the Indonesian acronym for oil fuels. It has been in place for so long so that everyone has got used to it. Reducing it, not to say abolishing it, will make the government very unpopular and even risk rioting. Today we are playing this old game again, but with a very different scenario. It is no longer the question of “to lift or not to lift”; that decision has been made. The outgoing government has firmly decided not to abolish the fuel subsidy, while its replacement, which will take over to govern the world’s fourth largest population in less than a month, has declared in no uncertain terms: no more “BBM subsidy”.  President-elect Joko “Jokowi” Widodo and his aging deputy Jusuf Kalla have said repeatedly that their government is going to abolish this subsidy because it favors the rich car owning sectors of society, ignoring the argument of his critics that increasing the prices of fossil fuels would cause uncontrollable inflation. Undeniable empirical evidence is easy to put forward for such an argument. But what then is the alternative? The answer for Jokowi is clear: “we are not going to stop the subsidy, we are just going to correct its wrong targeting system, we are going to shift it to productive purposes, to help farmers buy cheap seedlings and fertilizers, fishermen to have access to affordable diesel oil, we can use the savings from the trillions of rupiah in the “fuel subsidy” to finance universal health care, to build new schools in remote areas […] and such like productive activities. We have to change this subsidy from consumptive to productive purposes,” Jokowi said with his very convincing confidence that has won him the hearts and minds of the majority of Indonesians. But can he do it? Can the new government pull off this idea in a House of Representatives that is controlled by unfriendly political parties? Can this populist president persuade political parties and individuals well-known for their unhealthy politicking, often at the expense of those who elected them? The current government of President Susilo Bambang Yudhoyono refused Jokowi’s direct request to abolish the subsidy before he leaves office, saying the time is not right to do so, the House having refused his request for a budget to pay cash to the very poor who would be affected by the expected increase in essential commodities prices. This fuel subsidy has become a proverbial dilemma that in Acehnese culture is referred to as inadvertently eating the fruit of simalakama, one’s father will die if it is swallowed and one’s mother will die if it is spit out. Is there really no way out? At the risk of angering practically everyone in Indonesia by taking Malaysia as a better example, I am going to do this on this issue, especially when more often than not, the oft-repeated squabbles between these two very close (in every way) neighbors, are nothing more than sibling rivalry. The same “offense” committed by Singapore will not even raise an eyebrow in Indonesia, but when Malaysia does it, a lot of “patriotic” Indonesians call for the “crushing of Malaysia”, a battle cry coined by Sukarno during the so-called konfrontasi days back in the 1960s. Malaysia, even before becoming an oil-exporting nation, has put in place a subsidy on diesel fuel. It has been problematic, with lots of abuses not unlike what is still happening in Indonesia. Then about a decade ago, someone had a bright idea of ensuring that the intended subsidized fuel was not abused. They colored it blue. Not only unauthorized users now face criminal charges but also the sellers. Attendants at petrol stations will not sell this blue fuel to just any motorist because they too will be charged together with the buyer. Such a system reduces the need to have too much policing, as it is based on self-regulatory adherence. The problem with adopting such a system in Indonesia is the downstream sales monopoly by state-owned oil and gas company PT Pertamina, which is unable to have stations all over such a large country with a sufficient number of retail sale stations. This inability has led to a situation where practically at every street corner one will find a petty reseller of fuel disregarding the safety aspect of such a business. How ridiculously incongruous for those who are not familiar with the sight, to see cigarette kiosks also doubling as petrol and diesel fuel retailers. In the final analysis, it is not that Indonesia does not have brilliant people with creative ideas to devise such similar plans, she does and because it is the fourth most populous country in the world, it stands to reason that there will be a lot of talent to tap into. It is not the lack of good laws governing difficult issues; Indonesian laws are available to deal with practically every issue emerging in its vastly multifaceted society. The problem lies in the weak law and order sector. Having a good law is pointless if it is not implemented properly. Suppose the Malaysian way of coloring the diesel fuel was copied, “creative”, corruptible people would definitely find a way around it. Fishermen could be enticed with bribery to buy diesel fuel instead of using it themselves, sell it to middlemen or to those users who were not entitled to it. The system would be thus unworkable. On Oct. 20, the new government will come to power. And before embarking on a newly chartered route, first of all it has to make sure that the law and order sector must be made to be fully fair and effective. ●