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Indonesia Counts Cost of Coronavirus on Raft of BRI-Backed Projects

Jakarta-Bandung rail link and tourism facilities among developments hit by travel ban and supply chain disruptions.

Photo: Little light at the end of the tunnel: Coronavirus derails work on high-speed train link.
Little light at the end of the tunnel: Coronavirus derails work on high-speed train link.
Photo: Little light at the end of the tunnel: Coronavirus derails work on high-speed train link.
Little light at the end of the tunnel: Coronavirus derails work on high-speed train link.

Although Indonesia has only officially announced two cases of coronavirus within its borders, many of the country's Belt and Road Initiative (BRI) backed infrastructure projects have already been disrupted by a number of related issues. In particular, the travel ban on arrivals from China introduced early last month has led to a slowdown on several key development sites, as has a range of concomitant supply chain difficulties.

Indonesia's largest project to be backed by the BRI – China's ambitious international infrastructure development and trade facilitation programme – is the US$6 billion Jakarta-Bandung High-Speed Railway, which will connect the national capital to Bandung, the capital of West Java province. Until the extent of the coronavirus threat became apparent, rapid progress had been made on the rail link, with work expected to be completed at some point next year.

Now, however, the enforced absence of 300 key Chinese specialists – all of whom returned to the mainland for the Spring Festival holiday – is expected to significantly derail the agreed schedule. Commenting on the scale of the problem, Chandra Dwiputra, the President Director of PT Kereta Cepat Indonesia China, the project's lead developer, said: "Many of those who returned to China are very senior and this has seriously affected our decision-making capability. Among those unable to return are Project Directors, Managers, Engineers and Consultants."

In addition to the missing management teams, according to Chandra, supply chain interruptions have also proven to be something of a headache. Expanding upon this, he said: "Nearly 50% of the materials required for the rail link – including all the pipes, waterproofing materials and signalling equipment – have been sourced from China, many from manufacturers that have yet to resume production on account of concerns over the virus."

As well as the rail link, several Indonesia-sited BRI power projects have also been affected by the measures put in place to restrict the spread of the coronavirus. In North Sumatra, for instance, the construction of the $1.6 billion Batang Toru hydroelectric plant and dam has been put on hold as 125 of its key technical workers – all employed by Beijing-headquartered Sinohydro, the project's lead developer – are currently banned from returning to the country. As a result, the project is likely to miss its 2022 completion date.

In a related development, some 43,000 employees of a nickel mining hub on the island of Sulawesi, set up to service the Indonesia Morowali Industrial Park, were quarantined over coronavirus fears at the end of January, of which about 5,000 were of mainland China origin. Inevitably, this has seen the output of the site drop dramatically, an outcome that will have a knock-on effect on the industrial park itself.

Turning more to supply chain concerns, about half of the 68 foreign factories operating within the 320-hectare Batamindo Industrial Park rely on shipments from China, which have again been disrupted by the protracted shutdown of many mainland factories. Similarly, Panbil Industrial Estate – home to facilities operated by a number of global brands including Philips, Shimano and TDK – is also said to be suffering from chronic raw-material shortages on account of continuing supply chain disruptions.

Away from the industrial front, a number of BRI-backed travel and tourism projects are also said to be suffering, largely on account of a massive shortfall in the number of anticipated Chinese visitors. Among the most high-profile casualties here is likely to be a 30-storey hotel complex and an accompanying range of tourist facilities in Manado – one of Indonesia's Big Five tourism destinations – established with $200 million worth of financing pledged by the Wuhu-based Anhui Conch Investment Company. It is anticipated that the travel restrictions will cost Indonesia about $4 billion in terms of lost tourism revenue alone.

Geoff de Freitas, Special Correspondent, Jakarta

Content provided by Picture: HKTDC Research
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