Skip to main content

After protests, Indonesia's parliament boosts fuel prices by as much as 44%

By Kathy Quiano-Castro, CNN
updated 2:09 PM EDT, Mon June 17, 2013
Indonesian demonstrators rally outside outside parliament in Jakarta on June 17, 2013.
Indonesian demonstrators rally outside outside parliament in Jakarta on June 17, 2013.
STORY HIGHLIGHTS
  • Police fired tear gas and water cannons at thousands outside parliament before the vote
  • The vote was delayed for hours as political parties debated the fuel price increase
  • The subsidies are hefty; cutting them will ease concerns about financial sector, analysts say
  • The increased prices will not affect the public transport sector

Jakarta, Indonesia (CNN) -- After clashes between police and protesters, Indonesia's parliament Monday night voted to revise the national budget and allow an increase of up to 44% in the prices of subsidized gas and diesel fuel.

Earlier Monday, protesters who rejected the increase clashed with police outside the parliament building in Jakarta. Police fired tear gas and water cannons at thousands of them before legislators began voting on the budget revisions.

There were smaller protests in other parts of the country. Violence was reported in Malang in East Java province, Ternate in the Maluku Islands and Jambi province.

The vote was delayed for hours as political parties lobbied, behind closed doors, for and against the fuel price increase. As the final vote was announced, university students, who were seated at the parliament's gallery, locked arms and shouted slogans.

The revised budget will allow gas prices to increase from 4,500 to 6,500 rupiah (46 U.S. cents to 66 U.S. cents) and diesel from 4,500 to 5,000 rupiah. The World Bank has long pushed for a cut in subsidies, which it says benefit mostly rich private car owners, to help ease pressure on the budget. The increased prices will not affect the public transport sector.

Indonesia is an oil-producing country. It became a net oil importer in 2008 and suspended its OPEC membership in 2009. It still enjoys some of the world's lowest fuel prices.

In 2012, Indonesia spent about $20 billion on fuel subsidies. In previous years, more funds were spent on the hefty subsidies than on education and infrastructure development, the World Bank and the International Institute for Sustainable Development have said.

The revised budget includes some 9 trillion rupiah in compensation to the poor to help lessen the initial effect of the increased fuel prices.

President Susilo Bambang Yudhoyono delayed the increase for months and later insisted that parliament make the funds available for a cash handout program that would benefit the country's 15.5 million poorest households.

Monday's violent clashes were reminiscent of similar protests In May 2012, when the president failed to get parliament's approval for a price increase. Fuel price increases are politically sensitive in the world's fourth-most populous nation. In 1998, President Suharto was forced to resign after widespread protests and rioting followed an increase in petrol prices. The last price increase was in 2008.

After months of uncertainty, Yudhoyono said in a news conference last week, "We must unite to protect our economy, we must unite to face our problems, and we must unite when the fuel price increases."

Analysts say that cutting the subsidies will ease investor concerns about Indonesia's financial stability. The country's trade and budget deficits are ballooning, and its currency is one of Asia's worst-performing.

ADVERTISEMENT
Part of complete coverage on
updated 9:54 PM EST, Tue December 23, 2014
A decade on from devastating 2004 Indian Ocean tsunami, the Red Cross' Matthias Schmale says that the lessons learned have made us safer.
updated 7:24 PM EST, Tue December 23, 2014
As soon as word broke that "The Interview" will hit some theaters, celebrations erupted across social media -- including from the stars of the film.
updated 1:44 PM EST, Tue December 23, 2014
Did a rogue hacker -- or the U.S. government -- cut the cord for the regime's Internet?
updated 8:06 PM EST, Tue December 23, 2014
Monaco's newborn royals, Princess Gabriella and Crown Prince Jacques Honore Rainier, posed for their first official photos with their parents.
updated 12:06 PM EST, Tue December 23, 2014
Tim Berners-Lee, the man credited with inventing the world wide web, gives a speech on April 18, 2012 in Lyon, central France, during the World Wide Web 2012 international conference on April 18, 2012 in Lyon.
What's next for the Internet? Acclaimed scientist Sir Tim Berners-Lee shares his insights.
updated 3:22 AM EST, Tue December 23, 2014
The United States and North Korea have long been locked in a bitter cycle of escalating and deescalating tensions. But the current cyber conflict may be especially hard to predict.
updated 4:00 PM EST, Mon December 22, 2014
A chilling video shows Boko Haram executing dozens of non-Muslims.
updated 6:34 AM EST, Mon December 22, 2014
New planes, new flight tests ... but will we get cheaper airfares?
updated 12:46 PM EST, Sun December 21, 2014
The killing of two cops could not have happened at a worse time for a city embroiled in a public battle over police-community relations, Errol Louis says.
updated 9:51 PM EST, Sun December 21, 2014
The gateway to Japan's capital, Tokyo Station, is celebrating its centennial this month -- and it has never looked better.
updated 11:21 AM EST, Sat December 20, 2014
Unicef has warned that more than 1.7 million children in conflict-torn areas of eastern Ukraine face an "extremely serious" situation.
updated 12:01 PM EST, Mon December 22, 2014
Each day, CNN brings you an image capturing a moment to remember, defining the present in our changing world.
Browse through images from CNN teams around the world that you don't always see on news reports.
ADVERTISEMENT