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One Belt, One Road project in Indonesia plagued by delays, environmental impact, economic uncertainties

One Belt, One Road project in Indonesia plagued by delays, environmental impact, economic uncertainties

Gusty Da Costa

Project delays, the consequences of predatory lending and environmental concerns created by the People’s Republic of China’s (PRC’s) One Belt, One Road (OBOR) plan have plagued the construction of a high-speed railway between Indonesia’s largest city and capital, Jakarta, and its second-largest metropolis, Bandung. Economists, elected officials and environmentalists have voiced apprehensions over the project.

The long-standing dream of a high-speed railway between the cities gained momentum with a plan involving Japan during a feasibility study in 2014. However, control of the project shifted to the PRC in late 2015 as Beijing won the contract during a period of political disarray in Jakarta, Teuku Rezasyah, an international relations lecturer at Padjadjaran University, told FORUM.

“The decision-making process occurred quickly without a public hearing,” said Teuku, indicating that promises from PRC negotiators may have influenced the deal more than the proposed PRC contractor’s ability to complete the project.

Characterized as an OBOR infrastructure project by China’s Ministry of Foreign Affairs, the railway was originally set for completion in 2019. But construction remains underway with completion now forecast for the end of 2022.

The railway project is owned by Jakarta-based PT Kereta Cepat Indonesia China (PT KCIC) — with 60% of its shares held by Indonesian interests and 40% by Chinese, Faisal Basri, an economist at the University of Indonesia, told FORUM. The China Development Bank (CDB) financed 75% of the project’s U.S. $8 billion cost with a 40-year loan. The project, Faisal said, will never break-even.

“The 40-year break-even point was based on the assumption that there would be 60,000 passengers a day,” he said. Currently, just 18,000 train passengers travel between the two cities at ticket prices far lower than the anticipated price for the high-speed train. Moreover, he added, Indonesia plans to move its capital from Jakarta on the island of Java to Nusantara on the island of Borneo, which could reduce passenger demand for the new train.

“There will be no return on investment until the end of time,” he said, adding that the 150-kilometer journey between Jakarta and Bandung, with a stop halfway, is too short to justify the expense of a high-speed train. The project has a cost-overrun of U.S. $2 billion, and PT KCIC had to request an additional loan from CDB, Faisal added. (Pictured: Chinese Communist Party General Secretary Xi Jinping meets with Indonesian officials in Beijing during an April 2019 forum on the One Belt, One Road infrastructure project.)

Andre Rosiade, a member of Indonesia’s Parliament, told FORUM that he foresees a “debt trap” in the making, pointing to countries such as Sri Lanka, where the PRC used debt as a tool to claim assets and to assert operational control.

“Because of the huge amount of loan, the loan can become a binding loan that Beijing can use to dictate terms,” Nikolaus Loy, a lecturer at UPN “Veteran” University in Yogyakarta, told FORUM. “As a result, we have to use Chinese money, technology, labor and steel. Therefore, we are powerless.”

The project is also harming natural landscapes, agriculture and forests, Meiki W Paendong, chairman of Wahana Lingkungan Hidup Indonesia, or Indonesian Forum for the Environment, the nation’s largest environmental nongovernmental organization, told FORUM.

“The environmental impact can be described as a functional land shift resulting in floods and landslides,” he said. “These things are sure to continue to threaten us into the future.”

Gusty Da Costa is a FORUM contributor reporting from Jakarta, Indonesia.