Indonesia’s High-Speed Train Project Faces Debt and Safety Concerns

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Indonesia is set to launch its first high-speed train service in October, connecting the capital Jakarta with the city of Bandung in West Java. The project, which is part of China’s Belt and Road Initiative, has been delayed by several years and faced cost overruns and safety issues. Some analysts have warned that the project could pose a debt trap for Indonesia, which is already struggling with a high fiscal deficit amid the COVID-19 pandemic.

A Milestone for Indonesia’s Infrastructure Development

The Jakarta-Bandung high-speed rail line is expected to be the first of its kind in Southeast Asia, with trains running at up to 350 kilometers per hour. The project aims to reduce travel time between the two cities from more than three hours by car to less than an hour by train. The project also promises to create more than 40,000 jobs and spur economic growth in the regions along the route.

Indonesia’s High-Speed Train Project Faces Debt and Safety Concerns
Indonesia’s High-Speed Train Project Faces Debt and Safety Concerns

The project is a priority for Indonesian President Joko Widodo, who has been seeking to boost infrastructure investment in the country since he took office in 2014. He has also inaugurated other major projects, such as Jakarta’s new sky train and subway systems, which are expected to ease traffic congestion and improve public transportation in the capital.

The high-speed rail project is seen as a symbol of Indonesia’s strategic partnership with China, which has been expanding its economic and political influence in the region through its Belt and Road Initiative. China has provided loans and technical assistance for the project, as well as supplying most of the equipment and workers. The project is funded by a consortium of Indonesian and Chinese state-owned companies, known as PT Kereta Cepat Indonesia China (KCIC).

A Burden for Indonesia’s Debt and Budget

However, the high-speed rail project has also faced many challenges and controversies since it was launched in 2015. The project was initially expected to be completed by 2019, at a cost of $5.5 billion. However, it has been delayed by various operational issues, such as land acquisition, environmental permits, design changes, and coordination among stakeholders. The project’s budget has also ballooned to $7.3 billion, due to rising costs and currency fluctuations.

To cover the cost overruns, President Widodo agreed to use state funds to help finance the project, overriding a 2015 decree that barred the use of state funds in the construction of the railway. He also sought out an additional $560 million loan from China Development Bank, which increased Indonesia’s debt exposure to China.

Some analysts have expressed concerns that the project could become a debt trap for Indonesia, which is already facing a high fiscal deficit and debt burden amid the COVID-19 pandemic. According to the World Bank, Indonesia’s fiscal deficit widened to 6.1% of GDP in 2020, while its public debt rose to 37% of GDP. The government has also allocated $43 billion for its COVID-19 response and recovery program in 2021.

If the high-speed rail project fails to generate enough revenue or faces further delays or accidents, it could result in debt defaults or renegotiations that could harm Indonesia’s credit rating and sovereignty. Some economists have argued that the project is not economically viable or sustainable, given the low demand and high fares for the service. They have also questioned the social and environmental impacts of the project, such as displacement of local communities, loss of agricultural land, and damage to natural habitats.

A Risk for Worker Safety and Public Trust

The high-speed rail project has also raised worker safety concerns, after several accidents and deaths occurred during its construction. In December 2022, two Chinese workers died after falling from a viaduct at a construction site in West Java. In March 2021, another Chinese worker died after being electrocuted at a power station in Jakarta. In February 2021, a crane collapsed at a construction site in Bandung, injuring four workers.

These incidents have sparked public outrage and criticism over the poor safety standards and supervision of the project. Some activists have accused KCIC of violating labor laws and human rights by exploiting foreign workers and neglecting their welfare. They have also demanded more transparency and accountability from the government and the consortium regarding the project’s progress and problems.

The high-speed rail project is expected to undergo a trial launch in September, before becoming fully operational in October. However, it remains unclear whether it will be able to meet its deadline and expectations, or whether it will face more setbacks and challenges. The project’s success or failure will have significant implications for Indonesia’s economic development, debt management, and strategic relations with China.

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