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Jakarta Post

Chinese investment in Indonesia is not debt trap, senior minister says

  • News Desk

    The Jakarta Post

Jakarta   /   Thu, January 9, 2020   /   12:23 pm
 Chinese investment in Indonesia is not debt trap, senior minister says A worker cleans debris at the construction site of a giant tunnel for the Jakarta-Bandung high-speed train in Walini, West Bandung regency, West Java. The high-speed railway project is being developed by an Indonesian-Chinese consortium, PT Kereta Cepat Indonesia China (KCIC). (The Jakarta Post/Wienda Parwitasari)

The government welcomes Chinese investment despite concerns that the country could fall into a debt trap.

"If you look at the amount of investment from China, it is a lot. But some people still say 'debt trap, debt trap'," Coordinating Maritime Affairs and Investment Minister Luhut Pandjaitan said on Wednesday at the China Business Forum.

A debt trap is a term used to indicate the difficulty to pay debts to other countries.

Some economists have warned the government that an increase in Chinese investment, especially that financed under the economic giant’s Belt and Road Initiative (BRI), could cause the country to fall into a debt trap.

"We are not that stupid, you know," Luhut said at the forum, which was held amid a diplomatic row between Indonesia and China over an exclusive economic zone (EEZ) in the Natuna Islands.

Over the past week, Jakarta and Beijing have been embroiled in a diplomatic tug-of-war over the latter’s claim to parts of Indonesia’s EEZ, after the Maritime Security Agency (Bakamla) reported multiple counts of the Chinese coast guard and fishing vessels operating there illegally.

Luhut said the government had kept the ratio of debts to gross domestic product (GDP) at below the 30 percent limit.

Indonesia's debt-to-GDP ratio was recorded at 29.8 percent at the end of 2019, according to the Finance Ministry as quoted by kompas.com

In 2019, total government debt reached Rp 4.77 quadrillion, a slight increase from Rp 4.41 trillion in 2018, according to the Finance Ministry as quoted by kompas.com. As of September, Indonesia's foreign debt to China reached US$17.7 billion, making it the fourth-largest country creditor.

 "We have some differences with Chinese companies here and there. But in the end, we can find a solution." (dfr)