World Economy

Indonesia Bets on $200b Investment

Indonesia Bets on $200b InvestmentIndonesia Bets on $200b Investment

Indonesia plans to overhaul its energy policy to attract investment of as much as $200 billion over the next decade as the former OPEC member seeks to reverse a decline in its crude oil production.

The amendments to the energy policy, once approved by President Joko Widodo, will allow explorers various financial incentives including tax-free import of drilling equipment and technology and easier cost-recovery, Energy and Mineral Resources Minister Ignasius Jonan said in an interview, Bloomberg reported.

The nation is offering 14 unexplored oil and gas blocks, mostly offshore fields, to investors and expects both foreign and domestic companies to actively participate, he said.

Southeast Asia’s biggest economy is seeking to lift production of oil and gas as a supply deficit widens, deepening the nation’s reliance on imports.

While the development of a much-delayed Masela gas project may cost as much as $16 billion, the East Natuna block with an estimated reserves of 48 trillion cubic feet of gas may require investment of $30 billion to $40 billion, Jonan said. More than a dozen oil, gas and coal-bed methane fields being offered for development next month may need explorers to pump in $20 billion to $30 billion, he said.

Meanwhile, Indonesia will not need to repeat last year’s major spending cut as the government’s revenue projections look “on track” amid strengthening growth, Finance Minister Mulyani Indrawati told Reuters.

Indrawati said in an interview on Monday that the government would reallocate some spending within the budget to more “productive” areas that can support growth, such as land acquisition for infrastructure projects.

The former World Bank managing director also insisted that Indonesia’s international banking environment was not becoming more difficult, despite a recent row over a negative JP Morgan research report.

One of Indrawati’s first acts when she returned to Jakarta as finance minister in July 2016 was to slash state spending by $10.2 billion to hold Indonesia’s deficit within a 3% legal limit.

“We are not going to cut. The president is asking to reallocate more, focusing on the spending which is productive,” Indrawati said of this year’s budget, after the International Monetary Fund and World Bank spring meetings in Washington.

She said revenue projections appear “on track” as the World Bank projects Indonesia’s economic growth at 5.2% this year, compared to the government’s official 5.1% forecast used for budget planning, and 5% last year.

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