Economist Reveal Signs of Incoming China Debt Trap

TEMPO.CO, Jakarta - Research institute, Center of Economic and Law Studies (Celios) argued that Indonesia has not been caught in China's debt trap. However, the Celios Director of China-Indonesia Studies M Zulfikar Rakhmat, said that signs have emerged showing that Indonesia may potentially entering the trap if the government does not tread carefully.

"The government needs to be aware because there is potential for Indonesia to lead to it [debt trap]," said M Zulfikar Rakhmat at the Celios Policy Paper Launch event in Jakarta on Thursday, June 15, 2023.

Indonesia's economic capabilities, according to him, remain above two countries that are considered already in the debt trap; Sri Lanka and Zimbabwe. He acknowledged Indonesia’s ability to cover the debt for one of the country’s major projects the Jakarta-Bandung High-Speed Railway.

"It's just that we have to take debts again to cover the debt. But if KAI [state-owned railway firm] is asked to cover everything, it is clear that it will not be able to. But we are still safe as our economy is still quite strong," said Zulfikar.

Zulfikar estimates that Indonesia's debt to China could potentially increase along with the arrival of the Belt and Road initiative projects which have been signed. In 2022 alone, Indonesia's debt value reached Rp 315.1 trillion, which is equivalent to US$ 20.225 billion.

There is also concern about the risk of default which could cause big losses in the future. This concern, according to Zulfikar, is not without foundation as several countries involved in the Belt and Road Initiative project have defaulted, one of which is Sri Lanka in the Hambantota port development project.

“There are several factors that can lead to the risk of getting into debt. Among them is China's imposition of high credit schemes," said Zulfikar.

MOH KHORY ALFARIZI

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