Muhammad Havin Maulana Akbar

L201329190406
Personal Essay

Indonesia-China Energy Trade: An Opaque Mirror

for
Good Governance Implementation
This essay tries to study how Indonesian strategy used in free trade with China,
especially energy problem. The countries currently faced with the phenomenon of
interdependence, a condition in which no country in the world that does not require any other
country. International trade is one indicator of how a country interrelated and interdependent
with other countries. International trade is simply the exchange activity of capital, goods and
services across national boundaries or territories. The reason why a country held a trade with
other countries is due to the comparative advantage of a country on one or a few commodities,
there is also a endowment factors owned by a country, because the ownership of natural
resources or certain advantages not owned by other countries and vice versa. Therefore,
international trade is needed as an instrument for countries to achieve national
interests .Although international trade has become an instrument used the countries in the world,
but this is not enough, because in international trade heavily controlled by the political aspects
and powers of other countries involved in the trade . As a result there are some barriers faced by
countries to do international trade, so it takes free trade to minimize barriers that exist in
international trade.
The phenomenon of free trade has emerged in the 1950s when European countries agreed
to hold free trade coal into their common needs.
Free trade is international trade that has no barriers and restrictions again. Each country
in the world is seeking an increase in the domestic country's development, especially developing
countries. In this context, economic growth and development can not be separated from the
country necessity for energy supply. For developing countries to developed countries, the energy
be a capital base of economic activity that can generate profit and increase economic growth. As
for the most sought energy is fossil energy. that is the most important because the energy status is
nonrenewable. Generally, Indonesia is rich country in energy resources, so it can be used as a
comparative advantage in free trade, but Indonesia's oil reserves until now decreased arround
12.59% from 9.61 miliarbarel in 2000 , arround 8.4 barrels in 2007 ,this was followed by gas
reserves (reserves actual and potential) of 165 trillion cubic feet in 2007 were also decreased by
3,12% from 2000.
Indonesia and China energy cooperation has generate some contracts and cooperation that
has been started 1993 until 2008 which resulted in agreement that Indonesia will produce large
amounts of energy as response to fund that has given China. Therefore, it can be mentioned that
the energy trade between Indonesia and China as a form of free trade.

Muhammad Havin Maulana Akbar

L201329190406
Personal Essay

In September of 2002, Indonesia agreed to work 25-year contract from Tangguh PapuaIndonesia-China's Fujian Province, the project was won by the Chinese government based
multinational company (CNOOC). The consequences of the agreement, Indonesia will provides
liquefied natural gas as much as 2.6 million metric tons per year for 25 years, the implementation
of this agreement has been carried out starting in 2008. In direct energy trade between Indonesia
and China can be categorized into free trade no longer get obstacles in the process. In fact, this
cooperation is only worth US $ 8.5 billion for a long enough period of time, 25 years.
In 2008 there was a surge in the price of liquefied natural gas in the world and it is the
government urged the public to hold a renegotiation of the price which was considered too low.
Indonesian government should reconsider the background over China as the country increasingly
rapid development of not only has economic, but also political objectives.
Chinese political objectives can be assessed from Energy security policy of China,
especially in parts of outward looking. China uses state-owned oil company as an effort to
increase domestic self-sufficiency. The state energy company placed as a major actor in
providing the energy needed.
In 1998, the Chinese government organized the assets of natural gas and oil to 3
companies state that:
China National Petrochemical Corporation (Sinopec)
The China National Off-shore Oil Corporation (CNOOC)
The China National Petroleum Corporation (CNPC)

All of this companies operate outside of china as an agent of China's energy security policy
implementers. CNPC focused on the exploration and production of gas, while the Sinopec be on
duty in the refining and distribution of oil, and CNOOC focused in exploring sources of oil
reserves and opening new of energy fields. If seen overall China's energy policy, it can be seen
that China not only wants its energy needs met, but also to make good relationship with
Indonesia for approach to ASEAN(Association Of Southeast Asian Nation) .
Why? Because China currently is the largest exporter in the world, So China need
market to distribute their products. In this case China considers Indonesia as a key
actor of ASEAN. More important is expansion efforts of Chinese power in the
Malacca Strait sea lane where 50% of shipping crude oil is transported through this
strait, 60% of the sail is the Chinese ship, and 80% of China's crude oil imports are
transported through this strait. In addition, Indonesia also can be a buffer zone for
China as a supporter of good relations with the countries of the Middle East. On the
other side, the response of Indonesia to face the challenges of China, and energy
scarcity conditions that someday will be not able to properly regulated. Actually, the
problem of energy in Indonesia is on the problem of management of domestic
governance. Government agencies through the body of energy and mineral
development has not had a definite strategic vision. Decisions made still tend to
short-term and haste, and are not considered carefully. And also for communication
and socialization and government decision-making to the people of Indonesia. When
compared with the national company of China, Indonesia only has Pertamina (the

Muhammad Havin Maulana Akbar

L201329190406
Personal Essay
state oil company) and Natural Gas Company states that do not have absolute
freedom.

Energy problem is an important issue for every country. Without energy, human activities
will be halted. Indonesia's oil reserves of 9 billion barrels would only last up to 18 years if no
additional exploration, as well as for natural gas, Indonesia is expected to only have enough
reserves of up to 67 years. According to the author's opinion, the main problem that causes
Indonesian efforts and strategies have not been successful due to the lack of proper direction, in
other words the government of Indonesia has not had the right strategic vision related to energy
security, China has an energy policy with the right estimates and robust strategy. This has been
the main burden of the government. Indonesia's population of around 220 million people can be
considered as a challenge and also an opportunity for the government.
The first challenge is how to provide the best performance for the benefit of the people
are quite numerous and very varied their needs,
Second, increase accountability (in the form of policies and implementations that can be
accounted)
Third, transparency in the process of policy making and implementation of policies to
the public.

Conclusion
The interests of countries that can not be accommodated unilaterally has brought relations
between the countries of interdependent processes. Free trade is a big chance that facilitates
dependency relations of the countries in the world. Energy trade between Indonesia and China
through the agreement made in 1993 until 2008 turned out to not be able to produce the
maximum benefit for Indonesia.