Is ASEAN willpower finally strong enough to cut subsidies?

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Indonesia subsidiesIn light of recent news, the answer is apparently yes. Thailand, Indonesia and the Philippines have finally demonstrated the political will necessary to remove subsidies, a flashpoint issue in ASEAN that can culminate with street-level unrest.

And controversial subsidies – be they in energy, food or public transport form – usually do. From one side of the debate, there are politicians and economists that demonise subsides because of their negative effects on the environment, fiscal stability and growth. On the other side, in developing nations where large portions of the population straddle the poverty line, the slightest adjustment of the prices of essential goods can shake the foundations of whole families.

There is, however, a balance. Many governments, such as Indonesia, supplement price hikes with supportive programmes that target the nation’s most vulnerable people, supporting those who deserve it the most.
As is the disparate nation of ASEAN, Thailand, Indonesia and the Philippines have begun to tackle the removal of subsidies in their own way.

Indonesia: We got the power

Developmental banks have long chided Indonesia for not doing more to remove the costly fuel subsidy that has been upheld for over five decades. Experts estimated that the subsidising of fuel cost the Indonesian government approximately $22 billion, with 40 per cent of energy needs being met by imports.

A politically charged issue, especially within the ranks of ASEAN, the removal of fuel subsidies in Indonesia was carefully wedded with an over $2 billion compensation programme targeted at the country’s poorest. Though no similar programme has been announced yet, Thailand appears to have gotten the gist of it in its goal to one day follow suit with the removal of its own energy subsidy, valued at about $8 billion per year.

Thailand: The rice fiasco

Introduced by Prime Minster Yingluck Shinawatra after her election win in 2011, Thailand’s rice purchasing scheme has created massive stockpiles that have reportedly begun to rot, costing the country not only losses up to $22 billion, but also the position of the world’s largest exporter.

Thai rice has been quarantined by the US Food and Drug Administration over concerns that it has been treated with chemicals during stockpiling. In reaction to the failed rice policy, Yingluck’s cabinet went through a reshuffle and the price of rice purchased by the government was slashed, causing a stir in rural farmer communities. The popularity of the ruling Pheu Thai party has now dropped significantly, and an opposition movement called “V for Thailand” is now holding protests in Bangkok’s business districts every Sunday, demanding the government to step down over its failed populist policies.

Unlike Indonesia, few measures have been taken to wean those who benefited from the subsidy away, creating a political unstable cauldron of political fervour that, while disheartening, is not unfamiliar to Thailand.

The Philippines: Commuter costs

The Philippines likes to brand itself as the only ASEAN country that doesn’t have to deal with the imposing ire associated with the painful removal of fuel subsidies. However, its economy is by no means devoid of supportive funding that the government must deliberate on regarding impact and value.

Every year, the Philippine government spends about $161 million on subsidies for three large railways in Metro Manila, making fares affordable for the public. Boldly, the government has now decided to scale back on the subsidy, claiming that it is no longer sustainable and is unfair to those who do not take the railways.

The safety lever of choice for the transition phase: consultations. Those who feel they will be most affected by the government’s decision (railway operators among them) can participate in dialogue with the government. Or at least in theory.

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Reading Time: 3 minutes

In light of recent news, the answer is apparently yes. Thailand, Indonesia and the Philippines have finally demonstrated the political will necessary to remove subsidies, a flashpoint issue in ASEAN that can culminate with street-level unrest.

Reading Time: 3 minutes

Indonesia subsidiesIn light of recent news, the answer is apparently yes. Thailand, Indonesia and the Philippines have finally demonstrated the political will necessary to remove subsidies, a flashpoint issue in ASEAN that can culminate with street-level unrest.

And controversial subsidies – be they in energy, food or public transport form – usually do. From one side of the debate, there are politicians and economists that demonise subsides because of their negative effects on the environment, fiscal stability and growth. On the other side, in developing nations where large portions of the population straddle the poverty line, the slightest adjustment of the prices of essential goods can shake the foundations of whole families.

There is, however, a balance. Many governments, such as Indonesia, supplement price hikes with supportive programmes that target the nation’s most vulnerable people, supporting those who deserve it the most.
As is the disparate nation of ASEAN, Thailand, Indonesia and the Philippines have begun to tackle the removal of subsidies in their own way.

Indonesia: We got the power

Developmental banks have long chided Indonesia for not doing more to remove the costly fuel subsidy that has been upheld for over five decades. Experts estimated that the subsidising of fuel cost the Indonesian government approximately $22 billion, with 40 per cent of energy needs being met by imports.

A politically charged issue, especially within the ranks of ASEAN, the removal of fuel subsidies in Indonesia was carefully wedded with an over $2 billion compensation programme targeted at the country’s poorest. Though no similar programme has been announced yet, Thailand appears to have gotten the gist of it in its goal to one day follow suit with the removal of its own energy subsidy, valued at about $8 billion per year.

Thailand: The rice fiasco

Introduced by Prime Minster Yingluck Shinawatra after her election win in 2011, Thailand’s rice purchasing scheme has created massive stockpiles that have reportedly begun to rot, costing the country not only losses up to $22 billion, but also the position of the world’s largest exporter.

Thai rice has been quarantined by the US Food and Drug Administration over concerns that it has been treated with chemicals during stockpiling. In reaction to the failed rice policy, Yingluck’s cabinet went through a reshuffle and the price of rice purchased by the government was slashed, causing a stir in rural farmer communities. The popularity of the ruling Pheu Thai party has now dropped significantly, and an opposition movement called “V for Thailand” is now holding protests in Bangkok’s business districts every Sunday, demanding the government to step down over its failed populist policies.

Unlike Indonesia, few measures have been taken to wean those who benefited from the subsidy away, creating a political unstable cauldron of political fervour that, while disheartening, is not unfamiliar to Thailand.

The Philippines: Commuter costs

The Philippines likes to brand itself as the only ASEAN country that doesn’t have to deal with the imposing ire associated with the painful removal of fuel subsidies. However, its economy is by no means devoid of supportive funding that the government must deliberate on regarding impact and value.

Every year, the Philippine government spends about $161 million on subsidies for three large railways in Metro Manila, making fares affordable for the public. Boldly, the government has now decided to scale back on the subsidy, claiming that it is no longer sustainable and is unfair to those who do not take the railways.

The safety lever of choice for the transition phase: consultations. Those who feel they will be most affected by the government’s decision (railway operators among them) can participate in dialogue with the government. Or at least in theory.

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