Remarks by Mathias Cormann,

Secretary-General, OECD

Dear Ministers, Ambassadors, colleagues.

I am pleased to launch the OECD Clean Energy Finance and Investment Policy Review of Indonesia, and to open this webinar on “Attracting Private Investment to Indonesia’s Green Recovery”.

Let me begin by thanking

• Mr. Wimboh Santoso, Chairman of the Financial Services Authority (OJK),
• Mr. Arifin Tasrif, Minister of Energy and Mineral Resources, and
• Mr. Airlangga Hartarto, Co-ordinating Minister for Economic Affairs of Indonesia for joining us today, and to the Government of Denmark for their financial support to our Clean Energy Finance and Investment Mobilisation Programme.

This Review, the first of this kind, comes at a particularly challenging time.

As a result of the pandemic, Indonesia’s GDP fell by more than 2% last year, the worst recession since the Asian Financial Crisis in the 1990’s.

The Indonesian economy is gradually recovering and is expected to grow by 4 to 5% per year in 2021-2022.

The COVID-19 legacy has created new challenges: vulnerable groups lost years of progress, students did not attend school, and GDP remains below its potential.

Clean energy investment can play a crucial role in supporting Indonesia’s recovery. If fully exploited, Indonesia’s abundant renewable energy and energy efficiency potential could make it a leader in the clean energy market.

Indonesia is taking positive steps to make this happen.

In sustainable finance, it has stressed the importance of filling the SDG financing gap and leveraging all available sources, including blended finance approaches, and utilising triangular and South-South co-operation.

Indonesia’s global leadership in this field, also through the Tri Hita Karana roadmap, will help strengthen the G20 development agenda during Indonesia’s upcoming G20 presidency in 2022.

Indonesia has also made some tremendous improvements to the investment climate under its Omnibus Law.

However, more can and must be done.

Unlocking the potential of the green recovery will require a transition away from fossil fuels.

The energy sector is Indonesia’s second largest source of greenhouse gas emissions.

By embarking on a low-carbon path, Indonesia can attract responsible foreign investment, create jobs and address climate change.

Creating a sound, transparent and predictable regulatory environment in Indonesia is key to attract the hundreds of billions of dollars of private investment to clean energy, and supporting the country’s green recovery more broadly.

Aligning public investment and public procurement rules for Indonesia’s energy sector to contribute to the path towards carbon neutrality can also help accelerate the shift towards renewable energy sources while preserving market competition.

This Clean Finance and Investment Policy Review supports Indonesia in this endeavour by providing a comprehensive overview of Indonesia’s policies and highlighting untapped opportunities for accelerating clean energy finance and investment.

Let me highlight three proposed actions.

First, we need to increase market competition and more stringent energy efficiency standards. Access to renewable energy is increasingly important in attracting foreign direct investment and to remain a competitive investment destination, Indonesia should accelerate developments in this area.

Second, the government needs to continue supporting its clean energy transition. The recent commitment by PLN, the state-owned power utility, to achieve a net-zero emission target by 2060 through the retirement of coal plants from 2025 is the right step forward.

Support will be vital in this transition as nearly 60% of Indonesia's electricity supply comes from its 29-GW coal-fired power plants. Indonesia has also made efforts to reduce fossil fuel subsidies and is preparing for a future carbon price through the pilot of its emissions trading system.

Third, environmental, social and governance considerations and financial innovation for low-carbon opportunities need to be integrated into the financial sector.

To this end, Indonesia’s Sustainable Finance Roadmap and its Sustainable Finance Taxonomy, which the OECD is helping develop, will advance these efforts.

Looking ahead, the OECD stands ready to continue to support Indonesia, including as part of the fourth OECD-Indonesia Joint Work Programme expected to launch this year under the theme “fostering a resilient, sustainable and inclusive recovery”.

This new Joint Work Programme will exploit synergies with Indonesia’s G20 Presidency including on sustainable finance, which the government identified as a priority under the finance track.

The OECD has also launched a new International Programme for Action on Climate (IPAC) to help OECD and G20 countries implement the goals of the Paris Agreement, through a set of climate-related indicators, tailored recommendations and best practices. We would welcome Indonesia to join IPAC.

Indonesia’s investment in clean energy and its integration of ESG considerations also align it with the Blue Dot Network’s goals to accelerate quality infrastructure investment in the Asia-Pacific.

Finally, the OECD can provide assistance to Indonesia with its digital transformation. Digital technologies have bolstered resilience during the pandemic and they will be central to optimising the strength and the quality of the post-COVID recovery.

Dear Minister Airlangga, Friends,

The work required to optimise the post-COVID-19 recovery has given us the opportunity to accelerate the transition to cleaner, greener growth.

The OECD looks forward to deepening our engagement with Indonesia on environmental policy. We look forward to working with you as you progressively join our many declarations and conventions in this area, upgrading your policies and bringing them in line with international best practice.

Thank you.