Chinese Hand in Indonesia Housing Scheme Brings Challenges, Opportunities

Muhammad Zulfikar Rakhmat and Yeta Purnama
- January 31, 2025

Qatar recently announced its involvement in a significant housing development project in Indonesia, committing to the construction of one million houses. This initiative was formalised through a Memorandum of Understanding (MoU) signed on 8 January, 2024 between Sheikh Abdulaziz bin Abdulrahman Al Thani, the chairman of the investment company Qilaa International Group, and Maruarar Sirait, Indonesia’s Minister of Public Works and Public Housing, in Jakarta.

Following this announcement, Fahri Hamzah, the Indonesian Deputy Minister of Public Works and Public Housing, revealed that Qatar has increased its commitment, pledging an additional five million housing units in the country. This investment makes Qatar the first foreign investor to back President Prabowo Subianto’s ambitious programme to build three million houses annually.

One notable aspect of this project is that representatives from Qatar mentioned their intention to work with Chinese companies, which have established a reputation for delivering large-scale infrastructure projects. This decision raises important questions about the broader implications of such collaborations, and the spectre of a potential public backlash in Indonesia.

Indonesia has a complex and evolving relationship with China. While the two countries have cooperated extensively in infrastructure development, public perceptions of China in Indonesia have worsened in recent years. Concerns over China’s economic dominance, allegations of dumping, and the perceived lack of equitable benefits in Chinese-led projects have fuelled scepticism. Against this backdrop, Qatar’s reliance on Chinese contractors for the housing project could face scrutiny from Indonesian stakeholders and the public.

One area of concern is the economic context of China’s involvement. With a trade surplus exceeding US$1 trillion and a struggling domestic economy, China’s increased participation in overseas projects can be seen as a strategy to export surplus materials and labour. This raises legitimate fears of resource dumping, where Chinese companies might prioritise their economic recovery over the long-term interests of host countries like Indonesia. Similar concerns have been raised in other regions where Chinese contractors dominate, often leading to debates about the quality of work, labour practices, and long-term sustainability.

Furthermore, Chinese-led infrastructure projects have sometimes been criticised for their environmental and social impacts. In Indonesia, previous collaborations have sparked controversies over issues such as displacement of local communities, environmental degradation, and limited opportunities for local workers and businesses. These unresolved issues risk overshadowing the potential benefits of the Qatar-backed housing project.

To address these concerns, Indonesia must take proactive steps to ensure this collaboration aligns with national interests. Firstly, it is imperative to include robust mechanisms for transparency and accountability in the project’s implementation. Clear agreements on labour composition should ensure a significant proportion of local workers are employed, creating sustainable economic opportunities for Indonesians, rather than prioritising imported labour.

Secondly, the environmental implications of the housing development must be carefully managed. Large-scale projects often carry the risk of ecological harm, and it is crucial that this initiative adheres to the highest environmental standards. Sustainable construction practices, including the use of eco-friendly materials and technologies, should be non-negotiable.

Finally, public engagement is essential to address scepticism and build trust. Local communities should be involved in the planning and decision-making processes to ensure their needs and concerns are heard. Meaningful engagement can help mitigate resistance and foster a sense of ownership among the Indonesian population.

For Qatar, it is crucial to approach this project with a commitment to equitable partnership. Beyond financial investment, Qatar should focus on fostering long-term benefits for Indonesia by supporting capacity-building initiatives, such as training programmes for local workers, and knowledge transfer in construction and housing management. This approach will help reinforce Qatar’s image as a responsible and constructive partner.

On its part, the Chinese firms involved must address the lingering concerns about their practices in international infrastructure projects. By implementing higher standards for environmental protection, fair labour practices, and community engagement, Chinese contractors can demonstrate their commitment to sustainable development. Greater transparency in project implementation, and an emphasis on collaborative decision-making with local stakeholders, will also help rebuild trust and mitigate public apprehension.

While the housing project presents a unique opportunity for trilateral cooperation between Indonesia, Qatar, and China, it also highlights the complexities of managing international partnerships in a politically and economically sensitive environment. For Qatar, this initiative strengthens its global investment footprint. For China, it reflects an ongoing effort to maintain its status as a major player in global infrastructure. For Indonesia, however, the stakes are higher —ensuring this collaboration delivers tangible benefits without compromising economic sovereignty or environmental integrity will be critical.

Looking ahead, this project could set a precedent for future trilateral collaborations between China, Indonesia, and Middle Eastern countries. This is not the first instance of trilateral cooperation between Indonesia and Middle Eastern countries. In 2020, amid the Covid-19 pandemic, Indonesia, the UAE, and China signed a collaboration agreement to procure between 20-30 million doses of vaccines, highlighting the countries’ collective capacity to address regional challenges. If China, Qatar, and Indonesia are able to prioritise transparency, sustainability, and local engagement, there is a possibility that growing trilateral relations could expand beyond the housing sector, potentially extending to other areas such as energy, technology, and trade.

Furthermore, this cooperation will need to navigate Indonesia’s strategic stance within the Indo-Pacific. Indonesia adheres to its “free and active” foreign policy, aiming to maintain neutrality while actively engaging in multilateral cooperation through ASEAN. As ASEAN’s largest economy and its de facto leader, Indonesia has been a vocal advocate for the bloc’s centrality in navigating Indo-Pacific challenges, including economic integration and regional stability. However, Indonesia’s position is complicated by its dual approach to major powers. While it values its growing economic ties with China, particularly as its largest trading partner, Indonesia has expressed firm opposition to Chinese incursions in its exclusive economic zone in the South China Sea. Simultaneously, Indonesia is deepening security and trade relations with the United States, particularly under the auspices of the Indo-Pacific Economic Framework and joint defense initiatives. Qatar’s investment, therefore, plays a unique role in this landscape by demonstrating the potential of Middle Eastern countries to act as neutral and constructive partners. The housing project is not merely an economic venture but a microcosm of Indonesia’s broader diplomatic strategy—leveraging opportunities from all partners while maintaining its pivotal role in fostering an inclusive, stable, and prosperous Indo-Pacific.

Image Caption: Indonesian President Joko Widodo (2nd L) shakes hand with United Arab Emirates (UAE) Minister of State for Foreign Trade Thani Ahmed Al Zeyoudi (3rd R), as Minister of State Owned Enterprises Erick Thohir (2nd R) and CEO of Indonesia’s State Electricity Company Darmawan Prasodjo (L) look on during the inauguration of the newly built floating solar power plant on the water that can generate 192 mega watts of peak electricity in cooperation between the Indonesian government and Masdar from the UAE, at Cirata Reservoir, West Java, on 9 November 2023. Photo: AFP