Cuts in oil subsidies lead to protests in Asia

Agence France Presse

Bangkok, July 7:

With global crude prices hovering around record highs, governments across Asia are having to weather political storms after scrapping fuel subsidies or raising prices at the pump to relieve pressure on budgets. From Pakistan to Vietnam to Indonesia, governments have blamed soaring oil prices — which last week topped $60 a barrel for the first time — and economists have warned the levels could keep rising. But in the face of popular protests and opposition dissent, several governments are facing a test of their mettle to enact tough policies, says Robert Broadfoot, MD of the Hong Kong-based Political and Economic Risk Consultancy. “The bigger risk is that countries such as Indonesia and the Philippines don’t cut the subsidies,” Broadfoot said, “The downside is that you could get riots that cause political instability, which is what happened to former president Megawati Sukarnoputri in 2003 and she had to roll back the prices.”

“The upside is that it shows decisive leadership, and when president Susilo Bambang Yudhoyono carried through in March with his earlier promise to reduce subsidies, that was an important signpost that foreign creditors and investors took to mean more decisive leadership,

which got more foreign investment.” Students, workers and public transport operators staged demonstrations across Indonesia in March after Yudhoyono’s government raised fuel prices by an average of 29 per cent. Senior economy minister Abu Rizal Bakrie said the cash

strapped government had to scrap the subsidies because it had already spent around $6.4 billion. The government promised the poor would be compensated with more direct targeted assistance, with a total of $1.77 billion being channeled into medical, rice, social and education needs. Although a member of the Organisation of Petroleum Exporting Countries (OPEC) cartel, Indonesia’s antiquated and under-funded energy sector cannot meet domestic demand for fuels.

In Nepal’s capital Kathmandu on June 24, about 300 activists from eight student unions defied a government ban against demonstrations to protest a 12.5 per cent hike in cooking gas prices, chanting slogans against the government and alleging corruption in the state-run Nepal Oil Corporation (NOC). In the Philippines, which has some of Asia’s costliest fuel, the government’s inability to privatise the national power company and reduce fiscal deficits were major reasons people lacked confidence in the government, Broadfoot said. Pakistan’s government has also faced unrest after last week announcing a five per cent rise in petrol prices, taking prices to nearly 85 cents a litre. Politicians and human rights activists staged demonstrations in major cities on Monday, with protestors in Karachi chanting slogans and carrying banners charging that president Pervez Musharraf’s government was strangling the poor.

Leader of the right-wing Jamaat-i-Islami party, Liaquat Baloch, said a powerful alliance of six Islamic parties would launch a countrywide movement against rises in oil prices. In India, results were mixed for two strikes called in June. India imports more than 70 per cent of its oil needs with the import bill soaring by 40 per cent to $27.20 billion. India’s federal cabinet on June 20 raised petrol and diesel prices by as much as seven per cent to offset higher international oil prices since the last hike in November 2004, but froze prices for kerosene, used widely by poor households for cooking.

Crude futures jump

NEW YORK: Crude prices rose above $61 a barrel on Wednesday as traders worried that Tropical Storm Dennis might disrupt shipments and cause refinery outages along the US Gulf coast. — HNS