One of the reforms pressed by global finance on newly elected Indonesian president Joko Widodo is a cut in the fuel subsidies (gasoline and diesel) by which the country directs precious public funds into more use of personal vehicles on inadequate roads. With some of the worst traffic congestion in Asia, Jakarta--where Jokowi, as the president-elect is known, has been governor--is an abject lesson in why not to misallocate such resources.
These subsidies, because they most seem to benefit the struggling working or "middle" classes, are awfully hard to cut politically, and Jokowi is already going to have problems building a governing coalition. The good news, I suppose, is that bad as this strike against Indonesia is--its remaining fuel subsidies per-capita are the second highest in Asia--the region as a whole is a lesser offender than other parts of the world.
As economist Lucas Davis of U.C. Berkeley's Haas school shows in the current issue of the Milken Institute Review, fuel subsidies tend to be one more bit of the "oil curse" that afflicts countries where such seeming black gold has been drawn from the earth. The bargain in such places can be this: We (the state or its oil-major partner) drill the nation's patrimony and in return we give you, the people, a nearly free pass to drive wherever roads will take you. Not only is this bad for traffic, but it doesn't do the air any good either. (Climate change is another potential result.)
So, of the top 10 per-capita recipients of fuel breaks, as shown by Prof. Davis, nine are from the North Africa-Middle East belt. And the subsidies there can be way high: $948 a year for every Qatari, in the No. 1 spot. (That doesn't include all the imported laborers, who outnumber the citizens.) Compare that to the totals in No. 14 Malaysia ($84) and No. 15 Indonesia ($75)--not that big of a problem, it might seem. It's more of an issue when you consider income levels in the countries, however--Indonesia is spending a lot more proportionally on this than the Middle Easterners.
I am grateful to Prof. Davis for providing me with figures beyond those published by Milken, which only extend to the top 10. In the remainder of the top 25, you find no other South or East Asian country--just a few from Central Asia. Thailand, of the infamous rice and rubber protections for farmers, shows up at No. 28. India has diesel subsidies, and that will be an issue for its new prime minister Narendra Modi, but they pale by per-capita comparison--at No. 29 for fuel overall. (Food subsidies are a bigger rub.) Likewise, China by curbing some of its more noxious pump handouts has escaped per-capita attention.
+-----------------------------------------------+
| country TotSubPC GasSubPC DieSubPC |
|-----------------------------------------------|
1. | Qatar 947.5099 361.4908 586.019 |
2. | Saudi Arabia 885.4348 454.1056 431.3293 |
3. | Kuwait 859.7854 569.3481 290.4373 |
4. | Bahrain 769.9468 437.5385 332.4082 |
5. | Libya 454.3874 143.0297 311.3576 |
|-----------------------------------------------|
6. | Venezuela 445.3718 358.4581 86.9137 |
7. | Brunei 424.2012 222.562 201.6392 |
8. | Oman 377.7849 350.5217 27.26321 |
9. | Iran 279.9982 116.6685 163.3297 |
10. | U.A.E. 269.5445 174.8664 94.67814 |
|-----------------------------------------------|
11. | Algeria 165.0667 38.63519 126.4315 |
12. | Ecuador 121.9484 30.75047 91.19792 |
13. | Egypt 101.877 37.75636 64.12062 |
14. | Malaysia 83.54851 47.45036 36.09814 |
15. | Indonesia 75.34238 44.91179 30.43059 |
|-----------------------------------------------|
16. | Bolivia 74.25906 21.82284 52.43621 |
17. | Syria 46.59778 0 46.59778 |
18. | Tunisia 44.67528 .773868 43.90141 |
19. | Iraq 34.1233 0 34.1233 |
20. | Angola 29.38511 8.555042 20.83007 |
|-----------------------------------------------|
21. | Kyrgyzstan 26.13405 3.348178 22.78588 |
22. | Belarus 21.46595 3.724338 17.74162 |
23. | Yemen 17.35928 13.55972 3.799553 |
24. | Azerbaijan 14.00029 0 14.00029 |
25. | Kazakhstan 5.587463 0 5.587463 |
|-----------------------------------------------|
26. | Nigeria 5.447035 5.447035 0 |
27. | Sri Lanka 4.915472 0 4.915472 |
28. | Thailand 4.39225 0 4.39225 |
29. | India 3.971134 0 3.971134 |
30. | Morocco 3.305837 0 3.305837 |
+-----------------------------------------------+
Although heavy use of fuel chits is associated with countries that have had petroleum development (both Malaysia and Indonesia have such histories), they do not accrue only to the blessed. Some wretchedly poor nations are high on the per-capita subsidy charts: Belarus, Yemen, Algeria and (nowadays) Egypt. The largesse can be a way for autocrats to keep power while they siphon off most of the riches for themselves and cronies. By far the most egregious case of high subsidies amid desperate circumstances is Venezuela, which ranks No. 4 per-capita and, in a separate chart published by Milken and Davis, can be seen as offering gasoline by the gallon at the cost of a few bananas and getting more consumption per-capita than Japan as a result. (Venezuela also uses its oil to support other wretched governments in Latin America, which in turn buy public tolerance with cheaper fuel.)
The fact that Asia has only the extent of a fuel-subsidy problem that it manifests today is both a blessing and a warning: As drilling proceeds in many of the region's coastal waters, there is a danger not just of conflict over those resources, but of any captured oil being turned into the waste that we see elsewhere. Better examples such as Norway show that good fortune can translate into higher rates of college graduation as money is spent on human capital and the roads are kept basic and clear.
