Sector
Finance
Indonesia’s financial sector has been flourishing over the past half decade. The COVID-19 pandemic period, while being a time of austerity for most sectors, led to revolutionary innovations in Indonesia’s financial services industry, particularly in fintech. From December 2020 to December 2022, total assets of the fintech sector grew by 48.54 percent from 2020 to 2022. This growing trend continued even after the pandemic lockdowns ended, as total assets in fintech grew by 30.8 percent from December 2022 to December 2023.
View moreOther Sectors
Finance
Indonesia’s financial sector has been flourishing over the past half decade. The COVID-19 pandemic period, while being a time of austerity for most sectors, led to revolutionary innovations in Indonesia’s financial services industry, particularly in fintech. From December 2020 to December 2022, total assets of the fintech sector grew by 48.54 percent from 2020 to 2022. This growing trend continued even after the pandemic lockdowns ended, as total assets in fintech grew by 30.8 percent from December 2022 to December 2023.
With fintech paving the way forward, traditional banking followed suit by revolutionizing its services. From 2022 to 2023, the banking industry’s fund distribution increased by 6.28 percent, source of funds increased by 6.33 percent, and total assets in the industry grew by 6.98 percent, reaching a total of US$8.22 trillion. Moreover, even regional banks have been benefitting from this wave of innovation. For the same period from 2022 to 2023, the regional banking sector saw a 7.67 percent in distributed funds, an 8.08 percent increase in source of funds, and a 7.52 percent increase in total assets, reaching a total of US$137.96 billion.
Innovations in Indonesia’s finance sector extend beyond financial services. On September 2023, the Indonesian monetary authority, Bank Indonesia (BI), introduced three pro-market monetary instruments that function as short-term fixed income securities with high coupon rates. The three instruments, SRBI, SUVBI, and SUVBI, were able to collect Rp 409 trillion (US$25.2 billion), US$2.31 billion, and US$387 million, respectively.
Particularly in the case of the SRBI, this instrument represented an innovative way to attract capital flow from abroad during a period of high credit costs and slow investment. Approximately 20.77 percent, or Rp 85.02 trillion (US$ 5.26 billion), of the total outstanding SRBI were owned by non-Indonesian residents, underscoring the SRBI’s success as a monetary instrument.
Even when compared to other countries in the same region, the Indonesian finance sector stands out for its stability against fluctuations. Throughout 2023, the global cost of credit was high due to hawkish Fed policies made to curb US inflation, resulting in a stagnation of capital flow on a global scale. Entering the second quarter of 2024, the composite index of many Southeast Asian countries such as Singapore and Thailand recorded price decreases compared to the same period last year, reaching -3.96 percent and -13.9 percent on the Straits Times Index (STI) and the Bangkok SET index, respectively. Meanwhile, the Jakarta Stock Exchange Composite Index (JKSE) recorded a price increase of 5.18 percent for the same one-year period.
In summary, the Indonesian financial sector stands out for its stability and consistency, maintaining growth through innovation even during periods of austerity or global uncertainty. This consistency is also reflected in its GDP, which grew by 7.4 percent from 2022 to 2023, contributing roughly 4.16 percent to the national GDP in 2023.
Latest News
PT Nations Petroleum, an oil and gas company linked to businessman Hashim Djojohadikusumo, President Prabowo Subianto ’s younger brother and special climate and energy envoy, has committed US$103.3 million to three years of work on the Natuna D-Alpha block, prompting questions over why the relatively new player is willing to take on such an ambitious bet.
One of Indonesia’s largest undeveloped gas resources that has eluded development for decades, the block presents formidable technical and commercial challenges, including gas containing more than 70 percent carbon dioxide (CO2).
The scale of Nations Petroleum’s commitment is striking, not only because of the block’s complexity but also because the company lacks the track record of the major international oil companies that have previously sought to develop it.
Industry players describe Nations Petroleum as a new and unproven player that would likely need a major international partner to provide the technology and financing required to develop D-Alpha. This raises questions about the company’s financial and technical capacity to take on the block, as well as speculation over why it is willing to commit so much to a project that has defeated previous development attempts.
The block’s history dates back to 1980, when Pertamina and ExxonMobil subsidiary Esso Natuna signed a production sharing contract (PSC). Pertamina and Esso Natuna initially held equal 50 percent shares but in 1996, Pertamina transferred a 26 percent interest to ExxonMobil’s Mobil Natuna, leaving the United States major with a 76 percent stake and Pertamina with 24 percent.
The contract was eventually terminated after the contractor failed to submit a feasibility study demonstrating D-Alpha’s commercial viability per the agreed deadline.
The government handed responsibility for the block to Pertamina in 2008, seeking to revive its development with international partners. In 2010, Pertamina formed a consortium with ExxonMobil, France’s Total and Malaysia’s Petronas.
Petronas was replaced by Thailand’s PTT Exploration and Production (PTTEP) in 2012 and then Total subsequently withdrew, leaving behind a trio. By 2017 ExxonMobil and PTTEP had also withdrawn, bringing the consortium to an end and leaving Pertamina as the sole party.
The contrast with Nations Petroleum is considerable: ExxonMobil, Total, Petronas and PTTEP were all established international energy companies with extensive upstream operations and experience in technically challenging projects, yet they were unable to develop D-Alpha for commercial production.
The entity with the closest relevant experience within Hashim’s Arsari Group is PT Nations Natuna Barat, which is acquiring a 75 percent non-operated working interest in the Duyung PSC, which is developing the Mako gas field in the West Natuna basic. But that experience is both indirect and considerably smaller in scale than what D-Alpha requires.
The scope of the challenge also helps explain another view among industry players: that Nations Petroleum’s role in the block could primarily be as a source of capital rather than as the lead in its development. This has in turn fueled questions about the company’s ability to develop the block without a major international partner.
Hashim’s blood ties to Prabowo and his standing as a longtime political ally has added another layer of scrutiny, leading to speculation that political considerations may have played a role in awarding the block to Nations Petroleum.
Nevertheless, Pertamina cannot be expected to develop Natuna D-Alpha alone. The block presents an unusually difficult development proposition, while Indonesia has a strong interest in bringing its large undeveloped gas resources into production as domestic energy demand rises and oil and gas output remains under pressure.
Increasing domestic production is also an important part of the government’s broader energy security agenda, making D-Alpha strategically important despite the challenges involved.
The scale of the potential development is reflected in a 2010 estimate from the Energy and Mineral Resources Ministry pointing to a required investment of around $52 billion. This estimate, released before the doomed four-way consortium attempted to advance the project, indicates the formidable technical and commercial challenges involved, including the field’s roughly 70 percent CO2 content.
For now, Nations Petroleum’s involvement remains focused on exploration and early-stage appraisal. The company will conduct geological and geophysical surveys and process 3D seismic data covering 591 square kilometers of the Natuna D-Alpha block. It will then carry out additional exploration studies, including drilling an appraisal well and an exploration well.
The results of this preliminary work will help determine whether Nations Petroleum can develop D-Alpha beyond the cycle of failed attempts that has defined the block for decades.
