Indonesia Faces Potential Bailout for Chinese-Built High-Speed Rail
A Chinese-funded high-speed railway in Indonesia is struggling with significant debt and may require a government bailout, raising questions about the viability of some projects under China’s Belt and Road Initiative.
The $7.2 billion railway, dubbed Whoosh, connecting Jakarta and Bandung, has seen costs rise by approximately 20 percent since its 2015 inception. KCIC, the company operating the line, is currently operating at a loss due to interest payments, foreign exchange losses, and depreciation, despite generating sufficient revenue to cover operational costs. Passenger numbers have fallen short of initial projections, with 5.1 million passengers served between January and October of this year. This situation highlights the challenges of large-scale infrastructure projects in the region and the potential financial burdens they can create.
Indonesia’s Investment Minister Rosan Roeslani is reportedly seeking concessions from Chinese lenders, including extended repayment terms, reduced interest rates, and a potential conversion of the loan to yuan, though these discussions remain ongoing. A probe into potential corruption related to the project has been launched by the national anti-corruption agency, with a former minister claiming construction costs reached $52 million per kilometer, though data from the Transit Costs Project suggests the average cost of high-speed rail in China is approximately $47.7 million per kilometer. The debate over the project’s financial viability comes as China’s Belt and Road Initiative investments have surged again after a period of scaling back, as detailed in a report by the Lowy Institute.
Former Indonesian President Joko Widodo has maintained that the railway is a public service aimed at addressing congestion and that profit is not the primary objective, drawing parallels to Jakarta’s bus and metro systems which also rely on subsidies. Officials are currently debating who will ultimately bear the financial burden of KCIC’s losses, with a wider discussion underway regarding the project’s original purpose and financial planning.
The Indonesian government is expected to continue negotiations with Chinese lenders and assess the findings of the anti-corruption investigation in the coming weeks.
