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Economic 360 for Indonesia: Growth Prospects and Emerging Opportunities in the Energy Industry
Frost & Sullivan, Oct 2010
Indonesia is a politically stable, democratic country whose policy focus hinges on maintaining economic resilience. Indonesia is rich in energy resources, especially in geothermal reserves. The energy industry in Indonesia is provided an added impetus by Government policy and initiatives such as the Fast Track Program, development of geothermal energy and so on. The growing domestic demand for power is fuelling the growth of the oil and gas as well as the coal industry. Opportunities in the energy industry exist in infrastructure development, technology, and manufacturing equipment such as compressors, coal smelting equipment and turbines.
As the energy industry contributes to GDP significantly, determining the energy mix has become a key issue in most countries. To hedge against global oil price fluctuations, address environment challenges, and ensure long-term sustainability, countries are striving to augment the proportion of renewable energy sources in their energy mix. Developing countries such as Indonesia are facing increased demand for electric power. Indonesia is among the leading exporters of non-renewable energy sources. Power shortages in Indonesia are undermining growth in the manufacturing industry and threatening the environment. This has encouraged the country to seek green energy by tapping its geothermal resources. “The energy industry is assuming a greater role in the Indonesian economy, with domestic energy demand growing at an average of 7.0 percent per year,” notes the analyst of this research service. “Indonesia is the world’s largest exporter of coal and has more reserves of gas (2.70 trillion cubic meters of gas) than oil (8.3 billion barrels) and has a huge potential for renewable energy.”
The global energy industry is poised for growth due to the anticipated adoption of strong policy initiatives. General economic policies greatly impact the energy sector and provide an added impetus when effectively enforced. In addition, stronger trade ties and higher inflows of foreign direct investment (FDI) provide a shot of adrenalin to the industry. The Indonesian energy sector is excessively dependant on fossil fuels and those reserves are diminishing. Consequently, there will be a rise in coal and renewable energy proportion in the energy mix. Political stability in the country will enable the formulation of an appropriate energy strategy for augmenting its energy industry. Unleashing of fast track programs to enhance existing generation capacity and setting up of ambitious targets demonstrate a strong political backing for the energy industry. The Indonesian economy was only moderately impacted by the global economic crisis compared to the other countries in the region. This can be attributed to the country’s strong economic fundamentals, fiscal prudence, and greater focus on domestic demand rather than export.
The Indonesian economy is set to continue on the high growth trajectory in the near future. Significant investments have been channeled into infrastructure, opening up opportunities for adding generation capacity and upgrading equipment. There will be increased adoption of turbines, substations, and transmission and distribution equipment as new power plants and distribution systems become operational. The demand for portable generators is likely to witness an upswing. With the anticipated increase in population and demographic trends such as rapid urbanization, energy initiatives will witness an uptrend. This bodes well for the power supply and distribution systems’ segment. “Technological advancement for this industry in Indonesia is still at a premature stage,” says the analyst. “Particularly in the oil and gas sub-sector, firms that can introduce secondary and tertiary technologies are expected to thrive, as production from the mature fields is declining.” Equipment used for processing and smelting operations of coal will experience higher adoption. The business of oil and natural gas storage is growing rapidly and opening up to the private sector. In Indonesia, the downstream natural gas industries have been fairly liberalized from 2009. Advancements in fuel extraction and energy-efficient technologies will pave the way for well-sustained growth in the energy industry.
Frost & Sullivan’s 360 Perspective on Indonesia: Growth Prospects and Emerging Opportunities in the Energy Industry. This forecast service provides vital inputs for evaluating the attractiveness of the energy industry in the country. Besides enabling decision makers to assess the impact of non-market forces, it also helps in identifying new market opportunities. This service provides a strong base for preparing contingency plans. In addition, investors can assess the industry-specific risk factors as well as conduct a more in-depth micro research.
Benefits
The following benefits are offered by this research:
Identify New Market Opportunities
The economic trends of Indonesia have been analyzed along with their impact on the energy industry. This analysis will provide valuable information to industry participants on opportunities in specific segments of the industry.
Understand Future Industry Trends
This research service gives an insight into Indonesia’s energy industry, discusses its dependence on the prevailing economic scenario, and describes its various infrastructure developments. This will help industry participants to gauge the future direction of the market, enabling them to devise appropriate market strategies to improve market share.
Comprehend the Economic Environment
A detailed analysis of the economic framework of the Indonesian energy industry offers insights into the economic parameters, as they exist, and the future direction of the same. This is particularly beneficial in the case of the energy industry, as these economic indicators form important criteria for the industry’s performance.
Devise Country Entry Strategies
The study provides valuable information and analysis of the strengths and weaknesses of the economy of Indonesia, which are relevant to the energy industry. This is particularly useful in devising country-specific strategies for industry participants.
Evaluate Industry Segment Potential
This research service offers detailed coverage of economic and infrastructure indicators affecting the industry and their future direction. It provides both country and industry trends and forecasts for major variables and is an excellent tool for companies that plan to enter new geographic markets. This will help corporate planners in developing accurate business plans.
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