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Indonesia cuts some fuel prices for industry in fresh stimulus measures

[JAKARTA] Indonesia said on Wednesday 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 Southeast Asia's largest economy after growth cooled in the second quarter to 4.67 per cent, the slowest pace in six years.

Darmin Nasution, the coordinating minister for economics, said diesel prices would be lowered by about 3 per cent or 200 rupiah to 6,700 rupiah 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 (LPG), most commonly used for cooking.

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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," said 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 (S$1.2 billion) in state revenue next year, the minister said, adding priority would be given to labour-intensive industries such as petrochmical and fertilizer firms.

Indonesia's official unemployment rate was 5.81 per cent as of February, but many economists believe 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 in September as industry activity contracted for the 12th straight month, the Nikkei Markit purchasing managers' index (PMI) survey showed last week.

Export orders for manufacturers decreased for a 12th straight month, pointing to further weakness in 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.

President Joko Widodo last week 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 a positive development, showing the government's seriousness in supporting the real sector," said the chairman of employers association Hariyadi Sukamdani.

The third installment of the package also includes a plan to simplify land-use permits for industry and several financial supports for small medium enterprises.

The government will announce more stimulus measures next week.