Jakarta – The government’s policy of financing fossil energy projects has been criticised by observers, who consider the risk of stranded assets as the global shift towards renewable energy, according to CERAH in an official statement, Wednesday, March 19.
The government, through the Daya Anagata Nusantara Investment Management Agency (BPI Danantara), decided to allocate investment funds for 21 downstream energy projects with a value of up to USD 40 billion. These projects include oil storage, refinery construction, coal gasification, and downstream minerals such as copper, nickel and bauxite. Unfortunately, in this first funding phase, no renewable energy project was included in the priority list.
CERAH Policy Strategist Sartika Nur Shalati warned that the dominance of investment in the fossil energy sector could backfire on Indonesia. One example she highlighted was the coal gasification project into Dimethyl Ether (DME), which was initiated by PT Bukit Asam (Persero). Based on a study by the Institute of Energy Economic and Financial Analysis (IEEFA), the project is predicted to lose up to USD 377 million annually.
“This coal gasification project is very expensive and not competitive compared to LPG imports. If forced, the government will only burden state finances,” said Sartika.
Besides the risk of financial loss, Danantara’s decision to finance fossil-based projects also increases the threat of stranded assets. Energy infrastructure such as coal mines, oil refineries and fossil-based power plants can lose economic value faster than expected. This is happening as demand for fossil fuels continues to decline due to global energy transition policies.
The European Union, for example, has begun implementing the Carbon Border Adjustment Mechanism (CBAM) policy, which will impose additional taxes on products with a high carbon footprint. If Indonesia continues relying on fossil energy-based industries, export products risk losing competitiveness in the international market.
“Danantara should be utilised to support the energy transition, for example, by funding the development of renewable energy and early retirement of power plants. However, the opposite is happening. Funding is still more in favour of the coal and oil and gas industries,” Sartika continued.
In line with Sartika, another CERAH Policy Strategist, Wicaksono Gitawan, highlighted the amount of funds allocated for fossil projects. According to him, coal gasification’s investment value into DME, estimated at Rp 180.8 trillion, should be used to fund clean energy projects.
“This is a big number. If used to build renewable energy infrastructure, it would have a much more positive impact on Indonesia’s long-term energy security,” said Wicaksono.
Financial impact for SOEs
The funds managed by Danantara come from various sources, including state budget efficiency and SOE strategic assets. Currently, seven SOEs are listed as entities involved in managing Danantara, namely PT Perusahaan Listrik Negara (PLN), PT Pertamina, PT Telekomunikasi Indonesia (Telkom), PT Mineral Industri Indonesia (MIND ID), PT Bank Mandiri, PT Bank Negara Indonesia (BNI), and PT Bank Rakyat Indonesia (BRI).
With total funds under management reaching USD 900 billion, reliance on long-term investments can affect the country’s liquidity. National economic stability could be jeopardised if the projects financed suffer losses or fail to deliver the expected returns.
“SOEs whose assets are managed by Danantara could lose some control over their own investments. This could have a major impact on these companies’ capital structure and competitiveness,” Sartika added.
The importance of transparency and accountability
In addition to more appropriate project selection, Sartika also emphasised the importance of strong governance in managing sovereign wealth funds (SWFs) such as Danantara. Without strict transparency and accountability, the risk of misuse of funds and conflicts of interest could increase.
“We must learn from the 1MDB corruption scandal in Malaysia. The SWF must be managed transparently so that it does not become a tool for the political or business interests of a few parties,” he said.
However, the regulations governing Danantara have raised new concerns. Article 3Y of Law Number 1 Year 2025 on SOEs states that the agency’s ministers, organs, and employees cannot be held legally responsible for losses as long as they can prove that the decisions taken were not their fault or negligence.
“This provision has many loopholes and is difficult to prove, especially if the supervisory system is still weak. With rules like this, the risk of corruption is even greater,” Sartika concluded. (Hartatik)
Banner photo: Image generated by OpenAI’s DALL·E via ChatGPT (2025)
