The recent announcement that Indonesia has begun talks with China over the debt incurred from its high-speed rail project connecting Jakarta to Bandung is a wake-up call for Southeast Asia — and especially for Malaysia.

Indonesia’s first-ever high-speed rail venture, launched amid much fanfare as a symbol of modernisation, is now grappling with ballooning liabilities and revenue shortfalls.

As Indonesia seeks to renegotiate loan terms with China, the realities of megaproject debt burdens and political fallout shine a glaring light on what could happen to the East Coast Rail Link (ECRL) if strategic missteps are not urgently addressed.

Lessons from Indonesia’s debt crisis

Indonesia’s Whoosh high-speed railway began commercial operations in October 2023 but soon faced teething problems including costly delays, pandemic disruptions, and unexpectedly low ridership demand.

By mid-2025, the project posted a staggering Rp1.63 trillion loss in just six months, and liabilities had swelled to nearly 19 trillion rupiah, triggering talks with China to restructure the debt.

Significantly, Indonesia’s finance minister emphasised that state funds would not be used to pay off the debt, leaving the project’s future and the government’s fiscal health hanging in balance.

This scenario underscores a critical lesson, that large-scale infrastructure projects financed by foreign loans — even from close partners like China — can quickly turn into a debt trap if project viability, transparent governance and fiscal safeguards are not rigorously enforced.

The political leadership changes often before the financial fallout is fully realised, and succeeding administrations are left responsible for massive repayment obligations amidst public discontent.

ECRL and the looming debt risk

The ECRL, a 688km megaproject chiefly funded by a Chinese loan from the country’s Export-Import Bank, faces analogous challenges.

While analysts currently view Malaysia as not immediately at risk of falling into a Chinese debt trap thanks to fiscal responsibility laws and prudent debt management, the long-term economic impact remains uncertain.

The key concern is whether the ECRL can generate sufficient economic activity and revenue to service the loan without burdening the future taxpayers.

Much like Indonesia, Malaysia risks a future where politicians and officials who originally championed the project may no longer be in power when debt problems surface, with Cabinet and government changes once every four years so, if not more frequently.

Every time a new Cabinet is installed, new policies are introduced, deriding older ones! There is the danger they might deny accountability, blame predecessors, or plead ignorance, leaving the country’s financial stability vulnerable.

The debt repayment could thus become a legacy issue damaging Malaysia’s fiscal sovereignty — unless preventative audits, transparent reporting, and robust project governance are established immediately.

Avoiding white elephant projects, fiscal leaks

History offers cautionary examples of Malaysian projects that turned into costly white elephants, draining public resources and tying the nation to onerous repayments.

These include:

• Putrajaya: While symbolically cherished, criticisms have mounted over cost overruns and ongoing maintenance expenses, burdening government coffers.
• Forest City: Labelled a “ghost township”, with underutilised properties and stalled investments, it has raised concerns about financial sustainability and poor urban planning, and has now been designated a free Special Financial Zone (SFZ) since September 2024.
• 1MDB scandal: though not directly an infrastructure project, misappropriation of billions of ringgit fatally damaged Malaysia’s reputation and financial health, with ripple effects on government borrowing costs.

Such examples stress the critical need for thorough audits, transparent procurement, strict oversight, and public accountability mechanisms to halt leakages in project funds and ensure value for taxpayers.

Malaysia must learn from these experiences to ensure that the ECRL does not become another white elephant.

Proactive measures

To safeguard Malaysia’s future, the government must take several immediate steps:

• Comprehensive audit and public report: Order an independent audit of the ECRL project’s finances, contracts and progress, with findings publicly disclosed. This transparency will deter corrupt practices and reassure citizens.
• Fiscal risk management: Strengthen debt sustainability frameworks and monitor the project’s financial health continuously using international best practices.
• Project governance reform: Establish strong, independent oversight bodies with the power to intervene if deviations or irregularities are detected.
• Engage public stakeholders: Foster wider understanding among Malaysian citizens about the project’s status and government measures in place, building societal support for prudent decisions.
• Learn from regional experiences: Track developments in Indonesia’s high-speed rail project and other regional infrastructure ventures to anticipate risks and adapt mitigation strategies dynamically.

Indonesia’s high-speed rail debt crisis serves as a powerful warning for Malaysia.

While the ECRL holds promise for boosting economic connectivity and regional development, the risk of debt distress and political evasion of accountability looms large.

Malaysia cannot afford to repeat the mistakes of the past with white elephant projects draining resources and compromising national progress.

Only through unwavering commitment to transparency, fiscal prudence and proactive governance can Malaysia ensure that the ECRL becomes a transformational success — not a financial burden for generations to come.

The time to act decisively is now, before the trains run late on financial discipline and our reputable national trust.

The views expressed are those of the writer and do not necessarily reflect those of FMT.