W

hen receiving an undesirable gift, like an ugly shirt or tie, it’s often said that “it’s the thought that counts.”

Some could say the same of President Yudhoyono’s five-pronged policy, announced at the State Palace on Tuesday night, to address the growing burden fuel subsidies pose to the state budget. However, it is precisely the lack of thought in many ways that stands out.

Elements of Yudhoyono’s proposal were welcomed developments. Restrictions on the use of subsidized fuels in government vehicles, for example, are better late than never. The same can be said of similar prohibitions on the purchase of cheap fuels for vehicles owned and operated by lucrative extractive industries, including mining and plantation companies.

However, the method by which the government hopes to prohibit these vehicles from obtaining “premium” fuel is questionable at best. Rather than providing a sticker to those who qualify for subsidized purchases, the President’s proposal to slap stickers on vehicles banned from such purchases ignores the basic fact that such stickers are easily removed (thus removing their restriction) and that most government vehicles should already be easily recognized by their distinct registration plates.

The implementation of tighter monitoring controls over the distribution of subsidized fuels is a positive step, though implementing a nationwide electronic surveillance network is a step in the wrong direction. The costs associated with developing, deploying, maintaining, and monitoring such a system will surely outweigh the savings achieved by its operation.

Encouraging and facilitating the adoption of hybrid and electric car technology is a smart step for Indonesia to be taking, however this too comes with important caveats. The government would be wise to provide proven manufacturers and importers of more efficient vehicles with tax incentives, but without simultaneously increasing duties on traditional gas-guzzling forms of transportation may simply result in the addition of new cars in the market, further burdening the nation’s insufficient infrastructure without significantly reducing consumption.

The President’s insistence on developing a national electric car is a populist play on the sentiments of nationalism that run deep here in Indonesia. However, its feasibility and even its foundation in sound public policy are questionable. Rather than devoting precious national resources to a task better left to the private sector, the government should encourage manufacturers, such as Toyota which produces the popular Prius hybrid, to produce fuel-efficient vehicles here in the country.

And such incentives need not only benefit producers and their end-user consumers here in Indonesia, but with carefully crafted technology transfer programs and training, the Indonesian automotive industry can also gain valuable competitive edges over other markets in the region.

All too often, similar technology transfer programs in a variety of sectors are used not as an educational opportunity for the country’s advancement, but instead as opportunistic and unpredictable leverage against foreign producers. Articulating a long-term, mutually beneficial technology transfer program would not only benefit producers, as additional training would add to the limited pool of highly skilled labor that limits Indonesia’s high-tech production capabilities, but would also allow the Indonesian auto industry to leap-frog lengthy and expensive processes of research and development.

By allowing the private sector to do what it does best, state-owned enterprises like PT Industri Kereta Api (Inka) would be free from the distraction of having to develop a product with which it has limited experience and instead allow it to focus on its own strengths and produce, for example, the crucial mass transit components that the country so urgently needs for continued economic expansion.

But to focus on the finer points of Yudhoyono’s policy recommendations is like to miss the forest for the trees. His repeated avoidance of any measures that would lead to a rise in the price of subsidized fuels threatens to hamstring the state budget not only in the short term, but incurs massive opportunity costs in terms of the development of key infrastructure and human capital resources that are critical for long-term economic progress.

In all foreseeable likelihood, the threshold set by the House of Representatives in April to resume discussions on fuel price increases will be surpassed, as the Indonesian Crude Price (ICP) would have to plummet to below US$117 per barrel for the months of May and June to stay under the $120.75 legislative mark. Current pressures on the rupiah are not helping the situation either.

Fuel price increases, no matter how incremental and gradually they are implemented, are always unpopular the world over. However, Yudhoyono, who is in his final term as president, has nothing to lose. Constitutionally prohibited from running for reelection, the current president should seize the opportunity to make concrete policy improvements.

If he squanders such an opportunity, free from the constraints of short-term popularity that often bind the hands of politicians in an election cycle, the only thing he puts in jeopardy is the legacy he so earnestly hoped to leave behind.

While progress to curb corruption has advanced in fits and starts, and the process of free and fair democratic elections has now been firmly entrenched, other key components of the legacy Yudhoyono hoped to leave behind — religious tolerance, social stability and bureaucratic reform — have not faired as well.

Progress has been made in all of these areas, yet if the President does not take firm action on reducing the burden fuel subsidies pose to the country’s economy, these lesser achievements stand to be overlooked in years to come.

The writer is a former staff member of the National Endowment for Democracy, an American NGO which focuses on promoting democracy around the world. He now lives in Jakarta