Era of Lower Oil Masks Challenges for Southeast Asia Titans

Bloomberg

04 December 2014

Global oil’s fall below $70 provides a reprieve without being a cure-all for some of Southeast Asia’s biggest economies, where leaders face reform hurdles that could raise political risk into 2015.

The slump in crude to five-year lows has given the leaders of Malaysia and Indonesia room to dismantle decades’ old energy subsidies that have restrained growth. Still, Indonesian President Joko Widodo faces street protests against higher fuel prices as unions plan a national strike to demand higher wages, while Malaysia Prime Minister Najib Razak’s efforts to broaden the tax base and cut spending have dented his approval rating.

Both leaders will have further challenges in the coming year. Two months in office, Widodo, known as Jokowi, first rose to prominence from outside the major party machinery and must navigate a parliament dominated by his opposition, while Najib will implement an unpopular goods and services tax in April.

…“The fall in crude-oil prices gives them a bit more room to maneuver in tackling energy subsidies,” said Oh Ei Sun, a senior fellow at the S. Rajaratnam School of International Studies in Singapore. “Yet, Jokowi continues to be viewed skeptically by the power elites of Indonesia and Najib faces extremely steep pressure and resistance to the coming GST implementation as well as tensions within his party.”

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