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Indonesia to Reform Economy by Transitioning to Renewable Energy

In recent years, the Indonesian government has taken concrete policy steps to advance its digital transformation agenda, and while steady progress has been made in that direction, the good news is that the pace of change is expected to accelerate. To address this, Indonesia’s President has pledged to press ahead with economic reform plans, despite the heavy burden that COVID-19 has imposed on the country since the outbreak began.

In his speech, the President stated that in today’s disruptive world, the spirit to change, the spirit to make changes, and the spirit to innovate has become the foundation for building an advanced Indonesia. In this context, the president’s agenda remained focused on structural reforms designed “to promote inclusive and sustainable economic development.” Repeating the promises made at the beginning of his second term, he added that the development of “quality human capital” and infrastructure development will remain priorities, the latter a hallmark of his seven years in power.

The Indonesian leader also expressed hope that reform would help the country begin the transition to a more sustainable economy. “A significant change in our economy will be the transition to new and renewable energy, as well as the acceleration of an economy based on green technology. The President believes that using clean energy and green technology will contribute to the development of a more environmentally friendly economy. As a result, efforts will be made to strengthen national research in order to align with the country’s development agenda.

Switching to renewables requires far less investment in your power sector than building new coal or nuclear power plants would. That means lower electricity prices, which has ramifications throughout the economy. A lower electricity price lowers production costs and increases profit. At the same time, it benefits households because spending less on electricity allows citizens to spend more on other things. In that sense, the country is stimulating the economy by developing renewable energy.

In the first half of 2021, the realisation of investment in Indonesia, excluding that in the upstream oil and gas sector and the financial service sector, reached Rp442.8 trillion, he noted. Nearly 51.5 % of the investment was outside Java and 48.5 % in Java, and absorbed more than 620 thousand local workers, the President said. He expressed hope that investment will be realised until December 2021, meeting the government’s target of Rp900 trillion, creating more jobs, and significantly boosting the economy.

“The development of investment must be an integral part of just and inclusive economic growth,” he remarked. The government is optimistic about meeting its commitment to climate change adaptation in the Paris Agreement, according to the President.

The accelerated transition from fossil fuels to new and renewable energy is expected to reduce greenhouse gas emissions by 29% by 2030 and limit global warming to no more than 2 degrees Celsius. According to data from the Ministry of Energy and Mineral Resources, new and renewable energy has made significant progress in terms of contributing to electrical power and fuel usage.

The accomplishment of a new and renewable energy mix is expected to reach 11.31 % by the end of 2022, he added. The government is optimistic about meeting the challenge of achieving a 23 % new and renewable energy mix by 2025. On the other hand, the government is committed to maintaining the momentum of economic recovery by accelerating the National Economic Recovery (PEN) programme, which includes investments in health, social protection, priority programmes, and business support packages for MSME and corporate, with a total budget of Rp 699.43 trillion.

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