JAKARTA: The government’s plan to assume direct ownership of the Indonesian stake in the Whoosh Jakarta-Bandung high-speed railway is up in the air following the sudden removal of Purbaya Yudhi Sadewa as finance minister.
Purbaya had previously announced a plan for the domestic majority share in the Indonesian-Chinese joint venture to be transferred from a consortium of four state-owned enterprises (SOEs) to the Finance Ministry. A day before the takeover scheduled for Sept 15, President Prabowo Subianto abruptly ousted Purbaya as finance minister and appointed Suahasil Nazara as his replacement.
Asked about the plans for the Whoosh, which carries a substantial debt load, Purbaya told reporters after the ministerial handover on Tuesday (Sept 15) that “it will depend on the new finance minister” and jokingly responded with “Alhamdulillah [thank God], I’m safe”.
Meanwhile, newly appointed Finance Minister Suahasil Nazara signalled on the same occasion that the Whoosh takeover plan would be delayed and handled later, Kompas.com reported.
Purbaya said on Sept 8 that the debt restructuring for the railway project would involve Rp 1 trillion (US$56.4 million) in annual installments with an 80-year repayment period, which he deemed
Previously, the scheme had a 40-year tenor with a 10-year grace period to repay the initial US$4.5 billion loan from China Development Bank. Indonesia subsequently took more loans to cover cost overruns that reached over US$7.2 billion.
But projections showed that ticket revenue would not even match half of the operating costs, let alone servicing liabilities.
Purbaya had also mentioned plans to task a so-called special mission vehicle (SMV), entities operating directly under the Finance Ministry, with managing the project’s debt repayments. The entity will take over the 60 per cent stake in the railway held by the Indonesian SOE consortium, PT Pilar Sinergi BUMN Indonesia (PSBI), while the remaining 40 per cent is to be held by Chinese firms.
The largest share in PSBI belongs to railway operator PT Kereta Api Indonesia (KAI). In the first half of this year, PSBI recorded a loss of Rp 5.1 trillion, widening from Rp 4.9 trillion logged in the entirety of last year.
Purbaya said that the government was mulling over transferring the stake to sovereign wealth fund the Indonesia Investment Authority (INA), which is not an SMV, or to state-owned infrastructure financier PT Sarana Multi Infrastruktur (SMI).
The former finance minister also reiterated plans to extend the Whoosh project to East Java after the takeover. Economists cautioned that assigning yet another state-controlled entity to manage the Whoosh debt would not automatically eliminate debt pressure and would only transfer the burden to their operations.
Deni Friawan, a researcher at the Jakarta-based Centre for Strategic and International Studies (CSIS), told The Jakarta Post on Monday that fiscal risks could arise if the government ultimately repays the loan through the INA or SMI using state funds.
“It can also create a moral hazard and governance issues, and this could set a precedent suggesting to people that, if a project fails, [the state] will eventually help bail it out,” he added.
Furthermore, Deni pointed out that involving the INA as a sovereign wealth fund in repaying the loan could shift the INA’s main objective away from generating return on investment.
The new mandate could put pressure on the national wealth fund’s cash flow and liquidity, potentially limiting its capacity to make long-term investment plans.
“If these burdens can’t be managed by the INA and disrupt its investment and performance, they can undermine its credibility,” he warned.
Rahma Gafmi, an economics professor at Airlangga University, agreed that transferring accountability to the Finance Ministry through an SMV could create a perception that risks associated with national strategic infrastructure projects would ultimately be covered by the state.
Without strict governance, such obligations risk crowding out productive spending in other sectors of the state budget.
She also flagged a fiscal threat stemming from the “extreme tenor”, which could make interest payments balloon beyond its original debt value.
“This compound interest could become an intergenerational burden if not balanced with operational efficiency,” she said.
Achmad Nur Hidayat, an economist and public policy expert at public university UPN Veteran Jakarta, echoed that even if the new scheme involved SMI or the INA rather than directly drawing on the state budget, it would not automatically rule out an additional fiscal burden.
He noted that both SMI and the INA are state entities whose capital and profits carry an “opportunity cost”, meaning that funds used to repay Whoosh debt would no longer be available for other potential investments.
“The 80-year tenor won’t make the debt cheaper. It only distributes the burden to future generations,” he added.
The government should demand strict accountability and conduct audits before rushing into taking on the project’s financial obligations, he said, stressing that the participating firms and shareholders should bear the business risk in a project initially claimed to operate under a business-to-business scheme. - The Jakarta Post/ANN
