I

was going over an article I wrote nearly a decade ago on the potential and future use of renewable energy. The potential output was already understood as massive and could effectively support the country and more on its own. At that time, the output from renewables was a paltry 2 percent.

The country was receptive to the various global efforts at that time to increase the level of power output from the world’s substantial resources in renewables and gradually reduce its dependence on ultimately finite resources of fossil fuels. These had underpinned for well over a century the huge global developments emanating from the Industrial Age. In going back today to the position of a decade ago, for Indonesia it was clear that very largely all that I had to do was change the date of the article and republish it. Regrettably, little has changed.

In 2006, the government clearly announced the need to not just encourage but also secure significant private sector investment. In parallel, there was great interest and some excitement from foreign parties through investment to play their part in accelerating the build-out of umpteen infrastructure projects that would be required to support this vision.

However, it soon became clear that the legal and regulatory framework was not in place to provide the right structures for private sector investment, whether foreign or domestic, or even when considering the developed country usage of public-private- partnership. Increasingly, in order to try to keep the infrastructure programs going, albeit at a significantly less than required level, the government fell back on leveraging off the finances as well as the technical expertise of the nation’s growing state owned enterprises (SOEs).

Private sector investment did not come and the impact of private sector contractors interested in basic infrastructure development declined or simply withdrew and went to other countries. Hence today, infrastructure development is proceeding at about half the pace that is needed, however brave statements are presented, and SOEs are well overstretched both in terms of quality and quantity of the skilled people required. This, of course, leads to further investment in education of professional engineers and skilled technicians, but that is another discussion.

Underneath it all is the deeply entrenched philosophy that pervades government thinking from the early days of Independence, at a time when much of the world was imbued with the post-World War II view that the only fair and peaceful way to develop and grow the new world order was through the adoption of socialist principles. Capitalism had failed, it was said.

However, across the world the past seven decades have clearly shown that “pure” socialism, which implies that the central government knows best, does not work. While unbridled capitalism is also not right, since it leads to distortions in the economic structure of society, declining earning power in the middle class and an unhealthy consequence of increasing poverty for the poor and opportunity disadvantaged, a middle way has to be found.

The year 1998 was a chance to spread the democratic ideal across the country, and freedom of thought was in the air. The government embarked on relaxing the tight control of the center, but subsequent years have shown that regional government structures were just not prepared to be able to take up and administer the development needs for their peoples. A result has been creeping recentralization, or poor or no implementation when responsibility was clearly devolved to the regions and is still in their hands, as in the case of water.

So, here we are 20 years on operating under the principle of government knows best, over-bureaucratized, more regulations than the rest of ASEAN countries combined, an inadequate level of private sector involvement and a widening gap between delivery and requirement of the infrastructure build-out. Gross domestic product (GDP) is stagnating, not just because of world troubles, but also because consumer confidence across the archipelago is somewhat worried.

As the government knows and has stated, the annual GDP target has to rise again towards a 7 percent level to meet all its development challenges, something that can be achieved if the private sector is encouraged to be its partner and invest across the board, including in building as well as investing in infrastructure.

Returning to electricity generation, one of the fundamental pillars of GDP, it is very clear that coal must provide a baseload for the foreseeable future, especially if better power station machinery and quality coal can be introduced, and as needed in other developing countries.

However, there is absolutely no reason why the government should not be finding ways to encourage renewable project development, which would naturally bring in foreign investment. Furthermore, it would have a beneficial impact on budget by increasingly helping the government reduce its reliance on diesel imports, the national application of which, in turn, is known to be highly inefficient.

The government is targeting having some 23 percent of its energy output to come from renewables by the mid 2020s, but industry players say this is not possible without a major shift in policy. Remote regions do not need the heavy hand of central government for their electricity needs. This can be handled between a strong partnership by local government working with the private sector and local community involvement. A real challenge and an opportunity among others for the next government.
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