Fuel Price Tension Will Not Hit Investment, Kadin Says

By webadmin on 02:04 pm Apr 02, 2012
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Dion Bisara

Atop official at the Indonesian Chamber of Commerce and Industry says the country will retain solid long-term investment prospects even as it grapples with a controversial plan to raise the price of subsidized fuel.

“As long as the demonstrations do not lose control, things will be fine,” James T. Riady, the deputy chairman for employment, education and health care for the group, known as Kadin, said in his keynote speech to business executives at an event in Ancol, North Jakarta, on Friday.

Riady is also chief executive officer of the Lippo Group, which owns the Jakarta Globe.

“Indonesia is now the darling of investors,” he added. “Don’t let political turbulence take hostage the [country’s] currently sound fiscal stability.”

The government had planned to raise the price of subsidized premium fuel by 33 percent to Rp 6,000 (65 cents) per liter in a bid to reduce the burden of the fuel subsidy on the state’s budget. The planned price hike, initially slated to start on April 1, sparked nationwide protests, including some that turned violent.

The House of Representatives late on Friday voted to put the plan on hold, agreeing to only raise the fuel if Indonesian crude prices increase 15 percent or more above the $105-per-barrel assumed average of oil prices for a period of at least six months.

Riady called on the public to recognize the government was trying to improve the country.

“Behind the plan to increase the subsidized fuel is a good intention to push our domestic economy to grow faster,” he said.

Analysts have said the money saved from a cut to Indonesia’s fuel subsidy would make a major contribution if spent on public infrastructure such as roads, bridges, ports and airports.

Riady is bullish the nation’s economy can continue to grow at 6 percent to 7 percent per year, a belief underpinning the Lippo Group’s Rp 5 trillion investment in education and health, which he calls “vital social infrastructure,” in the next two to three years.