China's Belt and Road Initiative: from perceptions to realities in Indonesia's coal power sector

Abstract

This paper contributes to the debate on the sustainability of the Belt and Road Initiative (BRI) by analyzing Chinese investments in Indonesia's coal power sector. Insofar, scholarship on the BRI examined the role of Chinese companies “going out,” neglecting host countries' agency in shaping this initiative. This study analyses this important yet often overlooked dimension through the lens of local stakeholders. Fifteen in-depth interviews provide key insights into themes that are explored using a novel database. Results show a sharp increase in the Chinese-led financing, construction, and investments in Indonesia's coal power plants. While large State-owned enterprises spearheaded this increase, the BRI is also generating an impetus of private investments in new “instrumental” coal power plants that serve industrial parks, owned by non-energy companies. After the Paris Agreement, only Chinese, Japanese, and Malaysian institutions continued to finance coal power plants in Indonesia. However, unlike other foreign investors, Chinese companies are bringing mostly subcritical (low-end) technology, and their operations have been associated with the use of illegal labour. Overall, results show how China's export of industrial capacity and financing through the BRI is met by Indonesia's developmental attitude towards using coal and foreign investments to prioritize its economy growth over environmental and social sustainability.

Full text

Energy Strategy Reviews 34 (2021) 100624
Available online 25 February 2021
2211-467X/© 2021 The Author(s). Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
China’s Belt and Road Initiative: from perceptions to realities in Indonesia’s
coal power sector
Angela Tritto
The Hong Kong University of Science and Technology, Institute of Emerging Market Studies, Division of Social Science, Room 2026, IAS Lo Ka Chung Building, HKUST,
Clearwater Bay, Kowloon, Hong Kong Special Administrative Region
ARTICLE INFO
Keywords:
China
Belt and road initiative
Indonesia
Coal power plants
Sustainable development
Mixed methods research
ABSTRACT
This paper contributes to the debate on the sustainability of the Belt and Road Initiative (BRI) by analyzing
Chinese investments in Indonesia’s coal power sector. Insofar, scholarship on the BRI examined the role of
Chinese companies “going out,” neglecting host countries’ agency in shaping this initiative. This study analyses
this important yet often overlooked dimension through the lens of local stakeholders. Fifteen in-depth interviews
provide key insights into themes that are explored using a novel database. Results show a sharp increase in the
Chinese-led nancing, construction, and investments in Indonesia’s coal power plants. While large State-owned
enterprises spearheaded this increase, the BRI is also generating an impetus of private investments in new
“instrumental” coal power plants that serve industrial parks, owned by non-energy companies. After the Paris
Agreement, only Chinese, Japanese, and Malaysian institutions continued to nance coal power plants in
Indonesia. However, unlike other foreign investors, Chinese companies are bringing mostly subcritical (low-end)
technology, and their operations have been associated with the use of illegal labour. Overall, results show how
China’s export of industrial capacity and nancing through the BRI is met by Indonesia’s developmental attitude
towards using coal and foreign investments to prioritize its economy growth over environmental and social
sustainability.
1. Introduction
Since its launch in 2013, the narratives on China’s Belt and Road
Initiative (BRI) have considerably evolved. In its initial stage of
euphoria, many observers described the initiative as “China’s most
ambitious foreign and economic policy” [1] or “China’s $1
trillion-dollar project to shake up the economic order” [2]. Gradually,
narratives of “debt traps” emerged [3,4], which were met by defensive
counterarguments by ofcial and pro-China responses [5–7]. The debate
on the BRI’s sustainability has been equally polarized. On the one hand,
the Guidelines on Promoting Green Belt and Road and The Belt and Road
Ecological Cooperation Plan show an ofcial commitment by the Chinese
government to drive investments towards sustainable outcomes. The
document afrmed the need for “enterprises and institutions involved in
the One Belt and One Road initiative to practice environmental pro-
tection in foreign countries to ensure an eco-friendly and green Belt and
Road” [8]. Similarly, the BRI’s leading vehicles – the Asian Infrastruc-
ture Investment Bank, China Development Bank, and China EXIM Bank
set up guidelines and cooperation agreements with international coun-
terparts to promote green nance and Corporate Social Responsibility (i.
e., [9]). Commentaries from NGO leaders and academic sources inside
China also touted how the BRI “can pave the way to global sustain-
ability,” [10] making somewhat propagandistic claims that “BRI has a
positive impact on the sustainable development of all countries” [11],
without however providing strong empirical evidence. On the other
hand, recent reports and commentaries on the impacts of Chinese out-
ward investments outlined the potential threats and challenges that such
a large-scale endeavour can bring at global (see Refs. [12,13]) and local
level [14,15]. In-between the two, other studies have focused on the role
of investors, policy banks, and host governments in delivering the
promised outcomes [16–18] and have analysed the evident gap between
China’s domestic and overseas policies aimed at stirring green in-
vestments by Chinese companies [14,19–21].
Energy research is, likewise, contradictory. China was dubbed the
next “world’s renewable energy superpower” and a “global clean energy
champion” by studies that showed the country as the largest producer,
exporter, and installer of solar panels, wind turbines, batteries and
electric vehicles [22,23]. However, studies also show China as a leading
player in the nancing and development of coal power plants, therefore
contravening its own sustainability commitments for the BRI as well as
E-mail address: tritto@ust.hk.
Contents lists available at ScienceDirect
Energy Strategy Reviews
journal homepage: http://www.elsevier.com/locate/esr
https://doi.org/10.1016/j.esr.2021.100624
Received 29 April 2020; Received in revised form 27 August 2020; Accepted 18 January 2021

Energy Strategy Reviews 34 (2021) 100624
2
other multilateral ones such as the Paris Agreement [19,24–27]. These
studies often employ datasets of nancial data that, despite being
comprehensive and consistent, are often not released and veriable.
They often look at the role of Chinese investments globally or in a spe-
cic region; hence, they seldom captured the role of host governments in
attracting these investments, nor examine the impact and politicization
of Chinese investments. Most importantly, by focusing solely on Chinese
investments, they miss a comparative angle with other foreign in-
vestments that may reveal signicant differences.
This study contributes to the current debate on China’s BRI sus-
tainability by providing an in-depth analysis of investments in coal
power plants from a host country perspective. Being the largest mobi-
lization of Chinese capital to date, understanding the dynamics of BRI-
led investments is of paramount importance for the sustainability
debate in energy research. This study selected Indonesia as a focus of
research. The country is the quintessential case of resource-rich
emerging economy with a considerable gap in electrication rates and
a “developmental” attitude [28] that seeks to attract foreign capital to
alleviate its infrastructural gap. The study explores the role of Chinese
rms and nancial institutions vis-`
a-vis other foreign investors in the
development of coal power plants and adds nuances to the perceptions,
host government agency, and impacts at local level by proposing an
novel mixed-method research design. This design provides on the one
hand, insights on how local elites, civil servants, and civil society leaders
perceive Chinese investments, and on the other hand, confronts these
views with data. The database was created by merging and cross-
checking ve databases as well as other government-related sources.
This process could be replicated for other emerging economies to create
more comprehensive databases of coal power plants that not only show
the nancing, but also comprise data related to ownership, construction,
technology, social mobilizations, and environmental concerns. This new
method seeks to address the gap in creativity in the energy research
methods and add a “social” dimension to energy research that scholars
recently identied as under-examined [29,30]. In particular, analysing
the case of Indonesia through different actors’ viewpoints – the gov-
ernment, the business elites, the foreign investors, and the civil society
can provide useful insights into the complex dynamics that other
emerging economies are facing. As recent studies have pointed out, "It is
critical to understand current performance and establish a baseline un-
derstanding of the environmental impacts of Chinas overseas projects
thus far" [31]:1. A single country perspective allows an in-depth analysis
of the internal dynamics affecting Chinese investments, nancing, and
contracting of coal power plants and how these investments are
perceived by different stakeholders at national and local level. This focus
on a single case also allows to understand how the Belt and Road
Initiative has changed the presence of Chinese companies and nancial
institutions , and how this can in turn shape a country’s energy future
and its sustainable development.
2. Dark paths: Indonesia’s developmental attitudes meet
China’s BRI
Indonesia is the largest economy in Southeast Asia, and in 2020, it
accounted for roughly one-third of ASEAN’s GDP. In 2017, the country
had, however, yet to achieve homogeneous electrication rates to
accomplish its growth potential. Fig. 1 shows how provinces like Papua
and East Nusa Tenggara that had electrication rates below or slightly
above 50% were in stark contrast with highly electried areas and
provinces in Java and Sumatra.
This gap set Indonesia behind most of the other countries in ASEAN
such as Singapore, Brunei, Malaysia, Thailand, and Vietnam, which all
had higher installed capacity and electrication rate [32]. The fre-
quency of power outages and the goal of achieving upper middle-income
country status by 2025 are the main reasons behind the ambitious 35,
000 MW plan that President Widodo launched in 2015. This program
perfectly ts into the narratives of Indonesia’s developmentalism [28,
33,34] whereby large-scale projects are “justied by appeals to grand
narratives,” in which infrastructure development becomes vital to the
nation’s progress. Of this 35,000 MW of power, 10,681 were to be added
by state electricity company PLN through the construction of 35 new
power units, while the rest will be offered to Independent Power Pro-
ducers (IPPs; [32]). These IPPs include local power companies as well as
foreign investors.
Under the 35,000 MW plan, PLN issues a yearly Power Supply
Business Plan to set the specics of the installed capacity and the energy
mix of each region. The 2018–2027 plan [35]projected an increase of
electricity capacity of 56,024 MW over the next decade, mostly provided
through coal, which will account for 54.4% of Indonesia’s energy mix by
2025 (Fig. 2), followed by renewable energy (23%), natural gas (22.2%),
and gasoline (0.4%). In 2019, Papua and East Nusa Tenggara had
already reached a respective 94% and 85% electrication rate [36].
While the Government of Indonesia showed strong support for
moving towards the United Nations Sustainable Development Goals
both with its domestic policies and by signing and ratifying the Paris
Agreement in October 2016, the reality is that the heavy reliance on coal
will not change in the future. As pointed out by Cornot-Gandolphe [37];
this is because, from the government’s point of view, Indonesia’s
abundant coal is the quickest, easiest, and cheapest way to provide
Fig. 1. 2017 Electrication rates in Indonesian provinces. Sources: Ministry of Energy and Mineral Resources, 2017 - https://www.esdm.go.id/assets/media/co
ntent/content-rasio-elektrikasi.pdf.
A. Tritto

Energy Strategy Reviews 34 (2021) 100624
3
electricity. This study’s interviews with local private and public sector
stakeholders reect this perspective (Interview1; Interview6; Inter-
view10). The cost advantage for coal relates to its availability and
extraction method, its lower capital costs, but also the absence of
emission fees, and the lack of consideration of environmental external-
ities [38]. The analysis made by the Climate Action Tracker group
revealed that “Indonesian energy policy is not only going against the
global trend where renewable capacity additions have overtaken coal,”
but it seems set towards an insufcient commitment towards emission
reduction. Overall, “forest res, fast increasing energy demand, and
expansion of its dependency on coal will lead to an unsustainable sce-
nario of 3–4 ◦C temperature increase by 2030" [39]. While the Ministry
of Energy and Mineral Resources issued several strategies to phase out
plants that use subcritical pulverized technology, improve the refur-
bishment of existing power plants, and prioritize the use of so-called
“green coal technologies” such as supercritical, ultra-supercritical
(USC) and Combined-Cycle Technology [40], these are in sharp
contrast to the growth imperative set by PLN.
As previously mentioned, foreign investors play a crucial role in this
growth by building, nancing, and operating new coal power plants.
Indonesia’s infrastructure development plan shows a considerable
nancing gap of almost USD110 out of 157 billion that could be lled by
private investors, among which Chinese companies seem to be the most
eager to contribute [41]. According to Shearer et al. [42]; “Chinese
nancial institutions are the world’s largest funder of overseas coal
plants, investing US$15 billion in coal projects from 2013 to 2016
through international development funds, with another US$13 billion in
proposed funding” – the latter concurs with a report by the Natural
Resources Defense Council [43].
Recent research [20,42,44–47] well documented the overcapacity
issue in China’s coal sector, which has also been addressed by the CCP’s
13th Five Year Plan. The plan outlined the setting up of a fund to reward
structural adjustments in industrial enterprises, especially in the coal
and steel sector. Hence, capacity exporting, a commonly cited motive
underpinning the ambitious Belt and Road Initiative [48,49] along with
the excess of national savings and foreign reserves that China seeks to
diversify [50] seem particularly appropriate when looking at the coal
power sector in Indonesia [51]. Djankov and Miner [48] noted that even
though the total investments and construction contracts generated by
the BRI would still be much lower than the USD5 trillion per year that
China invested in xed assets domestically, “going out” will provide
leeway for Chinese companies to re-think of their future growth strategy
and engage in much-needed organizational restructuring. While this
could be a perfect match between a country with a signicant infra-
structure decit seeking investors and a country with sizeable industrial
overcapacity and available nancial resources, the environmental and
social sustainability of this path would go against both countries’
international commitments towards a green energy transition and car-
bon reduction. The following sections show how the BRI has changed
the presence of Chinese companies and banks in the nancing, con-
struction, and ownership of coal power plants in Indonesia.
3. Research methods
This study adopts a mixed method design that, according to Molina-
Azorin’s classication [52]:42), is a sequential type that assigns priority
to qualitative data and uses quantitative data to help validate and
expand on the gained insights. Using this design allows the validation of
interviewers’ perceptions with the realities of energy investments in
Indonesia.
3.1. Qualitative research methods
The interviews, which depict key perceptions of Chinese investments
by Indonesian stakeholders in the energy sector, are used to form hy-
potheses and provide additional content used in the results section.
Twenty-one in-depth interviews were collected using a snowball sam-
pling until saturation level was reached during three eld research trips
to Indonesia in December 2017, August 2018, and July 2019 for a total
of six weeks. Interviewees include members of international organiza-
tions (3), international and local think tanks (3), NGO leaders (3), ex-
ecutives of energy companies (4), leaders of business organizations (2)
as well as legal, nancing, and academic experts (4). Two interviews
were conducted in the Hong Kong SAR with a senior executive of a
utility company and an Indonesian diplomatic ofcial. The questions
ranged from ones’ perception of the BRI and Chinese investments in
Indonesia to details of specic coal power plants projects. A content
analysis of the results led to the formulation of four hypotheses, which
were explored by analysing quantitative data and other documentation.
The hypotheses are summarized below:
H1: The Belt and Road Initiative is bringing larger, rst tier-type of
companies to invest in Indonesia (Interview1; Interview2; Interview3;
Interview8; Interview15). The quote by an executive of a leading
Indonesian rm engaged in coal mining and power plants exemplies
this hypothesis:
“In 2014, my company visited Shenhua. The BRI brought more rst-
tier companies like this that have huge capacity - imagine that Shenhua
and Huadian combined produce 180 GW of power, and Indonesia’s total
capacity is 50 GW” (Interview8). This hypothesis entails that the BRI is
bringing companies that are leaders in the industry. Hence, they can
provide higher standards as opposed to what happened in the past,
which will be discussed in the next section.
H2: After the Paris Agreement, multilateral banks such as the World
Bank and funding institutions from the EU and OECD countries are not
Fig. 2. Indonesia Energy mix 2018 - 2027 (Gwh). Source: PLN, 2018: V-64.
A. Tritto

Energy Strategy Reviews 34 (2021) 100624
4
nancing any more coal power plants. This commitment does not
constrict Chinese-led nancial institutions and Chinese State-Owned
Enterprises (SOEs); hence, they can provide an indispensable channel
of nancing for new coal power plants (Interview10; Interview11).
NDRC data and Ren et al.’s [25] “Stage Three of rapid growth” of
Chinese nancing during the 2013–2015 period clearly illustrate this
claim. While nancing from the World Bank and the European Invest-
ment Bank stopped, Chinese nancing of coal power plants boomed.
While investments decreased from 2016 onwards because of the
commitment from the Paris Agreement, it is yet too early to establish if
this trend will continue. This study validates Ren et al.’s phases through
a detailed analysis based on a single country examining also the type of
nanced technology (see H3).
H3: Chinese companies bring lower-end types of technology to
minimize investment costs and win construction contracts because the
Indonesian tendering system in favours bidders mostly based on budget.
However, this generates a much higher cost on the environment and the
surrounding communities (Interview1; Interview9; Interview10;
Interview11).
H4: Chinese investments bring illegal labour to the country (Inter-
view1; Interview2; Interview3; Interview9; Interview10; Interview11).
Indonesia has strict laws regarding foreign labour, but Chinese workers
often bypass these laws with stratagems, such as using visitor visas or
sharing temporary work permits among workers (Interview3).
Yao et al. [51]’s policy brief partially supports hypotheses 3 and 4
despite, however, supporting it with data. This study does so by exam-
ining the type of technologies employed by coal power plants and by
coding the data on the Global Energy Monitor GEM.wiki (formerly
SourceWatch), which provides a background of main events and news
articles on each coal power plant. This data shows if these projects have
triggered any environmental or social impacts, have caused any work
accidents, legal lawsuits, or raised concerns over foreign labour issues.
Some of the above hypotheses reect a negative sentiment towards
Chinese investments, which is not surprising when looking at the
problematic history of the two country’s foreign relations [53]. This
paper aims to scrutinize these perceived dynamics by looking at data as
well as existing research on the coal power sector in Indonesia and
explain if and how the BRI is changing the institutions, the nancing,
and the technology brought by Chinese investments.
3.2. Quantitative research methods
This study employs a dataset that combined and crosschecked in-
formation from three databases of coal power plants. These are: the
Global Energy Monitor (GEM, formerly Coalswarm), an open-access
source on coal power plants; an open-access database on emissions of
coal power plants in Indonesia published by the American Chemical
Society containing data from the proprietary database Platts [54], which
was the primary source of emission data; and with NDRC’s Consolidated
Coal and Renewable Energy Database 2017 [55]. This data was cross-
checked with investment data from the China Global Investment tracker
[56] and with the Financial Times’ FDI Markets database. The resulting
database of plants that are above 50 MW of power is available from
Dataverse [57]. The database includes details of new variables. New
variables indicate the status of the plant (i.e., open for tender was
created to differentiate announced projects that have yet to receive any
interest from potential investors); to show the year of announcement
and the expected completion; and to display the leading country(ies)
responsible for investing, nancing, building, or supplying materials for
each plant. The sources were at times conicting or had to be updated or
modied based on available information. The manual analysis of each
coal power plant revealed GEM to be the most updated source, but that
at times the data still needed updating based on the latest available
news, which was recorded in the dataset. The database includes notes on
modications, alterations, and correspondence between data sources.
To examine H3 and H4, the background information of coal power
plants on GEM.wiki (formerly SourceWatch) was used to create another
dataset, which was coded to show evidence of different adverse impacts.
Categories of impacts include (1) environmental impacts related to the
quality of the environment and local livelihood; (2) incidents triggered
by the plant; (3) legal issues that may have been triggered by a lack of
permits, irregularities in respecting certain geographical boundaries or
procedures, or corruption; (4) issues related to illegal workers being
hired by the plant.
The plants built under the Fast Track Program 1 (FTP1), Fast Track
Program 2 (FTP2), and 35,000 MW were classied accordingly, using
available sources (see Refs. [58,59]. In this way, the study provides an
overview of the role of Chinese investments in the last three large-scale
government programs for electrication.
4. Chinese rms in Indonesia’s coal power sector
The rst large-scale programs to address the lack of energy infra-
structure in Indonesia were launched by Widodo’s predecessors in 2006
and 2010. They were the Fast Track Program 1 (FTP1) and Fast Track
Program 2 (FTP2). By the end of 2013, the FTP1 had accomplished 63%
of the planned 10,000 MW capacity and was scheduled for completion in
2015, ve years after the originally planned time [60]. The FTP2 had a
target capacity of 17,900 MW, and its expected completion time had
shifted from 2014 to 2020 [61]. Delays related to licensing issues, land
clearing, and technical difculties with the lack of transmission lines
[60]. This section explores the role of Chinese rms and institutions in
these two programs, which most interviewees viewed negatively. The
leader of a local business association mentioned, “Chinese companies
have a bad reputation from the past. They built power plants that then
broke down and lost 700 MW of capacity” (Interview2). Other studies
[62,63]:187 also mention that during the rst “Crash” program, plant
equipment was “purchased cheaply from China and assembled quickly.”
While “dirty and inefcient,” these served the purpose of alleviating the
lack of electricity supply and diverting the energy mix away from oil
fuel.
Table 1 shows the results of the combined database. The FT1 includes
eighteen unique coal power plants (CPP) and three extension projects of
existing coal power plants for a total of forty-two units and 9648 MW.
They all have “operating” status. The FTP2 includes ten coal power
plants and three plant extensions for a total of twenty-ve units and
9686 MW, with mixed completion status. Jawa5 (2000 MW) and Jawa6
(2000 MW) were canceled and shelved respectively, and Kaltim FTP2
(200 MW) was open for tender in 2015, but received no interest from
potential investors, leaving nine plants (5060 MW of power) that are
either announced (2), obtaining permits (2), under construction (4), or
operating (1). During both programs, PLN retained ownership over most
of the plants, which were largely nanced and built by foreign investors.
During the FTP1, foreign investors were primarily from China and
Japan, while during the FTP2 other countries’ institutions and rms
from Malaysia and Korea also participated in the investment and con-
struction of coal power plants, drawing nancing from Hong Kong and
Singaporean banks. Chinese institutions were the top source of nancing
for coal power plants in both programs, with a much more pronounced
percentage of construction contracts awarded to Chinese companies
during the FTP1. While Chinese investments outnumbered Japanese
ones, Japanese-linked plants were larger.
During the FTP1, all plants used subcritical technology – the least
advanced and cheapest, except for two plants: Teluk Sirih that uses
Circulating Fluidized Bed and Adipala power station, which uses Su-
percritical technology. PLN owns both plants, but Chinese banks and
companies nanced and built them. All plants built during the FTP2 use
subcritical technology except the Tanjung Jati B power plant, which uses
Ultra-supercritical technology. Japanese companies and institutions
invested, nanced, and built this plant with a Singaporean bank
included in the nancing. The adverse impacts brought by power plants
built during the FTP1 included environmental issues, protests, incidents,
A. Tritto

Energy Strategy Reviews 34 (2021) 100624
5
and legal issues. All of them related to plants built by Chinese companies
either alone or together with Indonesian companies. Data, therefore,
supports the previous quote on the reputation of Chinese companies
during this government program. During the FTP2, labour and legal
issues emerged in relation to the Parit Baru power plant, jointly owned
by Chinese and Indonesian companies, while an incident incurred in the
Tabalong power station, a joint Indonesian-Korean investment, and an
extension of the Tanjung Jati B, a Japanese investment, triggered
environmental protests and legal issues.
5. Chinese rms before and after the Belt and Road Initiative
Based on the analysis in the previous section, it is crucial to make a
distinction between investors and contractors-type of companies.
Table 2 shows data on these types of companies dividing them according
to the time they carried out coal power projects, to see if there are any
changes over time. Appendix 1 shows companies that carried out con-
struction contracts. Investments and construction contracts are consid-
ered as part of the BRI if they happened from the year 2013 onwards.
While the 21st Century Maritime Silk Road was announced in
November, most of the investments and construction contracts negoti-
ated during that year became part of the Belt and Road Initiative.
1
One
example is the Sulawesi Mining power plant, which is part of the
Morowali Industrial Park (IMIP), a ferro-nickel mining and smelter
cluster that emerged as one of the largest investments by Chinese
companies in the country [64].
The data clearly shows that large companies’ presence in the country
started with construction contracts and developed through increasing
investments. With a few exceptions, contractor companies seem to be
mostly the same. While construction contracts have a stable or
decreasing trend, investments rose after 2013, revealing a different
pattern concerning the type of investor. Namely, aside from leading
companies in the coal power sector like Shenhua, Huadian, the Power
Construction Group, and CEEC, leading companies in other key invest-
ment sectors such as aluminum (i.e. China Hongqiao Group), steel, and
stainless steel producers (i.e. Dingxin Group, Huadi Steel Group) are also
investing in coal power plants. They are investing in what this study calls
“instrumental” coal power plants - plants that do not add capacity to the
national or regional grid, but rather provide electricity for the industrial
complex or manufacturing plant of the rm.
A point worth noting is that interviewees perceived most of the
investing companies coming from China as overly condent and boastful
during business talks (Interview1; Interview8). As a result, some in-
terviewees claimed they felt more familiar with Japanese companies,
who have a much longer and established presence in the country as
investors and have a more established reputation (Interview1; Inter-
view8; Interview13). Interestingly, Soebagjo [62] also brings up this
point in her analysis of the FTP1. The political and nancial support by
the BRI to “go outward” is one of the leading factors that galvanize
Chinese companies and makes them more condent in investing. Data,
in fact, clearly shows that the top investing companies are mostly SOEs,
which enjoy strong government support and easier access to nancing
by state banks. At times, this makes collaborations with leading com-
panies in the private sector difcult (Interview8; Interview15). A senior
executive of a Hong Kong utility company explained, “Companies or
entities partnering up with the Chinese SOEs need to analyze the situ-
ation rationally. These are big companies with plenty of nancial re-
sources, and they always feel that they can buy anything they need or
want. If they do not have the expertise, they can buy it. If they do not
have the technology, they can buy it, and in addition to that, they can
perfect it, as they also have their R&D departments. Hence, because of
that nancial power, they do have the upper hand, and there is very
little bargaining room for the other party” (Interview15). A diplomat in
Hong Kong mentioned that high-level meetings usually facilitate and
speed up the projects, but negotiations are usually quite complex, and
the Indonesian side tends to suggest collaborations with local companies
to obtain access to land (Interview14).
6. Financing and funding institutions
The data from this study shows that China is the single leading funder
of coal power plants in Indonesia with USD 13.4 billion funds provided
from 2000 to 2016, conrming the results of the “Power Shift” report
[43]. In particular, a T-test with unequal variance showed that Chinese
institutions nanced a signicantly higher share of coal power plants
during the FTP1 and after the BRI compared to other countries (see
Appendix 2 for results).
Japanese companies and institutions tend to co-nance plants with
other institutions, mainly from Korea, Singapore, Hong Kong, and, in
one case, a plant was co-nanced with institutions from mainland China.
Overall, groups of nancial institutions from multiple countries in which
Table 1
Ownership, nancing, and construction contracts during the FTP1 and FTP2.
Fast Track Program 1 Fast Track Program 2
Ownership Financing Construction Ownership Financing Construction
Indonesia 19.5, 8593 MW (89%) 3, 540 MW (6%) 9.5, 4056 MW (42%) 5.5, 1900 MW (38%) 1, 100 MW (2%) 3, 1500 MW (30%)
China 0.5, 110 MW (1%) 8.5, 5436 MW (56%) 11.5, 5593 MW (58%) 1.5, 500 MW (10%) 3, 700 MW (14%) 2.5, 600 MW (12%)
Japan 1, 945 MW (10%) 1.5, 320 MW (3%) – 1, 2000 MW (40%) 0.8, 1066 MW (21%) 1, 2000 MW (40%)
Korea – – – 0.5, 100 MW (2%) 0.3, 66 MW (1%) 1, 200 MW (4%)
Malaysia – – – 0.5, 660 MW (13%) – 0.5, 660 MW (13%)
HK, SNG – – – 0.8, 1066 MW (21%) –
N/A – 8, 3362 MW (35%) 3, 2060 MW (41%) 1, MW 100 (2%)
Each country’s cell shows the number of plants (not units), the combined MW, and the percentage calculated on the total MW in the program. Plants whose ownership,
nancing, or construction was shared among entities of different countries were equally divided.
Table 2
Number of projects by Chinese investors.
Investing companies
Before BRI After BRI
Shanghai Electric
a
1 1
Shenhua Group
a
1 3
China Huadian Corporation
a
2 3
China Electric Power Construction
b
1 –
China Energy Engineering Corporation (CEEC, Gezouba)
a
1 2
Power Construction Group (Sinohydro, PowerChina)
a
1 4
China Hongqiao Group/Shandong Weiqiao
b
– 1
Dingxin Group
b
– 1
Huadi Steel Group
b
– 1
China’s Golden Concord Holdings (GCL-Poly)
b
– 1
a
SOE.
b
Private.
1
The Maritime Silk Road (MSR) is the sea route of the Belt and Road
Initiative (BRI) that includes Indonesia among other countries. This paper refers
to the BRI rather than to the MSR.
A. Tritto

Energy Strategy Reviews 34 (2021) 100624
6
Japan was one of the main funders provided USD 15 billion, whereas
Japanese institutions solely nanced USD 6.4 billion of coal power
plants. Malaysian institutions also provided 1.6 billion of nancing for
coal power plants in Indonesia. Hence, one key pattern that emerges
from the analysis is that Chinese nancial institutions tend to nance on
their own or together with Indonesian banks and institutions, while
other countries engage more in co-nancing with other foreign in-
vestors, a common de-risking practice.
Fig. 3 shows the source of external nancing of coal power plants
with active status by looking at the size of the plant in Megawatt. Both
Chinese and Japanese institutions have a constant presence, with a
marked increase in funding after 2013, and a sharp decrease after 2015.
The data also shows that the already scarce nancing from the United
States and European companies, as well as international agencies such as
the World Bank, decreased (these are marked as ‘US, EU’). However,
nine new power plant projects for 3000 MW are currently open for
tender, and therefore, it is essential to monitor further changes. In 2018,
most of the nancing for new coal power plant projects came from
Indonesia itself.
Another observation from the data is that the BRI has not changed
the prole of Chinese institutions nancing coal power plants (see
Table 3). China Development Bank, China Exim Bank, and Bank of China
played a crucial role in nancing plants built during the FTP1, as data
conrms they provided at least USD 4 billion in funding for a combined
capacity of 5546 MW of power, as well as during the FTP2, for which
they nanced at least 2726 MW of power.
Looking ahead, while foreign nancing is decreasing, Chinese in-
stitutions are set to continue nancing most new coal power plant
projects in Indonesia with a combined capacity of 5435 MW and USD 6.7
billion committed in the fourteen current projects.
7. Impacts: from technology to environmental, compliance, and
societal-related issues
The last hypotheses look at the type of technology brought by Chi-
nese investments, as well as at the environmental, social, and
compliance-related issues that may arise from Chinese-invested coal
power plants. In the dataset, technologies are classied into three
groups, starting from the lowest, cheapest, and most environmentally
damaging ones to the most advanced ones: subcritical, supercritical, and
ultra-supercritical/circulating uidized bed.
Fig. 4 shows the type of technology of the coal power plants and the
country of the foreign institution that provided the funding. The gure is
based on a subset of the database that covers active projects from 2008
until 2018. During this time, China invested either alone or together
with Indonesian companies in at least 3019 MW of subcritical power
plants (11 plants) and 2000 MW of supercritical technology (one plant),
with 2790 MW (six plants) unknown due to missing data. Japanese in-
vestments, either alone or in conjunction with Korean investors
accounted for most of the ultra-supercritical type of plants, whereas
investments from Malaysia brought coal power plants for a similar ca-
pacity of subcritical and supercritical technology.
Table 4 shows the results of multiple independent samples t-tests to
compare the different level of technologies in plants owned by foreign
investors. Results show that Chinese institutions invested in a signi-
cantly higher number of subcritical coal power plants as opposed to
other foreign investors. To the contrary, Japanese companies and in-
stitutions invested in plants using the latest technologies such as ultra-
supercritical and circulating uidized bed, investing in signicantly
less subcritical power plants than other foreign investors do.
Table 5 shows the results on multiple independent samples t-tests to
measure adverse environmental impacts voiced by either residents or
NGOs, which often include concerns over impacts on communities and
their livelihoods; recorded incidents related to the malfunctioning of the
power plants; issues related to illegal and foreign labour; and
compliance-related issues, including lack of environmental permits,
land or corruption issues. Results compare all main foreign investors and
show that investments from Chinese companies tend to incur in a higher
number of issues related to foreign labor. One example is the Celukan
Bawang power plant in Bali. According to GEM local news outlets, in
December 2012, immigration ofcials seized the passports of 75 illegal
foreign workers during an inspection [65] and in 2017, seven workers at
the plant who were found without immigration documents were
deported [66]. The same t-test performed using plants that were built by
Chinese companies through construction contracts does not show any
higher value of illegal labour issues.
Despite bringing more advanced technologies, Japanese investments
in coal power plants (alone or in conjunction with other foreign in-
vestors) were associated with a larger number of environmental and
community-related issues. The reason for this may be that being long-
established, Japanese investments initially brought subcritical technol-
ogy, but are now bringing ultra-supercritical by expanding the earlier
power plants. There are few examples of this type of situation, whereby
the cumulative adverse effects of the plant resulting from several
Fig. 3. Financing of coal power plants in Indonesia, by MW.
Table 3
Key Chinese nancing institutions of coal power plants in Indonesia.
FTP1 FTP2 BRI (After
2013)
China Development Bank 5
(2979)
1
(1641)
8 (4969)
China Exim Bank 4
(1073)
2 (413) 2 (970)
Bank of China 5
(1397)
– 3 (2789)
China Shenhua Overseas Development and
Investment
– – 1 (972)
Data shows the number of coal power plants that each institution nanced either
alone or in conjunction with other institutions and the sum of funding provided
in USD million in parenthesis.
A. Tritto

Energy Strategy Reviews 34 (2021) 100624
7
expansions have triggered strong opposition. The Paiton power com-
plex, for instance, is the result of three main expansions and now ac-
counts for 4950 MW of power and 80% of Hazardous and Toxic B3 waste
produced annually in East Java [67]. While in this case, the technology
to be added is subcritical, the similar cases of the Tanjung Jati B and the
Indramayu power station upgraded their technology to either super-
critical or ultra-supercritical. This is an interesting result since in-
terviews seemed to point out plenty of issues and resistance to
Chinese-invested coal power plants. Interviewees claimed that at times
the surrounding communities were deceived into believing that the
power plant was going to be a manufacturing plant (Interview9) and
that Chinese investors often look at Indonesia as a pollution haven, and
exploit the competitive bidding system to export lower types of tech-
nology (Interview9; Interview10; Interview11; Interview16). One
interviewee mentioned “There are not very strict standards here in
Indonesia as to how a power plant needs to be built or ran. By com-
parison, in China there are codes specifying down to the kind of door you
need to use. The upside for investor is you have more room to play
around with the CAPEX, and the downside is, the standards between
different power plants can vary greatly, thus affecting the reliability of
these power generators.” However, data from the media reports do not
show any signicantly higher number of concerns when compared to
other coal power plants. Finally, data show that when compared to other
foreign investors, Chinese companies have invested in a signicantly
higher number of instrumental coal power plants (see Table 6). These
are, as previously mentioned, plants that provide electricity for another
investment (i.e., aluminium factory or stainless-steel production).
The above results represent some of the BRI investment in industrial
parks connected to mining and smelter activities, which are sprouting all
over Indonesia and, therefore, this could be an important dynamic to
monitor. These plants may use less advanced technologies due to budget
constraints, but also because of a problem of exibility of technology, as
remote areas may have smaller grid capacity, which may only be able to
accommodate subcritical power plants. This in turn would lead to
adverse environmental and social impacts. So far, data on these plants
seems often unavailable, but two plants co-invested by China and
Indonesia (Ketapang Smelter and Medan Steel), both use subcritical
technology, showing this may be the case.
8. Discussion
When looking at the statements from the interviews and the results
from the quantitative analysis, it is possible to see both overlaps and
differences. Data have not always conrmed the perceptions revealed by
the interviews, and at times, these denoted a somewhat distorted and
negative view of Chinese investments. Hence, these statements reect
Fig. 4. Technology of foreign-invested coal power plants in Indonesia (2008-2018), by MW.
Table 4
T-tests - technology of coal power plants.
Main investor country: China Japan Korea Malaysia
Subcritical 0.94 0.31 0.40 0.50
SD =0.24 SD =0.48 SD =0.58 SD =0.58
Mean difference 0.49*** −0.52*** −0.32 −0.21
Supercritical 0.06 0.13 0.20 0.50
SD =0.24 SD =0.34 SD =0.45 SD =0.58
Mean difference −0.11 0.40 0.11 0.43
Ultra-supercritical/CFB 0.00 0.56 0.40 0.00
SD =0.00 SD =0.51 SD =0.58 SD =0.00
Mean difference −0.10*** 0.56*** 0.28 −0.15***
Total cases 39 16 5 4
T-test with unequal variance was conducted on a subset of active plants from
2000 onward, excluding plants invested by Indonesia only and dropping missing
data on technology. All variables take a value of zero or one. Total number of 63
units, current numbers total 64 because of a shared project between Japan and
Korea * indicates signicance at 10%; ** indicates signicance at 5%; *** in-
dicates signicance at 1%.
Table 5
Environmental, social, and compliance-related issues in foreign-invested coal
power plants.
Main investor country: China Japan Korea Malaysia
Environmental & livelihood
concerns
0.15 0.44 0.17 0.00
SD =0.36 SD =0.51 SD =0.41 SD =0.00
Mean difference −0.13 0.36*** −0.03 −0.21***
Incidents 0.00 0.11 0.33 0.00
SD =0.00 SD =0.32 SD =0.52 SD =0.00
Mean difference −0.14*** 0.08 0.31 −0.06***
Labor issues 0.19 0.00 0.00 0.00
SD =0.39 SD =0.00 SD =0.00 SD =0.00
Mean difference 0.10*** −0.15*** −0.13*** −0.13***
Legal issues 0.27 0.39 0.50 0.17
SD =0.45 SD =0.50 SD =0.55 SD =0.25
Mean difference 0.01 0.15 0.25 0.12
Count 48 18 6 6
T-test with unequal variance was conducted on a subset of active plants from
2000 onward, excluding plants invested by Indonesia only and dropping missing
data on technology. All variables take a value of zero or one. Total number of 77
units, current numbers total 78 because of a shared project between Japan and
Korea * indicates signicance at 10%; ** indicates signicance at 5%; *** in-
dicates signicance at 1%. Table 6
T-tests on the type of plants from Chinese investors.
Main investor: China Main investor: other Group difference
Instrumental 0.22 0.07 0.15**
SD =0.42 SD =0.26
T-test with unequal variance was conducted on a subset of active plants from
2000 onward, excluding plants invested by Indonesia only and dropping missing
data on technology. All variables take a value of zero or one. Total number of 77
units, current numbers total 78 because of a shared project between Japan and
Korea * indicates signicance at 10%; ** indicates signicance at 5%; *** in-
dicates signicance at 1%.
A. Tritto

Energy Strategy Reviews 34 (2021) 100624
8
the difcult history of Chinese-Indonesian relations and the consequent
anti-Chinese sentiment amongst various groups [68]
Chinese companies entered Indonesia’s coal power sector via con-
struction contracts, mostly during the FTP1 program. The recent study
of Soebadjo [62] unravels the reasons why this program was so inu-
ential in shaping local business elites’ perceptions of Chinese companies,
which range from unfamiliarity with Chinese business models - some-
thing still relevant nowadays, to unmet deadlines, contractual expecta-
tions, and issues with service and technical support after the
construction. The strong dissatisfaction from this experience led Presi-
dent Widodo to convey this issue directly during a visit to China in 2015
[62]:119). Interviews show that the quality of the investing and con-
tracting companies was perceived as a cause of this issue, but data as
well as other studies do not conrm this hypothesis. Soebadjo [62]:134),
for instance, uses Pearson’s three-tier categorization [69] of Chinese
companies and, like this study’s results, suggests that Chinese contrac-
tors in the FTP1 belong to the rst and second tier. The Global Energy
Monitor (GEM) [70] also states that Indonesia started to draw large
Chinese companies’ interest from the early 2000s, and high-level
meetings between company executives and government ofcials star-
ted to pave the way for the rst investments.
Recent years have shown an evident transition of Chinese companies
in Indonesia from construction contracts to investments. These in-
vestments peaked after 2013, the time of the launch of the BRI, and
declined after 2015, in line with the global dynamics shown in the study
of Ren et al. [25]. The reasons for this decline may be multiple and need
further investigation. They could include the stronger political
commitment to build a “Green Belt and Road Initiative” after the Paris
Agreement in 2017, the stricter control of capital outow resulting from
the Chinese government regulation, the perceived investment risk
before the 2019 Presidential elections in Indonesia, or a combination of
these elements. The reason for the sharp increase between 2013 and
2015, which resulted in 14 new deals for coal power plants also deserves
attention. A recent report by civil society organizations and an interview
with them exposed the already well-known links between the mining
sector and Indonesian’s economic and political elites [71]; Inter-
view17). In particular, they highlighted links to the current government
including President Widodo, Vice President Kalla, and the Coordinating
Ministry of Maritime Affairs, Luhut Pandjaitan, which oversees all key
negotiations of projects that are part of the BRI. These deeply entrenched
local interest in mining are also resulting in more adversary relations
between government and civil society organizations (Interview17;
Interview18).
Despite what interviewees perceived, the prole of Chinese investors
and contractors has not changed over time, except for new investments
coming from leading private companies in non–energy industries.
Therefore, the BRI is not changing the investor prole by bringing “rst
tier” companies to Indonesia, as these companies were amongst the
rstcomers. Rather, thanks to the impetus generated by the Initiative,
large Chinese SOEs are consolidating their presence in the country.
While this study, like others [21,25,27], identied the primary role of
Chinese SOEs in coal and other fossil fuel investments; it has also
highlighted a new emerging trend of coal power plants owned by large
private non-energy rms, which are continuing to be built until 2018
despite the overall declining trend.
The above result highlights a new important dynamic, namely, that
Chinese companies are not only investing in coal power plants projects
tendered by PLN, but they are also establishing power plants as part of
other investments. These plants are of considerable size due to the
energy-intensity of smelter activities, which are the most common ac-
tivities in Chinese-led industrial parks and represent the most substan-
tial part of Chinese FDI in Indonesia. Since there is little data available
on these “instrumental” plants, there is a need to review their specic
dynamics and how can local standards and regulations be adapted to
avoid adverse impacts on the local environment and society.
Chinese banks nanced a signicantly higher amount of coal power
plants both during the FTP1 and after 2013, declining in 2015 together
with investments. Financing from European, American, and interna-
tional institutions, which was already low before, signicantly
decreased in recent years. Chinese institutions, therefore, did ll the gap
left by other funders without however changing their prole, as the
leading nancing institutions remained the same. Hence, data and is in
line with the results of recent studies that show China Development
Bank and China EXIM Bank as the leading nancing institutions [25,50].
This study highlighted that plenty of new plants are currently open for
tender, and therefore, it is essential to monitor if this decline in nancing
will continue. Moreover, the increase of Indonesia-nanced coal power
plants in 2018 may indicate that in the absence of foreign investments,
the country may continue to invest in coal by accessing domestic funds.
Data showed that Chinese companies brought a signicantly higher
number of subcritical power plants than other foreign investors, con-
rming claims by Yao et al. Yao et al. [51] but going against the global
trend whereby Chinese banks nanced mostly supercritical plants [72].
The recent World Energy Investment report by the International Energy
Agency [73] also conrms that “the majority of the 2019 nal invest-
ment decisions for coal-red plants (almost 90%) were once again in
higher efciency plants, with only a very small portion in inefcient
subcritical projects, mainly in Indonesia”. Japanese companies are,
instead, bringing the latest technologies through their investments. This
may indicate that there is a lack of oversight from the Indonesian gov-
ernment in enforcing stricter regulations on environmental standards
and shows leniency towards the type of technology brought by new
investments. The analysis of environmental, social, and
compliance-related issues reported by news outlets did not show any
signicant results on Chinese investments. Data on recorded incidents
shows plants owned by Chinese companies were associated with
signicantly fewer incidents, despite what claimed by the interviewees,
especially concerning the FTP1, indicating a bias in perception. The
analysis, therefore, suggests that the issues encountered during the
FTP1, as highlighted by Soebagjo [62] most likely relate to policy,
management, and monitoring mechanisms. First, the tendering process
failed to guarantee the quality and capacity of selected companies to
deliver the expected results, favouring mostly speed and cost of con-
struction. Secondly, there was a lack of oversight processes to resolve
logistical and maintenance issues that could have avoided costly delays.
Finally, the only issue that was unique to Chinese investments is the
issue of foreign and illegal labor. This issue received plenty of negative
media coverage, not only in the coal power sector but also in relation to
Chinese investments and the BRI. The “Chinese invasion” as branded by
local media [74] has resulted in investigations by the Indonesian gov-
ernment, with consequent dismissal of the claim that thousands of illegal
workers entered Indonesia. However, a recent ofcial pledge by the
Chinese Premier Li Keqiang sought to prioritize the hiring of local
workforce [75,76]. This pledge became essential after many commen-
tators observed that in light of the upcoming election politics, the rising
anti-China sentiment could have undermined the support for Jokowi’s
re-election [77–79].
9. Conclusion and policy implications
This paper examined Chinese investments in Indonesia’s coal power
sector, explaining how the BRI is changing them, focusing on the host
country dynamics and stakeholders’ perceptions towards them. The
results validate and contribute to the emerging literature on the BRI’s
sustainability and provide insights into the barriers to energy transitions
of emerging economies. The case of Indonesia reects global and
regional dynamics highlighted by recent studies, such as the sharp in-
crease in Chinese-led investments and nancing of coal power plants
between 2013 and 2015 [25,42], along with concerns related to low-end
technologies and labor [51]. Results also conrmed that the BRI created
a strong political and nancial support for Chinese State-owned com-
panies and banks to engage in the coal power sector [25,27,50].
A. Tritto

Energy Strategy Reviews 34 (2021) 100624
9
However, they also revealed new dynamics of private,
non-energy-related companies that invest in instrumental coal power
plants to supply electricity for industrial parks.
This study offered new insights that may inform future conceptual-
izations and methodologies to analyze the BRI as well as foreign in-
vestments in other coal-rich countries. For Indonesia, and for other
emerging economies that seek to attract foreign investments to spur
economic growth by increasing power generation, the BRI constitutes a
vehicle to access much-needed funding and technology. Studies have
insofar provided one-sided narratives that imply an active role of Chi-
nese rms to seek and exploit investments opportunities, depicting host
countries as passive and subjected to their will, lacking the institutional
capacity for managing these investments [17,21]. This study shows that
host countries like Indonesia indeed have bargaining power and insti-
tutional capacity. Hence, an important barrier to the sustainability of the
BRI comes from their policies, policy gaps, and developmental agendas.
On the one hand, Indonesia’s positive attitude towards using coal was
one of the main factors that contributed to the rise in investments in coal
power plants. This attitude met with BRI-induced politically and
economically motivated Chinese investors, which eventually led to
several fast deals. On the other hand, Indonesia’s loose requirements and
lax enforcement on technological standards are the reason behind the
variations in technology between Chinese and Japanese companies. As
Soebadjo [62] highlighted, the lack of monitoring and the current
tendering system favoring projects with lower costs also constitute
major hindering aspects for sustainability in Indonesia’s coal power
sector. Hence, results from this study clearly show that the solutions to
greening the BRI should come both from China, by increasing trans-
parency and accountability of investing and nancing institutions [17,
80] and from the host countries, which should strengthen the mecha-
nisms to negotiate, tender, and monitor the quality of coal power plants.
Looking ahead, studies should continue to examine the role of Chi-
nese investments in emerging economies to validate the convergence of
the global commitment towards emission reduction set by the Paris
Agreement and the intention of building a “Green Belt and Road.” How
to reconcile the two is an interesting dilemma that now faces most of the
rising Asian countries who want to commit to global standards of sus-
tainability while at the same time maintain high growth based on ex-
ports and foreign FDI. A possible threat is that China will export its
“pollute rst and x later model” [81] of development, locking populous
countries like Indonesia in fossil-dependent futures that will exacerbate
social inequalities and create considerable public health challenges
[82]. The question is whether China will be able to exert its inuence
over the private sector to drive this change and claim its role of global
environmental leader. This study only provided a limited example of the
BRI’s effect through a “non-typical” BRI industry. It is essential to start
to assess the Initiatives’ environmental impacts carefully, analyzing
country-specic regulations and dynamics to understand how realities
can differ from visions.
Authorship statement
I declare that I am the sole author of the submitted manuscript.
Declaration of competing interest
The authors declare that they have no known competing nancial
interests or personal relationships that could have appeared to inuence
the work reported in this paper.
Acknowledgements
I would like to acknowledge the generous help of Prof. Albert Park,
Prof. Graeme Lang, and Prof. Andrews-Speed in reviewing this paper.
This research project (Project Number: S2016.A7.003) was funded by
the Strategic Public Policy Research Funding Scheme from the Central
Policy Unit of the Hong Kong Special Administrative Region Govern-
ment and by the HKUST Institute for Emerging Market Studies with
support from EY (Project Number: IEMS19RG01).
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