Indonesia's multi-billion-dollar domestic fuel subsidies are a burden standing in the way of the country's development, a World Bank official said Wednesday. "Energy subsidies ... (are) almost 20 billion dollars a year now. That's 20 billion dollars of lost opportunities," Indonesia director Joachim Von Amsberg told reporters here.
"It's a missed opportunity for investment, it's a missed opportunity for putting money into an education system that badly needs additional investment, it's a lost opportunity for public investment in infrastructure that is urgently needed," he said.
Von Amsberg praised the Indonesian government's macroeconomic policies, which have seen it achieve annual growth of over six percent. But he said the country was "floating" on high commodity prices and not preparing for any future downturn. The cost of the subsidy scheme outstrips the government's spending on housing, law and order, health and education combined, he said, while also heavily favouring the country's rich.
World Bank figures show nearly half of the subsidy ends up going to the country's richest 10 percent, while the poorest half of the population gets less than 20 percent. "I'm not going to tell you a list of precise policy prescriptions on what to do with subsidies because it is a very complex issue which is hugely political and it is genuinely - and I mean that - up to the elected leaders of Indonesia to decide what to do," von Amsberg said. Fuel subsidies are a highly charged issue in Indonesia, where two hefty price rises in 2005 sparked rowdy street protests.