World Bank Asks for Continuation of Direct Subsidy
Wednesday, 15 November, 2006 | 12:45 WIB

Tempo Interactive, Jakarta: The World Bank has asked that the government not to stop its direct cash subsidy (SLT) program as compensation for the fuel price rises.

The reason for this is that the program is considered as being capable of neutralizing the impact of the price rises.

William Wallace, World Bank Senior Economist, said that the direct subsidy is the world's biggest subsidy program.

Every family receives US$11 (around Rp100 thousand) per month for the whole three months.

“The SLT program is effective enough,” he said yesterday (11/14) in Jakarta.

“Although there were errors in determining the aid receivers, poor households still received compensation for the price rises.”

With the program, he added, the fuel price rises did not become the major trigger of increased poverty in Indonesia.

On the contrary, the increase of poverty to 39.05 million people, or 17.75 percent of the total inhabitants, between February 2005 and March 2006, was triggered by a rise of in the price of rice.

The World Bank used the data on poverty that the Center Bureau of Statistics issued in early September this year.

Wallace said he was worried that if the program were to be ended next year, then the poverty rate would increase once again.

In fact, he said, the conditional cash subsidy program that will be started next year will not provide much help in controlling the increase of poor people.

“Moreover, development programs that are driven by the public are extremely limited,” he said.

It would be best, said Wallace, if the government continues the cash subsidy program on a smaller scale.

The government can also adopt rice policy by stabilizing rice price that reflect the price at international market.

_________________________ Indonesian Business and Investment News Aggregator