Unlocking Indonesia's Prosperity Through the National Energy Endowment Fund

Indonesia is often referred to as an energy-rich country, yet it has not fully achieved energy security. On one hand, coal reserves are abundant, gas production remains the backbone, and renewable energy potential is widespread from west to east.

However, on the other hand, whenever global energy prices fluctuate, fiscal space is immediately pressured, policies become reactive, and energy welfare again depends on subsidy instruments. At this time, an increasingly relevant question arises: why does a country with abundant resources continue to patch short-term vulnerabilities? Our nation needs to urgently build long-term strength.

The root of the problem lies in how we view and manage energy wealth. So far, energy resources have been treated as immediate income flows used for current needs. When commodity prices rise, revenues increase and fiscal space feels ample.

But when prices fall, pressure immediately emerges and the state must adjust policies. This pattern creates a recurring cycle, where energy welfare is always in the shadow of global volatility.

The experience of various countries shows that escaping this cycle is not enough with short-term interventions. The key is to build mechanisms that can lock in long-term benefits.

Norway provides the clearest example. When oil and gas revenues increased, the country did not spend them on domestic consumption. They separated revenues from expenditures, then converted surpluses into an endowment fund invested globally. The result is not only a fiscal buffer but also the continuity of benefits across generations.

This approach is not merely about building a sovereign wealth fund, but about a mindset. Natural resources are viewed as assets that must be converted into long-term strength, not just momentary income. In this way, welfare no longer depends on global market fluctuations, but on the nation’s capacity to manage its outcomes.

A similar approach is seen in the United Arab Emirates, which uses oil wealth to build a global investment portfolio, from infrastructure to future technology. Saudi Arabia, through its Public Investment Fund, is beginning to shift dependence from oil to more diverse sectors. Meanwhile, Chile demonstrates how disciplined commodity management can maintain fiscal stability amid global price volatility.

If applied to the Indonesian context, the lessons from these countries are not to be copied verbatim, but to highlight the gaps we still have. Indonesia does not yet have a mechanism that consistently locks the benefits of its energy wealth into long-term instruments.

Revenues from coal, oil and gas, and strategic minerals still largely flow to short-term needs, including consumptive subsidies. In the short term, these policies maintain stability. However, in the long term, they do not build a stronger foundation.

This is where the idea of a National Energy Endowment Fund becomes relevant. This is not merely a financial instrument, but a paradigm shift. From consumption to investment. From responding to crises to preventing crises. From dependence on fluctuations to designed stability.

As a stabilisation mechanism, the endowment fund can function as a more structured buffer than subsidies. When global energy prices rise, the state does not need to always rely on sudden fiscal interventions. Funds collected when prices are high can be used to cushion the impact of those increases. Stability no longer depends on ad hoc decisions, but on a prepared system.

As a source of financing for energy transition, its role is also crucial. Transformation towards cleaner energy requires large and consistent investments, from renewable energy infrastructure, strengthening electricity grids, to efficiency technologies. All of this cannot rely on fluctuating annual budgets. The endowment fund provides a more stable source of financing, so the transition agenda is not easily disrupted.

Furthermore, the endowment fund also serves as an instrument of intergenerational justice. Energy resources exploited today essentially belong to all generations. Without the right mechanism, the benefits will be exhausted in one economic cycle. The endowment fund ensures that a portion of that wealth remains available for future generations, both in the form of economic stability and investment capacity.

However, building an endowment fund is not just about collecting funds. Its design is the determinant. Indonesia needs to ensure clear funding sources, disciplined management mechanisms, and measurable usage objectives.

Funding sources can come from strategic sectors such as coal, nickel, and oil and gas, especially through mechanisms that capture surpluses when prices are high. Instruments like windfall profit capture or resource rent tax are relevant in this context.

On the other hand, governance must be the top priority. Without transparency and discipline, the endowment fund risks losing its strategic function. Norway’s experience shows the importance of clear rules and a strict separation between fund management and short-term political interests. Indonesia does not need to copy that model wholesale, but its basic principles must be seriously adapted.

Without mechanisms like this, Indonesia will continue to be in a vulnerable position. Every energy price increase triggers fiscal pressure, and every price decrease narrows policy space. Subsidies will continue to be the main solution, even though their effectiveness is increasingly limited. More than that, without long-term instruments, Indonesia