Belt and Road investment under fire in Indonesia’s presidential elections

Concerns over Chinese investment in Indonesia have become a notable issue in the campaigns of Jokowi and Prabowo Subianto

Jokowi and Xi Jinping, file photo, 2016

Jokowi and Xi Jinping, file photo, 2016 (AP photo)

SYDNEY (East Asia Forum) -- In April 2019, Indonesian President Joko "Jokowi" Widodo will face retired general Prabowo Subianto in a "rematch" presidential election. Foreign policy issues do not determine who wins elections in Indonesia, but they give candidates a chance to prove their nationalist credentials.

Several foreign policy issues have emerged in the presidential campaigns, which began in late September 2018. One notable issue is concerns over Chinese investment in Indonesia. Since his electoral victory in 2014, Jokowi has been courting Chinese state-owned enterprises and private investors to help fulfil ambitious plans to improve the country’s poor connectivity and energy infrastructure.

According to a World Bank report, Indonesia has an infrastructure gap of US$1.5 trillion compared to other emerging economies. While the government aims to invest US$327 billion in infrastructure during Jokowi’s first term (2014–19), it will only spend US$15 billion from the state budget and around US$45.7 billion from state-owned enterprises.

The rest will need to come from other sources, including private sector and overseas funding. Notably, the Jokowi administration has repeatedly approached China for funding in relation to Beijing’s pledge to spend trillions on infrastructure projects under the Belt and Road Initiative (BRI).

While the Indonesian government does not formally recognize Chinese-funded projects as being under the aegis of the BRI, it recognizes some complementarity between the BRI and Jokowi’s own infrastructure vision. In particular, the Indonesian government is seeking Chinese investment to develop economic corridors in North Sumatra, North Kalimantan, North Sulawesi and Bali.

As recently as Oct. 22, 2018, Indonesia’s envoy for the BRI and Coordinating Minister for Maritime Affairs Luhut Panjaitan visited Beijing to discuss how the BRI can help facilitate Jokowi’s infrastructure vision.

That same day, Prabowo’s brother and his campaign’s communications director Hashim Djojohadikusumo announced in a press conference that Prabowo will review existing BRI projects in Indonesia if he wins the election.

Prabowo Subianto following 2014 Presidential election defeat, file photo (Associated Press Image)

The announcement by the Prabowo camp isn’t entirely surprising. Jokowi’s rivals, including Prabowo, have long been critical of Jokowi’s courting of Chinese investment for the administration’s ambitious infrastructure splurge. Delayed progress on construction, rumors of "swarming" Chinese laborers and fears of a potential "debt trap" have emerged as some of the primary concerns over Chinese-funded projects.

One controversial project is the Jakarta–Bandung High-Speed Railway — a US$6 billion project, of which 75 per cent will be funded by loans from the China Development Bank. Hashim has said that the project "doesn’t serve a purpose."

Critics question both the profitability and utility of the project, considering that the railway is only 150 kilometers long and that there are cheaper transport alternatives. The project’s construction has also been delayed due to problems with land acquisition, environmental concerns and inconsistencies in spatial plans.

Another important issue, which is also haunting the Jakarta–Bandung railway, is the exaggerated numbers of illegal Chinese laborers that are claimed to be partaking in the construction of Chinese-funded projects.

Fabricated information circulated online in late 2016 claiming that up to 10 million illegal Chinese workers had entered Indonesia was enough to start a public debate about the status of Chinese laborers in Indonesia. Debates intensified between March and May 2018 following the Jokowi administration’s decision to expedite the process to approve work permits for foreign workers.

Public concern over Chinese-funded projects has not fallen on deaf ears. Luhut, who heads a task force for the implementation of Jokowi’s Global Maritime Fulcrum, has laid down a number of conditions for accepting BRI projects.

These include requirements on the use of environmentally friendly technology and local workers, and the construction of upstream and downstream facilities. China, for its part, has listened. During Chinese Premier Li Keqiang’s visit to Jakarta in May 2018, he called on Chinese companies to hire primarily Indonesian workers.

While Jokowi’s infrastructure drive has borne some fruit, the problems haunting Chinese investment projects are likely to remain salient topics in the presidential elections. Jokowi’s rivals will no doubt keep a close eye on these projects for potentially inflammatory issues on which to gain public support. Several reasons help to explain why.

Despite significant developments in diplomatic ties in the post-Suharto era, China–Indonesia relations are still marked by the two countries’ acrimonious history and questions about the loyalty of Chinese Indonesians. Indonesia’s relations with China are consequently vulnerable to politicisation.

Jokowi also banks his performance on the success of his infrastructure programs and it is likely that his rivals will try to find fault in his claims of success. This criticism would conform with the tendency of Jokowi’s rivals to slander him for being too close to the Chinese business community. Similar accusations haunted Jokowi’s once closest ally and former Jakarta governor Basuki "Ahok" Tjahaja Purnama during the 2017 gubernatorial elections.

At a rally in early November 2018, Jokowi encouraged his supporters to fight against social media hoaxes, including the exaggerated numbers of illegal Chinese workers in Indonesia. Identity politics and economics will be the hot-button issues in 2019. Unfortunately for Chinese investors, BRI projects are vulnerable to politicization from both these angles.

(Associated Press Image)

This article originally appeared on East Asia Forum, published on Nov. 20, 2018.