19/11/14 - Angel Gurria, Secretary-General of the OECD, congratulated the newly elected President of Indonesia, Joko Widodo, for taking a bold first step in his economic reform agenda by substantially cutting fuel subsidies.
“This is a most welcome move, which has been a longstanding recommendation of the OECD, and is consistent with the positions set out by the President at the APEC and G20 summits. This reform will benefit the poor and future generations, by freeing up resources to expand social programmes, and reducing fuel consumption and pollution,” said Mr. Gurría.
Prior to this cut, energy subsidies accounted for around one fifth of the Indonesian government’s outlays. Moreover, these subsidies do not protect the poor as intended, as 40% of subsidy benefits go to the richest 10% of the population, and less than 1% goes to the poorest. They also have the unintended consequences of increasing energy demand, traffic congestion and environmental damage.
“The challenge now will be to move towards the complete removal of these and other energy subsidies in Indonesia so as to provide space for the government to increase funding for sectors that are much more beneficial to the Indonesian people, such as infrastructure, education and health. The OECD will continue to work with the Indonesian government to support its reform efforts to effectively promote more inclusive and sustainable economic growth for the benefit of all Indonesians.”
The next OECD Economic Survey of Indonesia will be published in March 2015.