Communicating Policy

This year is election year for Indonesia. Candidates for president have declare them selves and start making promises. Those promises is binding and will be the candidate's policy when he/she become a president.

Yesterday, 15/01/08, I discussed with my PA about activity plan until mid 2009. One of the activities is a joint program in one of the ASEAN countries with famous international bank that usually gives away loans. The discussion for the joint program has been initiated last year and so far emails from our side are just like lost in the sea. There is no reply from that "BIG" institution. I asked my PA whether we can do the program with other institution. His answer is no. That international bank has made a mark on that program in that particular country, therefore no other institution is dare to go for the same program in the same country. It is like a strategy to prevent somebody from doing something. But since the bank does not make any sign of movement, nothing happen so far. What a waste of time...

The second story is about Germany. One party promised their voters and people of Germany that if that particular party won election there will be a massive renewable promotion. That party won but until that policy came to the world there is no renewable investment in Germany. Total silent. What a waste of time....

Then I remember the fuel scarcity just recently in Indonesia. Government gave signal of fuel price cut but did not make its mind on when it will be effective. Many gas station owners refused to stock fuel because they are afraid of losing money due to higher buying cost. The effect was massive...and the weather just make it worst.

I learned something from those three stories. It is important to communicate policy carefully. Prepare contingency plans so that the worst is not happening. In the case of the bank, one high rank person said that it is the way the bank do the things. They will just take a looooooonnnnng time to answer and decide. Not very efficient at all. In the second case, that ruling party should have a side policy that can cover investments before the new promotion program launched. As in the third case, I just do not know what should the government do. Many time, good advices are just ignored by the government. Government is very reactive and not really do the plans with solid baseline. Maybe the advisors to the president are just not smr**t enough to see and analyse the whole big thing and predict or analyse the possible impacts. What a pity...

For the president candidates, be careful with your promise. Make sure that you already have clear realistic plan/s including the contingency plans. Make sure that you know and understand the possible impacts. Make sure that you have strong backup (brain ware). And the last thing is communicate your programs wisely and carefully. Be aware of your weaknesses...

Anyway...have a nice week end..

Energy Price = Energy Scarcity

Happy new year...

Classical Economic Theory says that if there is little supply then the price of the good will go up. This is the law of supply and demand. How true this law in Indonesia?

In the recent months, oil price is dropping from more than 100US$ for each barrel to approximately 40US$ for each barrel. This price drop has influenced energy pricing policy in Indonesia. Gasoline price was cut from IDR 6000 per liter (premium) to IDR 5500 and finally to IDR 5000. When the gasoline price was still in the IDR 4500 per liter level, crude oil price was in the level of 70-90US$ per barrel. Because of that, oil and gas pressure group is always trying to convince the government to again cut the gasoline price. The group calculated that normal premium class gasoline can be lower than IDR 4000 per liter. This discussion is so far only in the discussion level, but the issue has been affecting anyone.

One political party, the ruling party, use gasoline price cut as campaign material. They put the campaign in the television. This campaign indirectly affected the decision making of businessmen especially those in oil and gas business (gas station business). The campaign has created an impression that the current government will suddenly cut gasoline price again without enough notification. This condition has made those businessmen hesitated to stock gasoline and provide supply to his area. They are afraid that the stock that was bought using old price will be sold using new lower price. This condition has created gasoline shortages in many areas in Indonesia.

There are some arguments that the shortage is due to delayed transport. As you might know, transportation using small sea vessel is a bit dangerous now. There are reports of sinking boats or ferry boats in many places in Indonesia. This is due to the weather. Shortage is becoming more severe in outer islands because those area are depending so much on sea transportation. Pertamina said that there is no problem with the supply. Pertamina's refinery is fine and therefore there is no worry for fuel shortage. But as you might already see, things happen differently. There is still fuel shortage.

Anyway, since the energy price in Indonesia is regulated by the government, above mentioned economic law does not apply here in Indonesia. It is worth to note that politic has very much to do with the shortage and the weather just make it worst. Therefore the government should not make people confuse and political party should not use such sensitive issue for campaign material.

One other thing that I have learned from this fuel shortage is that businessmen do not have patriotism. They are just thinking of money money and money...in the last price increase those people have gained many profits because they stocked gasoline using old lower price and sell it with higher price. This is now the time for them to be patriotic. Rich class and middle class in Indonesia are just unreliable...