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Jakarta Post

Fuel-price hike won'€™t affect industrial growth

  • Linda Yulisman

    The Jakarta Post

  /   Fri, June 7, 2013   /  09:36 am

The government says that industrial growth for this year remains on track despite the planned increase in the prices of subsidized fuel later this month.

Industry Ministry secretary-general Ansari Bukhari said the manufacturing sector would not be affected because companies involved in industrial activities were already banned from using subsidized fuel.

'€œThe fuel-price rise will not affect production costs as the local industry already uses non-subsidized fuel,'€ Ansari said.

Higher fuel prices would push up transportation costs slightly, thereby contributing a minor increase to total production costs, Anshari added.

The government is due to increase the price of subsidized Premium gasoline by Rp 2,000 (US 20 cents) to Rp 6,500 per liter and the price of diesel by Rp 1,000 to Rp 5,500 this month once it secures approval from the House of Representatives.

A study by the Industry Ministry shows that the rise in Premium gasoline price will boost transportation costs by 23.8 percent, but it will increase production costs by only 1.2 percent on average. Prices of some manufactured goods, such as food and beverages, cement, textiles and footwear, will climb modestly by 0.63 percent, 0.66 percent and 1.54 percent, respectively.

Similar results will also apply following the increase in the price of diesel fuel with transportation costs expected to jump by 11.9 percent and manufacturing costs by 0.6 percent, according to the study. Several commodities, such as food and beverages, cement, textiles and footwear will see their
prices increase by 0.31 percent, 0.33 percent and 0.77 percent, respectively.

Anshari further claimed that with such an outlook, the government was still on course to achieve its target for growth in the non-oil and gas manufacturing industry of 7.1 percent throughout this year. '€œWe are upbeat that the industry will still grow by at least 6.7 percent in the second quarter, which would be the same rate as the first quarter,'€ Anshari said.

Manufacturing is a key contributor to growth in Southeast Asia'€™s largest economy. Since 2011, industry growth has always outpaced economic growth after a prolonged slow period from 2005 to 2010.

Last year, the industry expanded by 6.83 percent, supported heavily by robust domestic demand
amid slowing exports in the protracted global economic crisis, while the nation'€™s economy grew by
6.23 percent.

Franky Sibarani, the secretary-general of the Indonesian Food and Beverage Association (Gapmmi), confirmed that the planned fuel-price increase would have only a minor impact on medium and large size food and beverage firms.

However, the new policy could deal a severe blow to small and cottage industries as they sourced fuel for their production from gas stations sold at subsidized rates, he said.

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