Figure 1. Discussion session during the launching event of the International Institution for Sustainable Development (IISD) report
The International Institution for Sustainable Development (IISD) launched a report titled “Beyond Fossil Fuels: Indonesia’s Fiscal Transition” on 31 January 2019, in Jakarta. In the launching event, the highlight of the report was presented by David Braithwaite, IISD researcher and Lucky Lontoh as the Country Coordinator in IISD’s Energy Program. The report highlighted the importance of fiscal shifting for Indonesia under the threat of fossil fuel declining resource and price volatility.
IISD found that Indonesia is an example of a successful country in reducing its fiscal dependency from fossil energy production such as coal, oil and gas. In the report, Indonesia’s revenue from upstream oil and gas decreased from 35% in 2001 to 6% of total government revenue in 2016 or less than 1% of GDP. On the other hand, Indonesia’s GDP grows at a level of 3-4% per year while the budget deficit stayed in 2-3% level during the same period (2001-2016). This fact shows that Indonesia could still maintain the growth of its GDP despite the receding contribution of oil and gas in government revenue.
The reports also highlighted Indonesia’s challenges in transitioning its fiscal policy to support clean energy and sustainable development. According to IISD analysis, the total amount of the existing energy subsidies require almost the same amount of government tax and non-tax revenues from oil and gas extraction. However, Lucky Lontoh appreciated government’s positive strategy to do fossil energy subsidy reform, such as in fuel and electricity subsidies.
IISD suggested to reinvest the government revenue as well as the savings from the fossil energy sector to a more productive sector, such as health, education, public service and infrastructure, as well as supporting clean energy and sustainable development program. Energy efficiency should also be pushed to support Indonesia’s economic diversification and fiscal transition.