‘There’s nothing we can do’: Indonesian small businesses brace for impact of rising fuel prices
Jakarta: Zainal Ridho, 41, owns a car rental company in Banjarmasin, South Kalimantan.
Previously, the daily rate for his Toyota Innova, including the price of subsidized Pertalite fuel, was 800,000 rupees (US$54).
Last week it raised the price to 900,000 rupees a day, amid widespread belief that the government would soon raise the price of subsidized fuel.
“I have to explain to customers why I adjusted the rental price,” he said. Although he still has loyal customers, some of them try to negotiate a better deal to get a lower price, he said.
Moreover, its 20 employees have also demanded a salary increase as their expenses have increased.
Last weekend, the government announced it would increase subsidized fuel prices by around 30% amid rising global prices.
The price of subsidized diesel increased from 5,150 rupees per liter to 6,800 rupees. Subsidized petrol now costs 10,000 rupees per litre, down from 7,650 rupees previously.
The move is necessary to curb spending on energy subsidies, President Joko Widodo said last Saturday (3 September).
He said the nationwide energy subsidy budget had risen to 502.4 trillion rupees from the 152.5 trillion rupees originally budgeted last year.
The government anticipates fuel price hikes to drive inflation up to around 6.6% from the current 4.69%.
Apart from raising the price of diesel and 90 octane petrol, locally known as Pertalite, the government has also increased the price of 92 octane petrol.
Called Pertamax, it went from 12,500 rupees per liter to 14,500 rupees per litre. Pertamax is generally used by owners of cars with newer and larger engines.
The fuel price hike took effect an hour after the president’s announcement.
To soften the blow, the government said it would provide direct cash transfers to around 20 million poor households.
“We will distribute Rs 150,000 per month from September for four months to 20.65 million deprived families,” Mr Widodo said during the TV announcement.
Despite these measures, sporadic demonstrations have taken place this week in several Indonesian cities.
In Jakarta, thousands of people mobilized against rising prices. Similar protests also took place in other cities such as Surabaya, Makassar and Kendari.
Following the fuel hike, the Department for Transport said on Wednesday that fares for app-based motorcycle taxis, a popular mode of daily transport, would also rise.
Prices per kilometer will increase from 6% to 13.3%, starting this weekend.
As a lower-middle-income economy with a gross national income per capita of US$4,140 last year, Indonesia’s economy depends on its micro, small and medium enterprises (MSMEs).
About 98% of them are micro-enterprises sensitive to even minor changes in economic policy.
Although it is still early to see the full impact of rising fuel prices, Indonesian businesses are already preparing for how it will affect them in the long term.