IEA calls Indonesia a major player in global energy economy and praises increasingly progressive energy policies

For the first time, the International Energy Agency (IEA) has reviewed the energy policies of Indonesia, an important producer and consumer of energy. This review was conducted at the invitation of H.E. Dr. Purnomo Yusgiantoro, the country´s Minister of Energy and Mineral Resources. “I am delighted and honoured that the IEA has had this opportunity to work closely with the Indonesian government,” IEA Executive Director Mr. Nobuo Tanaka said today in Jakarta at the press launch of Energy Policy Review of Indonesia 2008. “Indonesia’s implementation of sound energy policies will be the basis for ensuring reliable energy supply and economic development,” he added.

The IEA conducts in-depth energy policy reviews of each of its 28 member countries every five years to strengthen their policies and to share good examples of other member countries' energy policy and programme experiences. “We also look for their successes and share these with the rest of our member countries,” Mr. Tanaka explained. “It is a policy-strengthening process that is objective and transparent; the reviews are done by a team of energy policy peers who volunteer from our member countries. In recent years, we have also been asked to conduct reviews of national and sectoral energy policy in non-member countries, such as Angola, China, India, Russia and Ukraine, as well as the Western Balkan region.”

Advancing Market Principles
Indonesia is a major player in the world energy economy. The country’s resource wealth, openness to trade and investment, and a strategically favourable location in East Asia have made Indonesia a key global exporter of oil, gas, and coal. It is the world’s leading steam coal exporter, a substantial LNG exporter and until recently a net oil exporter. Indonesia is also the fourth-most populous nation and has a dynamic economy with 5% to 6% annual growth.

Indonesia now faces the serious challenge of fast-rising domestic energy demand with declining oil and gas production. The country’s energy policy makers are looking closely at domestic energy requirements and best policies to meet these needs. “As I mentioned in my foreword to the review, Indonesia is undergoing a demanding evolution to a democratic community with advancing market principles,” noted Mr. Tanaka. “I commend the government and the people of Indonesia on the breadth of change: there is now a palpable sense of openness, confidence and interest that was not there just several years ago. I hope our review can assist in this process of change.”

Six Priorities for Attention
The review comprehensively examines all parts of the energy sector in Indonesia, and provides findings and policy recommendations for each. Six areas are suggested for priority attention. These cover progressively and transparently reducing fuel and electricity subsidies, ensuring energy policy is properly and fully implemented, improving the clarity of the investment framework, helping the energy regulators do their job more effectively, and harnessing a sustainable development agenda, particularly renewable energy and energy efficiency. The review commends the establishment of the new National Energy Council under the new Energy Law as a very useful step in examining and approving major energy policy changes.

“I know that many policy makers and industry specialists in Indonesia are already thinking along similar lines to the recommendations of our review,” said Mr. Tanaka. “To that extent, our work will give additional support to progressive changes that are already taking place. Investment in Indonesia’s energy resources and infrastructure is essential for Indonesia’s economic development and I also hope that the review contributes to domestic and international understanding of Indonesian energy policy and the potential for future trade and investment.”

A Closer Working Relationship
“The IEA is not always well known in some non-member countries, so I should add that the Agency is an energy policy think tank with nearly 35 years of experience. Through our work with key non-IEA countries, we hope to have a long-term sharing of international best practice in energy policy. I am very pleased that our relationship with Indonesia is strengthening: the IEA and the Ministry of Energy and Mineral Resources have already mapped out a programme of work in areas such as energy statistics and energy forecasting for the coming two years,” Mr. Tanaka concluded.