A strip of land is being prepared for the Jakarta-Bandung bullet train project last August. (Antara Photo/Risky Andrianto)

Indonesia Expects Delay in China's Key Train, Mining Projects

BY :NOVY LUMANAUW, TRIYAN PANGASTUTI

FEBRUARY 26, 2020

Jakarta. The Indonesian government expects several of China's investment projects in the country, including the coveted Jakarta-Bandung bullet train service, will face delay this year as government clampdowns to prevent the spread of the novel coronavirus continue to curb the supply of raw materials and stop workers from returning to the projects, a minister said on Tuesday.

The Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan said the Covid-19 outbreak is likely to hamper the supply of raw materials from China needed for the bullet train's track construction.

Also, Chinese workers on the project who had returned to the mainland for the Chinese New Year celebration are still yet to return, and there's no certainty when they can do so since Indonesia has closed its borders to all travelers from China. 

"[Some of them] are still stuck in Beijing. They did not make it back here in time," Luhut said. 

"Some of them are key workers in the project and they're now out of the picture. How can the project go on?" he said. 

The $6 billion bullet train project had already faced years of delay due to land clearing problems, before picking up the pace in the past 12 months.

The Transportation Ministry says the bullet train service should begin operations in 2021 at the latest. 

Luhut said the government remains hopeful the project could still be completed before the deadline.  

"We don't want to assume anything. We're just being super careful. I don't want to speculate, but [the bullet train project] can be delayed if the coronavirus outbreak goes on [for several more months]," Luhut said.

Several carbon and stainless steel projects in Morowali and Konawe in Central Sulawesi and Weda Bay in North Maluku, with a total Chinese investment value of $11 billion, have also been affected by disruptions from the coronavirus outbreak, Luhut said.  

Chinese giant Tsinghan Group, the world's largest stainless steel company, is involved in the Morowali and Weda Bay projects. 

Luhut said the delay would disrupt the country's steel exports. 

"This year we should be exporting $15 billion worth of steel or even more, but I don't think that's going to happen now," Luhut said.

Indonesia exported $8 billion worth of steel last year, down from $12 billion a year earlier. 

The government had pinned its hopes on the projects to boost export and reduce its current account deficit which amounted to $8.12 billion last year, or 2.8 percent of the country's gross domestic product. 

"If we export $11 billion worth [of steel], that would still be okay. But we had allowed ourselves to dream that our current account deficit would have decreased significantly by 2023," Luhut said. 

Bank Indonesia's governor, Perry Warjiyo, said the coronavirus outbreak would likely cause delays in Chinese investment projects worth a total of $400 million this year.

Disruptions in logistics and distributions for import and export are also likely to reduce the country's foreign exchange reserves by around $1 billion, Perry said.  

Meanwhile, at least $1.3 billion of tourism revenue would be lost if Indonesia continued to close its borders to Chinese tourists in the next two months. That would cause a slowdown in the number of foreign travelers in Indonesia in the next six months, Perry said. 

"These factors have caused us to revise projections for Indonesia's economic growth in 2020 downward. We will continue to carry out assessments and will update the forecast based on real-life monitoring. Everyone is feeling the uncertainty at the moment," Perry said.

The central bank now sees a 4.9 percent growth for 2020 more likely than its previous projection of 5 percent. 

 

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