Oil Price Woes for Southeast Asia

By John Gee


	In the Malaysian capital of Kuala Lumpur, motorists fill their gasoline tanks on June 4, 2008, hours before a 40 percent price increase was scheduled to take effect at midnight (AFP photo/AM/PL/MO).

MALAYSIA AND Indonesia took the radical step of abolishing their oil subsidies after prices rose above $130 a barrel at the end of May. The move led to angry public protests. PROTES, a coalition of opposition parties and NGOs, called for a series of activities leading up to a mass demonstration in Kuala Lumpur on July 12. In Indonesia, students clashed with police outside the presidential palace after the move was announced and protesters marched on regional parliament buildings and other official institutions.

Both countries are oil producers. Low prices were seen by much of the public as a benefit arising from their countries’ possession of this natural resource. The past subsidies provided by the Indonesian and Malaysian governments to maintain low prices reduced living expenses for many, but indiscriminately: wealthy drivers of SUVs and other large vehicles benefited even more from the subsidies than the poor, who were the intended beneficiaries of government support.

Nevertheless, it was the poor who were hardest hit by the two governments’ moves. Not only did travel expenses rise, but so did the cost of everything transported by road, including food. Kerosene, used as cooking fuel by many of Indonesia’s poorer city dwellers, also will rise in price.

“This is when you feel sorry for poor people who live in cities,” a young woman from a village in Java told me. “We can collect firewood to cook and eat what we grow. They have nothing to fall back on.”

The withdrawal of subsidies in Indonesia at midnight on May 23 was announced by Energy Minister Purnomo Yusgiantoro at a late-night press conference apparently timed to prevent a mass rush to gas stations. Fuel prices increased immediately by 30 percent. Plans were announced to distribute money to the poorest families to cushion the impact of the rise.

Although Malaysian leaders said there would be no price rise until September, on June 4 the government announced the slashing of fuel subsidies, resulting in an increase at the pumps the next day of 40.6 percent. On the same day, it was announced that electricity charges would rise by up to 26 percent. It was expected that inflation would rise from its current 3 percent level to 5 percent.

It was anticipated that rising costs would slow economic growth in both countries, and there were fears of the political consequences.

The fact that any government, whatever its political complexion, would eventually have had to cut the subsidies makes no difference; it is the incumbent leadership which gets the blame for the ensuing hardships.

Had Malaysia’s general election taken place following the price increase, rather than in March, it is quite likely that the opposition coalition, led by Anwar Ibrahim, would have won a majority. Those worst hit by the price increases will be poor Malays, long the electoral base of the main ruling party, the United Malays National Organization (UMNO). This is despite Prime Minister Abdullah Badawi’s pledge to spend part of the government’s savings on fuel subsidies.

Badawi’s position has been further weakened, and he faces not only opposition-led protests, but leadership challenges from within UMNO. Whether a change at the top can help retrieve the situation for the party that has led Malaysia since it became independent in 1957 will depend in some measure on the impact of a gathering global crisis over which it can have no control. The three-party People’s Alliance opposition coalition is in the enviable position of being well placed to challenge for power, but not having to take any responsibility for coping with the economic troubles that loom in the next couple of years.

Indonesian President Susilo Bambang Yudhoyono faces an election next year. His potential rivals—Golkar, the dominant party under the Suharto regime, ex-president Megawati Sukarnoputri’s Indonesian Democratic Party-Struggle, and the various Muslim political parties—have yet to settle on their electoral strategies, but are likely to heap blame upon Yodhoyono for negative social consequences arising from the oil price rises, without offering practical alternatives to an unsustainable subsidy.

The president no doubt recalls what happened when two of his predecessors decided to raise fuel prices. In 1998, the move led to protests that forced Suharto to resign after 33 years in power; and in 2003, Megawati backed down in the face of popular protest.

A Challenge to Indonesian Tolerance

The Ahmadiyah are allowed to follow their beliefs in some Muslim countries, but are banned in others, including Saudi Arabia. In Pakistan their mosques have come under violent physical attack.

They insist that they are Muslims, but most Muslims disagree, saying that Muhammad was the “Seal of the Prophets”—the final prophet—and that the Ahmadis deny this by considering Mirza Ghulam Ahmad, their founder, to have been a prophet.

The Ahmadiyah first established themselves in Indonesia in 1925, when missionaries arrived from India. Estimates of the current membership range from a low of 200,000 to an Ahmadiyah claim of two million. They have generally been able to co-exist with other communities with little friction, but this relatively easy-going relationship is under challenge.

In April, Indonesia’s highest Muslim authority, the Indonesian Council of Ulemas (MUI), ruled for the third time that the Ahmadiyah are a deviant group. The attorney general’s office banned the members from practicing their religion, but stopped short of banning the movement completely, although moves were afoot to do that as well. Fanatical groups took these moves as a signal to carry out physical assaults upon the Ahmadiyah. Four of its prayer houses were attacked in the month following MUI’s declaration.

On June 1, a small rally for religious tolerance was held at the National Monument in Jakarta. Mainstream Muslims, Christians and Ahmadis were present. An attack mounted on the participants by the Islamic Defenders Front (FPI) resulted in a dozen people being hurt.

The FPI is a small but vociferous group that indulges in high-profile publicity-seeking activities, many of them violent. From time to time, they raid places such as discothèques where people (particularly foreigners) gather on evenings out, and which they consider to be un-Islamic. They are said to be willing to accept cash payments to refrain from attacking. Their leader, Habib Rizieq Shihab, called a press conference after the National Monument attack, announcing that he had ordered all FPI members “to prepare for war against Ahmadiyah and their supporters” and demanding an immediate ban on the group.

Many Muslim leaders, including the MUI, condemned the violent action by the FPI. President Yudhoyono issued a strong condemnation of the attack, saying: “Our country is bound by the law and Constitution and does not support violence. The law must be upheld.”

On June 9, Indonesia’s attorney general’s office and the religious and home affairs ministries issued a joint statement ordering the Ahmadiyah to “stop spreading interpretations and activities which deviate from the principal teachings of Islam,” but did not ban it.

John Gee is a free-lance journalist based in Southeast Asia, and the author of Unequal Enemies: The Palestinians and Israel, available from the AET Book Club.