Indonesia needs China to get back on track
Presidential advisor Luhut Panjaitan tells Asia Times his nation needs more, not less, Chinese investment despite rising criticism of becoming a client state
Intent on getting the US$5.9 billion fast-rail project back on track, Indonesia is now considering eventually extending the China-funded Jakarta-Bandung line as far as Jogjakarta in central Java, hundreds of kilometers further east than originally designed.
But it won’t be happening under President Joko Widodo, whose infrastructure program tops his list of self-touted achievements heading into elections in 2019.
“We’re not interested in the election,” says Maritime Coordinating Minister Luhut Panjaitan, who is also the president’s senior political adviser. “It’s a 20-30-year objective.”
By then, Jakarta and Bandung, the latter already the country’s third biggest city, will be one metropolis, Panjaitan told Asia Times in an interview. “We have to look beyond just five years. The transport has to be in place – and it has to extend over hundreds of kilometers.”
Panjaitan acknowledged that China has not been consulted on the proposed extension, with all attention currently on acquiring the remaining 46% of land – much of it prime industrial real estate — needed before the China Development Bank will disburse funds.
Officials say what has been acquired so far is not contiguous, and that buying land for the railway’s right of way and related commercial and residential development is still “a big concern,” as it has been for all infrastructure ventures.
But as ambitious as it may seem, joint-venture PT Kareta Cepat Indonesia China (KCIC) insists the land acquisition phase can be completed in time for the start of construction in May, still more than two years behind the original schedule.
Officials dismiss media reports that the single-trip fare will be as high as 500,000 rupiah (US$37.50) and say it has yet to be calculated, taking into account cost recovery and how much KCIC expects to earn from the transit-orientated development.
Panjaitan recently took over the long-delayed project from State Enterprise Minister Rini Soemarno, adding it to his mountain of tasks which already range from organizing October’s IMF-World Bank annual meeting in Bali to preparing a strategy for Widodo’s re-election campaign.
In between all that is his role in trying to attract more foreign investment to a country struggling to light a fire under economic growth, which at 5% has fallen far short of what Widodo promised at the start of his presidency.
Former Deputy Coordinating Minister Havas Oegroseno, soon to become the new ambassador to Germany, says Indonesia is “losing out” to what he called “non-democratic” Vietnam – a sore point often raised by senior officials frustrated over Indonesia’s inability to be more competitive.
Much of Panjaitan’s workload falls outside his job as chief maritime minister, which in addition to fisheries and maritime affairs, also covers mines and oil and gas – a legacy of the political difficulties surrounding the president’s early days in office.
Panjaitan and his team agree that the fast-rail project makes little sense unless it covers at least 300 kilometers, not just the 142 kilometers between Jakarta and Bandung, where the steep gradient and four stations ensure it will never attain the speeds that make fast-rail fast.
The extended route will be separate from Japan’s planned upgrade of the existing northern double-track railway between Jakarta and the East Java port city of Surabaya, which is designed to cut the journey from eight to about six and a half hours.
Earlier plans for a similar fast-rail line to Surabaya appear to have been shelved, for now at least, because of the prohibitive cost of elevating long stretches of the track to avoid more than 900 level crossings along the 800-kilometer route.
The good news for Widodo is that the 1,167-kilometer Trans-Java Highway, more than 20 years in the building, is likely to be finished in time for 2019, the targeted completion date for a multitude of other major infrastructure undertakings, including Jakarta’s mass transit (MRT) and light-rail (LRT) systems.
The 27.5 trillion rupiah (US$2.06 billion), 42-kilometer LRT is a triumph of so-called ‘blended financing’, a mix of 18 trillion rupiah in commercial bank loans and funding provided by state enterprise developers which has not been used before in Indonesia.
A retired general, Panjaitan says he wants to show that coordinating ministers can make things happen, something they have been unable to do even during president Suharto’s strongman rule era, because of bureaucratic foot-dragging and a lack of real authority that should go with the job.
While aides acknowledge that Panjaitan’s military background and forceful personality are factors that set him apart from his colleagues in the other coordinating ministries, they still believe he is making a difference in showing the way.
Panjaitan says what is needed is a change in mentality that can only come from getting people to work together. “We can make this country better just with the good people in this room,” he says, gesturing to five members of his team arrayed around him in his Jakarta office.
Changing the bureaucracy’s mindset will always be a major challenge, but the minister believes it can be accomplished through improving access to technology. “We have problems,” he says, “but we are making a lot of progress. It’s a totally different ball game. There’s no project that has been ignored.”
Panjaitan is aware that the government’s reliance on China to finance much of its infrastructure-building leaves Widodo open to presidential rival Prabowo Subianto’s claims that Indonesia is in danger of becoming a Chinese client state.
But at a recent lunch with Prabowo, a fellow general and one-time business partner with whom he has had a long roller-coaster relationship going back to their army days, he said the opposition leader agreed that China can’t simply be ignored.
Despite trying to find other counterbalancing sources of investment, Panjaitan believes Indonesia must do a lot more if it wants to benefit from China’s One Belt One Road program. “We haven’t been aggressive enough,” he says. “They expect us to come to them, rather than they come to us.”
That’s why the signature Jakarta-Bandung project is crucially important – to show that Indonesia can overcome the internal problems that have stalled progress so far and attract more Chinese investment needed for infrastructure, tourism and industrial estate development across North Sumatra, North Kalimantan and North Sulawesi.