Aug 20th 2008
From the Economist Intelligence Unit ViewsWire
Rising fuel prices are making the president less popular in Indonesia
The damage to the standing of the Indonesian president, Susilo Bambang Yudhoyono, caused by the 30% increase in government-administered fuel prices in May has been reflected in recent opinion polls, in which his nearest contender, Megawati Soekarnoputri, who chairs the opposition Indonesian Democratic Party-Struggle (PDI-P), has taken a lead. A survey in June by a local polling company, Indo Barometer, put voter support for Ms Soekarnoputri at 30.4%, compared with 20.7% for Mr Yudhoyono. Prior to the May fuel price increase, the president led his nearest rival by a considerable margin in a range of opinion polls.
Polls have repeatedly highlighted the fact that economic problems are voters' main concern, and it is therefore no surprise that Mr Yudhoyono's rating has fallen as the result of a policy change that had an immediate and tangible impact on the cost of living. However, a fight-back by the president in the opinion polls is to be expected once the effects of the fuel price increases have played out through the economy. Bank Indonesia (BI, the central bank) estimates that this process will be completed within two months.
[url=http://ad.doubleclick.net/click;h=v8/3725/0/0/%2a/p;129088478;0-0;0;7069588;799-350/300;22237271/22255161/1;;~aopt=2/0/ff/0;~sscs=%3fhttp://www.economistsubscriptions.com/ecom522/global]
[/url]
[/url] World oil prices are now showing signs of falling, so that it is the price of rice, the country's staple food, that could have a more important bearing on the outcome of the election. In the rice market, circumstances look favourable for the president. The main harvest in March benefited from good weather conditions, and, although forecasts for the secondary harvest later this year are mixed, the Central Bureau of Statistics (BPS) is forecasting total production of 58m tonnes this year, representing a year-on-year increase of 2%. Higher domestic production will help to protect the population from elevated rice prices on the international market.
In addition, an extended programme to provide subsidised rice to the poor, which is being implemented by the State Logistics Agency (Bulog), entitles 19.1m poorer households to purchase 15 kg of rice per month at Rp1,600 (17 US cents) per kilogram--roughly one-quarter of the market price. Bulog will raise the farm gate prices that it pays for rice from January 2009 to help offset the rising production costs facing farmers. The agency will also increase the amount of rice that it purchases from farmers in 2009 by 18%, to 4.5m tonnes, up from 3.8m tonnes this year, giving it plentiful stocks and so ensuring stable supplies during the election year.
These measures to shore up the rice market will be supplemented by emergency cash assistance provided to poorer households to offset the impact of higher fuel prices, as well as an evolving programme of conditional assistance tied to schooling and healthcare. Together, these programmes should help to boost support for Mr Yudhoyono among a large swathe of the electorate and enable him to contest the election in 2009 from a strong anti-poverty platform.
The opposition PDI-P is also making inroads against Golkar, the largest party in the House of People's Representatives (DPR, the legislature) and the keystone of Mr Yudhoyono's coalition government. Only 12% of respondents to the recent Indo Barometer poll expressed support for Golkar, compared with 18% in December 2007. Meanwhile, 23.8% expressed support for the PDI‑P, compared with 25.3% in the previous poll, indicating that the PDI-P's support has held up better than Golkar's. Support for Mr Yudhoyono's Democrat Party is ebbing away owing to its weak performance, falling to 9.6% of voters, compared with 13.8% last December. The poll also confirmed the dominance of secular-nationalist parties over parties with their roots in political Islam. The top three parties in the poll are all in the former camp and enjoy a significant lead over their Islamic rivals. However, nearly 30% of the electorate remains undecided.