Jakarta plans fuel price cut for firms to revive economy

A worker loading sacks of rice at a market in Jakarta last month. Indonesian manufacturers cut payroll numbers at the second-fastest pace in at least four years last month, as industry activity contracted for the 12th straight month, showed the Nikke
A worker loading sacks of rice at a market in Jakarta last month. Indonesian manufacturers cut payroll numbers at the second-fastest pace in at least four years last month, as industry activity contracted for the 12th straight month, showed the Nikkei Markit purchasing managers' index survey.PHOTO: AGENCE FRANCE-PRESSE

JAKARTA • Indonesia said yesterday that it would cut energy prices and offer discounts for some companies as part of its latest economic stimulus measures.

The government already rolled out two sets of measures last month to re-energise South-east Asia's largest economy after growth cooled in the second quarter to 4.67 per cent, the slowest pace in six years.

Coordinating Minister for Economics Darmin Nasution said that diesel prices would be lowered by about 3 per cent to 6,700 rupiah (67 Singapore cents) per litre - effective at the end of this week.

Other energy prices, ranging from jet fuel to natural gas, will also be lowered for industry, while households will pay less for liquefied petroleum gas, which is most commonly used for cooking.

The government will also allow some firms to delay payment of 40 per cent of their electricity bills until next year, and give discounts if the firms keep their employees.

"We are no longer subsidising fuel. And we want to maintain the consistency of that subsidy policy," noted Energy Minister Sudirman Said, adding that the price cut would come from efficiencies within state energy company Pertamina.

Lower natural gas prices would cost the government 12 trillion rupiah in state revenue next year, Mr Sudirman said, adding that priority would be given to labour-intensive industries including petrochemical and fertiliser firms.

Indonesia's official unemployment rate was 5.81 per cent as of February, but many economists believe that the figure is unreliable and the real jobless rate may be much higher.

Indonesian manufacturers cut payroll numbers at the second- fastest pace in at least four years last month, as industry activity contracted for the 12th straight month, showed the Nikkei Markit purchasing managers' index survey last week.

Export orders for manufacturers decreased for a 12th straight month, pointing to further weakness in the coming months. Earlier stimulus measures included steps to attract more investment, streamline regulations and stabilise the shaky rupiah currency, but investors' response has been lukewarm as they wait to see if the government will follow through.

Last week, Indonesian President Joko Widodo requested the fuel price cut to help support companies' purchasing power, which has been dampened by weak exports and high inflation as the weak rupiah pushed up the price of imported raw materials.

Private consumption accounts for more than half of Indonesia's gross domestic product.

"I'm seeing this as a positive development, showing the government's seriousness in supporting the real sector," said the employers association chairman Hariyadi Sukamdani.

The third instalment of the package also includes a plan to simplify land-use permits for the industry and financial support for small and medium-sized enterprises. The government will announce more stimulus measures next week.

REUTERS

A version of this article appeared in the print edition of The Straits Times on October 08, 2015, with the headline 'Jakarta plans fuel price cut for firms to revive economy'. Print Edition | Subscribe