Should Indonesia scrutinise China-funded projects? Report flags debt risk but also benefits

South China Morning Post

2 days ago

Indonesia must tighten oversight of Chinese-funded infrastructure projects to maximise their economic benefits while guarding against debt risk, environmental harm and lack of transparency, according to a new report by leading policy researchers.
The study by US-based AidData and Indonesian think tank Foreign Policy Talks draws on more than two decades of investment data and urges Jakarta to play a more assertive role in ensuring that such projects deliver long-term public benefit.
While the report, titled 'Balancing Risk and Reward', raises red flags about the scale and structure of Chinese financing, it also pushes back against alarmist narratives that cast Beijing as predatory or portray Indonesia as a passive victim.
Instead, it calls for greater domestic accountability and stronger governance to ensure foreign-backed development works in the national interest.
Between 2000 and 2023, Chinese state-linked financing in Indonesia reached US$69.6 billion, with a further US$94.1 billion invested by private Chinese companies between 2010 and 2024. According to the report, 90 per cent of China's state-directed funding was issued as debt, while only 3 per cent took the form of grants or concessional loans.
That approach differs from countries such as Japan, where development assistance is more often provided on concessional terms. But the authors cautioned against interpreting China's model as predatory.