This Week in Asia

Indonesia to review China's belt and road projects if Prabowo beats Widodo in presidential election

Infrastructure projects Indonesia signed up to as part of China's Belt and Road Initiative are likely to be reviewed if former general Prabowo Subianto wins next year's presidential election, his brother and campaign leader has said.

"Indonesia and China have a good relationship, but I think there are certain [belt and road] projects that we want to look at," Hashim Djojohadikusumo said about China's ambitious infrastructure investment plan, after a recent media briefing for foreign correspondents. "I'm sure there are some projects that are very good, and I'm sure some projects are not necessary."

Djojohadikusumo, a wealthy businessman, contributes funding to his older brother's bid to lead Southeast Asia's biggest economy, just like he did in 2014, when Prabowo lost to current president Joko Widodo.

The 64-year-old, who serves as director of media and communications for Prabowo and his running mate, entrepreneur Sandiaga Uno, said one of the projects that would be reviewed was the US$4.5 billion high-speed railway currently being built to connect Jakarta and the city of Bandung, about 150km apart. The railway is being funded by loans from China Development Bank.

Indonesian President Joko Widodo and his running mate Ma'ruf Amin, left, with presidential candidate Prabowo Subianto and his running mate Sandiaga Uno, right. Photo: AFP

"I think it's too expensive ... we're talking about a US$4 billion investment for a [less than] 200km railway which [goes] from the suburb of Jakarta to the suburb of Bandung," said Djojohadikusumo, whose net worth in 2012 was estimated by Forbes to be US$850 million.

"It seems to me that it doesn't serve a purpose. Most people will be using buses, these are much cheaper and they go from city centre to city centre."

Djojohadikusumo and Prabowo are sons of Sumitro Djojohadikusumo, a former cabinet minister from the 1950s to 1970s who was labelled the architect of the country's modern economy.

Djojohadikusumo dismissed concerns that Prabowo would be seen as anti-China, quoting the example of Malaysia, where new prime minister Mahathir Mohamad has frozen US$22 billion of Chinese-backed projects since coming into office this year.

Malaysian Prime Minister Mahathir Mohamad is also rethinking some of China's belt and road investments. Photo: AP

"In Malaysia, Tun Mahathir has said that the China relationship is very, very important, but he wants to have an equal relationship and, I quote him, according to the Malaysian government they cannot afford to have all these projects, so some have been deferred and some have been cancelled.

"It's a matter of cash flow ... the Malaysian government doesn't have the money, so it's not being anti-Chinese. I think Indonesia and China have a good relationship."

In April, Indonesia and China signed five contracts worth more than US$23 billion under the belt and road plan. These included the construction of two hydropower plants worth nearly US$20 billion in North Kalimantan, a US$1.6 billion power plant in Bali, and a US$1.2 billion steel smelter.

These are in addition to belt and road projects already under way in Indonesia such as the Jakarta-Bandung high-speed railway and Morowali Industrial Park in Sulawesi. North Kalimantan, North Sulawesi, and North Sumatra have been offered by the country's investment board as investment zones especially for infrastructure projects such as industrial parks, ports, and airports due to their strategic location for seaborne trade.

The progress of these projects has been slow. According to a report by Nikkei Asian Review and The Banker magazine published in March, the Jakarta-Bandung high-speed railway, the country's first high-speed train, faced setbacks including a funding crunch and slow land acquisition, as well as paperwork and permit issues. This could delay the railway, which had been expected to open to the public next year. Only 10 per cent of the work has been completed so far, the report said.

The Chinese-funded projects in Morowali have also sparked controversy over a rumour - dismissed by Jakarta - that many Chinese have been working there illegally on tourist visas, exacerbating anti-Chinese sentiment.

Portraits of Joko Widodo and defeated presidential candidate, ex-general Prabowo Subianto, on the streets of central Java after Widodo's 2014 win. Photo: AFP

President Widodo's infrastructure drive across the archipelago is expected to cost US$355 billion, which is too expensive for the country's state-owned enterprises and state budget, especially amid an economic downturn that has seen the rupiah's value against the US dollar hit its lowest level since the 1998 Asian monetary crisis. Infrastructure spending is set to increase only 2.4 per cent next year, the smallest increase since Widodo came to power in 2014.

Private sector and foreign investment have been sought to fill the funding gap. According to a report by Singapore-based research firm The Tusk Advisory, about 286 projects were underway or had been completed by December 2017, with a combined value of more than US$103 billion. If these projects were to be completed by next year or 2020, Indonesia's GDP growth rate would be on track to rise to 7.2 per cent by 2023.

Critics of belt and road projects in Indonesia fear China will use its economic power to gain influence. They point to Sri Lanka, for example, where China has taken over a US$1.5 billion port it had helped build after the government could not pay its debt.

In the news conference, Djojohadikusumo reiterated that his brother was not a xenophobe, an accusation that emerged after Prabowo picked "Make Indonesia Great Again" as his campaign slogan.

"The other side has been trying to portray him as a xenophobe ... we don't have the intention for nationalism," Djojohadikusumo said. "We want to have reciprocal treatment by other countries. Financial services, for instance. The bank sector has been [a source] of unhappiness for us."

Djojohadikusumo said that Prabowo, if elected president, would ask neighbouring countries such as Malaysia to provide a level playing field for Indonesian banks.

Supporters of losing Indonesian presidential candidate Prabowo Subianto march to the Constitutional Court in 2014 in an effort to overturn the election result. Photo: AFP

"One Malaysian bank has been given the right to operate 1,600 branches and sub-branches in Indonesia, while Indonesian banks have only been allowed limited operations in Malaysia. This is also the case in Korea, Japan, and Singapore ... no reciprocity in the financial services," Djojohadikusumo said. "That's not fair."

Prabowo is currently trailing Widodo in opinion polls - SMRC and Indikator showed 60.2 per cent and 57.7 per cent of respondents, respectively, favoured the incumbent to win the election on April 17 next year. The initial Prabowo-Sandi campaign fund is two billion rupiah (US$131,683), smaller than the incumbent's 11 billion rupiah kitty, according to campaign financing declarations made last month.

Djojohadikusumo dismissed the polls.

"I don't believe in those polling organisations, they were all wrong [before]. In Jakarta [the gubernatorial election] every one of them said that Ahok would win. They were all wrong and Ahok lost," Djojohadikusumo said, referring to former Jakarta governor Basuki Tjahaja Purnama.

"[Widodo] is leading because he is an electable guy. He is a nice guy, but a nice guy is not a leader."

This article originally appeared on the South China Morning Post (SCMP).

Copyright (c) 2018. South China Morning Post Publishers Ltd. All rights reserved.

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