1 ISSUE: 2017 No. 43 ISSN 2335-6677 RESEARCHERS AT ISEAS – YUSOF ISHAK INSTITUTE ANALYSE CURRENT EVENTS Singapore | 27 June 2017 Developing Poor Little Rich Natuna’s Economy Deasy Simandjuntak* EXECUTIVE SUMMARY • Natuna district’s location in the disputed waters of the South China Sea and natural resource wealth enhances its strategic importance for Indonesia. • Despite its significant hydrocarbon and fisheries resources, Natuna district is poor and very dependent on central government transfer payments. Revenues from energy projects off Natuna district go largely to the central government and Kepri provincial government. • This conundrum between natural resource wealth and underdevelopment is behind the recent unsuccessful push by Natuna district to separate from Kepri province. • Revising Indonesia’s complex system of inter-governmental transfer payments, particularly for energy-producing districts, is key to improve Natuna district’s economic performance and position within Kepri province. * Deasy Simandjuntak is Visiting Fellow at ISEAS – Yusof Ishak Institute.