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27-28 May 2010

US says Indonesian red tape blocking clean energy

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Red tape and legal uncertainty are blocking investment in clean energy projects in Indonesia that could help reduce greenhouse gas emissions, US Commerce Secretary Gary Locke was quoted by AFP as saying Wednesday.

Locke said US energy companies were lining up to invest in renewable energy projects in the vast archipelago but were turned off by inconsistent regulations and a lack of government transparency.

"As I talk to American business leaders, the overriding concern that I hear is that there is not enough government transparency," he told a business luncheon.

He said businesses "frequently don't know what the rules are, how they will be enforced or how decisions are made", especially at the local level "bureaucratic bottlenecks" can delay projects for years.

"Especially 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," he said.

With executives from 10 energy companies in tow, Locke has held group meetings on clean energy with business leaders in Jakarta, as well as talks with the government since he arrived Tuesday.

The trip comes ahead of a visit next month by President Barack Obama, who is expected to sign a "comprehensive partnership" with Indonesia covering issues including trade, investment and the environment.

Companies represented in Locke's delegation include General Electric, Lockheed Martin Global, Oshkosh Corporation, Peabody Energy and Pratt and Whitney Power Systems.

In addition to exporting "dirty" fuels such as coal and gas, Indonesia is the top shipper of palm oil used in biofuels and possesses around 40 percent of the world's known geothermal resources.

Locke said it also had potential in areas such as solar and wind energy, and was perfectly suited for small-scale adaptation of such resources for communities scattered across 6,000 islands.

The mainly Muslim country of about 240 million people is widely considered the world's third biggest greenhouse gas emitter, largely due to deforestation.

President Susilo Bambang Yudhoyono has promised to reduce Indonesia's emissions by at least 26 percent by 2020, and 41 percent with foreign assistance.

His national energy policy calls for increasing renewable energy production from seven percent of Indonesias generating capacity to 15 percent by 2025, while sharply boosting supply.

But Locke said such policies were being undermined by regulations like the Negative Investment List, which limits foreign investment in power plants producing less than 10-megawatts.


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