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April 29, 2008

INDONESIA/ENERGY
Govt advised to raise fuel prices in June

An economist has urged the Indonesian government to make a decision on a fuel price hike as early as June 2008 in reaction to the surging global oil prices, national news agency Antara reported Monday.

"Whether we like it or not there must be a government decision on fuel price hike next June or the government has the guts to ensure that oil subsidy will remain low," Aviliani of the Indef economic research institute said in a joint press conference with Director General of Oil and Gas Lulu Sumiarso at the Information and Communications Ministry in Jakarta Friday.

Although the decision was not popular, it would have a positive impact on the sustainable growth of the Indonesian economy, he said.

If fuel prices were not raised, a fuel subsidy would put a heavy burden on the government and would in turn impede the growth of the development sector, he said.

"There will be no activities in the infrastructure sector. There will be no adequate fund to implement a poverty alleviation program," he said.


In addition, investors who had bought or would buy state bonds (SUN) and state retail bonds (ORI) might lose confidence in the government's capability to repay maturing SUN and ORI, he said.



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