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Indonesian President defends fuel price hike

INDONESIA: Indonesian President Susilo Bambang Yudhoyono on Monday defended his unpopular fuel price hike as necessary to avoid an economic meltdown similar to the 1997 financial crisis.

Workers and student groups have attacked the government over the 28.7-percent average rise in the price of subsidised fuel which came into effect on Saturday despite widespread protests.

But Yudhoyono told a forum of regional investors the government had to act to save the budget from collapsing under the weight of runaway subsidy bills linked to soaring global oil prices. "The decision on Friday to further reduce oil subsidies was the best, necessary and most responsible solution to save our national economy from crumbling and protect our people from harm," he said.

"The alternative would be a possible financial and economic crash similar to that of 1997 and the real loser here would be our own people."

Analysts applauded the price rise, saying it was vital to prevent a deficit blowout and demonstrated the government's fiscal responsibility despite the threat of protests leading up to general elections in April.

But critics say it puts an unacceptable burden on the poor who are already struggling to make ends meet after the recent surge in food prices.

The price rise has put intense political pressure on Yudhoyono, who has faced widespread public anger after his administration announced plans for the price increments earlier this month. Rallies have taken place almost daily across the archipelago.

Around 5,000 protestors gathered outside the presidential palace in the heart of Jakarta on Monday despite a strong police presence, police said. Peaceful protests were also held on the islands of Java, Sumatra and Sulawesi, including a hunger strike by seven students in the city of Bandar Lampung, ElShinta news radio reported.

A group of lawyers also filed a class action lawsuit against Yudhoyono in a Jakarta court on behalf of "the people" claiming millions of dollars in compensation for the fuel price hike, news website Detikcom reported. One of the lawyers said the president's move had violated a constitutional guarantee that natural riches would be used for the material prosperity of the Indonesian people.

"The decision to raise the fuel prices is legally wrong. It is a deed against the law, against the people of Indonesia," lawyer Habiburahman said.

Indonesia is a member of OPEC but is a net oil importer due to years of declining spending on infrastructure.

The government has been at pains to point out that most of the subsidies end up in the pockets of relatively rich car owners and the money is better spent on social programmes and infrastructure.

Even after the latest adjustment to the pricing regime, which saw gasoline prices jump 33.3 percent to 6,000 rupiah (65 cents), Indonesians enjoy some of the lowest fuel costs in Asia.

The government has moved to offset the negative impact of the plan by bringing in a temporary program of monthly direct cash transfers of 100,000 rupiah and free rice to millions of poor families. Jakarta, Monday, AFP

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