For decades, Southeast Asian leaders have dreamed of a modern, integrated rail network connecting the region. In 1995, former Malaysian Prime Minister Mahathir Mohamad outlined a vision for a “pan-Asian” railway network. Studies by PwC and the Asian Development Bank in 2014 called for major investments in cross-border rail to foster economic development. Yet the region has lagged behind, and few modern railways have reached completion over the past three decades.
In recent years, China has helped Southeast Asian governments turn this vision into reality. Capital, materials, and technical expertise have flowed from the Chinese government, state-owned enterprises, and private firms under the Belt and Road Initiative (BRI). Chinese companies have financed, constructed, and supplied rolling stock for most major rail projects across ASEAN over the past decade, including the line linking Vientiane to Kunming, Southeast Asia’s first high-speed railway between Jakarta and Bandung, and Malaysia’s forthcoming East Coast Rail Link.
Given China’s technical expertise, deep financial resources, and track record in the region, it may appear that companies from other countries have limited scope to participate meaningfully in Southeast Asia’s rail ambitions. Yet China faces structural challenges that are pushing Southeast Asian governments toward a diversified partnership model, creating meaningful opportunities for non-Chinese investors and technology providers.
The recently completed Jakarta–Bandung high-speed rail project, known as Whoosh (short for Waktu Hemat, Operasi Optimal, Sistem Hebat, or “Time-Saving, Optimal Operation, Outstanding System”), has been beset by financial strain following years of difficult land acquisition and construction delays. The line has become a fiscal burden, failing to generate sufficient ridership and revenue to service its heavy debt load. While travel times have been sharply reduced and millions of passengers have been carried, fare revenue falls well short of what is needed to cover operating costs and loan repayments. The project cost around $7.2 billion, roughly three-quarters of which was financed by the China Development Bank. Annual debt servicing alone is estimated at about $120 million. Persistent losses have weakened state-owned shareholders, led by Kereta Api Indonesia, which have been forced to absorb project-linked deficits.
With operating revenue unable to support repayments, the government has confirmed that the debt will now be covered by the state budget rather than by commercial returns or Danantara, the state-owned holding company. The Lowy Institute argues that Indonesia’s debt negotiations with China over the Jakarta–Bandung line highlight structural risks in China-backed rail projects across Southeast Asia: optimistic demand forecasts, cost overruns, construction delays, and long-term fiscal exposure for host governments. As the region’s first high-speed rail struggles financially, policymakers in Thailand, Malaysia, and the Philippines – where China-backed projects have already been renegotiated, scaled back, or cancelled – are likely to become more cautious about overreliance on Chinese financing and construction. While China remains an important partner, Whoosh’s difficulties will encourage governments to diversify funding sources, reassess project viability, and seek alternative partners to reduce debt and political risk.
Although Chinese firms delivered a technically impressive and operationally sound railway through the Whoosh project, public perception in Indonesia has emerged as a meaningful political and commercial constraint on China-backed infrastructure. Surveys and public reactions to the Jakarta–Bandung line operated by PT Kereta Cepat Indonesia China suggest that segments of the public are uneasy with Chinese involvement in strategic transport projects, shaped by concerns over debt dependence, governance, and the broader optics of BRI-linked investments. This skepticism does not translate into opposition to rail development itself; rather, there is strong demand for high-quality foreign participation. The implication for policymakers is that future railway development may benefit from diversifying international partners, as investment from Japan, South Korea, or European providers may face fewer public trust barriers while still delivering the capital, technology, and operational standards Indonesia needs.
Vietnam’s approach to foreign participation in the rail sector offers a preview of how other Southeast Asian countries may hedge risk by attracting investors and service providers from multiple jurisdictions. Geopolitical risk is central to Vietnam’s infrastructure decision-making. Communist Party leaders are acutely aware that what railways the country builds (and who it partners with to build them) will have far-reaching implications for national security and economic development. As a result, Chinese funding and technology are used selectively, and Hanoi is careful not to rely on China as the sole external partner.
Vietnam continues to accept Chinese support. It has approved the $8.3 billion Lao Cai–Hanoi–Hai Phong railway to modernize its outdated network and strengthen cross-border logistics with China, financing the project through state funds and concessional Chinese loans under the BRI. The line will use Chinese technology and rolling stock from CRRC Dalian, alongside plans for localization and technology transfer to rebuild domestic rail manufacturing capacity.
At the same time, policymakers emphasize “domestic–foreign cooperation,” encouraging firms such as THACO and VinSpeed to partner with companies from Japan, Korea, or Germany to acquire technology, strengthen domestic capacity, and mitigate reliance on any single foreign contractor. This approach aligns with Prime Minister Pham Minh Chinh’s directive that infrastructure development should reinforce national sovereignty and domestic capability. For strategic routes, including the North–South high-speed line, Vietnam is prioritizing contractors with high safety standards and financial transparency – criteria that often favor Japanese and European partners.
Vietnam’s efforts to diversify its railway development partners is one manifestation of the broader foreign policy of strategic balance, or “Bamboo Diplomacy,” carefully navigating the U.S.-China competition. By maintaining a selective approach – welcoming international investment while limiting dependence on China – Hanoi preserves flexibility and signals its geopolitical orientation. Partnerships like THACO’s collaboration with South Korea’s Hyundai Rotem to produce rolling stock and the selection of Spanish consultancy Ineco to provide a feasibility study on the North–South high-speed railway project further exemplify this strategy.
Vietnam’s diversification of railway partners reflects its broader strategy of “bamboo diplomacy,” balancing major powers while preserving strategic autonomy. By welcoming international investment while limiting dependence on China, Hanoi retains flexibility and signals its geopolitical orientation. Partnerships such as THACO’s collaboration with Hyundai Rotem of South Korea on rolling stock and the selection of Spanish consultancy Ineco for feasibility studies on the North–South high-speed rail project exemplify this approach.
Southeast Asia’s railway expansion offers a clear opening for Western investors and technology providers to engage alongside domestic partners. While China will continue to contribute capital, materials, and technical expertise, governments increasingly seek high-quality collaboration with Japanese, Korean, European, and American firms. Competition in future rail projects will extend beyond steel and rolling stock to include digital signaling, 5G-enabled operations, and integrated logistics platforms. International firms can partner with local developers such as THACO to deliver safer, more reliable, and commercially sustainable railways. By combining international know-how with regional capability, Western investors can play a pivotal role in shaping Southeast Asia’s modern, resilient rail networks while supporting domestic industrial growth.
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Maxwell Abbott
Maxwell Abbott is a Principal at Meriwether & Co., a specialist advisory firm helping investors and corporations navigate political risk and geostrategy across Asia-Pacific. He brings over a decade of experience combining political risk analysis, strategic intelligence, and on-the-ground investigations across the region, with particular expertise in Southeast Asia.