An interview with Pahala Mansury: Opportunities in sustainable energy transition in Indonesia

As part of our commitment to sustainability and being a catalyst for net zero, McKinsey aspires to help accelerate sustainable inclusive growth in the world. We have committed to helping clients decarbonize, build climate resilience, and address sustainability challenges to reach net zero by 2050. Tracking progress in areas across the globe is a key part of the McKinsey’s strategy to achieving this goal. In a recent fireside chat, four McKinsey leaders—Rajat Agarwal, coleader of McKinsey's capital excellence work in Indonesia; Kaushik Das, managing partner, Southeast Asia; Guillaume de Gantès, leader, Financial Services Practice in Southeast Asia; and Daniel Pacthod, global coleader, McKinsey Sustainability—talked to Pahala Mansury, Indonesia’s Vice Minister of Foreign Affairs, about Indonesia’s sustainability strategy.

Pahala Mansury spoke about Indonesia’s clean energy transition and shared his views on what it could take to achieve energy security in ASEAN. Indonesia is working toward transitioning to sustainable development practices that will benefit not only its citizens, but the region and the world. To combat climate change and keep global warming within a 1.5° C limit, Indonesia has committed to reduce its emissions and become carbon neutral by 2060, partly through a Just Energy Transition Plan agreed with G20 nations. In addition, Indonesia has recognized the need for stronger relationships and cooperation between ASEAN countries and the broader Indo–Pacific to unlock the green economy. A step toward achieving this goal has been the ASEAN–Indo–Pacific Forum (AIPF) that Indonesia organized and hosted in September 2023.

An edited version of the interview follows.

McKinsey: As Indonesia’s Vice Minister of Foreign Affairs, how has your view on energy security evolved?

Pahala Mansury: I have found that energy security, climate change, and the energy transition are even more relevant than before. The current geopolitical tension has made countries rethink their energy strategies, while volatile energy prices have driven inflation in food prices.

Indonesia is projected to be among the top-five largest economies by 2045, with the population reaching approximately 324 million people. With that in mind, a particular focus of our strategy will be accelerating the energy transition to ensure energy security and, at the same time, meeting our emissions reduction target. We have set a goal to reduce emissions by 32 percent in 2030 with national capacity and 42 percent with international support. This will affect Indonesia significantly, as we import a large portion of our energy, particularly for mobility and industrial needs. This tranformation is a big goal to tackle, but I prefer to look at it as a “glass half full” scenario because I believe we can achieve it while raising economic prosperity for Indonesia.

Indonesia can be part of the solution for the energy transition by leading the discussion and implementation and forging collaboration.

McKinsey: What role can Indonesia play in fostering ecosystem development to advance energy security, the energy transition, and broader technology enablement goals in Southeast Asia and beyond?

Pahala Mansury: Indonesia has been actively fostering cooperation at a bilateral, regional, and international level to support the energy transition.

At a national level, Indonesia has invited national and international private investment through its blended finance scheme by issuing green bonds and green sukuk. The scheme has been created to meet our goal of new and renewable energy reaching 32 percent in the energy mix in 2025 and 31 percent in 2050.

At the regional level, Indonesia is advancing cooperation in ASEAN, as well as Indo–Pacific, through the ASEAN Power Grid, the electric vehicle (EV) ecosystem, and other projects.

At a bilateral level, we are currently exploring cooperation on the energy transition and energy security with traditional partners such as China, Japan, and South Korea (which are the biggest investors in the country’s energy sector), as well as other countries such as Australia, Germany, and the United States. Then, at a multilateral level, we have the Just Energy Transition Partnership (JETP), in which the country will define pathways to accelerate the energy transition, supported by international partners.

Indonesia also needs international cooperation, not just to catalyze financial resources to support the energy transition, but also to pool other resources, including knowledge and technology.

With regard to technology, we are looking to international organizations and partners to invest in and bring their technology to leverage our existing markets and resources, as technology is a challenge that Indonesia faces with regard to energy security. I hope that science, technology, engineering, and math (STEM) education in Indonesia will be developed in anticipation of downstream technology, such as the production of refineries or even the development of green data centers. We need to ensure that in five to ten years’ time, Indonesia is not lagging global knowledge and capability.

Indonesia has recognized the need for cooperation between ASEAN countries and the broader Indo–Pacific to unlock the green economy.

McKinsey: Describe how Indonesia, ASEAN, and the broader Indo–Pacific can collaborate more to drive common growth in economic inclusiveness and advancement and social development.

Pahala Mansury: We have recognized ASEAN as the epicenter of growth in Indo–Pacific and that we need to collaborate better to foster effective economic integration. To this end, ASEAN is putting together the Community Vision 2045, in which we look at the megatrends, opportunities, and challenges facing the region beyond 2025. This collaboration will ensure that we can develop a scalable green infrastructure in the future and become part of the global supply chain.

I think that other countries could look to us in the energy transition as Indonesia has potential to help solve some of the region’s and world’s climate issues―for example, it has vast nickel reserves to support the creation of an EV ecosystem, the capacity to build green molecules (including green hydrogen and green ammonia), and the availability of renewable energy sources such as geothermal and solar. In addition, it also has one of the largest nature-based solutions potential globally.

McKinsey: What are some of the leadership lessons you have learned during your career?

Pahala Mansury: Number one is to get your vision to be shared and accepted by other leaders. As a leader, guiding mindset change is paramount. Stakeholders need to buy into your vision. Then, make the vision more concrete, more measurable. I come from a finance background, so I appreciate the value of targets and KPIs. But, at the same time, we can’t spend too much time refining calculations. So, lesson number two is to get started and move to action. For example, emissions’ reduction is very complex, but rather than spend a lot of time discussing calculations, we just need to start doing what is right. And, number three, leaders have to be role models and lead from the front. I need to be involved in this directly and be personally invested. I don’t just think about today, this moment—I remind myself that we are embarking on a 20-year journey for Indonesia and the world.

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