KNews.id- Indonesia’s government has been forced to dip into the state budget, something it said it wouldn’t do, to pay for cost overruns on China’s signature Jakarta-Bandung fast-rail project, which continues to be dogged by construction delays and land acquisition issues.
Launched in 2015 in the second year of President Joko Widodo’s presidency, the price tag for the 143-kilometer rail link has ballooned from US$6.07 billion to more than $8 billion with a completion date now set for late 2022, two years behind schedule.
Funded with a $4.5 billion Chinese loan, the project falls under Beijing’s Belt and Road Initiative (BRI) which a new detailed report by the AidData research unit at Virginia’s William & Mary College says has left Indonesia and many other countries saddled with a mountain of often unreported debt.
A comprehensive spreadsheet accompanying the AidData report shows that China committed more than $34.9 billion in financial aid to Indonesia between 2000 and 2017, designated as either official development assistance (ODA) or other official flows (OOF).
The researchers say Indonesia has $4.95 billion of sovereign debt exposure to China and $17.28 billion in what they call “hidden” public debt, which has been incurred by state-owned companies or other government entities without sovereign guarantees.
That means fully 78% of Indonesia’s debt to China is off the government’s books, amassing what a Koran Tempo newspaper editorial has ominously described as a “ticking time bomb” that could impact the country’s future economic development.
China’s weighted average borrowing terms, according to AidData team leader Brad Parks, are a 4.06% interest rate, a 15-year length of maturity and a 2.7-year grace period. The railway loan carries a 2% interest rate to be paid over 10 years.
By comparison, an Organization for Economic Cooperation and Development (OECD) study shows that ODA loans by all OECD members average out at an interest rate of 1.1%, with a maturity period of 28 years.
Analysts note that about half of the Chinese-funded projects have a “round trip” element under which the money being lent goes back to China through contract payments to Chinese or mixed Chinese-Indonesian entities, many of which use imported Chinese labor. (Ade/asistrin)
