Journal Article | Bulletin of Indonesian Economic Studies | December 2007

Private Power in Indonesia

by Louis T. Wells

Abstract

The Asian Currency Crisis led to the collapse of agreements Indonesia had negotiated for private electric power only a few years earlier. The ensuing struggle meant bad publicity and several hundred million dollars in costs for Indonesia. As Indonesia in 2007 was designing a new law that would pass the constitutional test and encourage private investors in electric power, it was not clear that officials had fully understood the lessons of the recent disputes. Problems lay less in the legal framework than in lack of information about deals elsewhere, the institutional structure for negotiations and renegotiations, and the personal interests of highly placed individuals. The resulting power purchase agreements had led to high prices for electricity, imbalances of risks and rewards, and an unwillingness of officials to use the most effective defenses when disputes arose. Learning from the past should help officials not to make similar mistakes in the future.

Keywords: Energy Generation; Government Legislation; Knowledge Management; Knowledge Sharing; Risk Management; Agreements and Arrangements; Business and Government Relations; Indonesia;

Citation:

Wells, Louis T. "Private Power in Indonesia." Bulletin of Indonesian Economic Studies 43, no. 3 (December 2007): 341–364.