The Gas Pipeline of Pertamina - Photo by Pertamina

JAKARTA (TheInsiderStories)–Yesterday, Indonesian government has decided that it’s state-owned oil and gas company PT Pertamina will take over operation of the Rokan oil block, the country’s second-biggest crude producing field, once PT Chevron Indonesia’s operating contract there expires in 2021.

Rokan has been a focus area for Chevron, which asked Indonesia earlier this year to extend its operating contract beyond 2021.

Indonesian government decision to award the block to its own company showed a growing trend in natural resource nationalism in Indonesia under the current Joko Widodo administration.

Resouce nationalism is characterized by the tendency of states to take direct and increasing financial, regulatory and sometimes operational control of the economic activity in the natural resource sector.

Previously, on July 12, 2018, Indonesia state-owned miner PT Indonesia Asahan Aluminium or Inalum has signed a head of agreement with the US ‘ Freeport McMoran to acquire a 51.38 percent share worth 3.85 billion in the biggest Grasberg copper and gold mine in Papua.

The transaction is expected to complex in the next two month.

Beside Rokan oil and gas block, and Grasberg gold mine, on January 1, 2018, Pertamina also took over Indonesia’s largest gas block Mahakam from France’s Total E&P Indonesie and Japan’s Inpex Corporation.

The move carried out through Pertamina ‘subsidiary PT Pertamina Hulu Indonesia that end the tenure of the two foreign companies operating the block since October 6, 1966.

Joko Widodo’s government policies on natural resources have attracted praises from Indonesian people, his supporters and also recognition from his political rivals alike ahead of 2019 Presidential Election.

There are numbers of reasons why the current government tend to opt resource nationalism than neoliberalism in which the nation’s natural resources are controlled by foreign Multi-National Companies.

First, Ideological reasons. The feeling of anti-foreign domination of Indonesia economy has existed since the early days of Independence. Indonesia’s first President who established the Indonesian National Party, the origin of the current Widodo’s ruling party Indonesia Democratic Party of Struggle since the beginning had a strong anti-colonialism and anti-Western capitalism view. After the independence, Soekarno closed the door for all foreign investments in natural resources and nationalized all Multi-National Companies assets in Indonesia.

Soekarno also promoted a state-led economy by putting a clause in the 1945 Constitution says that the land, the waters and the natural resources within shall be under the powers of the state and shall be used to the greatest benefit of the people.

Second, Indonesians people for a long time have been felt that they have not enjoyed the benefits derived from their natural resources. Under 32 years of the Western-backed authoritarians rule of President Soeharto, Indonesian people saw their national wealth was controlled and managed by foreign Multi-National Companies with small benefits for local people in terms of social justice. For example, after almost 50 years of its operation in Indonesia, the people of Papua still live in poverty, lack of education and underdeveloped. The control of the national resources will guarantee the distribution of wealth for all the people.

The third, election. Ahead of 2019 election, President Joko Widodo needs a reason to boost his popularity. His resources nationalism policies will appease many Indonesians felt structurally impoverished by the neoliberalism and longtime open – market stance of the Indonesian economy. These policies certainly will boost his popularity and electability.

While resource nationalism will be seen by many Indonesians as a good measure for them, at the same time foreign investors see the trend as a bad signal for them. In a statement released today, the US oil and gas company Chevron said that it is disappointed to hear the news of Indonesia ‘s Pertamina will take over the control of the Rokan block.

The government stance to nationalize  Indonesia ‘s resources will send a bad message to foreign investors on the sustainability of their investment here in Indonesia at the time when Indonesia is in dire need of foreign investment.

TIS Intelligence Team

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