(MENAFN- Asia Times) Indonesia's Jakarta–Bandung high-speed rail, known as Whoosh, was launched as a statement of national ambition-proof that Southeast Asia's largest economy could adopt cutting-edge transport infrastructure.

Yet as operations continue, the project now faces a deeper test: a complex financial burden that has placed Indonesia in a delicate policy dilemma, one that demands both prudence and political clarity.

Unlike many of Indonesia's past megaprojects, Whoosh is financed through a joint venture between Indonesian state-owned enterprises and Chinese partners, backed predominantly by loans from the China Development Bank as part of the Belt and Road Initiative.

Costs have soared far beyond initial projections, now exceeding US$6 billion with an additional $1.2 billion in approved overruns.

With Indonesian SOEs controlling 60% of the venture, the financial stress flows directly-almost mechanically-into their balance sheets. At the heart of this exposure is PT Kereta Api Indonesia (KAI), the country's primary rail operator and the dominant shareholder.

If KCIC, the operating company, struggles to meet its obligations, it is KAI-not the state budget-that would absorb much of the financial shock. This structural arrangement places Indonesia in a uniquely uncomfortable position. Legally, the government has been resolute: the loan is business-to-business, and must not be allowed to burden the state budget.

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Yet economically, the separation between sovereign and corporate responsibility becomes far less clear. A liquidity strain on KAI would undermine its capacity to expand rail networks across the archipelago, risking setbacks to broader national development goals.

Compounding this unease is a persistent comparison circulating in public discourse: Sri Lanka's Hambantota Port. Once hailed as a gateway to global maritime trade, the port became an emblem of debt vulnerability after Sri Lanka, unable to service over US$1.4 billion in Chinese loans, granted China Merchants Port a 99-year operational lease in 2017.

The episode has since been used-fairly or not-as a cautionary tale in discussions about Chinese development financing, which critics have referred to as“debt trap” diplomacy. While Indonesia's rail project differs significantly from Hambantota in structure, the debt trap accusation remains politically potent.

For Indonesia, the uncomfortable truth is that every available option carries both economic and political costs. A renegotiation of loan terms with the China Development Bank-extending maturities or adjusting interest rates-appears the most pragmatic first step, enabling breathing room without shifting the burden onto taxpayers.

Additional equity injections from shareholders are theoretically possible, but would require fresh government support for SOEs, a move that contradicts the government's stated stance of keeping fiscal risks at bay.

Limited guarantees or contingent support mechanisms could stabilize operations, though such measures must be carefully designed to avoid eroding Indonesia's reputation for fiscal discipline. Meanwhile, more radical restructuring, including bringing in new investors or divesting assets, is complicated by geopolitical sensitivities.

Default is widely viewed as unthinkable-not only because of the economic consequences, but because of the diplomatic implications for Indonesia–China relations. Both countries have strong incentives to prevent such an outcome.

The broader challenge Indonesia confronts is structural: the dual role of the state as fiscal custodian and majority shareholder. The Whoosh project exposes the tension between these identities.

While SOEs are expected to operate on commercial principles, their strategic roles and political importance make them difficult to shield from government intervention when financial pressure mounts.

Indonesia must therefore carefully calibrate its response: supporting its SOEs enough to preserve system stability, without allowing corporate liabilities to quietly evolve into sovereign ones.

Ultimately, the high-speed rail saga offers valuable lessons not only for Indonesia, but for other emerging economies undertaking ambitious infrastructure projects. First, cost discipline and transparent risk allocation must be embedded from the outset; optimism in forecasting can quietly compound into long-term strain.

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Second, the distinction between corporate and sovereign debt, while legally clean, is often porous in practice-especially when state-owned enterprises sit at the center of national infrastructure. And finally, geopolitical partnerships, however strategic, cannot substitute for rigorous financial planning and institutional safeguards.

As Indonesia navigates this narrow policy corridor, the outcome will be closely watched. Whether Whoosh becomes a symbol of long-term national progress or a cautionary reminder of financing complexities will depend not only on engineering success, but on the country's ability to reconcile ambition with financial discipline.

For nations seeking to modernize at speed, Indonesia's experience underscores a simple but powerful truth: infrastructure can accelerate development, but only when backed by governance structures resilient enough to withstand the weight of its own ambition.

Alek Karci Kurniawan is an analyst at the Indonesia Strategic and Economics Action Institution, a think tank focused on geopolitics and geoeconomics. He has also represented Indonesia at an international youth forum at the United Nations.

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