indonesia

Indonesia’s National Energy Policy
Current Political Context
Inaugurated at the end of October 2014, President Jokowi made it clear at the outset of his
term that the government’s top priority is boosting economic growth rates to above 7% per year
while also reducing poverty. To advance this goal, his economic team focused on three core issues
during his first year in office: boosting a slowing economy, stemming the current account deficit,
and stabilizing the rupiah (which has depreciated to levels not seen since 1998 in the aftermath of
the Asian financial crisis). In August 2015, Jokowi reshuffled his cabinet to replace a number of key
economic positions, and at the beginning of September 2015 the government announced a new
stimulus package to boost growth and prevent further depreciation of the rupiah. 13
A major contributor to the current account deficit was Indonesia’s oil import bill, which
was in large part a result of entrenched fuel subsidies. Jokowi promised during his campaign
to shift government spending away from costly fuel subsidies toward investment in education,
healthcare, and infrastructure. With low global oil prices working in his favor, he delivered on
this promise during his first month in office by eliminating subsidies for gasoline and capping
the subsidies for diesel.
Jokowi understands that significant investment is needed in order to boost production to
the required level to meet rapidly rising demand, and the government has in place a national
energy policy that seeks to address this need. There are, however, a number of structural and
policy challenges that inhibit greater investment. The biggest challenges include persisting
energy subsidies, a lack of infrastructure, the regulatory environment, and corruption. Economic
nationalism, particularly visible in the natural resources sector, is another challenge. These issues
will be explored at length later in the essay after first introducing and examining Indonesia’s
current national energy policy.
Current National Energy Policy
In 2007 the government passed an energy law (Law no. 30/2007) that established a legal basis for
energy policy and management at the national level, providing general principles and basic targets
for future development and the country’s energy mix. It also laid the foundation for regulations
on energy conservation and the development of renewable energy. The energy law established the
National Energy Council—referred to by its Indonesian acronym DEN (Dewan Energi Nasional)—
and mandated that the council draft a national energy policy and update it every five years. 14
DEN is chaired by the president, the vice president, and the minister of energy and mineral
resources and is composed of members from seven ministries (finance, national development
planning, transportation, industry, agriculture, research technology and higher education, and
environment and forestry) and eight additional expert representatives drawn from academia,
industry, and environmental and consumer groups. DEN designs and formulates the national
energy policy that is then reviewed and approved by Commission VII in the Indonesian
13 Chris Manning, “Jokowi Takes His First Shot at Economic Reform,” East Asia Forum, September 13, 2015, http://www.eastasiaforum.
org/2015/09/13/jokowi-takes-his-first-shot-at-economic-reform.
14 IEA, Indonesia 2015, 27.
INDONESIA’S ENERGY POLICY u STUART
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