EXECUTIVE SUMMARY
Indonesia’s power crisis has rumbled on this quarter, with fears existing over the impact of the country’s power deficit and regular brown outs on Indonesia’s economy. In July 2008, Reuters reported that Japan’s ambassador to Jakarta had sent a letter of complaint to the Indonesian government on the behalf of approximately 400 Japanese firms with operations in Indonesia. Members of the Jakarta Japan Club, a Japanese expatriate business club, are considering pulling out. The club includes Panasonic Lighting Indonesia, which has operations in East Java. Japanese firms have been hit by Indonesia’s power crisis, which due to regular power cuts, has led to stop-start production and financial losses. BMI notes that Indonesia’s economy would suffer if Japanese companies were to relocate. Japan is a major investor in Indonesia. There are over 900 Japanese companies with operations in the archipelago. Indonesia offers Japanese companies a large market and cheap labour. The influx of Japanese investors began in the 1960’s and the Japan External Trade Organisation (JETRO) reports that Japanese investment in Indonesia since then totals US$43bn.
Indonesia’s power infrastructure maybe causing problems for some Japanese companies but it is also offering opportunities for other. In August 2008, the Japanese firm Marubeni Corporation in consortium with France’s Alstom won a US$247mn contract for the construction of a combined cycle gas power plant on the island of Java.
A programme to build new capacity for power generation is just one way in which Indonesia is tackling its power crunch. The country’s deficit between power production and demand is set to reach 39TWh in 2008, and in addition to launching a strategy of planned brownouts, the country is also swapping from gasoline to natural gas, a fuel which the archipelago has in abundance. This is planned to help the country solve its power problems in the mid term, as well as manage problems with providing power in the short term. The strategy became active on July 21 2008, and will run until the end of 2009 for the Islands of Java and Bali. The decree will mean that manufacturing companies will have to move working days each month to a Saturday or Sunday. It is believed that the change is hours will better distribute electricity consumption, and hopefully reduce the number and severity of power surges, which often lead to blackouts.
© 2009 Business Monitor International Ltd
