The challenges of accelerated infrastructure investment in Southeast Asia

Jack McDermott | Indo-Pacific Fellow

Image Credit: Jack McDermott

In 2019, I caught the train from Jakarta to Bandung. It had been announced four years earlier that the two cities would be connected by Indonesia’s first high-speed rail, which would cut the journey from three hours to just over forty minutes. While the project was originally prospected by the Japan International Cooperation Agency, a competing proposal from China required no financial contribution from the Indonesian government, which ultimately led Jakarta to accept. As such, the Jakarta-Bandung High-Speed Rail would become the flagship project for the Southeast Asian leg of China’s ‘Belt and Road’ Initiative (BRI). And while Japan’s proposal would have the line operational in 2023, China promised a much earlier completion date of May 2019. I visited in June, so it was amusing, if unsurprising, to watch the dazzling terrain of West Java crawl by on the three-hour journey.


Southeast Asia is developing quickly, and increased foreign investment is perhaps the most important driver of this growth. But the acceleration of infrastructure investment in the region has not always been smooth, particularly when domestic political complexities are overlooked. In many ways, the Jakarta-Bandung High Speed Rail project is a revealing case study of these obstacles. And it has three big problems.


Acquiring the land is difficult, and there are a lot of actors involved. This has been noted of other BRI projects, in Southeast Asia and beyond. If you take a journey on the existing train line, these complexities are evident just looking out the window. The line passes through farmlands, which support the livelihoods of millions in West Java alone. It also intersects with major plots owned by other state-owned enterprises, including toll road operator Jasa Marga and the operator of the existing railway, Kereta Api Indonesia. Land use issues also attracted backlash from the Ministry of Transportation and the Indonesian Air Force early in the project. In total, the line passes through 6,800 plots owned by 5,580 individuals, state-owned enterprises, and private companies.


Land acquisition can cause headaches for any infrastructure project, but foreign investors are often at greater risk of becoming entangled in local peculiarities. In this case, land acquisition has caused numerous delays across the project’s implementation, and it is said to be the main reason it failed to meet the initial 2019 completion target that would have afforded me a ride.


The project has also faced significant public backlash. Residents along the train line have resisted its construction, reporting damage to property and to the local environment. Critics have accused Jokowi of “selling” the country to foreign investors, and the general public remains sceptical of the benefits of increased economic cooperation with China. Combined poor transparency and inadequate consultation processes, confidence in the project is low.


Future foreign-funded initiatives are likely to attract similar apprehensions. Polling in the region suggests that public opinion on the influence of China is split. Almost half of respondents in East and Southeast Asia believe that China does more harm than good in its engagement with the region—in countries with major territorial disputes with China, almost two thirds of respondents are sceptical.


Finally, environmental concerns turned out to be well-founded. The project’s development has had numerous environmental consequences, breaching both Indonesian and Chinese environmental impact standards. These concern not only the impact of the project on the local environment, but the effects of natural phenomena on the line’s operation—earthquakes, landslides, and floods are frequent in West Java. These issues were apparently not given adequate attention earlier in construction, as the need for a revised impact assessment was responsible for the project’s most recent delays.


Environmental impact has also been a point of concern across the region. Hydropower projects along the Mekong River have caused changes in river flow, water table levels, and fish migration, affecting local livelihoods. Energy is also a major sector for BRI investment—of which coal projects account for 42 per cent. More thorough impact assessments will be critical to bolstering confidence in future projects.


The Jakarta-Bandung High-Speed Rail is now due for completion by early 2023. It is possible that, despite the turbulence, the project will be heralded a successful example of foreign infrastructure investment, driving improved connectedness and growth. But whether its critics are convinced or not, foreign-funded infrastructure will form the foundation of economic development, supply-chain resilience, and even broader geostrategic competition among the region’s major players in the decades to come. Unless lessons are learned early, investors and recipients can only hope that the destination is worth the journey—especially if it takes longer than promised to reach it.


Jack McDermott is the Indo-Pacific Fellow for Young Australians in International Affairs.