Red tape, conflicting regulations and legal uncertainties keep US companies from investing in clean-energy projects in Indonesia that could help reduce carbon emissions and fight global warming, US Commerce Secretary Gary Locke said during his visit on Wednesday.
Locke said US companies were eager to invest in Indonesia, but a lack of government transparency was a huge obstacle, making it difficult for businesspeople to understand the countryâ€™s regulations.
â€śAs I have discussion with American business leaders, one of the most concerning thing to them is lack of government transparency. They do not know how regulations are implemented or how the government comes up with its decisions,â€ť Locke said at the end of a two-day trade mission to Jakarta.
He said businesses â€śfrequently donâ€™t know what the rules are, how they will be enforced or how decisions are made,â€ť while â€śbureaucratic bottlenecksâ€ť can caused development projects to be delayed for years.
â€śEspecially in the energy sector, where upfront capital investments can be in the hundreds of millions of dollars, this uncertainty has the potential to inhibit foreign corporate investment here,â€ť he said.
Locke arrived in Jakarta with representatives of 10 US companies eager to invest in clean energy, especially in geothermal power plants, solar plants and wind power.
They included General Electric, Lockheed Martin, Oshkosh, Peabody Energy and Pratt & Whitney Power Systems. They met with business leaders and government representatives during the mission.
The trip comes ahead of a visit to Indonesia next month by US President Barack Obama, who is expected to sign a comprehensive partnership with President Susilo Bambang Yudhoyono covering trade, investment and the environment.
Indonesia has enormous potential in geothermal resources, as about 40 percent of the worldâ€™s geothermal reserves can be found in the country. So far, only about 4 percent of that potential has been explored.
However, Indonesia is believed to be the worldâ€™s third-largest emitter of greenhouse gases, largely because of large-scale deforestation.
Yudhoyono has promised to reduce greenhouse-gas emissions by at least 26 percent by 2020, and 41 percent with foreign assistance. His energy policy calls for increasing the production of renewable energy from 7 percent of generating capacity to 15 percent by 2025, while sharply boosting supply.
Locke said Indonesia had the potential to be a major player in clean energy, and to help the world fight climate change while providing the fuel for the global economy.
He said the worldâ€™s demand for energy was expected to double by mid-century. With conventional energy, people needed to build at least two power plants with 1,000 megawatts of capacity every week to meet demand. Therefore new and innovative energy sources were needed.
â€śThis new energy has to be clean to avoid catastrophic climate change and it has to be cheap to keep our economies growing,â€ť he said.
But Locke said Indonesiaâ€™s energy and development goals were being undermined by such regulations as the Negative Investment List (DNI), which limits foreign investment in power plants producing less than 10 MW.
â€śI have been told Indonesia is working to amend this law, and I do hope the government will continue to roll back this and other anticompetitive regulations,â€ť he said.
Last year, Obama signed the Recovery and Reinvestment Act, a stimulus package that includes investment in clean energy of as much as $80 billion.
â€śUltimately, all the United States is seeking is a level playing field for its companies, where the cost and quality of their products determine whether or not they win business,â€ť Locke said.
â€śI have been discussing these and other concerns with my Indonesian counterparts. As you might expect, we do not always agree.â€ť