ASEAN KEY DESTINATIONS
RI should seek better realization in AIIB projects
Indonesia should ensure there are no strings attached in financing that China might offer to the country for the construction of infrastructure projects and emphasize surefire realization of the projects, given its unhappy experiences with Chinese-funded projects, the Institute for Development of Economics and Finance (Indef) warned Thursday.
The research agency said China had a poor track record in financing economic projects in Indonesia, from a very poor realization rate of investment projects to imposing stiff conditions on the beneficiary
“It’s fine to get money from China, but we need to be more careful,” Indef economic analyst Ahmad Heri Firdaus said in a discussion in Jakarta. “Any cooperation should benefit both sides,” he added.
He was responding to a plan, announced by the Finance Ministry this week, in which Indonesia would seek funding from the Asian Infrastructure Investment Bank (AIIB), a new Beijing initiative to rival the Japan and US sponsored Asian Development Bank (ADB).
Finance Minister Bambang Brodjonegoro said that unlike the Manila-based ADB, the AIIB would be able to finance long-term infrastructure projects such as toll roads, railways as well as ports.
According to the Cabinet secretariat’s data, the AIIB will cover the constructions of 24 ports, 15 airports, 1,000 kilometers of roads 8,700 km of railways, as well as 35,000 megawatts of power plants.
President Joko “Jokowi” Widodo, who has openly supported the establishment of the AIIB, criticized the way the International Monetary Fund and the World Bank had managed the global economy, during a speech to open the Asian-African Conference early this month.
While not completely rejecting the idea of using Chinese funds, Heri said the government should study why many investment projects funded by China had failed to materialize in the past.
Heri cited data from the Investment Coordinating Board (BKPM) showing a ratio of only one in 10 Chinese investment projects being realized, which did not compare well with Japan’s investment ratio of 6.5 realized projects of every 10.
He recalled that 35 coal-fired power plants promised to produce 10,000 megawatts, built by China during former president Susilo Bambang Yudhoyono’s term, produced between 35 and 50 percent of their capacity.
He also cited the example of Chinese-made buses brought to Jakarta in 2014 that developed engine trouble, with some even catching fire.
According to BKPM data on foreign direct investment, China is currently the 13th largest investor in Indonesia over the last five years, much lower than other Asian countries such as Singapore, Japan, South Korea and Malaysia.
The Chinese money could further exacerbate the deficits in both the current and trade accounts between Indonesia and China, Heri said.
Past experience also showed that China would dictate the terms of its investment projects, including the use of its management team and raw materials and components imported from China, he concluded.
Letters that do not contain full contact information cannot be published.
Letters become the property of AseanAffairs and may be republished in any format.
They typically run 150 words or less and may be edited
submit your comment in the box below