Indonesia Upbeat about OBOR despite Concerns over China’s Growing Clout

Indonesia’s investment chief expressed optimism about the future of China’s massive One Belt One Road (OBOR) infrastructure initiative in his country, despite lingering domestic criticism about Beijing’s growing economic influence.

President Joko Jokowi Widodo has made improving Indonesia’s dilapidated infrastructure a priority, and during his first term embraced Chinese investment and attended the initiative’s 2017 unveiling in Beijing. Multibillion-dollar projects under the OBOR banner in Indonesia feature the construction of a high-speed rail link and dams.

Thomas Lembong, chairman of the National Investment Coordinating Board, said this week he believed that the Chinese leadership will do whatever it takes to make Belt and Road a success.

Well, I’m very happy, because it’s going in the right direction, as far as I’m concerned, he told foreign correspondents in Jakarta on Wednesday.

Lembong also praised Chinese President Xi Jinping for what he described as a stunningly humble posture in responding to criticism about OBOR.

Soon after Indonesia’s presidential and legislative elections in April, Lembong accompanied Vice President Jusuf Kalla to the second international OBOR forum in Beijing. Kalla witnessed the signing there of 23 agreements between Indonesia and China, which Jakarta has described as business-to-business deals.

The president who just won reelection � according to unofficial quick-count projections by independent pollsters � highlighted his infrastructure push during a major post-electoral speech on Thursday. In it, he announced plans to unveil tougher reforms aimed at boosting the economy, as well as lifting Indonesia to developed nation status by 2045.

First and foremost is infrastructure. Equal development must be achieved. Without it, don’t ever dream of Indonesia progressing to be a country with the world’s fourth or fifth economy, Jokowi told the National Development Planning Conference in Jakarta, according to Indonesian news outlet Tempo.

Because he was heading into his second and last term in office due to term limits, he said he was no longer burdened by elections.

So I will do whatever it takes for the country’s sake, Bloomberg quoted him as saying.

Opposition politicians and conservative Muslim groups have accused Jokowi of being too soft on China by opening doors to Chinese investment in Southeast Asia’s largest economy and, with it, Chinese workers.

A modern-day Silk Road

OBOR, Chinese leader Xi’s signature policy, is an estimated U.S. $1 trillion-plus initiative that stretches across 70 countries. It aims to become a 21st century Silk Road by weaving a network of railways, ports and bridges, linking China with Africa, Europe and Southeast Asia.

Beijing’s globe-spanning project has drawn criticism domestically and abroad, amid accusations that China is engaging in a debt-trap diplomacy by extending excessive credit with the alleged intention of extracting economic or political concessions from the debtor country.

Economists contend that the initiative forces emerging economies to take on unsustainable levels of debt to fund Beijing-backed projects. They highlight concerns by pointing out that a Chinese state-owned company took over a majority stake in Sri Lanka’s Hambantota port after Colombo struggled to repay its loans from China.

In Indonesia, the perceived influx of Chinese workers has spawned criticism and was a key issue during campaigning for the April 17 presidential election. The opposition camp tapped into historic sentiment against the country’s ethnic Chinese minority and whipped up fears about eroding sovereignty.

It can’t be denied that the Chinese have built a lot of bridges, dams, factories and other infrastructure in recent years, said Achmad Sukarsono, an analyst at Control Risks, a Singapore-based consultancy.

These things may not be of high quality, but the Chinese get the jobs done, in places where Japanese and Western investors won’t take a second look, he told BenarNews, , an RFA-affiliated online news service.

The Jokowi government favors the arrangements with the Chinese because they aren’t too legalistic, with less attention paid to things like human rights, as long as they deliver and both sides’ interests align, he said.

There were occasional tensions in projects where Chinese nationals are employed as menial workers, foremen and managers, Achmad said.

Economist: Benefit to local economy ‘minimal’

Indonesia’s infrastructure needs cannot be financed by the state budget alone and OBOR is an attractive financing mechanism, said Bhima Yudhistira, an economist at the Institute for Development of Economics and Finance.

But Chinese investment often comes with workers, raw materials, machinery and technology, with the pretext that they aren’t readily available here. So the benefit to the local economy is often minimal, Bhima told BenarNews.

Despite its embrace of OBOR, the government has insisted that any infrastructure project under the scheme should be profitable and conducted on a business-to-business basis.

Lembong, the Indonesian investment chief, acknowledged that the Jokowi government had burned untold amounts of political capital with its decision to welcome Chinese investment.

Supporting Chinese investment in Indonesia exposes us to this hoax and attacks that we’re somehow an offshoot of the Communist Party, or secretly Chinese, or openly Chinese, and or secretly pro-China or what have you, he told reporters.

But Indonesia would miss out tremendously if it abstained from Chinese investment, Lembong said.

What happens then is that Chinese investment will just go next door, to Malaysia, to Thailand, to Cambodia and eventually Myanmar, maybe even the Philippines at some point, and all of them will see enhanced competitiveness, and we will not, he said.

Sino-Indonesian trade grew almost tenfold from 2003 to 2010 alone, when the volume reached 524 trillion rupiah (U.S. $36.1 billion), according to the International Institute for Sustainable Development, a Canada-based independent think-tank.

China was Indonesia’s third largest investor after Singapore and Japan in 2018, with investment worth $2.4 billion.

The government has said all along that we won’t meddle except for facilitating and issuing necessary regulations, said Wijayanto Samirin, an economic adviser to Kalla, the vice president.

We have learned from the experience of other countries and conveyed to President Xi Jinping that China must respect our independence, he told CNBC Indonesia last April.

Projects

OBOR’s flagship project in Indonesia, a U.S. $6-billion high-speed railway linking the city of Bandung in West Java and the capital Jakarta, went through initial setbacks after it was launched by Jokowi in 2016 to much fanfare.

Construction resumed last year after a delay for more than two years.

Lembong blamed the delay on good old-fashioned mismanagement and incompetence and said the problems were being fixed and the consortium building the railway was now being led by a younger and more energetic chief executive.

The project has been in difficulty, he said, but I’m confident it’s now being fixed.

A China-backed hydropower project in Indonesia already is under the spotlight amid concerns that it could threaten the world’s rarest orangutan species.

The U.S. $1.6 billion hydropower plant in the Batang Toru rainforest on Sumatra Island will divide the habitat of about 800 Tapanuli orangutan and increase the risk of their extinction, environmental groups and scientists have said.

Other OBOR projects include a hydroelectric project in North Kalimantan � in the Indonesian section of Borneo � estimated to cost 363 trillion rupiah (U.S. $25 billion) and a series of coal-fired power plants estimated to cost 174 trillion rupiah (U.S. $12 billion).

Achmad, of Control Risks, said problems in securing land also contributed to the delay in the high-speed train project.

But he said smaller Chinese-backed projects in remote places in the archipelago were mostly completed on time.

Jokowi is expected to continue courting Chinese investments in his second term, Achmad said. An official preliminary count after the April 17 election showed Jokowi poised for a second term with a 10-percentage-point lead.

The Chinese are here to stay and their role is unlikely to be reduced, he said, because they have contributed so much to Jokowi’s programs.

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