With much fanfare, the Indonesian government under President Joko Widodo awarded the coveted Jakarta-Bandung high-speed rail project to China, in 2015, instead of Japan as was expected. But Jakarta was stepping onto a slippery slope of debt and into the ruthless clutches of the dragon.
BRI And Indonesia
Guesstimated to cost around USD 1 trillion, the monstrous BRI project involves around 140 countries spread across Asia, Europe, and Africa.
72 Indonesian projects fall under President Xi Jinping's flagship Belt and Road Initiative, totaling a bill of $21 billion. According to AidData, an international development research lab based at the College of William and Mary in Virginia, nine projects under the scheme, worth $5.2 billion, are already riddled with "scandals, controversies or alleged violations," and four were flagged for "financial wrongdoing."
There is nothing rosy about this picture.
The Jakarta-Bandung high-speed rail is one such contract. The 143-kilometer railroad between the capital and Bandung, the country's major technology center, was to be ready by 2022. The project cost of US$6.07 billion was to be funded by a $4.5 billion Chinese loan. According to AidData report, the railway loan is to be paid over ten years and attracts a 2% interest.
It is interesting to note that Japan had completed an exhaustive feasibility survey before China entered the picture. The proposal was for a Jakarta - Surabaya rail line, a total of 453 miles that would connect the two ends of the island, Java.
Japan presented internationally acceptable/offered terms, while China gave copious amounts of financial aid and unusual sops like waiving sovereign guarantees. Beijing offered Jakarta a $50 million "general loan package" loan before the papers were signed. The Indonesian government was to bear no fiscal burden of the project.
All the promises made by China to one-up Japan have come to naught. The project is not cheaper, not being commissioned faster, nor is not free of mismanagement issues.
Now, Jakarta is being forced to tip into its state budget to meet the cost escalation and complete the rail line that critics claim will not be affordable to most regular commuters in the stretch.
Dogged by construction delays, held-up environmental permits, and land acquisition troubles, the rail line is two years behind schedule, and the projected cost is 8 billion. Officials claim that nearly a third of the project is complete. Yet, crucial aspects like the construction of three of the 13 tunnels are pending. Many believe the rail line will take much longer to materialize.
There have been indications of financial stress among the four state enterprises part of the joint venture. Wijaya Karta Tbk, a 38% stakeholder, handed over control to another partnering firm. There are also reports that the government pumped in an additional $286.7 million into the venture from its 2022 State Budget.
Sliding Into Debt
The AidData report presents a grim picture. It is estimated that Indonesia has $4.95 billion of sovereign debt exposure to China and an additional 17.23 billion in "hidden debt." This means that more than a third of the country's debt to another is "off the government books."
The debt trap is real. There will be harsh consequences for defaulting on payments. Sri Lanka had no recourse but to hand over Hambantota Port to China's state-owned Merchants Port Holdings on a 99-year lease as the country could not pay back the funding capital debt to China. The island nation's story is a stark warning to others who have borrowed heavily from Beijing and its state-owned enterprises and financial institutions.
Finance, or more specifically credit, is one of China's largest exports to the world. Yet, such massive lending is not reported to the IMF, the BIS, or the World Bank. Shockingly, the largest creditor in the world is not a member of the Paris Club. Reputed credit institutions often question China's terms of lending. Usually, projects like the Jakarta-Bandung high-speed rail will attract very low-interest rates and long repayment windows.
That Beijing gets away with such blatant flouting of acceptable standards of lending and business practices exposes the wide gap in credit sought and given to developing countries.
Belarusian police have detained dozens of people in the southeastern city of Homel on charges of subscribing to "extremist" social-media channels.
Authorities have declared hundreds of opposition Telegram channels and social media sites "extremist" since Belarus was engulfed by protests after a disputed presidential election in August 2020. Anyone operating or using such sites can face jail time or fines.
The Viasna human rights center said on October 26 that around 30 people were charged the day before for allegedly using banned Telegram channels. In one case, a 22-year-old student was picked up off the street by security agents in a car who threatened her with violence unless she provided the password to her phone, Viasna said.
Viasna says it considers 833 people as political prisoners. They exercised their basic rights to peacefully protest, express opinions, or engage in legitimate political activities.
A widespread cyberattack has hit gas stations and billboards across Iran, halting some fuel sales.
On Tuesday, gas stations across Iran were hit by a cyberattack, halting some fuel sales and altering billboards to messages challenging the regime's ability to distribute fuel.
No group has claimed responsibility for the attack, which aimed at undermining Supreme Leader Ayatollah Ali Khamenei. Altered billboards displayed messages such as "Khamenei! Where is our gasoline?"
Iranians rely on subsidies to fuel their vehicles, as the country is in dire economic straits due to economic mismanagement and crippling sanctions.
The Taliban has already expressed interest in Chinese investments and the Belt and Road Initiative (BRI).
Mr. Wang, the Chinese Foreign Minister, met with acting Deputy Prime Minister Mullah Abdul Ghani Baradar, who assured Beijing that "a friendly policy towards China" was "a firm choice" by the Taliban.
In their second meeting, Mr. Wang repeated to the Taliban leader China's expectations that the Taliban "will make a clean break with the East Turkestan Islamic Movement [ETIM] and other terrorist organizations and take effective measures to resolutely crack down on them."
The ETIM, which China has blamed for several attacks in its western Xinjiang region, poses a real threat to China's national security and territorial integrity and jeopardizes the domestic stability and long-term stability in Afghanistan.
A magnesium scarcity would impact many industries, including car-making and drinks cans.
The European market is almost entirely (95 percent) dependent on China for the supply of magnesium, a key ingredient in aluminum used to make cars and building supplies, and iron and steel production.
Remaining magnesium stocks in Europe were trading at US$10,000-US$14,000 a ton, up from around US$2,000 per ton earlier this year, industry groups said.
Although the U.S. is less reliant on China for magnesium, its aluminum producers faced a similar supply issue.
The largest U.S. aluminum billet maker, Matalco, has warned of an upcoming output reduction, while the largest U.S. raw aluminum producer, Alcoa, has expressed concerns about magnesium scarcity.
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