After spending 7.3 Billion USD, Indonesia has officially launched operations of the first bullet train in Indonesia and Southeast Asia earlier this month, marking a milestone in the country’s quest to accelerate infrastructure development.

Background

The high-speed rail, a prestige project for President Joko Widodo and Chinese President Xi Jinping’s Belt and Road Initiative, connects the capital city of Jakarta and Bandung, with the government expecting a positive economic impact on areas along the line due to a more efficient supply chain and flow of people. The train cuts the travel time between the two cities from 3 hours to only about 40 minutes.

The technology is undeniably impressive, offering a smooth ride for passengers. For 250,000 rupiah, it is quite affordable given that a car ride to the city will often cost more in terms of fuel, and a bus costs half the price but at quadruple the travel time. But despite this impressive technology the government’s projected ‘economic benefits’, many of Indonesia’s citizens are skeptical. They are right to be.

Bumps on the rail

The project has long been troubled, even from the signing of its deal. It is widely known in the country that the project has been delayed and has run over budget. But even then, it is unclear how big the size of the overrun is. It is US$982 million according to China, and $1.49 billion according to Indonesia. There were too many loopholes in the contract when it was signed in 2016, clearly because Indonesia was so ambitious to realize the mega project as soon as possible.

As a result, Indonesia has had trouble dealing with the cost overruns. In April of 2023, Indonesia requested an additional $560 million loan from China Development. According to the contract, Indonesia is responsible for bearing 60 percent of any additional cost while China has the rest, a high cost to pay for a nation with already bloated public finances from pandemic-related costs. Worse, China has increased the interest rate on its loans from the agreed 2% in 2016 to a whopping 3.4%.

This is a dangerous situation for Indonesia. Many of these things resemble previous Belt and Road projects in other countries that ended up as debt traps. Sri Lanka’s failed Hambantota Port development and Uganda’s Entebbe International Airport expansion project, have been described as a part of Chinese ‘debt-trap diplomacy.’ Both of these projects saw China growing increasingly aggressive with their terms as the progress went on, with the former project being seized by the Chinese government for going over budget.

At present, Indonesia still has a strong ability to service its Chinese debt. But with Indonesia relying on China as its primary source of development aid, it will find itself in a precarious position if it does not learn from its failure to sign a clear-cut deal with China.

But even if this does not end up as a debt trap, it is unclear how the project will become profitable or boost the economy. Even in the very ideal situation where KCIC meets its goal of having 31,000 passengers a day, at 250,000 rupiah per passenger, it will take at least 4 decades for the project to be profitable.

As the country’s incumbent president leaves office, it will be very hard for him to justify this project. Whoever becomes the next president can easily exploit the train mega project as a tool to delegitimize Jokowi’s achievements, especially in infrastructure. Unless Jokowi can prove this project was more beneficial than other infrastructure like tolls and a subway that the citizens have been asking for, this will be a bad stain on his legacy.