by Andrea Ferrario

The Indonesian consortium that controls 60% of the route inaugurated two years ago recorded losses of over 0 million in 2024. This year, losses are expected to increase further. The project is part of the Belt and Road Initiative, but from the outset it appeared to be economically unsustainable. It is not the only case among the major railway projects in Southeast Asia. Nevertheless, Prabowo is intensifying his embrace of Beijing.

Milan (AsiaNews) - A few months ago, the director general of the Indonesian state railway company made a metaphorical statement before a parliamentary committee that quickly made the rounds of Asian chancelleries.

The Jakarta-Bandung high-speed railway, christened Whoosh and inaugurated just two years earlier amid ceremonies and proclamations as the first connection of its kind in Southeast Asia, has now become, in his words, a ‘time bomb’.

This railway line, one of the flagships of China's Belt and Road Initiative, has become an unsustainable burden on Indonesia's public finances, with losses accumulating and no prospect of a reversal of the trend.

The Indonesian consortium that controls 60% of the project recorded losses of over 0 million in 2024, a figure set to increase in 2025, while the historical accumulation of liabilities has reached levels that jeopardise the sustainability of the entire operation.

Beijing has lent over billion through the China Development Bank to finance a project whose cost has risen from billion to .3 billion. The initial idea seemed simple and attractive. Once operational in October 2023, the line would generate enough revenue to repay the debt without burdening Indonesia's public finances.

The reality has turned out to be very different, with daily passenger numbers remaining at a third of initial forecasts (50-76,000 passengers per day), while estimated annual revenues are not even enough to cover the interest on the debt, which exceeds £70 million per year.

Jakarta is now forced to renegotiate the terms of the agreement with Beijing, and the investment minister has spoken openly of a “comprehensive” restructuring of the project as the only way to avoid default.

Formally, the finance minister continues to rule out the use of public funds, but in substance it seems increasingly unlikely that the Indonesian state will remain completely uninvolved in the operation.

Meanwhile, the situation has become even more complicated with the opening of an investigation by the anti-corruption agency and accusations by some MPs that the cost per kilometre of the line is almost triple the Chinese standard.

Why it all went wrong

The crisis surrounding the Whoosh project has its roots in questionable decisions made ten years ago. In 2015, the Indonesian government opted to build a high-speed line between Jakarta and Bandung, two cities just 142 kilometres apart.

The alternative proposal, a link between Jakarta and Surabaya, would have covered 780 kilometres, connecting the main arteries of the Javanese economy. This route accounts for 60% of Indonesia's gross domestic product and connects cities such as Cirebon, Semarang and Solo. It would have revolutionised transport and logistics on the island, but a smaller and faster project was preferred, at least on paper.

The second crucial decision concerned the choice of partner. Japan had submitted a detailed offer based on Shinkansen technology, with a 40-year loan at 0.1% interest, accompanied, however, by a request for explicit state guarantees.

The Chinese proposal promised faster times, lower costs and, above all, no direct involvement of the public budget. The administration of Joko Widodo, then president, chose to focus on Beijing, but in hindsight, the promises of self-financing appear unrealistic.

Costs rose over time due to delays in construction and technical problems, until it became clear that the project would not be viable without public support. At that point, the government had to provide guarantees and funds, ultimately contradicting the initial premises of a project that had obvious structural flaws from the outset.

The Halim station in Jakarta and the Tegalluar station near Bandung are in fact far from city centres, which drastically reduces the actual time savings compared to conventional transport, while the cost of tickets, around for economy class, is prohibitive for a large part of the Indonesian population.

It would be easy to take refuge in the rhetoric of the Chinese “debt trap”, but the picture is actually more complex and nuanced. Indonesia designed the agreement, managed the construction site and made the main strategic decisions, while Beijing provided technology and capital, agreeing to finance a project with obvious risks.

Both sides were guilty of excessive optimism and a lack of transparency. The Chinese loans were granted at relatively low interest rates, which makes it difficult to talk about loan sharking. However, the issue of possible artificial inflation of costs, as claimed by some parliamentarians, remains open, and it is on this point that the anti-corruption investigation could shed more light.

Growing dependence and illusions of diversification

The failure of the Whoosh project is part of a broader regional picture characterised by similar difficulties in other Southeast Asian countries. Thailand and Malaysia have renegotiated their high-speed rail projects, drastically reducing their dependence on Beijing's financing, while the Philippines cancelled billion worth of rail contracts in 2023 following the deterioration of bilateral relations.

Laos finds itself mired in debt accumulated for a railway line that the Asian Development Bank describes as “a huge contingent liability” with limited economic benefits. Vietnam, too, even as it accelerates its own infrastructure investments in the South China Sea, continues to accept Chinese loans for railway projects worth billions.

Despite the high-speed railway sinking, President Prabowo Subianto has intensified his embrace of Beijing. His first foreign visit as head of state was to Beijing, where he praised China as a ‘civilisation that seeks harmony,’ and this year Indonesia joined the BRICS and the New Development Bank.

Prabowo attended China's military parade last September, the first Indonesian leader to do so, and signed the largest defence agreement with Beijing, the purchase of J-10C jets for billion. Jakarta is now considering issuing ‘panda bonds’ for the first time, i.e. bonds denominated in yuan, a choice that reflects the growing weight of economic ties with Beijing.

Prabowo proclaims his willingness to diversify, inviting Australia and the United States to invest in critical minerals, but so far his moves remain symbolic, while new projects continue to depend on Chinese technology and financing.

This is a dynamic that does not only concern railways or the extractive industry. In Sulawesi and the Moluccas, Chinese-backed nickel mines have sparked local protests over the destruction of ecosystems, river pollution and working conditions in smelters.

Movements such as Save Sagea are fighting against mining concessions that threaten areas considered sacred by local communities. The model is reminiscent of what is happening in Africa, where Chinese mining projects often leave a trail of environmental degradation and social tensions.

The lesson of the Whoosh project is clear: what initially appears to be a quick win can turn into a long-term trap. The Indonesian government is now considering extending the line to Surabaya, a project that should probably have been a priority from the outset.

Prabowo's ability to preserve Indonesia's strategic autonomy will be tested by an increasingly marked economic dependence on Beijing. The high-speed railway emerges as both a financial and political test of the country's real sovereignty in its attempt to remain equidistant between the great powers.

 

• Indonesia
• China
• ferrocarriles
• Yakarta
• Bandung