Fuel subsidy storm clouds gather before Indonesia power handover

JAKARTA, Aug 31 (AFP): Just weeks before Joko Widodo takes office, a ham-fisted attempt by the state energy firm to tackle huge fuel subsidies has sparked panic buying and highlighted the most pressing economic issue confronting Indonesia's next president.
The subsidies are a perennial dilemma for Indonesian leaders-economists have long decried the expensive payouts as unsustainable, yet cutting them is hugely unpopular, and has in the past sparked violent protests.
But with economic growth slowing, observers say Indonesia can little afford to keep pouring around a fifth of the annual budget into keeping fuel prices artificially low, a programme that diverts money from much-needed reforms and has long caused concern among investors.
Outgoing President Susilo Bambang Yudhoyono has made some increases to the price of petrol and diesel during a decade in power, including a hike that averaged more than 30 percent last year, but has been criticised for not going far enough.
Politicians spent months this year gearing up for pivotal presidential elections and put the subsidy issue on the back burner, but it has come back into sharp focus as Widodo, known by his nickname Jokowi, prepares to take office on October 20.
He has made slashing the payouts a priority and wants to redirect the money to other programmes, from overhauling creaking infrastructure to helping the country's poorest.
"I am prepared to be unpopular," he said last week, adding that money from subsidies could be redirected to "villages, small and medium enterprises... farmers... fishermen and their boats". On the election campaign trail, Widodo said he would gradually reduce the subsidies over several years. But recent events have underscored the huge challenge facing him. - Botched half-measures.
As fears grew that the subsidised fuel quota for the year was running down too quickly, state energy company Pertamina, which manages the programme, started limiting supplies. But as news spread at the start of last week, cars and motorcycles rushed to fill up, with hours-long queues forming at petrol stations across the country, particularly on the main island of Java, with supplies at some kiosks running out entirely.